<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 14, 1996
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BACHMAN INFORMATION SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
MASSACHUSETTS 7399 04-2784044
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
8 NEW ENGLAND EXECUTIVE PARK, BURLINGTON, MASSACHUSETTS 01803 (617) 273-9003
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
PETER J. BONI
PRESIDENT AND CHIEF EXECUTIVE OFFICER
BACHMAN INFORMATION SYSTEMS, INC.
8 NEW ENGLAND EXECUTIVE PARK
BURLINGTON, MASSACHUSETTS 01803
(617) 273-9003
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
<TABLE>
COPIES TO:
<S> <C>
JOHN D. PATTERSON, JR., ESQ. WILLIAM B. SIMMONS, JR., ESQ.
DAVID W. WALKER, ESQ. TESTA, HURWITZ & THIBEAULT LLP
FOLEY, HOAG & ELIOT LLP 125 HIGH STREET
ONE POST OFFICE SQUARE BOSTON, MASSACHUSETTS 02110
BOSTON, MASSACHUSETTS 02109
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
Upon consummation of the merger described herein.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
<TABLE>
CALCULATION OF REGISTRATION FEE
===========================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE(3)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value per
share................................ 4,850,000 shs. $7.313 $35,468,050 $12,230.34
===========================================================================================================
<FN>
(1) Represents the number of shares of the Common Stock of the Registrant which
may be issued to former shareholders of Cadre Technologies Inc. pursuant to
the Merger described herein.
(2) Approximately every 3.311 shares of Cadre Technologies Inc. will be
converted into one share of Common Stock of the Registrant, subject to
certain possible adjustments, pursuant to the Merger described herein.
Pursuant to Rule 457(f) under the Securities Act of 1933, the registration
fee has been calculated as of June 11, 1996.
(3) The amount of the registration fee includes $8,851.25 previously paid
pursuant to Section 14(g) of the Securities Exchange Act, as amended, in
connection with the filing by the Registrant of a preliminary
Prospectus/Joint Proxy Statement related to the proposed acquisition.
</TABLE>
================================================================================
<PAGE> 2
BACHMAN INFORMATION SYSTEMS, INC.
CROSS-REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS/JOINT PROXY STATEMENT
OF INFORMATION REQUIRED BY ITEMS IN PART I OF FORM S-4
<TABLE>
<CAPTION>
ITEM OF FORM S-4 LOCATION IN PROSPECTUS/JOINT PROXY STATEMENT
----------------------------------------- ---------------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus... Facing Page; Cross-Reference Sheet; Outside
Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Available Information; Incorporation of
Certain Documents by Reference; Inside Front
and Outside Back Cover Pages of Prospectus
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............ Summary; Risk Factors; Selected Historical
and Unaudited Pro Forma Condensed Combined
Financial Information; Comparative Historical
and Pro Forma Share Data; The Merger
Proposals
4. Terms of the Transaction................. The Merger Proposals; The Merger Agreement;
Other Matters Related to the Merger;
Description of Bachman Capital Stock;
Comparison of Stockholders' Rights; Annex A.
Merger Agreement
5. Pro Forma Financial Information.......... Selected Historical and Unaudited Pro Forma
Condensed Combined Financial Information; Pro
Forma Condensed Combined Financial Statements
6. Material Contacts With the Company Being
Acquired................................. Summary; The Merger Proposals
7. Additional Information Required For
Reoffering by Persons and Parties Deemed
to be Underwriters....................... *
8. Interests of Named Experts and Counsel... Legal Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. *
10. Information With Respect to S-3
Registrants.............................. Available Information; Incorporation of
Certain Documents by Reference
11. Incorporation of Certain Information by
Reference................................ Incorporation of Certain Documents by
Reference
12. Information With Respect to S-2 or S-3
Registrants.............................. *
13. Incorporation of Certain Information by
Reference................................ *
14. Information With Respect to Registrants
Other Than S-2 or S-3 Registrants........ *
15. Information With Respect to S-3
Companies................................ *
16. Information With Respect to S-2 or S-3
Companies................................ *
17. Information With Respect to Companies
Other Than S-2 or S-3 Companies.......... Cadre; Financial Statements of Cadre
18. Information if Proxies, Consents or
Authorizations Are to be Solicited....... Summary; Introduction; The Bachman Special
Meeting; The Cadre Special Meeting; The
Merger Proposals; Other Matters Related to
the Merger
19. Information if Proxies, Consents or
Authorizations are not to be Solicited,
or in an Exchange Offer.................. *
</TABLE>
i
<PAGE> 3
[LETTERHEAD OF BACHMAN INFORMATION SYSTEMS, INC.]
June 19, 1996
Dear Stockholder:
The Board of Directors of Bachman Information Systems, Inc. ("Bachman") has
called a Special Meeting of Stockholders (the "Special Meeting") to be held on
July 18, 1996 at 10:00 a.m. local time at the offices of Foley, Hoag & Eliot LLP
located at One Post Office Square, Boston, Massachusetts. The purpose of the
Special Meeting is to consider and vote upon a proposal to adopt the Agreement
and Plan of Merger dated March 25, 1996, (the "Merger Agreement"), by and among
Bachman, Cadre Technologies Inc. ("Cadre"), and B.C. Acquisition Corp., a
wholly-owned subsidiary of Bachman, and to approve the issuance of Bachman
Common Stock as contemplated by the Merger Agreement. In addition, stockholders
will be asked to consider and vote upon proposals to (i) change Bachman's name
to Cayenne Software, Inc. upon the consummation of the merger, (ii) increase the
number of authorized shares of Bachman Common Stock by 26.2 million shares, and
(iii) adjourn the Special Meeting if and to the extent adjournment is proposed
by Bachman's management, in order to afford management time to solicit
additional proxies, if necessary, in support of one or more of the Proposals.
Under the Merger Agreement, B.C. Acquisition Corp. would be merged with and
into Cadre, with Cadre being the surviving corporation. B.C. Acquisition Corp.'s
separate corporate existence would cease. Up to 4,850,000 shares of Bachman
Common Stock, which is listed on the Nasdaq National Market under the symbol
"BACH," would be issued to Cadre stockholders, option holders and one warrant
holder. Subject to statutory dissenters' appraisal rights, approximately every
3.311 shares of Cadre Common Stock would be converted into the right to receive
one share of Bachman Common Stock. All stock options to purchase Cadre Common
Stock would become options to purchase Bachman Common Stock. All warrants to
purchase Cadre Common Stock would become warrants to purchase Bachman Common
Stock.
After the merger, the assets and business of Cadre would continue to be
owned and operated by Cadre, which would be a wholly-owned subsidiary of
Bachman. Subject to approval by Bachman's stockholders, Bachman would change its
name to Cayenne Software, Inc. upon consummation of the merger.
Bachman's Board of Directors has unanimously determined that the proposed
merger is in the best interests of Bachman and its stockholders. The Board
believes that the merger will provide Bachman with greater market penetration
through the acquisition of additional products, broader direct and indirect
channels of distributors and more strategic business partnerships.
The Board has also unanimously determined that the proposed increase in the
number of authorized shares of Bachman Common Stock is in the best interests of
Bachman and its stockholders. The Board believes that increasing the number of
authorized shares of Bachman Common Stock will allow Bachman to acquire or
invest in complementary businesses or technologies and have additional shares
available for employee stock option, purchase and other benefit plans, and for
other corporate purposes approved by the Board of Directors of Bachman.
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE YOUR SHARES OF
BACHMAN STOCK FOR THE PROPOSAL TO APPROVE THE MERGER AGREEMENT AND THE ISSUANCE
OF BACHMAN COMMON STOCK AS CONTEMPLATED BY THE MERGER AGREEMENT. The Board also
recommends that you vote FOR the proposal to change Bachman's name to Cayenne
Software, Inc., FOR the proposal to increase the number of authorized shares of
Bachman Common Stock by 26.2 million and FOR the proposal to adjourn the Special
Meeting if and to the extent adjournment is proposed by Bachman's management.
<PAGE> 4
Bachman Stockholders
June 19, 1996
Page Two
The merger will be effected only if the Merger Agreement and the related
issuance of Bachman Common Stock are approved by the affirmative vote of a
majority of the shares of Bachman Common Stock present in person or by a
properly executed proxy and entitled to vote at the Special Meeting.
A Notice of Special Meeting of Stockholders, Prospectus/Joint Proxy
Statement and proxy card are enclosed for your review. The Prospectus/Proxy
Statement consists of Bachman and Cadre's joint proxy statement, relating to the
actions to be taken by Bachman stockholders and Cadre stockholders, and
Bachman's prospectus with respect to the shares of Bachman Common Stock issuable
to holders of Cadre stock upon consummation of the proposed merger. THE BACHMAN
BOARD RECOMMENDS THAT YOU READ THE PROSPECTUS/JOINT PROXY STATEMENT CAREFULLY.
It is important that your shares of Bachman stock be represented at the
Special Meeting. EVEN THOUGH YOU MAY PLAN TO ATTEND THE SPECIAL MEETING IN
PERSON, WE URGE YOU TO COMPLETE AND RETURN THE ENCLOSED PROXY CARD IN THE
ACCOMPANYING ENVELOPE AS SOON AS POSSIBLE. If you attend the Special Meeting,
you may vote in person even if you have previously returned a completed proxy.
Sincerely,
/S/ PETER J. BONI
--------------------------------------
Peter J. Boni,
President and Chief Executive Officer
<PAGE> 5
[LETTERHEAD OF BACHMAN INFORMATION SYSTEMS, INC.]
June 19, 1996
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 18, 1996
A Special Meeting of Stockholders (the "Special Meeting") of BACHMAN
INFORMATION SYSTEMS, INC. ("Bachman") will be held on July 18, 1996 at 10:00
a.m. local time at the offices of Foley, Hoag & Eliot LLP located at One Post
Office Square, Boston, Massachusetts for the following purposes:
1. to consider and vote upon a proposal to adopt the Agreement and Plan of
Merger dated March 25, 1996 (the "Merger Agreement") by and among
Bachman, B.C. Acquisition Corp. and Cadre Technologies Inc., a copy of
which agreement is included as Annex A to the accompanying
Prospectus/Joint Proxy Statement, and to approve the issuance of up to
4,850,000 shares of Bachman's Common Stock, par value $.01 per share
(subject to adjustment as provided in the Merger Agreement), as
contemplated by the Merger Agreement;
2. to consider and vote upon a proposal to change Bachman's name to Cayenne
Software, Inc. upon consummation of the proposed merger;
3. to consider and vote upon a proposal to increase the number of shares of
Common Stock, par value $.01 per share, that Bachman shall have
authority to issue by 26.2 million shares;
4. to consider and vote upon a proposal to approve in advance one or more
adjournments of the Special Meeting if and to the extent such
adjournments are proposed by the management of Bachman; and
5. to transact such other business as may properly come before the Special
Meeting or any adjournment thereof.
The foregoing items of business are described more fully in the Prospectus/Joint
Proxy Statement accompanying this Notice.
The Board of Directors has fixed the close of business on June 7, 1996 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Special Meeting and at any continuation or adjournment thereof.
By Order of the Board of Directors,
/S/ JOHN D. PATTERSON, JR.
--------------------------------------
John D. Patterson, Jr., Clerk
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING.
WHETHER OR NOT YOU EXPECT TO ATTEND, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE
ENCLOSED STAMPED ENVELOPE. YOU MAY STILL VOTE IN
PERSON IF YOU ATTEND THE SPECIAL MEETING.
<PAGE> 6
[LETTERHEAD OF CADRE TECHNOLOGIES INC.]
June 19, 1996
Dear Stockholder:
The Board of Directors of Cadre Technologies Inc. ("Cadre") has called a
Special Meeting of Stockholders (the "Special Meeting") to be held on July 18,
1996 at 10:00 a.m. local time at the offices of Testa, Hurwitz & Thibeault LLP
located at 125 High Street, Boston, Massachusetts. The purpose of the Special
Meeting is to consider and vote upon a proposal to adopt the Agreement and Plan
of Merger dated March 25, 1996, (the "Merger Agreement"), by and among Cadre,
Bachman Information Systems, Inc. ("Bachman"), and B.C. Acquisition Corp., a
wholly-owned subsidiary of Bachman.
Under the Merger Agreement, B.C. Acquisition Corp. would be merged with and
into Cadre, with Cadre being the surviving corporation. B.C. Acquisition Corp.'s
separate corporate existence would cease. Up to 4,850,000 shares of Bachman
Common Stock, which is listed on the Nasdaq National Market under the symbol
"BACH," would be issued to Cadre Stockholders, option holders and one warrant
holder. Subject to statutory dissenters' appraisal rights, approximately every
3.311 shares of Cadre Common Stock would be converted into the right to receive
one share of Bachman Common Stock. All stock options to purchase Cadre Common
Stock would become options to purchase Bachman Common Stock. All warrants to
purchase Cadre Common Stock would become warrants to purchase Bachman Common
Stock.
After the merger, the assets and business of Cadre would continue to be
owned and operated by Cadre, which would be a wholly-owned subsidiary of
Bachman. Subject to approval by Bachman's stockholders, Bachman would change its
name to Cayenne Software, Inc. upon consummation of the merger. William H.D.
Goddard, Director of Cadre would serve as a director of Cayenne Software, Inc.
upon consummation of the merger. We also expect a second representative of Cadre
to be added to the Cayenne Board.
Cadre's Board of Directors has unanimously determined that the proposed
merger is in the best interests of Cadre and its stockholders. The Board
believes that the merger will provide Cadre with the benefits of a broader
combined product line of Bachman and Cadre products and access to the market in
which Bachman products are now sold. In entering into the Merger Agreement,
Cadre also seeks to maximize shareholder value by providing Cadre stockholders
with access to a public market for investment liquidity.
ACCORDINGLY, THE BOARD RECOMMENDS THAT YOU VOTE YOUR SHARES OF CADRE STOCK
FOR THE PROPOSAL TO APPROVE THE MERGER AGREEMENT. The Board also recommends that
you vote FOR the proposal to adjourn the Special Meeting if and to the extent
adjournment is proposed by Cadre's management, in order to afford management
time to solicit additional proxies, if necessary, in support of the Merger
Agreement proposal. The merger will be effected only if the Merger Agreement is
approved by the affirmative vote of at least 66 2/3% of the outstanding shares
of Cadre Common Stock.
A Notice of Special Meeting of Stockholders, Prospectus/Joint Proxy
Statement and proxy card are enclosed for your review. The Prospectus/Joint
Proxy Statement consists of Cadre and Bachman's joint proxy statement, relating
to the actions to be taken by Bachman stockholders and Cadre stockholders, and
Bachman's prospectus with respect to the shares of Bachman Common Stock issuable
to holders of Cadre stock upon consummation of the proposed merger. THE CADRE
BOARD RECOMMENDS THAT YOU READ THE PROSPECTUS/JOINT PROXY STATEMENT CAREFULLY.
<PAGE> 7
Cadre Stockholders
June 19, 1996
Page Two
It is important that your shares of Cadre stock be represented at the
Special Meeting. EVEN THOUGH YOU MAY PLAN TO ATTEND THE SPECIAL MEETING IN
PERSON, WE URGE YOU TO COMPLETE AND RETURN THE ENCLOSED PROXY CARD IN THE
ACCOMPANYING ENVELOPE AS SOON AS POSSIBLE. If you attend the Special Meeting,
you may vote in person even if you have previously returned a completed proxy.
Sincerely,
/S/ LAWRENCE T. SUTTER
--------------------------------------
Lawrence T. Sutter,
Chairman and Chief Executive Officer
<PAGE> 8
[LETTERHEAD OF CADRE TECHNOLOGIES INC.]
June 19, 1996
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 18, 1996
A Special Meeting of Stockholders (the "Special Meeting") of CADRE
TECHNOLOGIES INC. ("Cadre") will be held on July 18, 1996 at 10:00 a.m. local
time at the offices of Testa, Hurwitz & Thibeault LLP located at 125 High
Street, Boston, Massachusetts for the following purposes:
1. to consider and vote upon a proposal to adopt the Agreement and Plan of
Merger dated March 25, 1996 by and among Bachman Information Systems,
Inc., B.C. Acquisition Corp. and Cadre, a copy of which agreement is
included as Annex A to the accompanying Prospectus/Joint Proxy
Statement;
2. to consider and vote upon a proposal to approve in advance one or more
adjournments of the Special Meeting if and to the extent such
adjournments are proposed by the management of Cadre; and
3. to transact such other business as may properly come before the Special
Meeting or any adjournment thereof.
The foregoing items of business are described more fully in the Prospectus/Joint
Proxy Statement accompanying this Notice.
The Board of Directors has fixed the close of business on May 31, 1996 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Special Meeting and at any continuation or adjournment thereof.
By Order of the Board of Directors,
/S/ EDSON H. WHITEHURST, JR.
--------------------------------------
Edson H. Whitehurst, Jr., Secretary
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING.
WHETHER OR NOT YOU EXPECT TO ATTEND, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE
ENCLOSED STAMPED ENVELOPE. YOU MAY STILL VOTE IN
PERSON IF YOU ATTEND THE SPECIAL MEETING.
<PAGE> 9
BACHMAN INFORMATION SYSTEMS, INC. CADRE TECHNOLOGIES INC.
PROSPECTUS/JOINT PROXY STATEMENT
Bachman Information Systems, Inc., a Massachusetts corporation ("Bachman"),
has filed a Registration Statement on Form S-4 with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), covering an aggregate of up to 4,850,000 shares of its Common Stock, $.01
par value ("Bachman Common Stock"), to be issued upon conversion of outstanding
shares of Cadre Technologies Inc. ("Cadre") in connection with the proposed
merger (the "Merger") of B.C. Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Bachman ("Acquisition Corp."), with and into Cadre, a
Delaware corporation, pursuant to the terms set forth in the Agreement and Plan
of Merger dated as of March 25, 1996 (the "Merger Agreement"), by and among
Bachman, Acquisition Corp. and Cadre.
Pursuant to the Merger, in which Cadre will become a wholly-owned
subsidiary of Bachman, between 3,697,333 and 4,850,000 shares of Bachman Common
Stock will be issued to Cadre stockholders, option holders and one warrant
holder. Shares of Cadre's Common Stock, par value $.01 per share ("Cadre Common
Stock"), (other than duly qualified dissenting shares) will be converted into
shares of Bachman Common Stock, according to a formula set forth in the Merger
Agreement. The maximum amount of Bachman shares that may be issued is 4,850,000
(approximately 28% of the total outstanding after the Merger), or 0.3169 share
of Bachman for each share of Cadre (based on Cadre's outstanding shares at May
31, 1996). That amount may be adjusted downward based on Cadre's negative net
worth at the end of the month preceding the Closing. Based on Cadre's estimated
net worth at May 31, 1996, the actual amount of Bachman shares to be issued
would be 4,621,667 (approximately 27% of the total outstanding), or 0.3020 share
of Bachman for each share of Cadre. The Merger Agreement does not limit the
possible adjustment, but if the formula would result in fewer than 3,697,334
shares (approximately 22% of the total outstanding, or 0.2416 share of Bachman
for each share of Cadre) being issued, Bachman and Cadre will resolicit votes
for approval by their respective stockholders before consummating the Merger.
All stock options to purchase Cadre Common Stock will become options to purchase
Bachman Common Stock, and all warrants to purchase Cadre Common Stock will
become warrants to purchase Bachman Common Stock.
This Prospectus/Joint Proxy Statement and the accompanying form of proxy
are first being mailed to stockholders of Bachman and Cadre on or about June 19,
1996.
This Prospectus/Joint Proxy Statement constitutes (a) the Proxy Statement
of Cadre relating to the Special Meeting of Stockholders of Cadre, scheduled to
be held on July 18, 1996 (the "Cadre Special Meeting"), (b) the Proxy Statement
of Bachman relating to the Special Meeting of Stockholders of Bachman, scheduled
to be held on July 18, 1996 (the "Bachman Special Meeting"), and (c) the
Prospectus of Bachman filed as part of the Registration Statement. All
information herein with respect to Cadre has been furnished by Cadre, and all
information herein with respect to Bachman has been furnished by Bachman.
SEE "RISK FACTORS" AT PAGE 21 FOR A DISCUSSION OF CERTAIN FACTORS WHICH
SHOULD BE CONSIDERED CAREFULLY BY BACHMAN STOCKHOLDERS AND CADRE STOCKHOLDERS IN
EVALUATING THE PROPOSALS TO BE VOTED ON AT THE BACHMAN SPECIAL MEETING AND CADRE
SPECIAL MEETING AND THE ACQUISITION OF THE SECURITIES OFFERED HEREBY.
------------------------
NEITHER THIS TRANSACTION NOR THE SECURITIES OF BACHMAN OFFERED HEREBY HAVE
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS/JOINT PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus/Joint Proxy Statement is June 14, 1996.
1
<PAGE> 10
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A
SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW
HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT
ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER
ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A
SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE OF NEW HAMPSHIRE HAS
PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN
APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR
CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY
REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
2
<PAGE> 11
AVAILABLE INFORMATION
Bachman is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). The information filed by Bachman with the
Commission may be inspected and copied, at the prescribed rates, at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 and at the Regional Offices of
the Commission at Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New York 10048.
Bachman Common Stock is traded on the Nasdaq National Market. Reports, proxy
statements and other information filed by Bachman with the Nasdaq National
Market may be inspected and copied at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, Third Floor, Washington, D.C. 20006.
This Prospectus/Joint Proxy Statement does not contain all of the
information set forth in the Registration Statement on Form S-4 of which this
Prospectus/Joint Proxy Statement forms a part (together with all exhibits and
any amendments thereto, the "Registration Statement"), as filed by Bachman with
the Commission under the Securities Act of 1933 (the "Securities Act"). For
further information, reference is made to the Registration Statement, a copy of
which may be obtained, at prescribed rates, from the Public Reference Section of
the Commission at the address set forth above.
NO PERSON IS AUTHORIZED IN CONNECTION WITH THIS SOLICITATION AND OFFERING
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS/JOINT PROXY STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY CADRE OR
BACHMAN. THIS PROSPECTUS/JOINT PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF
BACHMAN COMMON STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR
A SOLICITATION OF AN OFFER TO BUY, ANY OF THE SHARES OF BACHMAN COMMON STOCK
OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE
SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS
PROSPECTUS/JOINT PROXY STATEMENT NOR ANY DISTRIBUTION OF BACHMAN COMMON STOCK
MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by Bachman are
incorporated herein by reference:
1. Bachman's Annual Report on Form 10-K for the year ended June 30, 1995;
2. Bachman's Proxy Statement dated October 23, 1995 in connection with the
Bachman Special Meeting in Lieu of Annual Meeting of Stockholders held
on November 15, 1995;
3. Bachman's Quarterly Report on Form 10-Q for the quarter ended September
30, 1995;
4. Bachman's Quarterly Report on Form 10-Q for the quarter ended December
31, 1995;
5. Bachman's Quarterly Report on Form 10-Q for the quarter ended March 31,
1996;
6. Bachman's Current Report on Form 8-K filed April 1996; and
7. The description of Bachman's Common Stock contained in Bachman's
Registration Statement on Form 8-A (File No. 0-19682), dated November
26, 1991.
3
<PAGE> 12
THIS PROSPECTUS/JOINT PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE
AVAILABLE UPON REQUEST FROM BACHMAN INFORMATION SYSTEMS, INC., 8 NEW ENGLAND
EXECUTIVE PARK, BURLINGTON, MASSACHUSETTS 01803, ATTN: INVESTOR RELATIONS
(TELEPHONE (617) 273-9003). IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS,
ANY REQUEST SHOULD BE MADE BY JULY 11, 1996.
Statements contained in this Prospectus/Joint Proxy Statement as to the
contents of any contract or other document are not necessarily complete. If the
contract or other document is filed as an exhibit to the Registration Statement,
reference is hereby made to the copy filed as an exhibit and each such statement
is qualified in all respects by such reference.
All reports and definitive proxy or information statements filed by Bachman
pursuant to Sections 13(a), 13(c) and 15(d) of the Exchange Act subsequent to
the date of this Prospectus/Joint Proxy Statement and prior to the termination
of the offering of the Bachman Common Stock to which this Prospectus/Joint Proxy
Statement relates shall be deemed to be incorporated by reference into this
Prospectus/Joint Proxy Statement from the date of filing such documents. Any
statement contained in a document incorporated or deemed to be incorporated
herein by reference shall be deemed to be modified or superseded for purposes of
this Prospectus/Joint Proxy Statement to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed to
be incorporated herein by reference modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus/Joint Proxy
Statement.
------------------------
"BACHMAN" is a registered trademark and "Cayenne" and "Cayenne Software,
Inc." are trademarks of Bachman. "Cadre," "ObjectTeam," and "Teamwork" are
registered trademarks of Cadre, and "ObjectTeam Application Factory" and
"VantageTeam" are trademarks of Cadre. This Prospectus/Joint Proxy Statement
also includes the trademarks of companies other than Bachman and Cadre.
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TABLE OF CONTENTS
<TABLE>
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<S> <C>
AVAILABLE INFORMATION................................................................. 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................... 3
SUMMARY............................................................................... 7
BACHMAN AND CADRE
SELECTED HISTORICAL AND UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION......................................................................... 15
BACHMAN AND CADRE
COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE DATA................................... 19
INTRODUCTION.......................................................................... 21
RISK FACTORS.......................................................................... 21
THE COMPANIES......................................................................... 28
THE BACHMAN SPECIAL MEETING........................................................... 28
Proposals........................................................................... 28
Voting and Proxy Information........................................................ 29
Solicitation of Proxies............................................................. 29
THE CADRE SPECIAL MEETING............................................................. 30
Proposals........................................................................... 30
Voting and Proxy Information........................................................ 30
Solicitation of Proxies............................................................. 31
THE MERGER PROPOSALS.................................................................. 31
Effects of the Merger............................................................... 31
Background and Purpose of the Merger................................................ 31
Financial Advisor To Bachman........................................................ 35
Interests of Certain Persons in the Merger.......................................... 39
Recommendation of the Board of Directors of Bachman................................. 40
Recommendation of the Board of Directors of Cadre................................... 40
THE MERGER AGREEMENT.................................................................. 40
Manner and Basis of Converting Shares............................................... 41
Exchanges of Stock Certificates..................................................... 42
Representations and Covenants....................................................... 43
Conditions to the Merger............................................................ 43
Conditions Precedent to Obligations of Bachman and Acquisition Corp. to Effect the
Merger........................................................................... 43
Conditions Precedent to Obligation of Cadre to Effect the Merger.................... 44
Termination......................................................................... 44
Expenses............................................................................ 44
Escrow Agreement.................................................................... 44
Holder's Agent...................................................................... 45
Bachman Board Representation........................................................ 45
Affiliate Agreements................................................................ 45
Indemnification of Cadre Officers and Directors..................................... 46
</TABLE>
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<TABLE>
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<S> <C>
OTHER MATTERS RELATED TO THE MERGER................................................... 46
Guarantee of Cadre Loan by Bachman.................................................. 46
Operation of Cadre's Business After the Merger...................................... 46
Promotional Programs................................................................ 46
Regulatory Matters.................................................................. 47
Certain Federal Income Tax Consequences............................................. 47
Carryforward of Net Operating Losses and Tax Credits................................ 49
Anticipated Accounting Treatment.................................................... 49
Appraisal Rights of Dissenting Stockholders......................................... 49
BACHMAN PRICE RANGE OF COMMON STOCK AND DIVIDENDS..................................... 52
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS.................................................................. 53
DESCRIPTION OF BACHMAN CAPITAL STOCK.................................................. 61
Bachman Preferred Stock............................................................. 61
Bachman Common Stock................................................................ 61
CADRE................................................................................. 62
Absence of Market for Cadre Stock; Dividend Policy.................................. 62
Cadre Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................................ 62
Business of Cadre................................................................... 75
Principal Stockholders of Cadre..................................................... 80
COMPARISON OF STOCKHOLDERS' RIGHTS.................................................... 83
THE BACHMAN NAME CHANGE PROPOSAL...................................................... 90
THE AUTHORIZED BACHMAN COMMON STOCK PROPOSAL.......................................... 90
THE BACHMAN ADJOURNMENT PROPOSAL...................................................... 90
THE CADRE ADJOURNMENT PROPOSAL........................................................ 91
OTHER MATTERS......................................................................... 91
LEGAL MATTERS......................................................................... 91
EXPERTS............................................................................... 91
INDEX TO FINANCIAL STATEMENTS OF CADRE................................................ F-1
ANNEX A. MERGER AGREEMENT
ANNEX B. DELAWARE GCL SECTION 262 ("APPRAISAL RIGHTS")
ANNEX C. STRATAGEM FAIRNESS OPINION
</TABLE>
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SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this
Prospectus/Joint Proxy Statement and the accompanying exhibits. Each Bachman
stockholder and Cadre stockholder should read carefully the entire
Prospectus/Joint Proxy Statement and accompanying exhibits before voting on the
matters discussed herein. Except as otherwise indicated, share and per share
data for Bachman Common Stock have been retroactively adjusted to reflect a
one-for-three split of Bachman Common Stock and the conversion of all of
Bachman's then-outstanding preferred stock into Bachman Common Stock, both
effected in the quarter ended December 31, 1991.
THE COMPANIES
BACHMAN INFORMATION SYSTEMS, INC. ("BACHMAN"), organized as a Massachusetts
corporation in 1983, develops, markets and supports a comprehensive suite of
software products and services. Fortune 1000 companies and government agencies
around the world use Bachman products as they develop, implement, and maintain
enterprise-wide, business-critical information systems. Bachman's products are
designed around an innovative open architecture that enables organizations to
create applications that integrate diverse information sources into new
high-performance computing environments, to modify applications as business and
technology change, and to run those applications on a variety of platforms.
Bachman's approach to reusability and its open architecture directly support
mainframe and client/server initiatives and partnerships with other leading
software vendors.
Bachman targets its products to Fortune 1000 companies, government
agencies, and organizations of similar size throughout the world that use
workstations, mid-range and mainframe computers and relational database
management systems for data-intensive applications.
As Bachman continues to make the transition from providing tools focused
solely on mainframe application development to supporting customers' needs for a
more open and flexible set of solutions aimed at the growing client/server
market, it faces many challenges. Bachman's plan is to enhance its product
offerings through development efforts, strategic alliances and acquisitions to
improve its long-term performance. The transition has had an adverse effect on
Bachman's operating results during fiscal 1993, 1994, and 1995 and the first
nine months of fiscal 1996, and will continue to affect operating results
throughout the remainder of fiscal 1996. Bachman anticipates that it will be
able to satisfy its cash requirements and other cash needs through fiscal 1996.
Bachman's cash requirements thereafter will depend on the results of future
operations, which cannot be foreseen.
B.C. ACQUISITION CORP. ("ACQUISITION CORP.") was incorporated in Delaware
in February 1996 for purposes of effecting the Merger. Acquisition Corp. is a
direct, wholly-owned subsidiary of Bachman. The principal executive offices of
both Bachman and Acquisition Corp. are located at 8 New England Executive Park,
Burlington, Massachusetts 01803, and their telephone number is (617) 273-9003.
CADRE TECHNOLOGIES INC. ("CADRE"), organized as a Delaware corporation in
1988, is the successor of Cadre Technologies Inc. and MicroCASE Inc., both of
which merged into Cadre on January 31, 1989. Cadre develops, markets and
supports software tools for the creation of complex computer software. Most of
the products sold by Cadre help to automate the process of requirements analysis
and software design by groups of software engineers. Customers use the tools to
capture, traverse, and analyze abstract models of the system to be built. These
models assist users, and sometimes their customers, in understanding a software
system, planning its implementation, and making engineering trade-offs.
Additional Cadre products address document generation, model configuration
management, software construction, and the "reverse engineering" (understanding)
of existing software.
Cadre's customers are generally developers of complex software systems in
both the Information System ("IS") and the "technical" sectors. While most of
Cadre's current customers consider themselves in the technical sector, Cadre
expects a shift toward IS customers as it concentrates on "object-oriented"
("OO") technology. Cadre's strategy is to maintain its position as a leading
provider of tools to the technical market, while introducing new products and
enhancements for its OO product line. See "Cadre -- Business."
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Cadre's principal executive offices are located at 222 Richmond Street,
Providence, Rhode Island 02903 and its telephone number is (401) 351-5950.
SPECIAL MEETING OF STOCKHOLDERS OF BACHMAN
A Special Meeting of the stockholders of Bachman will be held on July 18,
1996 at 10:00 a.m. local time at the offices of Foley, Hoag & Eliot LLP located
at One Post Office Square, Boston, Massachusetts (the "Bachman Special
Meeting"). The purpose of the Bachman Special Meeting is to vote on proposals to
(a) approve and adopt the Agreement and Plan of Merger, dated as of March 25,
1996, by and among Bachman, Cadre and Acquisition Corp. (the "Merger
Agreement"), providing for the merger of Acquisition Corp. with and into Cadre,
with Cadre becoming a wholly-owned subsidiary of Bachman, and to approve the
issuance of shares of Bachman Common Stock in connection with the Merger
Agreement (the "Merger/Stock Issuance Proposal"), (b) change the corporate name
of Bachman to Cayenne Software, Inc. upon consummation of the proposed merger
(the "Bachman Name Change Proposal"), (c) increase the number of authorized
shares of Bachman Common Stock by 26.2 million (the "Authorized Bachman Common
Stock Proposal"), and (d) approve in advance one or more adjournments of the
Bachman Special Meeting if and to the extent such adjournments are proposed by
the management of Bachman (the "Bachman Adjournment Proposal"). Holders of
Bachman Common Stock are being asked to approve the Merger/Stock Issuance
Proposal in order to comply with Section 6 of Schedule D to the By-Laws of the
National Association of Securities Dealers, Inc., which requires that Nasdaq
National Market issuers obtain stockholder approval if, in connection with the
acquisition of the stock or assets of another company, the number of shares of
common stock to be issued is or will be equal to or in excess of 20% of the
number of shares of common stock outstanding before the issuance of the stock or
securities.
The close of business on June 7, 1996 has been fixed as the record date for
the determination of the Bachman stockholders entitled to notice of and to vote
at the Bachman Special Meeting or any adjournment thereof (the "Bachman Record
Date"). The presence, in person or by a properly executed proxy, of the holders
of a majority in interest of all the capital stock issued, outstanding and
entitled to vote is necessary to constitute a quorum at the Bachman Special
Meeting. The stockholders present in person or represented by proxy at the
Bachman Special Meeting may approve the Bachman Adjournment Proposal, despite
the absence of a quorum for other purposes. Abstentions and broker non-votes
will be counted for purposes of determining a quorum, but broker non-votes will
be treated as not voting on the Merger/Stock Issuance Proposal, the Bachman Name
Change Proposal, the Authorized Bachman Common Stock Proposal and the Bachman
Adjournment Proposal.
Approval and adoption of the Merger/Stock Issuance Proposal and the Bachman
Adjournment Proposal require the affirmative vote of the holders of a majority
in interest of the shares of Bachman Common Stock present in person or by a
properly executed proxy and entitled to vote. Approval and adoption of the
Bachman Name Change Proposal and the Authorized Bachman Common Stock Proposal
require the affirmative vote of the holders of a majority in interest of all the
shares of Bachman Common Stock issued, outstanding and entitled to vote.
As of the Bachman Record Date, there were 12,742,120 shares of Bachman
Common Stock issued and outstanding of which 48,359 shares (or less than 1%)
were held by directors and executive officers of Bachman and their affiliates.
To the best of Bachman's knowledge, each of Bachman's directors and executive
officers who owns shares of Bachman Common Stock eligible to be voted intends to
vote those shares in favor of the Merger/Stock Issuance Proposal, the Bachman
Name Change Proposal, the Authorized Bachman Common Stock Proposal and the
Bachman Adjournment Proposal. See "The Bachman Special Meeting."
SPECIAL MEETING OF STOCKHOLDERS OF CADRE
A Special Meeting of the stockholders of Cadre will be held on July 18,
1996 at 10:00 a.m. local time at the offices of Testa, Hurwitz & Thibeault LLP
located at 125 High Street, Boston, Massachusetts ("the Cadre Special Meeting").
The purpose of the Cadre Special Meeting is to approve and adopt the Merger
Agreement (the "Merger Proposal"). Cadre stockholders are also asked to vote
upon a proposal to approve in advance one
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<PAGE> 17
or more adjournments of the Cadre Special Meeting if and to the extent such
adjournments are proposed by the management of Cadre (the "Cadre Adjournment
Proposal").
The close of business on May 31, 1996 has been fixed as the record date for
the determination of the Cadre stockholders entitled to notice of and to vote at
the Cadre Special Meeting or any adjournment thereof (the "Cadre Record Date").
The presence in person or by a properly executed proxy of the holders of a
majority of the outstanding shares of Cadre Common Stock is necessary to
constitute a quorum at the Cadre Special Meeting. The stockholders present in
person or represented by proxy at the Cadre Special Meeting may approve the
Cadre Adjournment Proposal, despite the absence of a quorum for other purposes.
Abstentions will be included as present or represented for purposes of
establishing a quorum for the transaction of business.
Under Cadre's Certificate of Incorporation, approval and adoption of the
Merger Proposal requires the affirmative vote of the holders of at least 66 2/3%
of the outstanding shares of Cadre Common Stock. Approval of the Cadre
Adjournment Proposal requires the affirmative vote of the holders of a majority
of the votes properly cast at the Cadre Special Meeting.
As of the Cadre Record Date, there were 14,364,846 shares of Cadre Common
Stock issued and outstanding of which 18% were held by directors and executive
officers of Cadre and their affiliates. To the best of Cadre's knowledge, each
of the Cadre directors and executive officers who owns shares of Cadre Common
Stock intends to vote those shares in favor of both the Merger Proposal and the
Cadre Adjournment Proposal. See "The Cadre Special Meeting."
THE MERGER PROPOSALS
EFFECTS OF THE MERGER; OPERATION OF CADRE'S BUSINESS AFTER THE MERGER
If the Merger/Stock Issuance Proposal is approved by Bachman's stockholders
and the Merger Proposal is approved by Cadre's stockholders, Acquisition Corp.
will be merged with and into Cadre (the "Merger"), subject to the terms of the
Merger Agreement by and among Bachman, Acquisition Corp. and Cadre. Up to
4,850,000 shares of Bachman Common Stock approximately 28% of the shares
outstanding will be issued to Cadre stockholders, option holders and one warrant
holder. Based on estimates as of May 31, 1996, the actual number of shares
issued would be 4,621,677 (approximately 26.6% of the total outstanding), and
every share of Cadre Common Stock (other than duly qualified dissenting shares)
will be converted into the right to receive 0.3020 share of Bachman Common
Stock, subject to possible adjustments (see "The Merger Agreement -- Manner and
Basis of Converting Shares"), rounded up to the nearest whole number. Options to
purchase shares of Cadre Common Stock will become options to purchase shares of
Bachman Common Stock in accordance with the terms of Article 6.8 of the Merger
Agreement. Each outstanding warrant will become exercisable for Bachman Common
Stock in accordance with the terms of Article 6.9 of the Merger Agreement. Based
upon the number of shares of Bachman Common Stock issued and outstanding as of
the Bachman Record Date, and after giving effect to the issuance of 4,850,000
shares of Bachman Common Stock in connection with the Merger, former holders of
Cadre Common Stock will hold approximately 28% of Bachman's total issued and
outstanding shares on a fully diluted basis.
After the Merger, the assets and business of Cadre will continue to be
owned and operated by Cadre, which will be a wholly-owned subsidiary of Bachman.
The separate corporate existence of Acquisition Corp. will cease. If the Bachman
Name Change Proposal is approved by Bachman's stockholders, Bachman will change
its name to Cayenne Software, Inc.
Neither Bachman nor Cadre is aware of any approval or other action by any
governmental, administrative, or regulatory agency or authority that will be
required prior to the consummation of the Merger. See "The Merger
Proposal -- Effects of the Merger" and "Other Matters Related to the
Merger -- Operation of Cadre's Business After the Merger."
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BACKGROUND AND PURPOSE OF THE MERGER
Bachman, Cadre and Acquisition Corp. executed the Merger Agreement on March
25, 1996. The Merger Agreement was preceded by a letter of intent entered into
by Bachman and Cadre on December 6, 1995, as amended.
The Board of Directors of Bachman believes that the acquisition of Cadre's
business will provide it with greater market penetration through the acquisition
of additional products, broader direct and indirect channels of distributors and
more strategic business partnerships.
The Board of Directors of Cadre believes that the Merger will provide Cadre
with the benefits of a broader combined product line of Bachman and Cadre
products and access to the markets in which Bachman products are now sold. In
entering into the Merger Agreement, Cadre also seeks to maximize stockholder
value by providing Cadre stockholders with access to a public market for
investment liquidity. Since completion of Bachman's initial public offering in
November 1991, the closing price of Bachman Common Stock, as reported by the
Nasdaq National Market, has ranged from $1 3/4 to $37 3/4. The closing price of
Bachman Common Stock reached $37 3/4 in February 1992, which was before Bachman
began its transition from the mainframe application market to the client/server
market. During fiscal 1995 and the first three quarters of fiscal 1996, the low
and high closing prices of Bachman Common Stock, as reported by the Nasdaq
National Market, were $1.750 and $7.875, and $5.8125 and $11.50, respectively.
See "The Merger Proposals -- Background and Purpose of the Merger." The closing
sale price on December 6, 1995, the last trading day preceding the public
announcement of the proposed Merger, was $6.875. The closing sale price on March
25, 1996, the day that the Merger Agreement was signed, was $9.625.
FAIRNESS OPINION
Bachman's financial adviser, Stratagem, has delivered to the Board of
Directors of Bachman its written opinion to the effect that, as of February 16,
1996, the Merger was fair from a financial point of view to the stockholders of
Bachman. The full text of the opinion of Stratagem, which sets forth assumptions
made and matters considered is attached hereto as Annex C to this
Prospectus/Joint Proxy Statement and is incorporated herein by reference.
HOLDERS OF BACHMAN STOCK ARE URGED TO, AND SHOULD, READ SUCH OPINION IN ITS
ENTIRETY. Bachman expects to receive prior to the date of first mailing of this
Prospectus/Joint Proxy Statement to stockholders an updated written opinion from
Stratagem to the effect that, as of that date, the Merger is fair, from a
financial point of view, to the stockholders of Bachman. See "The Merger
Proposals -- Bachman's Financial Advisor."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
As of the Cadre Record Date, the directors and executive officers of Cadre
as a group beneficially owned an aggregate of 4,053,321 shares of Cadre Common
Stock (including shares purchasable upon the exercise of outstanding options).
All of those shares would be treated in the Merger in the same manner as the
shares of Cadre Common Stock held by other Cadre stockholders. Each of the
directors and executive officers of Cadre has entered into an agreement
restricting his sale of Bachman shares for a period following the Effective Date
(as defined below). See "The Merger Proposals -- Interests of Certain Persons in
the Merger -- Cadre Stock Ownership" and "The Merger Agreement -- Affiliate
Agreements."
Certain directors and officers of Cadre, including Lawrence T. Sutter, a
director and President, Ronald H. Imbriale, Vice President, and Edson H.
Whitehurst, Jr., Vice President and Secretary, have entered into employment
agreements under which they will be entitled to certain compensation in the
event that they are involuntarily terminated during the terms of their
agreements. See "The Merger Proposals -- Interests of Certain Persons in the
Merger -- Cadre Employment Agreements."
EFFECTIVE DATE AND TIME OF THE MERGER
The effective date of the Merger (the "Effective Date") will be the date
upon which a certificate of merger in the form required by, and executed in
accordance with, the Delaware General Corporation Law
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<PAGE> 19
(the "Certificate of Merger") shall have been filed with the Secretary of State
of the State of Delaware and the effective time of the Merger (the "Effective
Time") will be the time of the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware. Assuming all conditions to the
Merger are met or waived prior thereto, it is anticipated that the Effective
Date will be on or about July 18, 1996.
CONDITIONS
The conditions to the obligations of each of Cadre, Bachman and Acquisition
Corp. to consummate the Merger include, among other things, (a) approval of the
Merger Agreement by the holders of at least 66 2/3% of the outstanding shares of
Cadre Common Stock, (b) approval of the Merger/Stock Issuance Proposal by the
holders of a majority of the shares of Bachman Common Stock voting on the
Proposal at the Bachman Special Meeting, and (c) the average of the closing bid
and asked prices of Bachman Common Stock as quoted on the Nasdaq National Market
on the twenty trade days immediately prior to the Effective Date being not be
less than $3.28 (appropriately adjusted to reflect fully the effect of any stock
split, reverse stock split, stock dividend, recapitalization or like change with
respect to Bachman Common Stock occurring after the date hereof and prior the
Effective Time). The obligations of Bachman and Acquisition Corp. to effect the
Merger are also conditioned on, among other things, the representations and
warranties of Cadre contained in the Merger Agreement being true and correct in
all material respects at the Effective Time. The obligation of Cadre to effect
the Merger is also conditioned on, among other things, the representations and
warranties of Bachman and Acquisition Corp. contained in the Merger Agreement
being true and correct in all material respects at the Effective Time. If any of
the above listed conditions are not met, one or more of the parties to the
Merger Agreement will have the right not to consummate the Merger. See "The
Merger Proposals -- Conditions to Merger, -- Conditions Precedent to Obligations
of Bachman and Acquisition Corp. to Effect the Merger and -- Conditions
Precedent to Obligation of Cadre to Effect the Merger."
EXPENSES
Bachman estimates that its expenses to be incurred in connection with the
Merger will total approximately $1.5 million, and Cadre estimates that its
expenses to be incurred in connection with the Merger will total approximately
$300,000. If the Merger is not consummated, each party will be and remain
responsible for its costs and expenses, including fees and disbursements of
consultants, investment bankers and other financial advisors, brokers and
finders, counsel and accountants. If the Merger is consummated, all of such
costs and expenses will be allocated between Bachman and Cadre, as the surviving
corporation.
EXCHANGES OF STOCK CERTIFICATES
As soon as practicable after the Effective Time, State Street Bank and
Trust Company, the transfer agent for Bachman Common Stock (the "Transfer
Agent"), will send a transmittal form to each person who held shares of Cadre
Common Stock (other than duly qualified dissenting shares) immediately prior to
the Effective Time. The transmittal form will contain instructions with respect
to the surrender of certificates formerly representing Cadre Common Stock in
exchange for certificates expressly representing Bachman Common Stock and a
section to be completed by each former Cadre stockholder (the "Transmittal
Form"). CADRE STOCKHOLDERS SHOULD NOT RETURN THEIR STOCK CERTIFICATES WITH THE
ENCLOSED PROXY AND SHOULD NOT FORWARD THOSE CERTIFICATES UNTIL THEY HAVE
RECEIVED TRANSMITTAL FORMS. See "The Merger Agreement -- Exchanges of Stock
Certificates."
ESCROW AGREEMENT
The Merger Agreement provides that, subject to certain limitations, Cadre
stockholders will indemnify Bachman and its subsidiaries for a period of one
year from and against any loss, liability, damage, cost or expense (including
costs and reasonable attorneys fees and disbursements) suffered, incurred or
paid by Bachman or any of its subsidiaries, which would not have been suffered,
incurred or paid if all the representations and warranties made by Cadre in the
Merger Agreement or in any other writing delivered by Cadre in connection with
the Merger Agreement had been true, complete and correct in all material
respects (the "Bachman Claims").
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As security for potential Bachman Claims incurred by Bachman, an aggregate
of approximately 485,000 shares of Bachman Common Stock (which amount represents
approximately 10% of each Cadre stockholder's portion of the total number of
shares of Bachman Common Stock into which such stockholder's shares of Cadre
Common Stock will be converted) will be transferred to State Street Bank and
Trust Company, as escrow agent (the "Escrow Agent"), pursuant to an Escrow
Agreement by and among Bachman, the Escrow Agent and James P. Lally, as agent
with power of attorney for the Cadre stockholders (the "Escrow Fund"). All
claims for indemnification by Bachman with respect to Bachman Claims shall be
recovered solely by the return to Bachman of property from the Escrow Fund. See
"The Merger Agreement -- Escrow Agreement."
HOLDER'S AGENT
Each Cadre stockholder who votes for the Merger Proposal or who surrenders
his certificates representing Cadre Common Stock to the Transfer Agent in
exchange for certificates representing Bachman Common Stock shall, without any
further action, be deemed to have irrevocably appointed James P. Lally (the
"Holder's Agent") as his attorney-in-fact with authority to act for and on
behalf of him in connection with the indemnity provisions in the Merger
Agreement, the Escrow Agreement, the notice provision of the Merger Agreement
and such other matters as are reasonably necessary for the consummation of the
Merger. Bachman and Acquisition Corp. and each of their respective affiliates
shall be entitled to rely on such appointment and treat the Holder's Agent as
the duly appointed attorney-in-fact of such Cadre stockholder. See "The Merger
Agreement -- Holder's Agent."
BACHMAN BOARD REPRESENTATION
Bachman has agreed that its Board of Directors will take appropriate action
to fill the two vacancies on its Board of Directors with Cadre representatives,
effective upon the consummation of the Merger. One vacancy will be filled by
William H.D. Goddard, and the second vacancy will be filled by a person selected
by Bachman and the Holder's Agent. See "The Merger Agreement -- Bachman Board
Representation."
AFFILIATE AGREEMENTS
The persons identified by Cadre as "affiliates" (as that term is defined
for purposes of Rule 145 promulgated under the Securities Act) of Cadre will,
prior to the consummation of the Merger, enter into agreements restricting
sales, dispositions or other transactions reducing their risk of investment in
respect of the shares of Cadre Common Stock held by them prior to the Merger and
the shares of Bachman Common Stock received by them in the Merger so as to
comply with the requirements of applicable federal securities and tax laws and
to help ensure that the Merger will be treated as a "pooling of interests" for
accounting and financial reporting purposes. The persons identified by Bachman
as affiliates of Bachman will enter into similar agreements with respect to the
Bachman Common Stock held by them. See "The Merger Agreement -- Affiliate
Agreements."
GUARANTEE OF CADRE LOAN BY BACHMAN
Bachman has agreed to guarantee a $1,500,000 loan made by Silicon Valley
Bank to Cadre (the "Cadre Loan"). If Bachman is required pursuant to its
guarantee to pay any of Cadre's obligation to the Bank, Bachman will have a
right of subrogation in the Bank's security interest in all of Cadre's assets.
Bachman's guarantee is limited to the Cadre Loan and does not extend to other
amounts that Cadre may now or later owe to Silicon Valley Bank. See "Other
Matters Related to the Merger -- Guarantee of Cadre Loan by Bachman."
PROMOTIONAL PROGRAMS
From April through June 1996, each company has entered into certain
promotional programs whereby it will distribute certain products of the other
company. These programs are designed to introduce customers of each company to
the products of the other and to try to get competitors of Cadre and Bachman to
try Cadre-Bachman products. See "Other Matters Related to the
Merger -- Promotional Programs."
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APPRAISAL RIGHTS OF DISSENTING CADRE STOCKHOLDERS
A holder of shares of Cadre Common Stock as of the Cadre Record Date who
elects to dissent from the approval of the Merger Agreement and who follows the
procedures set forth in Section 262 of the Delaware General Corporation Law (the
"Delaware GCL") will be entitled, as an alternative to receiving Bachman Common
Stock in exchange for those shares, to a judicial determination of the fair
value in cash of those shares. A copy of Section 262 of the Delaware GCL is
attached as Annex B to this Prospectus/Joint Proxy Statement. See "Other Matters
Related to the Merger -- Appraisal Rights of Dissenting Stockholders."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to be a tax-free reorganization so that no gain or
loss will be recognized by Cadre stockholders for federal income tax purposes,
except for holders of dissenting shares. The qualification of the Merger as a
reorganization, however, depends on a number of factual matters, including among
other things the extent to which Cadre stockholders perfect their dissenters'
rights and the extent to which, and circumstances under which, participating
Cadre stockholders dispose of Bachman Common Stock received in the Merger.
Accordingly, no assurance can be given that the Merger will qualify as a
reorganization for federal income tax purposes. CADRE STOCKHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS REGARDING ALL TAX CONSEQUENCES OF THE MERGER. See
"Other Matters Related to the Merger -- Certain Federal Income Tax
Considerations."
RECOMMENDATION OF THE BOARD OF DIRECTORS OF BACHMAN
On February 16, 1996, the Board of Directors of Bachman met and unanimously
approved and adopted the Merger Agreement and the issuance of shares of Bachman
Common Stock as contemplated by the Merger Agreement. At the meeting, the Board
of Directors of Bachman also unanimously resolved to present the Merger/Stock
Issuance Proposal for consideration by Bachman's stockholders. Those resolutions
were reaffirmed at a meeting of the Board of Directors held March 19, 1996. THE
BOARD OF DIRECTORS OF BACHMAN HAS UNANIMOUSLY RECOMMENDED THAT STOCKHOLDERS OF
BACHMAN VOTE FOR THE MERGER/STOCK ISSUANCE PROPOSAL.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF CADRE
On March 22, 1996, the Board of Directors of Cadre met and unanimously
approved and adopted the Merger Agreement. At the meeting, the Board of
Directors of Cadre also unanimously resolved to present the Merger Proposal for
consideration by Cadre's stockholders. THE BOARD OF DIRECTORS OF CADRE HAS
UNANIMOUSLY RECOMMENDED THAT STOCKHOLDERS OF CADRE VOTE FOR THE MERGER PROPOSAL.
THE BACHMAN NAME CHANGE PROPOSAL
Changing Bachman's name to Cayenne Software, Inc. upon consummation of the
Merger will reflect the new synergy of the resources of Bachman and Cadre joined
in the mission to focus on delivery of a suite of practical solutions for the
design and development needs of software teams. THE BOARD OF DIRECTORS OF
BACHMAN HAS UNANIMOUSLY RECOMMENDED THAT THE STOCKHOLDERS OF BACHMAN VOTE FOR
THE PROPOSAL TO CHANGE BACHMAN'S NAME TO CAYENNE SOFTWARE, INC. UPON
CONSUMMATION OF THE MERGER.
THE AUTHORIZED BACHMAN COMMON STOCK PROPOSAL
The Authorized Bachman Common Stock Proposal is intended to allow Bachman
to acquire or invest in complementary businesses or technologies and to have
additional shares available for employee stock option, purchase and other
benefit plans, and for other corporate purposes approved by the Board of
Directors of Bachman. THE BOARD OF DIRECTORS OF BACHMAN HAS UNANIMOUSLY
RECOMMENDED THAT THE STOCKHOLDERS OF BACHMAN VOTE FOR THE AUTHORIZED BACHMAN
COMMON STOCK PROPOSAL.
13
<PAGE> 22
THE BACHMAN ADJOURNMENT PROPOSAL
The Bachman Adjournment Proposal is intended to permit Bachman's management
to propose one or more adjournments of the Bachman Special Meeting in order to
permit further solicitation of proxies with respect to approval of any of the
Proposals. THE BOARD OF DIRECTORS OF BACHMAN HAS UNANIMOUSLY RECOMMENDED THAT
THE STOCKHOLDERS OF BACHMAN VOTE FOR THE BACHMAN ADJOURNMENT PROPOSAL.
THE CADRE ADJOURNMENT PROPOSAL
The Cadre Adjournment Proposal is intended to permit Cadre's management to
propose one or more adjournments of the Cadre Special Meeting in order to permit
further solicitation of proxies with respect to the approval of the Merger
Agreement or for other reasons. THE BOARD OF DIRECTORS OF CADRE HAS UNANIMOUSLY
RECOMMENDED THAT THE STOCKHOLDERS OF CADRE VOTE FOR THE CADRE ADJOURNMENT
PROPOSAL.
This Prospectus/Joint Proxy Statement contains forward-looking statements
which involve risks and uncertainties. Bachman's and Cadre's actual results may
differ significantly from the results discussed in the forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, those discussed in "Risk Factors."
14
<PAGE> 23
BACHMAN AND CADRE
SELECTED HISTORICAL AND UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL INFORMATION
The following selected historical information of Bachman and Cadre has been
derived from their respective historical financial statements and should be read
in conjunction with such consolidated financial statements and the notes
thereto, certain of which are incorporated by reference in this Prospectus/Joint
Proxy Statement. The Bachman and Cadre unaudited financial information for the
nine months ended March 31, 1996 and 1995 has been prepared on the same basis as
the annual audited financial statements and, in the opinion of management,
contains all adjustments, consisting only of normal recurring accruals necessary
for the fair presentation of the results of operations for such periods. The
selected pro forma financial information of Bachman and Cadre is derived from
the pro forma condensed combined financial statements of Bachman and Cadre, and
should be read in conjunction with such pro forma statements and notes thereto
which are included in this Proxy Statement/Prospectus. For the purpose of the
pro forma statement of operations data, Bachman's financial data for the nine
months ended March 31, 1996 and 1995 and the three years ended June 30, 1995,
1994 and 1993 have been combined with Cadre's financial data for the nine month
periods ended March 31, 1996 and 1995 and the twelve month periods ended June
30, 1995 and December 31, 1994 and 1993, respectively. In this presentation
Cadre's financial data for the period July 1, 1994 to December 31, 1994 is
included in the twelve month periods ended June 30, 1994 and 1995. No cash
dividends have been declared or paid on Bachman Common Stock or Cadre Common
Stock. The pro forma information is presented for illustrative purposes only and
is not necessarily indicative of the consolidated operating results or financial
position that would have occurred had the Merger been consummated at the
beginning of the periods presented, nor is it necessarily indicative of future
operating results or financial position.
15
<PAGE> 24
SELECTED HISTORICAL FINANCIAL DATA
<TABLE>
BACHMAN
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
NINE MONTHS ENDED
MARCH 31, YEAR ENDED JUNE 30,
----------------- --------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------- ------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................... $23,982 $23,758 $ 33,322 $ 36,502 $ 36,022 $47,997 $31,528
Income (loss) from operations(1)....... (2,817) (9,896) (10,474) (11,546) (15,541) 2,783 2,671
Extraordinary item -- reduction of
income taxes due to utilization of
prior years, net operating losses.... -- -- -- -- -- 909 833
Net income (loss)...................... (2,994) (9,783) (10,260) (11,541) (14,729) 2,808 2,364
Income (loss) per share:
Income (loss) before extraordinary
item............................... $ (0.27) $ (1.07) $ (1.12) $ (1.30) $ (1.81) $ 0.25 $ 0.23
Extraordinary item................... -- -- -- -- -- 0.12 0.12
Net income (loss).................... $ (0.27) $ (1.07) $ (1.12) $ (1.30) $ (1.81) $ 0.37 $ 0.35
Weighted average number of common and
common equivalent shares
outstanding.......................... 11,059 9,135 9,181 8,844 8,125 7,501 6,744
<FN>
- ---------------
(1) Income (loss) from operations includes restructuring costs of $2,000,
$2,000, and $6,316 for the nine months ended March 31, 1995, the years ended
June 30, 1995 and 1993, respectively; also includes a charge for purchased
research and development of $1,736 for the year ended June 30, 1994.
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
MARCH 31, -----------------------------------------------
1996 1995 1994 1993 1992 1991
--------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.................................. $10,590 $ 5,388 $ 6,865 $16,694 $28,363 $ 7,089
Total assets..................................... 24,873 21,209 26,040 37,345 52,265 20,518
Long-term obligations............................ 14 51 -- 151 668 1,421
Redeemable preferred stock....................... 475 5,493 -- -- -- --
Stockholders' equity............................. 13,011 3,640 12,508 21,840 36,094 9,548
</TABLE>
16
<PAGE> 25
<TABLE>
CADRE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
NINE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
----------------- -----------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues.................................. $27,082 $30,904 $39,467 $40,576 $42,274 $50,537 $50,272
Income (loss) from operations(1).......... (4,124) (2,813) (14,355) (1,814) (5,381) 624 (3,997)
Net income (loss)......................... (4,939) (2,613) (14,630) (1,661) (5,304) 362 (4,161)
Income (loss) per share................... $ (.35) $ (.22) $ (1.08) $ (0.14) $ (0.46) $ 0.04 $ (0.38)
Weighted average number of common and
common equivalent shares outstanding.... 14,276 11,884 13,501 11,789 11,460 12,969 11,066
<FN>
- ---------------
(1) Income (loss) from operations includes restructuring costs of $1,852,
$3,483, $3,428, $1,495 and $3,141 for the nine months ended March 31, 1996,
the years ended December 31, 1995, 1993, 1992 and 1991, respectively. Also
included in income (loss) from operations is a charge of $7,300 for
purchased research and development for the year ended December 31, 1995.
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -----------------------------------------------
1996 1995 1994 1993 1992 1991
--------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.................................. $(8,376) $(7,026) $ 1,328 $ 4,640 $ 8,870 $ 5,292
Total assets..................................... 14,269 14,175 20,399 25,136 28,829 28,114
Long-term obligations............................ 2,384 2,483 -- 2,400 2,381 --
Stockholders' equity............................. (8,074) (6,393) 4,828 6,389 11,326 11,432
</TABLE>
17
<PAGE> 26
UNAUDITED SELECTED PRO FORMA
COMBINED FINANCIAL DATA
<TABLE>
BACHMAN AND CADRE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
NINE MONTHS ENDED
MARCH 31, YEAR ENDED JUNE 30,
------------------ ------------------------------
1996 1995 1995 1994 1993
------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:(1)
Revenues............................................. $51,064 $ 54,662 $ 74,860 $ 77,078 $ 78,296
Income (loss) from operations........................ (6,941) (12,709) (23,453) (13,360) (20,922)
Net income (loss).................................... (7,933) (12,396) (23,092) (13,202) (20,033)
Income (loss) per share.............................. $ (0.52) $ (0.97) $ (1.79) $ (1.06) $ (1.73)
Weighted average number of common and common
equivalent shares.................................. 15,371 12,724 12,891 12,405 11,586
</TABLE>
<TABLE>
<CAPTION>
MARCH
31,
1996
--------
<S> <C>
BALANCE SHEET DATA:(1)
Working capital..................................... $(4,786)
Total assets........................................ 39,059
Long-term obligations............................... 798
Redeemable preferred stock.......................... 475
Stockholders' equity................................ (463)
<FN>
- ---------------
(1) The combined companies expect to incur charges to operations estimated at
approximately $5,000 to $7,000 in the quarter in which the merger is
consummated, to reflect costs associated with combining the operations of
the two companies and transaction fees and costs incident to the Merger. The
estimated charges are not reflected in the pro forma statement of operations
data but are included (at $7 million) for the balance sheet data. The amount
of these charges is a preliminary estimate and therefore is subject to
change. In this presentation Cadre's financial data for the period July 1,
1994 to December 31, 1994 is included in the twelve month periods ended June
30, 1994 and 1995.
</TABLE>
18
<PAGE> 27
BACHMAN AND CADRE
COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE DATA
<TABLE>
The following tables set forth certain unaudited historical per share data
of Bachman and Cadre and combined per share data on an unaudited pro forma basis
after giving effect to the Merger on a pooling of interests basis assuming the
issuance of 0.3020 share of Bachman Common Stock in exchange for each share of
Cadre Common Stock. The unaudited pro forma combined financial data are not
necessarily indicative of the operating results that would have been achieved
had the transaction been in effect as of the beginning of each of the periods
presented and should not be construed as representative of future operations.
<CAPTION>
NINE MONTHS ENDED
MARCH 31, YEAR ENDED JUNE 30,
----------------- ----------------------------
1996 1995 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Bachman -- Historical
Income (loss) from operations(3)............ $(0.27) $(1.07) $(1.12) $(1.30) $(1.81)
Book Value(1)............................... $ 1.04 $ 0.39
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
----------------- ----------------------------
1996 1995 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Cadre -- Historical
Income (loss) from operations(3)............ $(0.35) $(0.22) $(1.08) $(0.14) $(0.46)
Book Value(1)............................... $(0.56) $(0.45)
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, YEAR ENDED JUNE 30,
----------------- ----------------------------
1996 1995 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Pro forma combined -- per combined companies
share
Income (loss) from operations(3)(5)......... $(0.52) $(0.97) $(1.79) $(1.06) $(1.73)
Book Value(1)............................... $(0.03) $ 0.14
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, YEAR ENDED JUNE 30,
----------------- ----------------------------
1996 1995 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Equivalent pro forma combined -- per Cadre
share(4)
Income (loss) from continuing operations.... $(0.16) $(0.30) $(0.55) $(0.33) $(0.53)
Book Value(1)............................... $(0.01) $ 0.04
</TABLE>
- ---------------
(1) Historical book value per share is computed by dividing shareholders' equity
by the number of shares of common stock outstanding at the end of each
period. Pro forma combined-per combined companies share book value is
computed by dividing pro forma shareholders' equity by the pro forma number
of shares of Bachman Common Stock which would have been outstanding had the
merger been consummated as of each balance sheet date.
(2) For purposes of the pro forma combined income from continuing operations and
book value data, Bachman's financial data for the periods ended March 31,
1996 and 1995 and the three years ended June 30, 1995, 1994 and 1993 have
been combined with Cadre's financial data for the nine-month periods ended
March 31, 1996 and 1995 and for the twelvemonth periods ended June 30, 1995,
and December 31, 1994 and 1993, respectively. In this presentation Cadre's
financial data for the period July 1, 1994 to December 31, 1994 is included
in the twelve month periods ended June 30, 1994 and 1995.
(3) Income (loss) from operations includes restructuring costs of $1,852,000,
$2,000,000, $3,651,000 and $9,744,000 for the nine-month periods ended March
31, 1996 and 1995, and the years ended June 30,
19
<PAGE> 28
1995 and 1993, respectively; also includes charges for purchased research
and development of $7,300,000 and $1,736,000 for the years ended June 30,
1995 and 1994, respectively.
(4) The equivalent pro forma combined share amounts per Cadre share are
calculated by multiplying the combined pro forma per share amounts by the
preliminary estimated exchange ratio of 0.3020.
(5) The combined companies expect to incur charges to operations estimated at
approximately $5,000,000 to $7,000,000 in the quarter in which the merger is
consummated, to reflect costs associated with combining the operations of
the two companies and transaction fees and costs incident to the Merger. The
estimated charges are not reflected in the pro forma statement of operations
data but are included (at $7 million) for the balance sheet presentation.
The amount of these charges is a preliminary estimate and therefore is
subject to change.
20
<PAGE> 29
INTRODUCTION
This Prospectus/Joint Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Bachman Information
Systems, Inc., a Massachusetts corporation, ("Bachman"), to be used at the
Special Meeting of the stockholders of Bachman to be held on July 18, 1996 at
10:00 a.m. local time at the offices of Foley, Hoag & Eliot LLP located at One
Post Office Square, Boston, Massachusetts and at any adjournment or postponement
thereof (the "Bachman Special Meeting") and by the Board of Directors of Cadre
Technologies Inc., a Delaware corporation ("Cadre"), to be used at the Special
Meeting of the stockholders of Cadre to be held on at July 18, 1996 at 10:00
a.m. local time the offices of Testa, Hurwitz & Thibeault LLP located at 125
High Street, Boston, Massachusetts and at any adjournment or postponement
thereof (the "Cadre Special Meeting"; together with the Bachman Special Meeting,
the "Special Meetings"). This Prospectus/Joint Proxy Statement is dated June 14,
1996 and was first mailed to the respective stockholders of Bachman and Cadre on
or about June 19, 1996.
This Prospectus/Joint Proxy Statement is also furnished by Bachman to Cadre
stockholders in connection with the issuance of Bachman of shares of Common
Stock, par value $.01 per share, of Bachman ("Bachman Common Stock") in
connection with the Merger described herein.
The information set forth herein concerning Bachman has been furnished by
Bachman and the information set forth herein concerning Cadre has been furnished
by Cadre.
This Prospectus/Joint Proxy Statement contains certain information set
forth more fully in the Agreement and Plan of Merger, dated as of March 25, 1996
by and among Bachman, Cadre and B.C. Acquisition Corp., a wholly-owned
subsidiary of Bachman and Delaware corporation ("Acquisition Corp."), attached
hereto as Annex A (the "Merger Agreement") and is qualified in its entirety by
reference to the Merger Agreement which is hereby incorporated herein by
reference. The Merger Agreement should be read carefully by each Bachman
stockholder and each Cadre stockholder in formulating his or her voting decision
with respect to the proposed Merger and other transactions contemplated by the
Merger Agreement.
RISK FACTORS
The following factors should be considered carefully in evaluating the
proposals to be voted on at the Bachman Special Meeting and the Cadre Special
Meeting and the acquisition of the securities offered hereby. For periods
following the Merger, references to the products, business, operations,
financial results or financial condition of Bachman should be considered to
refer to Bachman and its subsidiaries, including Cadre, unless the context
otherwise requires.
FINANCIAL CONDITION OF BACHMAN
Bachman has entered into a revolving credit agreement with a bank to borrow
up to $4.0 million, increasing to $5.0 million upon achievement of profitability
of at least $200,000 after the Merger. Under the revolving credit agreement
profitability occurs upon the attainment of specified levels of consolidated net
income (generally defined as aggregate net income after deduction for operating
expenses, taxes, charges and other reserves). The term of such agreement extends
through October 1996. The loan is contingent upon meeting certain financial and
operating covenants at the time of any borrowing and over the life of the loan,
including a profit of $250,000 in fourth quarter of fiscal 1996. The financial
covenants include the achievement of (i) certain specified levels of
consolidated net income (loss) at the end of each quarter, (ii) tangible net
worth (generally defined as the excess of tangible assets of Bachman over total
liabilities (excluding any outstanding redeemable preferred stock)) at the end
of each quarter and each month and (iii) liquidity (generally defined as cash
and cash equivalents plus eligible domestic accounts receivable and eligible
international accounts receivable (less indebtedness to the bank)) at the end of
each month. The loan also contains certain adjustments to the financial and
operating covenants, borrowing amounts and interest rate that are triggered upon
the Merger. The loan is secured by all of the assets of Bachman and any
borrowing amounts are tied to a percentage of qualified accounts receivable
outstanding at the time of any borrowing. Any advances to Cadre under the Cadre
Loan shall be applied against Bachman's borrowing amounts. The
21
<PAGE> 30
Company obtained a waiver of compliance from the bank with respect to the loss
limitation covenant of $2 million for the quarter ended September 30, 1995. At
March 31, 1996, the borrowing base under the revolving credit agreement was
$750,000 and Bachman was in compliance with the covenants, as waived, under the
revised revolving credit agreement. In connection with the closing of the loan,
Bachman issued to the Bank a three-year warrant to purchase 47,771 shares of the
Bachman's Common Stock at an exercise price of $3.14 per share. The bank has
exercised its warrants in full. In November 1994 and September 1995, Bachman
raised approximately $11.9 million in equity capital through private placements
of Series A Convertible Preferred Stock, Common Stock Purchase Warrants, and
Common Stock. With the approximately $6.0 million Bachman raised in September
1995 and its revised revolving credit agreement, Bachman anticipates that
existing cash balances and funds generated from operations will be sufficient to
satisfy its cash requirements and other cash needs through fiscal 1996.
Thereafter, notwithstanding the loan and the private placement, Bachman's cash
requirements will depend upon the results of future operations, which cannot be
foreseen. See "Cadre Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."
FIXED EXCHANGE RATIO
Under the terms of the Merger Agreement, approximately each share of Cadre
Common Stock issued and outstanding at the Effective Time will be converted into
the right to receive 0.3020 share of Bachman Common Stock. The Merger Agreement
does not contain any provisions for adjustment of this exchange ratio based on
fluctuations in the price of Bachman Common Stock. Accordingly, the value of the
consideration to be received by stockholders of Cadre upon the Merger will
depend on the market price of Bachman Common Stock at the Effective Time. On
March 25, 1996, the date the Merger Agreement was signed, the closing price of
Bachman Common Stock was $9.625; there can be no assurance that the market price
of Bachman Common Stock on and after the Effective Time will not be lower than
that price. See "-- Volatility of Bachman Share Price."
The Merger Agreement does provide, however, that the effective exchange
ratio will depend on the amount of Cadre shares and options outstanding at the
time of closing and may be adjusted at the closing if Cadre's negative net worth
should exceed an agreed limitation amount. See "The Merger Agreement -- Manner
and Basis of Converting Shares." Accordingly, the exchange ratio actually
applied may differ from the estimate stated in this Prospectus/Proxy Statement.
INTEGRATION OF CERTAIN OPERATIONS; EFFECT ON BACHMAN COMMON STOCK
Bachman and Cadre have entered into the Merger Agreement with the
expectation that the Merger will result in beneficial synergies for the combined
companies. See "The Merger Proposals." Achieving the anticipated benefits of the
Merger will depend in part upon whether the integration of the two companies'
businesses is achieved in an efficient and effective manner, and there can be no
assurance that this will occur. The combination of the two companies will
require, among other things, integration of the companies' respective product
offerings and coordination of their sales and marketing and research and
development efforts. The experience of Bachman and Cadre in dealing with their
earlier acquisitions of other companies indicates that successful integration
may require, among other things, additional development effort to conform the
acquired software products to Bachman's preferred styles of user interface and
similar details and to convert some acquired products to other operating systems
used by Bachman's customers and prospective customers, and additional management
attention to supervise continuing development at a remote location. There can be
no assurance that integration will be accomplished smoothly or successfully. The
integration of certain operations following the Merger will require the
dedication of management resources which may temporarily distract attention from
the day-to-day business of the combined companies. Failure to effectively
accomplish the integration of the two companies' operations could have an
adverse effect on Bachman's results of operations and financial condition.
Furthermore, the issuance of shares of Bachman Common Stock pursuant to the
Merger will have the effect of reducing Bachman's income per share and could
reduce the market price of Bachman Common Stock unless and until revenue growth
or cost savings and other business
22
<PAGE> 31
synergies sufficient to offset the effect of such issuance can be achieved.
There can be no assurance that such cost savings or other synergies will be
achieved.
RESULTS OF RECENT OPERATIONS
Bachman's operating results for the three years ended June 30, 1995 and the
nine months ended March 31, 1996 were significantly adversely affected by the
continuing market trend of Bachman's customers moving from mainframe development
toward client/server and similar computing platforms together with Bachman's
efforts to respond to those trends.
As Bachman continues to make the transition from providing tools focused
solely on mainframe application development to supporting customers' needs for a
more open and flexible set of solutions aimed at the growing client/server
market, it faces many challenges. Bachman plans to enhance its product offerings
through development efforts, strategic alliances and acquisitions to improve its
long-term performance. The transition has had an adverse effect on Bachman's
operating results during the first nine months of fiscal 1996 and will continue
to affect operating results during the remainder of the 1996 fiscal year.
Bachman anticipates that existing cash balances and funds generated from
operations will be sufficient to satisfy its cash requirements through fiscal
1996. Thereafter, Bachman's cash requirements will depend on the results of
future operations, including the impact of the acquisition of Cadre, which
cannot be foreseen.
SIGNIFICANT RECENT LOSSES; SHORT PRIOR HISTORY OF PROFITABILITY
Bachman received its first venture capital financing in the third quarter
of fiscal 1986, shipped its first software products in the fourth quarter of
fiscal 1988, and did not reach profitability until the first quarter of fiscal
1991. While Bachman was profitable in fiscal 1991 and fiscal 1992, it incurred
net losses of $14.7 million, $11.5 million and $10.3 million in fiscal 1993,
fiscal 1994 and fiscal 1995, respectively. Approximately $1.75 million of the
loss in fiscal 1993 was attributable to costs in the second quarter of fiscal
1993 resulting from a 15% reduction in staff, costs of an exploration of
strategic and financial alternatives, and other expenses relating to a
restructuring intended, among other things, to facilitate a broadening of the
range of Bachman's products. A further restructuring in the fourth quarter of
fiscal 1993 resulted in a charge of approximately $4.6 million, involving
reductions in staff and writedowns of certain assets, including capitalized
software and prepaid royalties. In September 1994, the first quarter of fiscal
1995, Bachman recorded a restructuring charge of approximately $2.0 million
resulting from reductions in staff and related facilities expenses and the
termination of certain contracts. Future operating results will depend on many
factors, including demand for Bachman's products, Bachman's ability to obtain
major orders, the level of competition, Bachman's ability to develop and market
new products, the impact of the acquisition of Cadre, and the ability of its
officers and key employees to manage Bachman's business and control costs.
During the first nine months of fiscal 1996, Bachman had a loss of approximately
$3.0 million. There can be no assurance that revenue growth or profitable
operations on a quarterly or annual basis will be achieved during fiscal 1996 or
in any subsequent fiscal year.
FINANCIAL CONDITION OF CADRE
During the last three calendar years Cadre's revenues have declined from
$42,274,000 for the year ended December 31, 1993 to $39,467,000 for the year
ended December 31, 1995. Net losses for the three year period ended December 31,
1995 have totaled $21,636,000 with the loss during the year ended December 31,
1995 equal to $14,630,000. These losses have weakened the stockholder's equity
(deficiency) balance to a deficit position of $6,393,000 as of December 31,
1995. During the quarter ended March 31, 1996, Cadre incurred another net loss
of $1,783,000, increasing the stockholder's deficiency to $8,074,000. It is
expected that Cadre will continue to have substantial cash needs and Cadre may
continue to operate at a loss. Total employees have decreased from 311 as of
December 31, 1993 to 204 as of March 31, 1996. This reduction is due, in part,
to restructuring of operations in 1995, which eliminated a total of 67
employees, and to continued attrition of the workforce. Restructurings have
affected United States as well as international operations. These decreases in
employees may have an impact on the operations and financial performance of
Cadre. Following the effectiveness of the Merger, the combined companies will
not retain all of Cadre's current employees, because
23
<PAGE> 32
of elimination of duplicate functions and facilities. The currently-estimated
costs related to termination of employees, approximately $2.7 million, have been
reflected in the accompanying pro forma financial statements. See Note 4 of
Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
There can be no assurance that these factors and other issues involving
Cadre and its business will not have an adverse affect on Bachman after the
consummation of the Merger.
CHANGING MARKET; SHIFTING INDUSTRY DEMAND TOWARD CLIENT-SERVER PRODUCTS
Bachman develops products that enable organizations to create applications
that integrate diverse information sources into new computing environments, to
modify applications as business and technology change, and to run those
applications on a variety of platforms. In the past, most information-intensive
applications were built using large, centralized mainframe computers. More
recently, personal computer networks and related "client/server" technology has
made a variety of new computing configurations possible. In response to this
change in the market, Bachman, like many others in its industry, has experienced
a decline in demand for its products tailored to the large mainframe environment
and has devoted much effort to changing its product mix to serve the rising
demand for products suitable for the client/server environment. The frequent and
rapid changes in customer preferences and technology that have affected
Bachman's mainframe-related products in the recent past will continue in the
future. As a result, Bachman's future success will depend upon its ability to
enhance its current products and to develop and introduce new products that
accommodate advances in software and hardware technology and changing customer
requirements, particularly with respect to client/server applications. Demand
for IBM and other mainframe-based CASE products has declined precipitously as
the computer market has moved toward client/server products. Bachman has begun
to develop products and services for client/server application in recognition of
the industry shift away from mainframe applications. The industry is
aggressively seeking to reduce the costs of computing resources and is rapidly
moving away from expensive mainframe-based development toward less expensive
newer technology on client/server and similar computing platforms. This shift
has had a material adverse effect on Bachman's results of operations.
FLUCTUATIONS IN QUARTERLY PERFORMANCE; SIGNIFICANT CUSTOMER
Throughout its history, Bachman's revenues have varied from quarter to
quarter, with the largest portion of revenues recognized in the fourth quarter
of each fiscal year. In the normal course of events, Bachman may realize lower
revenues in the first quarter than in the preceding fourth quarter and also may
realize lower revenues in the third quarter than in the preceding second
quarter. Bachman has also frequently recognized more revenues in the last month
of each quarter than in either of the preceding two months. Bachman believes
that these quarterly and monthly patterns are partly attributable to Bachman's
sales commission policies, which compensate sales personnel for meeting or
exceeding annual quotas, and to the budgeting and purchasing cycles of
customers. In addition, Bachman's revenues and earnings have fluctuated
historically, and may fluctuate in the future, due to the timing of large
individual orders. In the second quarter of fiscal 1996, Bachman had a series of
significant orders from a single major systems integrator totalling $2.4
million. There were no large orders ($1.0 million or more) during the first or
third quarters of fiscal 1996. Bachman completed an order for approximately $1.1
million from an international customer in the third quarter of fiscal 1995.
Bachman usually has no significant backlog, and substantially all of its product
revenues in any quarter result from sales made in that quarter. If sales do not
close in a quarter as expected, Bachman's results of operations for that quarter
would be adversely affected. Net income may be disproportionately affected by a
reduction in revenues because only a small portion of Bachman's expenses vary
with revenues.
Historically, Bachman relied significantly on its relationship with
International Business Machines Corporation ("IBM") for development and
marketing of Bachman's products. IBM was Bachman's single largest customer in
each of fiscal 1993, 1994, 1995 and the first nine months of fiscal 1996 when
revenues from IBM (including license and maintenance fees paid by IBM in
connection with its own use of Bachman products, as well as amounts paid by IBM
as a distributor and systems integrator) accounted for 16%, 13%, 20% and 35% of
Bachman's total revenues, respectively. In January 1993, Bachman discontinued
its membership in the IBM International Alliances for AD/Cycle, System View, and
Information Warehouse.
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Bachman and IBM entered into a settlement and release agreement dated June 30,
1993 pursuant to which Bachman and IBM severed certain of their remaining
relationships. Each party released and discharged the other party from all known
and unknown claims occurring on or prior to June 30, 1993.
HIGHLY COMPETITIVE INDUSTRY; INCREASING COMPETITION; DEPENDENCE ON KEY PERSONNEL
The market for Bachman's software products is highly competitive, and
Bachman expects competition to increase. Companies competing in related markets,
including hardware manufacturers, could seek to enter this market with software
products which offer functionality similar to that offered by Bachman's
products. The computer aided software engineering ("CASE") market generally has
been adversely affected by competition from other programming support
environments. In addition, Bachman expects to encounter additional competitors
as it seeks to expand its product line beyond the mainframe market into the
client/server marketplace. Many of Bachman's existing and potential competitors
have greater financial, technical and other resources than Bachman. In addition,
mergers or other business combinations among competitors could strengthen them
and create larger companies with broader product offerings, more extensive
market influence and greater resources. Maintaining and improving Bachman's
competitive position will require continued investment by Bachman in research
and development and marketing, particularly as Bachman endeavors to expand its
product line beyond the mainframe market. There can be no assurance that Bachman
will have sufficient resources to make that investment. Competitive pressures
could result in loss of market share, price reductions and increases in expenses
that could adversely affect Bachman's business.
Bachman has experienced turnover in its personnel in the past including
certain executives and key management and technical employees. Bachman's future
success will depend in large part upon its ability to attract and retain skilled
executives and management and technical personnel, including employees of Cadre.
Competition for such personnel in the software industry continues to be intense.
There can be no assurance that Bachman will be successful in attracting and
retaining the personnel it requires for its operations.
VOLATILITY OF BACHMAN SHARE PRICE
Since the completion of Bachman's initial public offering in November 1991,
the closing price of Bachman Common Stock, as reported by the Nasdaq National
Market, has ranged from $1 3/4 to $37 3/4. The closing price of Bachman Common
Stock reached $37 3/4 in February 1992, which was before Bachman began its
transition from the mainframe application market to the client/server market.
The highest closing price of the Common Stock as reported on the Nasdaq National
Market during Bachman's last two completed fiscal years was $7.875 per share and
during the first nine months of fiscal 1996 was $11.50 per share. See "Bachman
Price Range of Common Stock and Dividends." Announcements of technological
innovations or new products by Bachman or its competitors, quarterly variations
in Bachman's operating results, general factors affecting the computer software
industry, and other factors may cause the market price of Bachman Common Stock
to fluctuate significantly in the future. In addition, in recent years the stock
market has experienced large price and volume fluctuations, which often have
been unrelated to the operating performance of specific companies or market
sectors.
RISKS OF INTERNATIONAL OPERATIONS; RELIANCE ON DISTRIBUTORS
Approximately 35%, 47%, 53% and 64% of Bachman's revenues in fiscal 1993,
1994, 1995 and the first three quarters of fiscal 1996, respectively, were
attributable to international sales.
The future contribution of sales from Bachman's international subsidiaries
to its results of operations depends on Bachman's success in maintaining
cost-effective direct marketing operations through Bachman's wholly-owned
subsidiaries in France, Germany, Italy, Singapore, Spain and the United Kingdom.
In September 1994, as part of a restructuring, Bachman reorganized the operation
of its German subsidiary. Sales in countries in which Bachman continues to use
independent distributors will remain subject to the distributors' financial
condition and success, which cannot be controlled by Bachman. Other risks
inherent in Bachman's international business generally include exposure to
currency fluctuations, longer payment cycles,
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greater difficulties in accounts receivable collection and the requirement of
complying with a wide variety of foreign laws.
DEPENDENCE ON PROPRIETARY TECHNOLOGY
Bachman's success is heavily dependent upon its proprietary software
technology. Bachman relies principally on a combination of copyrights, trade
secrets and contractual rights to protect its proprietary technology. Charles W.
Bachman has assigned to Bachman a patent on certain technology used in its
products, United States Patent 4,631,664, "Partnership Data Base Management
System and Method." This patent covers the unique internal formats used to store
design information in many of Bachman's products. Mr. Bachman and other
inventors have also assigned to Bachman patents with respect to the systems used
in certain Bachman products for dynamically modeling organizational information
systems (United States Patent 5,146,591, "Dynamic Information Management System
Utilizing Entity-Relationship Information Model in which the Attribute is
Independent of an Entity") and for processing complex information representative
of business transactions (United States Patent 5,179,698, "System for
Transforming User Data in Accordance with an Algorithm Defined by Design Data
and for Evaluating the Transformed Data Against Logical Criteria"). Seven
additional patents have been granted by the United States Patent and Trademark
Office (the "PTO") pertaining to technology used in Bachman's products. In
addition, patent applications filed in April and December 1991 (derived from
filings under the Patent Cooperation Treaty) are pending before the Canadian,
Japanese and European patent offices. These applications are directed to the
subject matter of all of the above referenced Bachman patents except U.S. Patent
4,631,664. Bachman has not been notified that any of those pending applications
has been denied. In connection with its acquisition of WindTunnel, Bachman
acquired rights to certain patent applications pending with the PTO pertaining
to the technology used in the WindTunnel product. The PTO has rejected some of
the claims of those applications on the basis, among others, of prior art with
respect to the technology involved. In view of the probable expense and
difficulty of overcoming the rejections, the uncertainty of the probable
outcome, and the availability of other means such as copyright, trademark, and
trade secret law to protect Bachman's rights in the technology, Bachman has
decided not to pursue prosecution of the WindTunnel patent applications. There
can be no assurance that any patents will be issued in respect of its
applications, or that steps taken by Bachman to protect its proprietary rights
will be adequate to prevent misappropriation of its technology or independent
development by others of similar technology.
Although Bachman believes that its products and technology do not infringe
on any existing proprietary rights of others, the use of patents to protect
software has increased, and there can be no assurance that third parties will
not assert infringement claims in the future. If any such claim were to be
asserted, it might involve costly and protracted litigation. No assurance can be
given that Bachman would be successful in any such litigation or that, if it
were not successful, it would be able to license the disputed proprietary rights
on commercially reasonable terms.
CONTINUED EXPANSION BY BACHMAN
Bachman may acquire other companies, products or technologies in the
future. There can be no assurance that future acquisitions by Bachman can be
integrated in an efficient and effective manner. There can be no assurance that
future acquisitions will not result in costs or liabilities that could adversely
effect Bachman's results of operations and financial condition, or that Bachman
will obtain the anticipated or desired benefits of these acquisitions.
In addition, if the Authorized Bachman Common Stock Proposal is approved,
Bachman will be authorized to issue up to a total of 52.4 million shares of
Bachman Common Stock, of which fewer than approximately 18 million will be
outstanding immediately following the closing of the Merger. Issuance of a
significant number of additional shares of Bachman Common Stock in connection
with future acquisitions would cause the holders of Bachman Common Stock to
suffer an immediate and substantial dilution in the net tangible book value per
share of the Bachman Common Stock. From 1993 through 1995, Bachman issued
650,000 shares of Bachman Common Stock and Cadre issued 2.2 million shares of
Cadre Common Stock in connection with acquisitions. See "The Authorized Bachman
Common Stock Proposal."
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ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS OF CHARTER AND BY-LAWS, MASSACHUSETTS
LAW
AND EMPLOYMENT AGREEMENTS
The Bachman Board has the authority to issue up to 1,600,000 shares of
preferred stock and to determine the price, rights, preferences, privileges and
restrictions, including voting rights, of those shares without any further vote
or action by the stockholders. The rights of the holders of Bachman Common Stock
will be subject to, and may be adversely affected by, the rights of the holders
of any Bachman preferred stock that may be issued in the future. The issuance of
Bachman preferred stock, while providing desirable flexibility in connection
with possible acquisitions and other corporate purposes, could have the effect
of making it more difficult for a third party to acquire a majority of the
outstanding voting stock of Bachman. Bachman has no present plans to issue
shares of its preferred stock. In addition, the classification of the Board of
Directors of Bachman and certain other provisions of Bachman's Restated Articles
of Organization (the "Bachman Articles"), its Amended and Restated By-Laws (the
"Bachman By-Laws") and Massachusetts law could delay or frustrate the removal of
incumbent directors and could make more difficult a merger, tender offer or
proxy contest involving Bachman. Further, Bachman and each of its current
executive officers except its President, and Vice President-Business Development
and Marketing have entered into employment agreements that become effective only
upon the occurrence of certain "changes in control." Other officers of Bachman
also have arrangements providing them with severance payments and other benefits
if their employment is terminated without cause or, in some cases, in connection
with a change in control of Bachman. While these agreements were intended by
Bachman to limit further departures by executive officers, the agreements also
could have the effect of making a merger, tender offer or proxy contest more
difficult.
SHARES OF COMMON STOCK ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Bachman Common Stock in the
public market could adversely affect the market price for the Bachman Common
Stock. Sales of substantial amounts of Bachman Common Stock by existing holders
may impair Bachman's ability to raise capital in the future through the sale of
Bachman Common Stock or other equity securities.
Bachman has registered 7,996,604 shares of Bachman Common Stock issuable
under its stock option and stock purchase plans, of which at least 1,951,196
shares were subject to outstanding options at June 7, 1996. Shares issued upon
the exercise of options and shares issued under Bachman's stock purchase plan
generally will be eligible for sale in the public market.
The holders of up to 2,901,945 shares (excluding the shares registered
hereunder) of Bachman Common Stock have certain rights to registration of their
shares under the Securities Act.
The shares of Bachman Common Stock issued to Cadre stockholders in
connection with the Merger will be immediately eligible for sale in the public
market, subject to certain restrictions described in "The Merger
Agreement -- Affiliate Agreements." In addition, employees who own options to
purchase Cadre Common Stock will have options to purchase Bachman Common Stock,
some of which will be eligible for sale in the public market within
approximately 60 days of the closing of the Merger.
Sales of substantial amounts of the foregoing shares in the public market
could adversely affect the market price of Bachman Common Stock.
POSSIBLE DELISTING OF COMMON STOCK FROM THE NASDAQ NATIONAL MARKET
Bachman Common Stock is listed on the Nasdaq National Market. Listing on
the Nasdaq National Market permits a company's securities to be quoted over the
automated electronic quotation system maintained by the National Association of
Securities Dealers, Inc., which makes current quotations of an issuer's
securities available to brokers and dealers nationwide. One of the requirements
for the continued listing of common stock on the Nasdaq National Market is that
either the minimum bid price is at least $1 or that the market value of the
public float is $3 million and there are $4 million of net tangible assets.
Although
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Bachman currently meets this requirement, there can be no assurance that it will
continue to do so and that Bachman Common Stock will continue to be listed on
the Nasdaq National Market.
DIVIDEND POLICY
To date, Bachman has not declared or paid cash dividends on its stock and
does not intend to pay cash dividends to its stockholders in the near future.
THE COMPANIES
Bachman was incorporated in Massachusetts in 1983. Its principal executive
offices are located at 8 New England Executive Park, Burlington, Massachusetts
01803, and its telephone number is (617) 273-9003. Unless the context indicates
otherwise, "Bachman" refers to Bachman Information Systems, Inc. and its
subsidiaries.
Acquisition Corp. was incorporated in Delaware in February 1996 for the
purpose of effecting the Merger. Acquisition Corp. is a direct, wholly-owned
subsidiary of Bachman with principal executive offices at the same address and
with the same telephone number as Bachman.
Cadre was incorporated in Delaware in 1988 and is the successor of Cadre
Technologies Inc. and MicroCASE Inc., both of which merged into Cadre on January
31, 1989. Cadre's principal executive offices are located at 222 Richmond
Street, Providence, Rhode Island 02903, and its telephone number is (401)
351-5950.
THE BACHMAN SPECIAL MEETING
PROPOSALS
At the Bachman Special Meeting, holders of Bachman Common Stock will be
asked to vote upon the proposal to approve and adopt the Merger Agreement and
approve the issuance of shares of Bachman Common Stock in connection with the
Merger Agreement (the "Merger/Stock Issuance Proposal"). Pursuant to the Merger
Agreement, among other things, (a) up to 4,850,000 shares of Bachman Common
Stock will be issued to Cadre stockholders, option holders and one warrant
holder, meaning that approximately every 3.311 shares of Cadre Common Stock
(other than duly qualified dissenting shares) would be converted into the right
to receive one share of Bachman Common Stock, subject to possible adjustments
and rounding as described in the Merger Agreement, and (b) Acquisition Corp.
would be merged with and into Cadre in the Merger, with Cadre becoming a
whollyowned subsidiary of Bachman. Holders of Bachman Common Stock are being
asked to approve the Merger/Stock Issuance Proposal in order to comply with
Section 6 of Schedule D to the By-Laws of the National Association of Securities
Dealers, Inc., which requires that Nasdaq National Market issuers obtain
stockholder approval if, in connection with the acquisition of the stock or
assets of another company, the number of shares of common stock to be issued is
or will be equal to or in excess of 20% of the number of shares of common stock
outstanding before the issuance of the stock or securities.
In addition, holders of Bachman Common Stock will be asked to vote to
approve proposals to (a) change Bachman's name to Cayenne Software, Inc. upon
consummation of the Merger (the "Bachman Name Change Proposal") (b) increase the
number of shares of Bachman Common Stock that Bachman is authorized to issue by
26.2 million (the "Authorized Bachman Common Stock Proposal") and (c) approve in
advance one or more adjournments of the Bachman Special Meeting if and to the
extent such adjournments are proposed by the management of Bachman (the "Bachman
Adjournment Proposal").
There may be transacted such other business as may properly come before the
Bachman Special Meeting.
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VOTING AND PROXY INFORMATION
VOTING RIGHTS AND REQUIREMENTS
The holders of Bachman Common Stock are entitled to one vote for each share
held on each matter submitted to vote.
Approval and adoption of the Stock Issuance/Merger Proposal and the Bachman
Adjournment Proposal require the affirmative vote of the holders of a majority
in interest of the shares of Bachman Common Stock present in person or by a
properly executed proxy and entitled to vote at the Bachman Special Meeting.
Approval and adoption of the Bachman Name Change Proposal and the Authorized
Bachman Common Stock Proposal require the affirmative vote of the holders of a
majority in interest of the shares of Bachman Common Stock issued and
outstanding and entitled to vote.
Only holders of record of Bachman Common Stock at the close of business on
the Bachman Record Date are entitled to notice of, and to vote at, the Bachman
Special Meeting. On the Bachman Record Date, there were outstanding 12,742,120
shares of Bachman Common Stock held by 254 holders of record, of which 48,359
shares (or less than 1%) were held by directors and executive officers of
Bachman and their affiliates. To the best of Bachman's knowledge, each of
Bachman's directors and executive officers who owns shares of Bachman Common
Stock eligible to be voted intends to vote those shares in favor of the
Merger/Stock Issuance Proposal, the Bachman Name Change Proposal, the Authorized
Bachman Common Stock Proposal and the Bachman Adjournment Proposal.
QUORUM
A quorum will exist at the Bachman Special Meeting if holders of a majority
in interest of all capital stock issued, outstanding and entitled to vote are
present in person or represented by a properly executed proxy. The stockholders
present in person or represented by proxy at the Bachman Special Meeting may
approve the Bachman Adjournment Proposal, despite the absence of a quorum for
other purposes.
Abstentions and broker non-votes will be counted for purposes of
determining a quorum, but broker non-votes will be treated as not voting on each
proposal. As a result, both abstentions and broker non-votes will have the same
effect as votes against a proposal that requires approval by a majority of the
outstanding Bachman Common Stock. On other matters, including the Merger/Stock
Issuance Proposal, abstention will have the same effect as a vote against, and
broker nonvotes will have no effect.
PROXY INFORMATION
All shares of Bachman Common Stock represented by a properly executed and
returned proxy will be voted at the Bachman Special Meeting in accordance with
the directions specified on the proxy, unless the proxy has previously been
revoked. If no direction is indicated for one or more of the proposals on a
properly signed proxy, the shares represented thereby will be voted FOR each
proposal for which a box has not been marked. If any other matters are properly
presented for action at the Bachman Special Meeting, the persons named in the
proxies and acting thereunder will have discretion to vote on such matters in
accordance with their best judgment.
A stockholder who has executed and returned a proxy may revoke the proxy at
any time before it is voted. A stockholder who wishes to revoke a proxy can do
so by (i) delivering written notice of revocation to the Clerk of Bachman, (ii)
submitting to the Clerk of Bachman a subsequently dated and signed proxy or
(iii) voting in person at the Bachman Special Meeting. Any such notice or
subsequent proxy should be sent to Bachman Information Systems, Inc., 8 New
England Executive Park, Burlington, Massachusetts 01803, Attention: Eugene J.
DiDonato.
SOLICITATION OF PROXIES
In addition to solicitations by mail, the directors, executive officers and
employees of Bachman may solicit proxies from Bachman stockholders by telephone
or electronic transmission or in person.
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THE CADRE SPECIAL MEETING
PROPOSALS
At the Cadre Special Meeting holders of Cadre Common Stock will be asked to
vote upon the proposal to adopt the Merger Agreement (the "Merger Proposal").
In addition, holders of Cadre Common Stock will be asked to vote upon the
proposal to approve in advance one or more adjournments of the Cadre Special
Meeting if and to the extent such adjournments are proposed by the management of
Cadre (the "Cadre Adjournment Proposal").
There may be transacted such other business as may properly come before the
Cadre Special Meeting.
VOTING AND PROXY INFORMATION
VOTING RIGHTS AND REQUIREMENTS
Holders of Cadre Common Stock are entitled to cast one vote per share with
respect to each of the Cadre Merger Proposal and the Cadre Adjournment Proposal.
Approval of the Cadre Merger Proposal requires the affirmative vote of the
holders of at least 66 2/3% of the outstanding shares of Cadre Common Stock. As
a result of the foregoing voting requirement, the failure of any Cadre
stockholder to be present or represented by proxy at the Cadre Special Meeting
will have the same effect as if that stockholder were to vote against the Cadre
Merger Proposal. Further, any Cadre stockholder's abstention from voting on the
Cadre Merger Proposal at the Cadre Special Meeting will have the same effect as
if that stockholder voted against the proposal.
Approval of the Cadre Adjournment Proposal requires the affirmative vote of
a majority of the votes properly cast at the Cadre Special Meeting.
Only holders of record of Cadre Common Stock at the close of business on
the Cadre Record Date are entitled to notice of, and to vote at, the Cadre
Special Meeting. At the Cadre Record Date, there were outstanding 14,364,846
shares of Cadre Common Stock held by 463 holders of record, of which 18% were
held by directors and executive officers of Cadre and their affiliates. To the
best of Cadre's knowledge, each of the Cadre directors and executive officers
who owns shares of Cadre Common Stock intends to vote those shares in favor of
both the Merger Proposal and the Cadre Adjournment Proposal.
QUORUM
For purposes of considering the Merger Proposal, a quorum will exist at the
Cadre Special Meeting if holders of a majority of the outstanding shares of the
Cadre Common Stock entitled to vote are present in person or represented by
proxy. Although a quorum may be present with respect to the Merger Proposal, the
proposal may not be approved without the affirmative vote of holders of at least
66 2/3% of the outstanding shares of Cadre Common Stock.
The stockholders present in person or represented by proxy at the Cadre
Special Meeting may approve the Cadre Adjournment Proposal, despite the absence
of a quorum for other purposes.
Abstentions will be included as present and represented for purposes of
establishing a quorum for the transaction of business.
PROXY INFORMATION
All shares of Cadre Common Stock represented by a properly executed and
returned proxy will be voted at the Cadre Special Meeting in accordance with the
directions specified on the proxy, unless the proxy has previously been revoked.
If no direction is indicated for one or both of the proposals on a properly
signed proxy, the shares represented thereby will be voted FOR each proposal for
which a box has not been marked. If any other matters are properly presented for
action at the Cadre Special Meeting, the persons named in the
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proxies and acting thereunder will have discretion to vote on such matters in
accordance with their best judgment.
A stockholder who has executed and returned a proxy may revoke the proxy at
any time before it is voted. A stockholder who wishes to revoke a proxy can do
so by (i) delivering written notice of revocation to the Secretary of Cadre,
(ii) submitting to the Secretary of Cadre a subsequently dated and signed proxy
or (iii) voting in person at the Cadre Special Meeting. Any such notice or
subsequent proxy should be sent to Cadre Technologies Inc., 222 Richmond Street,
Providence, Rhode Island 02903, Attention: Edson H. Whitehurst, Jr.
SOLICITATION OF PROXIES
In addition to solicitations by mail, the directors, executive officers and
employees of Cadre may solicit proxies from Cadre stockholders by telephone or
electronic transmission or in person. CADRE STOCKHOLDERS SHOULD NOT SEND THEIR
STOCK CERTIFICATES WITH THEIR PROXY CARDS.
THE MERGER PROPOSALS
EFFECTS OF THE MERGER
If the Merger is effected, Acquisition Corp. will be merged with and into
Cadre, which will become a wholly-owned subsidiary of Bachman. After the Merger,
Cadre will continue to own and operate the assets and business it currently owns
and operates.
Upon consummation of the Merger, holders of Cadre Common Stock will cease
to have any direct equity interest in Cadre. The Bachman Common Stock to be
received by holders of Cadre Common Stock upon consummation of the Merger will
provide those holders with an opportunity to have a continuing equity interest
in the combined operations of Bachman and Cadre.
Up to 4,850,000 shares of Bachman Common Stock will be issued to Cadre
stockholders, option holders and one warrant holder. Based on estimates as of
May 31, 1996, each share of Cadre Common Stock would be converted into 0.3020
share of Bachman Common Stock and the actual amount of Bachman shares issued
would be 4,621,667. Based upon the number of shares of Bachman Common Stock
issued and outstanding as of the Bachman Record Date, former holders of Cadre
Common Stock will hold between approximately 28.0% and approximately 26.6% of
Bachman's total issued and outstanding shares on a fully diluted basis.
BACKGROUND AND PURPOSE OF THE MERGER
Bachman, Cadre and Acquisition Corp. executed the Merger Agreement on March
25, 1996. The Merger Agreement was preceded by a letter of intent entered into
by Bachman and Cadre on December 6, 1995 and later amended.
BACHMAN'S REASONS FOR THE MERGER
The Board of Directors of Bachman believes that the acquisition of Cadre's
business will provide it with greater market penetration through the acquisition
of additional products, broader direct and indirect channels of distributors and
more strategic business partnerships.
Bachman's Board of Directors considers that the following factors indicate
that the Merger would be in the best interest of Bachman and its stockholders:
(i) the acquisition of Cadre would provide Bachman with technology in the
object-oriented marketplace, a relatively new and competitively important area;
(ii) the Merger would give Bachman the opportunity to expand the customer base
for its products (i.e., the commercial market) by marketing them to Cadre's
customers in the technical market and vice versa; and (iii) the combined
companies would have greater critical mass thereby offering customers a broader
range of products and services in both the commercial and technical markets.
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CADRE'S REASONS FOR THE MERGER
The Board of Directors of Cadre believes that the Merger will provide Cadre
with the benefits of a broader combined product line of Bachman and Cadre
products and access to the markets in which Bachman products are now sold. In
entering into the Merger Agreement, Cadre also seeks to maximize shareholder
value by providing Cadre stockholders with access to a public market for
investment liquidity. Since the completion of Bachman's initial public offering
in November 1991, the closing price of Bachman Common Stock, as reported by the
Nasdaq National Market, has ranged from $1 3/4 to $37 3/4. The closing price of
Bachman Common Stock reached $37 3/4 in February 1992, which was before Bachman
began its transition from the mainframe application market to the client/server
market. During fiscal 1995 and the first three quarters of fiscal 1996, the low
and high closing prices of Bachman Common Stock, as reported by the Nasdaq
National Market, were $1.750 and $7.875, and $5.8125 and $11.50, respectively.
Cadre's Board of Directors considers that the following factors indicate
that the Merger would be in the best interest of Cadre and its stockholders: (i)
the Merger with Bachman would provide needed working capital to Cadre; (ii) the
Merger with Bachman would provide access to a publicly traded security for Cadre
stockholders; (iii) the Board's evaluation of the current value of the Bachman
Common Stock to be exchanged for the Cadre Common Stock in light of the
prospects for Bachman after a merger with Cadre; (iv) the Merger would provide a
faster entry into the commercial market for Cadre products; (v) the larger
combined company would create a greater critical mass for Cadre's customers; and
(vi) the current financial position of Cadre requires action if Cadre does not
proceed with the Merger.
MATERIAL CONTACTS AND BOARD DELIBERATIONS
In early October, 1995, Peter J. Boni, President and Chief Executive
Officer of Bachman contacted James P. Lally, a Director of Cadre, to arrange a
meeting. On October 4, 1995, Mr. Boni and Gerald Christopher, Chief Financial
Officer of Bachman, met with Lawrence Sutter, Chief Executive Officer of Cadre,
Mr. Lally, and Ed Whitehurst, the Chief Financial Officer of Cadre, to discuss
generally possible strategic alliances between Bachman and Cadre, including the
possible merger of the companies (the "Merger").
On October 24, 1995, Mr. Boni and Mr. Christopher met with certain members
of Cadre's management, including Mr. Whitehurst, Ronald Imbriale, acting Chief
Operating Officer of Cadre, and Mory Bahar, Vice President of Marketing of
Cadre, to discuss their companies' respective businesses, product offerings,
marketing strategies and customer bases.
On October 30, 1995, Mr. Boni reviewed by telephone with the members of
Bachman's Board of Directors, Cadre's business, product offerings, marketing
strategy and customer bases. Mr. Boni also reviewed the business synergies
between the two companies, the broad terms of the possible Merger and Cadre's
general financial condition.
On November 8, 1995, at the offices of Bachman's outside counsel, Messrs.
Boni and Christopher met with Messrs. Sutter and Whitehurst to review each
company's financial condition and business and discuss the preliminary terms and
structure of the possible Merger of the companies. During the following week,
Mr. Boni and Massood Zarrabian, Vice President of Product Operations of Bachman,
met with William Goddard and Jon Flint, members of the Board of Directors of
Cadre, to discuss the broad terms of the possible Merger and to review each
company's product offerings and product and business synergies between the two
companies.
On November 15, 1995, Mr. Boni presented to the Bachman Board of Directors
the business, product and customer synergies between the companies and the
preliminary terms and structure of the possible Merger. The business synergies
between the two companies would result in a single entity capable of delivering
a number of practical solutions for the design and development needs of software
users with core competencies in modeling, database design and development,
objects and components. From a product standpoint the two companies would be
able to offer structured, data-driven and object-oriented solutions to software
developers in the commercial and technical applications. From a customer
standpoint each company would be able to leverage the other customer base to
sell its products since Bachman focuses primarily on the
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commercial market and Cadre on the technical market. In addition, Mr. Zarrabian
made a presentation to the Board of Directors on the product offerings and
product synergies of the two companies. The acquisition would give Bachman a
presence in the competitively important object-oriented as well as established
structured analysis and design markets. The combined company product line would
include solutions for: model-driven object-oriented application generation;
model-driven data modeling; database design and implementation; and structured
analysis and design for real-time embedded applications. On the basis of those
presentations, the Bachman Board of Directors informally authorized management
to proceed with further negotiations and the preparation of a letter of intent
at such meeting. After that meeting, Bachman prepared a term sheet which was
delivered to Cadre's Chief Executive Officer outlining the proposed terms of the
Merger of the companies.
Subsequently, during the middle of November 1995, Mr. Boni had various
meetings with Messrs. Goddard, Sutter, Whitehurst, and Imbriale to further
discuss the customer, product and business synergies between the two companies
and possible organizational structure of the combined companies.
During the end of November 1995, and the first week of December 1995, a
variety of telephonic meetings took place involving Mr. Boni, Eugene DiDonato,
Vice President and General Counsel of Bachman, and Messrs. Sutter, Goddard, and
Whitehurst, as well as each company's legal counsel and Stratagem Partnering,
Inc., Bachman's financial advisor. Negotiations regarding the principal terms of
the Merger, including exchange ratios, and adjustments thereto, rights of
parties to terminate the Merger, the structure of the transaction, operating
covenants prior to the closing, and the timing of the Merger were discussed. On
December 7, 1995, a letter of intent was executed between Bachman and Cadre
setting out the general terms of the Merger. After December 7, 1995, senior
management and representatives of Bachman and Cadre conducted their respective
accounting, financial and legal due diligence review.
On January 17, 1996, the Board of Directors of Bachman met with certain
members of management, with outside counsel present, to discuss legal and
financial due diligence performed by Bachman, its outside counsel and its
independent accountants up to that time. The Board of Directors considered the
financial and business implications of the transaction, technology and product
strategy and corporate synergies and authorized management to proceed with the
preparation of the Merger Agreement.
Bachman's Board of Directors also considered the following factors in
determining to proceed with the Merger: (i) the acquisition of Cadre would
provide Bachman with technology in the object-oriented marketplace, a relatively
new and competitively important area; (ii) the Merger would give Bachman the
opportunity to expand the customer base for its products (i.e., the commercial
market) by marketing them to Cadre's customers in the technical market and vice
versa; (iii) the combined companies would have greater critical mass thereby
offering customers a broader range of products and services in both the
commercial and technical markets; and (iv) the strain that the Merger would put
on the management's resources. The Board did not assign any priority or
weighting among the first three factors, and considered that the fourth factor
did not significantly offset the advantages of the merger, because the Board
believed that the management could cope with the enlarged business.
On February 6, 1996, the Bachman Board of Directors met with certain
members of management, outside counsel, independent accountants and its outside
financial advisor, Stratagem, to review the general terms of the Merger
Agreement and to review the status of accounting, legal and financial due
diligence. Bachman's management reviewed for the Board of Directors the history
of the negotiation, corporate synergies and the status of accounting, financial
and legal due diligence, and the product strategies, corporate cultures and
competitive positions of each company. Bachman's independent accountants and
outside counsel, presented the Board of Directors with summaries of accounting
and legal due diligence, respectively. Bachman's independent accountants'
summary focused on the proposed accounting treatment for the Merger, and
observations related to Cadre's financial statements and condition. Bachman's
outside counsel's summary focused on a review of major contracts, corporate
records, intellectual property matters and pending litigation. Stratagem
provided the Board of Directors with a preliminary presentation as to the
fairness of the Merger to the Bachman stockholders, including an analysis of
comparable acquisitions.
Stratagem provided Bachman's management with assistance in determining the
consideration to be offered by Bachman in the Merger. Management then prepared a
valuation analysis based upon the then
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current share price for Bachman Common Stock of approximately $6.00 per share,
and actual and forecasted Cadre revenues and operating income. Management also
considered the method of accounting for the transaction as a purchase or pooling
in its analysis. Bachman's Board of Directors was provided with management's
analysis and set 5 million Bachman shares as the maximum consideration to be
paid provided the transaction is accounted for as a pooling of interests.
On February 16, 1996, the Bachman Board of Directors met with certain
members of management, with outside counsel present, to consider the terms of
the Merger Agreement. Bachman's management reviewed the progress of negotiation,
updated the Board of Directors on accounting, legal and financial due diligence
matters, and the risks and benefits of the transaction. The Board of Directors
discussed the respective technologies, competitive positions, potential
synergies that could be achieved through the business combination, information
regarding the market price of the Bachman stock and marketing strategies for the
combined companies. The Board also reviewed the fairness opinion prepared by
Stratagem. Bachman's Board of Directors concluded that the Merger is fair to and
in the best interests of Bachman and its stockholders and unanimously adopted
resolutions, among other things, authorizing the officers of Bachman to enter
into and perform the Merger Agreement with such changes as authorized by the
President and to recommend to the Bachman stockholders that they vote in favor
of approval of the Merger Agreement. On February 27, 1996 and March 13, 1996,
members of Bachman and Cadre's management met with their respective outside
counsels to discuss negotiations involving the Merger Agreement and the filing
of a Registration Statement on Form S-4 in connection with the Merger.
On March 19, 1996, Bachman's Board of Directors met with some members of
management, with outside counsel present, to consider the terms of the revised
Merger Agreement and to review a revised draft of the Registration Statement to
be filed in connection with the proposed Merger. The Board unanimously
reaffirmed the resolutions adopted on February 16, 1996 relating to the Merger
Agreement and the Registration Statement and adopted further resolutions
relating to other matters.
During the period from November 1995 through March 1996, various terms of
the Merger were negotiated between Bachman and Cadre. Bachman offered Cadre 4.2
million shares of Bachman Common Stock in the acquisition. Cadre sought
approximately 5.5 million shares. The companies finally agreed upon 4,850,000
shares upon the assumption that the transaction be accounted for as a pooling of
interests. Bachman also proposed that the number of shares to be issued be
adjusted upward or downward based upon the fair market value of Bachman Common
Stock prior to closing. After negotiations, the parties agreed to remove such
adjustment mechanisms.
Cadre's Board of Directors met with members of Cadre's executive management
and its legal counsel on November 22, 1995 and December 1, 1995 to discuss the
financial, business and technical due diligence performed by Cadre and its
independent accountants up to that time. In addition, Cadre's Board of Directors
met on November 16, 1995, December 20, 1995 and January 17, 1996 to discuss the
financial and business implications of the transaction. Cadre's Board of
Directors met again on February 16, 1996 and March 22, 1996 to review in detail
the terms of the Merger Agreement and the financial implications to Cadre
stockholders, before approving the definitive Merger Agreement and determining
to proceed with the Merger.
Among the factors considered by Cadre's Board of Directors in determining
to proceed with the Merger were the following: (i) the Merger with Bachman would
provide needed working capital to Cadre; (ii) the Merger with Bachman would
provide access to a publicly traded security for Cadre stockholders; (iii) the
Board's evaluation of the current value of the Bachman Common Stock to be
exchanged for the Cadre Common Stock in light of the prospects for Bachman after
a merger with Cadre; (iv) the Merger would provide a faster entry into the
commercial market for Cadre products; (v) the larger combined company would
create a greater critical mass for Cadre's customers; and (vi) the current
financial position of Cadre required action if Cadre did not proceed with the
Merger. Cadre's Board did not assign any priority or weighting among the
factors. Cadre's Board did not consider that projections relating to the
separate companies were a reliable guide to estimating the results that might be
achieved by the combined companies, and accordingly did not consider any
projections significant in comparison to the other factors outlined above.
On March 25, 1996, Bachman and Cadre entered into the definitive Merger
Agreement.
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FINANCIAL ADVISOR TO BACHMAN
The Board of Directors of Bachman used Stratagem as its financial advisor
in connection with the transactions contemplated by the Merger Agreement.
Stratagem was selected by the Board of Directors of Bachman because of its
qualifications and expertise in providing advice on mergers and acquisitions,
corporate partnering, product licensing and fund raising to companies in the
software industry, as well as its reputation as an investment banking firm.
At the request of Bachman, Stratagem delivered its written opinion to the
Board of Directors of Bachman to the effect that, as of February 16, 1996, the
Merger was fair, from a financial point of view, to the stockholders of Bachman
(the "Stratagem Opinion"). Bachman expects to receive prior to the date of first
mailing of the Prospectus/Joint Proxy Statement to stockholders an updated
written opinion from Stratagem to the effect that, as of that date, the Merger
is fair, from a financial point of view, to the stockholders of Bachman.
THE FULL TEXT OF THE STRATAGEM OPINION IS ATTACHED AS ANNEX C TO THIS
PROSPECTUS/JOINT PROXY STATEMENT. BACHMAN STOCKHOLDERS ARE URGED TO, AND SHOULD,
READ THE STRATAGEM OPINION CAREFULLY IN ITS ENTIRETY IN CONJUNCTION WITH THIS
PROSPECTUS/JOINT PROXY STATEMENT FOR ASSUMPTIONS MADE, MATTERS CONSIDERED AND
LIMITS OF THE REVIEW BY STRATAGEM.
Stratagem. In connection with the Merger, Bachman Information Systems,
Inc. retained Stratagem to act as its financial advisor and to render an opinion
as to the fairness to the shareholders of Bachman, from a financial point of
view, of the consideration to be paid by Bachman to the holders of Cadre
Technologies Inc. Common Stock.
Stratagem assisted in Bachman's discussions and negotiations with Cadre
leading up to the execution of the Merger Agreement and in the consideration by
the Bachman Board of the Merger. On February 5, 1996, Stratagem assured the
Bachman Board that it was prepared to deliver an opinion that the consideration
to be paid by Bachman to the holders of Cadre Common Stock was fair to the
shareholders of Bachman from a financial point of view, and on February 16, 1996
Stratagem delivered its written opinion (the "Stratagem Opinion") to that
effect.
Although Stratagem evaluated the financial terms of the Merger and
participated in discussions concerning the consideration to be paid, in
rendering its opinion Stratagem did not recommend the specific consideration to
be paid in the Merger. The consideration to be received by Cadre's stockholders
as a result of the Merger was determined by negotiation between Cadre
Technologies Inc. and Bachman Information Systems, Inc.
A copy of the Stratagem Opinion is attached hereto as Annex C. Stockholders
are urged to read the opinion in its entirety for a summary of assumptions made,
procedures followed, other matters considered and limits of the review by
Stratagem. The summary of the Stratagem Opinion set forth in this Joint Proxy
Statement/Prospectus is qualified in its entirety by reference to the full text
of such opinion. The Stratagem Opinion was prepared for the Bachman Board, is
directed only to the fairness to Bachman as of February 16, 1996, from a
financial point of view, of the consideration to be received by holders of Cadre
Common Stock pursuant to the Merger Agreement, and does not constitute a
recommendation to any stockholder as to how to vote.
In connection with its opinion, Stratagem, among other things, (i) reviewed
the Merger Agreement; (ii) reviewed the Annual Report to Stockholders and Annual
Report on Form 10-K of Bachman for the fiscal years ended June 30, 1992 through
1995; (iii) reviewed audited financial reports for the 1992 through 1995 fiscal
years ended December 31 for Cadre Technologies Inc.; (iv) reviewed certain
interim reports to stockholders and Quarterly Reports on Form 10-Q of Bachman;
(v) reviewed certain operating and financial information, including projections,
provided by the managements of Bachman and Cadre relating to their respective
business prospects (the "Bachman Management Projections" and the "Cadre
Management Projections,") respectively; (vi) discussed with certain members of
Bachman's senior management Bachman's operations, historical financial
statements and future prospects, as well as their views with respect to the
operations, historical financial statements and future prospects of Cadre, and
their views of the business,
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operational and strategic benefits, potential synergies (including revenue
enhancements and cost savings) and other implications of the Merger; (vii)
discussed with certain members of Cadre's senior management Cadre's operations,
historical financial statements and future prospects and their views of the
potential synergies and benefits of the Merger; (viii) reviewed the pro forma
financial impact of the Merger on Bachman; (ix) reviewed the historical stock
prices and trading volumes of the Bachman Common Stock; (x) reviewed certain
publicly available financial information and stock market performance data of
other publicly-held companies which it deemed generally comparable to Bachman
and Cadre; (xi) reviewed the financial terms of certain other recent
acquisitions of companies which it deemed generally comparable to Cadre; and
considered such other studies, analyses, inquiries and investigations which it
deemed relevant.
Stratagem relied without independent verification upon (i) the accuracy and
completeness of all of the financial and other information reviewed by it for
purposes of its opinion, and (ii) the reasonableness of the assumptions made by
the managements of Bachman and Cadre with respect to their projected financial
results and potential synergies and the cost savings which could be achieved
upon consummation of the Merger. Stratagem also relied upon the belief of
Bachman's management that the combined entity resulting from the Merger might
enjoy several strategic advantages over a stand-alone Bachman, including (i) the
ability of a combined entity to develop and bring to market a wider range of
development tools for client/server users, particularly in the strategically
critical object-oriented tool segment; (ii) an expanded marketing and sales
capacity which will permit the combined entity to better compete in the highly
competitive client/server software industry and (iii) significant cost
synergies. In addition, Stratagem has not made an independent evaluation or
appraisal of the assets and liabilities of Bachman or Cadre and Stratagem has
not been furnished with any such evaluation or appraisal. Stratagem further
relied upon the assurances of the managements of Bachman and Cadre that such
managements were not aware of any facts that would make the information provided
to Stratagem materially incomplete or misleading. Stratagem's opinion is also
necessarily based upon the economic, market and other conditions as in effect
on, and the information made available to it as of, the date of this opinion.
Stratagem also assumed that the consummation of the transaction contemplated
pursuant to the Merger will be recorded as a pooling of interests under the
requirements of Accounting Principles Board Opinion No. 16.
Analysis of Selected Software Acquisitions. Stratagem reviewed and
compared the prices paid in 24 selected merger and acquisition transactions in
the software industry from January 1, 1995 to October 30, 1995. To the extent
possible, Stratagem calculated the aggregate consideration and various financial
multiples for each transaction. The aggregate consideration for the selected
transactions ranged from $20 million to $3.0 billion. Stratagem calculated the
aggregate consideration paid in the selected transactions as a multiple of
various financial measures, concentrating principally on the key multiple of
transaction value compared to the last twelve months' revenues, compared to $51
million (value of stock to be issued plus liabilities to be assumed) to be paid
by Bachman for Cadre. The transaction value compared to the last twelve months'
revenues for the selected transactions ranged from 0.8 times to 21.7 times with
a median multiple of 4.2 times versus 1.3 times for the Bachman/Cadre Merger.
Where information on a target company's profits was available, the multiples of
transaction value versus the last twelve months' net income for profitable
companies ranged from 24.4 times to 58.6 times. The median multiple was 40.0
times. Since Cadre was unprofitable over the prior twelve months, there is no
meaningful comparison available. Since Cadre was both losing money and
experiencing a revenue decline in its last twelve months, Stratagem calculated
the multiple of transaction value versus last twelve months' revenues for just
those companies that were not profitable and those that were experiencing
revenue declines. Out of the 24 transactions examined, 4 companies were
unprofitable in the last twelve months. In those four companies, the transaction
value compared to the last twelve months revenues ranged from 0.8 times to 3.3
times with a median of 2.3 times, whereas the multiple is 1.3 times the
transaction value in the Bachman/Cadre Merger. Out of the 24 transactions
examined, 3 companies experienced revenue declines in the last twelve months'
revenues ranged from 0.8 times to 3.3 times with a median of 1.6 times compared
to 1.3 times for the Bachman/Cadre Merger. Stratagem noted to the Board of
Directors that none of the transactions reviewed was exactly comparable due to
differences in products, product lifecycles, growth prospects, profitability and
strategic fit; however, based on other merger and acquisition transactions in
the software industry, this analysis shows the Merger to be fair to the
shareholders of Bachman.
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The 24 transactions are: the acquisitions of Alias Research and Wavefront
Technology by Silicon Graphics; the acquisitions of the Learning Company, Future
Visions Holdings and MECC by Softkey International, the acquisition of Spry by
Compuserve, the acquisitions of Trinzic and Answer Systems by Platinum
Technology, the acquisition of Recognition International by BancTec, the
acquisition of Digitalk by ParcPlace, the acquisition of Legent by Computer
Associates, the acquisition of Rasna by Parametric Technology, the acquisition
of Information Resources Inc's OLAP business by Oracle, the acquisition of Frame
Technology by Adobe, the acquisition of Delrina by Symantec, the acquisition of
Clinicom by HBO and Co., the acquisition of Sigma Imaging by Wang Laboratories,
the acquisition of Watermark by Filenet, the acquisition of Novell's UNIX
operating system business by The Santa Cruz Operation, the acquisition of
Collabra by Netscape, the acquisition of Viewstar by Caere (this acquisition was
not consummated), and the acquisition of Microtec by Mentor Graphics.
The four companies that were not profitable in the last twelve months are:
Trinzic, Recognition International, Lotus Development and Viewstar.
The three companies that experienced revenue declines in the last twelve
months are: Viewstar, Lotus Development and Recognition International.
Relative Contribution Analysis. Stratagem reviewed certain historical and
estimated future financial information (including equity ownership, book value,
revenues, and operating profit) for Bachman, Cadre and the pro forma combined
entity resulting from the Merger. Stratagem compared the relative percentage
equity ownership of Bachman and Cadre to the relative revenues, operating
earnings, and book value contributions for Bachman and Cadre for 1995. In this
analysis, Stratagem notes that Bachman shareholders will own approximately 74%
of the shares in the combined company; however, Bachman will contribute
approximately 47% of the combined companies' revenues for calendar 1995. Both
Bachman and Cadre lost money on an operating basis in calendar 1995 with Bachman
contributing a similar 46% to the operating loss of the combined companies. The
relative contribution to book value is borne exclusively by Bachman and its
shareholders as Cadre had a negative book value as of March 31, 1996. As a
result of the Merger, Bachman shareholders will experience significant dilution
in their book value per share as it existed on March 31, 1996, from $1.04 to
$(.03). While this analysis of contribution to book value suggests the Merger
favors the shareholders of Cadre, Stratagem believes the relative contribution
to revenues and earnings is a far more important and relevant comparison and
hence, the transaction remains fair to the shareholders of Bachman. Stratagem
also analyzed the relative contribution to revenues and operating income for
calendar 1996 based on forecasts provided by the management teams of Bachman and
Cadre. In this analysis, it is forecast that Bachman will contribute
approximately 50% of the combined companies' revenues and 25% of the combined
companies' operating income for calendar 1996 while owning 74% of the combined
entity. In addition, Stratagem analyzed the relative contribution to revenues
and operating income based on forecasts provided by the Bachman management team
and a version of the Cadre forecast which was downwardly revised by Bachman's
management team. Bachman's downwardly revised estimates for Cadre reflected
Bachman's more conservative assessment of the likely revenues to be achieved by
Cadre during calendar 1996. In these downwardly revised estimates, Bachman did
not adjust expense expectations for Cadre. The revised estimates forecast total
revenue of Cadre for calendar 1996 at a level somewhat below its historical
level for 1995, and a net loss for calendar 1996 somewhat less than its
historical level for the quarter ended March 31, 1996. This analysis forecasts
that Bachman will contribute 53% of the combined companies' revenues, but well
over 100% of the combined companies' income as the revised Cadre forecast calls
for a loss in calendar 1996. If the Bachman management forecast and the Cadre
forecast downwardly revised by Bachman's management were accurate, it would
result in significant earnings dilution to Bachman's shareholders in calendar
1996. The above analysis does not take into account any cost savings expected
from combining and consolidating the companies' operations. However, Stratagem
also relied on an estimate by Bachman's management that the combined companies
could realize approximately $4,500,000 of cost savings in calendar 1996. That
management estimate took into account possible savings from eliminating
duplicated functions (approximately $2.7 million), eliminating duplicated
facilities (approximately $0.9 million), and consolidated marketing
(approximately $0.9 million).If the Bachman operating forecast and the Cadre
forecast as downwardly revised by Bachman's management, combining the companies'
operations, are met, this operating result, coupled with the cost savings
expected by Bachman's management from combining the companies'
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operations, would show significant earnings accretion for calendar 1996 to the
Bachman shareholder. As a result of the foregoing analysis, Stratagem finds the
weight of the evidence showing this Merger to be fair to Bachman's shareholders.
Pro Forma Merger Analysis. Stratagem prepared pro forma analyses of the
financial impact of the Merger using reported earnings for calendar 1995 and
earning forecasts for Bachman and Cadre prepared by their respective managements
for calendar 1996. In addition, Stratagem prepared an analysis showing the pro
forma earnings per share forecast for calendar 1996, assuming the Bachman
management forecast and the Cadre forecast downwardly revised by Bachman's
management and factoring in cost savings expected by Bachman's management
resulting from combining the companies' operations. For calendar 1995, the
combined companies will show a substantially greater loss per share than Bachman
experienced on its own. For calendar 1996, the combined companies, after
factoring in expected cost savings, are expected to show significantly higher
earnings per share from continuing operations than would be expected to be
achieved by Bachman alone. The primary rationale for the Merger is that the
larger industry presence achieved through a higher critical mass of revenues and
broader product line will lead to improved competitive strength. This improved
competitive position, coupled with a lower cost structure resulting from
overhead reductions will lead to a greater likelihood of profitability for
Bachman, which is the most relevant consideration for future stock performance.
Thus, Stratagem believes that the relative contribution of Cadre to the revenues
of the combined companies is a more important and relevant metric than Cadre's
negative contribution to the book value of the combined companies, and that
market capitalization to revenues is a more significant ratio than the ratio of
market capitalization to book value.
Selected Companies Analysis. Stratagem reviewed and compared certain
financial information relating to Bachman and Cadre to corresponding financial
information, ratios and public market valuations and multiples for 12 publicly
traded corporations in the software industry: Platinum Technologies Inc.;
Compuware Corporation; Intersolv; Sterling Software, Inc.; VMark Software, Inc.;
LBMS, Inc.; Logic Works, Inc.; Seer Technologies, Inc.; Rational Software
Corporation; Gupta Corporation; Magic Software Enterprise, Ltd.; and New
Dimension Software. The eight companies Stratagem determined were most
comparable to Bachman were public companies that compete with Bachman in
products or markets or both. Competitors among Application Development Modeling
Tool vendors include: Seer Technologies, Intersolv, Sterling Software, LBMS and
Logic Works. Competitors among Object Oriented CASE vendors include Rational
Software and Intersolv. Companies that provide a broad array of enterprise-level
applications include Platinum Technologies and Compuware. There is no single
vendor whose products and market position are directly comparable to Bachman.
These eight companies, in the aggregate, represent the competitive array that
Bachman faces. The four companies Stratagem determined were most comparable to
Cadre were struggling public companies that compete with Cadre in the
development tools market. VMark posted a significant loss ($0.49 per share) in
1995, after a small loss in 1994. The company's revenues grew 5% in 1995. Gupta
posted a loss in 1995 ($0.81 per share) after a larger loss in 1994. Revenue
growth was 9% in 1995. Magic Software posted a loss ($0.30 per share) in 1995
after a larger loss in 1994. Revenue growth was 7%. New Dimension Software
recovered in 1995 (EPS of $0.13) after a 1994 loss of $2.00 per share.
Stratagem calculated and compared various financial multiples and ratios
for these companies to assess relevant comparisons to companies deemed similar
to Bachman and companies deemed similar to Cadre. Before factoring in
differences in book value between the companies, Bachman has a market value of
approximately 4.0 times its calendar 1995 revenues. This compares to a range of
0.7 times to 7.6 times and 3.4 times the average of the eight companies viewed
most comparable to Bachman. This analysis indicates that Bachman is valued above
the average for companies Stratagem views as being most comparable to Bachman.
After reducing the market value of each company by the stated book value,
Bachman's adjusted market value is 3.5 times its calendar 1995 revenues compared
to a range of 0.4 times to 7.0 times and 2.8 times the average of the eight
companies viewed most comparable to Bachman. This analysis also indicates that
Bachman is priced above the average for companies Stratagem views as being most
comparable to Bachman. The revenue growth rate for Bachman in calendar 1995
versus calendar 1994 was 1%. This compares with a range of 17% to 131% and an
average of 36%. Thus, Bachman has experienced slower growth than any of the
eight companies viewed as being comparable. For calendar 1995, Bachman
experienced losses, hence it does not have a meaningful price earnings multiple.
In the eight comparable companies, eight experienced meaningful
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earnings per share, two experienced losses and one experienced a minuscule
profit. Out of the five companies with meaningful earnings per share, the price
earnings multiples ranged from 16.1 times to 136.5 times calendar 1995 earnings.
The two companies with losses reported from continuing operations approximately
1% of revenues versus losses of approximately 9% of revenues for Bachman.
Using the implied value of Cadre based upon Bachman's share price and
assuming that 4,850,000 Bachman shares will be issued, Cadre has a market value
1.2 times its calendar 1995 revenues. This compares to a range of 0.9 times to
2.0 times and an average of 1.4 times the average of the four companies viewed
as most comparable to Cadre. Thus, Cadre is valued slightly below the average of
this set of comparable companies. After adjusting Cadre's market value for its
negative book value, it has an adjusted market value of 1.3 times its calendar
1995 revenues. The four companies Stratagem believes are most comparable to
Cadre have adjusted market values divided by 1995 revenues in the range of 0.4
times to 1.4 times and an average of 1.0 times. While this indicates that Cadre
is valued near the top end of the range of these companies, Stratagem believes
this individual comparison does not outweigh the preponderance of the analyses
which indicate that this Merger is valued favorably for the shareholders of
Bachman. While considered closely comparable to Cadre, these companies are not
exactly comparable to Cadre as they are not in the same product or financial
position as is Cadre and do not have the same strategic fit with Bachman.
The Bachman Management Projections and the Cadre Management Projections
were intended solely for use by Stratagem in performing its analysis and were
based on assumptions that the respective managements considered reasonable and
appropriate. Stratagem did not independently evaluate or express any opinion
concerning the reasonableness of any such projections or of any underlying
assumption by either management. There can be no assurance that any projected
results, including any estimated cost savings or other elements, will be
achieved.
The Stratagem Opinion addresses only the fairness of the Merger from a
financial point of view to the stockholders of Bachman and does not constitute a
recommendation to any stockholder of Bachman as to how such stockholder should
vote with respect to the approval of the Merger/Stock Issuance Proposal.
In the ordinary course of its business, Stratagem does not engage in
trading of the equity securities of Bachman.
Pursuant to a Fairness Opinion Agreement, dated as of January 26, 1996,
Bachman agreed to pay Stratagem a fee of $100,000 for rendering its initial
opinion and two updates to such opinion in connection with the Merger. Pursuant
to a Strategic Partnering Agreement, dated as of June 16, 1995, Bachman will pay
Stratagem an additional fee based on the fair market value at the closing of the
total consideration paid by Bachman in the Merger calculated as follows: (a)
$50,000, plus; (b) 4% of the second million dollars in consideration, plus; (c)
3% of the third million dollars in consideration, plus (d) 2% of any
consideration that exceeds $3 million up to $10 million, plus; (e) 1% of any
consideration that exceeds $10 million up to $40 million, plus (f) 0.75% of any
consideration that exceeds $40 million up to $80 million, plus (g) 1% of any
consideration that exceeds $80 million up to $100 million, plus; (h) 2% of any
consideration that exceeds $100 million up to $120 million, plus; (i) 3% of any
consideration that exceeds $120 million. Under each of the foregoing agreements,
Bachman has also agreed to reimburse Stratagem for its reasonable out-of-pocket
expenses, including the reasonable fees and disbursements of counsel, and to
indemnify Stratagem and certain related persons against certain liabilities in
connection with the engagement of Stratagem, including certain liabilities under
the federal securities laws. Bachman also has agreed to pay Stratagem a minimum
retainer of $4,500 a month under the Strategic Partnering Agreement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
CADRE STOCK OWNERSHIP
As of the Cadre Record Date, the directors and executive officers of Cadre
as a group beneficially owned an aggregate of 4,053,321 shares of Cadre Common
Stock (including shares purchasable upon the exercise of outstanding options).
All of those shares will be treated in the Merger in the same manner as the
shares of
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Cadre Common Stock held by other stockholders of Cadre. To the best of Cadre's
knowledge, each of the Cadre directors and executive officers who owns shares of
Cadre Common Stock intends to vote those shares in favor of both the Merger
Proposal and the Cadre Adjournment Proposal. Each director and executive officer
of Cadre will enter into an agreement restricting his sale of Bachman shares for
a period following the effectiveness of the Merger. See "The Merger
Agreement -- Affiliate Agreements."
CADRE EMPLOYMENT AGREEMENTS
Certain directors and officers of Cadre have entered into agreements under
which they will be entitled to compensation in the event that they are
involuntarily terminated during the terms of their agreements.
Lawrence T. Sutter, a director and President of Cadre, has entered into an
agreement which expires on October 31, 1997. If he is involuntarily terminated,
Mr. Sutter will be paid the sum of his monthly base compensation multiplied by
the number of months left under the contract or 12 months, whichever is greater,
plus certain other benefits.
Ronald H. Imbriale, Vice-President, has entered into an agreement which
expires on September 25, 1996. If he is involuntarily terminated, Mr. Imbriale
will be paid the sum of his monthly base compensation multiplied by the number
of months left under the contract or 6 months, whichever is greater, plus
certain other benefits.
Edson H. Whitehurst, Jr., Vice-President and Secretary, has entered into an
agreement which expires on November 23, 1996. If he is involuntarily terminated,
Mr. Whitehurst will be paid the sum of his monthly base compensation multiplied
by the number of months left under the contract or 9 months, whichever is
greater, plus certain other benefits. Mr. Whitehurst must be paid $10,000 per
month from January 1996 through June 1996 ($60,000 total) as a "Commitment
Bonus" for agreeing not to exercise an option to return to Portland, Oregon, the
former location of Cadre's principal office. On February 14, 1994, Cadre loaned
Mr. Whitehurst $150,000 to assist him in buying a house. If he is terminated
involuntarily within 12 months of a change in control, including the Merger,
$50,000 of that loan is forgiven.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF BACHMAN
On February 16, 1996, the Board of Directors of Bachman met and unanimously
approved and adopted the Merger Agreement and the issuance of shares of Bachman
Common Stock as contemplated by the Merger Agreement. At the meeting, the Board
of Directors of Bachman also unanimously resolved to present the Merger/Stock
Issuance Proposal for consideration by Bachman's stockholders. Those resolutions
were reaffirmed at a meeting of the Board of Directors held March 19, 1996. The
Board of Directors of Bachman has unanimously recommended that stockholders of
Bachman vote FOR the Merger/Stock Issuance Proposal.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF CADRE
On March 22, 1996, the Board of Directors of Cadre met and unanimously
approved and adopted the Merger Agreement. At the meeting, the Board of
Directors of Cadre also unanimously resolved to present the Merger Proposal for
consideration by Cadre's stockholders. The Board of Directors of Cadre has
unanimously recommended that the stockholders of Cadre vote FOR the Merger
Proposal.
THE MERGER AGREEMENT
The following description summarizes the material terms and provisions of
the Merger Agreement. All references to and summaries of the provisions of the
Merger Agreement contained in this Prospectus/Joint Proxy Statement are
qualified in their entirety by reference to the text of the Merger Agreement,
which is included as Annex A to this Prospectus/Joint Proxy Statement. Bachman
stockholders and Cadre stockholders are urged to read the Merger Agreement in
its entirety.
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MANNER AND BASIS OF CONVERTING SHARES
The Merger Agreement provides that upon the terms and subject to the
conditions of the Merger Agreement, at the Effective Time, in accordance with
the Delaware GCL, Acquisition Corp. will be merged with and into Cadre, the
separate corporate existence of Acquisition Corp. will cease, and Cadre will
continue as the surviving corporation in the Merger and as a wholly-owned
subsidiary of Bachman. The term "Effective Time" means the particular time at
which the parties to the Merger Agreement cause the Merger to be consummated by
filing with the Secretary of State of the State of Delaware a certificate of
merger in the form required by, and executed in accordance with, the Delaware
GCL.
At the Effective Time, by virtue of the Merger and without any action on
the part of Bachman, Acquisition Corp., Cadre, or the holders of any of their
respective securities:
(a) Each share of Cadre Common Stock issued and outstanding
immediately prior to the Effective Time (excluding shares, if any, owned by
Cadre, which will be canceled, and shares held by any dissenting holder who
has taken the steps necessary under the Delaware GCL to seek appraisal of,
and demand payment for, such shares and is otherwise entitled to such
payment under the Delaware GCL, but including shares held by any Cadre
stockholder who abstains from voting at the Cadre Special Meeting) will be
converted into the right to receive 0.3020 share of Bachman Common Stock,
subject to possible adjustments as described in Article 2 of the Merger
Agreement, and provided that the total number of shares of Bachman Common
Stock to be issued to any particular Cadre stockholder will be rounded up
to the nearest whole number.
Under Article 2 of the Merger Agreement, the actual ratio at which
Cadre shares will be converted into Bachman shares will be computed as of
the date of the closing, based on the number of Cadre shares and options to
purchase Cadre shares outstanding then, subject to adjustments to account
for the exercise prices of outstanding Cadre options and a certain warrant.
In addition, if the negative net worth of Cadre, as defined in the Merger
Agreement (that is, excluding an outstanding note to the Cadmount trustee
in the amount of $1,600,000), at the end of the month preceding the closing
exceeds $5,611,000, the conversion ratio may be further adjusted to reduce
the number of Bachman shares that may be issued. The adjustment would be
calculating by dividing the "excess" negative net worth of Cadre by $6.00.
Based on preliminary estimates provided by Cadre's management, Cadre's
negative net worth on May 31, 1996 was approximately $8,581,000. Assuming
that estimate solely for purposes of this example, the "excess" negative
net worth after allowing for the $1,600,000 Cadmount note and the base
amount of $5,611,000 would be $1,370,000. Dividing that by $6.00 would
result in an adjustment of 228,333 shares, so that the total number of
Bachman shares to be issued would be 4,621,667 (approximately 26.6% of the
total to be outstanding after the Merger). That would be divided among
holders of approximately 17,798,568 shares of Cadre outstanding and
issuable on exercise of stock options and the warrant referred to above
(reduced by 2,495,719 shares to account for the aggregate exercise price
ofthe options and the warrant), resulting in a ratio of approximately
0.3020 share of Bachman for each outstanding share of Cadre.
Because the actual exchange ratio to be applied under the Agreement
depends on the negative net worth of Cadre at the end of the month
preceding the closing and the actual amounts of Cadre shares and employee
stock options outstanding at the date of the closing, the precise ratio
will not be known until the date of the closing. If the calculation of the
exchange ratio would result in reducing the amount of Bachman shares to be
issued to less than 3,697,333 (approximately 20% below the estimated level
based on May 31, 1996 estimates) Bachman and Cadre will resolicit proxies
for approval of the Merger before consummation of the Merger.
(b) Each share of common stock of Acquisition Corp. outstanding prior
to the Effective Time will be converted into and become one share of Cadre
Common Stock.
(c) Any notes and other debt instruments of Acquisition Corp. and
Cadre outstanding as of the Effective Time will continue to be outstanding
subsequent to the Effective Time as debt instruments of Cadre, as the
surviving corporation, subject to their respective terms and provisions.
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As a result of the rounding described in paragraph (a) above, no fractional
shares of Bachman Common Stock will be issued in the Merger.
EXCHANGES OF STOCK CERTIFICATES
At or promptly after the Effective Time, State Street Bank and Trust
Company, the transfer agent for Bachman Common Stock (the "Transfer Agent") will
send a transmittal form (the "Transmittal Form") to each person who held shares
of Cadre Common Stock (other than dissenting shares) immediately prior to the
Effective Time. The Transmittal Form will contain instructions with respect to
the surrender of certificates formerly representing Cadre Common Stock in
exchange for certificates expressly representing Bachman Common Stock, together
with a section for each former Cadre Stockholder to complete and return to the
Transfer Agent. The Transmittal Form will also contain a representation that the
signer owns the shares of Cadre Common Stock being exchanged for Bachman Common
Stock and an agreement by the signer to indemnify Bachman if that representation
is not true.
The Transfer Agent will prepare two certificates representing Bachman
Common Stock for each person who held shares of Cadre Common Stock immediately
prior to the Effective Time (other than dissenting shares.) The first
certificate will represent ten percent of the number of shares of Cadre Common
Stock formerly held by such stockholder (the "Escrow Certificate"), and the
second certificate will represent the balance of such shares (the "Balance
Certificate"). Upon surrender of all of such stockholder's certificates
representing Cadre Common Stock in accordance with the instructions contained in
the Transmittal Form, such stockholder will be entitled to receive such
stockholder's Balance Certificate. The Escrow Certificate will delivered to
State Street Bank and Trust Company, as Escrow Agent. See "The Merger
Agreement -- Escrow Agreement."
The approximately 2,200,000 shares of Cadre Common Stock that were issued
in connection with Cadre's purchase of Westmount Technology B.V. and are
registered in the name of Stichting Administratiekantoor Cadmount (the "Cadmount
Shares") are held in escrow under the terms of the agreement relating to that
acquisition (the "Cadmount Agreement"). At or promptly after the Effective Time,
the Transfer Agent will prepare a certificate for the corresponding shares of
Bachman Common Stock. Upon receipt of a certificate or certificates representing
the Cadmount Shares, Bachman will deliver the certificate representing the
corresponding shares of Bachman Common Stock to the escrow agent and the shares
of Bachman Common Stock will be held in escrow subject to the terms of the
Cadmount Agreement.
Cadre stockholders should not forward Cadre stock certificates to the
Transfer Agent until they have received Transmittal Forms from the Transfer
Agent. CADRE STOCKHOLDERS SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED
PROXY.
No dividends or other distributions that are declared or made after the
Effective Time with respect to Bachman Common Stock and that have a record date
after the Effective Time will be paid to the holder of any unsurrendered Cadre
stock certificate with respect to the shares of Bachman Common Stock represented
thereby, until the holder surrenders the Cadre stock certificate. Upon surrender
of the Cadre stock certificate after the Effective Time, there shall be paid to
the holder thereof (i) the amount of all dividends and distributions with a
record date after the Effective Time that were paid prior to the date of
surrender with respect to the Bachman Common Stock represented by such
certificate and (ii) at the appropriate payment date, the amount of dividends or
other distributions with respect to such Bachman Common Stock to the extent such
distributions have a record date occurring after the Effective Time but before
the date of surrender and a payment date after the date of surrender. For all
other purposes, however, each certificate that represents shares of Cadre Common
Stock outstanding at the Effective Time will be deemed to evidence ownership of
the shares of Bachman Common Stock into which the Cadre shares formerly
represented by the certificate have been converted by virtue of the Merger.
All shares of Bachman Common Stock issued upon conversion of shares of
Cadre Common Stock shall be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of Cadre Common Stock.
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REPRESENTATIONS AND COVENANTS
In the Merger Agreement, Cadre, on the one hand, and Bachman and
Acquisition Corp., on the other hand, have each made customary representations
and warranties to the other.
The Merger Agreement contains various covenants and agreements to be
performed on the part of Cadre, on the one hand, and Bachman and Acquisition
Corp., on the other hand, that, if materially breached, would permit the other
to terminate the Merger Agreement. See "-- Termination." These covenants include
agreements by Cadre to carry on its business in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted and not to take
certain significant actions, including amending its charter, borrowing
substantial funds, acquiring another business, or entering into new long-term
commitments, without Bachman's prior approval. Bachman has agreed to
substantially similar restrictions on the conduct of its business pending the
consummation of the Merger.
CONDITIONS TO THE MERGER
The obligations of Cadre, Bachman, and Acquisition Corp. to consummate the
Merger are subject to satisfaction of certain conditions before the closing,
including the conditions that:
1. The stockholders of each of Cadre, Bachman and Acquisition Corp. have
all approved the Merger Agreement and the Merger.
2. Coopers & Lybrand L.L.P., the independent auditors of Bachman, has
issued a letter confirming its concurrence with the conclusions of Bachman's
management as to the appropriateness of pooling of interests accounting for the
Merger under Accounting Principles Board Opinion No. 16.
3. Bachman and Cadre shall have each received written opinions from their
counsel, Foley, Hoag & Eliot LLP and Testa, Hurwitz & Thibeault LLP,
respectively, in form and substance reasonably satisfactory to them, to the
effect that the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code.
4. The average of the closing bid and asked prices of Bachman Common Stock
as quoted on the Nasdaq National Market System on the twenty trade days
immediately prior to the Effective Date shall not be less than $3.28
(appropriately adjusted to reflect fully the effect of any stock split, reverse
stock split, stock dividend, reorganization, recapitalization, or like change
with respect to Bachman Common Stock occurring after the date hereof and prior
to the Effective Time).
CONDITIONS PRECEDENT TO OBLIGATIONS OF BACHMAN AND ACQUISITION CORP. TO EFFECT
THE MERGER
The obligations of Bachman and Acquisition Corp. to effect the Merger are
subject to the satisfaction of the following additional conditions:
1. The representations and warranties of Cadre contained in the Merger
Agreement are true and correct in all material respects at the Effective Time.
2. Each affiliate of Cadre has delivered to Bachman an executed Cadre
Affiliate Agreement, restricting sales, dispositions or other transactions
reducing his risk of investment in respect of the shares of Cadre Common Stock
held by him prior to the Merger and the shares of Bachman Common Stock received
by him in the Merger.
3. Cadre has not suffered any materially adverse change in or effect on the
financial condition, business, operations, assets, properties, results of
operations or prospects of Cadre considered on a consolidated basis.
4. All other conditions usual for merger transactions have been satisfied.
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CONDITIONS PRECEDENT TO OBLIGATION OF CADRE TO EFFECT THE MERGER
The obligation of Cadre to effect the Merger is subject to the satisfaction
of additional conditions, including the following:
1. The representations of Bachman and Acquisition Corp. contained in the
Merger Agreement are true and correct in all material respects at the Effective
Time.
2. Bachman has not suffered any materially adverse change in or effect on
the financial condition, business, operations, assets, properties, results of
operations or prospects of Bachman and its subsidiaries considered on a
consolidated basis.
TERMINATION
The Boards of Directors of Bachman and Cadre may decide to terminate the
Merger at any time before it is effective, before the Merger Agreement may be
terminated, or after approval by the stockholders of Cadre in certain
circumstances, including:
1. by mutual written consent;
2. by Bachman if there has been a breach of any representation, warranty,
covenant or agreement contained in the Merger Agreement on the part of Cadre;
3. by the Company if there has been a breach of any representation,
warranty, covenant or agreement contained in the Merger Agreement on the part of
Bachman or Acquisition Corp.;
4. by any party hereto if there is a court order or regulatory action or
other similar circumstance that would make it impossible or impractical legally
to consummate the Merger; and
5. by any party if the Merger has not been consummated by June 30, 1996.
EXPENSES
Bachman estimates that its expenses to be incurred in connection with the
Merger will total approximately $1.5 million, and Cadre estimates that its
expenses to be incurred in connection with the Merger will total approximately
$300,000. If the Merger is not consummated, each party will be and remain
responsible for its costs and expenses, including fees and disbursements of
consultants, investment bankers and other financial advisors, brokers and
finders, counsel and accountants. If the Merger is consummated, all of such
costs and expenses will be allocated between Bachman and Cadre, as the surviving
corporation.
ESCROW AGREEMENT
The Merger Agreement provides that Cadre stockholders will indemnify
Bachman and its subsidiaries for a period of one year from and against any loss,
liability, damage, cost or expense (including costs and reasonable attorneys
fees and disbursements) suffered, incurred or paid by Bachman which would not
have been suffered, incurred or paid if all the representations and warranties
made by Cadre in the Merger Agreement or any other writing delivered by Cadre in
connection with the Merger Agreement had been true, complete and correct in all
material respects (the "Bachman Claims").
As security for potential Bachman Claims incurred by Bachman, an aggregate
of approximately 485,000 shares of Bachman Common Stock (which amount represents
approximately 10% of each Cadre stockholder's portion of the total number of
shares of Bachman Common Stock into which such stockholder's shares of Cadre
Common Stock will be converted), will be transferred to State Street Bank and
Trust Company, as escrow agent (the "Escrow Agent"), pursuant to an Escrow
Agreement by and among Bachman, the Escrow Agent and James P. Lally, as agent
(the "Holder's Agent") with power of attorney for the Cadre stockholders (the
"Escrow Fund").
Cadre stockholders will be obligated to indemnify Bachman only with respect
to those Bachman Claims as to which Bachman has given the Holder's Agent written
notice on or prior to a date one year after the
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closing of the Merger. No indemnification shall be required to be made by Cadre
stockholders unless the amount of Bachman Claims exceeds $100,000 in the
aggregate, in which case, the Cadre stockholders' indemnification obligations
shall apply to the amount of such Bachman Claims in excess of $100,000.
All claims for indemnification by Bachman shall be recovered solely by the
return to Bachman of property from the Escrow Fund. Any distribution of property
from the Escrow Fund to satisfy a Bachman Claim shall be done so as to reduce
each Cadre stockholder's interest in the Bachman Common Stock in the Escrow Fund
in a pro rata manner.
Notwithstanding the above described limitations, nothing in the Merger
Agreement limits a party's rights or remedies with respect to claims resulting
from or arising out of willful misconduct or fraud.
HOLDER'S AGENT
Each Cadre stockholder who votes for the Merger Proposal or who surrenders
his certificates representing Cadre Common Stock to the Transfer Agent in
exchange for certificates representing Bachman Common Stock shall be deemed to
have irrevocably appointed James P. Lally (the "Holder's Agent") as his
attorney-in-fact with authority to act for and on behalf of him in connection
with the indemnity provisions in the Merger Agreement, the Escrow Agreement, the
notice provision of the Merger Agreement and such other matters as are
reasonably necessary for the consummation of the Merger. Bachman and Acquisition
Corp. and each of their respective affiliates shall be entitled to rely on such
appointment and treat the Holder's Agent as the duly appointed attorney-in-fact
of such Cadre stockholder. The Holder's Agent shall not be liable to any Cadre
stockholder, Bachman or its subsidiaries and affiliates or to 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 Merger Agreement or the Escrow Agreement, in the
absence of fraud, gross negligence, wilful misconduct, or bad faith on the part
of the Holder's Agent.
BACHMAN BOARD REPRESENTATION
Bachman has agreed that its Board of Directors will take appropriate action
to fill the two vacancies on its Board of Directors with Cadre representatives,
effective upon the consummation of the Merger. Upon the Merger, Mr. William H.D.
Goddard will become a Director of Bachman. The second vacancy will be filled by
a person selected by Bachman and the Holder's Agent.
Mr. Goddard, 53, served as a Director, Chairman, and Chief Executive
Officer of Cadre from 1982 to 1989 and rejoined the Board of Directors of Cadre
in 1992. He is President and Treasurer of the Warwick Land Company, a company
engaged in investment in and management and development of real and intellectual
property, and a Partner of Brown & Ives, an office management partnership
holding these positions since 1974 and 1970 respectively. Mr. Goddard received
compensation from Cadre in fiscal 1995 of $3,500.
AFFILIATE AGREEMENTS
The Bachman Common Stock to be issued pursuant to the Merger will be freely
transferable under the Securities Act, except for shares issued to any person
who is an "affiliate" of Bachman or Cadre within the meaning of Rules 144 and
145 under the Securities Act. Rules 144 and 145 impose restrictions on the
manner in which such affiliates may resell securities and also on the quantity
of securities that such affiliates and others with whom they might act in
concert may resell within any three-month period.
As a condition to the Merger, prior to the Effective Time, each person who
has been identified by Cadre as an affiliate of Cadre is required to have
entered into an agreement with Bachman providing that such person will not offer
to sell or otherwise dispose of any Bachman Common Stock obtained as a result of
the Merger except in compliance with the Securities Act and the rules and
regulations thereunder. Generally this will require that such sales be made in
accordance with Rule 145(d) under the Securities Act, which in turn requires
that, for specified periods, such sales be made in compliance with the volume
limitations, manner of sale provisions and current information requirements of
Rule 144 under the Securities Act. The volume limitations should not pose any
material limitations on any Bachman stockholder who owns less than one
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percent of the outstanding Bachman Common Stock after the Merger unless,
pursuant to Rule 144, such stockholder's shares are required to be aggregated
with those of another stockholder.
In order to help ensure that the Merger will qualify as a "reorganization"
under Section 368 (a) of the Code, the affiliate agreements to be executed by
each affiliate of Cadre contain a representation that such affiliate has no plan
or intention to sell any of the shares of Bachman Common Stock received in the
Merger (and will have no such plan or intention at the Effective Time).
In order to help ensure that the Merger will be treated as a "pooling of
interests" for accounting and financial reporting purposes, affiliate agreements
to be executed by affiliates of both Cadre and Bachman provide that such
affiliate will not (i) sell, transfer or otherwise dispose of any shares of
Cadre Common Stock or any shares of Bachman Common Stock, or (ii) in any way
reduce such affiliate's interest in or risk relating to such shares of Cadre
Common Stock or Bachman Common Stock, during the period from at least thirty
days prior to the Effective Time until two days after such time as results of
combined sales and net income covering at least thirty days of combined
operations of Cadre and Bachman have been publicly announced by Bachman.
INDEMNIFICATION OF CADRE OFFICERS AND DIRECTORS
Bachman has agreed to indemnify the former officers and directors of Cadre
to the extent that they are currently indemnified under Cadre's Restated
Certificate of Incorporation and By-Laws.
OTHER MATTERS RELATED TO THE MERGER
GUARANTEE OF CADRE LOAN BY BACHMAN
Bachman has agreed to guarantee a $1,500,000 loan made by Silicon Valley
Bank to Cadre (the "Cadre Loan"). If Bachman is required pursuant to its
guarantee to pay any of Cadre's obligation to the Bank, Bachman will have a
right of subrogation in the Bank's security interest in all of Cadre's assets.
Bachman's guarantee is limited to the Cadre Loan and does not extend to any
other amounts that Cadre may now or later owe to Silicon Valley Bank.
OPERATION OF CADRE'S BUSINESS AFTER THE MERGER
In the Merger, Acquisition Corp. would be merged with and into Cadre, with
Cadre being the surviving corporation and becoming a wholly-owned subsidiary of
Bachman. The separate corporate existence of Acquisition Corp. would cease.
Bachman expects to retain certain employees of Cadre as employees of the
surviving corporation. It is expected that Peter J. Boni will be the sole
director of Cadre, the surviving corporation.
Bachman currently expects that the surviving corporation will perform the
operations of Cadre as its primary business for an indefinite period after the
Merger. Bachman does not currently have any plans to discontinue or otherwise
change Cadre's business structure after the Merger. The continuation of Cadre's
business would, however, be subject to change at any time after the Merger,
based upon Bachman's experience in operating the business of Cadre after the
Merger.
PROMOTIONAL PROGRAMS
From April through June 1996, each company has entered into certain
promotional programs whereby it will distribute certain products of the other
company. These programs are designed to introduce customers of each company to
the products of the other and to try to get competitors of Cadre and Bachman to
try Cadre-Bachman products.
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REGULATORY MATTERS
Neither Bachman nor Cadre is aware of any license or regulatory permit that
appears to be material to the business of Cadre that might be adversely affected
by the Merger or of any approval or other action by any governmental,
administrative, or regulatory agency or authority, domestic or foreign, that
would be required prior to the Merger. Should any such approval or other action
be required, the parties currently contemplate that it will be sought. If such
approval or other action is needed, however, there can be no assurance that any
such approval or other action would be obtained or, if obtained, that it will be
obtained without substantial conditions or that adverse consequences might not
result to Cadre's business. The obligation of each of the parties under the
Merger Agreement to consummate the Merger is subject to the receipt from any
governmental or regulatory body of all permits and approvals required for the
lawful consummation of the Merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
consequences of the Merger that are generally applicable to Bachman, Cadre and
holders of Cadre Common Stock under the Internal Revenue Code of 1986, as
amended (the "Code"). Cadre stockholders should be aware that this discussion
does not deal with all federal income tax considerations that may be relevant to
particular Cadre stockholders in light of their particular circumstances, such
as stockholders who are dealers in securities, who are subject to the
alternative minimum tax provisions of the Code, who are foreign persons, who
acquired their shares in connection with stock option or stock purchase plans or
in other compensatory transactions, or who otherwise hold convertible
securities, warrants or options. In addition, the following discussion does not
address the tax consequences of transactions effectuated prior to or after the
Merger (whether or not such transactions are or were undertaken in connection
with the Merger), including without limitation the Cadre Loan or guarantee
thereof, the Cadmount Agreement and related escrow, the earlier acquisition by
Cadre of Westmount Technology B.V., or other transactions in which shares of
Cadre Common Stock were or are acquired, or transactions in which shares of
Bachman Common Stock are disposed of. Furthermore, no foreign, state or local
tax considerations are addressed herein.
CADRE STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICABLE FEDERAL,
STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE MERGER.
The following discussion is based on the Code, applicable United States
Treasury regulations, judicial authority, and administrative rulings and
practice, all as of the date hereof. The Internal Revenue Service (the "IRS") is
not precluded from adopting a contrary position. In addition, there can be no
assurance that future legislative, judicial or administrative changes or
interpretations will not adversely affect the accuracy of the statements and
conclusions set forth herein. Any such changes or interpretations could be
applied retroactively and could affect the tax consequences of the Merger to
Bachman, Cadre and their respective stockholders.
TREATMENT OF THE MERGER
At the Closing, as a condition to the obligations of Cadre and Bachman to
consummate the Merger, Cadre and Bachman will receive opinions from their
respective legal counsel, Testa, Hurwitz and Thibeault, LLP, and Foley, Hoag &
Eliot LLP, to the effect that, for federal income tax purposes, the Merger will
constitute a "reorganization" within the meaning of Section 68(a) of the Code,
with each of Bachman, Acquisition Corp., and Cadre qualifying as a "party to the
reorganization" under Section 368(b) of the Code. The opinions will be based on
certain assumptions and representations and will be subject to limitations and
qualifications as provided in the opinions. The opinion of Foley, Hoag & Eliot
LLP, subject to limitations and qualifications provided therein, will further
conclude that Bachman and Acquisition Corp. will not recognize material amounts
of gain or loss solely as a result of the Merger. The opinion of Testa, Hurwitz
and Thibeault,
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LLP, subject to the limitations and qualifications provided therein, will
further conclude that the Merger will generally result in the following
consequences:
(a) No gain or loss will be recognized by holders of Cadre Common
Stock upon their receipt in the Merger of Bachman Common Stock solely in
exchange for Cadre Common Stock;
(b) The aggregate tax basis of the Bachman Common Stock received in
the Merger will be the same as the aggregate tax basis of Cadre Common
Stock surrendered in exchange therefor;
(c) The holding period of the Bachman Common Stock received in the
Merger will include the period for which the Cadre Common Stock surrendered
in exchange therefor was held, provided that the Cadre Common Stock is held
as a capital asset at the time of the Merger;
(d) A stockholder who exercises dissenters' rights with respect to a
share of Cadre Common Stock and receives payment for such share in cash
will generally recognize gain or loss for federal income tax purposes,
measured by the difference between the holder's basis in such share and the
amount of cash received, provided that the payment is neither essentially
equivalent to a dividend within the meaning of Section 302 of the Code nor
has the effect of a distribution of a dividend within the meaning of
Section 356(a)(2) of the Code (collectively, a "Dividend Equivalent
Transaction"). Such gain or loss generally will be capital gain or loss,
provided that the Cadre Common Stock is held as a capital asset at the time
of the Merger, and will be long-term capital gain or loss, if the Cadre
Common Stock has been held for more than one year at the time of the
Merger. A sale of Cadre Common Stock pursuant to an exercise of dissenters'
rights will generally not be a Dividend Equivalent Transaction if, as a
result of such exercise, the stockholder exercising dissenters' rights owns
no shares of Bachman Common Stock (either actually or constructively within
the meaning of Section 318 of the Code). If, however, a stockholder's sale
for cash of Cadre Common Stock pursuant to an exercise of dissenters'
rights is a Dividend Equivalent Transaction, then such stockholder may
recognize income for federal income tax purposes in an amount up to the
entire amount of cash so received; and
(e) Cadre will not recognize material amounts of gain or loss solely
as a result of the Merger.
The parties are not requesting a ruling from the IRS in connection with the
Merger. The opinions of legal counsel referred to herein neither bind the IRS
nor preclude the IRS from adopting a contrary position, and are subject to
certain assumptions and qualifications and the accuracy of certain
representations made by Bachman, Acquisition Corp., Cadre and stockholders of
Cadre, including representations in certificates to be delivered to counsel by
the respective managements of Bachman, Acquisition Corp. and Cadre and by
stockholders of Cadre. Of particular importance are certain assumptions and
representations relating to the "continuity of interest" requirement.
To satisfy the continuity of interest requirement, Cadre stockholders must
not, pursuant to a plan or intent existing at or prior to the Merger, dispose of
or transfer so much of either (i) their Cadre Common Stock in anticipation of
the Merger or (ii) the Bachman Common Stock to be received in the Merger
(collectively, "Planned Dispositions"), such that the Cadre stockholders, as a
group, would no longer have a significant equity interest in the Cadre business
conducted after the Merger. Planned Dispositions include, among other things,
dispositions of shares pursuant to the exercise of dissenters' rights. Cadre
stockholders will generally be regarded as having retained a significant equity
interest as long as the Bachman Common Stock received in the Merger (after
taking into account Planned Dispositions), in the aggregate, represents a
substantial portion of the entire consideration received by the Cadre
stockholders in the Merger. If the continuity of interest requirement were not
satisfied, the Merger would not be treated as a "reorganization."
A successful IRS challenge to the "reorganization" status of the Merger (as
a result of a failure of the "continuity of interest" requirement or otherwise)
would result in each Cadre stockholder recognizing gain or loss with respect to
each share of Cadre Common Stock surrendered equal to the difference between the
stockholder's basis in such share and the fair market value, as of the Effective
Time, of the Bachman Common Stock received in exchange therefor. In such event,
a stockholder's aggregate basis in the Bachman Common Stock so received would
equal its fair market value and his holding period for such stock would begin
the day after the Merger.
48
<PAGE> 57
Even if the Merger qualifies as a "reorganization," a recipient of shares
of Bachman Common Stock may recognize income or gain to the extent that such
shares were considered to be received in exchange for services or property
(other than solely Cadre Common Stock). All or a portion of such income or gain
may be taxable as ordinary income. In addition, gain or loss would be recognized
to the extent that a Cadre stockholder was treated as receiving (directly or
indirectly) consideration other than Bachman Common Stock in exchange for the
stockholder's Cadre Common Stock.
CARRYFORWARD OF NET OPERATING LOSSES AND TAX CREDITS
As of December 31, 1995, Cadre had net operating loss ("NOL") carryforwards
for federal income tax purposes of approximately $20,500,000, which are
available to offset future taxable income, if any, through 2010, and unused
federal tax credits of approximately $1,900,000 which will expire between the
years 1999 and 2004. Pursuant to Treasury regulations promulgated under Section
1502 of the Code, Cadre's pre-merger NOLs and tax credits may be used only to
offset the post-merger income of Cadre. Sections 382 and 383 of the Code also
will place restrictions on Cadre's use after the Merger of its pre-merger NOLs
and tax credits. In any taxable year after the Merger the amount of income
against which Cadre may apply pre-merger NOLs and tax credits will be limited to
the product of (i) the fair market value of Cadre Common Stock immediately
before the Merger, multiplied by (ii) the long-term tax-exempt rate at the time
of the Merger (such rate equals 5.31% per annum for April of 1996).
Bachman has NOL carryforwards for federal income tax purposes of
approximately $46,000,000, including approximately $4,000,000 attributable to
international operations, currently available to offset future taxable income,
and unused federal tax credits of approximately $1,400,000. If not utilized,
these credits and carryforwards will expire between the years 2003 and 2010. Due
to the Company's issuances of stock, Section 382 of the Code has restricted the
Company's use of approximately $7,000,000 of its existing NOL carryforwards as
of its latest fiscal year end. If the Merger results in an "ownership change"
during the most recent three years within the meaning of Section 382 of the
Code, Bachman's use after the Merger of its other pre-merger NOLs and tax
credits would also be restricted under Sections 382 and 383 of the Code in a
similar fashion as set forth above for Cadre.
ANTICIPATED 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 recorded
historical cost basis of the assets and liabilities of Bachman and Cadre will be
carried forward to the operations of the combined companies at recorded amounts.
Results of operations of the combined companies will include income of Bachman
and Cadre for the entire fiscal period in which the combination occurs, and the
historical results of operations of the separate companies for fiscal years
prior to the Merger will be combined and reported as the results of operations
of the combined companies.
APPRAISAL RIGHTS OF DISSENTING STOCKHOLDERS
Any holder of shares of Cadre Common Stock who objects to the adoption of
the Merger Agreement may elect to be paid the value of those shares as
determined by the Delaware Court of Chancery. The rights of dissenting holders
of Cadre stock are governed by Section 262 of the Delaware GCL. The following
description summarizes the material applicable provisions of Section 262 of the
Delaware GCL. The following description is not intended to be a complete
statement of such provisions and is qualified in its entirety by reference to
the full text of Section 262, which is set forth in Annex B to this
Prospectus/Joint Proxy Statement.
If any holder of Cadre Common Stock wishes to elect to dissent from the
Merger and demand appraisal, such holder must satisfy each of the following
conditions:
(i) Such holder must deliver a written demand for appraisal of his shares
to Cadre, before the taking of the vote with respect to the Merger
Proposal. This written demand for appraisal must be in addition to and
separate from any proxy or vote against the Merger Proposal; neither
voting against nor
49
<PAGE> 58
failure to vote for the Merger Proposal will constitute a demand for
appraisal within the meaning of Section 262.
(ii) Such holder must not vote in favor of the Merger Proposal. A failure
to vote will satisfy this requirement, but a vote in favor of the
Merger Proposal, by proxy or in person, will constitute a waiver of
such holder's right of appraisal and will nullify any previously filed
written demand for appraisal.
If any holder of shares of Cadre stock fails to comply with either of these
conditions and the Merger becomes effective, such holder will have no appraisal
rights with respect to those shares.
All written demands for appraisal by Cadre stockholders should be delivered
to Cadre Technologies Inc., 222 Richmond Street, Providence, Rhode Island 02903,
Attention: Corporate Secretary, before the taking of the vote on the Merger
Agreement at the Special Meeting, and should be executed by, or on behalf of,
the holder of record. Such demand must reasonably inform Cadre of the identity
of the stockholder and of the intention of the stockholder to demand the
appraisal of such stockholder's shares.
Within ten days after the date of the Merger, Cadre must give written
notice that the Merger has become effective to each stockholder who has filed a
written demand for appraisal and who did not vote in favor of the Merger. Within
120 days after the date of the Merger, either Cadre or any stockholder entitled
to appraisal rights under Section 262 may file a petition in the Delaware Court
of Chancery demanding a determination of the value of the stock of all
stockholders entitled to appraisal. Cadre does not presently intend to file such
a petition. Inasmuch as Cadre has no obligation to file such a petition, unless
at least one dissenting stockholder of Cadre files such a petition within the
period specified, the previous written demands for appraisal of all stockholders
of Cadre could be nullified. In any event, at any time within sixty days after
the date of the Merger, any stockholder who has demanded appraisal of Cadre
stock has the right to withdraw such stockholder's demand for appraisal.
Within 120 days after the date of the Merger, any stockholder entitled to
appraisal rights under Section 262 shall be entitled, upon written request, to
receive from Cadre a statement setting forth (a) the aggregate number of shares
not voted in favor of the Merger Agreement and with respect to which demands for
appraisal have been received and (b) the aggregate number of holders of such
shares. Cadre is required to mail such written statement to such stockholder
within ten days after receipt of the written request therefor.
If a petition for appraisal described above is duly filed by a Cadre
stockholder and a copy thereof is served upon Cadre, Cadre will then be
obligated within twenty days to provide the Delaware Court of Chancery Register
with a duly verified list containing the names and addresses of all holders of
dissenting shares with whom agreement as to the value of their shares has not
been reached. After notice to such stockholders, the Court of Chancery is
empowered to conduct a hearing upon the petition in order to determine those
stockholders who have complied with Section 262 and who have become entitled to
appraisal rights thereunder. The Court may require the stockholders who demanded
payment for their shares to submit their stock certificates to the Register in
Chancery for notation thereon of the pendency of the appraisal proceedings. If
any stockholder fails to comply with such direction, the Court may dismiss the
proceedings as to such stockholder. After determination of the stockholders
entitled to an appraisal, the Court of Chancery shall appraise the shares,
determining their fair value, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value. In
determining the fair value of the shares, the Court is to 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 Cadre would have
to pay to borrow money during the pendency of the proceedings. When the fair
value is determined, the Court will direct the payment by Cadre of such value,
with interest thereon, if any, to the stockholders entitled to receive the same,
upon surrender to Cadre by such stockholders of the certificates representing
such stock.
Cost of the appraisal proceedings may be charged to the parties thereto
(i.e., Cadre and the stockholders participating in the proceeding) by the Court
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
50
<PAGE> 59
in connection with the appraisal proceeding, including reasonable attorneys'
fees and the fees and expenses for experts, to be charged pro rata against the
value of all shares entitled to appraisal. From and after the Effective Time, no
stockholder who has demanded appraisal rights is entitled to vote his shares for
any purpose or to receive payment of dividends or other distributions on his
shares (other than with respect to payment as of a record date prior to the
Effective Time), provided, however, that if no petition for appraisal is filed
within 120 days after the date of the Merger, as provided above, or if such
stockholder shall deliver a written withdrawal of such demand for an appraisal
and an acceptance of the Merger, either within 60 days after the date of the
Merger, as provided above, or thereafter with the written approval of Cadre,
then the right of such stockholder to appraisal shall cease.
Because the Massachusetts Business Corporation Law does not require that
the stockholders of Bachman approve the Merger Agreement, those stockholders
will not have dissenters' rights in connection with the Merger.
51
<PAGE> 60
BACHMAN
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
<TABLE>
The following table sets forth, for the periods indicated, the range of
high and low closing prices for the Company's common stock, as reported by the
Nasdaq National Market. Bachman's Common Stock is traded under the Nasdaq symbol
"BACH". These prices reflect interdealer prices, without retail mark-ups, mark-
downs or commissions, and do not necessarily represent actual transactions.
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR
1996 1995 1994 1993
---------------- --------------- --------------- ---------------
HIGH LOW HIGH LOW HIGH LOW HIGH LOW
------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Quarter............ $ 7.875 $5.750 $2.750 $1.750 $4.500 $2.625 $13.000 $6.750
Second Quarter........... 10.250 4.625 4.188 2.000 3.875 2.375 7.750 3.750
Third Quarter............ 11.875 8.250 5.375 3.500 3.750 2.500 6.125 3.500
Fourth Quarter........... 7.875 4.500 3.000 2.000 4.125 2.500
</TABLE>
Bachman has not declared or paid cash dividends on its Common stock and
does not plan to pay cash dividends to its stockholders in the near future.
Bachman presently intends to retain any earnings to finance further growth of
its business. At June 7, 1996, there were approximately 254 stockholders of
record of Bachman's Common Stock.
The closing sale price of Bachman Common Stock, as reported by the Nasdaq
National Market, was $6.875 on December 6, 1995, the last trading day preceding
the public announcement of the proposed Merger. The closing sale price of
Bachman Common Stock, as reported by the Nasdaq National Market, was $9.625 on
March 25, 1996, the day that the Merger Agreement was signed.
52
<PAGE> 61
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
BACHMAN AND CADRE
The following unaudited pro forma condensed combined financial statements
assume a business combination between Bachman and Cadre accounted for on a
pooling of interests basis and are based on the respective historical financial
statements and the notes thereto, which are included or incorporated by
reference in this Prospectus/Joint Proxy Statement. The unaudited pro forma
condensed combined balance sheet gives effect to the Merger as if it had
occurred on March 31, 1996, combining the balance sheets of Bachman and Cadre at
March 31, 1996. The unaudited pro forma condensed combined statements of
operations give effect to the Merger as if it had occurred at the beginning of
each of the periods presented combining Bachman's historical results for the
nine month periods ended March 31, 1996 and 1995 and each of the three years
ended June 30, 1995, 1994 and 1993, with corresponding Cadre results for the
nine month periods ended March 31, 1996 and 1995 and the twelve month periods
ended June 30, 1995, December 31, 1994, and December 31, 1993, respectively. In
this presentation Cadre's financial data for the period July 1, 1994 to December
31, 1994 is included in the twelve month periods ended June 30, 1994 and 1995.
The six month period July 1, 1994 to December 31, 1994 for Cadre included $21.3
million in revenues and a net loss of $1.3 million.
The pro forma information is presented for illustrative purposes only and
is not necessarily indicative of the operating results or financial position
that would have occurred if the Merger had been consummated at the beginning of
the earliest period presented, nor is it necessarily indicative of future
operating results or financial position.
These unaudited pro forma condensed combined financial statements are based
on, and should be read in conjunction with, the historical consolidated
financial statements and the related notes thereto of Bachman and Cadre, certain
of which are incorporated by reference in the Prospectus/Joint Proxy Statement.
53
<PAGE> 62
BACHMAN AND CADRE
<TABLE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1996
<CAPTION>
PRO FORMA
BACHMAN CADRE COMBINED
------- ------- ---------
(in thousands, except per share data)
<S> <C> <C> <C>
Revenues:
Software license........................................... $ 9,713 $11,538 $21,251
Consulting and education services.......................... 6,604 2,657 9,261
Maintenance................................................ 7,665 12,887 20,552
------- ------- -------
Total Revenues..................................... 23,982 27,082 51,064
Costs and Expenses:
Cost of revenues........................................... 6,834 6,482 13,316
Sales and marketing........................................ 10,999 13,988 24,987
Research and development................................... 5,725 5,503 11,228
General and administrative................................. 3,241 3,381 6,622
Restructuring costs........................................ -- 1,852 1,852
------- ------- -------
Total costs and expenses........................... 26,799 31,206 58,005
------- ------- -------
Income (loss) from operations................................ (2,817) (4,124) (6,941)
Interest, other income, net.................................. 221 (784) (563)
------- ------- -------
Income (loss) before provision for income taxes.............. (2,596) (4,908) (7,504)
Provision for income taxes................................... 398 31 429
------- ------- -------
Net income (loss).................................. $(2,994) $(4,939) $(7,933)
======= ======= =======
Income (loss) per share:
Net income (loss).......................................... $ (0.27) $ (0.35) $ (0.52)
Weighted average number of common and common equivalent
shares outstanding......................................... 11,059 14,276 15,371
======= ======= =======
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
54
<PAGE> 63
BACHMAN AND CADRE
<TABLE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1995
<CAPTION>
PRO FORMA
BACHMAN CADRE COMBINED
------- ------- ---------
(in thousands, except per share data)
<S> <C> <C> <C>
Revenues:
Software license........................................... $ 7,689 $15,820 $ 23,509
Consulting and education services.......................... 7,242 3,521 10,763
Maintenance................................................ 8,827 11,563 20,390
------- ------- --------
Total Revenues..................................... 23,758 30,904 54,662
Costs and Expenses:
Cost of revenues........................................... 8,585 7,899 16,484
Sales and marketing........................................ 13,092 16,095 29,187
Research and development................................... 6,806 7,472 14,278
General and administrative................................. 3,171 2,251 5,422
Restructuring costs........................................ 2,000 -- 2,000
------- ------- --------
Total costs and expenses........................... 33,654 33,717 67,371
------- ------- --------
Income (loss) from operations................................ (9,896) (2,813) (12,709)
Interest, other income, net.................................. 193 233 426
------- ------- --------
Income (loss) before provision for income taxes.............. (9,703) (2,580) (12,283)
Provision for income taxes................................... 80 33 113
------- ------- --------
Net income (loss).................................. $(9,783) $(2,613) $(12,396)
======= ======= ========
Income (loss) per share:
Net income (loss).......................................... $ (1.07) $ (0.22) $ (0.97)
Weighted average number of common and common equivalent
shares outstanding......................................... 9,135 11,884 12,396
======= ======= ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
55
<PAGE> 64
BACHMAN AND CADRE
<TABLE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1995
<CAPTION>
PRO FORMA
BACHMAN CADRE COMBINED
-------- -------- ---------
(in thousands, except per share data)
<S> <C> <C> <C>
Revenues:
Software license......................................... $ 11,264 $ 21,128 $ 32,392
Consulting and education services........................ 10,330 4,780 15,110
Maintenance.............................................. 11,728 15,630 27,358
-------- -------- --------
Total Revenues................................... 33,322 41,538 74,860
Costs and Expenses:
Cost of revenues......................................... 11,860 10,674 22,534
Sales and marketing...................................... 17,007 21,983 38,990
Research and development................................. 8,676 9,832 18,508
General and administrative............................... 4,253 3,097 7,350
Restructuring costs...................................... 2,000 1,631 3,631
Charge for purchased research & development.............. -- 7,300 7,300
-------- -------- --------
Total costs and expenses......................... 43,796 54,517 98,313
-------- -------- --------
Income (loss) from operations.............................. (10,474) (12,979) (23,453)
Interest income (expense), net............................. 460 190 650
-------- -------- --------
Income (loss) before provision for income taxes............ (10,014) (12,789) (22,803)
Provision for income taxes................................. 246 43 289
-------- -------- --------
Net income (loss)................................ $(10,260) $(12,832) $(23,092)
======== ======== ========
Income (loss) per share:
Net income (loss)........................................ $ (1.12) $ (1.04) $ (1.79)
Weighted average number of common and common equivalent
shares outstanding....................................... 9,181 12,283 12,891
======== ======== ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
56
<PAGE> 65
BACHMAN AND CADRE
<TABLE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1994
<CAPTION>
PRO FORMA
BACHMAN CADRE COMBINED
-------- ------- ---------
(in thousands, except per share data)
<S> <C> <C> <C>
Revenues:
Software license.......................................... $ 15,807 $20,364 $ 36,171
Consulting and education services......................... 8,953 4,637 13,590
Maintenance............................................... 11,742 15,575 27,317
-------- ------- --------
Total Revenues.................................... 36,502 40,576 77,078
Costs and Expenses:
Cost of revenues.......................................... 10,245 9,171 19,416
Sales and marketing....................................... 20,307 21,068 41,375
Research and development.................................. 10,771 9,357 20,128
General and administrative................................ 4,989 2,794 7,783
Charge for purchased research & development............... 1,736 -- 1,736
-------- ------- --------
Total costs and expenses.......................... 48,048 42,390 90,438
-------- ------- --------
Income (loss) from operations............................... (11,546) (1,814) (13,360)
Interest income, net........................................ 362 123 485
Other income................................................ -- 80 80
-------- ------- --------
Income (loss) before provision for income taxes............. (11,184) (1,611) (12,795)
Provision for income taxes.................................. 357 50 407
-------- ------- --------
Net income (loss)................................. $(11,541) $(1,661) $(13,202)
======== ======= ========
Income (loss) per share:
Net income (loss)......................................... $ (1.30) $ (0.14) $ (1.06)
Weighted average number of common and common equivalent
shares outstanding........................................ 8,844 11,789 12,405
======== ======= ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
57
<PAGE> 66
BACHMAN AND CADRE
<TABLE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1993
<CAPTION>
PRO FORMA
BACHMAN CADRE COMBINED
-------- ------- ---------
(in thousands, except per share data)
<S> <C> <C> <C>
Revenues:
Software license.......................................... $ 18,257 $21,523 $ 39,780
Consulting and education services......................... 8,712 4,761 13,473
Maintenance............................................... 9,053 15,192 24,245
Other..................................................... 798 798
-------- ------- --------
Total Revenues.................................... 36,022 42,274 78,296
Costs and Expenses:
Cost of revenues.......................................... 8,927 8,756 17,683
Sales and marketing....................................... 24,363 22,692 47,055
Research and development.................................. 5,824 8,966 14,790
General and administrative................................ 6,133 3,813 9,946
Restructuring costs....................................... 6,316 3,428 9,744
-------- ------- --------
Total costs and expenses.......................... 51,563 47,655 99,218
-------- ------- --------
Income (loss) from operations............................... (15,541) (5,381) (20,922)
Interest, other income, net................................. 906 36 942
-------- ------- --------
Income (loss) before provision for income taxes............. (14,635) (5,345) (19,980)
Provision for (benefit from) income taxes................... 94 (41) 53
-------- ------- --------
Net income (loss)................................. $(14,729) $(5,304) $(20,033)
======== ======= ========
Income (loss) per share:
Net income (loss)......................................... $ (1.81) $ (0.46) $ (1.73)
Weighted average number of common and common equivalent
shares outstanding........................................ 8,125 11,460 11,586
======== ======= ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
58
<PAGE> 67
BACHMAN INFORMATION SYSTEMS, INC.
<TABLE>
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED BALANCE SHEET
AT MARCH 31, 1996
<CAPTION>
HISTORICAL PRO FORMA
--------------------- --------------------------
BACHMAN CADRE ADJUSTMENTS COMBINED
-------- -------- ----------- ---------
(in thousands)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................. $ 10,362 $ 3,920 $ 14,282
Trade accounts receivable, net............. 10,411 6,855 17,266
Prepaid expenses and other current
assets.................................. 1,190 808 (83)(2) 1,915
-------- -------- ---------
Total current assets............... 21,963 11,583 33,463
Property and equipment, net.................. 1,369 1,633 3,002
Capitalized software costs, net.............. 1,100 653 1,753
Other assets................................. 441 400 841
-------- -------- ---------
$ 24,873 $ 14,269 $ 39,059
======== ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable........................... $ 1,401 $ 2,089 $ 3,490
Accrued expenses........................... 1,182 -- 1,182
Accrued compensation and benefits.......... 2,469 1,485 3,954
Accrued restructuring costs................ -- 1,000 1,000
Accrued merger and related costs........... -- -- 6,917(2) 6,917
Income and other taxes payable............. 793 82 875
Obligations under capital lease............ 33 443 476
Factor borrowing........................... -- 4,442 4,442
Other liabilities.......................... -- 964 964
Deferred revenue........................... 5,495 9,454 14,949
-------- -------- ---------
Total current liabilities.......... 11,373 19,959 38,249
Long term debt............................... 14 387 401
Other deferred liabilities................... 397 397
Long term shareholder loan................... 1,600 (1,600)(2) --
Redeemable Series A Convertible Preferred
Stock...................................... 475 -- 475
Stockholders' equity:
Common stock............................... 126 145 (97)(2) 174
Additional paid-in capital................. 67,769 31,267 1,697 100,733
Accumulated deficit........................ (54,582) (39,346) (7,000) (100,928)
Accumulated translation adjustments........ (302) (140) (442)
-------- -------- ---------
Stockholders' equity............... 13,011 (8,074) (463)
-------- -------- ---------
$ 24,873 $ 14,269 $ 39,059
======== ======== =========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
59
<PAGE> 68
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
(In Thousands Except Per Share Data)
(1) The Unaudited Pro Forma Condensed Combined Financial Statements of
Bachman and Cadre give retroactive effect to the Merger which is being accounted
for as a pooling of interests and, as a result, such statements are presented as
if the combining companies had been combined for all periods presented. The
unaudited pro forma condensed combined financial statements reflect the issuance
of an assumed 0.3020 (exchange ratio, which is subject to adjustment) of a share
of Bachman Common Stock for each share of Cadre Common Stock to effect the
Merger. The actual exchange ratio and number of shares of Bachman Common Stock
to be issued will be determined at the effective time of the Merger.
<TABLE>
(2) For purposes of the Unaudited Pro Forma Condensed Combined Financial
Statements, the pro forma condensed combined net income per share is based on
the combined weighted average number of common stock and common stock
equivalents of Bachman and Cadre for each period, based upon an effective
exchange ratio of 0.3020 share of Bachman common stock for each share of Cadre
common stock. The unaudited pro forma condensed combined balance sheet reflects
the issuance of 4,850 shares of Bachman common stock ($0.01 par value) in
exchange for all of the shares of Cadre common stock outstanding at March 31,
1996. The pro forma adjustments were calculated as follows:
<S> <C>
Elimination of Cadre Common Stock................................... $ 146
Issuance of Bachman Common Stock.................................... 49
Automatic conversion of convertible note............................ 1,600
Elimination of Prepaid Royalty...................................... 83
Accrued Balance of Restructuring Costs.............................. 6,917
</TABLE>
(3) The Unaudited Pro Forma Condensed Combined Financial Statements do not
include adjustments to conform the accounting policies of Cadre to those of
Bachman. The nature and extent of such adjustments, if any, will be based upon
further study and analysis and are not expected to be material. The nature of
these differences may include the estimated useful life of assets.
(4) The combined companies expect to incur charges to operations estimated
at approximately $5 million to $7 million in the quarter in which the Merger is
consummated, to reflect costs associated with combining the operations of the
two companies, transaction fees and costs incident to the Merger. The estimated
charge is not reflected in the pro forma statement of operations data but is
included (at $7 million) for the balance sheet presentation. The amount of this
charge is a preliminary estimate and therefore is subject to change. Included in
the estimated charge is approximately $2,700 of employee related termination
expenses, $1,800 of legal, accounting, broker and other professional fees,
$1,500 of facility closure and consolidation expenses, and $1,000 of other
miscellaneous expenses associated with the consolidation of the two companies
and the company name change.
(5) The unaudited pro forma financial data combines Bachman's financial
data for the nine month periods ended March 31, 1996 and 1995 and each of the
three years ended June 30, 1995, 1994 and 1993 with Cadre's financial data for
the nine month periods ended March 31, 1996 and 1995 and for the twelve month
periods ended June 30, 1995, and December 31, 1994 and 1993. In this
presentation Cadre's financial data for the period July 1, 1994 to December 31,
1994 is included in the twelve month periods ended June 30, 1994 and 1995. The
six month period July 1, 1994 to December 31, 1994 for Cadre included $21.3
million in revenues and a net loss of $1.3 million.
60
<PAGE> 69
DESCRIPTION OF BACHMAN CAPITAL STOCK
The authorized capital stock of Bachman consists of 26,200,000 shares of
Bachman Common Stock, par value $0.01 per share, and 1,600,000 shares of
preferred stock, $1.00 par value per share ("Bachman Preferred Stock"). As of
the Bachman Record Date there were outstanding (i) 12,742,120 shares of Bachman
Common Stock held by approximately 254 holders of record and (ii) options to
purchase approximately 1,951,196 shares of Bachman Common Stock.
The following summary of certain provisions of Bachman Preferred Stock and
Bachman Common Stock does not purport to be complete and is subject to, and
qualified in its entirety by, the provisions of the Bachman Articles and
applicable law. See also "Comparison of Stockholders' Rights."
BACHMAN PREFERRED STOCK
The authorized Bachman Preferred Stock consists of 1,600,000 shares of
undesignated preferred stock issuable from time to time in one or more series.
The Bachman Board is authorized, subject to any limitations prescribed by
Massachusetts Law, to provide for the issuance of Bachman 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 stockholders. The Bachman Board may authorize and
issue Bachman Preferred Stock with voting, conversion and other rights and
preferences that could adversely affect the voting power or other rights of the
holders of Bachman Common Stock. Although Bachman has no current plans to issue
such shares, the issuance of Bachman Preferred Stock or of rights to purchase
Bachman Preferred Stock could be used to discourage an unsolicited acquisition
proposal.
BACHMAN COMMON STOCK
Holders of Bachman Common Stock are entitled to one vote per share on all
matters to be voted upon by Bachman stockholders. Subject to preferences that
may be applicable to any then-outstanding Bachman Preferred Stock, the holders
of Bachman Common Stock are entitled to receive ratably such dividends, if any,
as may be declared from time to time by the Bachman Board out of funds legally
available therefor. In the event of a liquidation, dissolution or winding up of
Bachman, the holders of Bachman Common Stock are entitled to share ratably in
all assets remaining after payment of liabilities, subject to prior distribution
rights of any Bachman Preferred Stock then outstanding. Bachman Common Stock has
no preemptive, redemption, conversion or subscription rights. All outstanding
shares of Bachman Common Stock are fully paid and non-assessable, and the shares
of Bachman Common Stock offered hereby will be, upon issuance in accordance with
the terms of the Merger Agreement, fully paid and non-assessable.
61
<PAGE> 70
CADRE
ABSENCE OF MARKET FOR CADRE STOCK; DIVIDEND POLICY
There is no established trading market for Cadre Common Stock. As of the
Cadre Record Date, there were 463 holders of record of Cadre Common Stock.
To date, Cadre has not declared or paid cash dividends on its stock and in
the absence of the Merger, does not intend to pay cash dividends to its
stockholders in the near future.
The following "Cadre Management's Discussion and Analysis of Financial
Condition and Results of Operations" has been provided by Cadre's management for
inclusion in this Prospectus/Joint Proxy Statement, based in part on the audited
Financial Statements of Cadre, copies of which are attached. Those financial
statements do not include statements of Westmount Technology B.V. ("Westmount"),
for any period before Cadre's acquisition of Westmount in May 1995 (see Note 3
of Cadre Technologies Inc. Notes to Consolidated Financial Statements), because
Bachman believes that the historical financial condition and results of
operations of Westmount before its acquisition by Cadre are not material to
evaluation of the proposed Merger. Bachman has been advised that Cadre's Board
of Directors did not consider an audit of Westmount's financial statements to be
useful in their consideration of whether to acquire Westmount because, among
other things, Cadre's purpose in acquiring Westmount was to acquire Westmount's
software product line (including products embodying new object-oriented
technology) to complement Cadre's products and to give Cadre access to a broader
customer market. Some information concerning the effect of the acquisition on
Cadre's results for 1995 is provided in Note 3 of Notes to Consolidated
Financial Statements. Based on unaudited financial statements and financial
records, Cadre's management attributes the following financial items to
Westmount for the year ended December 31, 1995: Gross revenues, $2,445,000;
Costs and Expenses, $5,160,000, and Net loss, $2,715,000.
CADRE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cadre is the successor of Cadre Technologies Inc. ("Original Cadre") and
MicroCASE Inc. ("MicroCASE"), both of which merged into Cadre on January 31,
1989. Prior to the merger, both predecessor companies were involved in the
development, marketing and support of software automation tools for the
automated creation of complex computer software. The predecessor companies,
however, each had focused on a different stage of the software and systems
development process. Original Cadre, which commenced operations in 1983 under
the name "Cadre Systems Corporation," designed and marketed CASE products that
automated the planning, analysis, design and code generation of software
systems, or "front-end" CASE products. MicroCASE, which commenced operations as
an Oregon corporation in 1981 under the name "Northwest Instruments Systems,
Inc.," developed hardware products that focused on the automation of debugging,
integration, optimization, and verification of software systems, or "back-end"
CASE products.
In 1991, Cadre made a strategic decision to phase out of the hardware
product line, or "back-end" CASE products. Cadre's decision to shift focus away
from hardware products was because of the increasing sophistication and use of
higher margin software tools which were replacing many of the tasks formerly
accomplished only by hardware tools. Since then, Cadre has provided software
tools to help automate and manage the entire software development life cycle.
Cadre's Teamwork(R) product line addresses the structured methods approach to
software development. The Teamwork(R) product line targets the large industrial
sectors including the federal sector, government agencies, aerospace and
defense.
The trend in software development is to "re-use" existing and proven
software code; these blocks of existing software code are called "objects".
Cadre's object-oriented software tools support this object-oriented modeling
technique. The object-oriented approach to software development is especially
suited to the information systems, or IS, market.
To strengthen Cadre's product offerings in the object-oriented marketplace
as well as accelerate its penetration in the IS market, Cadre acquired Westmount
Technology B.V. ("Westmount") of Delft, The
62
<PAGE> 71
Netherlands in May 1995. Westmount, founded in 1986, develops and markets
enterprise development tools for the client/server market. From the acquisition
comes additional products to Cadre's product family for both structured methods
and object-oriented approaches to software development. The
VantageTeam[Tradement] product line supports leading analysis and design
approaches for application development for both structured methods and
object-oriented techniques. VantageTeam[Tradement] is especially suited for the
managing of large and complex development environments and supports all major
relational databases and code generation for 4GLs. Another addition is
ObjectTeam for OMT, which supports object-oriented analysis, design and
implementation.
RESULTS OF OPERATIONS
<TABLE>
The following table sets forth certain income and expense items in Cadre's
consolidated statements of operations as a percentage of total revenues and the
percentage change in dollar amounts of such items for the periods indicated.
<CAPTION>
PERCENTAGE OF
TOTAL REVENUES PERCENT CHANGE PERCENTAGE CHANGE
FOR THREE PERCENTAGE OF TOTAL THREE MONTHS YEAR TO YEAR
MONTHS ENDED REVENUES FOR YEAR ENDED ENDED MARCH -------------------
MARCH 31, DECEMBER 31, 31, 1996 1995 1994
--------------- ------------------------- COMPARED TO COMPARED COMPARED
1996 1995 1995 1994 1993 MARCH 31, 1995 TO 1994 TO 1993
----- ----- ----- ----- ----- -------------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Software license........................ 38.5% 49.7% 47.1% 50.2% 50.9% (36.7)% (8.7)% (5.4)%
Maintenance............................. 48.5 39.1 42.8 38.4 35.9 1.3 8.5 2.5
Consulting and education services....... 13.0 11.2 10.1 11.4 11.3 (5.6) (14.3) (2.6)
Other................................... 0.0 0.0 0.0 0.0 1.9 -- -- --
----- ----- ----- ----- ----- ------ ----- -----
Total revenues.......................... 100.0 100.0 100.0 100.0 100.0 (18.3) (2.7) (4.0)
Cost and expenses:
Cost of revenues
Cost of software licenses............. 8.2 13.5 10.3 9.0 5.8 (50.4) 10.6 (50.0)
Cost of consulting and education
services and maintenance............ 15.2 15.5 15.6 13.6 14.9 (19.6) 11.6 (12.8)
Research and development.............. 20.2 22.0 21.2 23.1 21.2 (24.8) (10.4) 4.4
Purchased in-process research and
development......................... 0.0 0.0 18.5 0.0 0.0 -- -- --
Marketing and selling................. 57.4 55.6 52.3 51.9 53.7 (15.7) (2.0) (7.2)
General and administrative............ 15.5 7.6 9.7 6.9 9.0 65.4 36.3 (26.7)
Restructuring charges................. 0.0 0.0 8.8 0.0 8.1 -- -- (100.0)
----- ----- ----- ----- ----- ------ ----- -----
Total costs and expenses.............. 116.5 114.2 136.4 104.5 112.7 (16.6) 27.0 (11.0)
----- ----- ----- ----- ----- ------ ----- -----
Income (loss) from operations............. (16.5) (14.2) (36.4) (4.5) (12.7) (4.8) 691.3 (66.3)
Interest income........................... 0.4 0.9 0.6 0.9 0.9 (60.7) (26.0) (8.6)
Interest expense.......................... (5.3) (0.7) (1.3) (0.6) (0.6) 485.7 127.8 (11.3)
----- ----- ----- ----- ----- ------ ----- -----
Other income.............................. (1.5) 0.9 0.1 0.2 (0.2) (234.8) (57.5) (187.9)
Loss before provision (benefit) for income
taxes................................... 22.9 13.1 (37.0) (4.0) (12.6) 43.2 805.0 (69.9)
Provision (benefit) for income taxes...... 0.0 0.0 0.1 0.1 (0.1) (100.0) 2.0 (222.0)
----- ----- ----- ----- ----- ------ ----- -----
Net loss.............................. 22.9% (13.1)% (37.1)% (4.1)% (12.5)% 42.1% 780.8% (68.7)%
===== ===== ===== ===== ===== ====== ===== =====
</TABLE>
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995
REVENUES
Cadre's revenues are derived primarily from software product licenses,
consulting and education services and maintenance agreements. For the three
months ended March 31, 1996 total Cadre revenues were $7,804,000, down
$1,751,000 from the three months ended March 31, 1995. Revenues attributable to
software product licenses decreased $1,739,000, or 36.7%, consulting and
education services decreased $60,000 or 5.6%, and maintenance revenues increased
$48,000, or 1.3%.
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<PAGE> 72
Software Licenses. Software license revenues for the three months ended
March 31, 1996 were $3,004,000 compared to $4,743,000 for the comparable period
of the prior year, a decrease of $1,739,000, or 37%. Software license revenues,
as a percent of total Cadre revenues, declined from 50% from the prior year's
quarter to 39% for the current year's quarter. The decrease was due primarily to
two factors: a $840,000 drop in Cadre's Teamwork[Registered Trademark]
structured methods product line revenues and an $868,000 drop in Cadre's
object-oriented product line revenues. The decline in Cadre's
Teamwork[Registered Trademark] structured methods product revenues is
attributable to both the industry trend in software development transitioning
from structured methods to object-oriented modeling, and to the contraction of
federal programs, which led to industry consolidation, which in turn led to a
shrinking of Cadre's traditional technical embedded customer base. The decline
in object-oriented revenues, year over year, was due to limited introduction of
the Windows 95 and NT object-oriented product in the quarter ended March 31,
1996, which was to replace a Windows-based object-oriented product distributed
by Cadre under a third-party license agreement. That agreement expired February
1995. In the quarter ended March 31, 1995, there were revenues of $1,001,000
from the third-party licensed Windows-based object-oriented product.
Consulting and Education. Total consulting and education revenues for the
quarter ended March 31, 1996 decreased $60,000, or 5.6%. A drop in educational
services training revenues of $370,000 was somewhat offset by an increase in
consulting revenues of $310,000.
Maintenance. Maintenance revenues for annual maintenance contracts are
deferred and recognized ratably over the terms of the agreements. In spite of
the year-to-year decline in software license revenues, Cadre's maintenance
revenues for the quarter ended March 31, 1996 continued year to year growth;
maintenance revenues increased $48,000, or 1.3% over the same period of the
prior year. Revenues from maintenance contracts for the quarter ended March 31,
1996 made up 48.5% of total Cadre revenues.
<TABLE>
Worldwide. The following table sets forth the amount of revenues derived
by Cadre, by geographic area, for each period indicated and the percentage
change in such amounts as compared to the prior period:
<CAPTION>
PERECENT CHANGE:
THREE MONTHS ENDED
THREE MONTHS MARCH 31, 1996
ENDED MARCH 31, COMPARED TO
----------------- THREE MONTHS ENDED
(DOLLARS IN THOUSANDS) 1996 1995 MARCH 31, 1995
- --------------------------------------------------------- ------ ------ ------------------
<S> <C> <C> <C>
United States............................................ $4,337 $5,481 (20.9)%
United Kingdom........................................... 1,128 1,354 (16.7)%
Rest of Europe........................................... 1,648 1,873 (12.0)%
Asia and Rest of World................................... 691 847 (18.4)%
------ ------ -----
Total revenues...................................... $7,804 $9,555 (18.3)%
====== ====== =====
</TABLE>
Cadre's international revenues, including the United Kingdom, Rest of
Europe, and Asia and Rest of World contributed 44.4% of total revenues during
the quarter ended March 31, 1996, and 42.6% during the quarter ended March 31,
1995. Rest of Europe and Asia and Rest of World operations are comprised of
wholly-owned subsidiaries and export distributor operations.
On May 1, 1995, Cadre acquired Westmount located in Delft, The Netherlands.
Westmount distributed its products through an export distributor network that
included several eastern European countries. With this addition to Cadre's
existing European distributor network, the European distributor revenues,
including the Rest of Europe, total increased by $281,000 in 1996 or 44.3%.
However, wholly-owned subsidiaries revenues, comprising the remainder of Rest of
Europe, decreased by $506,000. These decreases are attributable to the decrease
in Teamwork[Registered Trademark] software license revenues.
Revenues decreased in the United Kingdom by $226,000 and in Asia and Rest
of World by $156,000 for the quarter ended March 31, 1996 compared to the
quarter ended March 31, 1995. These decreases were also attributable to the
decrease in Teamwork[Registered Trademark] software license revenues.
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<PAGE> 73
Costs and Expenses.
<TABLE>
The following table sets forth Cadre's costs and expenses and headcount for
the periods indicated:
<CAPTION>
PERCENT CHANGE
THREE MONTHS THREE MONTHS ENDED
ENDED MARCH 31, MARCH 31, 1996
-------------------- COMPARED TO
1996 1995 MARCH 31, 1995
------ ------- ------------------
<S> <C> <C> <C>
COST OF REVENUES:
Cost of software licenses............................................. $ 640 $ 1,291 (50.4)%
Cost of consulting, education and maintenance......................... 1,188 1,478 (19.6)
------ -------
Total cost of revenues.............................................. 1,828 2,769 (34.0)
End-of-period headcount............................................... 31 49 (36.7)
Sales and marketing..................................................... 4,479 5,311 (15.7)
End-of-period headcount............................................... 91 127 (28.3)
Research and development................................................ 1,579 2,099 (24.8)
End-of-period headcount............................................... 53 68 (22.1)
General and administrative.............................................. 1,206 729 65.4
End-of-period headcount............................................... 29 33 (12.1)
Restructuring........................................................... 0 0 --
Charges for purchased research and development.......................... 0 0 --
------ -------
Total costs and expenses................................................ $9,092 $10,908 (16.6)
====== =======
End-of-period headcount............................................... 204 277 (26.4)
</TABLE>
Cost of Revenues. Cadre's cost of software license revenues includes
royalties, amortization of capitalized software, product packaging,
documentation and media, materials, labor and overhead costs. Cost of consulting
and education services and maintenance includes personnel, payments for
third-party services, travel and occupancy costs connected with providing such
services.
Cost of software licenses as a percentage of related revenues for the
quarter ended March 31, 1996 decreased to approximately 21.3% from 27.2% in the
corresponding period of the prior year. The decrease is due primarily to reduced
royalty costs associated with Cadre's object-oriented product line; in the
quarter ended March 31, 1996 Cadre shipped internally developed object-oriented
product on which a modest amount of royalties were paid, whereas in the
corresponding quarter of the prior year Cadre shipped object-oriented product
licensed from a third party on which substantial royalties were paid.
The cost of consulting, education and maintenance as a percentage of
related revenues decreased to 24.8% in the quarter ended March 31, 1996 from
30.7% for the corresponding period of the prior year. The decrease in cost as a
percentage of revenues is specifically attributable to a decrease in consulting
costs as a percentage of consulting revenues. Consulting costs as a percentage
of revenues were 123% during the quarter ended March 31, 1995, compared to 40%
of revenues for the quarter ended March 31, 1996.
Selling and Marketing. Selling and marketing expenses decreased by
$832,000 or 15.7% for the quarter ended March 31, 1996 compared to the
corresponding period of the prior year. The decline in selling and marketing
expenses was due to: lower commission expense on lower revenues, a reduction in
staffing by 36 employees (from both the 1995 restructuring programs and
attrition), and reduced promotional spending. About 38% of the selling and
marketing expense decline was in Cadre's international subsidiary sales
organization.
Research and Development. Research and development expenses decreased by
$520,000 or 24.8% for the quarter ended March 31, 1996 compared to the
corresponding period of the prior year; from 22% of revenues to 20.2%. The
decrease is due primarily to reduced staffing as a result of the 1995
restructuring programs and from attrition.
General and Administrative. General and administrative expenses include
the costs of finance, human resources, legal and administrative departments of
Cadre. These expenses increased $477,000, or 65.4% for the quarter ended March
31, 1996 compared to the corresponding period of the prior year. The increase in
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<PAGE> 74
expenses was primarily attributable to legal and audit fees associated with the
pending Merger between Cadre and Bachman Information Systems.
<TABLE>
EFFECT OF INTERNATIONAL OPERATIONS ON INCOME (LOSS) FROM OPERATIONS
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
(DOLLARS IN THOUSANDS) 1996 1995
- ---------------------- ------- -------
<S> <C> <C>
United States........................................................ $ (532) $ (659)
United Kingdom....................................................... (208) (444)
Rest of Europe....................................................... (798) (560)
Asia and Rest of World............................................... 250 310
------- -------
Operating Income................................................... $(1,288) $(1,353)
======= =======
</TABLE>
International operations had a significant impact on operations, in
addition to the other factors mentioned before.
United Kingdom loss from operations decreased from 1996 compared to 1995 by
$236,000. This decrease in loss from operations is a result of expense
reductions related to attrition.
Rest of Europe loss from operations increased in 1996 compared to 1995 by
$238,000. This increase in loss is primarily a result of reduced revenues of
$225,000.
INTEREST INCOME, NET
Cadre's cash balances are kept primarily in interest-bearing money market
accounts and transferred to Cadre's checking accounts as required. In the
quarter ended March 31, 1995, Cadre had a net interest income of $19,000; in the
quarter ended March 31, 1996, Cadre had net interest expense of $375,000. At
March 31, 1995, Cadre had $3,574,000 more cash than debt financing; at March 31,
1996, Cadre had $2,952,000 more debt financing than cash.
PROVISION FOR INCOME TAXES
During the quarters ended March 31, 1995 and 1996 Cadre provided for income
taxes of $10,000 and $0, respectively. Because of the operating losses for those
quarters, the tax provision for those periods are composed mostly of foreign
withholding taxes and income taxes related to the profitability of certain
subsidiaries.
1995 COMPARED TO 1994
REVENUES
Cadre's revenues are derived primarily from software product licenses,
customer support services (maintenance agreements), and consulting and education
services. From 1994 to 1995 Cadre's total revenues decreased $1,109,000, or
2.7%. During that time revenues attributable to software products licenses
decreased $1,779,000, or 8.7% and consulting and education services decreased
$661,000 or 14.3%; partially offsetting the drop in product license and
consulting and education services revenues was an increase in maintenance
revenues of $1,331,000, or 8.5%.
Software Licenses. Cadre's Teamwork(R) line of development tools addresses
all aspects of structured methods software development. Cadre's product offering
has expanded in the last several years to meet industry trends towards the
adoption of object-oriented software development. In this effort, Cadre has
provided, both through internal development and through partnership licensing,
object modeling tools to this market. During 1995, an expected transition from
partnership licensed tools to internally developed tools was delayed and
resulted in Cadre not being able to offer certain object-oriented products for a
period of several months. Subsequent to the expiration of the partnership
licensed object-oriented product, Cadre acquired Westmount to augment Cadre's
internal development of its object modeling tools.
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<PAGE> 75
The reduced availability of certain object-oriented products for Windows 95
and NT platforms caused object modeling revenues to decline by $842,000 from
1994. In 1994, product license revenues from the Teamwork[Registered Trademark]
product line generated $14,947,000, or 73% of Cadre's software license revenues.
In 1995, the Teamwork[Registered Trademark] product line revenues decreased by
$2,192,000, to $12,755,000, or 69% of software license revenues. There were two
main reasons for the decline: 1) the industry trend in software development
transitioning from structured methods to object-oriented modeling, and 2) the
contraction of federal programs, which led to industry consolidation, which in
turn led to a shrinking of Cadre's customer base. In May 1995, Cadre acquired
Westmount and its product lines, including object-oriented products and
structured-method products, which contributed revenues of $1,255,000 in 1995.
Because revenues from WestMount products during 1995 did not offset the decline
in revenues from object-oriented and Teamwork[Registered Trademark] products,
total software revenues decreased $1,779,000 from 1994 to 1995.
Consulting and Education. Total consulting and education revenues
decreased in 1995 by $661,000, or 14.3%. Specifically, methods training, used
for Teamwork[Registered Trademark] structured analysis modeling, declined by
$1,776,000. Substantially offsetting this drop was an increase in tools usage
training by $344,000 and an increase in consulting revenues by $771,000. In
1995, Cadre expanded its consulting group to capitalize on the growing demand
for customer onsite application installation and integration.
Maintenance. Maintenance revenues for annual maintenance contracts are
deferred and recognized ratably over the term of the agreement. In spite of the
year-to-year decline in license software revenues, Cadre's maintenance revenues
continued year to year growth; maintenance revenues increased $1,331,000, or
8.5% over 1994 due to the increase in the installed customer base. Revenues from
maintenance contracts in 1995 constituted 42.8% of total Cadre revenues.
<TABLE>
Worldwide. The following table sets forth the amount of revenues derived
by Cadre, by geographic area, for each period indicated and the percentage
change in such amounts as compared to the prior period:
<CAPTION>
PERCENTAGE CHANGE
YEAR TO YEAR
--------------------
YEAR ENDED DECEMBER 31, 1995 1994
------------------------------- COMPARED COMPARED
(DOLLARS IN THOUSANDS) 1995 1994 1993 TO 1994 TO 1993
- ----------------------------------------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
United States............................ $21,934 $22,498 $25,352 (2.5)% (11.3)%
United Kingdom........................... 5,641 6,630 4,868 (14.9)% 36.2%
Rest of Europe........................... 9,307 8,059 8,766 15.5% (8.1)%
Asia and Rest of World................... 2,585 3,389 3,288 (23.7)% 3.1%
------- ------- ------- ----- -----
Total revenues...................... $39,467 $40,576 $42,274 (2.7)% (4.0)%
======= ======= ======= ===== =====
</TABLE>
Cadre's international revenues, including United Kingdom, Rest of Europe
and Asia and Rest of World, contributed 44.4% of total revenues in 1995 and
44.6% in 1994. Rest of Europe and Asia and Rest of World operations are
comprised of wholly-owned subsidiaries and export distributor operations. On May
1, 1995, Cadre acquired Westmount located in Delft, The Netherlands. Westmount
distributed its products through an export distributor network that included
several eastern European countries. With this addition to Cadre's existing
distributor network, the distributor revenues increased by $1,477,000 in 1995 or
30.0%. This increase was offset by decreases in Cadre's wholly-owned subsidiary
revenues, including the United Kingdom, of $2,022,000 or 16.7%. Revenues for the
United Kingdom and Cadre's other subsidiaries declined due to the decline of
structured methods license revenues.
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COSTS AND EXPENSES
<TABLE>
The following table sets forth statement of operations data of Cadre and
the percentage change in dollar amounts of such items for the period indicated:
<CAPTION>
PERCENT CHANGE
YEAR TO YEAR
---------------------
YEAR ENDED DECEMBER 31, 1995 1994
------------------------------- COMPARED COMPARED
1995 1994 1993 TO 1994 TO 1993
------- ------- ------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Cost of revenues:
Cost of software license.............. $ 4,055 $ 3,667 $ 2,444 10.6% 50.0%
Cost of consulting and education
services and maintenance........... 6,143 5,504 6,312 11.6 (12.8)
------- ------- -------
Total cost of revenues................ 10,198 9,171 8,756 11.2 4.7
End-of-period headcount............... 40 39 42 2.6 (7.1)
Marketing and selling................... 20,649 21,068 22,692 (2.0) (7.2)
End-of-period headcount............... 99 135 144 (26.7) (6.3)
Research and development................ 8,383 9,357 8,966 (10.4) 4.4
End-of-period headcount............... 66 74 82 (10.8) (9.8)
General administrative.................. 3,809 2,794 3,813 36.3 (26.7)
End-of-period headcount............... 33 33 43 0.0 (23.3)
Restructuring charges................... 3,483 -- 3,428 -- (100.0)
Purchased in-process research and
development........................... 7,300 -- -- -- --
Total costs and expenses................ 53,822 42,390 47,655 27.0 (11.0)
End-of-period headcount............... 238 281 311 (15.3) (9.6)
</TABLE>
Cost of Revenues. Cadre's cost of software license revenues includes
royalties, amortization of capitalized software, product packaging,
documentation and media, materials, labor and overhead costs. Cost of consulting
and education services and maintenance includes personnel, payments for
third-party services, travel and occupancy costs connected with providing such
services.
Cost of software license revenues increased $388,000 from 1994 to 1995,
from 18.0% of related software license revenues to 21.8%. The increase was due
to increased sales of products on which Cadre pays royalties to third parties.
Royalties paid to third parties for product license revenues were $2,577,000 in
1995 compared to $2,007,000 in 1994, an increase of $570,000. Decreases in costs
occurred in personnel and overhead expenses. As part of the acquisition of
Westmount, Cadre capitalized $800,000 of purchased software development.
$107,000 of the $800,000 was amortized to cost of license revenues in 1995
leaving $693,000 of capitalized software at the end of 1995.
The cost of consulting, education and maintenance increased $639,000 in
1995, from 27.2% of related revenues in 1994 to 29.4% in 1994. Consulting
expenses of $471,000 were new for 1995 as the group was expanded in 1995. As
part of the acquisition of Westmount, $649,000 was added to cost of maintenance
in 1995, as the Westmount technical support personnel were folded into cost of
maintenance revenues. Royalty payments to third parties for their support of
Cadre's maintenance revenues increased $463,000 in 1995. Partially offsetting
these increased customer support costs was a $1,005,000 reduction in payments to
third parties that provide methods training -- this follows the $1,776,000 drop
in methods training revenues.
Marketing and Selling. Marketing and selling expenses decreased by
$419,000 or 2.0% from 1994 primarily as a result of lower headcount and lower
sales commissions commensurate with 1995's lower revenues. As a percentage of
total revenues, selling and marketing expenses had a modest increase from 51.9%
of revenues in 1994 to 52.3% in 1995. In conjunction with the acquisition of
Westmount, 15 Westmount selling and marketing employees joined Cadre.
Notwithstanding the acquisition, the year-end headcount
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<PAGE> 77
dropped by 8 for the combined companies' selling and marketing staff. The drop
in headcount was the result of both attrition and restructuring.
Research and Development. Research and development expenses decreased by
$974,000 or 10.4% from 1994 due to two offsetting factors. First, during 1994
the Company reduced the carrying value of capitalized software development costs
associated with a technology license and charged $1,150,000 to research and
development; also during 1994, the Company paid and expensed $500,000 for the
right to modify and distribute certain in-process software technology. Second,
offsetting the above, the Company acquired Westmount and their related research
and development function during 1995.
General and Administrative. General and administrative expenses include
the costs of finance, human resources, legal and administrative departments of
Cadre. These expenses increased $1,015,000, or 36.2% in 1995 over 1994, making
general and administrative expenses 9.7% of revenues in 1995 compared to 6.9% in
1994. The increase in expenses was primarily due to the addition of the
Westmount administrative function.
Charge for Purchased In-Process Research and Development. On May 1, 1995,
Cadre acquired Westmount located in Delft, The Netherlands, in exchange for:
2,200,000 shares of Cadre Common Stock, and a warrant to purchase 600,000 shares
of Cadre Common Stock. The acquisition was accounted for as a purchase. The
purchase price was allocated to assets and liabilities based on their estimated
fair values as of the date of acquisition. The cost in excess of net assets
acquired of $8,100,000 was identified as software technology and technology in
process. The software technology was valued at $800,000 and the technology in
process was valued at $7,300,000. As a result, the technology in process of
$7,300,000 was charged to the income statement upon closing of the acquisition,
and $800,000 of software technology was capitalized. The technological
feasibility of the in-process technology had not yet been achieved nor did an
alternative future use exist.
Restructuring Charges. During the quarter ended June 1995, formal plans
were adopted and approved by executive management for the restructuring of Cadre
operations to eliminate redundant capitalized software development costs and to
reduce company-wide expenses. The purpose of acquiring Westmount was to acquire
Westmount's object-oriented software technology, which essentially replaced
Cadre's existing object-oriented product line. The redundant software
development cost write-off was $945,000 and consisted of the existing
capitalized software development costs related to object-oriented software
development which were replaced by Westmount's software technology. During this
time, and as a result of the acquisition of Westmount, other costs were
eliminated to reduce redundant expenses and to better align costs with revenues,
including consolidating and downsizing European offices and reducing domestic
expenses. One facility, Cadre's Switzerland sales office, was closed and its
operations were moved to The Netherlands. Approximately 20 employees were
terminated in conjunction with the restructuring. The effect of restructuring on
future operations include: 1) reduced capitalized software amortization expenses
of approximately $330,000 annually, and 2) reduced expenses due primarily to
employee terminations of approximately $1,300,000 annually. Restructuring costs
during the quarter ended June 1995 equaled $1,789,000 and included: employee
severance of $789,000, office closure costs of $55,000, and $945,000 of
capitalized software development costs write-offs mentioned earlier.
In the quarter ended December 31, 1995, formal plans were adopted and
approved by executive management for an additional restructuring of Cadre
operations related to the absence of Windows-based object-oriented products.
After the Westmount acquisition, Cadre had planned to introduce and sell object-
oriented Windows 95 and NT-based product during the quarter ended December 1995.
When it became apparent that the product was not going to be introduced and sold
in the December 1995 quarter, and as a result revenues would be less than
expected, a restructuring of operations was required to reduce expenses. Total
restructuring costs of $1,694,000 included: $1,612,000 employee severance,
$12,000 office closure costs, and $70,000 other costs. Approximately 47
employees were terminated during this restructuring. The effect of the
restructuring on future operations is to reduce annual expenses by $3,000,000
related to employee terminations.
The restructuring programs discussed above began during the quarter ended
June 1995 and will be completed by mid-1996. Approximately $1,490,000 of accrued
charges related to restructuring are included in
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<PAGE> 78
accrued payroll and benefits at December 31, 1995. Approximately $2,487,000 of
restructuring-related charges were paid in 1995.
<TABLE>
EFFECT OF INTERNATIONAL OPERATIONS ON INCOME (LOSS) FROM OPERATIONS
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
(DOLLARS IN THOUSANDS) 1995 1994 1993
- ------------------------------------------------------------- -------- ------- -------
<S> <C> <C> <C>
United States................................................ $ (3,394) $(1,363) $(5,110)
United Kingdom............................................... (1,442) (223) (90)
Rest of Europe............................................... (10,421) (1,580) (1,429)
Asia and Rest of World....................................... 902 1,352 1,248
-------- ------- -------
Loss from Operations.................................... $(14,355) $(1,814) $(5,381)
======== ======= =======
</TABLE>
International operations had a significant impact on operations in addition
to the other factors mentioned before.
United Kingdom loss from operations increased from 1995 compared to 1994 by
$1,219,000. This increase is attributable to $259,000 of additional costs for
delivery of training revenues by independent contractors and a decline of
revenues of $989,000. As mentioned earlier, the revenues decline is related to
reduced license revenues for structured products.
Rest of Europe loss from operations increased from 1995 compared to 1994 by
$8,841,000. This increase in loss is a result of a purchased research and
development charge of $7,300,000 related to the acquisition of Westmount during
1995, and restructuring charges of $1,031,000.
Asia and Rest of World income from operations decreased in 1995 from 1994
by $450,000 due to the decline related to reduced license revenues for
structured products.
Included in income (loss) from operations in 1995 are $3,483,000 of
restructuring costs, $2,407,000 in the United States, $45,000 in United Kingdom,
and $1,031,000 in Rest of Europe.
INTEREST INCOME, NET
Cadre's cash balances are kept primarily in interest bearing money market
accounts and transferred to Cadre's checking accounts as required. In 1994,
Cadre had net interest income of $123,000; in 1995, Cadre had net interest
expense of $258,000. At December 31, 1994, Cadre had $5,479,000 more cash than
debt financing; at December 31, 1995, Cadre had $2,568,000 more debt financing
than cash.
PROVISION FOR INCOME TAXES
During 1994 and 1995, Cadre provided for income taxes of $50,000 and
$51,000, respectively. Because of the operating losses for 1994 and 1995, the
tax provision for those periods is composed mostly of foreign withholding taxes
and income taxes related to the profitability of certain subsidiaries.
1994 COMPARED TO 1993
REVENUES
From 1993 to 1994, Cadre's total revenues decreased $1,698,000, or 4.0%.
1993 was the final year of a multi-year R&D product development agreement and
the final year of revenues derived from hardware sales. In 1990 Cadre entered
into a R&D partnership arrangement to fund research and development and
marketing of Cadre's FORTRAN and C forward and reverse engineering products.
During 1993, $620,000 of product development revenues were recognized as part of
the R&D product development agreement; there were no product development
revenues recognized in 1994. Also, in 1993, there was $178,000 of hardware
revenues; there were no hardware revenues in 1994. Revenues attributable to
software products licenses decreased $1,159,000, or 5.4%, consulting and
education services revenues decreased $124,000, and maintenance revenues
increased $383,000, or 2.5%.
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<PAGE> 79
Software Licenses. Software license revenues decreased $1,159,000 from
1993 to 1994, or 5.4%. This decrease was mainly due to a $4,116,000 drop in
Cadre's Teamwork[Registered Trademark] structured methods product line. There
were two main reasons for the decline: 1) the industry trend in software
development in transitioning from structured methods to object-oriented
modeling, and 2) the contraction of federal programs which has historically been
a large portion of Cadre's customer base. The contraction of federal programs
has also led to industry consolidation which effectively shrinks Cadre's
customer base.
Partially offsetting the decreased Teamwork[Registered Trademark] revenues
was an increase in Cadre's object-oriented product line. The developing trend in
industry adoption of object-oriented tools was evident in the growth of Cadre's
object-oriented product line, from $2,272,000 in 1993 to $4,999,000 in 1994, an
increase of $2,727,000.
Consulting and Education. Total consulting and education revenues
decreased in 1994 by $124,000, or 2.6%. Education revenues typically follow the
trend of software license revenues and, therefore, the decline in software
license revenues caused training revenues to also decline.
Maintenance. Maintenance revenues for annual maintenance contracts is
deferred and recognized ratably over the term of the agreement. Cadre's
maintenance revenues increased $383,000 from 1993 to 1994. Revenues from
maintenance contracts accounted for 38.4% of total Cadre revenues.
Cadre's international operations, including United Kingdom and Rest of
World, contributed 44.6% of revenues in 1994 and 40.0% in 1993. United Kingdom
revenues increased by $1,762,000 in 1994 compared to 1993, or 36.2%. United
Kingdom's revenue growth occurred in the areas of maintenance, training, object-
oriented software license revenues and structured methods revenues.
Rest of World revenues declined by $606,000 or 5.0% in 1994 compared to
1993 due to the decline in structured method license revenues.
COSTS AND EXPENSES
Cost of Revenues. Cost of software license revenues increased $1,223,000
from 1993 to 1994, from 11.4% of related software license revenues to 18.0%. The
increase was primarily due to increased sales of externally developed products
for which Cadre pays royalties. Royalties paid to third parties for product
license revenues were $918,000 in 1993 compared to $2,007,000 in 1994, an
increase of $1,089,000. There was no amortization of capitalized software in
1994; there was $23,000 of capitalized software amortization in 1993.
The cost of consulting, education and maintenance decreased $808,000 in
1994, from 31.6% of related revenues in 1993 to 27.2% in 1994. Two main factors
contributed to the $808,000 decline: 1) a decrease in costs attributable to
training provided by third-parties, and 2) a reduction in personnel required to
support the training revenues.
Marketing and Selling. Marketing and selling expenses decreased by
$1,624,000, or 7.2% in 1994. Reasons for the decrease were: 1) average headcount
from 1993 to 1994 decreased by 15 employees which accounts for approximately
$1,280,000, 2) travel expenses were down $278,000, and 3) depreciation expenses
were down $163,000. As a percent of total revenues, selling and marketing
expenses were 53.7% in 1993 and 51.9% in 1994.
Research and Development. Research and development expenses increased
$391,000, or 4.4% in 1994 due to two large, unrelated, offsetting factors.
First, in 1994, Cadre, which had software development offices in both Portland,
Oregon and in Providence, Rhode Island, consolidated the two offices into the
Providence, Rhode Island site. Due to this consolidation, many employees chose
not to move from Portland, Oregon to Providence, Rhode Island, and therefore
resigned. The average headcount dropped by 14 from 1993 to 1994. This drop in
headcount, plus the savings incurred in overhead efficiencies, accounted for
$1,268,000 in research and development expense savings. Second, in 1993 the
Company entered into a technology license agreement to allow for further
development and distribution of modified technology. The agreement called for a
minimum payment of $1,150,000. In 1994, the Company re-evaluated the market
potential of this
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technology and concluded that the near-term business level associated with this
agreement did not warrant the carrying value and therefore expensed $1,150,000
to research and development. Also in 1994, the Company paid $500,000 for the
right to modify and distribute certain in-process software technology. During
1994 the Company expensed the $500,000 to research and development because the
technological feasibility of the in-process research and development had not yet
been achieved nor did alternative future use exist.
General and Administrative. General and administrative expenses include
the costs of finance, human resources, legal and administrative departments of
Cadre. General and administrative expenses decreased $1,019,000, or 26.7% in
1994 over 1993. The decrease was primarily due to the consolidation of the
Portland, Oregon office into the Providence, Rhode Island office in 1994. In
that consolidation, in which the Portland office was closed, the administrative
staff was reduced by 13 employees which accounted for approximately $658,000 of
expense savings. Other administrative savings occurred in travel, outside legal
fees, and depreciation. This accounts for the drop in general and administrative
expenses as a percent of revenues, from 9% in 1993 to 6.9% in 1994.
Restructuring Charges. During 1993, Cadre decided to consolidate its
Portland, Oregon engineering, marketing and administrative operations to
Providence, Rhode Island, its largest existing facility. This consolidation
resulted in a restructuring charge of $3,820,000, which included: employee
severance of $1,284,000; office closure costs of $2,307,000; fixed asset
write-offs of $174,000; other costs of $55,000. The transition began in November
of 1993 and was completed in 1994. The restructuring charge of $3,820,000 was
partially offset by a credit relating to a prior year's charge of $392,000,
leaving a net restructuring charge of $3,428,000 for 1993.
EFFECT OF INTERNATIONAL OPERATIONS ON INCOME (LOSS) FROM OPERATIONS
Loss from operations in the United Kingdom increased $133,000 in 1994
compared to 1993. Revenues increased by $1,762,000, however, costs increased by
$1,895,000 resulting in a decrease of $133,000. Increased costs were
attributable to increased sales and marketing efforts to take advantage of
improving market conditions.
Rest of Europe decreased income from operations in 1994 compared to 1993 by
$151,000. This decrease is attributable to the decline in structured methods
license revenues. Expansion of distributor export operations into Latin America
and continued growth of revenues in Asian markets increased income from
operations in Asia and the Rest of World by $104,000 in 1994 compared to 1993.
Included in income (loss) from operations in 1993 is $3,428,000 of restructuring
costs all incurred in the United States.
PROVISION (BENEFIT) FOR INCOME TAXES
During 1993 and 1994, Cadre provided for income taxes of ($41,000) and
$50,000, respectively. The benefit in 1993 was related to federal and state
refunds. The tax provision recorded in 1994 was composed mostly of foreign
withholding taxes related to earnings and license fees.
LIQUIDITY AND CAPITAL RESOURCES
Cadre has financed its operations through private sales of common stock,
which raised $27,453,000; equipment lease financing of $1,000,000; short-term
debt of $3,000,000; shareholder subordinated loans of $1,600,000; $6,930,000 of
research and development partnership reimbursements; and cash generated from
operations. The Westmount acquisition increased common stock and additional paid
in capital by $3,380,000 accounting for the balance of the total capitalization.
Cash and temporary cash equivalents decreased from $7,879,000 as of
December 31, 1994 to $2,965,000 as of December 31, 1995, or a reduction of
$4,914,000 for the year. At December 31, 1995, cash and temporary cash
investments were $2,965,000. Cash flows used in operating activities were
$5,551,000. This use was offset by $1,000,000 proceeds from lease financing,
$1,600,000 from the shareholder subordinated debt, an increase of $600,000 of
bank borrowings, less debt repayments of $720,000. Cadre's principal long-term
cash
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commitments are for office space operating leases. As of December 31, 1995,
Cadre had no material commitments for capital expenditures.
During January 1996, Cadre refinanced its $3,000,000 short term bank debt
due to the termination of the line of credit by the lender. A new financing
agreement called "Factoring Agreement" with a new lender was used to pay-off
existing bank debt on January 5, 1996. The Factoring Agreement has a financing
limit of $5,600,000 and is based upon qualified accounts receivable. All assets
including trademarks and copyrights collateralize this debt. Receivables
generated in the United States and in foreign countries qualify for financing
purposes, on an individual invoice by invoice basis. Up to an 80% advance rate
may be granted for each invoice, once the liens are perfected in each country
outside of the United States.
This short term debt is self-liquidating, meaning the collections are used
to pay principal down first, until a new receivable is generated. Accordingly,
new invoices must be generated to finance new advances of funds to Cadre. As a
result of Cadre's month-end and quarter-end increases in generating revenues and
therefore receivables, the debt will be reduced during mid-month and
mid-quarter, creating a need for additional financing. The debt is based upon
the lender approving new, qualified receivables (receivables less than 90 days
old) and contains financial performance covenants. The events of default
include: a restriction that net worth cannot decrease by more than 30% since
December 31, 1995, payment of debts generally when they become due, and
bankruptcy.
The agreement expires December 8, 1996, unless terminated in writing sooner
by either party, with 60 days notice. A finance charge of 18% based on the
amount of gross receivable (100% of invoice amount) financed is payable monthly,
together with an administrative fee of 0.5% for each receivable financed.
The approval of each new receivable is based solely on the lender's
decision to accept that receivable, which cannot be assured. Receivables that
are over 90 days old must be replaced or reflected by repayment of a part of the
outstanding balance. Payments by customers against receivables are applied to
reduce the principal of the debt first, before any use for the Company's
operations. As a result, this debt may be paid down and may not be renewed, and
the failure to do so will have a material adverse impact on Cadre's business and
operations.
To support the need for additional financing mentioned earlier, Cadre has
obtained a commitment from Silicon Valley Bank for a $1.5 million line of credit
(the "Bridge Loan"). The revolving line of credit of $1,500,000 is backed by a
guarantee by Bachman up to such amount. The Bridge Loan expires upon the earlier
of the closing of the Merger or 90 days from the closing of the Bridge Loan, and
carries an interest rate of prime plus 2%.
Cadre has sufficient cash resources to meet its needs through June 1996.
Thereafter, Cadre will depend on results of operations to meet its future cash
requirements, which cannot be foreseen. There can be no assurances that Cadre's
receivables will continue to meet qualified lending criteria, achieve its
operating plan and return to profitability, and the failure to do so will have a
material adverse impact on Cadre's business and operations.
FOREIGN CURRENCY
Cadre's foreign subsidiaries sales are invoiced in local foreign currency,
while all other foreign sales are invoiced and collected in United States'
dollars. Cadre experienced no significant gains or losses on foreign currency
transactions or translations in 1995, 1994, and 1993. Foreign currency
transaction gains and losses are created by Cadre's intercompany accounts
payable in amounts denominated in United States dollars, that are payable by
Cadre's international subsidiaries located in Germany, France, United Kingdom,
and Australia. Cadre does not have foreign exchange risk in highly inflationary
countries. At December 31, 1995, 1994, and 1993 the intercompany accounts
payable amounts were $2,242,000, $1,972,000 and $900,000, respectively.
To reduce these currency risks, Cadre, in the past, employed a hedging
strategy using foreign currency forward exchange contracts. At December 31,
1995, 1994, 1993 the foreign exchange contracts outstanding were $0, $574,000,
and $521,000, respectively. The hedging strategy employed used forward contracts
to hedge intercompany accounts payable. Hedges occurred in the local currency
that was to be remitted and as a
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result was an effective hedge. However, many times Cadre chose to hedge only a
portion of the intercompany accounts payable, as its subsidiaries experience
losses that interrupted cash flows, thus making those flows less predictable.
Cadre has not incurred material currency transaction gains and losses
historically.
Cadre's hedging line of credit expired on January 5, 1996, concurrently
with Cadre's bank line of credit. In addition, due to restructurings and losses
incurred by its subsidiaries, Cadre's cash flows have been unpredictable. For
theses reasons, Cadre has not hedged since 1995.
Cadre has not experienced material foreign currency gains or losses
historically, and therefore, operating trends and liquidity are consistent with
the underlying operations. No assurance can be given that it will not experience
material foreign currency gains and losses subsequent to March 1996.
INFLATION
To date, inflation has not had a material impact on Cadre's revenues or
income.
QUARTERLY PERFORMANCE
Cadre's quarterly results are subject to fluctuations resulting from a
variety of factors, including the effects of customer purchasing patterns, the
timing and cost of product upgrades, new product introductions and promotions
and recognition of fees in connection with licenses, maintenance, development
and similar agreements. As a result of the factors discussed above, Cadre's
operating results for any one quarter are not necessarily indicative of results
for any future period.
<TABLE>
The following table presents certain unaudited consolidated quarterly
statements of operations data for the eight fiscal quarters ended December 31,
1995:
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1994 1994 1994 1994 1995 1995 1995 1995
-------- -------- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Software licenses..................... $ 4,064 $ 5,223 $ 4,959 $ 6,118 $ 4,743 $ 5,308 $ 4,495 $ 4,039
Maintenance........................... 3,888 3,864 3,818 4,005 3,740 4,067 4,428 4,671
Consulting and education services..... 1,095 1,093 1,180 1,269 1,072 1,259 807 838
Product Development...................
------- ------- ------- ------- ------- -------- ------- -------
Total Revenue................... 9,047 10,180 9,957 11,392 9,555 10,634 9,730 9,548
Costs and expenses:
Cost of software licenses............. 630 779 951 1,307 1,291 1,131 979 654
Cost of consulting and educational
services and maintenance............ 1,350 1,282 1,439 1,433 1,478 1,644 1,583 1,438
Research and development.............. 1,892 2,092 3,261 2,112 2,099 2,360 2,204 1,720
Purchased in-process research and
development......................... 0 0 0 0 0 7,142 0 158
Marketing and selling................. 4,776 5,508 5,028 5,756 5,311 5,829 5,173 4,336
General and administrative............ 539 733 713 809 729 905 997 1,178
Restructuring charges................. 0 0 0 0 0 1,789 0 1,694
------- ------- ------- ------- ------- -------- ------- -------
Total costs and expenses........ 9,187 10,394 11,392 11,417 10,908 20,800 10,936 11,178
Income (loss) from operations........... (140) (214) (1,435) (25) (1,353) (10,166) (1,206) (1,630)
Other................................... 26 52 86 39 108 (43) (115) (174)
------- ------- ------- ------- ------- -------- ------- -------
Income (loss) before provision (benefit)
for income taxes...................... (114) (162) (1,349) 14 (1,245) (10,209) (1,321) (1,804)
Provision (benefit) for income taxes.... 27 0 18 5 10 10 5 26
------- ------- ------- ------- ------- -------- ------- -------
Net income (loss)....................... $ (141) $ (162) $(1,367) $ 9 $(1,255) $(10,219) $(1,326) $(1,830)
======= ======= ======= ======= ======= ======== ======= =======
Net income (loss) per common share...... (0.012) (0.014) (0.116) 0.001 (0.105) (0.758) (0.093) (0.128)
Weighted average common shares
outstanding........................... 11,732 11,775 11,788 12,434 12,004 13,478 14,248 14,272
</TABLE>
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BUSINESS OF CADRE
Cadre develops, markets and supports software tools for the creation of
complex computer software. Most of the products sold by Cadre help to automate
the process of requirements analysis and software design by groups of software
engineers. Customers use the tools to capture, traverse, and analyze abstract
models of the system to be built. These models assist users, and sometimes their
customers, in understanding a software system, planning its implementation, and
making engineering trade-offs. The models are analogous to those built in other
engineering disciplines. Additional Cadre products address document generation,
model configuration management, software construction, and the "reverse
engineering" (understanding) of existing software.
INDUSTRY/COMPANY BACKGROUND
Cadre was one of the earliest companies to be created explicitly for the
purpose of developing and marketing Computer Aided Software Engineering (CASE)
products. As the name suggests, the problem addressed by CASE is the creation
and maintenance of complex software systems. During the 1970's, a number of
"structured" techniques and methods were invented to replace earlier ad-hoc
approaches to software development. The analysis and design (as opposed to
implementation) techniques emphasize the building of abstract models to assist
in the understanding, planning, and implementation of a system. The rationale
for modeling is the same in software as it is in any engineering discipline:
money and effort are saved if problems are identified and dealt with early in
the engineering process.
STRUCTURED ANALYSIS AND STRUCTURED DESIGN
In the early eighties, networks of computer workstations made it feasible
to partially automate the capture, traversal, and analysis of engineering models
by work groups. This technology was rapidly adopted in the civil, mechanical,
and electrical engineering domains. Cadre was founded to do the same for
software engineering. The initial products, marketed today as part of the
Teamwork(R) family, addressed the process of Structured Analysis and Structured
Design.
The CASE market expanded quickly in the mid- to late-eighties, as did the
number of companies formed to service it. Cadre focused on the "high end" of the
market, with its multi-user networked UNIX engineering workstation solution,
which found a home in technically-oriented organizations, such as those in
telecommunications, aerospace, and defense. The other major player in that
market segment was Interactive Development Environments, Inc. ("IDE") of San
Francisco. Most other CASE companies sold single-user, personal computer ("PC")
based products. These found early success in corporate Information System ("IS")
organizations, where PCs were widely used. Leading companies in this segment
included Nastec, Index Technologies, Inc., Knowledgeware, Inc. (subsequently
acquired by Sterling Software, Inc.) and Popkin Software & Systems, Inc.
The IS CASE market declined in the early nineties for a number of reasons.
While the IS software development market is large, commitment to Structured
methods (and the attendant engineering discipline) was weak. Some CASE companies
made claims which the products were unable to deliver and soured the market.
Others were slow to respond to technology changes such as the shift to
client-server application development and object orientation (discussed further
below). The decline resulted in a number of market leaders closing or being
acquired. The technical market, where Cadre gets the majority of its business,
was effected by the contraction and consolidation in the defense industry. Cadre
diversified its product line into more of the software development process,
including debugging, measurement, and verification tools.
OBJECT ORIENTED TECHNOLOGY
In the meantime, the software development community began to experiment
with "object-oriented" ("OO") technology, and in particular, OO analysis,
design, and implementation techniques. The Structured techniques mentioned
previously generally partition a system purely along functional lines, i.e. in
terms of what the system does. The OO approach partitions a system into
"objects," where each object encapsulates information and those functions that
operate on that information. The benefit of the OO approach is that
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systems partitioned this way are more robust, more amenable to change, and the
objects are easier to reuse in other systems.
Cadre started selling its first OO analysis and design products (based on
the method of developing software created by Shlaer-Mellor) in 1989. When market
momentum began to build around a related method called the Object Modeling
Technique ("OMT"), Cadre initially entered the market by reselling an OMT
product in 1993. This has been replaced by the OMT tool developed by Westmount,
acquired in 1995. As the Structured tools market matures, Cadre expects its
growth to come from the OMT tool and related products. These products run on
both Unix-based platforms and Windows 95 and NT-based platforms. OO technology
is progressing beyond early adopters and is now being used by mainstream
software developers. Early indications are that there is greater market
acceptance of OO modeling than there is of Structured technology modeling.
RECENT RESTRUCTURING
Cadre adopted restructuring plans during the quarters ended June 30, 1995
and December 31, 1995. The restructuring plan adopted by Cadre during the
quarter ended June 30, 1995 was in connection with Cadre's acquisition of
Westmount. Cadre wrote off $945,000 of redundant software development costs,
closed its Switzerland sales office, and terminated 20 employees. Cadre adopted
a second restructuring program during the quarter ended December 31, 1995 in
order to reduce expenses once it became apparent that revenues would be less
than expected due to the absence of Windows-based object-oriented products.
Approximately 47 employees were terminated during this restructuring.
CUSTOMERS AND APPLICATIONS
Cadre's customers are generally developers of complex software systems,
covering a wide range of applications. One way to view the customer base is
whether they are in the Information System (IS) or "technical" sectors, as
described earlier in "-- Industry Background." While most of Cadre's current
customers consider themselves in the technical sector, Cadre expects its IS
customer base will increase as it concentrates on OO technology. Another
division, prevalent in the technical market, is whether the software being built
is mostly visible to the user (e.g., computerized reservations, inventory
management, billing), or if it is "embedded" in some other end-product (e.g.,
anti-lock brakes, telephone exchange, heart monitor, missile target seeker).
Cadre has customers in both segments.
STRATEGY
Cadre's strategy is to maintain its position as a leading provider of tools
to the technical market, while introducing new products and enhancements for its
OO product line.
COMPETITION
Cadre's business is intensely competitive. The CASE market is characterized
by rapid change and frequent introduction of new products. Cadre competes with a
number of companies in each of Cadre's product areas, as well as with internal
CASE tool development groups of potential customers. In the Structured technical
market, Cadre's primary competitor is IDE. In the object-oriented market,
Cadre's primary competitors are Rational Software Corp., Platinum Technology,
Inc. and IDE.
Many other companies produce products that compete with Cadre and still
others might become competitors in the future. As Cadre expands its product line
into new solution areas it is encountering additional competitors. Many of
Cadre's existing and potential competitors have substantially greater financial,
marketing and technological resources than Cadre.
The principal competitive factors that have affected the market for Cadre's
products include responsiveness to customer needs, product function, product
reliability, product ease of use, product openness, quality of customer training
and support, vendor reputation, relationships with other vendors, and price. A
variety of external and internal events and circumstances could adversely affect
Cadre's competitive capacity in the
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future. Cadre's ability to be competitive will depend, to a great extent, on
performance in product development and in sales and marketing. To be successful
in the future, Cadre must respond promptly and effectively to the challenges of
technological change and its competitors' innovations by continually enhancing
its own product offerings and ensuring that the market is aware of the solutions
Cadre offers.
PRODUCTS
The following is a list of Cadre's products (several of the product lines
listed have companion tools for more specific applications):
ObjectTeam(R) is a collection of tools and services that support
object-oriented software development. The tool suite supports the most popular
approaches to OO application development including component-based application
assembly and model driven application generation. The ObjectTeam family includes
the following products:
- ObjectTeam for OMT automates and manages software construction using the
Object Modeling Technique (OMT). It provides a multi-user repository with
version and configuration management, supports the Rumbaugh et al. Object
Modeling Technique, and generates incremental code.
- ObjectTeam Application Factory(TM) enables C++ developers to quickly
develop, locate and interconnect components and class libraries together
to incrementally create and maintain Windows C++ applications using
standard language and interfaces.
- ObjectTeam for Shlaer-Mellor automates the Shlaer-Mellor object-oriented
analysis ("OOA") method. It includes support for simulation, Recursive
Design, and all specified work products, diagrams, and notations.
Teamwork(R) is a family of structured methods products, used by both C++
and Ada developers, which help software engineers improve software quality,
streamline the software development process, and reduce development costs.
Specific Teamwork(R) tools address aspects of development including requirements
analysis, real-time systems development, dynamic verification, structured
design, testcase generation, and document generation.
VantageTeam(TM) is a family of structured method products that enable
relational database developers to build and maintain enterprise client/server
systems. Its integrated, model-driven environment offers developers a choice of
either structured or object-oriented modeling approach. VantageTeam(TM) features
extensive code-generation capabilities for popular 3GLs and 4GLs, and supports
the leading relational database management systems, including CA-Ingres,
Informix, Oracle and Sybase.
Most Cadre products are available on industry-leading UNIX workstations; in
addition, most object-oriented products are available on Microsoft Windows 95
and NT platforms.
RISKS OF INTERNATIONAL OPERATIONS
Approximately 44.4%, 44.6% and 40.0% of the Cadre's revenues in 1995, 1994,
and 1993, respectively, were attributable to international sales. Cadre
commenced direct sales and marketing operations in France in 1989 and now also
has direct sales and marketing operations in Germany and the United Kingdom. The
future contribution of sales from the subsidiaries to Cadre's results depends on
Cadre's success in maintaining cost-effective direct marketing operations
through these wholly-owned subsidiaries. In the fourth quarter of 1995, Cadre
restructured its German and United Kingdom subsidiaries to reduce expenses.
Approximately 16.2%, 12.1%, and 10.5% of Cadre's revenues in 1995, 1994,
and 1993, respectively, were attributable to sales made to independent
international distributors. Cadre acquired Westmount in May 1995 and
consolidated its European distributor management operations to Westmount's
headquarters in The Netherlands from Switzerland. Asian distributors are managed
through Cadre's United States sales organization in combination with its
Australian subsidiary. Sales in countries in which Cadre continues to use
independent distributors will remain subject to the distributors' financial
condition and success, which cannot be controlled by Cadre.
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Risks inherent in Cadre's international business generally include exposure
to currency fluctuations, longer payment cycles, greater difficulties in
accounts receivable collection and the requirement of complying with a wide
variety of foreign laws. While Cadre has not experienced any material delays,
expenditures or other adverse consequences in complying with foreign laws to
date, it has been necessary for Cadre to take steps to protect its proprietary
rights and license its products under local laws from country to country.
CUSTOMER SUPPORT
Cadre offers a variety of support services for its products that include
consulting, educational services, technical support services, and periodic
product upgrades (maintenance). Consulting is offered at a customer's site for
installation and integration assistance, and implementation and project
management services. Classroom and on-site education is offered for both product
training and methodologies training. Customer and technical support services
include toll-free hotline support, problem reporting and tracking, and a 24-hour
dial-in problem/answer database. Product maintenance is offered for each of
Cadre's products. Cadre provides maintenance and support of its software
products for an annual fee, payable in advance. Customers receive periodic
updates of covered products providing upgrades and enhancements. Revenues from
sales of maintenance support, referred to in Cadre's financial statements as
"maintenance agreements" or "customer support services" are recognized ratably
over the term of the agreements, generally one year.
As of March 31, 1996, there were 22 full-time employees within the customer
support service group. Cadre also contracts with outside parties to provide
methodology training and consulting services to customers.
PRODUCT DEVELOPMENT
All Cadre products are developed in Providence, Rhode Island and Delft, The
Netherlands. Cadre's research and development organization designs, develops,
tests, debugs and enhances Cadre's software products. During fiscal years 1995,
1994 and 1993 research and development expenses were $8,383,000, $9,357,000 and
$8,966,000, respectively. There was no capitalization of internally developed
software costs during these years. Cadre anticipates that it will continue to
commit substantial resources to research and development in the future. As of
March 31, 1996, Cadre had 53 employees engaged in product development.
Cadre, from time to time, enters into product licensing agreements for the
right to distribute, or incorporate within Cadre's products, other companies'
products. Other companies' products, under the license agreements, may or may
not be modified by Cadre before resale. Royalty payments are paid by Cadre for
distribution rights.
PROPRIETARY RIGHTS
Cadre relies on a combination of trade secret, copyright and trademark
laws, license and non-disclosure agreements and technical measures to protect
its rights in its software products and proprietary technology. Substantially
all of Cadre's employees have signed non-disclosure agreements obligating them
to maintain the confidentiality of Cadre's proprietary information.
Cadre's products are generally licensed to end users pursuant to a license
agreement that restricts the use of the products to the customer's internal
purposes and provides for non-disclosure of confidential information. Cadre
protects the source code version of its products as a trade secret and as an
unpublished copyrighted work. Cadre has no registered copyrights. Cadre has
agreed to make portions of its source code available to certain customers and
OEMs under very limited circumstances, subject to confidentiality, use and other
restrictions. Despite these precautions, it may be possible for third parties to
copy aspects of Cadre's products or to obtain and use information that Cadre
regards as proprietary without authorization. In addition, effective copyright
and trade secret protection for software products may be unavailable in certain
foreign countries.
Cadre believes that patent, trade secret and copyright protection are less
significant to Cadre's success than factors such as the knowledge, ability and
experience of Cadre's personnel, new product development,
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frequent product enhancements, name recognition and ongoing reliable product
maintenance. Cadre does not believe that its products or processes infringe on
existing proprietary rights of others.
MARKETING AND SALES
Cadre marketing is conducted from both Providence, RI and Delft, The
Netherlands. As of March 31, 1996, there were 13 marketing employees, and 78
sales employees. Cadre products and services are distributed by Cadre's direct
sales force in the United States and by direct and distributor sales channels
internationally. As of March 31, 1996, there were 44 employees in the U.S. sales
operations; they included sales representatives, sales engineers, tele-sales
representatives, and sales support. There are 12 sales offices in the U.S.
comprising a total leased space of approximately 17,000 square feet.
International sales are conducted through both direct and distributor channels
in Europe and through distributor channels rest of world. As of March 31, 1996,
Cadre employed 34 persons in its international sales operations and currently
has offices in the United Kingdom, Germany, France, The Netherlands, and
Australia.
EMPLOYEES
As of March 31, 1996, Cadre employed 204 persons worldwide, including 113
in marketing, sales and support services, 53 in engineering, 9 in manufacturing
and 29 in management, administration and finance. Of these employees, 131 were
located in the United States, 45 in Delft, The Netherlands and 28 in other
countries. None of Cadre's employees is represented by a labor union or is the
subject of a collective bargaining agreement. Cadre has never experienced a work
stoppage and believes that its employee relations are good.
LITIGATION
Cadre is not a party to any material litigation and is not aware of any
pending or threatened litigation that would have a material adverse effect on
Cadre or its business.
PROPERTY
Cadre's principal administrative, marketing, and research and development
facilities consist of approximately 73,000 square feet in Providence, Rhode
Island and approximately 25,000 square feet in Delft, The Netherlands. Cadre
occupies these premises under lease agreements expiring March 31, 1997 for the
Providence, and February 28, 1999 for the Delft lease. The base rents are
subject to annual adjustments. Cadre maintains offices in 12 locations in the
United States and five locations in other countries. Cadre believes that its
facilities are adequate for its current needs and that suitable additional space
will be available as needed to accommodate expansion of Cadre's operations.
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PRINCIPAL STOCKHOLDERS OF CADRE
<TABLE>
The following table sets forth certain information regarding the beneficial
ownership of Cadre Common Stock as of April 30, 1996 by (i) each person known by
Cadre to own beneficially more than 5% of the outstanding shares of Cadre Common
Stock, (ii) each director of Cadre, (iii) each of the executive officers of
Cadre and (iv) all directors and officers of Cadre as a group.
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED(1)
------------------------
DIRECTORS, EXECUTIVE OFFICERS AND PERCENTAGE
FIVE PERCENT STOCKHOLDERS NUMBER OWNERSHIP
- ---------------------------------------------------------------------- --------- ----------
<S> <C> <C>
David Best............................................................ 49,666(2) *
Jonathan A. Flint..................................................... 505,091(3) 3.5%
William H. D. Goddard................................................. 456,932(4) 3.2%
James P. Lally........................................................ 1,070,859(5) 7.4%
<FN>
- ---------------
* Less than 1% of the outstanding Common Stock.
(1) Based on 14,359,139 shares of Common Stock outstanding as of April 30,
1996. Unless otherwise indicated, the named person possesses sole voting
and dispositive power with respect to the shares.
(2) Consists of 49,666 shares subject to options granted under Cadre's 1988
Incentive and Non-Statutory Stock Option Plan (the "1988 Option Plan")
which are exercisable at June 30, 1996 or within 60 days thereafter.
(3) Includes 35,000 shares subject to options granted under Cadre's 1988 Option
Plan which are exercisable at June 30, 1996 or within 60 days thereafter.
Includes 318,628 shares held by Alta III Limited Partnership, 8,003 shares
held by Alta Jami Boston Limited Partnership, 432 shares held by Golden
Coins N.V., 50,577 shares held by Gallion Partners II and 80,922 shares
held by C.V. Sofinnova Partners Four. Burr, Egan, Deleage & Co. is a
venture capital firm which directly or indirectly provides investment
advisory services to five venture capital funds: Alta III Limited
Partnership, Alta Jami Boston Limited Partnership, Gallion Partners II,
C.V. Sofinnova Partners Four and Golden Coins N.V. The respective General
Partners of these funds exercise sole voting and investment power with
respect to the shares held by the funds. The principals of Burr, Egan,
Deleage & Co. are General Partners of 1) Alta III Management Partners
Limited Partnership (which is the General Partner of Alta III Limited
Partnership) and 2) Alta Jami Boston Limited Partnership. As General
Partners of these funds, they may be deemed to share voting and investment
powers for the shares held by these funds. Burr, Egan, Deleage & Co. serves
as an advisor to Gallion Partners II, C.V. Sofinnova Partners Four and
Golden Coins N.V. The principals of Burr, Egan, Deleage & Co. disclaim
beneficial ownership of all of the shares held by the foregoing funds
except to the extent of their pecuniary interests therein. Mr. Jonathan
Flint, an employee of Burr, Egan, Deleage & Co. disclaims beneficial
ownership of all shares owned by the funds affiliated with Burr, Egan,
Deleage & Co.
(4) Includes 4,000 shares held by Mr. Goddard as custodian for Charlotte Ives
Goddard under the Rhode Island UTMA, as to which Mr. Goddard disclaims any
beneficial ownership. Also includes 272,324 shares held by Bob & Co. and
29,000 shares subject to options granted under the 1988 Option Plan which
are exercisable at June 30, 1996 or within 60 days thereafter.
(5) Includes 760,220 shares held by Kleiner Perkins Caufield & Byers II and
275,639 shares held by Kleiner Perkins Caufield & Byers II -- Annex Fund.
Mr. Lally is a general partner of both partnerships and shares voting and
investment powers with the other general partners of the partnerships. Mr.
Lally disclaims beneficial ownership of such shares except to the extent of
his direct pecuniary interest therein. Also includes 35,000 shares subject
to options granted under the 1988 Option Plan which are exercisable at June
30, 1996 or within 60 days thereafter.
</TABLE>
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<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
------------------------
DIRECTORS, EXECUTIVE OFFICERS AND PERCENTAGE
FIVE PERCENT STOCKHOLDERS NUMBER OWNERSHIP
- ---------------------------------------------------------------------- --------- ----------
<S> <C> <C>
Lawrence L. Mayhew.................................................... 33,000(6) *
Lawrence Sutter....................................................... 615,500(7) 4.2%
H.H. van der Kwast.................................................... 175,874(8) 1.2%
Mory Bahar............................................................ 60,583(9) *
Read T. Fleming....................................................... 274,605(10) 1.9%
Ronald H. Imbriale.................................................... 196,000(11) 1.4%
Edson H. Whitehurst, Jr. ............................................. 225,000(12) 1.5%
William F. Winslow.................................................... 25,600(13) *
David C. Dayton....................................................... 268,875(14) 1.8%
Donald A. Millers, II................................................. 97,582(15) *
</TABLE>
- ---------------
(6) Consists of 33,000 shares subject to options granted under the 1988 Option
Plan which are exercisable at June 30, 1996 or within 60 days thereafter.
(7) Includes 287,500 shares subject to options granted under the 1988 Option
Plan which are exercisable at June 30, 1996 or within 60 days thereafter.
(8) Consists of Mr. van der Kwast's portion of shares currently held by
Stichting Administratiekantoor Cadmount ("Cadmount") (see footnote number
16) as follows: 36,800 shares issuable on conversion of the $1,600,000
promissory note and 30,422 shares issuable upon the exercise of the 600,000
share warrant (each convertible or exercisable at June 30, 1996 or within
60 days thereafter) and 108,652 shares of the 2,200,000 shares currently
held by Cadmount. Mr. van der Kwast is the nominee of Cadmount to the Board
of Directors of Cadre but is not an affiliate of Cadmount.
(9) Consists of 60,583 shares subject to options granted under the 1988 Option
Plan which are exercisable at June 30, 1996 or within 60 days thereafter.
(10) Includes an aggregate of 169,000 shares subject to options granted under
the 1988 Option Plan and 1989 Non-Statutory Stock Option Plan which are
exercisable at June 30, 1996 or within 60 days thereafter.
(11) Includes 141,000 shares subject to options granted under the 1988 Option
Plan which are exercisable at June 30, 1996 or within 60 days thereafter.
(12) Includes 165,000 shares subject to options granted under the 1988 Option
Plan which are exercisable at June 30, 1996 or within 60 days thereafter
and 60,000 shares held with Gayle Ann Whitehurst as joint tenants with
right of survivorship.
(13) Consists of 25,600 shares subject to options granted under the 1988 Option
Plan which are exercisable at June 30, 1996 or within 60 days thereafter.
(14) Consists of 268,875 shares subject to options granted under the 1988 Option
Plan which are exercisable at June 30, 1996 or within 60 days thereafter.
(15) Consists of 97,582 shares subject to options granted under the 1988 Option
Plan which are exercisable at June 30, 1996 or within 60 days thereafter.
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<PAGE> 90
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
------------------------
DIRECTORS, EXECUTIVE OFFICERS AND PERCENTAGE
FIVE PERCENT STOCKHOLDERS NUMBER OWNERSHIP
- ---------------------------------------------------------------------- --------- ----------
<S> <C> <C>
Stichting Administratiekantoor Cadmount............................... 3,525,333(16) 22.5%
Strawinskylaan 3073
1077 2X Amsterdam
Netherlands
Kleiner Perkins Caufield & Byers II................................... 760,220(17) 5.3%
2750 Sand Hill Road
Menlo Park, California 94025
Morgan Stanley Venture Partners....................................... 746,985(18) 5.2%
3000 Sand Hill Road
Building 4, Suite 250
Menlo Park, California 94025
All executive officers and directors as a group (15 persons).......... 4,057,467(19) 25.8%
</TABLE>
- ---------------
(16) Consists of 725,333 shares issuable upon the conversion of a $1,600,000
convertible promissory note (calculated for payments of principal and
interest as of August 29, 1996), 600,000 shares issuable under a warrant
exercisable at June 30, 1996 or within 60 days thereafter and 2,200,000
shares currently held by Cadmount.
(17) Does not include 275,639 shares held by Kleiner Perkins Caufield & Byers
II -- Annex Fund or 35,000 shares subject to options granted to James Lally
under the 1988 Option Plan which are exercisable at June 30, 1996 or within
60 days thereafter.
(18) Consists of 53,695 shares held by Meteor 1984 L.P., 52,740 shares held by
Comet 1983 Co., 21,750 shares held by Nova 1985 Co. and 618,800 shares held
by Morgan Stanley Venture Capital Fund L.P.
(19) Includes an aggregate of 1,396,806 shares subject to options granted under
the 1988 Option Plan and 1989 Non-Statutory Stock Option Plan which are
exercisable at June 30, 1996 or within 60 days thereof. Also includes
36,800 shares issuable upon the conversion of a promissory note and 30,422
shares issuable upon the exercise of a warrant, each convertible or
exercisable at June 30, 1996 or within 60 days thereafter (see footnote 8).
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COMPARISON OF STOCKHOLDERS' RIGHTS
Upon consummation of the Merger, the stockholders of Cadre, a Delaware
corporation, will become stockholders of Bachman, a Massachusetts corporation.
The Delaware GCL and the Massachusetts General Laws, including the Massachusetts
Business Corporation Law (the "Massachusetts BCL"), differ in many aspects, and
these differences will result in several changes in the rights of Cadre
stockholders. While it is not practical to summarize all of the differences
between the Delaware GCL and the Massachusetts BCL, the following description
summarizes material differences that may affect the rights of Cadre
stockholders.
ACTION BY WRITTEN CONSENT OF STOCKHOLDERS
Under Delaware GCL Section 228, unless otherwise provided in a
corporation's certificate of incorporation, any action required or permitted to
be taken at an annual or special meeting of stockholders may be taken without
such a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action to be taken is signed by the holders of
outstanding stock representing the number of shares necessary to take such
action at a meeting at which all shares entitled to vote were present. Cadre's
Restated Certificate of Incorporation (the "Cadre Charter") does not prohibit
stockholder action by written consent.
Under Section 43 of the Massachusetts BCL and the Bachman By-Laws, any
action required or permitted to be taken at any meeting of stockholders may be
taken without a meeting if all stockholders entitled to vote consent to the
action in writing.
CLASS VOTES OF STOCKHOLDERS
Neither the Delaware GCL nor the Massachusetts BCL requires separate class
votes of all voting classes in order to approve charter amendments, mergers and
sales of substantially all assets. Section 242 of the Delaware GCL and Section
71 of the Massachusetts BCL, however, provide that all classes of stock, even a
nonvoting class of stock, vote on charter amendments that adversely affect the
rights of holders of shares of such class. In addition, Section 78 of the
Massachusetts BCL provides that all classes of stock, even a nonvoting class of
stock, vote on a merger agreement that would adversely affect the rights of
holders of shares of such class.
STOCKHOLDER VOTING
The Delaware GCL generally requires a majority vote of the shares of stock
of each constituent corporation outstanding and entitled to vote in order to
effectuate a merger between two Delaware corporations (Section 251) or between a
Delaware corporation and a corporation organized under the laws of another state
(a "foreign" corporation) (Section 252). The Cadre Charter provides, however,
that a merger or consolidation of Cadre with or into any other corporation or
corporations must be approved by the holders of at least 66 2/3% of the total
number of shares of capital stock issued and outstanding.
Section 78 of the Massachusetts BCL provides that a merger between two or
more Massachusetts corporations must be approved by two-thirds of the shares of
each class of stock of each constituent corporation outstanding and entitled to
vote thereon or by such lesser proportion (but not less than a majority) thereof
as a corporation's articles of organization may provide. Where the merger is
between one or more Massachusetts corporations and one or more foreign
corporations and the surviving corporation is to be a foreign corporation, the
foregoing vote is required for the domestic corporation under Section 79 of the
Massachusetts BCL, but the foreign corporation is required only to comply with
the applicable provisions of its jurisdiction of incorporation. The Bachman
Articles do not alter the requirement that a merger of Bachman with or into
another corporation be approved by two-thirds of all outstanding shares entitled
to vote.
CERTAIN BUSINESS COMBINATIONS
Section 203 of the Delaware GCL prohibits a corporation from engaging in
any business combination with an interested stockholder (defined as a 15%
stockholder) for a period of three years after the time that the stockholder
became an interested stockholder unless (1) prior to that time, the board of
directors of the
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corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder or (2) upon
consummation of the transaction pursuant to which the person became an
interested stockholder, such stockholder owned 85% or more of the outstanding
voting stock at the time the transaction commenced (excluding shares owned by
directors and officers and shares owned by employee stock option plans in which
the participants cannot determine confidentially whether or not the shares would
be tendered in response to a tender or an exchange offer) or (3) on or
subsequent to the time of the transaction, the business combination is approved
by the corporation's board of directors and by a vote at a meeting (and not by
written consent) of at least two-thirds of the outstanding voting stock not
owned by the interested stockholder.
Section 203 only applies to Delaware corporations which have a class of
voting stock that is listed on a national securities exchange, is quoted on an
interdealer quotation system such as Nasdaq or is held of record by more than
2,000 stockholders. Cadre is not in any of these categories and, therefore,
Section 203 currently does not apply to it. A Delaware corporation may elect in
its original certificate of incorporation, or by amending its certificate of
incorporation or bylaws, that it will not be governed by Section 203. Any such
amendment must be approved by the stockholders and may not be further amended by
the board of directors. Cadre has not elected not to be governed by Section 203.
Bachman is subject to the provisions of Chapter 110F of the Massachusetts
General Laws, an anti-takeover law. In general, this statute prohibits a
publicly held Massachusetts corporation with sufficient ties to Massachusetts
from engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
becomes an interested stockholder, unless either (i) prior to the date on which
such stockholder becomes an interested stockholder the board of directors
approves either the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder; (ii) the interested
stockholder owns 90% of the corporation's outstanding voting stock upon
consummation of the transaction which made him an interested stockholder
(excluding shares held by certain affiliates of the corporation and shares owned
by employee stock option plans in which the participants cannot determine
confidentially whether or not the shares would be tendered in response to a
tender or an exchange offer); or (iii) on or after the date such person becomes
an interested stockholder, the business combination is approved by both the
board of directors and two-thirds of the outstanding voting stock of the
corporation (excluding shares held by the interested stockholder). An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or at any time within the prior three years did own) 5% or
more of the corporation's voting stock. A "business combination" includes
merger, stock and asset sales and other transactions resulting in a financial
benefit to the stockholder. Bachman has not elected, and does not intend to
elect, not to be governed by Chapter 110F. Bachman, however, may at any time
amend the Bachman Articles to elect not to be governed by Chapter 110F by a vote
of the holders of a majority of its voting stock, but such an amendment would
not be effective for twelve months and would not apply to a business combination
with any person who became an interested stockholder on or prior to the date of
the amendment.
DIVIDEND
Section 170 of the Delaware GCL allows a Delaware corporation to pay
dividends out of surplus or, if there is no surplus, out of its net profits for
the fiscal year in which the dividend is declared and/or the preceding fiscal
year.
Section 61 of the Massachusetts BCL permits a Massachusetts corporation to
pay dividends as long as the corporation is not insolvent or thereby rendered
insolvent.
APPRAISAL RIGHTS
Section 262 of the Delaware GCL provides for appraisal rights only in the
case of a statutory merger or consolidation of the corporation where the
petitioning stockholder does not consent to the transaction. In addition, no
appraisal rights are available where the corporation is to be the surviving
corporation and a vote of its stockholders is not required under Delaware GCL
Section 251(f) or (g). There are also no appraisal rights, unless otherwise
provided for in a corporation's certificate of incorporation, for shares of
stock listed on a
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national securities exchange or held by more than 2,000 holders of record,
unless such stockholders would be required to accept anything other than shares
of stock of the surviving corporation, shares of another corporation so listed
or held by such number of holders of record, cash in lieu of fractional shares
of such stock, or any combination thereof. The Cadre Charter does not provide
for such additional appraisal rights. For more information concerning
dissenters' right under the Delaware GCL, see "Other Matters Related to the
Merger -- Appraisal Rights of Dissenting Stockholders."
Pursuant to Section 76 of the Massachusetts BCL, a stockholder of a
Massachusetts corporation, who complies with the statutory procedures, is
entitled to demand payment for his or her stock in the event that the
corporation has voted to sell, lease or exchange all or substantially all of its
property and assets or has adopted any amendment of its articles of organization
that adversely affects the rights of such stockholder.
REDEEMABLE SHARES
Section 151 of the Delaware GCL permits both common and preferred stock to
be redeemable at the option of the corporation, at the option of the stockholder
or upon the happening of a specified event, subject to certain limitations.
The Massachusetts BCL does not expressly authorize the creation of
redemption rights. Redemption rights are generally regarded, however, as being
encompassed by Section 13(a)(5) of the Massachusetts BCL, which permits a
corporation's articles of incorporation to grant "special rights or privileges"
to holders of a class or series of stock. It is less certain, however, whether
redemption rights may be granted with respect to common stock, in addition to
preferred stock. The equivalent of redemption rights, however, may be created by
contract.
AMENDMENT OF BY-LAWS
Section 109 of the Delaware GCL provides that the stockholders entitled to
vote have the power to adopt, amend or repeal by-laws and that a corporation
may, in its certificate of incorporation, confer such powers on the board of
directors. In accordance with the Cadre Charter, the Cadre By-Laws may be
altered, amended or repealed by a vote of a majority of the directors in office,
subject to the power of the stockholders to alter or repeal by-laws made by the
Cadre Board.
Section 17 of the Massachusetts BCL provides that the stockholders have the
power to make, amend or repeal by-laws and, if provided in the articles of
organization of the corporation, the directors may also make, amend or repeal
bylaws, except with respect to any provision of the by-laws which by law, the
articles of organization or such by-laws requires action by the stockholder. Any
by-law adopted by the directors of the corporation may be amended or repealed by
the stockholders. In the event the directors make, amend or repeal any by-law,
notice of such action stating the substance of the change to the by-laws must be
given to all stockholders entitled to vote on by-law amendments not later than
the time of the giving of notice of the meeting of stockholders next following
the action by the directors. In accordance with the Bachman Charter, the Bachman
By-Laws may be amended or repealed by a vote of a majority of the directors in
office, subject to the power of the stockholders to alter or repeal by-laws made
by the Bachman Board. The Bachman By-Laws provide that certain provisions of the
Bachman By-Laws cannot be amended by the stockholders without the vote of at
least eighty percent of the capital stock issued, outstanding and entitled to
vote.
Massachusetts has adopted a "control share" statute (Chapter 110D of the
Massachusetts General Laws) under which a person who acquires voting stock of a
Massachusetts corporation which results in such person's voting power exceeding
certain specified amounts (20%, 33 1/3% and 50%, respectively) would lose the
right to vote such stock unless the stockholders of the corporation so
authorize. Any person making such a control share acquisition may file a
statement with the corporation demanding that such corporation call a
stockholders' meeting to vote on whether to reinstate that person's voting
rights. Stockholders who vote not to reinstate such voting rights may demand
certain appraisal rights in the event such voting rights are reinstated. In the
absence of an affirmative election to opt out by amending its articles of
organization or by-laws, the control share statute applies to a Massachusetts
corporation which has (i) 200 stockholders of record, (ii) its principal
executive office or substantial assets within Massachusetts and (iii) either
more than 10% of its
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stockholders of record residing in Massachusetts or more than 10% of its issued
and outstanding shares held by Massachusetts residents. Bachman has opted out of
the control share statute. Delaware does not have a control share statute.
LIMITATION ON DIRECTORS' LIABILITY; INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 102 of the Delaware GCL allows a corporation to include in its
certificate of incorporation a provision that limits or eliminates the personal
liability of directors to the corporation and its shareholders for monetary
damages for breach of fiduciary duty as a director. Section 102 of the Delaware
GCL does not, however, permit a corporation to limit or eliminate the personal
liability of a director 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
which involve intentional misconduct or a knowing violation of law, (iii)
intentional or negligent payment of unlawful dividends or stock purchase or
redemption or (iv) any transaction from which the director derived an improper
personal benefit. The Cadre Charter provides for limitations on directors'
liability as permitted by this statute.
Section 145 of the Delaware GCL provides that a corporation may indemnify
any of its officers and directors party to any action, suit or proceeding by
reason of the fact that he or she was a director, officer, employee or agent of
the corporation by, among other things, a majority vote consisting of directors
who were not parties to such action, suit or proceeding, provided that such
officer or director acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the corporation. The
Cadre Charter and the Cadre By-Laws provide for indemnification of officers and
directors of Cadre as permitted by this statute.
Section 67 of the Massachusetts BCL provides that indemnification of
directors, officers, employees and other agents of a corporation, and persons
who serve at its request as directors, officers, employees or other agents of
another organization, may be provided by it to whatever extent specified in or
authorized by (i) the articles of organization, (ii) a by-law adopted by the
stockholders or (iii) a vote adopted by the holders of a majority of the shares
of stock entitled to vote on the election of directors. The Bachman Articles
include a provision eliminating the personal liability of Bachman' directors for
monetary damages resulting from breaches of their fiduciary duty. This
provision, however, does not eliminate or limit any director's liability (i) for
any breach of the director's duty of loyalty to Bachman or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 61 and 62 of the
Massachusetts BCL, or any amendatory or successor provisions thereto or (iv)
with respect to any transaction from which the director derived an improper
personal benefit.
In addition, the Bachman By-Laws provide that Bachman will indemnify its
directors or officers (including persons who serve at its request as directors,
officers or trustees of any organization in which Bachman has an interest as a
stockholder, creditor or otherwise), to the fullest extent permitted by
Massachusetts law, against liabilities and expenses arising out of legal
proceedings brought or threatened against them by reason of their status as
directors or officers. Under this provision each director and officer is
entitled to indemnification even if not successful on the merits, if such
director or officer acted in good faith in the reasonable belief that his or her
action was in the best interest of Bachman.
CLASSIFIED BOARD OF DIRECTORS
Delaware law permits, but does not require, a classified board of
directors, with staggered terms under which one-half or one-third of the
directors are elected for terms of two or three years, respectively. The Cadre
Charter does not provide for a Board of Directors which is divided into classes.
Section 50A of the Massachusetts General Corporation Laws generally
requires that publicly-held Massachusetts corporations have a classified board
of directors consisting of three classes as nearly equal in size as possible,
unless those corporations elect to opt out of the statute's coverage.
The Bachman Board is divided into three classes with staggered terms. The
classification of directors makes it more difficult for stockholders to change
the composition of the Bachman Board in a relatively short
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period of time. At least two annual meetings of stockholders, instead of one,
generally are required to effect a change in a majority of the Bachman Board.
This delay provides the Bachman Board with additional time to evaluate proposed
takeover efforts and other extraordinary corporate transactions, to consider
appropriate alternatives to such proposals and to act in what it believes to be
the best interests of the stockholders. The classified board provision may have
the effect of discouraging a third party from making a tender offer or otherwise
attempting to obtain control of Bachman. The foregoing provisions of the Bachman
Articles and Bachman By-Laws may be amended only by a vote of the holders of at
least eighty percent of Bachman's voting stock or, in the case of the Bachman
By-Laws, by the Bachman Board.
REMOVAL OF DIRECTORS
Under Section 141 of the Delaware GCL, any director or the entire board of
directors may be removed, with or without cause, by the holders of a majority of
the shares entitled to vote at an election of directors, except (i) unless the
certificate of incorporation otherwise provides, in the case of a corporation
having a classified board, stockholders may effect such removal only for cause,
and (ii) in the case of a corporation having cumulative voting, if less than the
entire board is to be removed, no director may be removed without cause if the
votes cast against his removal would be sufficient to elect him if then
cumulatively voted at an election of the entire board of directors. Cadre does
not have a classified board or cumulative voting.
Under Section 51 of the Massachusetts BCL, unless the articles of
organization or by-laws provide otherwise, (a) directors and officers elected by
stockholders may be removed from their respective offices with or without cause
by the vote of the holders of a majority of the shares entitled to vote in the
election of directors or such officers, as the case may be, provided that the
directors of a class elected by a particular class of stockholders and officers
elected by a particular class of stockholders may be removed only by the vote of
the holders of a majority of the shares of the particular class of stockholders
entitled to vote for the election of such directors or officers, as the case may
be; (b) officers elected or appointed by the directors may be removed from their
respective offices with or without cause by vote of a majority of the directors
then in office; and (c) any director, and any officer elected by the
stockholders, may be removed from office for cause by vote of a majority of the
directors then in office. A director or officer may be removed for cause only
after a reasonable notice and opportunity to be heard before the body proposing
to remove such director or officer. Under Bachman's By-Laws, however, directors
may be removed only by a vote of at least eighty percent of Bachman's voting
stock, provided that directors of a class elected by a particular class of
stockholders may be removed only by the vote of the holders of two-thirds of the
shares of such class.
NEWLY CREATED DIRECTORSHIPS AND VACANCIES
Section 223 of the Delaware GCL provides that vacancies and newly created
directorships may be filled by a majority of the directors then in office, even
if the number of directors then in office is less than a quorum, or by a sole
remaining director unless (i) otherwise provided in a corporation's certificate
of incorporation or by-laws or (ii) the certificate of incorporation directs
that a particular class is to elect such director, in which case any other
directors elected by such class, or a sole remaining director, shall fill such
vacancy. In addition, if, at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board, the Delaware Court of Chancery may, upon application of
stockholders holding at least ten percent of the shares outstanding at the time
and entitled to vote for such directors, summarily order an election to be held
to fill any such vacancies or newly created directorships, or to replace the
directors chosen by the directors then in office. Such elections are to be
conducted in accordance with the procedures provided by the Delaware GCL. Unless
otherwise provided in the certificate of incorporation or by-laws, when one or
more directors resign from the board, a majority of directors then in office,
including those who have so resigned, may vote to fill the vacancy.
The Cadre By-Laws provide that vacancies and any newly created
directorships resulting from any increase in the number of directors may be
filled by a vote of the stockholders at a meeting called for the purpose, or by
a majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
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Section 52 of the Massachusetts BCL provides that, unless otherwise
provided in a corporation's articles of organization, any vacancy in the board
of directors (including a vacancy resulting from the enlargement of the board)
may be filled in the manner prescribed in the by-laws or in the absence of such
a by-law, by the directors. The Bachman By-Laws provide that any such vacancy
may be filled by the vote of the holders of not less than eighty percent of the
capital stock issued and outstanding and entitled to vote or, in the absence of
such stockholder action, by the directors then in office.
SPECIAL MEETINGS
Under Section 211 of the Delaware GCL, special meetings of stockholders may
be called by the board of directors and by such other person or persons
authorized to do so by the corporation's certificate of incorporation or
by-laws. Under the Cadre By-Laws, a special meeting of stockholders may be
called by the President and shall be called by the President or Secretary at the
written request of a majority of the Cadre Board, or at the written request of
the holders of at least ten percent of all capital stock of the corporation
issued and outstanding and entitled to vote at such meeting.
Under Section 34 of the Massachusetts BCL, special meetings of stockholders
of a corporation with a class of voting stock registered under the Exchange Act
may be called by the president or by the directors and, unless otherwise
provided in the articles of organization or by-laws, shall be called by the
clerk, or in case of the death, absence, incapacity or refusal of the clerk, by
any other officer, upon written application of one or more stockholders who hold
at least forty percent in interest of the capital stock entitled to vote
thereat. In case none of the officers is able and willing to call a special
meeting, the supreme judicial or superior court, upon application of one or more
stockholders who hold at least forty percent in interest, or such other
percentage as shall be specified in the corporation's articles of organization
or by-laws, of the capital stock entitled to vote thereat, shall have
jurisdiction in equity to authorize one or more of such stockholders to call a
meeting by giving such notice as is required by law. The Bachman By-Laws set
forth an advance notice procedure regarding the nomination, other than by or at
the direction of the Bachman Board or a committee thereof, of candidates for
election as directors (the "Nomination Procedure") and regarding certain matters
to be brought before an annual meeting of stockholders of Bachman (the "Business
Procedure").
The Nomination Procedure provides that the notice of proposed stockholder
nominations for the election of directors (including certain information about
the nominee and the nominating stockholder) must be given in writing to the
Clerk of Bachman not less than 60 days, nor more than 120 days, prior to the
date of the scheduled annual meeting. The Business Procedure provides that at an
annual meeting only such business may be conducted as has been brought before
the meeting by the Bachman Board or by a stockholder who has given notice
(including certain information about the proposed business and the proposing
stockholder) to the Clerk of Bachman not less than 60 days, nor more than 120
days, prior to the meeting. If less than seventy days' notice or prior public
disclosure of the date of the scheduled annual meeting is given or made, the
Nomination Procedure provides that the required notice by the stockholder, to be
timely, must be made within ten days following such public disclosure or mailing
of such notice, whichever is earlier.
The purpose of the Nomination Procedure is to afford the Bachman Board a
meaningful opportunity to consider the qualifications of the proposed nominees
and to inform stockholders about such qualifications. The purpose of the
Business Procedure is to provide the Bachman Board with a meaningful opportunity
to inform stockholders of any action proposed to be taken at such meeting and
the Bachman Board's position as to the advisability of taking such action. These
procedures may have the effect of precluding a nomination for the election of
directors or precluding the taking of proposed actions at a particular meeting
if the proper procedures are not followed, and may discourage or deter a third
party from conducting a solicitation of proxies to elect its own slate of
directors or otherwise attempting to obtain control of Bachman.
The Nomination Procedure and the Business Procedure may be amended only by
a vote of holders of at least eighty percent of Bachman's voting stock or by the
Bachman Board.
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INSPECTION RIGHTS
Section 220 of the Delaware GCL provides that any stockholder, upon written
demand stating the purpose of the inspection, shall have the right to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders, and its other books and records.
Section 32 of the Massachusetts BCL provides that a stockholder may inspect
a corporation's articles of organization, its by-laws, records of its meetings
of incorporators and stockholders, a list of its stockholders, and its other
stock and transfer records, provided that the actual purpose of the stockholder
for the inspection is in the interest of the stockholder as such, relative to
the affairs of the corporation.
ELECTION
The Bachman By-Laws provide that Bachman's Board of Directors will consist
of not less than three nor more than eighteen directors and that the number of
directors will be determined from time to time by the stockholders and may be
enlarged or reduced at any time by vote of a majority of the directors then in
office.
The number of directors constituting the full Bachman Board is fixed at
seven. The Bachman Board is divided into three classes, each containing, insofar
as possible, an equal number of directors. Directors are elected to serve for
three-year terms, and until their respective successors are duly elected and
qualified, with the term of one of the three classes expiring each year at
Bachman's annual meeting or special meeting in lieu thereof.
The Cadre By-Laws provide that Cadre's Board of Directors will consist of
not less than one nor more than nine directors, that the stockholders at the
annual meeting will determine the number of directors and that the number of
directors may be increased or decreased at any time by the stockholders or the
directors by a vote of a majority of directors then in office except that any
such decrease by vote of the directors shall only be made to eliminate vacancies
existing by reason of the death, resignation or removal of one or more
directors. Each director holds office until the next annual meeting, and until
such director's successor is elected and qualified.
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THE BACHMAN NAME CHANGE PROPOSAL
Changing Bachman's name to Cayenne Software, Inc. will reflect the new
synergy of the resources of Bachman and Cadre joined in the mission to focus on
delivery of a suite of practical solutions to the designated development needs
of software teams. The Bachman Board unanimously recommends that holders of
Bachman stock vote FOR the Bachman Name Change Proposal.
THE AUTHORIZED BACHMAN COMMON STOCK PROPOSAL
The Authorized Bachman Common Stock Proposal will allow Bachman to acquire
or invest in complementary businesses or technologies and have additional shares
available for employee stock option, purchase and other benefit plans, and for
other corporate purposes by the Board of Directors of Bachman. Bachman, however,
has no agreement or understanding regarding any acquisition or investment.
Bachman has issued shares in connection with acquisitions several times in
the recent past, and the Board of Directors of Bachman may entertain proposals
for additional acquisitions in the future. It is in the nature of acquisition
discussions that they may arise and may be terminated on short notice, and the
terms proposed may change rapidly. Accordingly, as a matter of policy, Bachman
does not announce or discuss publicly either the existence or the status of
negotiations relating to possible acquisitions in the absence of an agreement in
principle as to all essential terms. No information can be given as to the
nature or terms of any possible future transaction.
If the Proposal is approved, Bachman will be authorized to issue up to a
total of 52.4 million shares of Bachman Common Stock, of which fewer than
approximately 18 million will be outstanding immediately following the closing
of the Merger. Issuance of a significant number of additional shares of Bachman
Common Stock in connection with future acquisitions would cause the holders of
Bachman Common Stock to suffer an immediate and substantial dilution in the net
tangible book value per share of the Bachman Common Stock. From 1993 through
1995, Bachman issued 650,000 shares of Bachman Common Stock and Cadre issued 2.2
million shares of Cadre Common Stock in connection with acquisitions. The
availability of a large amount of shares that may be issued by action of the
Board of Directors could also have the effect of discouraging a possible
takeover of Bachman. See "Risk Factors -- Anti-Takeover Effect of Certain
Provisions of Charter and By-Laws, Massachusetts Law and Employment Agreements."
The Bachman Board unanimously recommends that Bachman Stockholders vote FOR
the Authorized Bachman Common Stock Proposal.
THE BACHMAN ADJOURNMENT PROPOSAL
It is Bachman's expectation that, at the Bachman Special Meeting, votes
will be taken and the polls closed on all proposals submitted to the holders of
Bachman Common Stock, including approval of the Merger/Stock Issuance Proposal,
the Bachman Name Change Proposal, the Authorized Bachman Common Stock Proposal
and the Bachman Adjournment Proposal. It is likely that the Bachman Special
Meeting will then be adjourned to allow the votes to be counted. It is possible,
however, that Bachman's management may propose one or more adjournments of the
Bachman Special Meeting, without closing the polls on any of the proposals
submitted to holders of Bachman stock, in order to permit further solicitation
of proxies with respect to any such proposals or for other reasons.
Any such adjournment would require the affirmative vote of the holders of a
majority of the shares of Bachman Common Stock present in person or represented
by proxy at the Bachman Special Meeting. See "The Bachman Special
Meeting -- Voting and Proxy Information."
The Bachman Board unanimously recommends that stockholders vote FOR any
such adjournments proposed by management. If proxies for any class of shares are
returned properly signed but otherwise unmarked, the shares represented by such
proxies will be voted at the Bachman Special Meeting for any such adjournment
that management might propose but will not be considered a direction to vote for
any adjournment proposed by others. If any adjournment is properly presented at
the Bachman Special Meeting
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for action by any person or persons other than management, the persons named as
proxies, acting in such capacity, will have discretion to vote on such matters
in accordance with their best judgment.
THE CADRE ADJOURNMENT PROPOSAL
It is Cadre's expectation that, at the Cadre Special Meeting, votes will be
taken and the polls closed on all proposals submitted to the holders of Cadre
Common Stock, including approval of the Merger Proposal and the Cadre
Adjournment Proposal. It is likely that the Cadre Special Meeting will then be
adjourned to allow the inspectors of election to count and report on the votes
cast. It is possible, however, that Cadre's management may propose one or more
adjournments of the Cadre Special Meeting, without closing the polls on any of
the proposals submitted to holders of Cadre Common Stock, in order to permit
further solicitation of proxies with respect to any such proposals or for other
reasons.
Any such adjournment would require the affirmative vote of the holders of a
majority of the shares of Cadre Common Stock present in person or represented by
proxy at the Special Meeting. See "The Cadre Special Meeting -- Voting and Proxy
Information."
The Cadre Board recommends that holders of Cadre Common Stock vote FOR any
such adjournments proposed by management. If proxies for any class of shares are
returned properly signed but otherwise unmarked, the shares represented by such
proxies will be voted at the Cadre Special Meeting for any such adjournment that
management might propose but will not be considered a direction to vote for any
adjournment proposed by others. If any adjournment is properly presented at the
Cadre Special Meeting for action by any person or persons other than management,
the persons named as proxies, acting in such capacity, will have discretion to
vote on such matters in accordance with their best judgment.
OTHER MATTERS
As of the date of this Proxy Statement/Prospectus, neither the management
of Bachman nor the management of Cadre knows of any matters to be presented for
consideration at the Bachman Special Meeting or the Cadre Special Meeting, other
than those described above. If any other matters properly come before the
Special Meetings, the persons named in the accompanying proxy intend to vote
their proxies to the extent entitled in accordance with their best judgment.
LEGAL MATTERS
The legality of the Bachman Common Stock to be issued in connection with
the Merger and certain federal tax matters related to the Merger are being
passed upon for Bachman by Foley, Hoag & Eliot LLP, Boston, Massachusetts.
Certain federal tax consequences of the Merger will be passed upon for Cadre
stockholders by Testa, Hurwitz & Thibeault LLP, Boston, Massachusetts.
EXPERTS
The consolidated balance sheets as of June 30, 1995 and 1994 and the
consolidated statements of operations, stockholders' equity, cash flows, and the
related financial statement schedule for each of the three years in the period
ended June 30, 1995 of Bachman incorporated by reference in this
Prospectus/Joint Proxy Statement, have been incorporated by reference herein in
reliance on the reports of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Cadre as of December 31, 1995 and
1994 and for each of the three years in the period ended December 31, 1995
included in this Prospectus/Joint Proxy Statement have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their report appearing herein
(which report expresses an unqualified opinion and includes an explanatory
paragraph referring to an uncertainty regarding the Company's ability to
continue as a going concern), and have been so included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
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CADRE TECHNOLOGIES INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-2
Consolidated Balance Sheets, December 31, 1995 and 1994 and March 31, 1996
(unaudited)......................................................................... F-3
Consolidated Statements of Operations, Years Ended December 31, 1995, 1994 and 1993
and Three Months Ended March 31, 1996 and 1995 (unaudited).......................... F-4
Consolidated Statement of Stockholders' (Deficiency) Equity, Years Ended December 31,
1995, 1994 and 1993 and Three Months Ended March 31, 1995 (unaudited)............... F-5
Consolidated Statements of Cash Flows, Years Ended December 31, 1995, 1994 and 1993
and Three Months Ended March 31, 1996 and 1995 (unaudited).......................... F-6
Notes to Consolidated Financial Statements............................................ F-8
</TABLE>
F-1
<PAGE> 101
INDEPENDENT AUDITORS' REPORT
To the Stockholders of Cadre Technologies Inc.:
We have audited the accompanying consolidated balance sheets of Cadre
Technologies Inc. and its subsidiaries (the "Company") as of December 31, 1995
and 1994, and the related consolidated statements of operations, stockholders'
(deficiency) equity, and cash flows for each of the three years in the period
ended December 31, 1995. 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, such consolidated financial statements present fairly, in
all material respects, the financial position of Cadre Technologies Inc. and its
subsidiaries at December 31, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995 in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
1 to the consolidated financial statements, the Company's recurring losses from
operations, cash used in operating activities, deficiency in working capital and
stockholders' deficiency raise substantial doubt about its ability to continue
as a going concern. Management's plans concerning these matters are outlined in
Note 16. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Deloitte & Touche LLP
February 2, 1996
Boston, MA
F-2
<PAGE> 102
CADRE TECHNOLOGIES INC.
<TABLE>
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994 AND MARCH 31, 1996
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE VALUE)
<CAPTION>
DECEMBER 31,
MARCH 31, ---------------------
1996 1995 1994
----------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................................... $ 3,920 $ 2,965 $ 7,879
Accounts receivable (net of allowance for doubtful accounts: 1996,
$198; 1995, $224; 1994, $252).................................. 6,855 7,092 7,818
Inventories....................................................... 16 39 68
Prepaid expenses.................................................. 792 963 1,134
-------- -------- --------
Total current assets...................................... 11,583 11,059 16,899
-------- -------- --------
PROPERTY:
Leasehold improvements............................................ 387 389 351
Equipment......................................................... 13,709 13,768 12,281
Office furniture and fixtures..................................... 2,307 2,322 2,046
-------- -------- --------
Total..................................................... 16,403 16,479 14,678
Less accumulated depreciation and amortization.................... (14,770) (14,450) (11,954)
-------- -------- --------
Property -- net........................................... 1,633 2,029 2,724
-------- -------- --------
OTHER ASSETS:
Software development costs -- net................................. 653 693 525
Other............................................................. 400 394 251
-------- -------- --------
Total other assets........................................ 1,053 1,087 776
-------- -------- --------
TOTAL............................................................... $ 14,269 $ 14,175 $ 20,399
======== ======== ========
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) EQUITY
CURRENT LIABILITIES:
Factor borrowing.................................................. $ 4,442 -- --
Bank borrowing.................................................... -- $ 3,000 $ 2,400
Current portion of long-term debt................................. 443 456 --
Accounts payable.................................................. 2,171 1,951 2,398
Accrued payroll and benefits...................................... 2,485 3,156 2,102
Deferred income................................................... 9,454 8,523 7,577
Other liabilities................................................. 964 999 1,094
-------- -------- --------
Total current liabilities................................. 19,959 18,085 15,571
-------- -------- --------
OTHER DEFERRED LIABILITIES.......................................... 397 406 --
-------- -------- --------
LONG-TERM DEBT...................................................... 387 477 --
-------- -------- --------
LONG-TERM SHAREHOLDER LOAN.......................................... 1,600 1,600 --
-------- -------- --------
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' (DEFICIENCY) EQUITY:
Common stock -- $.01 par value, 25,000 shares authorized; issued
and outstanding: 1996, 14,349 shares; 1995, 14,294 shares;
1994,
12,027 shares.................................................. 145 143 120
Additional paid-in capital........................................ 31,267 31,220 27,827
Cumulative translation adjustment................................. (140) (193) (186)
Accumulated deficit............................................... (39,346) (37,563) (22,933)
-------- -------- --------
Total stockholders' equity (deficiency)................... (8,074) (6,393) 4,828
-------- -------- --------
TOTAL............................................................... $ 14,269 $ 14,175 $ 20,399
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 103
CADRE TECHNOLOGIES INC.
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
AND THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE VALUE)
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------- --------------------------------
1996 1995 1995 1994 1993
------- ------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Software license...................... $ 3,004 $ 4,743 $ 18,585 $20,364 $21,523
Maintenance........................... 3,788 3,740 16,906 15,575 15,192
Consulting and education services..... 1,012 1,072 3,976 4,637 4,761
Other................................. -- -- -- -- 798
------- ------- -------- ------- -------
Total revenues................ 7,804 9,555 39,467 40,576 42,274
------- ------- -------- ------- -------
COSTS AND EXPENSES:
Cost of revenues:
Cost of software licenses.......... 640 1,291 4,055 3,667 2,444
Cost of consulting and educational
services and maintenance......... 1,188 1,478 6,143 5,504 6,312
Research and development.............. 1,579 2,099 8,383 9,357 8,966
Purchased in-process research and
development........................ -- -- 7,300 -- --
Marketing and selling................. 4,479 5,311 20,649 21,068 22,692
General and administrative............ 1,206 729 3,809 2,794 3,813
Restructuring charges................. 0 0 3,483 -- 3,428
------- ------- -------- ------- -------
Total costs and expenses...... 9,092 10,908 53,822 42,390 47,655
------- ------- -------- ------- -------
LOSS FROM OPERATIONS.................... (1,288) (1,353) (14,355) (1,814) (5,381)
------- ------- -------- ------- -------
OTHER INCOME (EXPENSE):
Interest income....................... 35 89 259 350 383
Interest expense...................... (410) (70) (517) (227) (256)
Other -- net.......................... (120) 89 34 80 (91)
------- ------- -------- ------- -------
Total other income
(expense) -- net............ (495) 108 (224) 203 36
------- ------- -------- ------- -------
LOSS BEFORE PROVISION (BENEFIT) FOR
INCOME TAXES.......................... (1,783) (1,245) (14,579) (1,611) (5,345)
PROVISION (BENEFIT) FOR INCOME TAXES.... 0 10 51 50 (41)
------- ------- -------- ------- -------
NET LOSS................................ $(1,783) $(1,255) $(14,630) $(1,661) $(5,304)
======= ======= ======== ======= =======
NET LOSS PER COMMON SHARE............... $ (0.12) $ (0.10) $ (1.08) $ (0.14) $ (0.46)
======= ======= ======== ======= =======
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING........................... 14,308 12,004 13,501 11,789 11,460
======= ======= ======== ======= =======
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 104
CADRE TECHNOLOGIES INC.
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIENCY) EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993 AND
THREE MONTHS ENDED MARCH 31, 1996
(AMOUNTS IN THOUSANDS)
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE
----------------- DEFERRED PAID-IN TRANSLATION ACCUMULATED
SHARES AMOUNT COMPENSATION CAPITAL ADJUSTMENTS DEFICIT TOTAL
------ ------ ------------ ---------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993.... 11,439 $114 $(70) $27,944 $(210) $(15,968) $ 11,810
Stock options exercised... 502 5 -- 465 -- -- 470
Repurchases of
stock/warrants.......... (261 ) (2) -- (653) -- -- (655)
Net loss.................. -- -- -- -- -- (5,304) (5,304)
Translation adjustment.... -- -- -- -- (2) -- (2)
Amortization of deferred
compensation............ -- -- 70 -- -- -- 70
------ ---- ---- ------- ----- -------- --------
BALANCE, DECEMBER 31,
1993...................... 11,680 117 -- 27,756 (212) (21,272) 6,389
Stock options exercised... 127 1 -- 73 -- -- 74
Cashless exercise of stock
options................. 220 2 -- (2) -- -- --
Net loss.................. -- -- -- -- -- (1,661) (1,661)
Translation adjustment.... -- -- -- -- 26 -- 26
------ ---- ---- ------- ----- -------- --------
BALANCE, DECEMBER 31,
1994...................... 12,027 120 -- 27,827 (186) (22,933) 4,828
Issuance of warrants...... -- -- -- 29 -- -- 29
Stock options exercised... 80 1 -- 48 -- -- 49
Repurchases of
stock/warrants.......... (26 ) -- -- (42) -- -- (42)
Cashless exercise of stock
options................. 13 -- -- -- -- -- --
Purchase of Westmount
Technologies............ 2,200 22 -- 3,358 -- -- 3,380
Net loss.................. -- -- -- -- -- (14,630) (14,630)
Translation adjustment.... -- -- -- -- (7) -- (7)
------ ---- ---- ------- ----- -------- --------
BALANCE, DECEMBER 31,
1995...................... 14,294 $143 $ -- $31,220 $(193) $(37,563) $ (6,393)
====== ==== ==== ======= ===== ======== ========
Unaudited:
Stock options
exercised............. 55 2 47 49
Net loss................ (1,783) (1,783)
Translation
adjustment............ 53 53
------ ---- ---- ------- ----- -------- --------
BALANCE, MARCH 31,
1996 (unaudited).......... 14,349 $145 $ -- $31,267 $(140) $(39,346) $ (8,074)
====== ==== ==== ======= ===== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 105
CADRE TECHNOLOGIES INC.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
AND THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(AMOUNTS IN THOUSANDS)
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------- --------------------------------
1996 1995 1995 1994 1993
------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.............................. $(1,783) $(1,245) $(14,630) $(1,661) $(5,304)
Adjustments to reconcile net loss to
net cash (used in) provided by
operating activities:
Depreciation and amortization...... 419 453 1,890 2,172 2,609
Deferred income and other
liabilities...................... 922 1,248 (91) (457) (355)
Charge for purchased technology.... -- -- 7,300 -- --
Loss on disposal of property....... -- -- -- 14 9
Reduction of carrying value of
capitalized software............. -- -- 945 1,150 --
Restructuring charges.............. (623) (173) 996 (3,057) 3,320
Changes in:
Accounts receivable................ 237 (508) 993 78 787
Inventories........................ 23 15 29 30 112
Prepaid expenses................... 171 (350) 474 (581) 164
Accounts payable................... (207) (244) (1,351) 511 (999)
Accrued payroll and benefits....... 713 (506) (509) (217) (507)
Other liabilities.................. (369) 96 (1,597) 266 173
------- ------- -------- ------- -------
Net cash (used in) provided by
operating activities.......... (497) (1,214) (5,551) (1,752) 9
------- ------- -------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property................. (43) (328) (814) (1,649) (1,464)
Proceeds from sale of property........ 50 -- -- -- 6
Software development costs............ -- (250) (420) (1,025) (500)
Purchase of Westmount, net of cash.... -- -- (508) -- --
Other -- net.......................... 6 (115) (114) (160) 40
------- ------- -------- ------- -------
Net cash provided by (used in)
investing activities.......... 13 (693) (1,856) (2,834) (1,918)
------- ------- -------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options and
warrants........................... 49 33 49 74 657
Repurchase of stock/warrants.......... -- (42) -- (655)
Current and long-term financing:
Borrowings......................... 10,695 -- 3,200 -- 19
Repayments......................... (9,361) -- (720) -- --
------- ------- -------- ------- -------
Net cash provided by financing
activities.................... 1,383 33 2,487 74 21
------- ------- -------- ------- -------
(Continued)
</TABLE>
F-6
<PAGE> 106
CADRE TECHNOLOGIES INC.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
AND THREE MONTHS ENDED MARCH 31, 1996 AND 1995 -- (CONTINUED)
(AMOUNTS IN THOUSANDS)
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
1996 1995 1995 1994 1993
------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
EFFECT OF EXCHANGE RATE CHANGES ON
CASH.................................. 56 (31) 6 26 29
------- ------- -------- ------- -------
DECREASE IN CASH AND CASH EQUIVALENTS... 955 (1,905) (4,914) (4,486) (1,859)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD................................ 2,965 7,879 7,879 12,365 14,224
------- ------- -------- ------- -------
CASH AND CASH EQUIVALENTS, END OF
PERIOD................................ $ 3,920 $ 5,974 $ 2,965 $ 7,879 $12,365
======= ======= ======== ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest................ $ 296 $ 51 $ 363 $ 140 $ 180
======= ======= ======== ======= =======
Cash paid for income taxes............ $ 4 $ 20 $ 111 $ 99 $ 126
======= ======= ======== ======= =======
NONCASH ACTIVITIES --
Disposal of property included in
restructuring accrual.............. $ -- $ -- $ -- $ 222 $ --
======= ======= ======== ======= =======
Warrants issued in connection with
sale-leaseback..................... $ -- $ -- $ 29 $ -- $ --
======= ======= ======== ======= =======
</TABLE>
(Concluded)
In 1995, the Company acquired $8,100 of assets, including $7,300 of
in-process research and development, and assumed liabilities of approximately
$4,300 in exchange for 2,200 shares of common stock valued at $3,080, and a
warrant to purchase 600 shares of common stock valued at $300. In addition, the
Company incurred $508 of expenses relating to this transaction.
See notes to consolidated financial statements.
F-7
<PAGE> 107
CADRE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
BUSINESS -- Cadre Technologies Inc. and subsidiaries (the "Company" or
"Cadre") develop, market and support management and automation products,
services and solutions to improve the productivity and quality of critical tasks
in the process of developing complex software systems. The Company markets and
supports its products and services through its direct sales organization and
worldwide distribution network.
BASIS OF PRESENTATION -- The accompanying consolidated financial statements
have been prepared assuming the Company will continue as a going concern. As a
result of recurring losses from operations, cash used in operating activities,
the Company's deficiency in working capital and its stockholders' deficiency,
there is uncertainty as to the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements
include the accounts of Cadre Technologies Inc. and its wholly owned
subsidiaries. All significant intercompany balances and transactions have been
eliminated.
ACCOUNTING ESTIMATES -- The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
NET LOSS PER SHARE -- Net loss per share is computed based on the weighted
average common shares outstanding during the period. Warrants and options
outstanding are not included in the computation, as the effect of including
these securities would be antidilutive.
REVENUE RECOGNITION -- Revenue from the sale of products is recognized at
the time of shipment. No significant vendor obligations remain at the time of
shipment. Maintenance fees are recorded as deferred income when billed to
customers and are recognized as revenue ratably over the term of the maintenance
agreement (generally one year). Revenue earned from custom development contracts
is recognized based on the percentage of contract completion. Revenue earned is
based on the percentage that the incurred costs to date bear to total estimated
costs for the contract.
INVENTORIES -- Inventories are stated at the lower of cost or market. Cost
is determined using the first-in, firstout method. Inventory consists of product
media, documentation, and packaging.
PROPERTY -- Property is stated at cost. Depreciation and amortization are
provided using straight-line or accelerated methods over the estimated useful
lives of the related assets (three to five years). The cost of fully depreciated
property that remains in use at December 31, 1995 equals $6,500.
SOFTWARE DEVELOPMENT COSTS -- The Company capitalizes, on a
product-by-product basis, certain costs related to internally developed software
products after technological feasibility has been established. In addition, the
Company capitalizes the cost of purchased software technology when technological
feasibility has been established for the product that the purchased software has
been incorporated into and all research and development activities for the other
components of the product have been completed or if the product has an
alternative future use, the costs are capitalized when the product is acquired
and accounted for in accordance with its intended use. The establishment of
technological feasibility and the ongoing assessment of recoverability of
capitalized software development costs requires considerable judgment by
management with respect to certain external factors, including, but not limited
to, technological feasibility, anticipated future gross revenues, estimated
economic life and changes in software and hardware technologies. Software
F-8
<PAGE> 108
CADRE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
development costs incurred prior to technological feasibility are charged to
research and development expense in the period incurred. Capitalized software
costs are amortized, on a product by product basis, on a straight-line basis
over their useful economic lives (generally three to five years), or the ratio
of current gross revenues to total gross current and future revenues, whichever
is greater. Amortization of capitalized software costs was $107, $0 and $23 for
the years ended December 31, 1995, 1994, and 1993, respectively. Accumulated
amortization at December 31, 1995 and 1994 was $107 and $0, respectively. During
1995 and 1994, the Company reduced the carrying value of certain capitalized
software development costs by $945 and $1,150, respectively, to their estimated
net realizable value (see Notes 12 and 13).
INCOME TAXES -- The Company follows the asset and liability method of
accounting for income taxes, under which deferred income taxes are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which the temporary differences are expected to be recovered or settled. The
effect on deferred taxes of a change in tax rates is recognized in income in the
period that includes the enactment date.
CASH AND CASH EQUIVALENTS -- The Company considers all liquid investments
purchased with remaining maturities of three months or less to be cash
equivalents.
OTHER LONG-TERM DEFERRED LIABILITIES -- In connection with the purchase of
Westmount B.V. (Note 3) the Company assumed a liability to deliver software
licenses to a distributor. The distributor has unused payments toward licenses
of $406 at December 31, 1995.
FOREIGN CURRENCY TRANSLATION -- The local currencies of the Company's
foreign subsidiaries are predominantly determined to be the functional
currencies. The assets and liabilities of foreign subsidiaries are translated
into U.S. dollars at current exchange rates. Revenue and expense accounts of
these operations are translated at average exchange rates prevailing during the
year. Translation gains and losses are included as an adjustment to
stockholders' equity. Transaction gains and losses, primarily related to foreign
currency denominated intercompany payables and receivables recorded in the
financial statements of the Company's foreign subsidiaries, are reflected in
income.
RECLASSIFICATIONS -- Certain amounts in the 1993 and 1994 financial
statements have been reclassified to conform to the 1995 presentation.
OFF-BALANCE SHEET RISK -- The Company enters into forward exchange
contracts as a hedge against the adverse impacts of fluctuations of foreign
currency denominated receivables, payables, and other commitments. At December
31, 1995, the amount of the Company's forward exchange contracts outstanding was
$0.
RECENTLY ISSUED ACCOUNTING STANDARDS -- The Financial Accounting Standards
Board (the "FASB") has issued Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets To Be Disposed Of." This statement, which will be required in
1996, establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used and for long-lived assets and certain identifiable intangibles to
be disposed of. The Company has not yet determined the effect of implementing
SFAS No. 121 on its financial position and results of operations in any future
period.
The FASB has also issued SFAS No. 123, "Accounting for Stock-Based
Compensation." This statement, which will be required in 1996, establishes
financial accounting and reporting standards for stock-based employee
compensation plans. The Company has not yet determined if it will adopt the
income measurement provisions of SFAS No. 123, nor has it determined the effect
of implementing SFAS No. 123 on its financial position and its results of
operations in any future period.
F-9
<PAGE> 109
CADRE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
CONCENTRATIONS OF CREDIT -- The Company's financial instruments subject to
credit risk are primarily cash and cash equivalents and trade receivables. The
Company places its cash equivalents with high credit financial institutions and,
by policy, limits the amount of credit exposure to any one financial
institution.
The Company performs ongoing credit evaluations of its customers' financial
condition and requires no collateral from its customers. Aerospace, defense, and
government industry sectors are some of the leading users of the Company's
products and services. The Company believes the credit risk to be limited due to
the large number of customers and the significant financial resources of these
industry sectors. The balance of credit risk with respect to receivables is
limited due to the large number of customers, generally short payment terms, and
their dispersion across geographic areas and industry sectors.
<TABLE>
As of December 31, 1995 and 1994, the geographical breakdown of accounts
receivable is as follows:
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
United States.................................................... $2,968 $3,825
United Kingdom................................................... 1,682 1,845
Rest of Europe................................................... 2,345 1,789
Asia and Rest of World........................................... 97 359
------ ------
$7,092 $7,818
====== ======
</TABLE>
INTERIM RESULTS (UNAUDITED) -- The accompanying balance sheet at March 31,
1996, the statement of stockholders' (deficiency) equity for the three months
ended March 31, 1996 and the statements of operations and cash flows for the
three months ended March 31, 1995 and 1996 are unaudited. In the opinion of
management, these statements have been prepared on the same basis as the audited
financial statements and include all adjustments, consisting only of normal
recurring adjustments, necessary for the fair statement of financial data for
such periods.
3. WESTMOUNT PURCHASE
On May 1, 1995, the Company acquired Westmount Technology, B.V.
("Westmount") which develops, markets and supports enterprise development tools
for the client/server market. The consolidated statement of operations of Cadre
for the year ended December 31, 1995 includes the results of operations of
Westmount for the eight-month period Westmount was owned by Cadre. Cadre
acquired all of the assets and assumed all of the liabilities of Westmount in
exchange for 2,200 shares of common stock and a warrant to purchase 600 shares
of Cadre common stock. Consideration given for the purchase transaction,
including $508 of expenses related to the acquisition, was valued at
approximately $3,800. As security for specific and general representations and
warranties of the seller of Westmount, an escrow account was established at the
date of purchase to hold the Cadre shares exchanged. The purchase and sale
agreement calls for the escrowed shares to be released to the seller at various
dates through July 1, 1999. The 2,200 shares are held to secure representations
and warranties under the purchase and sale agreement with Westmount, and will be
released at scheduled times, over a four year period, to the extent not
transferred to Cadre. There is no contingent consideration. All of the 2,200
shares are included in computing loss per share and remain in escrow at December
31, 1995.
The Company accounted for this transaction as a purchase. As such, the
purchase price (and related transaction fees) were allocated to the estimated
fair value of Westmount's assets and assumed liabilities of Westmount were
recorded at market value. In connection with this transaction, the Company
recorded assets purchased of approximately $8,100 and liabilities assumed of
approximately $4,300. $7,300 of the recorded asset was attributed to in-process
research and development and was charged to operations in 1995. The
F-10
<PAGE> 110
CADRE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
technological feasibility of the in-process research and development had not yet
been achieved nor did alternative future use exist.
<TABLE>
The following unaudited pro forma consolidated financial information of
Cadre reflects the results of operations for the years ended December 31, 1995
and 1994 as though the acquisition of Westmount had occurred on January 1, 1994.
The amounts reflected in 1994 do not include the $7,300 purchased research and
development charge. The $7,300 charge is included in the 1995 amounts only.
<CAPTION>
1995 1994
-------- -------
(UNAUDITED)
<S> <C> <C>
Revenues................................................................ $ 40,202 $45,541
Loss before taxes....................................................... (15,992) (3,523)
Net loss................................................................ (16,043) (3,573)
Net loss per common share............................................... $ (1.13) $ (0.25)
</TABLE>
4. BORROWINGS
The Company had a bank agreement that consisted of a $3,000 revolving line
loan commitment and provided for a $975 foreign exchange facility. The maximum
available under the agreement at any one time was $3,000. The loan was
collateralized by general intangibles, accounts receivable and inventory. The
agreement contained covenants pertaining to tangible net worth, current ratio
and debt to equity.
The Company did not meet those covenants as of September 30, 1995. The bank
agreed to forbear acting on the event of default, provided the Company terminate
this agreement on January 5, 1996, repay the loan amount in full and pay a $10
fee. The Company has complied with these terms.
A new financing arrangement ("Factoring Agreement") was used to repay the
loan of $3,000 on January 5, 1996. The new agreement has a financing limit of
$5,600 based on qualified accounts receivable. All assets including trademarks
and copyrights collateralize this debt. Receivables generated in the United
States and in foreign countries by its subsidiaries qualify for financing
purposes, on an individual invoice-by-invoice basis. Up to an 80% advance rate
may be granted for each invoice once liens are perfected in each country outside
of the United States.
The approval or qualification of each new account receivable is based on
the lender's discretion. Receivables over 90 days from the date of invoice do
not qualify. In addition, receivables that have not been paid within 90 days
must either be replaced with new receivables or the loan advance corresponding
to that receivable must be repaid. Payments from customers against qualified
receivables are used to reduce the principal of the debt first, prior to any use
of the funds for Company operating purposes. Accordingly, new invoices must be
generated to finance new advances of funds to the Company.
The Factoring Agreement contains events of default, which include covenants
for net worth, payments of debts, and bankruptcy. The agreement expires December
8, 1996, unless terminated sooner by either party in writing, with 60 days
notice. A finance charge of 18% based on the gross amount of receivables (100%
of invoice amount) financed is payable monthly, together with an administrative
fee of 0.5% for each receivable financed.
5. SUBORDINATED SHAREHOLDER LOAN
A shareholder trust of former Westmount shareholders granted the Company a
$1,600 subordinated, convertible loan evidenced by a promissory note issued May
1, 1995 in connection with the purchase of Westmount (Note 3). The note accrues
interest at a simple rate of 10%, payable annually in arrears. It has a
three-year term and matures on May 1, 1998.
F-11
<PAGE> 111
CADRE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
The loan is subordinated to all financial institution debt and all leases.
The note plus accrued interest is convertible, at the option of the holder, any
time after the first anniversary date, which is May 1, 1996, at $2.50 until the
second anniversary date, and it is convertible at $2.00 after the second
anniversary date through maturity. The note is convertible automatically at the
time of an initial public offering or change in control of the Company.
6. SALES AND LEASEBACK FINANCING
The Company sold and immediately leased back all of its fixed assets
located in the United States in consideration for $1,000. In connection with
this financing, the Company issued the lessor a warrant to purchase common stock
(see Note 8). The Company granted the lessor security in all of its United
States-based fixed assets, which had a net book value of $1,481 as of the date
of the transaction. The transaction is accounted for as a financing, due to the
Company retaining a bargain purchase option. As a result, the fixed assets
remain on the books and will continue to be depreciated. The lease has a
two-year term with annual payments of $591. This $1,000 of financing is included
in the statement of cash flows as part of the $3,200 of borrowings.
The long-term portion of the lease-back obligation is classified as
long-term debt for $477 and the short-term portion is classified as current
portion of long-term debt for $456. The imputed interest rate on this lease is
approximately 23%.
7. COMMITMENTS AND CONTINGENCIES
The Company leases office space primarily under noncancelable operating
leases. Lease terms range from one to ten years. Rental expense under operating
leases for the years ended December 31, 1995, 1994, and 1993 was $2,654, $2,268,
and $2,391, respectively.
<TABLE>
Minimum future lease payments under noncancelable operating leases for the
next five years as of December 31, 1995 were as follows:
<S> <C>
1996.............................................. $2,621
1997.............................................. 1,588
1998.............................................. 561
1999.............................................. 196
2000.............................................. 108
------
Total............................................. $5,074
======
</TABLE>
CONTINGENCIES -- The Company is not a party to any material litigation and
is not aware of any pending or threatened litigation that would have a material
adverse effect on the Company's business.
8. STOCKHOLDERS' (DEFICIENCY) EQUITY
STOCK OPTIONS -- The Company has stock option plans which provide for
grants of incentive and nonstatutory stock options to employees and directors.
Under the plans, the Board of Directors determines the option price at the time
the option is granted; however, the option price for incentive options cannot be
less than the fair value on the date of the grant. The options granted under the
plan generally vest within five years and expire ten years from the date of
grant or upon termination of employment and are exercisable over the period
stated in each option. The Company has reserved 5,516 shares of common stock for
issuance under the plans.
F-12
<PAGE> 112
CADRE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
Activity under stock option plans was as follows:
<CAPTION>
OUTSTANDING OPTIONS
----------------------------
NUMBER PRICE
OF SHARES PER SHARE
--------- --------------
<S> <C> <C>
Outstanding January 1, 1993......................................... 2,975 $.50 - $2.50
Granted........................................................... 391 1.60 - 2.50
Exercised......................................................... (502) .50 - 2.50
Canceled.......................................................... (120) .50 - 2.50
------
Outstanding, December 31, 1993...................................... 2,744 .50 - 2.50
Granted........................................................... 1,964 1.60
Exercised......................................................... (447) .50 - 2.50
Canceled.......................................................... (1,554) .50 - 2.50
------
Outstanding, December 31, 1994...................................... 2,707 .50 - 1.60
Granted........................................................... 398 1.60
Exercised......................................................... (113) .50 - 1.60
Canceled.......................................................... (158) .50 - 1.60
------
Outstanding, December 31, 1995...................................... 2,834 .50 - 1.60
======
Exercisable at December 31, 1995.................................... 2,123
======
</TABLE>
In May 1994, due to a reduction in the fair market value of Cadre
Technologies Inc. stock, the Company offered active employees holding
outstanding options the opportunity to exchange these options for new options
with an exercise price of $1.60 per share. As a result of the offer, holders of
options for 521 shares returned their options for cancellation and they were
granted in exchange options for 521 shares with the new exercise price.
In connection with the purchase of Westmount (Note 3), the Company issued a
warrant for 600 shares of common stock with an exercise price of $2.50 per
share. This warrant will expire on October 31, 1998.
The Company issued a warrant for 36 shares of common stock in connection
with the sale-leaseback transaction (Note 6). The warrant expires on November
30, 2000 and its exercise price is $1.40 per share.
The Company has issued warrants to purchase up to 625 shares and 115 shares
of its common stock at $5 and $8, respectively, per share to PaineWebber R&D
Partners II, L.P. ("PaineWebber II") and PaineWebber R&D Partners III, L.P.
("PaineWebber III"), respectively. The warrant to purchase 625 shares is
exercisable on June 20, 1994 and expires on June 20, 1997. The warrant to
purchase 115 shares is exercisable on July 12, 1995 and expires on July 12,
1998.
Under certain circumstances, the exercise prices and terms of the Company's
warrants are subject to adjustment.
RIGHT TO REPURCHASE STOCK -- The Company has the right, under certain
conditions, to repurchase its common stock.
F-13
<PAGE> 113
CADRE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
9. INCOME TAXES
<TABLE>
The provision (benefit) for income taxes consists of the following:
<CAPTION>
1995 1994 1993
--- --- ----
<S> <C> <C> <C>
Current:
Federal....................................................... $-- $-- $(18)
State......................................................... -- -- (23)
Foreign....................................................... $51 $50 $ --
--- --- ----
Provision (benefit) for income taxes............................ $51 $50 $(41)
=== === ====
</TABLE>
<TABLE>
A reconciliation of income tax expense computed at the statutory federal
income tax rates with the Company's effective income tax rates follows:
<CAPTION>
1995 1994 1993
------- ----- -------
<S> <C> <C> <C>
Taxes at federal statutory rate......................... $(4,974) $(548) $(1,817)
Effect of nonutilization of net operating losses........ 4,974 548 1,817
State income taxes, net of federal benefit.............. -- -- (23)
Foreign income taxes.................................... 51 50 --
Effect of alternative minimum tax....................... -- -- (18)
------- ----- -------
Provision (benefit) for income taxes.................... $ 51 $ 50 $ (41)
======= ===== =======
</TABLE>
<TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at December 31, 1995 and 1994 are as
follows:
<CAPTION>
1995 1994
-------- -------
<S> <C> <C>
Accounts receivable............................................. $ 58 $ 48
Fixed assets.................................................... 2,801 230
Inventory....................................................... 24 115
Compensation.................................................... 188 483
Restructuring................................................... 309 198
Other temporary differences..................................... 29 63
Net operating loss carryforwards................................ 8,201 5,766
Investment tax credit carryforwards............................. 90 90
Research credit carryforwards................................... 1,815 1,825
Alternative minimum tax credit carryforwards.................... 187 187
Foreign tax credit carryforwards................................ 109 109
-------- ------
Total gross deferred tax assets................................. 13,811 9,114
Less valuation allowances....................................... (13,811) (9,114)
-------- -------
Net deferred tax assets......................................... $ -- $ --
======== =======
</TABLE>
A valuation allowance is provided against temporary deductible differences,
net operating loss carryforwards and tax credits which are not more likely than
not to be realized. During 1995, the net valuation allowance was increased to
fully reserve gross deferred tax assets.
As of December 31, 1995, the Company had net operating loss carryforwards
for federal income tax purposes of $20,502, which are available to offset future
federal taxable income, if any, through 2010. The Company also had investment
and research tax credit carryforwards for federal income tax purposes of $90
F-14
<PAGE> 114
CADRE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
and $1,825, respectively, which are available to reduce future federal income
taxes, if any, through 1999 and 2004, respectively. In addition, the Company has
alternative minimum tax credit carryforwards of $187 which are available to
reduce future federal regular income taxes, if any, over an indefinite period.
The Company has $109 of foreign tax credit carryforwards which expire through
1998.
The Company has accrued income taxes on all of the retained earnings of
international subsidiaries, including withholding taxes expected when earnings
and license fees are remitted.
10. RESEARCH AND DEVELOPMENT
In 1990 and 1991, the Company entered into research and development
agreements with PaineWebber II and PaineWebber III to develop software
technologies and products. Under the agreements, the Company was reimbursed for
specified development costs of $5,430 and $1,500, respectively, and retained the
right to use the resulting technologies for commercial purposes. Under the
agreements, PaineWebber II and PaineWebber III own the underlying technologies
until such time as the Company exercises its options to purchase such
technologies by committing to pay PaineWebber II and PaineWebber III royalties
on future sales. During 1993, the Company exercised its option to purchase the
PaineWebber II technology. PaineWebber II and PaineWebber III also received
warrants to purchase shares of the Company (see Note 8).
<TABLE>
The following schedule summarizes the revenue and expense under the
PaineWebber agreements for the years ended December 31, 1995, 1994, and 1993:
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revenue:
Amortization of retainer fees............................... $ -- $ -- $101
Reimbursement of product development costs.................. -- -- 519
---- ---- ----
Total revenue....................................... $ -- $ -- $620
==== ==== ====
Expenses:
Product royalties paid to Paine Webber...................... $239 $247 $278
Amortization of commitment and legal fees................... -- -- 76
Product development costs................................... -- -- 519
---- ---- ----
Total expenses...................................... $239 $247 $873
==== ==== ====
</TABLE>
11. EMPLOYEE BENEFIT PLAN
The Company maintains a qualified defined contribution plan, under the
provisions of Section 401(k) of the Internal Revenue Code, covering
substantially all domestic employees. Under the terms of the plan, eligible
employees may make contributions up to 15% of pay, subject to statutory
limitations. Contributions not exceeding 6% of an employee's pay are matched 40%
by the Company. The Company may, at its discretion, make an additional year-end
contribution. Employee contributions are always fully vested. Company
contributions vest 20% for each completed year of service, becoming fully vested
after five years of service. Matching contributions by the Company under the
plan were $213, $290, and $189 in 1995, 1994, and 1993, respectively. No
discretionary contributions have been made to the plan.
12. RESTRUCTURING CHARGES
During 1995 and 1993, the Company restructured its operations to reduce
costs and utilize resources more effectively. During 1995, following the
Westmount Technology, B.V. acquisition, the Company restructured operations and
wrote off redundant software investments. The software write-off of $945 was
F-15
<PAGE> 115
CADRE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
attributable to acquiring similar products in the acquisition, with the result
that several of the Company's products were de-emphasized or eliminated. The
1993 charges included $3,820 of estimated costs of centralizing the majority of
U.S. operations to one location and a credit of $392 related to 1992 charges.
The 1993 charges included estimated losses on a product line where resources for
product development and marketing were downsized. Specifically, restructuring
charges include write-offs of:
<TABLE>
<CAPTION>
1995 1993
------ ------
<S> <C> <C>
Capitalized software development costs............................. $ 945 $ --
Fixed assets....................................................... -- 174
Employee severance................................................. 2,401 1,284
Office closure costs............................................... 67 2,307
Other.............................................................. 70 55
Credit related to 1992 charges..................................... -- (392)
------ ------
Total.................................................... $3,483 $3,428
====== ======
</TABLE>
Actual termination benefits paid in 1995 totaled $2,487. Included in
accrued payroll and benefits at December 31, 1995 are accrued restructuring
related charges of $1,490. The 1995 restructuring charges by geographic area
are: $2,407 in the United States, $45 in the United Kingdom, and $1,031 in the
Rest of Europe. All of the 1993 restructuring costs were incurred in the United
States.
13. PURCHASED SOFTWARE DEVELOPMENT COSTS
The Company entered into a technology license agreement in 1992 to allow
further development and distribution of modified technology. The agreement
contained minimum payments of $1,150, which were met.
During 1994 the Company reduced the carrying value of capitalized software
development costs associated with this agreement by $1,150, which equaled the
total amount paid and capitalized in accordance with the agreement. The
write-off, which was charged to research and development expense, resulted from
the Company's reassessment of anticipated near-term business levels in light of
the anticipated product release date and the related impact on estimated revenue
levels.
Royalty payments begin upon the commercialization of a modified product and
end on the seventh anniversary date, or after payment of $5,000 of royalties, if
earlier. The 1994 minimum payment of $500 was used to reduce the maximum
royalties of $5,000.
14. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates in one business segment: design, development,
marketing and support of software development automation products. The Company
markets and supports its products and services through its direct sales
organizations and distributors (which are independent product representatives)
in the United States, Europe, Asia and rest of the world.
Revenues from unaffiliated customers are based on the location of the
unaffiliated customers. For the purposes of determining operating income,
research and development expenses, marketing expenses and general and
administrative expenses are allocated based on each region's percentage of total
revenue
F-16
<PAGE> 116
CADRE TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
contribution. Geographic information for the years ended December 31, 1995,
1994, and 1993 is presented in the table below:
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Revenues from unaffiliated customers (except as
otherwise noted):
United States...................................... $ 21,934 $22,498 $25,352
United States revenues to affiliated customers..... 4,800 6,042 5,758
United Kingdom..................................... 5,641 6,630 4,868
Rest of Europe..................................... 9,307 8,059 8,766
Asia and Rest of World............................. 2,585 3,389 3,288
Revenues eliminated from affiliated customers...... (4,800) (6,042) (5,758)
-------- ------- -------
$ 39,467 $40,576 $42,274
======== ======= =======
Loss from operations:
United States...................................... $ (3,394) $(1,363) $(5,110)
United Kingdom..................................... (1,442) (223) (90)
Rest of Europe..................................... (10,421) (1,580) (1,428)
Asia and Rest of World............................. 902 1,352 1,247
-------- ------- -------
$(14,355) $(1,814) $(5,381)
======== ======= =======
Identifiable assets:
United States...................................... $ 9,290 $16,330 $20,356
United Kingdom..................................... 2,364 2,171 2,233
Rest of Europe..................................... 2,348 1,811 2,362
Asia and Rest of World............................. 173 87 185
-------- ------- -------
$ 14,175 $20,399 $25,136
======== ======= =======
</TABLE>
15. PROPOSED MERGER
In 1995, the Company signed a letter of intent to merge with Bachman
Information Systems, Inc. of Burlington, Massachusetts. As of the date of this
report, no formal merger agreement had been signed. The Company expects the
merger to be completed in 1996.
16. GOING CONCERN
Management has formulated a plan to address the deficiency of working
capital. As noted in Note 15 to the consolidated financial statements, the
Company has signed a letter of intent to merge with Bachman Information Systems,
Inc. Prior to the merger, the Company is attempting to obtain nontraditional
financing and has reduced headcount and other fixed costs so that the current
outflow of cash from operations will decrease, and as a result, current cash
resources will be sufficient to fund the Company's working capital needs through
June 30, 1996.
F-17
<PAGE> 117
ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
BACHMAN INFORMATION SYSTEMS, INC.
B.C. ACQUISITION CORP.
AND
CADRE TECHNOLOGIES INC.
<PAGE> 118
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE 1
DEFINITIONS
<S> <C> <C>
1.1. CERTAIN MATTERS OF CONSTRUCTION................................................. A-1
1.2. CROSS REFERENCES................................................................ A-1
1.3. CERTAIN DEFINITIONS............................................................. A-3
ARTICLE 2
THE MERGER
2.1. PROCEDURE FOR THE MERGER........................................................ A-5
2.2. SURVIVING CORPORATION........................................................... A-5
2.2.1. CORPORATE EXISTENCE................................................... A-5
2.2.2. CERTIFICATE OF INCORPORATION AND BY-LAWS.............................. A-5
2.2.3. DIRECTORS............................................................. A-5
2.2.4. EFFECT OF THE MERGER.................................................. A-5
2.3. CONVERSION OF STOCK............................................................. A-5
2.3.1. STOCK OF THE COMPANY.................................................. A-5
2.3.2. DEFINITION OF EXCHANGE RATIO.......................................... A-6
2.3.3. STOCK OF MERGER SUB................................................... A-6
2.4. STOCK OPTIONS................................................................... A-6
2.5. WARRANTS........................................................................ A-6
2.6. FRACTIONAL SHARES............................................................... A-6
2.7. DISSENTING SHARES............................................................... A-7
2.8. HOLDER'S AGENT.................................................................. A-7
2.9. ISSUANCE OF PARENT STOCK........................................................ A-7
2.9.1. STOCKHOLDER LIST...................................................... A-7
2.9.2. DELIVERY OF CERTIFICATES.............................................. A-8
2.9.3. CADMOUNT.............................................................. A-8
2.10. CLOSING......................................................................... A-8
2.11. TRANSFERS OF OWNERSHIP.......................................................... A-8
2.12. TAX AND ACCOUNTING CONSEQUENCES................................................. A-8
2.13. ADDITIONAL ACTIONS.............................................................. A-8
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1. CORPORATE STATUS OF THE COMPANY................................................. A-9
3.2. CAPITAL STOCK................................................................... A-9
3.2.1. AUTHORIZED STOCK OF THE COMPANY....................................... A-9
3.2.2. OPTIONS AND CONVERTIBLE SECURITIES OF THE COMPANY..................... A-9
3.3. SUBSIDIARIES.................................................................... A-9
3.4. AUTHORITY FOR AGREEMENT; NONCONTRAVENTION....................................... A-10
3.4.1. AUTHORITY............................................................. A-10
3.4.2. NO CONFLICT........................................................... A-10
3.5. FINANCIAL STATEMENTS............................................................ A-10
3.6. ABSENCE OF MATERIAL ADVERSE CHANGES AND UNDISCLOSED LIABILITIES................. A-10
3.7. COMPLIANCE WITH APPLICABLE LAW, ARTICLES AND BY-LAWS............................ A-11
3.8. LITIGATION AND AUDITS........................................................... A-11
</TABLE>
i
<PAGE> 119
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
3.9. TAX MATTERS..................................................................... A-11
3.9.1. FILING OF RETURNS..................................................... A-11
3.9.2. PAYMENT OF TAXES...................................................... A-11
3.9.3. WITHHOLDING........................................................... A-11
3.9.4. ASSESSMENTS........................................................... A-11
3.9.5. ACCESS TO RETURNS..................................................... A-12
3.9.6. DEFINITION OF TAXES................................................... A-12
3.10. EMPLOYEE BENEFIT PLANS.......................................................... A-12
3.10.1. LIST OF PLANS......................................................... A-12
3.10.2. ERISA................................................................. A-12
3.10.3. PLAN DETERMINATIONS................................................... A-13
3.10.4. FUNDING............................................................... A-13
3.11. EMPLOYMENT-RELATED MATTERS...................................................... A-13
3.11.1. LABOR RELATIONS....................................................... A-13
3.11.2. EMPLOYEE LIST......................................................... A-14
3.12. ENVIRONMENTAL................................................................... A-14
3.12.1. ENVIRONMENTAL LAWS.................................................... A-14
3.12.2. ENVIRONMENTAL CLAIMS.................................................. A-14
3.12.3. NO BASIS FOR CLAIMS................................................... A-14
3.13. NO BROKER'S OR FINDER'S FEES.................................................... A-14
3.14. ASSETS OTHER THAN REAL PROPERTY................................................. A-14
3.14.1. TITLE................................................................. A-14
3.14.2. INVENTORY............................................................. A-15
3.14.3. CONDITION............................................................. A-15
3.15. REAL PROPERTY................................................................... A-15
3.15.1. COMPANY REAL PROPERTY................................................. A-15
3.15.2. COMPANY LEASES........................................................ A-15
3.15.3. CONDITION............................................................. A-15
3.16. AGREEMENTS, CONTRACTS AND COMMITMENTS........................................... A-15
3.16.1. COMPANY AGREEMENTS.................................................... A-15
3.16.2. VALIDITY.............................................................. A-17
3.17. INTELLECTUAL PROPERTY........................................................... A-17
3.17.1. RIGHT TO INTELLECTUAL PROPERTY........................................ A-17
3.17.2. NO CONFLICT........................................................... A-17
3.17.3. EMPLOYEE AGREEMENTS................................................... A-18
3.18. INSURANCE CONTRACTS............................................................. A-18
3.19. BANKING RELATIONSHIPS........................................................... A-18
3.20. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS.............................. A-18
3.21. POOLING......................................................................... A-19
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
4.1. CORPORATE STATUS OF PARENT AND ITS SUBSIDIARIES................................. A-19
4.2. CAPITAL STOCK................................................................... A-19
4.2.1. AUTHORIZED STOCK OF PARENT............................................ A-19
4.2.2. AUTHORIZED STOCK OF MERGER SUB........................................ A-19
4.2.3. CONVERTIBLE SECURITIES OF PARENT...................................... A-19
4.3. SUBSIDIARIES.................................................................... A-20
4.4. AUTHORITY FOR AGREEMENT; NONCONTRAVENTION....................................... A-20
4.4.1. AUTHORITY OF PARENT................................................... A-20
4.4.2. NO CONFLICT........................................................... A-20
4.5. SEC STATEMENTS, REPORTS AND DOCUMENTS........................................... A-21
4.6. ABSENCE OF MATERIAL ADVERSE CHANGES AND UNDISCLOSED LIABILITIES................. A-21
4.7. COMPLIANCE WITH APPLICABLE LAW, CHARTER AND BY-LAWS............................. A-21
4.8. LITIGATION AND AUDITS........................................................... A-22
</TABLE>
ii
<PAGE> 120
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
4.9. TAX MATTERS..................................................................... A-22
4.9.1. FILING OF RETURNS..................................................... A-22
4.9.2. PAYMENT OF TAXES...................................................... A-22
4.9.3. WITHHOLDING........................................................... A-22
4.9.4. ASSESSMENTS........................................................... A-22
4.9.5. ACCESS TO RETURNS..................................................... A-22
4.10. EMPLOYEE BENEFIT PLANS; COMPLIANCE WITH ERISA................................... A-22
4.10.1. LIST OF PLANS......................................................... A-22
4.10.2. ERISA................................................................. A-23
4.10.3. PLAN DETERMINATIONS................................................... A-23
4.10.4. FUNDING............................................................... A-23
4.11. EMPLOYMENT-RELATED MATTERS...................................................... A-24
4.12. ENVIRONMENTAL................................................................... A-24
4.12.1. ENVIRONMENTAL LAWS.................................................... A-24
4.12.2. ENVIRONMENTAL CLAIMS.................................................. A-24
4.12.3. NO BASIS FOR CLAIMS................................................... A-24
4.13. NO BROKER'S OR FINDER'S FEES.................................................... A-24
4.14. ASSETS OTHER THAN REAL PROPERTY................................................. A-24
4.14.1. TITLE................................................................. A-25
4.14.2. INVENTORY............................................................. A-25
4.14.3. CONDITION............................................................. A-25
4.15. REAL PROPERTY................................................................... A-25
4.15.1. PARENT REAL PROPERTY.................................................. A-25
4.15.2. PARENT LEASES......................................................... A-25
4.15.3. CONDITION............................................................. A-25
4.16. AGREEMENTS, CONTRACTS AND COMMITMENTS........................................... A-25
4.17. INTELLECTUAL PROPERTY........................................................... A-26
4.17.1. RIGHT TO INTELLECTUAL PROPERTY........................................ A-26
4.17.2. NO CONFLICT........................................................... A-26
4.18. INSURANCE CONTRACTS............................................................. A-26
4.19. POOLING......................................................................... A-26
4.20. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS.............................. A-26
ARTICLE 5
CONDUCT PRIOR TO THE EFFECTIVE TIME
5.1. CONDUCT OF BUSINESS OF THE COMPANY.............................................. A-27
5.2. CONDUCT OF BUSINESS OF PARENT................................................... A-29
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1. PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT.............................. A-30
6.2. MEETING OF STOCKHOLDERS......................................................... A-30
6.3. EXCLUSIVITY..................................................................... A-30
6.4. EXPENSES........................................................................ A-31
6.5. POOLING ACCOUNTING.............................................................. A-31
6.6. AFFILIATE AGREEMENTS............................................................ A-31
6.7. BLUE SKY LAWS................................................................... A-31
6.8. STOCK OPTIONS................................................................... A-31
6.8.1. EXERCISABLE FOR PARENT STOCK.......................................... A-31
6.8.2. FORM S-8.............................................................. A-31
6.9. WARRANTS........................................................................ A-32
6.10. BOARD REPRESENTATION............................................................ A-32
6.11. TAX-FREE REORGANIZATION......................................................... A-32
6.12. ACCESS AND INFORMATION.......................................................... A-32
6.13. PUBLIC DISCLOSURE............................................................... A-32
</TABLE>
iii
<PAGE> 121
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
6.14. NO SOLICITATION OF EMPLOYEES.................................................... A-32
6.15. ESCROW AGREEMENT................................................................ A-32
6.16. COMPANY CLOSING CERTIFICATE..................................................... A-32
6.17. CADMOUNT ACKNOWLEDGMENT......................................................... A-32
6.18. OBTAINING LICENSE AGREEMENTS.................................................... A-32
6.19. DIRECTORS AND OFFICERS INDEMNIFICATION.......................................... A-33
6.20. NASDAQ LISTING.................................................................. A-33
6.21. 401(K) MATCHING CONTRIBUTION POLICY............................................. A-33
6.22. NO INCREASE IN DEBT............................................................. A-33
6.23. REASONABLE EFFORTS.............................................................. A-33
ARTICLE 7
CONDITIONS PRECEDENT
7.1. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF EACH PARTY........................... A-33
7.1.1. STOCKHOLDER APPROVAL.................................................. A-33
7.1.2. REGISTRATION STATEMENT EFFECTIVE...................................... A-33
7.1.3. NO INJUNCTION......................................................... A-33
7.1.4. ILLEGALITY............................................................ A-34
7.1.5. ESCROW AGREEMENT...................................................... A-34
7.1.6. OPINION OF ACCOUNTANTS................................................ A-34
7.1.7. TAX OPINIONS.......................................................... A-34
7.1.8. FORMULA PRICE PER SHARE............................................... A-34
7.2. CONDITIONS PRECEDENT TO OBLIGATION OF PARENT AND MERGER SUB TO EFFECT THE A-34
MERGER..........................................................................
7.2.1. REPRESENTATIONS AND WARRANTIES........................................ A-34
7.2.2. AGREEMENTS AND COVENANTS.............................................. A-34
7.2.3. LEGAL OPINION......................................................... A-34
7.2.4. CLOSING DOCUMENTS..................................................... A-34
7.2.5. AFFILIATE AGREEMENTS.................................................. A-35
7.2.6. THIRD PARTY CONSENTS.................................................. A-35
7.2.7. MATERIAL ADVERSE EFFECT............................................... A-35
7.2.8. COMPANY CLOSING CERTIFICATE........................................... A-35
7.2.9. CADMOUNT NOTE......................................................... A-35
7.2.10. CADMOUNT ACKNOWLEDGMENT............................................... A-35
7.2.11. FAIRNESS OPINION...................................................... A-35
7.2.12. VOTING AGREEMENT...................................................... A-35
7.2.13. STOCKHOLDER LIST...................................................... A-35
7.2.14. ELIMINATION OF MATCHING CONTRIBUTION TO 401(K) PLAN................... A-35
7.3. CONDITIONS TO OBLIGATIONS OF THE COMPANY TO EFFECT THE MERGER................... A-35
7.3.1. REPRESENTATIONS AND WARRANTIES........................................ A-35
7.3.2. AGREEMENTS AND COVENANTS.............................................. A-35
7.3.3. LEGAL OPINION......................................................... A-35
7.3.4. CLOSING DOCUMENTS..................................................... A-35
7.3.5. AFFILIATE AGREEMENTS.................................................. A-36
7.3.6. MATERIAL ADVERSE EFFECT............................................... A-36
7.3.7. NASDAQ LISTING........................................................ A-36
ARTICLE 8
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
8.1. SURVIVAL OF REPRESENTATIONS..................................................... A-36
8.1.1. THE COMPANY'S REPRESENTATIONS......................................... A-36
8.1.2. PARENT'S REPRESENTATIONS.............................................. A-36
8.2. AGREEMENT TO INDEMNIFY.......................................................... A-36
8.3. LIMITATION OF STOCKHOLDERS' LIABILITY........................................... A-36
</TABLE>
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<TABLE>
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PAGE
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<S> <C> <C> <C>
8.4. PROCESS OF INDEMNIFICATION FOR PARENT CLAIMS.................................... A-37
8.4.1. NOTICE FROM PARENT.................................................... A-37
8.4.2. RECOVERY BY PARENT.................................................... A-37
8.4.3. THIRD-PARTY PARENT CLAIMS............................................. A-37
ARTICLE 9
TERMINATION
9.1. TERMINATION EVENTS.............................................................. A-38
9.2. EFFECT OF TERMINATION........................................................... A-38
ARTICLE 10
MISCELLANEOUS
10.1. AMENDMENTS AND SUPPLEMENTS...................................................... A-38
10.2. NO WAIVER....................................................................... A-39
10.3. GOVERNING LAW................................................................... A-39
10.4. NOTICE.......................................................................... A-39
10.5. ENTIRE AGREEMENT................................................................ A-40
10.6. ASSIGNABILITY................................................................... A-40
10.7. VALIDITY........................................................................ A-40
10.8. SPECIFIC PERFORMANCE............................................................ A-40
10.9. COUNTERPARTS.................................................................... A-40
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 25, 1996 (the "Agreement"),
by and among BACHMAN INFORMATION SYSTEMS, INC., a Massachusetts corporation
("Parent"), B.C. ACQUISITION CORP., a Delaware corporation and wholly-owned
subsidiary of Parent, ("Merger Sub") and CADRE TECHNOLOGIES INC., a Delaware
corporation (the "Company"). Merger Sub and the Company together are sometimes
referred to herein as the "Constituent Corporations."
WITNESSETH
WHEREAS, the respective boards of directors of Parent, Merger Sub and the
Company have determined that it is advisable that Merger Sub be merged with and
into the Company (the "Merger") on the terms and conditions set forth herein and
in accordance with the provisions of the General Corporation Law of the State of
Delaware (the "GCL");
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations and warranties and other agreements in connection with the
Merger;
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a pooling of interests under generally accepted accounting
principles ("GAAP"); and
WHEREAS, the parties intend, by executing this Agreement, to adopt a plan
of reorganization within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code");
NOW, THEREFORE, Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1. CERTAIN MATTERS OF CONSTRUCTION. A reference to an Article, Section,
Exhibit or Schedule shall mean an Article of, a Section in, or Exhibit or
Schedule to, this Agreement unless otherwise expressly stated. The titles and
headings herein are for reference purposes only and shall not in any manner
limit the construction of this Agreement which shall be considered as a whole.
The words "include," "includes" and "including" when used herein shall be deemed
in each case to be followed by the words "without limitation."
<TABLE>
1.2. CROSS REFERENCES. The following terms defined elsewhere in this
Agreement in the Sections set forth below shall have the respective meanings
therein defined:
<CAPTION>
TERM DEFINITION
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Actual Negative Net Worth......................................... Section 2.3.2.
Aggregate Consideration Amount.................................... Section 2.3.2.
Aggregate Exercise Price.......................................... Section 2.3.2.
Agreement......................................................... Preamble
Balance Certificate............................................... Section 2.9.2
Cadmount Acknowledgment........................................... Section 6.17.
Cadmount Certificate.............................................. Section 2.9.3.
Cadmount Escrow Agent............................................. Section 2.9.3.
Certificate of Merger............................................. Section 2.1.
Closing........................................................... Section 2.10.
Code.............................................................. Preamble
Company........................................................... Preamble
Company Affiliate Agreements...................................... Section 6.6.
Company Balance Sheet............................................. Section 3.5.
Company Closing Certificate....................................... Section 6.16.
</TABLE>
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<TABLE>
<CAPTION>
TERM DEFINITION
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<S> <C>
2.3.1.Company Financial Statements................................ Section 3.5.
Company Insurance Contracts....................................... Section 3.18.
Company Meeting................................................... Section 3.20.
Company Proprietary Rights........................................ Section 3.17.1.
Company Plans..................................................... Section 3.10.1.
Constituent Corporations.......................................... Preamble
Dispute Notice.................................................... Section 8.4.2.
Dissenting Shares................................................. Section 2.7.
Effective Date.................................................... Section 2.1.
Effective Time.................................................... Section 2.1.
Employee List..................................................... Section 3.11.2.
Encumbrances...................................................... Section 3.14.1.
Escrow Agent...................................................... Section 2.9.2.
Escrow Agreement.................................................. Section 2.9.2.
Escrow Fund....................................................... Escrow Agreement
Exchange Ratio.................................................... Section 2.3.2.
Fully-Diluted Shares.............................................. Section 2.3.2.
GAAP.............................................................. Preamble
GCL............................................................... Preamble
Governmental Entity............................................... Section 3.4.2.
Holder's Agent.................................................... Section 2.8
Indemnified Parties............................................... Section 6.19.
Liabilities....................................................... Section 3.6.
Merger............................................................ Preamble
Merger Sub........................................................ Preamble
Merger Sub Stock.................................................. Section 2.3.3.
Negative Net Worth Limit.......................................... Section 2.3.2.
Net Worth Calculation Date........................................ Section 2.3.2.
Parent............................................................ Preamble
Parent Affiliate Agreements....................................... Section 6.6.
Parent Agreements................................................. Section 4.16.
Parent Balance Sheet.............................................. Section 4.5.
Parent Claims..................................................... Section 8.2.
Parent Insurance Contracts........................................ Section 4.18.
Parent Meeting.................................................... Section 3.20.
Parent Plans...................................................... Section 4.10.1.
Parent Proprietary Rights......................................... Section 4.17.1.
Parent Reports.................................................... Section 4.5.
Parent Share Amount............................................... Section 2.3.2.
Parent Stock...................................................... Section 2.3.1.
Parent Stock Plans................................................ Section 4.2.3.
Permits........................................................... Section 3.7.
Per-Share Consideration Amount.................................... Section 2.3.2
Proxy Statement................................................... Section 3.20.
Registration Statement............................................ Section 4.20.
Stockholder List.................................................. Section 2.9.1.
Stockholders...................................................... Section 2.9.1.
</TABLE>
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<TABLE>
<CAPTION>
TERM DEFINITION
------------------------------------------------------------------ -----------------
<S> <C>
Stockholder's Share Amount........................................ Section 2.9.2.
Surviving Corporation............................................. Section 2.1.
Taxes............................................................. Section 3.9.6.
Third-Party Parent Claims......................................... Section 8.4.3.
Transmittal Letter................................................ Section 2.9.2.
</TABLE>
1.3. CERTAIN DEFINITIONS. As used herein, the following terms shall have
the following meanings:
Affiliate: with respect to any Person, any Person which, directly or
indirectly, controls, is controlled by, or is under common control with,
such Person.
Cadmount: Stichting Administraitiekantoor Cadmount.
Cadmount Note: the Convertible Promissory Note dated May 1, 1995 of
the Company in the principal amount of $1,600,000 payable to Cadmount.
COBRA: the provisions of Section 4980B of the Code and Part 6 of
Title I of ERISA.
Commercial Software: packaged commercial software programs generally
available to the public through retail dealers in computer software or
directly from the manufacturer which have been licensed to the Company (or,
in the case of Section 4.17, to Parent) pursuant to End-User Licenses and
which are used in the Company's business (or in Parent's business in the
case of Section 4.17) but are in no way a component of or incorporated in
or specifically required to develop or support any of the Company's (or of
Parent's in the case of Section 4.17) products and related trademarks,
technology and know-how.
Company Leases: each lease, sublease, license or other agreement
under which the Company or any of its Subsidiaries uses, occupies or has
the right to occupy any real property or interest therein that (a) provides
for future minimum payments of $50,000 or more (ignoring any right of
cancellation or termination) or (b) the cancellation or termination of
which would have a Company Material Adverse Effect.
Company Material Adverse Effect: any materially adverse change in or
effect on the financial condition, business, operations, assets,
properties, results of operations or prospects of the Company and its
Subsidiaries considered on a consolidated basis.
Company Option Plans: the Company's 1988 and 1989 Incentive and
Non-Statutory Stock Option Plans.
control (including with correlative meaning, controlled by and under
common control with): as used with respect to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of such Person, whether through the ownership
of voting securities, by contract or otherwise.
End-User Licenses: any object code end-user licenses granted to
end-users in the ordinary course of business that permit use of software
products without a right to modify, distribute or sublicense the same.
Environmental Claim: any notice alleging potential liability
(including, without limitation, potential liability for investigatory
costs, cleanup costs, response or remediation costs, natural resources
damages, property damages, personal injuries, fines or penalties) arising
out of, based on or resulting from (a) the presence, or release of any
Material of Environmental Concern at any location, whether or not owned by
that party or any of its Subsidiaries or (b) circumstances forming the
basis of any violation, or alleged violation, of any Environmental Law.
Environmental Laws: any and all statutes, regulations and ordinances
relating to the protection of public health, safety or the environment.
ERISA: the Employee Retirement Income Security Act of 1974, as
amended.
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ERISA Affiliate: with respect to a party, any member (other than that
party) of a controlled group of corporations, group of trades or businesses
under common control or affiliated service group that includes that party
(as defined for purposes of Section 414(b), (c) and (m) of the Code).
Exchange Act: the Securities Exchange Act of 1934, as amended.
Formula Price Per Share: a number rounded to two decimal places equal
to the average of the closing bid and asked prices of Parent Stock as
quoted on the Nasdaq National Market on the twenty trade days immediately
prior to the Effective Date.
Materials of Environmental Concern: petroleum and its by-products and
all substances or constituents that are regulated by, or form the basis of
liability under, any Environmental Law.
Parent Leases: each lease, sublease, license or other agreement under
which Parent or any of its Subsidiaries uses, occupies or has the right to
occupy any real property or interest therein that (a) provides for future
minimum payments of $50,000 or more (ignoring any right of cancellation or
termination) or (b) the cancellation or termination of which would have a
Parent Material Adverse Effect.
Parent Material Adverse Effect: any materially adverse change in or
effect on the financial condition, business, operations, assets,
properties, results of operations or prospects of Parent and its
Subsidiaries considered on a consolidated basis, other than continuing
losses from operations.
Permitted Encumbrances: (a) liens for current taxes and other
statutory liens and trusts not yet due and payable or that are being
contested in good faith, (b) liens that were incurred in the ordinary
course of business, such as carriers', warehousemen's, landlords' and
mechanics' liens and other similar liens arising in the ordinary course of
business, (c) liens on personal property leased under operating leases, (d)
liens, pledges or deposits incurred or made in connection with workmen's
compensation, unemployment insurance and other social security benefits, or
securing the performance of bids, tenders, leases, contracts (other than
for the repayment of borrowed money), statutory obligations, progress
payments, surety and appeal bonds and other obligations of like nature, in
each case incurred in the ordinary course of business, (e) pledges of or
liens on manufactured products as security for any drafts or bills of
exchange drawn in connection with the importation of such manufactured
products in the ordinary course of business, (f) liens under Article 2 of
the Uniform Commercial Code that are special property interests in goods
identified as goods to which a contract refers, (g) liens under Article 9
of the Uniform Commercial Code that are purchase money security interests,
and (h) such imperfections or minor defects of title, easements,
rights-of-way and other similar restrictions (if any) as are insubstantial
in character, amount or extent, do not materially detract from the value or
interfere with the present or proposed use of the properties or assets of
the party subject thereto or affected thereby, and do not otherwise
adversely affect or impair the business or operations of such party.
Person: an individual, a corporation, an association, a partnership,
an estate, a trust and any other entity or organization.
SEC: the Securities and Exchange Commission, or any Governmental
Entity succeeding to its functions.
Securities Act: the Securities Act of 1933, as amended.
Stock Options: options to purchase Company Common Stock outstanding
under the Company Option Plans.
Subsidiary: any corporation, association, or other business entity a
majority (by number of votes on the election of directors or persons
holding positions with similar responsibilities) of the shares of capital
stock (or other voting interests) of which is owned by Parent, the Company
or their respective Subsidiaries, as the case may be.
Warrants: the Warrants (First Set) and the Warrants (Second Set).
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Warrants (First Set): Warrants to purchase 115,000 shares of Company
Common Stock dated July 12, 1991 to Painewebber R&D Partners III, L.P.;
Warrants to purchase 625,000 shares of Company Common Stock dated July 12,
1991 granted to Painewebber R&D Partners II, L.P.; and Warrants to purchase
600,000 shares of Company Common Stock dated May 1, 1995 to Cadmount.
Warrants (Second Set): Warrants to purchase 35,714 shares of Company
Common Stock dated November 1995 to First Portland Corporation.
ARTICLE 2
THE MERGER
2.1. PROCEDURE FOR THE MERGER. Merger Sub shall be merged, in accordance
with section 251 of the GCL, with and into the Company, which shall be and is
sometimes referred to herein to as the "Surviving Corporation". The Merger shall
be effected by filing a certificate of merger, substantially in the form of
Exhibit A attached hereto (the "Certificate of Merger"), with the Secretary of
State of the State of Delaware in accordance with section 251(c) of the GCL. The
effective date of the Merger (the "Effective Date") shall be the date upon which
the Certificate of Merger shall have been filed with the Secretary of State of
the State of Delaware and the effective time of the Merger (the "Effective
Time") shall be the time of the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware.
2.2. SURVIVING CORPORATION.
2.2.1. CORPORATE EXISTENCE. The Surviving Corporation shall continue
its corporate existence under the laws of the State of Delaware. The
separate corporate existence of Merger Sub shall cease at the Effective
Time.
2.2.2. CERTIFICATE OF INCORPORATION AND BY-LAWS. The certificate of
incorporation of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the certificate of incorporation of the Surviving
Corporation until the same shall be amended thereafter in accordance with
the GCL and such certificate of incorporation, provided, however, that the
first article of the certificate of incorporation of the Surviving
Corporation shall be amended to read as follows: "The name of the
corporation is Cadre Technologies Inc." The by-laws of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the by-laws of the
Surviving Corporation until the same shall be amended thereafter in
accordance with the GCL, the certificate of incorporation of the Surviving
Corporation and such by-laws.
2.2.3. DIRECTORS. As of the Effective Time, Peter J. Boni shall be
the sole director of the Surviving Corporation, to hold office in
accordance with the certificate of incorporation and by-laws of the
Surviving Corporation.
2.2.4. EFFECT OF THE MERGER. As of the Effective Time, the effect of
the Merger shall be as provided in this Agreement and the applicable
provisions of the GCL. Without limiting the generality of the foregoing, at
the Effective Time, all the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
2.3. CONVERSION OF STOCK.
2.3.1. STOCK OF THE COMPANY. At the Effective Time, by virtue of the
Merger and without any action on the part of the holders thereof, each
share of Common Stock, $.01 par value per share, of the Company ("Company
Common Stock") issued and outstanding immediately prior to the Effective
Time (other than (i) Company Common Stock held in the Company's treasury or
by any of the Company's Subsidiaries and (ii) Dissenting Shares (as defined
in and to the extent provided in Section 2.7(a)) will be canceled and
extinguished and be converted automatically into the right to receive the
number of shares of the Common Stock, $.01 par value per share, of Parent
("Parent Stock") equal to the Exchange Ratio, provided, however, that a
portion of the shares of Parent Stock issuable pursuant to the Merger in
respect of shares of Company Common Stock shall be delivered into escrow
and held as
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specified in Section 2.9. Each share of Parent Stock issued pursuant to the
Merger shall be validly issued, fully paid and nonassessable.
2.3.2. DEFINITION OF EXCHANGE RATIO. As used herein, the following
terms shall have the following meanings:
Actual Negative Net Worth: the Company's consolidated negative net
worth (exclusive of the Cadmount Note) on the Net Worth Calculation Date
(rounded to the nearest thousand dollars) as determined in accordance
with GAAP consistently applied.
Aggregate Consideration Amount: an amount equal to the Parent
Share Amount multiplied by 6 (subject to adjustment to reflect fully the
effect of any stock split, reverse stock split, stock dividend,
reorganization, recapitalization, or like change with respect to Parent
Stock occurring after the date hereof and prior to the Effective Time).
Aggregate Exercise Price: an amount equal to the aggregate
exercise price of all Stock Options and Warrants (Second Set)
outstanding immediately prior to the Effective Time payable to the
Company upon exercise thereof.
Exchange Ratio: a number rounded to four decimal places equal to a
fraction, the numerator of which is the Parent Share Amount, and the
denominator of which is (a) Fully-Diluted Shares minus (b) the Aggregate
Exercise Price divided by the Per-Share Consideration Amount.
Fully-Diluted Shares: the aggregate number of shares of Company
Common Stock outstanding at the Effective Time or issuable at the
Effective Time upon the exercise in full of Stock Options and Warrants
(Second Set) outstanding at the Effective Time.
Negative Net Worth Limit: $5,611,000.
Net Worth Calculation Date: the last day of the month immediately
preceding the Effective Time.
Parent Share Amount: 4,850,000, subject to adjustment as follows:
in the event that Actual Negative Net Worth is greater than the Negative
Net Worth Limit, then the Parent Share Amount shall be equal to the
quotient obtained from the division of a fraction, the numerator of
which is (a) 29,100,000 minus (b) the amount that Actual Negative Net
Worth is greater than the Negative Net Worth Limit, and the denominator
of which is 6. The Parent Share Amount shall be appropriately adjusted
to reflect fully the effect of any stock split, reverse stock split,
stock dividend, reorganization, recapitalization, or like change with
respect to Parent Stock occurring after the date hereof and prior to the
Effective Time.
Per-Share Consideration Amount: a number rounded to four decimal
places equal to (a) the Aggregate Consideration Amount divided by (b)
Fully-Diluted Shares.
2.3.3. STOCK OF MERGER SUB. At the Effective Time, each share of the
Common Stock, par value $.01 per share, of Merger Sub ("Merger Sub Stock")
issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the holder
thereof, be converted into and become one validly issued, fully paid and
nonassessable share of Common Stock, par value $.01 per share, of the
Surviving Corporation.
2.4. STOCK OPTIONS. At the Effective Time, all Stock Options then
outstanding shall become options to purchase Parent Stock in accordance with
Section 6.8.1 hereof.
2.5. WARRANTS. At the Effective Time, all Warrants then outstanding shall
become warrants to purchase Parent Stock in accordance with Section 6.9 hereof.
2.6. FRACTIONAL SHARES. Only whole shares of Parent Stock will be issued
by virtue of the Merger. Any holder of shares of Company Common Stock who would
otherwise be entitled to a fraction of a share of Parent Stock (after
aggregating all fractional shares of Parent Stock to be received by such holder)
shall have such fractional share interest rounded up to the nearest whole share.
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2.7. DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the contrary, the
shares of any holder of Company Common Stock who has demanded and perfected
appraisal rights for such shares in accordance with the GCL and who, as of the
Effective Time, has not effectively withdrawn or lost such appraisal rights
("Dissenting Shares"), shall not be converted into or represent a right to
receive Parent Stock pursuant to Section 2.3.1, but the holder thereof shall
only be entitled to such rights as are granted by the GCL.
(b) Notwithstanding the provisions of subsection (a), if any holder of
shares of Company Common Stock who demands appraisal of such shares under the
GCL shall effectively withdraw the right to appraisal, then, as of the later of
the Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive Parent
Stock, without interest thereon, upon surrender of the certificate representing
such shares.
(c) The Company shall give Parent (i) prompt notice of any written demands
for appraisal of any shares of Company Common Stock, withdrawals of such
demands, and any other instruments served pursuant to the GCL and received by
the Company which relate to any such demand for appraisal and (ii) the
opportunity to participate in all negotiations and proceedings which take place
prior to the Effective Time with respect to demands for appraisal under the GCL.
The Company shall not, except with the prior written consent of Parent,
voluntarily make any payment with respect to any demands for appraisal of
Company Common Stock or offer to settle any such demands.
2.8. HOLDER'S AGENT. James P. Lally shall, by virtue of the Merger and the
resolutions to be adopted at the Company Meeting, be irrevocably appointed
attorney-in-fact and authorized and empowered to act, for and on behalf of any
or all of the Stockholders (with full power of substitution in the premises) in
connection with the indemnity provisions of Article 8 as they relate to the
Stockholders 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 Stockholders 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 Parent and its Subsidiaries 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 Stockholders appointed by him or
after his death or incapacity elected by vote of holders of a majority of
Company Common Stock outstanding immediately prior to the Effective Time being
referred to herein as the "Holder's Agent"). The Holder's Agent shall not be
liable to any Stockholder, Parent or its Subsidiaries 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 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 or the part of the
Holder's Agent. Each of Parent and Merger Sub and each of their respective
Affiliates (including, after the Closing, the Company) shall be entitled to rely
on such appointment and treat such Holder's Agent as the duly appointed
attorney-in-fact of each Stockholder. Each Stockholder who votes in favor of the
Merger pursuant to the terms hereof, by such vote, without any further action,
and each Stockholder who receives shares of Parent Stock 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 the Parent and Merger Sub to enter into this Agreement is based,
in part, on the appointment of a representative to act on behalf of the
Stockholders.
2.9. ISSUANCE OF PARENT STOCK.
2.9.1. STOCKHOLDER LIST. The Company shall prepare a list (the
"Stockholder List") setting forth the names and addresses of all Persons
who are the record holders of Company Common Stock immediately prior to the
Effective Time (the "Stockholders"), which it shall deliver to Parent at
the Closing.
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2.9.2. DELIVERY OF CERTIFICATES. At or promptly after the Effective
Time, Parent shall cause its transfer agent to prepare two certificates for
each Stockholder (other than Cadmount), each such certificate registered in
the name of such Stockholder and together representing the total number of
shares of Parent Stock issuable pursuant to the Merger in respect of shares
of Company Common Stock held by such Stockholder (the "Stockholder's Share
Amount"), as follows: (a) one certificate shall represent ten percent of
such Stockholder's Share Amount (rounded up to the nearest whole number of
shares of Parent Stock), and shall be delivered by Parent to State Street
Bank and Trust Company, as escrow agent (the "Escrow Agent"), as security
for Parent Claims and (b) one certificate (the "Balance Certificate") shall
represent the balance of such Stockholder's Share Amount after deducting
therefrom the shares of Parent Stock being placed in escrow hereunder. At
and after the Effective Time, each Stockholder (other than Cadmount) shall
be entitled to receive such Stockholder's Balance Certificate upon delivery
to Parent of a certificate or certificates representing the full number of
shares of Company Common Stock held by such Stockholder immediately prior
to the Effective Time, together with a properly completed transmittal
letter, substantially in the form of Exhibit B attached hereto (a
"Transmittal Letter"). The Escrow Agent shall hold and administer the
shares of Parent Stock delivered to it hereunder in accordance with the
terms of an escrow agreement dated as of the Effective Date among Parent,
the Holder's Agent and the Escrow Agent (the "Escrow Agreement"), such
Escrow Agreement to be substantially in the form of Exhibit C attached
hereto.
2.9.3. CADMOUNT. The parties hereto acknowledge that the shares of
Company Common Stock registered in the name of Cadmount are held in escrow
pursuant to a Share Purchase Agreement between Cadmount and the Company
dated May 1, 1995 and an Escrow Agreement among the Company, Cadmount and
Mees Peirson Trust B.V., as escrow agent (the "Cadmount Escrow Agent")
dated May 1, 1995. At or promptly after the Effective Time, Parent shall
cause its transfer agent to prepare one certificate registered in the name
of Cadmount and representing the total number of shares of Parent Stock
issuable pursuant to the Merger in respect of shares of Company Common
Stock registered in Cadmount's name (the "Cadmount Certificate"). Upon
Parent's receipt of a certificate or certificates representing the full
number of shares of Company Common Stock registered in Cadmount's name
immediately prior to the Effective Time, together with a properly completed
Transmittal Letter, Parent shall deliver the Cadmount Certificate to the
Cadmount Escrow Agent, and the shares of Parent Stock represented by the
Cadmount Certificate shall remain in escrow subject to the terms of such
Share Purchase Agreement and Escrow Agreement.
2.10. CLOSING. The closing of the Merger (the "Closing") shall take place
at the offices of Foley, Hoag & Eliot in Boston, Massachusetts on the Effective
Date simultaneously with the Effective Time, or at such other time and place or
on such other date as the parties hereto agree.
2.11. TRANSFERS OF OWNERSHIP. If any certificate for shares of Parent
Stock is to be issued in a name other than that in which the certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the Stockholder requesting
such exchange will have paid to Parent or any agent designated by it any
transfer or other taxes required by reason of issuance of a certificate for
shares of Parent Stock in any name other than that of the registered holder of
the certificate surrendered, or established to the reasonable satisfaction of
Parent or any agent designated by it that such tax has been paid or is not
payable.
2.12. TAX AND ACCOUNTING CONSEQUENCES. It is intended by the parties
hereto that the Merger shall (a) constitute a reorganization within the meaning
of Section 368 of the Code and (b) qualify for accounting treatment as a pooling
of interests under GAAP.
2.13. ADDITIONAL ACTIONS. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purposes of this
Agreement or to vest, perfect or confirm in the Surviving Corporation title to
or ownership or possession of any property, right, privilege, power, franchise
or other asset of either Constituent Corporation acquired or to be acquired by
reason of, or as a result of, the Merger, the officers and directors of the
Company and Merger Sub are fully authorized in the name of their respective
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corporations or otherwise to take, and will take, all such lawful and necessary
action, so long as such action is consistent with this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub as follows:
3.1. CORPORATE STATUS OF THE COMPANY. Except as set forth on Schedule 3.1
hereto, the Company and each of its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with the requisite corporate power to own,
operate and lease its properties and to carry on its business as now being
conducted. The Company and its Subsidiaries are duly qualified or licensed to do
business as foreign corporations and are in good standing in all jurisdictions
in which the character of the properties owned or held under lease by each or
the nature of the business transacted by each makes qualification necessary,
except where failure to be so qualified would not have a Company Material
Adverse Effect. All jurisdictions in which the Company and its Subsidiaries are
qualified to do business are set forth on Schedule 3.1 hereto.
3.2. CAPITAL STOCK.
3.2.1. AUTHORIZED STOCK OF THE COMPANY. The authorized capital stock
of the Company consists of 25,000,000 shares of Company Common Stock, of
which 14,305,362 shares were issued and outstanding as of February 29,
1996. The outstanding shares of Company Common Stock are held of record
and, to the knowledge of the Company, beneficially, by the Stockholders in
the amounts set forth opposite their respective names as set forth on
Schedule 3.2 hereto. All of the outstanding shares of Company Common Stock
have been duly authorized and validly issued, were not issued in violation
of any person's preemptive rights, and are fully paid and nonassessable.
3.2.2. OPTIONS AND CONVERTIBLE SECURITIES OF THE COMPANY. Except as
set forth on Schedule 3.2 or as set forth on the option schedule dated
November 30, 1995 previously delivered by the Company to Parent, there are
no outstanding subscriptions, options, warrants, conversion rights or other
rights, securities, agreements or commitments obligating the Company to
issue, sell or otherwise dispose of shares of its capital stock, or any
securities or obligations convertible into, or exercisable or exchangeable
for, any shares of its capital stock. Since February 29, 1996, the Company
has not issued, sold or otherwise disposed of any shares of its capital
stock, other than pursuant to the Company Option Plans. Except as set forth
on Schedule 3.2, there are no voting trusts or other agreements or
understandings to which the Company or any Stockholder is a party with
respect to the voting of the shares of Company Common Stock and the Company
is not a party to or bound by any outstanding restrictions, options or
other obligations, agreements or commitments to sell, repurchase, redeem or
acquire any outstanding shares of Company Common Stock or other equity
securities of the Company.
3.3. SUBSIDIARIES. A list of the Company's Subsidiaries and their
respective jurisdictions of incorporation is set forth on Schedule 3.3 hereto.
Except as set forth on Schedule 3.3, immediately prior to the Closing, the
Company will beneficially and of record own all of the outstanding securities of
its Subsidiaries (except for directors qualifying shares, nominee shares and the
like), free and clear of all liens, charges, pledges, security interests,
encumbrances, and other restrictions and agreements with respect thereto. All of
the outstanding shares of capital stock of the Company's Subsidiaries have been
duly authorized and validly issued, were not issued in violation of any person's
preemptive rights, and are fully paid and nonassessable. Except as contemplated
by this Agreement, there are no outstanding subscriptions, options, warrants,
conversion rights or other rights, securities, agreements or commitments
obligating the Company or any of its Subsidiaries to issue, sell or otherwise
dispose of any shares of capital stock, or any securities or obligations
convertible into, or exercisable or exchangeable for, any shares of capital
stock, of any of the Company's Subsidiaries.
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3.4. AUTHORITY FOR AGREEMENT; NONCONTRAVENTION.
3.4.1. AUTHORITY. The Company has the corporate power and authority
to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the board of directors of the Company and no other
corporate proceedings on the part of the Company are necessary to authorize
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, other than the approval of the Merger by
the vote of the holders of at least two-thirds of the Company Common Stock.
This Agreement and the other agreements contemplated hereby to be signed by
the Company have been duly executed and delivered by the Company and
constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, subject to the
qualifications that enforcement of the rights and remedies created hereby
and thereby are subject to (a) bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium and other laws of general application
affecting the rights and remedies of creditors and (b) general principles
of equity (regardless of whether enforcement is considered in a proceeding
in equity or at law).
3.4.2. NO CONFLICT. Except as set forth on Schedule 3.4 hereto,
neither the execution and delivery of this Agreement by the Company, nor
the performance by the Company of its obligations hereunder, nor the
consummation by the Company of the transactions contemplated hereby will
(a) conflict with or result in a violation of any provision of the charter
documents or by-laws of the Company or its Subsidiaries, (b) with or
without the giving of notice or the lapse of time, or both, conflict with,
or result in any violation or breach of, or constitute a default under, or
result in any right to accelerate or result in the creation of any lien,
charge or encumbrance pursuant to, or right of termination under, any
provision of any note, mortgage, indenture, lease, instrument or other
agreement, permit, concession, grant, franchise, license, judgment, order,
decree, statute, ordinance, rule or regulation to which the Company or any
of its Subsidiaries is a party or by which any of them or any of their
assets or properties is bound or which is applicable to any of them or any
of their assets or properties. No authorization, consent or approval of, or
filing with or notice to, any United States or foreign governmental or
public body or authority (each a "Governmental Entity") is necessary for
the execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby, except
for (i) the filing of the Certificate of Merger with the Secretary of State
of the State of Delaware, (ii) the filing of the Registration Statement
with the SEC in accordance with the Securities Act, (iii) the filing of the
Proxy Statement with the SEC in accordance with the Exchange Act, (iv) any
filings as may be required under applicable state securities laws and the
laws of any foreign country, and (v) such other consents, authorizations,
filings, approvals and registrations which if not obtained or made would
not have a Company Material Adverse Effect.
3.5. FINANCIAL STATEMENTS. The Company has previously furnished Parent
with an accurate and complete copy of the consolidated balance sheets of the
Company as of December 31, 1995, 1994, 1993 and 1992 and the consolidated
statements of operations, cash flows and changes in stockholders' equity of the
Company and its Subsidiaries for the respective years then ended, as audited by
Deloitte & Touche LLP, the Company's certified public accountants. Collectively,
the financial statements referred to in the immediately preceding sentence are
sometimes referred to herein as the "Company Financial Statements" and the
audited consolidated balance sheet of the Company and its Subsidiaries as of
December 31, 1995 is referred to herein as the "Company Balance Sheet." Each of
the balance sheets included in the Company Financial Statements (including any
related notes) fairly presents in all material respects the financial position
of the Company and its Subsidiaries as of its date, and the other statements
included in the Company Financial Statements (including any related notes)
fairly present in all material respects the results of operations, cash flows
and stockholders' equity, as the case may be, of the Company and its
Subsidiaries for the periods therein set forth, in each case in accordance with
GAAP consistently applied (except as otherwise stated therein).
3.6. ABSENCE OF MATERIAL ADVERSE CHANGES AND UNDISCLOSED
LIABILITIES. Except as set forth on Schedule 3.6 hereto, since the date of the
Company Balance Sheet, (a) the Company has not suffered any Company Material
Adverse Effect, nor has there occurred or arisen any event, condition or state
of facts of
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any character that could reasonably be expected to result in a Company Material
Adverse Effect and (b) there have been no dividends or other distributions
declared or paid in respect of, or any repurchase or redemption by the Company
of, any of the shares of capital stock of the Company, or any commitment
relating to any of the foregoing. Except as set forth on Schedule 3.6, the
Company has no material liabilities or obligations, fixed, accrued, contingent
or otherwise (collectively, "Liabilities"), that are not fully reflected or
provided for on, or disclosed in the notes to, the balance sheets included in
the Company Financial Statements, except (i) Liabilities incurred in the
ordinary course of business since the date of the Company Balance Sheet, none of
which individually or in the aggregate has had or could reasonably be expected
to have a Company Material Adverse Effect, (ii) Liabilities permitted or
contemplated by this Agreement, and (iii) Liabilities expressly disclosed on the
Schedules delivered hereunder.
3.7. COMPLIANCE WITH APPLICABLE LAW, ARTICLES AND BY-LAWS. Each of the
Company and its Subsidiaries has all requisite licenses, permits and
certificates from all Governmental Entities (collectively, "Permits") necessary
to conduct its business as currently conducted, and to own, lease and operate
its properties in the manner currently held and operated, except as set forth on
Schedule 3.7 hereto. All of the Company's and its Subsidiaries' Permits are in
full force and effect. Each of the Company and its Subsidiaries is in compliance
in all material respects with all the terms and conditions related to such
Permits. There are no proceedings in progress, pending or, to the knowledge of
the Company, threatened, which may result in revocation, cancellation,
suspension, or any material adverse modification of any of such Permits. The
business of the Company and its Subsidiaries is not being conducted in violation
of any applicable law, statute, ordinance, regulation, rule, judgment, decree,
order, Permit, concession, grant or other authorization of any Governmental
Entity, except for any violations that, in the aggregate, do not and could not
reasonably be expected to have a Company Material Adverse Effect or prevent or
materially delay the consummation of the transactions contemplated hereby.
Neither the Company nor its Subsidiaries is in default or violation of any
provision of its charter documents or its by-laws.
3.8. LITIGATION AND AUDITS. Except for any claim, action, suit or
proceeding set forth on Schedule 3.8 or 3.9 hereto, (a) there is no
investigation by any Governmental Entity with respect to the Company or its
Subsidiaries pending or, to the knowledge of the Company, threatened, nor has
any Governmental Entity indicated to the Company or any of its Subsidiaries an
intention to conduct the same; (b) there is no claim, action, suit, arbitration
or proceeding pending or, to the knowledge of the Company, threatened against or
involving the Company or any of its Subsidiaries, or any of its or their assets
or properties, at law or in equity, or before any arbitrator or Governmental
Entity, that, if adversely determined, either singly or in the aggregate, would
have a Company Material Adverse Effect or prevent or materially delay the
consummation of the transactions contemplated hereby; and (c) there are no
judgments, decrees, injunctions or orders of any Governmental Entity or
arbitrator outstanding against the Company or any of its Subsidiaries.
3.9. TAX MATTERS.
3.9.1. FILING OF RETURNS. Except as set forth on Schedule 3.9 hereto,
the Company and its Subsidiaries have prepared and filed on a timely basis
with all appropriate governmental authorities all material returns in
respect of Taxes that they are required to file on or prior to the Closing,
and all such returns are correct and complete in all material respects.
3.9.2. PAYMENT OF TAXES. Except as set forth on Schedule 3.9, the
Company and its Subsidiaries have paid in full all Taxes due on or before
the Closing and, in the case of Taxes accruing on or before the Closing
that are not due on or before the Closing, the Company has made adequate
provision in its books and records and financial statements for such
payment.
3.9.3. WITHHOLDING. Except as set forth on Schedule 3.9, the Company
and its Subsidiaries have withheld from each payment made to any of its
present or former employees, officers and directors all amounts required by
law to be withheld and has, where required, remitted such amounts within
the applicable periods to the appropriate governmental authorities.
3.9.4. ASSESSMENTS. Except as set forth on Schedule 3.9, there are no
assessments of the Company or its Subsidiaries with respect to Taxes that
have been issued and are outstanding. Except as set forth on
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Schedule 3.9, no Governmental Entity has examined or audited the Company in
respect of Taxes. Except as set forth on Schedule 3.9, neither the Company
nor any of its Subsidiaries has received any indication in writing from any
Governmental Entity that an assessment in respect of the Company or any of
its Subsidiaries is proposed. Neither the Company nor any of its
Subsidiaries has executed or filed any agreement extending the period of
assessment or collection of any Taxes.
3.9.5. ACCESS TO RETURNS. Parent has been provided with a copy of or
access to all federal, state, local and foreign income Tax returns filed by
the Company and its Subsidiaries since January 1, 1990. Parent has been
provided with a copy of or access to all assessments, extensions and
waivers resulting from any audits of the Company or its Subsidiaries by a
Governmental Entity in respect of Taxes, and all such assessments and
related penalties and interest have been paid in full unless being
contested in good faith by the Company or its Subsidiaries.
3.9.6. DEFINITION OF TAXES. As used herein, "Taxes" means all taxes,
levies and other assessments, including all income, sales, use, goods and
services, value added, capital, capital gains, net worth, transfer,
profits, withholding, payroll, employer health, excise, real property and
personal property taxes, and any other taxes, assessments or similar
charges in the nature of a tax including unemployment insurance payments
and workers compensation premiums, together with any installments with
respect thereto, and any interest, fines and penalties, imposed by any
Governmental Entity (including federal, state, municipal and foreign
Governmental Entities), and whether disputed or not.
3.10. EMPLOYEE BENEFIT PLANS.
3.10.1. LIST OF PLANS. Schedule 3.10 hereto contains a correct and
complete list of all pension, profit sharing, retirement, deferred
compensation, welfare, legal services, medical, dental or other employee
benefit or health insurance plans, life insurance or other death benefit
plans, disability, stock option, stock purchase, stock compensation, bonus,
vacation pay, severance pay and other similar plans, programs or
agreements, and every material written personnel policy, relating to any
persons employed by the Company or in which any person employed by the
Company is eligible to participate and which is currently maintained or
that was maintained at any time in the last five calendar years by the
Company or any ERISA Affiliate (collectively, the "Company Plans"). The
Company has made available to Parent complete copies, as of the date
hereof, of all of the Company Plans that have been reduced to writing,
together with all documents establishing or constituting any related trust,
annuity contract, insurance contract or other funding instrument, and
summaries of those that have not been reduced to writing. The Company has
made available to Parent complete copies of current plan summaries,
employee booklets, personnel manuals and other material documents or
written materials concerning the Company Plans that are in the possession
of the Company as of the date hereof. The Company does not have any
"defined benefit plans" as defined in Section 3(35) of ERISA.
3.10.2. ERISA. Neither the Company nor any ERISA Affiliate of the
Company has incurred any "withdrawal liability" calculated under Section
4211 of ERISA and there has been no event or circumstance which would cause
them to incur any such liability. Neither the Company nor any ERISA
Affiliate of the Company has ever maintained a Company Plan providing
health or life insurance benefits to former employees, other than as
required pursuant to Section 4980B of the Code or to any state law
conversion rights. No plan previously maintained by the Company or its
ERISA Affiliates which was subject to ERISA has been terminated; no
proceedings to terminate any such plan have been instituted within the
meaning of Subtitle C of Title IV of ERISA; and no reportable event within
the meaning of Section 4043 of said Subtitle C of Title IV of ERISA with
respect to which the requirement to file a notice with the Pension Benefit
Guaranty Corporation has not been waived has occurred with respect to any
such Company Plan, and no liability to the Pension Benefit Guaranty
Corporation has been incurred by the Company or its ERISA Affiliates.
Except as set forth on Schedule 3.10, with respect to all the Company
Plans, the Company and every ERISA Affiliate of the Company are in material
compliance with all requirements prescribed by all statutes, regulations,
orders or rules currently in effect, and have in all material respects
performed all obligations required to be performed by them. Neither the
Company nor any ERISA Affiliate of the Company, nor any of their directors,
officers, employees or agents, nor any
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trustee or administrator of any trust created under the Company Plans, have
engaged in or been a party to any "prohibited transaction" as defined in
Section 4975 of the Code and Section 406 of ERISA which could subject the
Company or its Affiliates, directors or employees or the Company Plans or
the trusts relating thereto or any party dealing with any of the Company
Plans or trusts to any tax or penalty on "prohibited transactions" imposed
by Section 4975 of the Code. Except as set forth on Schedule 3.10, neither
the Company Plans nor the trusts created thereunder have incurred any
"accumulated funding deficiency," as such term is defined in Section 412 of
the Code and regulations issued thereunder, whether or not waived.
3.10.3. PLAN DETERMINATIONS. Each Company Plan intended to qualify
under Section 401(a) of the Code has been determined by the Internal
Revenue Service to so qualify, and the trusts created thereunder have been
determined to be exempt from tax under Section 501(a) of the Code; copies
of all determination letters have been delivered to the Company; and, to
the knowledge of the Company, nothing has occurred since the date of such
determination letters which might cause the loss of such qualification or
exemption. With respect to each Company Plan which is a qualified profit
sharing plan, all employer contributions accrued for plan years ending
prior to the Closing under the Company Plan terms and applicable law have
been made.
3.10.4. FUNDING. Except as set forth on Schedule 3.10:
(a) all contributions, premiums or other payments due or required
to be made to the Company Plans as of the date hereof have been made as
of the date hereof or are properly reflected on the Company Balance
Sheet;
(b) there are no actions, liens, suits or claims pending or, to the
knowledge of the Company, threatened (other than routine claims for
benefits) with respect to any Company Plan;
(c) to the knowledge of the Company, no event has occurred, and
there exists no condition or set of circumstances, which presents a
material risk of a partial termination (within the meaning of Section
411(d)(3) of the Code) of any Company Plan;
(d) each Company Plan that is a "group health plan" (as defined in
Section 607(1) of ERISA) has been operated at all times in substantial
compliance with the provisions of COBRA and any applicable, similar
state law; and
(e) with respect to any Company Plan that is qualified under
Section 401(k) of the Code, individually and in the aggregate, no event
has occurred, and to the knowledge of the Company, there exists no
condition or set of circumstances in connection with which the Company
could be subject to any liability that is reasonably likely to have a
Company Material Adverse Effect (except liability for benefits claims
and funding obligations payable in the ordinary course) under ERISA, the
Code or any other applicable law.
3.11. EMPLOYMENT-RELATED MATTERS.
3.11.1. LABOR RELATIONS. Except to the extent set forth on Schedule
3.11 hereto: (a) neither the Company nor any of its Subsidiaries is a party
to any collective bargaining agreement or other contract or agreement with
any labor organization or other representative of any of the employees of
the Company or any of its Subsidiaries; (b) there is no labor strike,
dispute, slowdown, work stoppage or lockout that is pending or threatened
against or otherwise affecting the Company or any of its Subsidiaries, and
neither the Company nor any of its Subsidiaries has experienced the same
since January 1, 1992; (c) neither the Company nor any of its Subsidiaries
have closed any plant or facility, effectuated any layoffs of employees or
implemented any early retirement or separation program at any time from or
after January 1, 1992, nor has the Company or any of its Subsidiaries
planned or announced any such action or program for the future with respect
to which the Company has any material liability; and (d) all salaries,
wages, vacation pay, bonuses, commissions and other compensation payable by
the Company or its Subsidiaries to the employees of the Company and its
Subsidiaries before the date hereof have been paid in all material respects
as of the date hereof.
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3.11.2. EMPLOYEE LIST. The Company has heretofore delivered to Parent
a list (the "Employee List") dated as of January 18, 1996 containing the
name of each employee of the Company and its Subsidiaries, and each such
employee's position, starting employment date and annual salary. The
Employee List is correct and complete as of the date of the Employee List.
No third party has asserted any claim, or, to the knowledge of the Company,
has any reasonable basis to assert any valid claim, against the Company or
its Subsidiaries that either the continued employment by, or association
with, the Company or its Subsidiaries of any of the present officers or
employees of, or consultants to, the Company or its Subsidiaries
contravenes any agreements or laws applicable to unfair competition, trade
secrets or proprietary information.
3.12. ENVIRONMENTAL.
3.12.1. ENVIRONMENTAL LAWS. Except for matters which, individually or
in the aggregate, would not have a Company Material Adverse Effect, (a) the
Company and each of its Subsidiaries is in compliance with all applicable
Environmental Laws in effect on the date hereof; (b) the Company and each
of its Subsidiaries have not received any written communication that
alleges that the Company or any of its Subsidiaries is not in compliance in
all material respects with all applicable Environmental Laws in effect on
the date hereof; (c) to the knowledge of the Company, there are no
circumstances that may prevent or interfere with compliance in the future
with all applicable Environmental Laws; (d) all material Permits and other
governmental authorizations currently held by the Company and each of its
Subsidiaries pursuant to the Environmental Laws are in full force and
effect, the Company and its Subsidiaries are in compliance with all of the
terms of such Permits and authorizations, and no other Permits or
authorizations are required by the Company or its Subsidiaries for the
conduct of its and their business on the date hereof; and (e) the
management, handling, storage, transportation, treatment, and disposal by
the Company and each of its Subsidiaries of all Materials of Environmental
Concern has been in compliance with all applicable Environmental Laws.
3.12.2. ENVIRONMENTAL CLAIMS. Except as set forth on Schedule 3.12
hereto and except for Environmental Claims which, individually or in the
aggregate, would not have a Company Material Adverse Effect, there is no
Environmental Claim pending or, to the knowledge of the Company, threatened
against or involving the Company or any of its Subsidiaries or against any
person or entity whose liability for any Environmental Claim the Company or
any of its Subsidiaries has or may have retained or assumed either
contractually or by operation of law.
3.12.3. NO BASIS FOR CLAIMS. Except for matters which, individually
or in the aggregate, would not have a Company Material Adverse Effect, to
the knowledge of the Company, there are no past or present actions or
activities by the Company or any of its Subsidiaries, or any circumstances,
conditions, events or incidents, including the storage, treatment, release,
emission, discharge, disposal or arrangement for disposal of any Material
of Environmental Concern, that could reasonably form the basis of any
Environmental Claim against the Company or any of its Subsidiaries or
against any person or entity whose liability for any Environmental Claim
the Company or any of its Subsidiaries may have retained or assumed either
contractually or by operation of law.
3.13. NO BROKER'S OR FINDER'S FEES. The Company has not paid or become
obligated to pay any fee or commission to any broker, finder, financial advisor
or intermediary in connection with the transactions contemplated by this
Agreement.
3.14. ASSETS OTHER THAN REAL PROPERTY.
3.14.1. TITLE. The Company or one of its Subsidiaries has good and
marketable title to all of the tangible assets shown on the Company Balance
Sheet, in each case, free and clear of any mortgage, pledge, lien, security
interest, lease or other encumbrance (collectively, "Encumbrances"), except
for (a) assets disposed of since the date of the Company Balance Sheet in
the ordinary course of business and in a manner consistent with past
practices, (b) liabilities, obligations and Encumbrances reflected in the
Company Balance Sheet or otherwise in the Company Financial Statements, (c)
Permitted Encumbrances, and (d) liabilities, obligations and Encumbrances
set forth on Schedule 3.14 hereto.
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3.14.2. INVENTORY. Except as set forth on Schedule 3.14, the
inventory reflected on the Company Balance Sheet contains no material
amount of slow-moving or obsolete items that have not been reserved for.
The values at which such inventories are carried on the Company Balance
Sheet reflect the normal inventory valuation policies of the Company and
are carried in accordance with GAAP, consistently applied.
3.14.3. CONDITION. Except as set forth on Schedule 3.14, all
receivables shown on the Company Balance Sheet and all receivables accrued
by the Company since the date of the Company Balance Sheet, have been
collected or are collectible in all material respects in the aggregate
amount shown, less any allowances for doubtful accounts reflected therein,
and, in the case of receivables arising since the date of the Company
Balance Sheet, any additional allowance in respect thereof calculated in a
manner consistent with the allowance reflected in the Company Balance
Sheet. All material plant, equipment and personal property owned by the
Company and its Subsidiaries and regularly used in its and their businesses
is in good operating condition and repair, ordinary wear and tear excepted.
3.15. REAL PROPERTY.
3.15.1. COMPANY REAL PROPERTY. Neither the Company nor any of its
Subsidiaries owns any real property.
3.15.2. COMPANY LEASES. Schedule 3.15 hereto lists all of the Company
Leases. Complete copies of the Company Leases, and all material amendments
thereto (which are identified on Schedule 3.15), have been made available
by the Company to Parent. The Company Leases grant leasehold estates free
and clear of all Encumbrances granted by or caused by the actions of the
Company. To the knowledge of the Company, the Company Leases are in full
force and effect and are binding and enforceable against each of the
parties thereto in accordance with their respective terms. Except as set
forth on Schedule 3.15, neither the Company nor any of its Subsidiaries,
nor, to the knowledge of the Company, any other party to a Company Lease,
has committed a material breach or default under any Company Lease, nor has
there occurred any event that with the passage of time or the giving of
notice or both would constitute such a breach or default, nor are there any
facts or circumstances that would reasonably indicate that the Company or
any of its Subsidiaries is likely to be in material breach or default
thereunder. Schedule 3.15 correctly identifies each Company Lease the
provisions of which would be materially and adversely affected by the
transactions contemplated hereby and each Company Lease that requires the
consent of any third party in connection with the transactions contemplated
hereby. No material construction, alteration or other leasehold improvement
work with respect to the real property covered by any of the Company Leases
remains to be paid for or to be performed by the Company or any of its
Subsidiaries. No Company Leases have an unexpired term which including any
renewal or extensions of such term provided for in the Company Lease could
exceed fifty years.
3.15.3. CONDITION. All buildings, structures and fixtures, or parts
thereof, used by the Company or any of its Subsidiaries in the conduct of
its business are in good operating condition and repair, ordinary wear and
tear excepted, and are insured with coverages that are usual and customary
for similar properties and similar businesses or are required, pursuant to
the terms of the Company Leases, to be insured by third parties.
3.16. AGREEMENTS, CONTRACTS AND COMMITMENTS.
3.16.1. COMPANY AGREEMENTS. Except as set forth on Schedule 3.16
hereto or any other Schedule hereto, neither the Company nor any of its
Subsidiaries is a party to:
(a) any bonus, deferred compensation, pension, severance,
profit-sharing, stock option, employee stock purchase or retirement
plan, contract or arrangement or other employee benefit plan or
arrangement;
(b) any employment agreement with any present employee, officer,
director or consultant (or former employees, officers, directors and
consultants to the extent there remain at the date hereof obligations to
be performed by the Company or any of its Subsidiaries);
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(c) any agreement for personal services or employment with a term
of service or employment specified in the agreement or any agreement for
personal services or employment in which the Company or any of its
Subsidiaries has agreed on the termination of such agreement to make any
payments greater than those that would otherwise be imposed by law;
(d) any agreement of guarantee or indemnification in an amount that
is material to the Company and its Subsidiaries taken as a whole;
(e) any agreement or commitment containing a covenant limiting or
purporting to limit the freedom of the Company or any of its
Subsidiaries to compete with any person in any geographic area or to
engage in any line of business;
(f) any lease other than the Company Leases under which the Company
or any of its Subsidiaries is lessee that involves payments of $50,000
or more per annum or is material to the conduct of the business of the
Company;
(g) any joint venture or profit-sharing agreement (other than with
employees);
(h) except for trade indebtedness incurred in the ordinary course
of business and equipment leases entered into in the ordinary course of
business, any loan or credit agreements providing for the extension of
credit to the Company or any of its Subsidiaries or any instrument
evidencing or related in any way to indebtedness incurred in the
acquisition of companies or other entities or indebtedness for borrowed
money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee, or otherwise that individually
is in the amount of $50,000 or more;
(i) any license agreement, either as licensor or licensee,
involving payments (including past payments) of $50,000 or more, or any
material distributor, dealer, reseller, franchise, manufacturer's
representative, or sales agency or any other similar material contract
or commitment;
(j) any agreement granting exclusive rights to, or providing for
the sale of, all or any portion of the Company Proprietary Rights;
(k) any agreement or arrangement providing for the payment of any
commission based on sales other than to employees of the Company or any
of its Subsidiaries;
(l) any agreement for the sale by the Company or its Subsidiaries
of materials, products, services or supplies that involves future
payments to the Company or its Subsidiaries of more than $50,000;
(m) any agreement for the purchase by the Company or any of its
Subsidiaries of any materials, equipment, services, or supplies, that
either (i) involves a binding commitment by the Company or any of its
Subsidiaries to make future payments in excess of $50,000 and cannot be
terminated by it without penalty upon less than three months' notice or
(ii) was not entered into in the ordinary course of business;
(n) any agreement or arrangement with any third party to develop
any intellectual property or other asset expected to be used or
currently used or useful in the business of the Company and its
Subsidiaries;
(o) any agreement or commitment for the acquisition, construction
or sale of fixed assets owned or to be owned by the Company or any of
its Subsidiaries that involves future payments by it of more than
$50,000;
(p) any agreement or commitment to which present or former
directors, officers or Affiliates of the Company (or directors or
officers of an Affiliate of the Company) are also parties;
(q) any agreement not described above (ignoring, solely for this
purpose, any dollar amount thresholds in those descriptions) involving
the payment or receipt by the Company or any of its Subsidiaries of more
than $100,000, other than the Company Leases; or
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(r) any agreement not described above that was not made in the
ordinary course of business and that is material to the financial
condition, business, operations, assets, results of operations or
prospects of the Company and its Subsidiaries taken as a whole.
3.16.2. VALIDITY. Except as set forth on Schedule 3.16, to the
knowledge of the Company, all contracts, leases, instruments, licenses and
other agreements required to be set forth on Schedule 3.16 are valid and in
full force and effect and the Company has not, nor, to the knowledge of the
Company, has any other party thereto, breached any provision of, or
defaulted under the terms of any such contract, lease, instrument, license
or other agreement, except for any breaches or defaults that, in the
aggregate, would not reasonably be expected to have a Company Material
Adverse Effect or have been cured or waived. Schedule 3.16 identifies each
contract and other document set forth on Schedule 3.16 or disclosed by the
Company on another Schedule hereto that requires the consent of a third
party in connection with the transactions contemplated hereby.
3.17. INTELLECTUAL PROPERTY.
3.17.1. RIGHT TO INTELLECTUAL PROPERTY. Except as set forth on
Schedule 3.17 hereto, the Company and its Subsidiaries own, or have
perpetual, fully paid, worldwide rights to use, all patents, trademarks,
trade names, service marks, copyrights, and any applications therefor,
maskworks, net lists, schematics, technology, know-how, computer software
programs or applications (in both source code and object code form), and
tangible or intangible proprietary information or material (excluding
Commercial Software) that are used in the business of the Company and its
Subsidiaries as currently conducted (the "Company Proprietary Rights").
3.17.2. NO CONFLICT. Set forth on Schedule 3.17 is a complete list of
all patents, trademarks, registered copyrights, trade names and service
marks, and any applications therefor, included in the Company Proprietary
Rights, specifying, where applicable, the jurisdictions in which each such
Company Proprietary Right has been issued or registered or in which an
application for such issuance and registration has been filed, including
the respective registration or application numbers and the names of all
registered owners. Except as set forth on Schedule 3.17, none of the
Company's or its Subsidiaries' currently marketed software products has
been registered for copyright protection with the United States Copyright
Office or any foreign offices nor has the Company or any of its
Subsidiaries been requested to make any such registration. Set forth on
Schedule 3.17 is a complete list of all material licenses, sublicenses and
other agreements as to which the Company or any of its Subsidiaries is a
party and pursuant to which the Company or any of its Subsidiaries or any
other person is authorized to use any Company Proprietary Right (excluding
End-User Licenses) or other trade secret material to the business of the
Company and its Subsidiaries, and includes the identity of all parties
thereto, a description of the nature and subject matter thereof, the
applicable royalty and the term thereof. Neither the Company nor any of its
Subsidiaries is in violation of any license, sublicense or agreement
described on such list except such violations as do not materially impair
the Company or its Subsidiaries' rights under such license, sublicense or
agreement. Except as disclosed in this Article 3, the execution and
delivery of this Agreement by the Company, and the consummation of the
transactions contemplated hereby, will neither cause the Company nor any of
its Subsidiaries to be in violation or default under any such license,
sublicense or agreement, nor entitle any other party to any such license,
sublicense or agreement to terminate or modify such license, sublicense or
agreement. Except as set forth on Schedule 3.17, the Company or one of its
Subsidiaries is the sole and exclusive owner or licensee of, with all
right, title and interest in and to (free and clear of any and all liens,
claims and encumbrances), the Company Proprietary Rights, and has sole and
exclusive rights (and is not contractually obligated to pay any
compensation to any third party in respect thereof) to the use thereof or
the material covered thereby in connection with the services or products in
respect of which the Company Proprietary Rights are being used. No claims
with respect to the Company Proprietary Rights have been asserted or, to
the knowledge of the Company, are threatened by any person nor are there
any valid grounds for any bona fide claims (a) to the effect that the
manufacture, sale, licensing or use of any of the products of the Company
and its Subsidiaries as now manufactured, sold or licensed or used or
proposed for manufacture, use, sale or licensing by the Company and its
Subsidiaries infringes on any copyright, patent, trademark, service mark
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or trade secret, (b) against the use by the Company or any of its
Subsidiaries of any trademarks, service marks, trade names, trade secrets,
copyrights, patents, technology, know-how or computer software programs and
applications used in the Company's or any of its Subsidiaries' business as
currently conducted or as proposed to be conducted by the Company or any of
its Subsidiaries, or (c) challenging the ownership by the Company or any of
its Subsidiaries, validity or effectiveness of any of the Company
Proprietary Rights. All material registered trademarks, service marks and
copyrights held by the Company and its Subsidiaries are valid and
subsisting. To the knowledge of the Company there is no material
unauthorized use, infringement or misappropriation of any of the Company
Proprietary Rights by any third party, including any employee or former
employee of the Company or any of its Subsidiaries. No Company Proprietary
Right or product of the Company or any of its Subsidiaries is subject to
any outstanding decree, order, judgment, or stipulation restricting in any
manner the licensing thereof by the Company or any of its Subsidiaries.
Neither the Company nor any of its Subsidiaries has entered into any
agreement (other than exclusive distribution agreements) under which the
Company or its Subsidiaries are restricted from selling, licensing or
otherwise distributing any of its products to any class of customers, in
any geographic area, during any period of time or in any segment of the
market. The Company's products, packaging and documentation contain
copyright notices sufficient to maintain copyright protection on the
copyrighted portions of the Company Proprietary Rights.
3.17.3. EMPLOYEE AGREEMENTS. Except as set forth on Schedule 3.17,
each employee, officer and consultant of the Company and its Subsidiaries
has executed a confidentiality agreement in substantially the form attached
hereto as Schedule 3.17.3, providing the Company or one of its Subsidiaries
with title and ownership to the Company Proprietary Rights developed or
used by the Company and its Subsidiaries in their business. No employee,
officer or consultant of the Company and its Subsidiaries is in violation
of any term of any employment or consulting contract, proprietary
information and inventions agreement, non-competition agreement, or any
other contract or agreement relating to the relationship of any such
employee, officer or consultant with the Company or any previous employer.
3.18. INSURANCE CONTRACTS. Schedule 3.18 hereto lists all contracts of
insurance and indemnity (not shown in any other Schedule to this Agreement) in
force at the date hereof with respect to the Company and its Subsidiaries. Such
contracts of insurance and indemnity and those shown in other Schedules to this
Agreement (collectively, the "Company Insurance Contracts") insure against such
risks, and are in such amounts, as appropriate and reasonable considering the
Company and its Subsidiaries' property, business and operations. All of the
Company Insurance Contracts are in full force and effect, with no default
thereunder by the Company or its Subsidiaries which could permit the insurer to
deny payment of claims thereunder. The Company has not received notice from any
of its insurance carriers that any insurance premiums will be materially
increased in the future or that any insurance coverage provided under the
Company Insurance Contracts will not be available in the future on substantially
the same terms as now in effect. The Company has not received or given a notice
of cancellation with respect to any of the Company Insurance Contracts.
3.19. BANKING RELATIONSHIPS. Schedule 3.19 hereto shows the names and
locations of all banks and trust companies in which the Company or any of its
Subsidiaries has accounts, lines of credit or safety deposit boxes and, with
respect to each account, line of credit or safety deposit box, the names of all
persons authorized to draw thereon or to have access thereto.
3.20. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The information
supplied by the Company for inclusion in the Registration Statement shall not at
the time the Registration Statement is filed with the SEC and at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. The
information supplied by the Company for inclusion in the proxy
statement/prospectus to be sent to the stockholders of the Company and
stockholders of Parent in connection with the meeting of the Company's
stockholders to consider the Merger (the "Company Meeting") and in connection
with the meeting of Parent's stockholders to consider the issuance of shares of
Parent Stock pursuant to the Merger (the "Parent Meeting") (such proxy
statement/prospectus as amended or supplemented is referred to herein as the
"Proxy Statement") shall not, on the date the Proxy Statement is first mailed to
the Company's stockholders and Parent's stockholders, at the time of the Company
Meeting or
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Parent Meeting and at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not false or misleading; or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Company
Meeting or Parent Meeting which has become false or misleading. The Proxy
Statement will comply as to form in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder. If at any time prior
to the Effective Time any event relating to the Company or any of its
affiliates, officers or directors should be discovered by the Company which
should be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement, the Company shall promptly inform Parent.
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to any information supplied by Parent or Merger Sub which is
contained in any of the foregoing documents.
3.21. POOLING. To the knowledge of the Company, based on consultation with
the Company's independent accountants, neither the Company nor any of its
directors, officers or shareholders has taken any action that would prevent
Parent from accounting for the Merger as a pooling of interests under GAAP.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub, jointly and severally, represent and warrant to the
Stockholders as follows:
4.1. CORPORATE STATUS OF PARENT AND ITS SUBSIDIARIES. Parent and each of
its Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, with the
requisite corporate power to own, operate and lease its properties and to carry
on its business as now being conducted. Parent and its Subsidiaries are duly
qualified or licensed to do business as foreign corporations and are in good
standing in all jurisdictions in which the character of the properties owned or
held under lease by each or the nature of the business transacted by each makes
qualification necessary, except where failure to be so qualified would not have
a Parent Material Adverse Effect.
4.2. CAPITAL STOCK.
4.2.1. AUTHORIZED STOCK OF PARENT. The authorized capital stock of
Parent consists of (a) 26,200,000 shares of Parent Stock, of which
12,474,686 shares are issued and outstanding as of February 29, 1996 and
(b) 1,600,000 shares of Preferred Stock, $1.00 par value per share, of
which no shares are issued and outstanding. All of the outstanding shares
of Parent Stock have been duly authorized and validly issued, were not
issued in violation of any person's preemptive rights, and are fully paid
and nonassessable. Each share of Parent Stock issued pursuant to the Merger
shall be validly issued, fully paid and nonassessable.
4.2.2. AUTHORIZED STOCK OF MERGER SUB. The authorized capital stock
of Merger Sub consists of 1,000 shares of Merger Sub Stock, of which 100
shares are issued and outstanding. All of the outstanding shares of Merger
Sub Stock have been duly authorized and validly issued, were not issued in
violation of any person's preemptive rights, and are fully paid and
nonassessable.
4.2.3. CONVERTIBLE SECURITIES OF PARENT. There are no outstanding
subscriptions, options, warrants, conversion rights or other rights,
securities, agreements or commitments obligating Parent to issue, sell or
otherwise dispose of shares of its capital stock, or any securities or
obligations convertible into, or exercisable or exchangeable for, any
shares of its capital stock, other than (a) the transactions contemplated
by this Agreement, (b) as disclosed in Schedule 4.2.3 hereto or (c)
pursuant to the Parent's Amended and Restated 1986 Incentive and
Nonqualified Stock Option Plan and Parent's 1992 Stock Purchase Plan
(together, the "Parent Stock Plans"). Since February 9, 1996, Parent has
not issued, sold or otherwise disposed of any shares of its capital stock,
other than as described on Schedule 4.2.3 hereto and pursuant to the Parent
Stock Plans. Except (a) for the transactions contemplated by this
Agreement, (b) as set forth on Schedule 4.2.3 and (c) for options and
rights granted pursuant to the
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Parent Stock Plans, neither Parent nor any Subsidiary is a party to or
bound by any outstanding options, restrictions or other obligations,
agreements or commitments to sell, repurchase, redeem or acquire any
outstanding shares of capital stock or other equity securities of Parent or
any Subsidiary. 2,006,524 shares of Parent Stock are subject to options
outstanding as of March 11, 1996 under Parent's Amended and Restated 1986
Incentive and Nonqualified Stock Option Plan and 4,550,000 shares of Parent
Stock are reserved for issuance under the Parent Stock Plans.
4.3. SUBSIDIARIES. A list of Parent's Subsidiaries and their respective
jurisdictions of incorporation is set forth on Schedule 4.3 hereto. Except as
set forth on Schedule 4.3, immediately prior to the Closing, Parent will
beneficially and of record own all of the outstanding securities of its
Subsidiaries (except for directors qualifying shares, nominee shares and the
like), free and clear of all liens, charges, pledges, security interests,
encumbrances, and other restrictions and agreements with respect thereto. All of
the outstanding shares of capital stock of Parent's Subsidiaries have been duly
authorized and validly issued, were not issued in violation of any person's
preemptive rights, and are fully paid and nonassessable. Except as contemplated
by this Agreement, there are no outstanding subscriptions, options, warrants,
conversion rights or other rights, securities, agreements or commitments
obligating Parent or any of its Subsidiaries to issue, sell or otherwise dispose
of any shares of capital stock, or any securities or obligations convertible
into, or exercisable or exchangeable for, any shares of capital stock, of any of
Parent's Subsidiaries.
4.4. AUTHORITY FOR AGREEMENT; NONCONTRAVENTION.
4.4.1. AUTHORITY OF PARENT. Each of Parent and Merger Sub has the
corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the boards of directors of
Parent and Merger Sub and the stockholder of Merger Sub and no other
corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby, other than the approval of the
issuance of the shares of Parent Stock pursuant to the Merger by the vote
of the holders of a majority of Parent Stock. This Agreement and the other
agreements contemplated hereby to be signed by Parent or Merger Sub have
been duly executed and delivered by Parent and Merger Sub, as the case may
be, and constitute valid and binding obligations of Parent and Merger Sub,
as the case may be, enforceable against Parent and Merger Sub in accordance
with their terms, subject to the qualifications that enforcement of the
rights and remedies created hereby and thereby are subject to (a)
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium
and other laws of general application affecting the rights and remedies of
creditors and (b) general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
4.4.2. NO CONFLICT. Except as set forth on Schedule 4.4.2 hereto,
neither the execution and delivery of this Agreement by Parent or Merger
Sub, nor the performance by Parent or Merger Sub of its obligations
hereunder, nor the consummation by Parent or Merger Sub of the transactions
contemplated hereby will (a) conflict with or result in a violation of any
provision of the charter documents or by-laws of Parent or its Subsidiaries
(including Merger Sub), or (b) with or without the giving of notice or the
lapse of time, or both, conflict with, or result in any violation or breach
of, or constitute a default under, or result in any right to accelerate or
result in the creation of any lien, charge or encumbrance pursuant to, or
right of termination under, any provision of any note, mortgage, indenture,
lease, instrument or other agreement, Permit, concession, grant, franchise,
license, judgment, order, decree, statute, ordinance, rule or regulation to
which Parent, Merger Sub or any of Parent's other Subsidiaries is a party
or by which any of them or any of their assets or properties is bound or
which is applicable to any of them or any of their assets or properties. No
authorization, consent or approval of, or filing with or notice to, any
Governmental Entity is necessary for the execution and delivery of this
Agreement by Parent or Merger Sub or the consummation by Parent or Merger
Sub of the transactions contemplated hereby, except for (i) the filing of
the Certificate of Merger with the Secretary of State of the State of
Delaware, (ii) the filing of a Form 8-K and Form 10-C with the SEC within
fifteen days and ten days, respectively, after the Closing, (iii) the
filing of the Registration Statement with the SEC in accordance with the
Securities Act, (iv) the filing of the Proxy Statement with the SEC in
accordance with the Exchange Act, (v) any
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filings as may be required under applicable state securities laws and the
laws of any foreign country, and (vi) such other consents, authorizations,
filings, approvals and registrations which if not obtained or made would
not have a Parent Material Adverse Effect.
4.5. SEC STATEMENTS, REPORTS AND DOCUMENTS. Parent has timely filed all
required forms, reports, statements and documents with the SEC since January 1,
1993. Parent heretofore has delivered or made available to counsel for the
Company true and complete copies of (a) its Annual Reports on Form 10-K for the
fiscal years ended June 30, 1994 and 1995, respectively, (b) its Quarterly
Reports on Form 10-Q for the fiscal quarters ended September 30, 1995 and
December 31, 1995, respectively, (c) all proxy statements relating to Parent's
meetings of stockholders (whether annual or special) held since June 30, 1994,
(d) all other forms, reports, statements and documents filed or required to be
filed by it with the SEC since June 30, 1994, and (e) all amendments and
supplements to all such reports and registration statements filed by Parent with
the SEC (the documents referred to in clauses (a), (b), (c), (d) and (e) being
hereinafter referred to as the "Parent Reports"). As of their respective dates,
the Parent Reports complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder, and did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements (including any
related notes) of Parent included in the Parent Reports were prepared in
conformity with GAAP applied on a consistent basis (except as otherwise stated
in the financial statements), and present fairly the consolidated financial
position, results of operations and changes in financial position of Parent and
its consolidated Subsidiaries as of the dates and for the periods indicated,
subject, in the case of unaudited interim consolidated financial statements, to
(i) the absence of certain notes thereto and (ii) normal year-end audit
adjustments which are not in the aggregate material. The consolidated balance
sheet of Parent and its Subsidiaries as at December 31, 1995, including the
notes thereto, is hereinafter referred to as the "Parent Balance Sheet." Parent
has heretofore furnished or made available to the Company a correct and complete
copy of any amendments or modifications, which have not yet been filed with the
SEC but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by Parent with the SEC pursuant to
the Securities Act or the Exchange Act.
4.6. ABSENCE OF MATERIAL ADVERSE CHANGES AND UNDISCLOSED LIABILITIES. Since
the date of the Parent Balance Sheet, (a) Parent has not suffered any Parent
Material Adverse Effect, nor has there occurred or arisen any event, condition
or state of facts of any character that could reasonably be expected to result
in a Parent Material Adverse Effect and (b) there have been no dividends or
other distributions declared or paid in respect of, or any repurchase or
redemption by Parent or its Subsidiaries of, any of the shares of capital stock
of Parent or its Subsidiaries, or any commitment related to the foregoing except
as contemplated by this Agreement and the transactions contemplated hereby.
Parent and its Subsidiaries, considered as a whole, have no material Liabilities
that are not fully reflected or provided for on, or disclosed in the notes to,
the Parent Balance Sheet or elsewhere in the Parent Reports, except (i)
Liabilities incurred in the ordinary course of business since the date of the
Parent Balance Sheet, none of which individually or in the aggregate has had or
could reasonably be expected to have a Parent Material Adverse Effect, (ii)
Liabilities permitted or contemplated by this Agreement, and (iii) Liabilities
expressly disclosed on the Schedules delivered hereunder.
4.7. COMPLIANCE WITH APPLICABLE LAW, CHARTER AND BY-LAWS. Each of Parent
and its Subsidiaries has all requisite Permits from all Governmental Entities
necessary to conduct its business as currently conducted, and to own, lease and
operate its properties in the manner currently held and operated, except as set
forth on Schedule 4.7 hereto. All of Parent's and its Subsidiaries' Permits are
in full force and effect. Each of Parent and its Subsidiaries is in compliance
in all material respects with all the terms and conditions related to such
Permits. There are no proceedings in progress, pending or, to the knowledge of
Parent, threatened, which may result in revocation, cancellation, suspension, or
any material adverse modification of any of such Permits. The business of Parent
and its Subsidiaries is not being conducted in violation of any applicable law,
statute, ordinance, regulation, rule, judgment, decree, order, Permit,
concession, grant or other authorization of any Governmental Entity (including
the applicable provisions of the Securities Act and the Exchange Act),
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except for any violations that, in the aggregate, do not and could not
reasonably be expected to have a Parent Material Adverse Effect or prevent or
materially delay the consummation of the transactions contemplated hereby.
Neither Parent nor any of its Subsidiaries is in default or violation of any
provision of its charter documents or its by-laws.
4.8. LITIGATION AND AUDITS. Except for any claim, action, suit or
proceeding disclosed in the Parent Reports or set forth on Schedule 4.8 hereto,
(a) there is no investigation by any Governmental Entity with respect to Parent
or its Subsidiaries pending or, to the knowledge of Parent, threatened, nor has
any Governmental Entity indicated to Parent or any of its Subsidiaries an
intention to conduct the same; (b) there is no claim, action, suit, arbitration
or proceeding pending or threatened against or involving Parent or any of its
Subsidiaries, or any of its or their assets or properties, at law or in equity,
or before any arbitrator or Governmental Entity, that, if adversely determined,
either singly or in the aggregate, would have a Parent Material Adverse Effect
or prevent or materially delay the consummation of the transactions contemplated
hereby; and (c) there are no judgments, decrees, injunctions or orders of any
arbitrator or Governmental Entity outstanding against Parent or any of its
Subsidiaries.
4.9. TAX MATTERS.
4.9.1. FILING OF RETURNS. Except as set forth on Schedule 4.9 hereto,
Parent and its Subsidiaries have prepared and filed on a timely basis with
all appropriate governmental authorities all returns and other documents in
respect of Taxes that they are required to file on or prior to the Closing,
and all such returns or other documents are correct and complete in all
material respects.
4.9.2. PAYMENT OF TAXES. Parent and its Subsidiaries have paid in
full all Taxes accruing due on or before the Closing and, in the case of
Taxes accruing on or before the Closing that are not due on or before the
Closing, Parent has made adequate provision in its books and records and
financial statements for such payment.
4.9.3. WITHHOLDING. Parent and its Subsidiaries have withheld from
each payment made to any of their present or former employees, officers and
directors all amounts required by law to be withheld and have, where
required, remitted such amounts within the applicable periods to the
appropriate governmental authorities.
4.9.4. ASSESSMENTS. There are no assessments of Parent or its
Subsidiaries with respect to Taxes that have been issued and are
outstanding. Except as set forth on Schedule 4.9, no Governmental Entity
has examined or audited Parent or its Subsidiaries in respect of Taxes.
Except as set forth on Schedule 4.9, neither Parent nor any of its
Subsidiaries has received any indication in writing from any Governmental
Entity that an assessment in respect of Parent or any of its Subsidiaries
is proposed. Neither Parent nor any of its Subsidiaries have executed or
filed any agreement extending the period of assessment or collection of any
Taxes.
4.9.5. ACCESS TO RETURNS. The Company has been provided with a copy
of or access to all federal, state, local and foreign income Tax returns
filed by Parent and its Subsidiaries since January 1, 1992. The Company has
been provided with a copy of or access to all assessments, extensions and
waivers resulting from any audits of Parent or its Subsidiaries by a
Governmental Entity in respect of Taxes, and all such assessments and
related penalties and interest have been paid in full unless being
contested in good faith by Parent or its Subsidiaries.
4.10. EMPLOYEE BENEFIT PLANS; COMPLIANCE WITH ERISA.
4.10.1. LIST OF PLANS. Schedule 4.10 hereto contains a correct and
complete list of all pension, profit sharing, retirement, deferred
compensation, welfare, legal services, medical, dental or other employee
benefit or health insurance plans, life insurance or other death benefit
plans, disability, stock option, stock purchase, stock compensation, bonus,
vacation pay, severance pay and other similar plans, programs, or
agreements, and every material written personnel policy relating to any
persons employed by Parent or in which any person employed by parent is
eligible to participate and which is currently maintained or was maintained
at any time in the last five calendar years by Parent or by any ERISA
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Affiliate (collectively, the "Parent Plans"). Parent has made available to
the Company complete copies, as of the date hereof, of all of the Parent
Plans that have been reduced to writing, together with all documents
establishing or constituting any related trust, annuity contract, insurance
contract or other funding instrument, and summaries of those that have not
been reduced to writing. Parent has made available to the Company complete
copies of current plan summaries, employee booklets, personnel manuals and
other material documents or written materials concerning the Parent Plans
that are in the possession of Parent as of the date hereof. Parent does not
have any "defined benefit plans" as defined in Section 3(35) of ERISA.
4.10.2. ERISA. Neither Parent nor any ERISA Affiliate has incurred
any "withdrawal liability" calculated under Section 4211 of ERISA and there
has been no event or circumstance which would cause them to incur any such
liability. Neither Parent nor any ERISA Affiliate has ever maintained a
Parent Plan providing health or life insurance benefits to former
employees, other than as required pursuant to Section 4980B of the Code or
to any state law conversion rights. No plan previously maintained by Parent
or its ERISA Affiliates which was subject to ERISA has been terminated; no
proceedings to terminate any such plan have been instituted within the
meaning of Subtitle C of Title IV of ERISA; and no reportable event within
the meaning of Section 4043 of said Subtitle C of Title IV of ERISA with
respect to which the requirement to file a notice with the Pension Benefit
Guaranty Corporation has not been waived has occurred with respect to any
such Parent Plan, and no liability to the Pension Benefit Guaranty
Corporation has been incurred by Parent or its ERISA Affiliates. With
respect to all the Parent Plans, Parent and every ERISA Affiliate are in
material compliance with all requirements prescribed by all statutes,
regulations, orders or rules currently in effect, and have in all material
respects performed all obligations required to be performed by them.
Neither Parent nor any ERISA Affiliate, nor any of their directors,
officers, employees or agents, nor any trustee or administrator of any
trust created under the Parent Plans, have engaged in or been a party to
any "prohibited transaction" as defined in Section 4975 of the Code and
Section 406 of ERISA which could subject Parent or its affiliates,
directors or employees or the Parent Plans or the trusts relating thereto
or any party dealing with any of the Parent Plans or trusts to any tax or
penalty on "prohibited transactions" imposed by Section 4975 of the Code.
Except as set forth on Schedule 4.10, neither the Parent Plans nor the
trusts created thereunder have incurred any "accumulated funding
deficiency," as such term is defined in Section 412 of the Code and
regulations issued thereunder, whether or not waived.
4.10.3. PLAN DETERMINATIONS. Each Parent Plan intended to qualify
under Section 401(a) of the Code has been determined by the Internal
Revenue Service to so qualify, and the trusts created thereunder have been
determined to be exempt from tax under Section 501(a) of the Code; copies
of all determination letters have been delivered to Parent; and, to the
knowledge of Parent, nothing has occurred since the date of such
determination letters which might cause the loss of such qualification or
exemption. With respect to each Parent Plan which is a qualified profit
sharing plan, all employer contributions accrued for plan years ending
prior to the Closing under the Parent Plan terms and applicable law have
been made.
4.10.4. FUNDING. Except as set forth on Schedule 4.10:
(a) all contributions, premiums or other payments due or required
to be made to the Parent Plans as of the date hereof have been made as
of the date hereof or are properly reflected on the Parent Balance
Sheet;
(b) there are no actions, liens, suits or claims pending or, to the
knowledge of Parent, threatened (other than routine claims for benefits)
with respect to any Parent Plan;
(c) to the knowledge of Parent, no event has occurred, and there
exists no condition or set of circumstances, which presents a material
risk of a partial termination (within the meaning of Section 411(d)(3)
of the Code) of any Parent Plan;
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(d) each Parent Plan that is a "group health plan" (as defined in
Section 607(1) of ERISA) has been operated at all times in substantial
compliance with the provisions of COBRA and any applicable, similar
state law; and
(e) with respect to any Parent Plan that is qualified under Section
401(k) of the Code, individually and in the aggregate, no event has
occurred, and to the knowledge of Parent, there exists no condition or
set of circumstances in connection with which Parent could be subject to
any liability that is reasonably likely to have a Parent Material
Adverse Effect (except liability for benefits claims and funding
obligations payable in the ordinary course) under ERISA, the Code or any
other applicable law.
4.11. EMPLOYMENT-RELATED MATTERS. (a) Neither Parent nor any of its
Subsidiaries is a party to any collective bargaining agreement or other contract
or agreement with any labor organization or other representative of any of the
employees of Parent or any of its Subsidiaries; (b) there is no labor strike,
dispute, slowdown, work stoppage, lockout or other labor controversy that is
pending or threatened against or otherwise affecting Parent or any of its
Subsidiaries, and neither Parent nor any of its Subsidiaries has experienced the
same since January 1, 1992; and (c) all salaries, wages, vacation pay, bonuses,
commissions and other compensation payable by Parent or its Subsidiaries to the
employees of Parent and its Subsidiaries before the date hereof have been paid
in all material respects as of the date hereof.
4.12. ENVIRONMENTAL.
4.12.1. ENVIRONMENTAL LAWS. Except for matters which, individually or
in the aggregate, would not have a Parent Material Adverse Effect, (a)
Parent and each of its Subsidiaries is in compliance with all applicable
Environmental Laws in effect on the date hereof; (b) Parent and each of its
Subsidiaries have not received any written communication that alleges that
Parent or any of its Subsidiaries is not in compliance in all material
respects with all applicable Environmental Laws in effect on the date
hereof; (c) to the knowledge of Parent, there are no circumstances that may
prevent or interfere with full compliance in the future with all applicable
Environmental Laws; (d) all material Permits and other governmental
authorizations currently held by Parent and each of its Subsidiaries
pursuant to the Environmental Laws are in full force and effect, Parent and
its Subsidiaries are in compliance with all of the terms of such Permits
and authorizations, and no other Permits or authorizations are required by
Parent or its Subsidiaries for the conduct of its and their business on the
date hereof; and (e) the management, handling, storage, transportation,
treatment, and disposal by Parent and each of its Subsidiaries of all
Materials of Environmental Concern has been in compliance with all
applicable Environmental Laws.
4.12.2. ENVIRONMENTAL CLAIMS. Except for Environmental Claims which,
individually or in the aggregate, would not have a Parent Material Adverse
Effect, there is no Environmental Claim pending or, to the knowledge of the
Parent, threatened against or involving Parent or any of its Subsidiaries
or against any person or entity whose liability for any Environmental Claim
Parent or any of its Subsidiaries has or may have retained or assumed
either contractually or by operation of law.
4.12.3. NO BASIS FOR CLAIMS. Except for matters which, individually
or in the aggregate, would not have a Parent Material Adverse Effect, to
the knowledge of Parent, there are no past or present actions or activities
of Parent or any of its Subsidiaries, or any circumstances, conditions,
events or incidents, including the storage, treatment, release, emission,
discharge, disposal or arrangement for disposal of any Material of
Environmental Concern, that could reasonably form the basis of any
Environmental Claim against Parent or any of its Subsidiaries or against
any person or entity whose liability for any Environmental Claim Parent or
any of its Subsidiaries may have retained or assumed either contractually
or by operation of law.
4.13. NO BROKER'S OR FINDER'S FEES. Except as set forth on Schedule 4.13
hereto, Parent has not paid or become obligated to pay any fee or commission to
any broker, finder, financial advisor or intermediary in connection with the
transactions contemplated by this Agreement.
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4.14. ASSETS OTHER THAN REAL PROPERTY.
4.14.1. TITLE. Parent or one of its Subsidiaries has good and
marketable title to all of the tangible assets shown on the Parent Balance
Sheet, in each case, free and clear of any Encumbrances, except for (a)
assets disposed of since the date of the Parent Balance Sheet in the
ordinary course of business and in a manner consistent with past practices,
(b) liabilities, obligations and Encumbrances reflected in the Parent
Balance Sheet or otherwise in the Parent Financial Statements, (c)
Permitted Encumbrances, and (d) liabilities, obligations and Encumbrances
set forth on Schedule 4.14 hereto.
4.14.2. INVENTORY. The inventory reflected on the Parent Balance
Sheet contains no material amount of slow-moving or obsolete items that
have not been reserved for. The values at which such inventories are
carried on the Parent Balance Sheet reflect the normal inventory valuation
policies of Parent and are carried in accordance with GAAP, consistently
applied.
4.14.3. CONDITION. All receivables shown on the Parent Balance Sheet
and all receivables accrued by Parent since the date of the Parent Balance
Sheet, have been collected or are collectible in all material respects in
the aggregate amount shown, less any allowances for doubtful accounts
reflected therein, and, in the case of receivables arising since the date
of the Parent Balance Sheet, any additional allowance in respect thereof
calculated in a manner consistent with the allowance reflected in the
Parent Balance Sheet. All material plant, equipment and personal property
owned by Parent and its Subsidiaries and regularly used in its and their
businesses is in good operating condition and repair, ordinary wear and
tear excepted.
4.15. REAL PROPERTY.
4.15.1. PARENT REAL PROPERTY. Neither Parent nor any of its
Subsidiaries owns any real property.
4.15.2. PARENT LEASES. Schedule 4.15 lists all of the Parent Leases.
Complete copies of the Parent Leases, and all material amendments thereto
(which are identified on Schedule 4.15), have been made available by Parent
to the Company. The Parent Leases grant leasehold estates free and clear of
all Encumbrances granted by or caused by the actions of Parent or its
Subsidiaries. To the knowledge of Parent, the Parent Leases are in full
force and effect and are binding and enforceable against each of the
parties thereto in accordance with their respective terms. Except as set
forth on Schedule 4.15, neither Parent nor any of its Subsidiaries, nor, to
the knowledge of Parent, any other party to a Parent Lease, has committed a
material breach or default under any Parent Lease, nor has there occurred
any event that with the passage of time or the giving of notice or both
would constitute such a breach or default, nor are there any facts or
circumstances that would reasonably indicate that Parent or any of its
Subsidiaries is likely to be in material breach or default thereunder. No
material construction, alteration or other leasehold improvement work with
respect to the real property covered by any of the Parent Leases remains to
be paid for or to be performed by Parent or any of its Subsidiaries. No
Parent Leases have an unexpired term which including any renewal or
extensions of such term provided for in the Parent Lease could exceed fifty
years.
4.15.3. CONDITION. All buildings, structures and fixtures, or parts
thereof, used by Parent or any of its Subsidiaries in the conduct of its
business are in good operating condition and repair, ordinary wear and tear
excepted, and are insured with coverages that are usual and customary for
similar properties and similar businesses or are required, pursuant to the
terms of the Parent Leases, to be insured by third parties.
4.16. AGREEMENTS, CONTRACTS AND COMMITMENTS. All contracts, leases,
instruments, licenses and other agreements required to be filed as an exhibit to
the Parent Reports or disclosed by Parent on a Schedule hereto (collectively,
"Parent Agreements") are valid and in full force and effect and neither Parent
nor any of its Subsidiaries has, nor has any other party thereto, breached any
provision of, or defaulted under the terms of, nor, to the knowledge of Parent,
are there any facts or circumstances that would reasonably indicate that Parent
or any of its Subsidiaries is likely to be in breach or default under any such
contract, lease, instrument, license or agreement, except for any breaches or
defaults that, in the aggregate, do not have and could not reasonably be
expected to have a Parent Material Adverse Effect.
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4.17. INTELLECTUAL PROPERTY.
4.17.1. RIGHT TO INTELLECTUAL PROPERTY. Except as set forth on
Schedule 4.17.1 hereto, Parent and its Subsidiaries own, or have perpetual,
fully paid, worldwide rights to use, all patents, trademarks, trade names,
service marks, copyrights, and any applications therefor, maskworks, net
lists, schematics, technology, know-how, computer software programs or
applications (in both source code and object code form), and tangible or
intangible proprietary information or material (excluding Commercial
Software) that are used in and are material to the business of Parent and
its Subsidiaries as currently conducted (the "Parent Proprietary Rights").
4.17.2. NO CONFLICT. The execution and delivery of this Agreement by
Parent, and the consummation of the transactions contemplated hereby, will
neither cause Parent nor any of its Subsidiaries to be in violation or
default under any material license, sublicense or agreement to which Parent
or any of its Subsidiaries is a party and pursuant to which Parent or any
of its Subsidiaries or any other person is authorized to use any Parent
Proprietary Right (excluding End-User Licenses) or other trade secret
material to the business of Parent and its Subsidiaries, nor entitle any
other party to any such license, sublicense or agreement to terminate or
modify such license, sublicense or agreement. No claims with respect to the
Parent Proprietary Rights have been asserted or, to the knowledge of
Parent, are threatened by any person nor are there any valid grounds for
any bona fide claims (a) to the effect that the manufacture, sale,
licensing or use of any of the products of Parent and its Subsidiaries as
now manufactured, sold or licensed or used or proposed for manufacture,
use, sale or licensing by Parent and its Subsidiaries infringes on any
copyright, patent, trademark, service mark or trade secret, (b) against the
use by Parent or any of its Subsidiaries of any trademarks, service marks,
trade names, trade secrets, copyrights, patents, technology, know-how or
computer software programs and applications used in Parent's or any of its
Subsidiaries' business as currently conducted or as proposed to be
conducted by Parent or any of its Subsidiaries, or (c) challenging the
ownership by Parent or any of its Subsidiaries, validity or effectiveness
of any of the Parent Proprietary Rights. To the knowledge of Parent there
is no material unauthorized use, infringement or misappropriation of any of
the Parent Proprietary Rights by any third party, including any employee or
former employee of Parent or any of its Subsidiaries. No Parent Proprietary
Right or product of Parent or any of its Subsidiaries is subject to any
outstanding decree, order, judgment, or stipulation restricting in any
manner the licensing thereof by Parent or any of its Subsidiaries. Neither
Parent nor any of its Subsidiaries has entered into any agreement (other
than exclusive distribution or third party reseller agreements) under which
Parent or its Subsidiaries are restricted from selling, licensing or
otherwise distributing any of its products to any class of customers, in
any geographic area, during any period of time or in any segment of the
market.
4.18. INSURANCE CONTRACTS. Schedule 4.18 hereto lists all contracts of
insurance and indemnity (not shown in any other Schedule to this Agreement) in
force at the date hereof with respect to Parent and its Subsidiaries. Such
contracts of insurance and indemnity and those shown in other Schedules to this
Agreement (collectively, the "Parent Insurance Contracts") insure against such
risks, and are in such amounts, as appropriate and reasonable considering Parent
and its Subsidiaries' property, business and operations. All of the Parent
Insurance Contracts are in full force and effect, with no default thereunder by
Parent or its Subsidiaries which could permit the insurer to deny payment of
claims thereunder. Parent has not received notice from any of its insurance
carriers that any insurance premiums will be materially increased in the future
or that any insurance coverage provided under the Parent Insurance Contracts
will not be available in the future on substantially the same terms as now in
effect. Parent has not received or given a notice of cancellation with respect
to any of the Parent Insurance Contracts.
4.19. POOLING. To the knowledge of Parent, based on consultation with
Parent's independent accountants, neither Parent nor any of its directors,
officers or shareholders has taken any action that would prevent Parent from
accounting for the Merger as a pooling of interests under GAAP.
4.20. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. Subject to the
accuracy of the representations of the Company made in Section 3.20, the
registration statement on Form S-4 (including any amendments or supplements
thereto, the "Registration Statement"), pursuant to which the shares of Parent
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Stock to be issued in the Merger will be registered with the SEC shall not, at
the time the Registration Statement is filed with the SEC and at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. The
information in the Proxy Statement to be sent to the stockholders of the Company
and stockholders of Parent in connection with the Company Meeting and the Parent
Meeting shall not, on the date the Proxy Statement is first mailed to the
Company's stockholders and Parent's stockholders, at the time of the Company
Meeting or Parent Meeting and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not false or misleading; or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Company
Meeting or Parent Meeting which has become false or misleading. The Proxy
Statement will comply as to form in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder. If at any time prior
to the Effective Time any event relating to Parent, Merger Sub or any of their
respective affiliates, officers or directors should be discovered by Parent or
Merger Sub which should be set forth in an amendment to the Registration
Statement or a supplement to the Proxy Statement, Parent or Merger Sub shall
promptly inform the Company. Notwithstanding the foregoing, Parent and Merger
Sub make no representation or warranty with respect to any information supplied
by the Company which is contained in any of the foregoing documents.
ARTICLE 5
CONDUCT PRIOR TO THE EFFECTIVE TIME
5.1. CONDUCT OF BUSINESS OF THE COMPANY. Except as set forth on Schedule
5.1 hereto, between the date of this Agreement and the Effective Time or the
date, if any, on which this Agreement is earlier terminated pursuant to its
terms, the Company and each of its Subsidiaries shall, except to the extent that
Parent shall otherwise consent in writing, (i) carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, pay its debts and taxes when due subject to good faith
disputes over such debts or taxes, pay or perform other material obligations
when due subject to good faith disputes over such obligations, and use all
reasonable efforts consistent with past practices and policies to preserve
intact the Company's present business organizations, keep available the services
of its present officers and employees and preserve its relationships with
customers, suppliers and others having business relationships with it, to the
end that the Company's and each of its Subsidiaries' goodwill and ongoing
business be unimpaired at the Effective Time, and (ii) promptly notify Parent of
any event or occurrence not in the ordinary course of business of the Company
and each of its Subsidiaries which will have or could reasonably be expected to
have a Company Material Adverse Effect. In addition, between the date of this
Agreement and the Effective Time or the date, if any, on which this Agreement is
earlier terminated pursuant to its terms, the Company and each of its
Subsidiaries shall not, except to the extent that Parent shall otherwise consent
in writing:
(a) amend its charter documents or by-laws;
(b) declare or pay any dividends or distributions on the Company's
outstanding shares of capital stock nor purchase, redeem or otherwise
acquire for consideration any shares of the Company's capital stock or
other securities except in accordance with agreements existing as of the
date hereof or as permitted under the Company Option Plans;
(c) issue or sell any shares of its capital stock, effect any stock
split or otherwise change its capitalization as it exists on the date
hereof, or issue, grant, or sell any options, stock appreciation or
purchase rights, warrants, conversion rights or other rights, securities or
commitments obligating it to issue or sell any shares of its capital stock,
or any securities or obligations convertible into, or exercisable or
exchangeable for, any shares of its capital stock, other than the issuance
of shares of Company Common Stock pursuant to the conversion, exercise or
exchange of securities therefor outstanding as of the date hereof in
accordance with their terms;
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(d) borrow or agree to borrow any funds or voluntarily incur, or
assume or become subject to, whether directly or by way of guaranty or
otherwise, any obligation or Liability, except (i) obligations incurred in
the ordinary course of business consistent with past practices and (ii)
obligations under the Company's line of credit with Silicon Valley Bank
(and its line of credit, if any, with any other lender reasonably
acceptable to Parent) (A) not to exceed $5.5 million in the aggregate
outstanding at any time from the date hereof through the day immediately
preceding the Net Worth Calculation Date and (B) not to exceed $5.0 million
in the aggregate outstanding at any time from the Net Worth Calculation
Date through the Effective Time;
(e) pay, discharge or satisfy any claim, obligation or Liability in
excess of $50,000 (in any one case) or $100,000 (in the aggregate), other
than the payment, discharge or satisfaction in the ordinary course of
business of obligations reflected on or reserved against in the Company
Balance Sheet, or incurred since the date of the Company Balance Sheet in
the ordinary course of business consistent with past practices or in
connection with this transaction;
(f) except as required by applicable law, adopt or amend in any
material respect, any agreement or plan (including severance arrangements)
for the benefit of its employees;
(g) sell, mortgage, pledge or otherwise encumber or dispose of any of
its assets which are material, individually or in the aggregate, to the
business of the Company and its Subsidiaries, except in the ordinary course
of business consistent with past practices and except with respect to
securing its obligations to Silicon Valley Bank (and another lender
reasonably acceptable to Parent) and Parent;
(h) acquire by merging or consolidating with, or by purchasing any
equity interest in or a material portion of the assets of, any business or
any corporation, partnership interest, association or other business
organization or division thereof, or otherwise acquire any assets which are
material, individually or in the aggregate, to the business of the Company
and its Subsidiaries, except in the ordinary course of business consistent
with past practices;
(i) subject to Section 5.1(o), increase the following amounts payable
or to become payable: (i) the salary of any of its directors or officers,
other than increases in the ordinary course of business consistent with
past practices and not exceeding, in any case, ten percent (10%) of the
director's or officer's salary on the date hereof, (ii) any other
compensation of its directors or officers, including any increase in
benefits under any bonus, insurance, pension or other benefit plan made for
or with any of those persons, other than increases that are provided in the
ordinary course of business consistent with past practices to broad
categories of employees and do not discriminate in favor of the
aforementioned persons, and (iii) the compensation of any of its other
employees, consultants or agents except in the ordinary course of business
consistent with past practices;
(j) dispose of, permit to lapse, or otherwise fail to preserve the
rights of the Company or any of its Subsidiaries to use the Company
Proprietary Rights or enter into any settlement regarding the breach or
infringement of, any Company Proprietary Rights, or modify any existing
rights with respect thereto, other than in the ordinary course of business
consistent with past practices, and other than any such disposal, lapse,
failure, settlement or modification that does not have and could not
reasonably be expected to have a Company Material Adverse Effect;
(k) sell, or grant any right to exclusive use of, all or any part of
the Company Proprietary Rights;
(l) enter into any contract or commitment or take any other action
that is not in the ordinary course of its business or could reasonably be
expected to have an adverse impact on the transactions contemplated
hereunder or that would have or could reasonably be expected to have a
Company Material Adverse Effect;
(m) amend in any material respect any agreement to which the Company
or any of its Subsidiaries is a party the amendment of which will have or
could reasonably be expected to have a Company Material Adverse Effect;
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(n) waive, release, transfer or permit to lapse any claims or rights
(i) that has a value, or involves payment or receipt by it, of more than
$50,000 or (ii) the waiver, release, transfer or lapse of which would have
or could reasonably be expected to have a Company Material Adverse Effect;
(o) intentionally take any action, including the acceleration of
vesting of any options or other rights to acquire shares of the capital
stock of the Company, which would be reasonably likely to interfere with
Parent's ability to account for the Merger as a pooling of interests under
GAAP;
(p) take any action that would materially decrease the Company's net
worth, provided, however, that payments by the Company of reasonable legal
and accounting fees related to the Merger shall not be deemed to be a
breach of this Section 5.1(p);
(q) make any change in any method of accounting or accounting practice
other than changes required to be made in order that the Company's
financial statements comply with GAAP; or
(r) agree, whether in writing or otherwise, to take any action
described in this Section 5.1.
5.2. CONDUCT OF BUSINESS OF PARENT. Between the date of this Agreement and
the Effective Time or the date, if any, on which this Agreement is earlier
terminated pursuant to its terms, Parent and each of its Subsidiaries shall,
except to the extent that the Company shall otherwise consent in writing, (i)
carry on its business in the usual, regular and ordinary course in substantially
the same manner as heretofore conducted, pay its debts and taxes when due
subject to good faith disputes over such debts or taxes, pay or perform other
material obligations when due subject to good faith disputes over such
obligations, and use all reasonable efforts consistent with past practices and
policies to preserve intact its present business organizations, keep available
the services of its present officers and employees and preserve its
relationships with customers, suppliers and others having business relationships
with it, to the end that Parent's and each of its Subsidiaries' goodwill and
ongoing business be unimpaired at the Effective Time, and (ii) promptly notify
the Company of any event or occurrence not in the ordinary course of business of
Parent and each of its Subsidiaries which will have or could reasonably be
expected to have a Parent Material Adverse Effect. In addition, between the date
of this Agreement and the Effective Time or the date, if any, on which this
Agreement is earlier terminated pursuant to its terms, Parent and each of its
Subsidiaries shall not, except to the extent that the Company shall otherwise
consent in writing:
(a) amend the charter documents or by-laws of Parent or Merger Sub;
(b) declare or pay any dividends or distributions on Parent's
outstanding shares of capital stock nor purchase, redeem or otherwise
acquire for consideration any shares of Parent's capital stock or other
securities except in accordance with agreements existing as of the date
hereof or as permitted under the Parent Stock Plans;
(c) issue or sell any shares of Parent's capital stock, effect any
stock split or otherwise change Parent's capitalization as it exists on the
date hereof, or issue, grant, or sell any options, stock appreciation or
purchase rights, warrants, conversion rights or other rights, securities or
commitments obligating Parent to issue or sell any shares of its capital
stock, or any securities or obligations convertible into, or exercisable or
exchangeable for, any shares of its capital stock, other than (i) the
issuance of shares of Parent Stock pursuant to the conversion, exercise or
exchange of securities therefor outstanding as of the date hereof in
accordance with their terms and (ii) options to purchase shares of Parent
Stock to be granted consistent with past practice;
(d) sell, mortgage, pledge or otherwise encumber or dispose of any of
its assets which are material, individually or in the aggregate, to the
business of Parent and its Subsidiaries, except in the ordinary course of
business consistent with past practices;
(e) dispose of, permit to lapse, or otherwise fail to preserve the
rights of Parent and its Subsidiaries to use the Parent Proprietary Rights
or enter into any settlement regarding the breach or infringement of, any
Parent Proprietary Rights, or modify any existing rights with respect
thereto, other than in the ordinary course of business consistent with past
practices, and other than any such disposal, lapse, failure,
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settlement or modification that does not have and could not reasonably be
expected to have a Parent Material Adverse Effect;
(f) enter into any contract or commitment or take any other action
that is not in the ordinary course of its business or could reasonably be
expected to have an adverse impact on the transactions contemplated
hereunder or that would have or could reasonably be expected to have a
Parent Material Adverse Effect, other than guaranteeing payment of
indebtedness of the Company;
(g) amend in any material respect any agreement to which Parent or any
of its Subsidiaries is a party the amendment of which will have or could
reasonably be expected to have a Parent Material Adverse Effect;
(h) waive, release, transfer or permit to lapse any claims or rights
(i) that has a value, or involves payment or receipt by it, of more than
$100,000 or (ii) the waiver, release, transfer or lapse of which would have
or could reasonably be expected to have a Parent Material Adverse Effect;
(i) intentionally take any action, including the acceleration of
vesting of any options or other rights to acquire shares of the capital
stock of Parent, which would be reasonably likely to interfere with
Parent's ability to account for the Merger as a pooling of interests under
GAAP; or
(j) agree, whether in writing or otherwise, to take any action
described in this Section 5.2.
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1. PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT. As promptly as
practicable after the execution of this Agreement, Parent and the Company shall
prepare and file with the SEC the Proxy Statement, and Parent shall prepare and
file with the SEC the Registration Statement in which the Proxy Statement will
be included as a prospectus. Each of Parent and the Company shall use its best
efforts to have the Registration Statement declared effective as soon thereafter
as practicable; provided, however, that Parent shall have no obligation to agree
to account for the Merger as a "purchase" in order to cause the Registration
Statement to become effective. The Proxy Statement shall include the
recommendations of (i) the Board of Directors of the Company in favor of the
Merger which shall not be withdrawn, modified or withheld except in compliance
with the fiduciary duties of the Company's Board under applicable law and (ii)
the Board of Directors of Parent in favor of the Merger which shall not be
withdrawn, modified or withheld except in compliance with the fiduciary duties
of Parent's Board under applicable law.
6.2. MEETING OF STOCKHOLDERS. Promptly after the Registration Statement is
declared effective by the SEC, the Company shall take all action necessary in
accordance with the GCL and its certificate of incorporation and by-laws to
convene the Company Meeting to be held as promptly as practicable for the
purpose of voting upon this Agreement and the Merger. The Company shall consult
with Parent and use all reasonable efforts to hold the Company Meeting on the
same day as the Parent Meeting. Promptly after the Registration Statement is
declared effective by the SEC, Parent shall take all action necessary in
accordance with the Massachusetts Business Corporation Law and its articles of
organization and by-laws to convene the Parent Meeting to be held as promptly as
practicable for the purpose of voting upon this Agreement and the issuance of
shares of Parent Stock to the Stockholders in the Merger as contemplated hereby.
Parent shall consult with the Company and use all reasonable efforts to hold the
Parent Meeting on the same day as the Company Meeting.
6.3. EXCLUSIVITY. From and after the date of this Agreement until the
earlier of the Effective Time and termination of this Agreement in accordance
with Article 9 hereof, the Company and its Subsidiaries will not, directly or
indirectly, through their respective affiliates, agents, officers and directors,
(a) solicit, initiate, participate in discussions or negotiations or otherwise
cooperate in any way with, or provide any information to any person, entity or
group concerning, any tender offer, exchange offer, merger, business
combination, sale of substantial assets, sale of shares of capital stock or
similar transaction involving the Company or any of its Subsidiaries or (b)
effect, or enter into any agreement to effect, any such transaction. The Company
will
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promptly communicate to Parent the terms of any proposal or offer or request for
information which it or any of its Subsidiaries may receive in respect of any
such proposed transaction.
6.4. EXPENSES. Each party hereto shall be responsible for its own costs
and expenses in connection with the Merger, including fees and disbursements of
consultants, investment bankers and other financial advisors, brokers and
finders, counsel and accountants.
6.5. POOLING ACCOUNTING. Parent and the Company shall each use its best
efforts to cause the business combination to be effected by the Merger to be
accounted for as a pooling of interests under GAAP. Each of Parent and the
Company shall use its best efforts to cause its Affiliates not to take any
action that would adversely affect the ability of Parent to account for the
business combination to be effected by the Merger as a pooling of interests
under GAAP.
6.6. AFFILIATE AGREEMENTS. Set forth on Schedule 6.6 is a list of those
persons who are, in Parent's or the Company's reasonable judgment, as the case
may be, Affiliates of Parent or the Company, as the case may be. Each of Parent
and the Company shall provide the other such information and documents as the
other shall reasonably request for purposes of reviewing such list. The Company
shall use its best efforts to deliver or cause to be delivered to Parent prior
to the Closing from each of the Affiliates of the Company, an executed Affiliate
Agreement in the form attached hereto as Exhibit D (each a "Company Affiliate
Agreement", collectively, the "Company Affiliate Agreements"). Parent shall use
its best efforts to deliver or cause to be delivered to the Company prior to the
Closing from each of the Affiliates of Parent, an executed Affiliate Agreement
in the form attached hereto as Exhibit E (each a "Parent Affiliate Agreement",
collectively, the "Parent Affiliate Agreements"). Parent shall be entitled to
place appropriate legends on the certificates evidencing any shares of Parent
Stock to be received by such Affiliates of the Company pursuant to the terms of
this Agreement, and to issue appropriate stop transfer instructions to the
transfer agent for Parent Stock, consistent with the terms of the Company
Affiliate Agreements.
6.7. BLUE SKY LAWS. Parent shall take such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of shares of Parent Stock pursuant hereto and the
transactions contemplated hereby except that it will not be required to execute
a general consent to service of process in jurisdictions where it has not
already done so. The Company shall use its best efforts to assist Parent as may
be necessary to comply with the securities and blue sky laws of all
jurisdictions which are applicable in connection with the issuance of Parent
Stock pursuant hereto.
6.8. STOCK OPTIONS.
6.8.1. EXERCISABLE FOR PARENT STOCK. Parent agrees that, at the
Effective Time, each outstanding Stock Option, whether vested or unvested,
will become an option exercisable into Parent Stock. Each such Stock Option
shall continue to have, and be subject to, the same terms and conditions
set forth in the option agreement for such Stock Option and the Company
Option Plan, except that (a) such Stock Option shall be exercisable (when
vested) for that number of whole shares of Parent Stock equal to the
product of the number of shares of Company Common Stock that were issuable
upon exercise of such Stock Option immediately prior to the Effective Time
multiplied by the Exchange Ratio, rounded down to the nearest whole number
of shares of Parent Stock, and (b) the per share exercise price for shares
of Parent Stock issuable upon exercise of such Stock Option shall be equal
to the quotient determined by dividing the exercise price per share of
Company Common Stock at which such Stock Option was exercisable immediately
prior to the Effective Time by the Exchange Ratio, rounded up to the
nearest whole cent. After the Effective Time, Parent or the Surviving
Corporation shall issue to each holder of an outstanding Stock Option a
document evidencing the foregoing. Parent intends that the assumption and
substitution of Stock Options that constitute "incentive stock options," as
defined in Section 422(b) of the Code, will not constitute a modification
of such options, as defined in Section 424 of the Code.
6.8.2. FORM S-8. Parent shall file a registration statement on Form
S-8 for the shares of Parent Stock issuable with respect to Stock Options
no later than sixty days after the Closing Date, and Parent shall use its
best efforts to cause such registration statement to become effective then
and remain effective for as long as the Stock Options are outstanding.
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6.9. WARRANTS. Parent agrees that, at the Effective Time, each outstanding
Warrant will become a warrant exercisable for Parent Stock. Each such Warrant
shall continue to have, and be subject to, the same terms and conditions set
forth in the agreement for such Warrant, except that (a) such Warrant shall be
exercisable (when vested) for that number of whole shares of Parent Stock equal
to the product of the number of shares of Company Common Stock that were
issuable upon exercise of such Warrant immediately prior to the Effective Time
multiplied by the Exchange Ratio, rounded down to the nearest whole number of
shares of Parent Stock, and (b) the per share exercise price for shares of
Parent Stock issuable upon exercise of such Warrant shall be equal to the
quotient determined by dividing the exercise price per share of Company Common
Stock at which such Warrant was exercisable immediately prior to the Effective
Time (after giving effect to any adjustment to such exercise price required by
such Warrant as a result of the Merger) by the Exchange Ratio, rounded up to the
nearest whole cent. After the Effective Time, Parent or the Surviving
Corporation shall issue to each holder of an outstanding Warrant a document
evidencing the foregoing.
6.10. BOARD REPRESENTATION. As of the date hereof, Parent's Board of
Directors has five members and two vacancies. The Board of Directors of Parent
shall take appropriate action so that, effective upon the Effective Time, (a)
one vacancy shall be filled by William Goddard and (b) the other vacancy shall
be filled by a person selected by Parent and the Holder's Agent, provided,
however, if Parent and the Holder's Agent are unable to agree on a person to
fill such vacancy, then the vacancy shall remain unfilled until the stockholders
of Parent elect a person to fill such vacancy.
6.11. TAX-FREE REORGANIZATION. Parent and the Company shall each use all
reasonable efforts to cause the Merger to be treated as a reorganization within
the meaning of Section 368 of the Code.
6.12. ACCESS AND INFORMATION. The Company and Parent shall afford to the
other and to its officers, employees, accountants, counsel and other authorized
representatives full and complete access, upon 24 hours advance telephone
notice, during regular business hours, throughout the period prior to the
earlier of the Effective Time or the termination of this Agreement pursuant to
its terms, to its offices, properties, books and records and those of its
Subsidiaries, and shall use reasonable efforts to cause its representatives and
independent public accountants to furnish to the other party such additional
financial and operating data and other information as to its business,
customers, vendors and properties and those of its Subsidiaries as the other
party may from time to time reasonably request.
6.13. PUBLIC DISCLOSURE. Except as otherwise required by law, any press
release or other public disclosure of information regarding the proposed
transaction (including the negotiations with respect to the Merger and the terms
and existence of this Agreement) shall be developed by Parent, subject to the
Company's review. The Company and Parent agree that each party's non-disclosure
obligations contained in the Nondisclosure Agreement dated October 11, 1995
signed by the Company and Parent shall remain in full force and effect in
accordance with the terms of such Agreement.
6.14. NO SOLICITATION OF EMPLOYEES. Parent and the Company agree that
between the date of this Agreement and the Effective Time or the date one year
after the date, if any, on which this Agreement is earlier terminated pursuant
to its terms, neither party shall solicit, induce or recruit any of the other
party's employees to leave their employment.
6.15. ESCROW AGREEMENT. At the Closing, Parent and the Holder's Agent
shall enter into the Escrow Agreement with the Escrow Agent.
6.16. COMPANY CLOSING CERTIFICATE. At or prior to the Closing, the Company
shall deliver to Parent a certificate signed on behalf of the Company by the
President and Chief Financial Officer of the Company (the "Company Closing
Certificate"), which shall set forth the Actual Negative Net Worth.
6.17. CADMOUNT ACKNOWLEDGMENT. At or prior to the Closing, Cadmount shall
execute an acknowledgment (the "Cadmount Acknowledgment"), such acknowledgment
to be substantially in the form of Exhibit F attached hereto.
6.18. OBTAINING LICENSE AGREEMENTS. The Company acknowledges that, from
time to time, certain of its customers have obtained software and other Company
Proprietary Rights from the Company and its
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Subsidiaries without entering into or becoming subject to written license
agreements. Between the date of this Agreement and the Closing, the Company
shall use all commercially reasonable efforts to identify those customers, and
to obtain from such customers, where possible when such customers order
additional products or services from the Company or renew maintenance with the
Company, signed license agreements in a form substantially similar to the
standard license agreements the Company now uses to license its software and
other Company Proprietary Rights.
6.19. DIRECTORS AND OFFICERS INDEMNIFICATION. From and after the Effective
Time, Parent and the Surviving Corporation shall indemnify, defend and hold
harmless each person who is now, or has been at any time prior to the date
hereof, an officer or director of the Company (the "Indemnified Parties") to the
same extent that such Indemnified Parties are currently indemnified by the
Company pursuant to the Company's Certificate of Incorporation and By-Laws for
acts or omissions in their capacities as officers or directors of the Company
occurring on or prior to the Effective Time.
6.20. NASDAQ LISTING. Parent agrees to authorize for listing on the Nasdaq
National Market the shares of Parent Stock issuable in connection with the
Merger, upon official notice of issuance.
6.21. 401(K) MATCHING CONTRIBUTION POLICY. The Company shall eliminate,
effective at or before the Effective Time and in a manner reasonably
satisfactory to Parent, any requirement or policy that the Company provide
matching contributions to participants in its 401(k) plan.
6.22. NO INCREASE IN DEBT. From the Net Worth Calculation Date through the
Effective Time, the Company shall not increase its aggregate obligations under
the Company's line of credit with Silicon Valley Bank (and its line of credit,
if any, with any other bank reasonably acceptable to Parent) above the aggregate
amount of such obligations as of the Net Worth Calculation Date.
6.23. REASONABLE EFFORTS. Subject to terms and conditions herein provided,
each of the parties agrees to use all reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the Merger and the other transactions contemplated by this Agreement.
Without limiting the generality of the foregoing, the Company and Parent each
will use all reasonable efforts to obtain all approvals, authorizations,
consents and waivers from, and give all notices to, any public or private third
parties that are necessary on its part in order to effect the transactions
contemplated hereby.
ARTICLE 7
CONDITIONS PRECEDENT
7.1. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF EACH PARTY. The
obligations of the parties hereto to effect the Merger shall be subject to the
fulfillment at or prior to the Closing of the following conditions:
7.1.1. STOCKHOLDER APPROVAL. This Agreement and the transactions
contemplated hereby shall have been approved by the requisite vote under
applicable law of the stockholders of the Company. The issuance of the
shares of Parent Stock pursuant to the Merger shall have been approved by
the stockholders of Parent by the vote required by Section 6(i) of Part III
of Schedule D to the By-Laws of the National Association of Securities
Dealers, Inc.
7.1.2. REGISTRATION STATEMENT EFFECTIVE. The SEC shall have declared
the Registration Statement effective. No stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have
been issued and no proceeding for that purpose, and no similar proceeding
in respect of the Proxy Statement, shall have been initiated or threatened
in writing by the SEC; and all requests for additional information on the
part of the SEC shall have been complied with to the reasonable
satisfaction of the parties hereto.
7.1.3. NO INJUNCTION. No injunction or restraining or other order
issued by a court of competent jurisdiction that prohibits or materially
restricts the consummation of the Merger or the other transactions
contemplated hereby shall be in effect (each party agreeing to use all
reasonable efforts to
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have any injunction or other order immediately lifted), and no action or
proceeding shall have been commenced or threatened in writing seeking any
injunction or restraining or other order that seeks to prohibit, restrain,
invalidate or set aside consummation of the Merger or any of the other
transactions contemplated hereby.
7.1.4. ILLEGALITY. There shall not have been any action taken, and no
statute, rule or regulation shall have been enacted, by any state or
federal government agency that would prohibit or materially restrict the
consummation of the Merger or the other transactions contemplated hereby.
7.1.5. ESCROW AGREEMENT. Parent, the Holder's Agent and the Escrow
Agent shall have entered into the Escrow Agreement as contemplated by
Section 6.15 hereof.
7.1.6. OPINION OF ACCOUNTANTS. Parent shall have received a letter
from Coopers & Lybrand L.L.P. regarding that firm's concurrence with the
conclusions of Parent's management as to the appropriateness of pooling of
interests accounting for the Merger under Accounting Principles Board
Opinion No. 16 if closed and consummated in accordance with this Agreement.
7.1.7. TAX OPINIONS. Parent shall have received a written opinion
from its counsel, Foley, Hoag & Eliot in form and substance reasonably
satisfactory to it, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code. The
Company and the Stockholders shall have received a written opinion from the
Company's counsel, Testa, Hurwitz & Thibeault, in form and substance
reasonably satisfactory to the Company, to the effect that the Merger will
constitute a reorganization within the meaning of Section 368(a) of the
Code and that no gain or loss will be recognized by the Stockholders solely
upon their receipt of Parent Stock in the Merger in exchange for Company
Common Stock. The parties to this Agreement agree to make reasonable
representations as requested by such counsel for the purpose of rendering
such opinions.
7.1.8. FORMULA PRICE PER SHARE. The Formula Price Per Share shall not
be less than $3.28 (appropriately adjusted to reflect fully the effect of
any stock split, reverse stock split, stock dividend, reorganization,
recapitalization, or like change with respect to Parent Stock occurring
after the date hereof and prior to the Effective Time).
7.2. CONDITIONS PRECEDENT TO OBLIGATION OF PARENT AND MERGER SUB TO EFFECT
THE MERGER. The obligation of Parent and Merger Sub to effect the Merger shall
be subject to the fulfillment at or prior to the Closing of the following
additional conditions:
7.2.1. REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Agreement shall be true and
correct in all material respects on and as of the Effective Time, except
for changes contemplated by this Agreement and except for those
representations and warranties which address matters only as of a
particular date (which shall remain true and correct as of such date), with
the same force and effect as if made on and as of the Effective Time,
except in all such cases, for such breaches, inaccuracies or omissions of
such representations and warranties which have neither had nor reasonably
would be expected to have a Company Material Adverse Effect; and the
Company shall have delivered to Parent a certificate to that effect, dated
the date of the Closing and signed on behalf of the Company by the
President and Chief Financial Officer of the Company.
7.2.2. AGREEMENTS AND COVENANTS. The Company shall have performed in
all material respects all of its agreements and covenants set forth herein
that are required to be performed at or prior to the Effective Time; and
the Company shall have delivered to Parent a certificate to that effect,
dated the date of the Closing and signed on behalf of the Company by the
President and Chief Financial Officer of the Company.
7.2.3. LEGAL OPINION. Parent and Merger Sub shall have received an
opinion from Testa, Hurwitz & Thibeault, counsel to the Company, in
substantially the form attached hereto as Exhibit G hereto.
7.2.4. CLOSING DOCUMENTS. The Company and the Holder's Agent shall
have delivered to Parent and Merger Sub such closing documents as Parent
shall reasonably request (other than additional opinions of counsel).
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7.2.5. AFFILIATE AGREEMENTS. Each of the parties identified by the
Company pursuant to Section 6.6 hereof as being an Affiliate of the Company
shall have delivered to Parent an executed Company Affiliate Agreement
which shall be in full force and effect.
7.2.6. THIRD PARTY CONSENTS. All third party consents or approvals
listed in Schedule 7.2.6 hereto shall have been obtained by the Company and
shall be effective and shall not have been suspended, revoked, or stayed by
action of any such third party.
7.2.7. MATERIAL ADVERSE EFFECT. Since the date of this Agreement, the
Company shall not have suffered a Company Material Adverse Effect.
7.2.8. COMPANY CLOSING CERTIFICATE. The Company shall have delivered
the Company Closing Certificate to Parent.
7.2.9. CADMOUNT NOTE. The Cadmount Note shall have been converted
into Company Common Stock and there shall be no amounts due under the
Cadmount Note.
7.2.10. CADMOUNT ACKNOWLEDGMENT The Company and Cadmount shall have
entered into the Cadmount Acknowledgment as contemplated by Section 6.17
hereof.
7.2.11. FAIRNESS OPINION. Parent shall have received at the time of
the mailing by Parent of the Proxy Statement to its stockholders an update
from Stratagem of Stratagem's written opinion dated February 16, 1996 that
the Merger is fair to Parent's stockholders from a financial point of view.
7.2.12. VOTING AGREEMENT. The Amended and Restated Voting Agreement
dated May 1, 1995 between the Company and Cadmount shall have been
terminated.
7.2.13. STOCKHOLDER LIST. The Company shall have delivered to Parent
the Stockholder List.
7.2.14. ELIMINATION OF MATCHING CONTRIBUTION TO 401(K) PLAN. The
Company shall have eliminated any requirement or policy to provide matching
contributions for its 401(k) plan as contemplated by Section 6.21 hereof.
7.3. CONDITIONS TO OBLIGATIONS OF THE COMPANY TO EFFECT THE MERGER. The
obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Closing of the following additional conditions:
7.3.1. REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall be
true and correct in all material respects on and as of the Effective Time,
except for changes contemplated by this Agreement and except for those
representations and warranties which address matters only as of a
particular date (which shall remain true and correct as of such date), with
the same force and effect as if made on and as of the Effective Time,
except in all such cases, for such breaches, inaccuracies or omissions of
such representations and warranties which have neither had nor reasonably
would be expected to have a Parent Material Adverse Effect; and Parent
shall have delivered to the Company a certificate to that effect, dated the
date of the Closing and signed on behalf of Parent by the President and
Chief Financial Officer of Parent.
7.3.2. AGREEMENTS AND COVENANTS. Parent and Merger Sub shall have
performed in all material respects all of their agreements and covenants
set forth herein that are required to be performed at or prior to the
Effective Time; and Parent shall have delivered to the Company a
certificate to that effect, dated the date of the Closing and signed on
behalf of Parent by the President and Chief Financial Officer of Parent.
7.3.3. LEGAL OPINION. The Company shall have received an opinion from
Foley, Hoag & Eliot, counsel to Parent, in substantially the form attached
hereto as Exhibit H hereto.
7.3.4. CLOSING DOCUMENTS. Parent and Merger Sub shall have delivered
to the Company such closing documents as the Company shall reasonably
request (other than additional opinions of counsel).
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7.3.5. AFFILIATE AGREEMENTS. Each of the parties identified by Parent
pursuant to Section 6.6 hereof as being an Affiliate of Parent shall have
delivered to the Company an executed Parent Affiliate Agreement which shall
be in full force and effect.
7.3.6. MATERIAL ADVERSE EFFECT. Since the date of this Agreement,
Parent shall not have suffered a Parent Material Adverse Effect.
7.3.7. NASDAQ LISTING. The shares of Parent Stock issuable to
stockholders of the Company in connection with the Merger shall have been
authorized for listing and eligible for trading on the Nasdaq National
Market upon official notice of issuance.
ARTICLE 8
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
8.1. SURVIVAL OF REPRESENTATIONS.
8.1.1. THE COMPANY'S REPRESENTATIONS. All representations and
warranties made by the Company in this Agreement or any certificate or
other writing delivered by the Company pursuant hereto or in connection
herewith shall survive the Closing and any investigation at any time made
by or on behalf of Parent and shall terminate on the first anniversary of
the Effective Date (except that Parent Claims pending on the first
anniversary of the Effective Date shall continue until resolved pursuant to
this Article 8). The covenants made by the Company, the Stockholders and
the Holder's Agent in this Agreement or any certificate or other writing
delivered by the Company or any of its Affiliates, the Stockholders or the
Holder's Agent pursuant hereto or in connection herewith shall survive the
Closing and any investigation at any time made by or on behalf of Parent.
8.1.2. PARENT'S REPRESENTATIONS. All representations and warranties
made by Parent and Merger Sub in this Agreement or any certificate or other
writing delivered by Parent, Merger Sub or any of their respective
Affiliates pursuant hereto or in connection herewith shall terminate at the
Effective Time, and only the covenants of Parent, Merger Sub and their
respective Affiliates that by their terms survive the Effective Time shall
survive the Effective Time.
8.2. AGREEMENT TO INDEMNIFY. Subject to the terms and conditions of this
Article 8, the Stockholders agree to indemnify, defend and hold harmless Parent
and its Subsidiaries from and against any loss, liability, damage, cost or
expense (including costs and reasonable attorneys' fees and disbursements)
suffered, incurred or paid by Parent or any of its Subsidiaries which would not
have been suffered, incurred or paid if all the representations and warranties
of the Company contained in this Agreement or any certificate or other writing
delivered by the Company pursuant hereto or in connection herewith had been
true, complete and correct in all material respects (collectively, "Parent
Claims").
8.3. LIMITATION OF STOCKHOLDERS' LIABILITY.
8.3.1. LIMITATION OF PARENT CLAIMS. The obligations and liabilities
of the Stockholders hereunder with respect to indemnification for Parent
Claims shall be subject to the following limitations:
(a) The Stockholders shall be obligated to indemnify Parent only
with respect to those Parent Claims as to which Parent has given the
Holder's Agent written notice on or prior to a date one year after the
Closing.
(b) No indemnification shall be required to be made by the
Stockholders hereunder unless the amount of Parent Claims exceeds
$100,000 in the aggregate, in which case the Stockholders'
indemnification obligations shall apply to the amount of such Parent
Claims in excess of $100,000.
(c) All claims for indemnification pursuant to Section 8.2 hereof
shall be brought and recovered by Parent solely by the return to Parent
of property from the Escrow Fund. Without limiting the generality of the
foregoing, Parent shall not have any recourse against any Stockholder
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individually, or any Stockholder's assets or property, for Parent
Claims, except for recovery against the Escrow Fund pursuant to the
terms of this Agreement and the Escrow Agreement.
(d) For purposes of determining the amount of property recoverable
from the Escrow Fund sufficient to satisfy a Parent Claim subject to
indemnification hereunder, the value of a share of Parent Stock shall be
equal to the Formula Price Per Share.
(e) Parent, the Surviving Corporation and the Stockholders
acknowledge and agree that any distribution of property from the Escrow
Fund to satisfy a Parent Claim hereunder shall be done so as to reduce
each Stockholder's interest in the Parent Stock in the Escrow Fund in a
pro rata manner based on the Stockholders' respective ownership
interests in the Parent Stock in the Escrow Fund.
8.3.2. EXCLUSIVE REMEDY. The indemnification provided in this Article
8 shall be Parent's and its Subsidiaries' exclusive remedy for any breach
by the Company of a representation or warranty contained in this Agreement
or any certificate or other writing delivered by the Company pursuant
hereto or in connection herewith. Notwithstanding the foregoing, nothing
contained herein shall limit a party's rights or remedies with respect to
claims resulting from or arising out of willful misconduct or fraud.
8.4. PROCESS OF INDEMNIFICATION FOR PARENT CLAIMS.
8.4.1. NOTICE FROM PARENT. Parent shall promptly notify the Holder's
Agent in writing of the assertion of any Parent Claim by a third party or
the discovery of any fact upon which Parent intends to base a Parent Claim
hereunder. Such notice shall set forth the amount of the Parent Claim and
specify the alleged basis of the Parent Claim. The delay or failure of
Parent to provide notice hereunder shall not in any way limit Parent's
indemnification rights hereunder except to the extent that the Stockholders
shall have been materially adversely affected by such delay or failure and
except that in any event such notice shall be made within the one year
period provided in Section 8.3.1(a) hereof.
8.4.2. RECOVERY BY PARENT. If the Holder's Agent does not dispute the
basis or amount of any Parent Claim within 30 days of receiving written
notice thereof, Parent shall have the right promptly to recover indemnity
as and to the extent provided herein and in the Escrow Agreement. If the
Holder's Agent disagrees with the basis of the Parent Claim or the amount
of damages caused thereby, then within 30 days of receiving written notice
thereof, the Holder's Agent shall give notice to Parent of such
disagreement (the "Dispute Notice") and, in that case, Parent shall have no
right to recover indemnity hereunder until such time, if at all, as (a) a
court of competent jurisdiction issues a final, non-appealable order
specifying the amount of Parent's recovery, in which case Parent shall have
the right promptly to recover the amount so specified (subject to the
limitations contained in Section 8.3 hereof) and (b) Parent and the
Holder's Agent agree in writing to the amount of Parent's recovery, in
which case Parent shall have the right promptly to recover the amount so
agreed. In the event Parent receives a Dispute Notice and the Parent Claim
that is the subject of the Dispute Notice has not been resolved by
agreement of Parent and the Holder's Agent, then Parent shall, not later
than six months after its receipt of the Dispute Notice, commence a
proceeding before a court of competent jurisdiction to adjudicate the
Parent Claim that is the subject of the Dispute Notice.
8.4.3. THIRD-PARTY PARENT CLAIMS. Parent agrees promptly to notify
the Holder's Agent of any Parent Claims asserted by third parties that are
reasonably likely to give rise to indemnification hereunder ("Third-Party
Parent Claims"). The Holder's Agent shall have the right to conduct and
control, through counsel of his own choosing, any Third-Party Parent Claim,
and Parent agrees to cooperate with the Holder's Agent and their counsel in
that regard. Parent agrees that it will not settle any Third-Party Parent
Claims without the consent of the Holder's Agent, which consent shall not
be unreasonably withheld. Parent further agrees that if the Holder's Agent
wishes to enter into a settlement with respect to a Third-Party Parent
Claim, Parent will cooperate in such settlement, provided that such
settlement includes as an unconditional term thereof the giving by the
third party to Parent of a release from all liability in respect of such
Third-Party Parent Claim.
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ARTICLE 9
TERMINATION
9.1. TERMINATION EVENTS. This Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) by mutual written consent of Parent and the Company;
(b) by Parent if there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of
the Company and such breach has not been cured within ten business days
after written notice to the Company (provided, that neither Parent nor
Merger Sub is in material breach of the terms of this Agreement, and
provided further, that no cure period shall be required for a breach which
by its nature cannot be cured) such that the conditions set forth in
Section 7.2.1 or Section 7.2.2 hereof, as the case may be, will not be
satisfied;
(c) by the Company if there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of
Parent or Merger Sub and such breach has not been cured within ten business
days after written notice to Parent (provided, that the Company is not in
material breach of the terms of this Agreement, and provided further, that
no cure period shall be required for a breach which by its nature cannot be
cured) such that the conditions set forth in Section 7.3.1 or Section 7.3.2
hereof, as the case may be, will not be satisfied;
(d) by any party hereto if: (i) there shall be a final, non-appealable
order of a federal or state court in effect preventing consummation of the
Merger; (ii) there shall be any final action taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to
the Merger by any Governmental Entity which would make consummation of the
Merger illegal or which would prohibit Parent's ownership or operation of
all or a material portion of the business or assets of the Company, or
compel Parent to dispose of or hold separate all or a material portion of
the business or assets of the Company or Parent as a result of the Merger;
(iii) if the Company's stockholders do not approve this Agreement and the
transactions contemplated hereby at the Company Meeting; (iv) if Parent's
stockholders do not approve this Agreement and the issuance of shares of
Parent Stock to the Stockholders in the Merger as contemplated hereby at
the Parent Meeting; or
(e) by any party hereto if the Merger shall not have been consummated
by June 30, 1996, provided that the right to terminate this Agreement under
this Section 9.1(e) shall not be available to any party whose failure to
fulfill any material obligation under this Agreement has been the cause of,
or resulted in, the failure of the Effective Time to occur on or before
such date.
Where action is taken to terminate this Agreement pursuant to this Section
9.1, it shall be sufficient for such action to be authorized by the board of
directors (as applicable) of the party taking such action.
9.2. EFFECT OF TERMINATION. In the event of termination of this Agreement
as provided in Section 9.1 hereof, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of the Parent, Merger
Sub, the Company or their respective officers, directors, stockholders or
Affiliates, except to the extent that a party hereto is in breach of any of its
representations, warranties, covenants or agreements set forth in this
Agreement, and provided that the provisions of Sections 6.4, 6.13 and 6.14
hereof and Article 10 hereof shall remain in full force and effect and survive
any termination of this Agreement.
ARTICLE 10
MISCELLANEOUS
10.1. AMENDMENTS AND SUPPLEMENTS. This Agreement may not be amended,
modified or supplemented by the parties hereto in any manner, except by an
instrument in writing signed on behalf of each of the parties hereto personally
or by their duly authorized officers or representatives.
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10.2. NO WAIVER. The failure of any party hereto to enforce at any time
any of the provisions of this Agreement shall in no way be construed to be a
waiver of any such provision, nor in any way to affect the validity of this
Agreement or any part hereof or the right of such party thereafter to enforce
each and every such provision. No waiver of any breach of or non-compliance with
this Agreement shall be held to be a waiver of any other or subsequent breach or
non-compliance.
10.3. GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the substantive laws of The Commonwealth of
Massachusetts, without regard to its principles of conflicts of laws.
10.4. NOTICE. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered by hand, sent by facsimile
transmission with confirmation of receipt requested, sent via a reputable
overnight courier service with confirmation of receipt requested, or mailed by
registered or certified mail (postage prepaid and return receipt requested) to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice), and shall be deemed given on the date on
which delivered by hand or otherwise on the date of receipt as confirmed:
To Parent or Merger Sub:
Bachman Information Systems, Inc.
Eight New England Executive Park
Burlington, Massachusetts 01803
Attn: President
With a copy to:
John D. Patterson, Jr., Esq.
Foley, Hoag & Eliot
One Post Office Square
Boston, Massachusetts 02109
To the Company:
Cadre Technologies Inc.
222 Richmond Street
Providence, Rhode Island 02903
Attn: President
With a copy to:
William B. Simmons, Jr., Esq.
Testa, Hurwitz & Thibeault
High Street Tower
125 High Street
Boston, Massachusetts 02110
To the Holder's Agent:
James P. Lally
Kleiner Perkins Caufield & Byers
2750 Sandhill Road
Menlo Park, California 94025
With a copy to:
William B. Simmons, Jr., Esq.
Testa, Hurwitz & Thibeault
High Street Tower
125 High Street
Boston, Massachusetts 02110
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10.5. ENTIRE AGREEMENT. This Agreement and the documents and instruments
and other agreements among the parties hereto as contemplated by or referred to
herein (including the Nondisclosure Agreement dated October 11, 1995 between
Parent and the Company) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all other prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof, including the Letter of Intent dated December 6,
1995, as amended, between Parent and the Company. Each party hereto acknowledges
that, in entering this Agreement and completing the transactions contemplated
hereby, such party is not relying on any representation, warranty, covenant or
agreement not expressly stated in this Agreement or in the agreements among the
parties contemplated by or referred to herein.
10.6. ASSIGNABILITY. This Agreement is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder, except as
otherwise expressly provided herein. Neither this Agreement nor any of the
rights and obligations of the parties hereunder shall be assigned or delegated,
whether by operation of law or otherwise, without the written consent of all
parties hereto, except that certain rights and obligations of Merger Sub and the
Company may be assigned and delegated to the Surviving Corporation as a result
of the Merger without any further consent hereunder.
10.7. VALIDITY. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
10.8. SPECIFIC PERFORMANCE. The parties hereto acknowledge that damages
alone may not adequately compensate a party for violation by another party of
this Agreement. Accordingly, in addition to all other remedies that may be
available hereunder or under applicable law, any party shall have the right to
any equitable relief that may be appropriate to remedy a breach or threatened
breach by any other party hereunder, including the right to enforce specifically
the terms of this Agreement by obtaining injunctive relief in respect of any
violation or non-performance hereof.
10.9. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which together shall constitute one and the same agreement.
* * * * *
IN WITNESS WHEREOF, the parties have duly executed this Agreement and Plan
of Merger as of the date first above written.
BACHMAN INFORMATION SYSTEMS, INC.
By: /s/ Peter J. Boni
---------------------------------
Title: President
B.C. ACQUISITION CORP.
By: /s/ Peter J. Boni
---------------------------------
Title: President
CADRE TECHNOLOGIES INC.
By: /s/ William H. D. Goddard
---------------------------------
Title: Director
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<PAGE> 163
ANNEX B
DELAWARE GENERAL CORPORATION LAW SEC. 262
SEC. 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 sec. 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 non-stock 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 non-stock 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 sec. 251 (other than a merger effected pursuant to
subsection (g) of sec. 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 date 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 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 sec. 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
sec.sec. 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 sec. 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.
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(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.
(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 sec. 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.
(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
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<PAGE> 165
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 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 forthwith, in 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 of
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
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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.
B-4
<PAGE> 167
ANNEX C
CONFIDENTIAL February 16, 1996
The Board of Directors
Bachman Information Systems, Inc.
8 New England Executive Park
Burlington, MA 01803
To the Members of the Board of Directors:
Bachman Information Systems, Inc. ("Bachman" or the "Company") is
contemplating entering into an Agreement and Plan of Merger with B.C.
Acquisition Corp., a wholly owned subsidiary of Bachman (the "Merger Sub") and
Cadre Technologies Inc. ("Cadre") ("the Merger Agreement"). Pursuant to the
Merger Agreement, the Merger Sub shall be merged with and into Cadre and Cadre
shall continue as the surviving corporation (the "Transaction"). In connection
with the Transaction, Bachman will pay the common stockholders of Cadre an
aggregate of approximately 4,850,000 shares of Bachman common stock (subject to
certain adjustments), plus conversion rights for the outstanding Cadre Warrants
and Options as specified in the Merger Agreement. The Transaction is expected to
be accounted for as a pooling of interests.
You have requested our opinion as to the fairness of the Transaction, from
a financial point of view, to the Company's stockholders. Stratagem Partnering,
Inc. ("Stratagem"), as part of its investment banking business, is regularly
engaged in the evaluation of capital structures, the valuation of businesses and
their securities in connection with mergers and acquisitions, private
placements, financial restructurings and other financial services. As you are
aware, Stratagem has provided investment banking services to the Company and
will receive a fee if the Transaction is consummated. As you are also aware,
Stratagem has been engaged by the Company to provide the opinion contained
herein, and will receive a fee for the provision of such opinion.
In rendering its opinion, Stratagem has, among other things, (i) reviewed a
draft of the Merger Agreement (including the Exhibits thereto), the Letter of
Intent between Bachman and Cadre dated December 6, 1995, as amended, and certain
financial and other information that was publicly available or furnished by the
Company, including certain internal financial analyses, budgets, reports and
other information prepared by the Company's management; (ii) discussed with
representatives of the management of Bachman the business, properties and
prospects of the Company and undertaken such other reviews, analyses and
inquiries relating to the Company as we deemed appropriate; (iii) conducted
discussions with representatives of the management of Cadre as to the past and
current operations, financial condition and prospects of Cadre; (iv) analyzed
the pro forma impact of the Transaction on Bachman's earnings per share; (v)
compared the financial performance of Cadre with that of certain comparable
publicly traded companies and their securities; (vi) reviewed the reported
prices and trading activity of the Bachman Common Stock; (vii) compared the
financial performance of Bachman Common Stock with that of certain other
comparable publicly traded companies and their securities; (vii) reviewed the
financial terms, to the extent publicly available, of certain comparable
acquisition transactions; (ix) reviewed and discussed with the senior management
of Bachman the strategic rationale for the Transaction and the benefits of the
Transaction to Bachman; and (x) performed such other studies, analyses and
inquires and considered such other information as Stratagem deemed relevant.
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<PAGE> 168
CONFIDENTIAL
BACHMAN INFORMATION SYSTEMS, INC.
FEBRUARY 16, 1996 PAGE 2
In our review and analysis and in rendering the opinion contained herein,
we have relied upon and have not independently verified, the accuracy,
completeness and fair presentation of all financial and other information that
was provided to us by or on behalf of Bachman or Cadre or that was publicly
available, and such opinion is conditioned upon such information (whether
written or oral) being complete, accurate and fair in all material respects.
With respect to any financial forecasts reviewed relating to the prospectus of
the Company and Cadre, we have assumed that they have been reasonably prepared
on bases reflecting the best currently available estimates and judgments of
their respective management teams as to their future financial performance. We
have not made an independent evaluation or appraisal or conducted a physical
inspection of any of the assets of the Company or Cadre nor have we been
furnished with any such appraisals. Our opinion is based on economic, monetary,
political, market and other conditions existing and which can be evaluated as of
the date of this opinion. However, such conditions are subject to rapid and
unpredictable change.
With your permission, in rendering such opinion we have also assumed that
(i) the terms and provisions contained in the definitive Merger Agreement
(including the Exhibits thereto), will not differ materially from those
contained in the drafts of those documents we have heretofore reviewed; (ii) the
conditions to the consummation of the Merger Agreement set forth in the Merger
Agreement will be satisfied; and (iii) there is not now, and there will not as a
result of the consummation of the transactions contemplated by the Merger
Agreement be any default, or event of default, under any indenture, credit
agreement or other material instrument to which the Company or any of its
subsidiaries or affiliates is a party that would materially and adversely affect
the Company.
Finally, in rendering the opinion set forth below we note that; (i) the
consummation of the Merger Agreement is conditioned upon the approval of
Bachman's stockholders; (ii) we did not consider the tax effects of the
Agreement upon the stockholders of the Company's Common Stock; (iii) the
provision of such opinion does not constitute a recommendation as to any action
the Company, its Board of Directors or any of its security holders should take
in connection with the Transaction; and (iv) we are not opining as to the prices
at which any of the securities of the Company may trade following the
consummation of the Transaction.
Based upon and subject to the foregoing, and upon such other matters as we
consider relevant, it is our opinion as investment bankers that, as of the date
hereof, the Transaction from a financial point of view is fair to the
stockholders of Bachman.
Sincerely,
/S/ BRIAN MUTERT
....................................
Stratagem Partnering Inc.
Brian Mutert
President
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<PAGE> 169
BACHMAN INFORMTION SYSTEMS, INC.
8 NEW ENGLAND EXECUTIVE PARK
BURLINGTON, MASSACHUSETTS 01803
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON JULY 18, 1996
The undersigned hereby constitutes and appoints Peter J. Boni and Eugene J.
DiDonato, and each of them acting singly, as proxies of the undersigned, each
with full power to appoint his substitute, and authorizes each of them, and each
substitute so appointed, to represent and vote all shares of Common Stock of
Bachman Informtion Systems, Inc. ("Bachman") held of record by the undersigned
at the close of business on June 7, 1996 at the Special Meeting of Stockholders
of Bachman to be held at the offices of Foley, Hoag & Eliot LLP located at One
Post Office Square, Boston, Massachusetts on July 18, 1996 at 10:00 a.m. local
time and of any adjournments thereof (the "Special Meeting").
When properly executed, this proxy will be voted in the manner directed herein
by the undersigned stockholder(s). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2, 3 AND 4 AND IN THE DISCRETION OF THE PERSONS NAMED AS
PROXIES AS TO SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. A
stockholder wishing to vote in accordance with the recommendations of the Board
of Directors need only sign and date this proxy and return it in the enclosed
envelope.
The undersigned hereby acknowledge(s) receipt of a copy of the accompanying
Notice of Special Meeting of Stockholders and of the Proxy Statement relating
thereto, and hereby revoke(s) any proxy or proxies heretofore given. This proxy
may be revoked at any time before it is exercised.
----------------------------------------------------------------------------
PLEASE VOTE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
----------------------------------------------------------------------------
Please sign this proxy exactly as your name(s) appear on your stock
certificate. Joint owners should sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign, and where more
than one name appears, a majority must sign. If a corporation or partnership,
this signature should be that of an authorized officer or other person who
should state his or her title.
- -------------------------------------------------------------------------------
LIST ANY ADDRESS CHANGES HERE: COMMENTS:
- ----------------------------------- --------------------------------------
- ----------------------------------- --------------------------------------
<PAGE> 170
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
For Against Abstain
1. Proposal to adopt and approve the / / / / / /
Agreement and Plan of Merger dated
as of March 25, 1996 (the "Merger
Agreement") by and among Bachman
B.C. Acquisition Corp. and Cadre
Technologies, Inc., and to approve the
issuance of up to 4,850,000 shares of
Bachman's Common Stock, par value
$.01 per share (subject to adjustment
as provided in the Merger Agreement),
as contemplated by the Merger
Agreement.
For Against Abstain
2. Proposal to change Bachman's name to / / / / / /
Cayenne Software, Inc. Upon consummation
of the proposed merger.
For Against Abstain
3. Proposal to increase the number of shares / / / / / /
of Bachman's Common Stock, par value
$.01 per share, that Bachman shall have the
authority to issue by 26.2 million shares.
For Against Abstain
4. Proposal to approve in advance one or more / / / / / /
adjournments of the Special Meeting if and
to the extent such adjournments are
proposed by the management of Bachman.
RECORD DATE SHARES:
-------------------------------
Please complete, sign and date this Proxy Date
- -----------------------------------------------------------------------------
Stockholder sign here----------------Co-owner sign here--------------------
Mark box at right if comments or address changes have been noted on the reverse
side of this card. / /
DETACH CARD DETACH CARD
<PAGE> 171
CADRE TECHNOLOGIES INC.
222 RICHMOND STREET
PROVIDENCE, RHODE ISLAND 02903
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 18, 1996
The undersigned hereby constitutes and appoints Lawrence T. Suttor and Edson
H. Whitehurst, Jr. and each of them acting singly, as proxies of the
undersigned, each with full power to appoint his substitute, and authorizes
each of them, and each substitute so appointed, to represent and vote all shares
of Common Stock of Cadre Technologies Inc. ("Cadre") held of record by the
undersigned at the close of business on May 31, 1996 at the Special Meeting of
Stockholders of Cadre to be held at the offices of Testa, Hurwitz & Thibeault
L.L.P., 125 High Street, Boston, Massachusetts on July 18, 1996 at 10:00 a.m.
local time and at any adjournments thereof (the "Special Meeting").
When properly executed, this proxy will be voted in the manner directed herein
by the undersigned stockholder(s). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2 AND IN THE DISCRETION OF THE PERSONS NAMED AS
PROXIES AS TO SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. A
stockholder wishing to vote in accordance with the recommendations of the Board
of Directors need only sign and date this proxy and return it in the enclosed
envelope.
The undersigned hereby acknowledge(s) receipt of a copy of the accompanying
Notice of Special Meeting of Stockholders and of the Proxy Statement relating
thereto, and hereby revoke(s) any proxy or proxies heretofore given. This proxy
may be revoked at any time before it is exercised.
- -----------------------------------------------------------------------------
PLEASE VOTE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
- -----------------------------------------------------------------------------
Please sign exactly as name appears on your stock certificate. When there is
more than one holder, each must sign. When signing as an attorney,
administrator, executor, guardian or trustee, please add your title as such.
If executed on behalf of a corporation, the proxy should be signed by a duly
authorized person, stating his title or authority.
- -------------------------------------------------------------------------------
<PAGE> 172
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
RECORD DATE SHARES:
-------------------------------
Please be sure to sign and date this Proxy Date
- -----------------------------------------------------------------------------
- --Stockholder sign here----------------Co-owner sign here--------------------
FOR AGAINST ABSTAIN
1.) Proposal to adopt and approve the / / / / / /
Agreement and Plan of Merger dated
March 25, 1996 (the "Merger
Agreement") by and among Bachman
Information Systems, Inc., B.C.
Acquisition Corp. and Cadre.
FOR AGAINST ABSTAIN
2.) Proposal to approve in advance one or / / / / / /
more adjournments of the Special
Meeting if and to the extent such
adjournments are proposed by the
management of Cadre.
DETACH CARD DETACH CARD
<PAGE> 173
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Paragraph D of Article 6 of the Bachman Articles provides that, to the
maximum extent permitted by Massachusetts law (as the same exists or is
subsequently amended), no director shall be personally liable to Bachman or any
of its stockholders for monetary damages arising out of the director's breach of
fiduciary duty as a director of Bachman. Section 13(b)(l 1/2) of the
Massachusetts BCL provides that a Massachusetts corporation's articles of
organization may state a provision eliminating or limiting the personal
liability of a director to a corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that such provision
may not eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under specified sections of the Massachusetts
BCL establishing the liability of directors for certain unauthorized
distributions and loans to insiders or (iv) for any transaction from which the
director derived an improper personal benefit.
Section 6 of Article VII of the Bachman By-Laws provides that Bachman
shall, to the extent legally permissible, indemnify each of its directors and
officers (including persons who serve at its request as directors, officers or
trustees of any organization in which Bachman has an interest as a stockholder,
creditor or otherwise), against all liabilities and expenses reasonably incurred
by such persons in connection with the defense or disposition of any action,
suit or proceeding in which they may be involved or with which they may be
threatened by reason of being or having been such a director or officer, except
with respect to any matter as to which they shall have been adjudicated not to
have acted in good faith in the reasonable belief that their action was in the
best interests of Bachman. Section 67 of the Massachusetts BCL authorizes a
Massachusetts corporation to indemnify its directors, officers, employees and
other agents unless such person shall have been adjudicated in any proceeding
not to have acted in good faith in the reasonable belief that such action was in
the best interests of the corporation.
The effect of these provisions would be to permit indemnification by
Bachman for, among other liabilities, (a) liabilities arising out of the
Securities Act in connection with this Registration Statement (see Item 22
below) and (b) certain liabilities incurred by individuals serving as directors
and officers of Acquisition Corp., all of whom serve at the request of Bachman.
Section 67 of the Massachusetts BCL also affords a Massachusetts
corporation the power to obtain insurance on behalf of its directors, officers,
employees and agents against liabilities incurred by them in those capacities or
out of their status as such, whether or not the corporation would have the power
to indemnify them against those liabilities. Bachman has procured a directors'
and officers' liability and company reimbursement liability insurance policy
that (a) insures directors and officers of Bachman against losses (in excess of
a deductible amount) arising from certain claims made against them by reason of
certain acts done or attempted by such directors or officers and (b) insures
Bachman against losses (in excess of a deductible amount) arising from any such
claims, but only if Bachman is required or permitted to indemnify such directors
or officers for such losses under statutory or common law or under provisions of
Bachman's articles of organization or by-laws.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
<TABLE>
<S> <C>
2.1 Agreement and Plan of Merger (the "Merger Agreement") by and among Bachman,
Acquisition Corp. and Cadre, dated as of March 25, 1996, and form of Transmittal
Letter (Exhibit B), form of Escrow Agreement (Exhibit C), form of Cadre Affiliate
Agreement (Exhibit D), Form of Bachman Affiliate Agreement (Exhibit E), and form of
Cadmount Amendment (Exhibit F)
5.1 Legal Opinion of Foley, Hoag & Eliot LLP, counsel to the Registrant
8.1 Form of tax opinion of Foley, Hoag & Eliot LLP, counsel to the Registrant
8.2 Form of tax opinion of Testa, Hurwitz & Thibeault LLP, counsel to Cadre
</TABLE>
II-1
<PAGE> 174
<TABLE>
<S> <C>
23.1 Consent of Coopers & Lybrand L.L.P., independent accountants
23.2 Consent of Deloitte & Touche LLP, independent accountants
23.3 Consent of counsel (included in Exhibit 5.1 hereto)
24.1 Powers of Attorney (see page II-4)
</TABLE>
(B) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedules of the Registrant for the years
ended June 30, 1995, 1994 and 1993 are incorporated by reference to the
Registrant's Annual Report on Form 10-K for the year ended June 30, 1995.
REPORT OF INDEPENDENT ACCOUNTS
Schedule II; Valuation and Qualifying Accounts
Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set forth
therein is included in the consolidated financial statements or notes thereto.
ITEM 22. UNDERTAKINGS
(1) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended (the
"Securities Act"), each filing of the registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(2) The undersigned registrant hereby undertakes as follows: prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(3) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (2) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415, will be filed
as part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(4) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus/Joint Proxy
Statement pursuant to Items 4, 10(b), 11 or 13 of Form S-4, within one business
day of receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the Registration Statement
through the date of responding to the request.
(5) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(6) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such
II-2
<PAGE> 175
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE> 176
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Burlington, Massachusetts, on June 13, 1996.
BACHMAN Information Systems, Inc.
By: /S/ PETER J. BONI
-------------------------------------
Peter J. Boni
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints Peter J. Boni and Eugene J. DiDonato, and each of
them, his true and lawful attorneys-in-fact and agents with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing he may
deem necessary or advisable to be done in connection with this Registration
Statement, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
<TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/S/ PETER J. BONI President and June 13, 1996
- ------------------------------------------ Chief Executive Officer,
Peter J. Boni Director
/S/ EUGENE J. DIDONATO Vice President -- General June 13, 1996
- ------------------------------------------ Counsel, Treasurer, and Chief
Eugene J. DiDonato Financial and Accounting
Officer
/S/ CHARLES W. BACHMAN Chairman of the Board June 10, 1996
- ------------------------------------------ of Directors
Charles W. Bachman
/S/ JOHN J. ALEXANDER Director June 13, 1996
- ------------------------------------------
John J. Alexander
/S/ R. JOHN FLETCHER Director June 13, 1996
- ------------------------------------------
R. John Fletcher
/S/ ALLYN C. WOODWARD, JR. Director June 13, 1996
- ------------------------------------------
Allyn C. Woodward, Jr.
</TABLE>
II-4
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
BACHMAN INFORMATION SYSTEMS, INC.
B.C. ACQUISITION CORP.
AND
CADRE TECHNOLOGIES INC.
<PAGE> 2
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 25, 1996 (the "Agreement"),
by and among BACHMAN INFORMATION SYSTEMS, INC., a Massachusetts corporation
("Parent"), B.C. ACQUISITION CORP., a Delaware corporation and wholly-owned
subsidiary of Parent, ("Merger Sub") and CADRE TECHNOLOGIES INC., a Delaware
corporation (the "Company"). Merger Sub and the Company together are sometimes
referred to herein as the "Constituent Corporations."
WITNESSETH
WHEREAS, the respective boards of directors of Parent, Merger Sub and the
Company have determined that it is advisable that Merger Sub be merged with and
into the Company (the "Merger") on the terms and conditions set forth herein and
in accordance with the provisions of the General Corporation Law of the State of
Delaware (the "GCL");
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations and warranties and other agreements in connection with the
Merger;
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a pooling of interests under generally accepted accounting
principles ("GAAP"); and
WHEREAS, the parties intend, by executing this Agreement, to adopt a plan
of reorganization within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code");
NOW, THEREFORE, Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1. CERTAIN MATTERS OF CONSTRUCTION. A reference to an Article, Section,
Exhibit or Schedule shall mean an Article of, a Section in, or Exhibit or
Schedule to, this Agreement unless otherwise expressly stated. The titles and
headings herein are for reference purposes only and shall not in any manner
limit the construction of this Agreement which shall be considered as a whole.
The words "include," "includes" and "including" when used herein shall be deemed
in each case to be followed by the words "without limitation."
1.2. CROSS REFERENCES. The following terms defined elsewhere in this
Agreement in the Sections set forth below shall have the respective meanings
therein defined:
<TABLE>
<CAPTION>
TERM DEFINITION
------------------------------------------------------------------ -----------------
<S> <C>
Actual Negative Net Worth......................................... Section 2.3.2.
Aggregate Consideration Amount.................................... Section 2.3.2.
Aggregate Exercise Price.......................................... Section 2.3.2.
Agreement......................................................... Preamble
Balance Certificate............................................... Section 2.9.2
Cadmount Acknowledgment........................................... Section 6.17.
Cadmount Certificate.............................................. Section 2.9.3.
Cadmount Escrow Agent............................................. Section 2.9.3.
Certificate of Merger............................................. Section 2.1.
Closing........................................................... Section 2.10.
Code.............................................................. Preamble
Company........................................................... Preamble
Company Affiliate Agreements...................................... Section 6.6.
Company Balance Sheet............................................. Section 3.5.
Company Closing Certificate....................................... Section 6.16.
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
TERM DEFINITION
------------------------------------------------------------------ -----------------
<S> <C>
Company Common Stock.............................................. Section 2.3.1.
Company Financial Statements...................................... Section 3.5.
Company Insurance Contracts....................................... Section 3.18.
Company Meeting................................................... Section 3.20.
Company Proprietary Rights........................................ Section 3.17.1.
Company Plans..................................................... Section 3.10.1.
Constituent Corporations.......................................... Preamble
Dispute Notice.................................................... Section 8.4.2.
Dissenting Shares................................................. Section 2.7.
Effective Date.................................................... Section 2.1.
Effective Time.................................................... Section 2.1.
Employee List..................................................... Section 3.11.2.
Encumbrances...................................................... Section 3.14.1.
Escrow Agent...................................................... Section 2.9.2.
Escrow Agreement.................................................. Section 2.9.2.
Escrow Fund....................................................... Escrow Agreement
Exchange Ratio.................................................... Section 2.3.2.
Fully-Diluted Shares.............................................. Section 2.3.2.
GAAP.............................................................. Preamble
GCL............................................................... Preamble
Governmental Entity............................................... Section 3.4.2.
Holder's Agent.................................................... Section 2.8
Indemnified Parties............................................... Section 6.19.
Liabilities....................................................... Section 3.6.
Merger............................................................ Preamble
Merger Sub........................................................ Preamble
Merger Sub Stock.................................................. Section 2.3.3.
Negative Net Worth Limit.......................................... Section 2.3.2.
Net Worth Calculation Date........................................ Section 2.3.2.
Parent............................................................ Preamble
Parent Affiliate Agreements....................................... Section 6.6.
Parent Agreements................................................. Section 4.16.
Parent Balance Sheet.............................................. Section 4.5.
Parent Claims..................................................... Section 8.2.
Parent Insurance Contracts........................................ Section 4.18.
Parent Meeting.................................................... Section 3.20.
Parent Plans...................................................... Section 4.10.1.
Parent Proprietary Rights......................................... Section 4.17.1.
Parent Reports.................................................... Section 4.5.
Parent Share Amount............................................... Section 2.3.2.
Parent Stock...................................................... Section 2.3.1.
Parent Stock Plans................................................ Section 4.2.3.
Permits........................................................... Section 3.7.
Per-Share Consideration Amount.................................... Section 2.3.2
Proxy Statement................................................... Section 3.20.
Registration Statement............................................ Section 4.20.
Stockholder List.................................................. Section 2.9.1.
Stockholders...................................................... Section 2.9.1.
</TABLE>
2
<PAGE> 4
<TABLE>
<CAPTION>
TERM DEFINITION
------------------------------------------------------------------ -----------------
<S> <C>
Stockholder's Share Amount........................................ Section 2.9.2.
Surviving Corporation............................................. Section 2.1.
Taxes............................................................. Section 3.9.6.
Third-Party Parent Claims......................................... Section 8.4.3.
Transmittal Letter................................................ Section 2.9.2.
</TABLE>
1.3. CERTAIN DEFINITIONS. As used herein, the following terms shall have
the following meanings:
Affiliate: with respect to any Person, any Person which, directly or
indirectly, controls, is controlled by, or is under common control with,
such Person.
Cadmount: Stichting Administraitiekantoor Cadmount.
Cadmount Note: the Convertible Promissory Note dated May 1, 1995 of
the Company in the principal amount of $1,600,000 payable to Cadmount.
COBRA: the provisions of Section 4980B of the Code and Part 6 of
Title I of ERISA.
Commercial Software: packaged commercial software programs generally
available to the public through retail dealers in computer software or
directly from the manufacturer which have been licensed to the Company (or,
in the case of Section 4.17, to Parent) pursuant to End-User Licenses and
which are used in the Company's business (or in Parent's business in the
case of Section 4.17) but are in no way a component of or incorporated in
or specifically required to develop or support any of the Company's (or of
Parent's in the case of Section 4.17) products and related trademarks,
technology and know-how.
Company Leases: each lease, sublease, license or other agreement
under which the Company or any of its Subsidiaries uses, occupies or has
the right to occupy any real property or interest therein that (a) provides
for future minimum payments of $50,000 or more (ignoring any right of
cancellation or termination) or (b) the cancellation or termination of
which would have a Company Material Adverse Effect.
Company Material Adverse Effect: any materially adverse change in or
effect on the financial condition, business, operations, assets,
properties, results of operations or prospects of the Company and its
Subsidiaries considered on a consolidated basis.
Company Option Plans: the Company's 1988 and 1989 Incentive and
Non-Statutory Stock Option Plans.
control (including with correlative meaning, controlled by and under
common control with): as used with respect to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of such Person, whether through the ownership
of voting securities, by contract or otherwise.
End-User Licenses: any object code end-user licenses granted to
end-users in the ordinary course of business that permit use of software
products without a right to modify, distribute or sublicense the same.
Environmental Claim: any notice alleging potential liability
(including, without limitation, potential liability for investigatory
costs, cleanup costs, response or remediation costs, natural resources
damages, property damages, personal injuries, fines or penalties) arising
out of, based on or resulting from (a) the presence, or release of any
Material of Environmental Concern at any location, whether or not owned by
that party or any of its Subsidiaries or (b) circumstances forming the
basis of any violation, or alleged violation, of any Environmental Law.
Environmental Laws: any and all statutes, regulations and ordinances
relating to the protection of public health, safety or the environment.
ERISA: the Employee Retirement Income Security Act of 1974, as
amended.
3
<PAGE> 5
ERISA Affiliate: with respect to a party, any member (other than that
party) of a controlled group of corporations, group of trades or businesses
under common control or affiliated service group that includes that party
(as defined for purposes of Section 414(b), (c) and (m) of the Code).
Exchange Act: the Securities Exchange Act of 1934, as amended.
Formula Price Per Share: a number rounded to two decimal places equal
to the average of the closing bid and asked prices of Parent Stock as
quoted on the Nasdaq National Market on the twenty trade days immediately
prior to the Effective Date.
Materials of Environmental Concern: petroleum and its by-products and
all substances or constituents that are regulated by, or form the basis of
liability under, any Environmental Law.
Parent Leases: each lease, sublease, license or other agreement under
which Parent or any of its Subsidiaries uses, occupies or has the right to
occupy any real property or interest therein that (a) provides for future
minimum payments of $50,000 or more (ignoring any right of cancellation or
termination) or (b) the cancellation or termination of which would have a
Parent Material Adverse Effect.
Parent Material Adverse Effect: any materially adverse change in or
effect on the financial condition, business, operations, assets,
properties, results of operations or prospects of Parent and its
Subsidiaries considered on a consolidated basis, other than continuing
losses from operations.
Permitted Encumbrances: (a) liens for current taxes and other
statutory liens and trusts not yet due and payable or that are being
contested in good faith, (b) liens that were incurred in the ordinary
course of business, such as carriers', warehousemen's, landlords' and
mechanics' liens and other similar liens arising in the ordinary course of
business, (c) liens on personal property leased under operating leases, (d)
liens, pledges or deposits incurred or made in connection with workmen's
compensation, unemployment insurance and other social security benefits, or
securing the performance of bids, tenders, leases, contracts (other than
for the repayment of borrowed money), statutory obligations, progress
payments, surety and appeal bonds and other obligations of like nature, in
each case incurred in the ordinary course of business, (e) pledges of or
liens on manufactured products as security for any drafts or bills of
exchange drawn in connection with the importation of such manufactured
products in the ordinary course of business, (f) liens under Article 2 of
the Uniform Commercial Code that are special property interests in goods
identified as goods to which a contract refers, (g) liens under Article 9
of the Uniform Commercial Code that are purchase money security interests,
and (h) such imperfections or minor defects of title, easements,
rights-of-way and other similar restrictions (if any) as are insubstantial
in character, amount or extent, do not materially detract from the value or
interfere with the present or proposed use of the properties or assets of
the party subject thereto or affected thereby, and do not otherwise
adversely affect or impair the business or operations of such party.
Person: an individual, a corporation, an association, a partnership,
an estate, a trust and any other entity or organization.
SEC: the Securities and Exchange Commission, or any Governmental
Entity succeeding to its functions.
Securities Act: the Securities Act of 1933, as amended.
Stock Options: options to purchase Company Common Stock outstanding
under the Company Option Plans.
Subsidiary: any corporation, association, or other business entity a
majority (by number of votes on the election of directors or persons
holding positions with similar responsibilities) of the shares of capital
stock (or other voting interests) of which is owned by Parent, the Company
or their respective Subsidiaries, as the case may be.
Warrants: the Warrants (First Set) and the Warrants (Second Set).
4
<PAGE> 6
Warrants (First Set): Warrants to purchase 115,000 shares of Company
Common Stock dated July 12, 1991 to Painewebber R&D Partners III, L.P.;
Warrants to purchase 625,000 shares of Company Common Stock dated July 12,
1991 granted to Painewebber R&D Partners II, L.P.; and Warrants to purchase
600,000 shares of Company Common Stock dated May 1, 1995 to Cadmount.
Warrants (Second Set): Warrants to purchase 35,714 shares of Company
Common Stock dated November 1995 to First Portland Corporation.
ARTICLE 2
THE MERGER
2.1. PROCEDURE FOR THE MERGER. Merger Sub shall be merged, in accordance
with section 251 of the GCL, with and into the Company, which shall be and is
sometimes referred to herein to as the "Surviving Corporation". The Merger shall
be effected by filing a certificate of merger, substantially in the form of
Exhibit A attached hereto (the "Certificate of Merger"), with the Secretary of
State of the State of Delaware in accordance with section 251(c) of the GCL. The
effective date of the Merger (the "Effective Date") shall be the date upon which
the Certificate of Merger shall have been filed with the Secretary of State of
the State of Delaware and the effective time of the Merger (the "Effective
Time") shall be the time of the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware.
2.2. SURVIVING CORPORATION.
2.2.1. CORPORATE EXISTENCE. The Surviving Corporation shall continue
its corporate existence under the laws of the State of Delaware. The
separate corporate existence of Merger Sub shall cease at the Effective
Time.
2.2.2. CERTIFICATE OF INCORPORATION AND BY-LAWS. The certificate of
incorporation of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the certificate of incorporation of the Surviving
Corporation until the same shall be amended thereafter in accordance with
the GCL and such certificate of incorporation, provided, however, that the
first article of the certificate of incorporation of the Surviving
Corporation shall be amended to read as follows: "The name of the
corporation is Cadre Technologies Inc." The by-laws of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the by-laws of the
Surviving Corporation until the same shall be amended thereafter in
accordance with the GCL, the certificate of incorporation of the Surviving
Corporation and such by-laws.
2.2.3. DIRECTORS. As of the Effective Time, Peter J. Boni shall be
the sole director of the Surviving Corporation, to hold office in
accordance with the certificate of incorporation and by-laws of the
Surviving Corporation.
2.2.4. EFFECT OF THE MERGER. As of the Effective Time, the effect of
the Merger shall be as provided in this Agreement and the applicable
provisions of the GCL. Without limiting the generality of the foregoing, at
the Effective Time, all the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
2.3. CONVERSION OF STOCK.
2.3.1. STOCK OF THE COMPANY. At the Effective Time, by virtue of the
Merger and without any action on the part of the holders thereof, each
share of Common Stock, $.01 par value per share, of the Company ("Company
Common Stock") issued and outstanding immediately prior to the Effective
Time (other than (i) Company Common Stock held in the Company's treasury or
by any of the Company's Subsidiaries and (ii) Dissenting Shares (as defined
in and to the extent provided in Section 2.7(a)) will be canceled and
extinguished and be converted automatically into the right to receive the
number of shares of the Common Stock, $.01 par value per share, of Parent
("Parent Stock") equal to the Exchange Ratio, provided, however, that a
portion of the shares of Parent Stock issuable pursuant to the Merger in
respect of shares of Company Common Stock shall be delivered into escrow
and held as
5
<PAGE> 7
specified in Section 2.9. Each share of Parent Stock issued pursuant to the
Merger shall be validly issued, fully paid and nonassessable.
2.3.2. DEFINITION OF EXCHANGE RATIO. As used herein, the following
terms shall have the following meanings:
Actual Negative Net Worth: the Company's consolidated negative net
worth (exclusive of the Cadmount Note) on the Net Worth Calculation Date
(rounded to the nearest thousand dollars) as determined in accordance
with GAAP consistently applied.
Aggregate Consideration Amount: an amount equal to the Parent
Share Amount multiplied by 6 (subject to adjustment to reflect fully the
effect of any stock split, reverse stock split, stock dividend,
reorganization, recapitalization, or like change with respect to Parent
Stock occurring after the date hereof and prior to the Effective Time).
Aggregate Exercise Price: an amount equal to the aggregate
exercise price of all Stock Options and Warrants (Second Set)
outstanding immediately prior to the Effective Time payable to the
Company upon exercise thereof.
Exchange Ratio: a number rounded to four decimal places equal to a
fraction, the numerator of which is the Parent Share Amount, and the
denominator of which is (a) Fully-Diluted Shares minus (b) the Aggregate
Exercise Price divided by the Per-Share Consideration Amount.
Fully-Diluted Shares: the aggregate number of shares of Company
Common Stock outstanding at the Effective Time or issuable at the
Effective Time upon the exercise in full of Stock Options and Warrants
(Second Set) outstanding at the Effective Time.
Negative Net Worth Limit: $5,611,000.
Net Worth Calculation Date: the last day of the month immediately
preceding the Effective Time.
Parent Share Amount: 4,850,000, subject to adjustment as follows:
in the event that Actual Negative Net Worth is greater than the Negative
Net Worth Limit, then the Parent Share Amount shall be equal to the
quotient obtained from the division of a fraction, the numerator of
which is (a) 29,100,000 minus (b) the amount that Actual Negative Net
Worth is greater than the Negative Net Worth Limit, and the denominator
of which is 6. The Parent Share Amount shall be appropriately adjusted
to reflect fully the effect of any stock split, reverse stock split,
stock dividend, reorganization, recapitalization, or like change with
respect to Parent Stock occurring after the date hereof and prior to the
Effective Time.
Per-Share Consideration Amount: a number rounded to four decimal
places equal to (a) the Aggregate Consideration Amount divided by (b)
Fully-Diluted Shares.
2.3.3. STOCK OF MERGER SUB. At the Effective Time, each share of the
Common Stock, par value $.01 per share, of Merger Sub ("Merger Sub Stock")
issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the holder
thereof, be converted into and become one validly issued, fully paid and
nonassessable share of Common Stock, par value $.01 per share, of the
Surviving Corporation.
2.4. STOCK OPTIONS. At the Effective Time, all Stock Options then
outstanding shall become options to purchase Parent Stock in accordance with
Section 6.8.1 hereof.
2.5. WARRANTS. At the Effective Time, all Warrants then outstanding shall
become warrants to purchase Parent Stock in accordance with Section 6.9 hereof.
2.6. FRACTIONAL SHARES. Only whole shares of Parent Stock will be issued
by virtue of the Merger. Any holder of shares of Company Common Stock who would
otherwise be entitled to a fraction of a share of Parent Stock (after
aggregating all fractional shares of Parent Stock to be received by such holder)
shall have such fractional share interest rounded up to the nearest whole share.
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2.7. DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the contrary, the
shares of any holder of Company Common Stock who has demanded and perfected
appraisal rights for such shares in accordance with the GCL and who, as of the
Effective Time, has not effectively withdrawn or lost such appraisal rights
("Dissenting Shares"), shall not be converted into or represent a right to
receive Parent Stock pursuant to Section 2.3.1, but the holder thereof shall
only be entitled to such rights as are granted by the GCL.
(b) Notwithstanding the provisions of subsection (a), if any holder of
shares of Company Common Stock who demands appraisal of such shares under the
GCL shall effectively withdraw the right to appraisal, then, as of the later of
the Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive Parent
Stock, without interest thereon, upon surrender of the certificate representing
such shares.
(c) The Company shall give Parent (i) prompt notice of any written demands
for appraisal of any shares of Company Common Stock, withdrawals of such
demands, and any other instruments served pursuant to the GCL and received by
the Company which relate to any such demand for appraisal and (ii) the
opportunity to participate in all negotiations and proceedings which take place
prior to the Effective Time with respect to demands for appraisal under the GCL.
The Company shall not, except with the prior written consent of Parent,
voluntarily make any payment with respect to any demands for appraisal of
Company Common Stock or offer to settle any such demands.
2.8. HOLDER'S AGENT. James P. Lally shall, by virtue of the Merger and the
resolutions to be adopted at the Company Meeting, be irrevocably appointed
attorney-in-fact and authorized and empowered to act, for and on behalf of any
or all of the Stockholders (with full power of substitution in the premises) in
connection with the indemnity provisions of Article 8 as they relate to the
Stockholders 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 Stockholders 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 Parent and its Subsidiaries 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 Stockholders appointed by him or
after his death or incapacity elected by vote of holders of a majority of
Company Common Stock outstanding immediately prior to the Effective Time being
referred to herein as the "Holder's Agent"). The Holder's Agent shall not be
liable to any Stockholder, Parent or its Subsidiaries 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 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 or the part of the
Holder's Agent. Each of Parent and Merger Sub and each of their respective
Affiliates (including, after the Closing, the Company) shall be entitled to rely
on such appointment and treat such Holder's Agent as the duly appointed
attorney-in-fact of each Stockholder. Each Stockholder who votes in favor of the
Merger pursuant to the terms hereof, by such vote, without any further action,
and each Stockholder who receives shares of Parent Stock 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 the Parent and Merger Sub to enter into this Agreement is based,
in part, on the appointment of a representative to act on behalf of the
Stockholders.
2.9. ISSUANCE OF PARENT STOCK.
2.9.1. STOCKHOLDER LIST. The Company shall prepare a list (the
"Stockholder List") setting forth the names and addresses of all Persons
who are the record holders of Company Common Stock immediately prior to the
Effective Time (the "Stockholders"), which it shall deliver to Parent at
the Closing.
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2.9.2. DELIVERY OF CERTIFICATES. At or promptly after the Effective
Time, Parent shall cause its transfer agent to prepare two certificates for
each Stockholder (other than Cadmount), each such certificate registered in
the name of such Stockholder and together representing the total number of
shares of Parent Stock issuable pursuant to the Merger in respect of shares
of Company Common Stock held by such Stockholder (the "Stockholder's Share
Amount"), as follows: (a) one certificate shall represent ten percent of
such Stockholder's Share Amount (rounded up to the nearest whole number of
shares of Parent Stock), and shall be delivered by Parent to State Street
Bank and Trust Company, as escrow agent (the "Escrow Agent"), as security
for Parent Claims and (b) one certificate (the "Balance Certificate") shall
represent the balance of such Stockholder's Share Amount after deducting
therefrom the shares of Parent Stock being placed in escrow hereunder. At
and after the Effective Time, each Stockholder (other than Cadmount) shall
be entitled to receive such Stockholder's Balance Certificate upon delivery
to Parent of a certificate or certificates representing the full number of
shares of Company Common Stock held by such Stockholder immediately prior
to the Effective Time, together with a properly completed transmittal
letter, substantially in the form of Exhibit B attached hereto (a
"Transmittal Letter"). The Escrow Agent shall hold and administer the
shares of Parent Stock delivered to it hereunder in accordance with the
terms of an escrow agreement dated as of the Effective Date among Parent,
the Holder's Agent and the Escrow Agent (the "Escrow Agreement"), such
Escrow Agreement to be substantially in the form of Exhibit C attached
hereto.
2.9.3. CADMOUNT. The parties hereto acknowledge that the shares of
Company Common Stock registered in the name of Cadmount are held in escrow
pursuant to a Share Purchase Agreement between Cadmount and the Company
dated May 1, 1995 and an Escrow Agreement among the Company, Cadmount and
Mees Peirson Trust B.V., as escrow agent (the "Cadmount Escrow Agent")
dated May 1, 1995. At or promptly after the Effective Time, Parent shall
cause its transfer agent to prepare one certificate registered in the name
of Cadmount and representing the total number of shares of Parent Stock
issuable pursuant to the Merger in respect of shares of Company Common
Stock registered in Cadmount's name (the "Cadmount Certificate"). Upon
Parent's receipt of a certificate or certificates representing the full
number of shares of Company Common Stock registered in Cadmount's name
immediately prior to the Effective Time, together with a properly completed
Transmittal Letter, Parent shall deliver the Cadmount Certificate to the
Cadmount Escrow Agent, and the shares of Parent Stock represented by the
Cadmount Certificate shall remain in escrow subject to the terms of such
Share Purchase Agreement and Escrow Agreement.
2.10. CLOSING. The closing of the Merger (the "Closing") shall take place
at the offices of Foley, Hoag & Eliot in Boston, Massachusetts on the Effective
Date simultaneously with the Effective Time, or at such other time and place or
on such other date as the parties hereto agree.
2.11. TRANSFERS OF OWNERSHIP. If any certificate for shares of Parent
Stock is to be issued in a name other than that in which the certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the Stockholder requesting
such exchange will have paid to Parent or any agent designated by it any
transfer or other taxes required by reason of issuance of a certificate for
shares of Parent Stock in any name other than that of the registered holder of
the certificate surrendered, or established to the reasonable satisfaction of
Parent or any agent designated by it that such tax has been paid or is not
payable.
2.12. TAX AND ACCOUNTING CONSEQUENCES. It is intended by the parties
hereto that the Merger shall (a) constitute a reorganization within the meaning
of Section 368 of the Code and (b) qualify for accounting treatment as a pooling
of interests under GAAP.
2.13. ADDITIONAL ACTIONS. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purposes of this
Agreement or to vest, perfect or confirm in the Surviving Corporation title to
or ownership or possession of any property, right, privilege, power, franchise
or other asset of either Constituent Corporation acquired or to be acquired by
reason of, or as a result of, the Merger, the officers and directors of the
Company and Merger Sub are fully authorized in the name of their respective
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corporations or otherwise to take, and will take, all such lawful and necessary
action, so long as such action is consistent with this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub as follows:
3.1. CORPORATE STATUS OF THE COMPANY. Except as set forth on Schedule 3.1
hereto, the Company and each of its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with the requisite corporate power to own,
operate and lease its properties and to carry on its business as now being
conducted. The Company and its Subsidiaries are duly qualified or licensed to do
business as foreign corporations and are in good standing in all jurisdictions
in which the character of the properties owned or held under lease by each or
the nature of the business transacted by each makes qualification necessary,
except where failure to be so qualified would not have a Company Material
Adverse Effect. All jurisdictions in which the Company and its Subsidiaries are
qualified to do business are set forth on Schedule 3.1 hereto.
3.2. CAPITAL STOCK.
3.2.1. AUTHORIZED STOCK OF THE COMPANY. The authorized capital stock
of the Company consists of 25,000,000 shares of Company Common Stock, of
which 14,305,362 shares were issued and outstanding as of February 29,
1996. The outstanding shares of Company Common Stock are held of record
and, to the knowledge of the Company, beneficially, by the Stockholders in
the amounts set forth opposite their respective names as set forth on
Schedule 3.2 hereto. All of the outstanding shares of Company Common Stock
have been duly authorized and validly issued, were not issued in violation
of any person's preemptive rights, and are fully paid and nonassessable.
3.2.2. OPTIONS AND CONVERTIBLE SECURITIES OF THE COMPANY. Except as
set forth on Schedule 3.2 or as set forth on the option schedule dated
November 30, 1995 previously delivered by the Company to Parent, there are
no outstanding subscriptions, options, warrants, conversion rights or other
rights, securities, agreements or commitments obligating the Company to
issue, sell or otherwise dispose of shares of its capital stock, or any
securities or obligations convertible into, or exercisable or exchangeable
for, any shares of its capital stock. Since February 29, 1996, the Company
has not issued, sold or otherwise disposed of any shares of its capital
stock, other than pursuant to the Company Option Plans. Except as set forth
on Schedule 3.2, there are no voting trusts or other agreements or
understandings to which the Company or any Stockholder is a party with
respect to the voting of the shares of Company Common Stock and the Company
is not a party to or bound by any outstanding restrictions, options or
other obligations, agreements or commitments to sell, repurchase, redeem or
acquire any outstanding shares of Company Common Stock or other equity
securities of the Company.
3.3. SUBSIDIARIES. A list of the Company's Subsidiaries and their
respective jurisdictions of incorporation is set forth on Schedule 3.3 hereto.
Except as set forth on Schedule 3.3, immediately prior to the Closing, the
Company will beneficially and of record own all of the outstanding securities of
its Subsidiaries (except for directors qualifying shares, nominee shares and the
like), free and clear of all liens, charges, pledges, security interests,
encumbrances, and other restrictions and agreements with respect thereto. All of
the outstanding shares of capital stock of the Company's Subsidiaries have been
duly authorized and validly issued, were not issued in violation of any person's
preemptive rights, and are fully paid and nonassessable. Except as contemplated
by this Agreement, there are no outstanding subscriptions, options, warrants,
conversion rights or other rights, securities, agreements or commitments
obligating the Company or any of its Subsidiaries to issue, sell or otherwise
dispose of any shares of capital stock, or any securities or obligations
convertible into, or exercisable or exchangeable for, any shares of capital
stock, of any of the Company's Subsidiaries.
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3.4. AUTHORITY FOR AGREEMENT; NONCONTRAVENTION.
3.4.1. AUTHORITY. The Company has the corporate power and authority
to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the board of directors of the Company and no other
corporate proceedings on the part of the Company are necessary to authorize
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, other than the approval of the Merger by
the vote of the holders of at least two-thirds of the Company Common Stock.
This Agreement and the other agreements contemplated hereby to be signed by
the Company have been duly executed and delivered by the Company and
constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, subject to the
qualifications that enforcement of the rights and remedies created hereby
and thereby are subject to (a) bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium and other laws of general application
affecting the rights and remedies of creditors and (b) general principles
of equity (regardless of whether enforcement is considered in a proceeding
in equity or at law).
3.4.2. NO CONFLICT. Except as set forth on Schedule 3.4 hereto,
neither the execution and delivery of this Agreement by the Company, nor
the performance by the Company of its obligations hereunder, nor the
consummation by the Company of the transactions contemplated hereby will
(a) conflict with or result in a violation of any provision of the charter
documents or by-laws of the Company or its Subsidiaries, (b) with or
without the giving of notice or the lapse of time, or both, conflict with,
or result in any violation or breach of, or constitute a default under, or
result in any right to accelerate or result in the creation of any lien,
charge or encumbrance pursuant to, or right of termination under, any
provision of any note, mortgage, indenture, lease, instrument or other
agreement, permit, concession, grant, franchise, license, judgment, order,
decree, statute, ordinance, rule or regulation to which the Company or any
of its Subsidiaries is a party or by which any of them or any of their
assets or properties is bound or which is applicable to any of them or any
of their assets or properties. No authorization, consent or approval of, or
filing with or notice to, any United States or foreign governmental or
public body or authority (each a "Governmental Entity") is necessary for
the execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby, except
for (i) the filing of the Certificate of Merger with the Secretary of State
of the State of Delaware, (ii) the filing of the Registration Statement
with the SEC in accordance with the Securities Act, (iii) the filing of the
Proxy Statement with the SEC in accordance with the Exchange Act, (iv) any
filings as may be required under applicable state securities laws and the
laws of any foreign country, and (v) such other consents, authorizations,
filings, approvals and registrations which if not obtained or made would
not have a Company Material Adverse Effect.
3.5. FINANCIAL STATEMENTS. The Company has previously furnished Parent
with an accurate and complete copy of the consolidated balance sheets of the
Company as of December 31, 1995, 1994, 1993 and 1992 and the consolidated
statements of operations, cash flows and changes in stockholders' equity of the
Company and its Subsidiaries for the respective years then ended, as audited by
Deloitte & Touche LLP, the Company's certified public accountants. Collectively,
the financial statements referred to in the immediately preceding sentence are
sometimes referred to herein as the "Company Financial Statements" and the
audited consolidated balance sheet of the Company and its Subsidiaries as of
December 31, 1995 is referred to herein as the "Company Balance Sheet." Each of
the balance sheets included in the Company Financial Statements (including any
related notes) fairly presents in all material respects the financial position
of the Company and its Subsidiaries as of its date, and the other statements
included in the Company Financial Statements (including any related notes)
fairly present in all material respects the results of operations, cash flows
and stockholders' equity, as the case may be, of the Company and its
Subsidiaries for the periods therein set forth, in each case in accordance with
GAAP consistently applied (except as otherwise stated therein).
3.6. ABSENCE OF MATERIAL ADVERSE CHANGES AND UNDISCLOSED
LIABILITIES. Except as set forth on Schedule 3.6 hereto, since the date of the
Company Balance Sheet, (a) the Company has not suffered any Company Material
Adverse Effect, nor has there occurred or arisen any event, condition or state
of facts of
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any character that could reasonably be expected to result in a Company Material
Adverse Effect and (b) there have been no dividends or other distributions
declared or paid in respect of, or any repurchase or redemption by the Company
of, any of the shares of capital stock of the Company, or any commitment
relating to any of the foregoing. Except as set forth on Schedule 3.6, the
Company has no material liabilities or obligations, fixed, accrued, contingent
or otherwise (collectively, "Liabilities"), that are not fully reflected or
provided for on, or disclosed in the notes to, the balance sheets included in
the Company Financial Statements, except (i) Liabilities incurred in the
ordinary course of business since the date of the Company Balance Sheet, none of
which individually or in the aggregate has had or could reasonably be expected
to have a Company Material Adverse Effect, (ii) Liabilities permitted or
contemplated by this Agreement, and (iii) Liabilities expressly disclosed on the
Schedules delivered hereunder.
3.7. COMPLIANCE WITH APPLICABLE LAW, ARTICLES AND BY-LAWS. Each of the
Company and its Subsidiaries has all requisite licenses, permits and
certificates from all Governmental Entities (collectively, "Permits") necessary
to conduct its business as currently conducted, and to own, lease and operate
its properties in the manner currently held and operated, except as set forth on
Schedule 3.7 hereto. All of the Company's and its Subsidiaries' Permits are in
full force and effect. Each of the Company and its Subsidiaries is in compliance
in all material respects with all the terms and conditions related to such
Permits. There are no proceedings in progress, pending or, to the knowledge of
the Company, threatened, which may result in revocation, cancellation,
suspension, or any material adverse modification of any of such Permits. The
business of the Company and its Subsidiaries is not being conducted in violation
of any applicable law, statute, ordinance, regulation, rule, judgment, decree,
order, Permit, concession, grant or other authorization of any Governmental
Entity, except for any violations that, in the aggregate, do not and could not
reasonably be expected to have a Company Material Adverse Effect or prevent or
materially delay the consummation of the transactions contemplated hereby.
Neither the Company nor its Subsidiaries is in default or violation of any
provision of its charter documents or its by-laws.
3.8. LITIGATION AND AUDITS. Except for any claim, action, suit or
proceeding set forth on Schedule 3.8 or 3.9 hereto, (a) there is no
investigation by any Governmental Entity with respect to the Company or its
Subsidiaries pending or, to the knowledge of the Company, threatened, nor has
any Governmental Entity indicated to the Company or any of its Subsidiaries an
intention to conduct the same; (b) there is no claim, action, suit, arbitration
or proceeding pending or, to the knowledge of the Company, threatened against or
involving the Company or any of its Subsidiaries, or any of its or their assets
or properties, at law or in equity, or before any arbitrator or Governmental
Entity, that, if adversely determined, either singly or in the aggregate, would
have a Company Material Adverse Effect or prevent or materially delay the
consummation of the transactions contemplated hereby; and (c) there are no
judgments, decrees, injunctions or orders of any Governmental Entity or
arbitrator outstanding against the Company or any of its Subsidiaries.
3.9. TAX MATTERS.
3.9.1. FILING OF RETURNS. Except as set forth on Schedule 3.9 hereto,
the Company and its Subsidiaries have prepared and filed on a timely basis
with all appropriate governmental authorities all material returns in
respect of Taxes that they are required to file on or prior to the Closing,
and all such returns are correct and complete in all material respects.
3.9.2. PAYMENT OF TAXES. Except as set forth on Schedule 3.9, the
Company and its Subsidiaries have paid in full all Taxes due on or before
the Closing and, in the case of Taxes accruing on or before the Closing
that are not due on or before the Closing, the Company has made adequate
provision in its books and records and financial statements for such
payment.
3.9.3. WITHHOLDING. Except as set forth on Schedule 3.9, the Company
and its Subsidiaries have withheld from each payment made to any of its
present or former employees, officers and directors all amounts required by
law to be withheld and has, where required, remitted such amounts within
the applicable periods to the appropriate governmental authorities.
3.9.4. ASSESSMENTS. Except as set forth on Schedule 3.9, there are no
assessments of the Company or its Subsidiaries with respect to Taxes that
have been issued and are outstanding. Except as set forth on
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Schedule 3.9, no Governmental Entity has examined or audited the Company in
respect of Taxes. Except as set forth on Schedule 3.9, neither the Company
nor any of its Subsidiaries has received any indication in writing from any
Governmental Entity that an assessment in respect of the Company or any of
its Subsidiaries is proposed. Neither the Company nor any of its
Subsidiaries has executed or filed any agreement extending the period of
assessment or collection of any Taxes.
3.9.5. ACCESS TO RETURNS. Parent has been provided with a copy of or
access to all federal, state, local and foreign income Tax returns filed by
the Company and its Subsidiaries since January 1, 1990. Parent has been
provided with a copy of or access to all assessments, extensions and
waivers resulting from any audits of the Company or its Subsidiaries by a
Governmental Entity in respect of Taxes, and all such assessments and
related penalties and interest have been paid in full unless being
contested in good faith by the Company or its Subsidiaries.
3.9.6. DEFINITION OF TAXES. As used herein, "Taxes" means all taxes,
levies and other assessments, including all income, sales, use, goods and
services, value added, capital, capital gains, net worth, transfer,
profits, withholding, payroll, employer health, excise, real property and
personal property taxes, and any other taxes, assessments or similar
charges in the nature of a tax including unemployment insurance payments
and workers compensation premiums, together with any installments with
respect thereto, and any interest, fines and penalties, imposed by any
Governmental Entity (including federal, state, municipal and foreign
Governmental Entities), and whether disputed or not.
3.10. EMPLOYEE BENEFIT PLANS.
3.10.1. LIST OF PLANS. Schedule 3.10 hereto contains a correct and
complete list of all pension, profit sharing, retirement, deferred
compensation, welfare, legal services, medical, dental or other employee
benefit or health insurance plans, life insurance or other death benefit
plans, disability, stock option, stock purchase, stock compensation, bonus,
vacation pay, severance pay and other similar plans, programs or
agreements, and every material written personnel policy, relating to any
persons employed by the Company or in which any person employed by the
Company is eligible to participate and which is currently maintained or
that was maintained at any time in the last five calendar years by the
Company or any ERISA Affiliate (collectively, the "Company Plans"). The
Company has made available to Parent complete copies, as of the date
hereof, of all of the Company Plans that have been reduced to writing,
together with all documents establishing or constituting any related trust,
annuity contract, insurance contract or other funding instrument, and
summaries of those that have not been reduced to writing. The Company has
made available to Parent complete copies of current plan summaries,
employee booklets, personnel manuals and other material documents or
written materials concerning the Company Plans that are in the possession
of the Company as of the date hereof. The Company does not have any
"defined benefit plans" as defined in Section 3(35) of ERISA.
3.10.2. ERISA. Neither the Company nor any ERISA Affiliate of the
Company has incurred any "withdrawal liability" calculated under Section
4211 of ERISA and there has been no event or circumstance which would cause
them to incur any such liability. Neither the Company nor any ERISA
Affiliate of the Company has ever maintained a Company Plan providing
health or life insurance benefits to former employees, other than as
required pursuant to Section 4980B of the Code or to any state law
conversion rights. No plan previously maintained by the Company or its
ERISA Affiliates which was subject to ERISA has been terminated; no
proceedings to terminate any such plan have been instituted within the
meaning of Subtitle C of Title IV of ERISA; and no reportable event within
the meaning of Section 4043 of said Subtitle C of Title IV of ERISA with
respect to which the requirement to file a notice with the Pension Benefit
Guaranty Corporation has not been waived has occurred with respect to any
such Company Plan, and no liability to the Pension Benefit Guaranty
Corporation has been incurred by the Company or its ERISA Affiliates.
Except as set forth on Schedule 3.10, with respect to all the Company
Plans, the Company and every ERISA Affiliate of the Company are in material
compliance with all requirements prescribed by all statutes, regulations,
orders or rules currently in effect, and have in all material respects
performed all obligations required to be performed by them. Neither the
Company nor any ERISA Affiliate of the Company, nor any of their directors,
officers, employees or agents, nor any
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trustee or administrator of any trust created under the Company Plans, have
engaged in or been a party to any "prohibited transaction" as defined in
Section 4975 of the Code and Section 406 of ERISA which could subject the
Company or its Affiliates, directors or employees or the Company Plans or
the trusts relating thereto or any party dealing with any of the Company
Plans or trusts to any tax or penalty on "prohibited transactions" imposed
by Section 4975 of the Code. Except as set forth on Schedule 3.10, neither
the Company Plans nor the trusts created thereunder have incurred any
"accumulated funding deficiency," as such term is defined in Section 412 of
the Code and regulations issued thereunder, whether or not waived.
3.10.3. PLAN DETERMINATIONS. Each Company Plan intended to qualify
under Section 401(a) of the Code has been determined by the Internal
Revenue Service to so qualify, and the trusts created thereunder have been
determined to be exempt from tax under Section 501(a) of the Code; copies
of all determination letters have been delivered to the Company; and, to
the knowledge of the Company, nothing has occurred since the date of such
determination letters which might cause the loss of such qualification or
exemption. With respect to each Company Plan which is a qualified profit
sharing plan, all employer contributions accrued for plan years ending
prior to the Closing under the Company Plan terms and applicable law have
been made.
3.10.4. FUNDING. Except as set forth on Schedule 3.10:
(a) all contributions, premiums or other payments due or required
to be made to the Company Plans as of the date hereof have been made as
of the date hereof or are properly reflected on the Company Balance
Sheet;
(b) there are no actions, liens, suits or claims pending or, to the
knowledge of the Company, threatened (other than routine claims for
benefits) with respect to any Company Plan;
(c) to the knowledge of the Company, no event has occurred, and
there exists no condition or set of circumstances, which presents a
material risk of a partial termination (within the meaning of Section
411(d)(3) of the Code) of any Company Plan;
(d) each Company Plan that is a "group health plan" (as defined in
Section 607(1) of ERISA) has been operated at all times in substantial
compliance with the provisions of COBRA and any applicable, similar
state law; and
(e) with respect to any Company Plan that is qualified under
Section 401(k) of the Code, individually and in the aggregate, no event
has occurred, and to the knowledge of the Company, there exists no
condition or set of circumstances in connection with which the Company
could be subject to any liability that is reasonably likely to have a
Company Material Adverse Effect (except liability for benefits claims
and funding obligations payable in the ordinary course) under ERISA, the
Code or any other applicable law.
3.11. EMPLOYMENT-RELATED MATTERS.
3.11.1. LABOR RELATIONS. Except to the extent set forth on Schedule
3.11 hereto: (a) neither the Company nor any of its Subsidiaries is a party
to any collective bargaining agreement or other contract or agreement with
any labor organization or other representative of any of the employees of
the Company or any of its Subsidiaries; (b) there is no labor strike,
dispute, slowdown, work stoppage or lockout that is pending or threatened
against or otherwise affecting the Company or any of its Subsidiaries, and
neither the Company nor any of its Subsidiaries has experienced the same
since January 1, 1992; (c) neither the Company nor any of its Subsidiaries
have closed any plant or facility, effectuated any layoffs of employees or
implemented any early retirement or separation program at any time from or
after January 1, 1992, nor has the Company or any of its Subsidiaries
planned or announced any such action or program for the future with respect
to which the Company has any material liability; and (d) all salaries,
wages, vacation pay, bonuses, commissions and other compensation payable by
the Company or its Subsidiaries to the employees of the Company and its
Subsidiaries before the date hereof have been paid in all material respects
as of the date hereof.
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3.11.2. EMPLOYEE LIST. The Company has heretofore delivered to Parent
a list (the "Employee List") dated as of January 18, 1996 containing the
name of each employee of the Company and its Subsidiaries, and each such
employee's position, starting employment date and annual salary. The
Employee List is correct and complete as of the date of the Employee List.
No third party has asserted any claim, or, to the knowledge of the Company,
has any reasonable basis to assert any valid claim, against the Company or
its Subsidiaries that either the continued employment by, or association
with, the Company or its Subsidiaries of any of the present officers or
employees of, or consultants to, the Company or its Subsidiaries
contravenes any agreements or laws applicable to unfair competition, trade
secrets or proprietary information.
3.12. ENVIRONMENTAL.
3.12.1. ENVIRONMENTAL LAWS. Except for matters which, individually or
in the aggregate, would not have a Company Material Adverse Effect, (a) the
Company and each of its Subsidiaries is in compliance with all applicable
Environmental Laws in effect on the date hereof; (b) the Company and each
of its Subsidiaries have not received any written communication that
alleges that the Company or any of its Subsidiaries is not in compliance in
all material respects with all applicable Environmental Laws in effect on
the date hereof; (c) to the knowledge of the Company, there are no
circumstances that may prevent or interfere with compliance in the future
with all applicable Environmental Laws; (d) all material Permits and other
governmental authorizations currently held by the Company and each of its
Subsidiaries pursuant to the Environmental Laws are in full force and
effect, the Company and its Subsidiaries are in compliance with all of the
terms of such Permits and authorizations, and no other Permits or
authorizations are required by the Company or its Subsidiaries for the
conduct of its and their business on the date hereof; and (e) the
management, handling, storage, transportation, treatment, and disposal by
the Company and each of its Subsidiaries of all Materials of Environmental
Concern has been in compliance with all applicable Environmental Laws.
3.12.2. ENVIRONMENTAL CLAIMS. Except as set forth on Schedule 3.12
hereto and except for Environmental Claims which, individually or in the
aggregate, would not have a Company Material Adverse Effect, there is no
Environmental Claim pending or, to the knowledge of the Company, threatened
against or involving the Company or any of its Subsidiaries or against any
person or entity whose liability for any Environmental Claim the Company or
any of its Subsidiaries has or may have retained or assumed either
contractually or by operation of law.
3.12.3. NO BASIS FOR CLAIMS. Except for matters which, individually
or in the aggregate, would not have a Company Material Adverse Effect, to
the knowledge of the Company, there are no past or present actions or
activities by the Company or any of its Subsidiaries, or any circumstances,
conditions, events or incidents, including the storage, treatment, release,
emission, discharge, disposal or arrangement for disposal of any Material
of Environmental Concern, that could reasonably form the basis of any
Environmental Claim against the Company or any of its Subsidiaries or
against any person or entity whose liability for any Environmental Claim
the Company or any of its Subsidiaries may have retained or assumed either
contractually or by operation of law.
3.13. NO BROKER'S OR FINDER'S FEES. The Company has not paid or become
obligated to pay any fee or commission to any broker, finder, financial advisor
or intermediary in connection with the transactions contemplated by this
Agreement.
3.14. ASSETS OTHER THAN REAL PROPERTY.
3.14.1. TITLE. The Company or one of its Subsidiaries has good and
marketable title to all of the tangible assets shown on the Company Balance
Sheet, in each case, free and clear of any mortgage, pledge, lien, security
interest, lease or other encumbrance (collectively, "Encumbrances"), except
for (a) assets disposed of since the date of the Company Balance Sheet in
the ordinary course of business and in a manner consistent with past
practices, (b) liabilities, obligations and Encumbrances reflected in the
Company Balance Sheet or otherwise in the Company Financial Statements, (c)
Permitted Encumbrances, and (d) liabilities, obligations and Encumbrances
set forth on Schedule 3.14 hereto.
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3.14.2. INVENTORY. Except as set forth on Schedule 3.14, the
inventory reflected on the Company Balance Sheet contains no material
amount of slow-moving or obsolete items that have not been reserved for.
The values at which such inventories are carried on the Company Balance
Sheet reflect the normal inventory valuation policies of the Company and
are carried in accordance with GAAP, consistently applied.
3.14.3. CONDITION. Except as set forth on Schedule 3.14, all
receivables shown on the Company Balance Sheet and all receivables accrued
by the Company since the date of the Company Balance Sheet, have been
collected or are collectible in all material respects in the aggregate
amount shown, less any allowances for doubtful accounts reflected therein,
and, in the case of receivables arising since the date of the Company
Balance Sheet, any additional allowance in respect thereof calculated in a
manner consistent with the allowance reflected in the Company Balance
Sheet. All material plant, equipment and personal property owned by the
Company and its Subsidiaries and regularly used in its and their businesses
is in good operating condition and repair, ordinary wear and tear excepted.
3.15. REAL PROPERTY.
3.15.1. COMPANY REAL PROPERTY. Neither the Company nor any of its
Subsidiaries owns any real property.
3.15.2. COMPANY LEASES. Schedule 3.15 hereto lists all of the Company
Leases. Complete copies of the Company Leases, and all material amendments
thereto (which are identified on Schedule 3.15), have been made available
by the Company to Parent. The Company Leases grant leasehold estates free
and clear of all Encumbrances granted by or caused by the actions of the
Company. To the knowledge of the Company, the Company Leases are in full
force and effect and are binding and enforceable against each of the
parties thereto in accordance with their respective terms. Except as set
forth on Schedule 3.15, neither the Company nor any of its Subsidiaries,
nor, to the knowledge of the Company, any other party to a Company Lease,
has committed a material breach or default under any Company Lease, nor has
there occurred any event that with the passage of time or the giving of
notice or both would constitute such a breach or default, nor are there any
facts or circumstances that would reasonably indicate that the Company or
any of its Subsidiaries is likely to be in material breach or default
thereunder. Schedule 3.15 correctly identifies each Company Lease the
provisions of which would be materially and adversely affected by the
transactions contemplated hereby and each Company Lease that requires the
consent of any third party in connection with the transactions contemplated
hereby. No material construction, alteration or other leasehold improvement
work with respect to the real property covered by any of the Company Leases
remains to be paid for or to be performed by the Company or any of its
Subsidiaries. No Company Leases have an unexpired term which including any
renewal or extensions of such term provided for in the Company Lease could
exceed fifty years.
3.15.3. CONDITION. All buildings, structures and fixtures, or parts
thereof, used by the Company or any of its Subsidiaries in the conduct of
its business are in good operating condition and repair, ordinary wear and
tear excepted, and are insured with coverages that are usual and customary
for similar properties and similar businesses or are required, pursuant to
the terms of the Company Leases, to be insured by third parties.
3.16. AGREEMENTS, CONTRACTS AND COMMITMENTS.
3.16.1. COMPANY AGREEMENTS. Except as set forth on Schedule 3.16
hereto or any other Schedule hereto, neither the Company nor any of its
Subsidiaries is a party to:
(a) any bonus, deferred compensation, pension, severance,
profit-sharing, stock option, employee stock purchase or retirement
plan, contract or arrangement or other employee benefit plan or
arrangement;
(b) any employment agreement with any present employee, officer,
director or consultant (or former employees, officers, directors and
consultants to the extent there remain at the date hereof obligations to
be performed by the Company or any of its Subsidiaries);
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(c) any agreement for personal services or employment with a term
of service or employment specified in the agreement or any agreement for
personal services or employment in which the Company or any of its
Subsidiaries has agreed on the termination of such agreement to make any
payments greater than those that would otherwise be imposed by law;
(d) any agreement of guarantee or indemnification in an amount that
is material to the Company and its Subsidiaries taken as a whole;
(e) any agreement or commitment containing a covenant limiting or
purporting to limit the freedom of the Company or any of its
Subsidiaries to compete with any person in any geographic area or to
engage in any line of business;
(f) any lease other than the Company Leases under which the Company
or any of its Subsidiaries is lessee that involves payments of $50,000
or more per annum or is material to the conduct of the business of the
Company;
(g) any joint venture or profit-sharing agreement (other than with
employees);
(h) except for trade indebtedness incurred in the ordinary course
of business and equipment leases entered into in the ordinary course of
business, any loan or credit agreements providing for the extension of
credit to the Company or any of its Subsidiaries or any instrument
evidencing or related in any way to indebtedness incurred in the
acquisition of companies or other entities or indebtedness for borrowed
money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee, or otherwise that individually
is in the amount of $50,000 or more;
(i) any license agreement, either as licensor or licensee,
involving payments (including past payments) of $50,000 or more, or any
material distributor, dealer, reseller, franchise, manufacturer's
representative, or sales agency or any other similar material contract
or commitment;
(j) any agreement granting exclusive rights to, or providing for
the sale of, all or any portion of the Company Proprietary Rights;
(k) any agreement or arrangement providing for the payment of any
commission based on sales other than to employees of the Company or any
of its Subsidiaries;
(l) any agreement for the sale by the Company or its Subsidiaries
of materials, products, services or supplies that involves future
payments to the Company or its Subsidiaries of more than $50,000;
(m) any agreement for the purchase by the Company or any of its
Subsidiaries of any materials, equipment, services, or supplies, that
either (i) involves a binding commitment by the Company or any of its
Subsidiaries to make future payments in excess of $50,000 and cannot be
terminated by it without penalty upon less than three months' notice or
(ii) was not entered into in the ordinary course of business;
(n) any agreement or arrangement with any third party to develop
any intellectual property or other asset expected to be used or
currently used or useful in the business of the Company and its
Subsidiaries;
(o) any agreement or commitment for the acquisition, construction
or sale of fixed assets owned or to be owned by the Company or any of
its Subsidiaries that involves future payments by it of more than
$50,000;
(p) any agreement or commitment to which present or former
directors, officers or Affiliates of the Company (or directors or
officers of an Affiliate of the Company) are also parties;
(q) any agreement not described above (ignoring, solely for this
purpose, any dollar amount thresholds in those descriptions) involving
the payment or receipt by the Company or any of its Subsidiaries of more
than $100,000, other than the Company Leases; or
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(r) any agreement not described above that was not made in the
ordinary course of business and that is material to the financial
condition, business, operations, assets, results of operations or
prospects of the Company and its Subsidiaries taken as a whole.
3.16.2. VALIDITY. Except as set forth on Schedule 3.16, to the
knowledge of the Company, all contracts, leases, instruments, licenses and
other agreements required to be set forth on Schedule 3.16 are valid and in
full force and effect and the Company has not, nor, to the knowledge of the
Company, has any other party thereto, breached any provision of, or
defaulted under the terms of any such contract, lease, instrument, license
or other agreement, except for any breaches or defaults that, in the
aggregate, would not reasonably be expected to have a Company Material
Adverse Effect or have been cured or waived. Schedule 3.16 identifies each
contract and other document set forth on Schedule 3.16 or disclosed by the
Company on another Schedule hereto that requires the consent of a third
party in connection with the transactions contemplated hereby.
3.17. INTELLECTUAL PROPERTY.
3.17.1. RIGHT TO INTELLECTUAL PROPERTY. Except as set forth on
Schedule 3.17 hereto, the Company and its Subsidiaries own, or have
perpetual, fully paid, worldwide rights to use, all patents, trademarks,
trade names, service marks, copyrights, and any applications therefor,
maskworks, net lists, schematics, technology, know-how, computer software
programs or applications (in both source code and object code form), and
tangible or intangible proprietary information or material (excluding
Commercial Software) that are used in the business of the Company and its
Subsidiaries as currently conducted (the "Company Proprietary Rights").
3.17.2. NO CONFLICT. Set forth on Schedule 3.17 is a complete list of
all patents, trademarks, registered copyrights, trade names and service
marks, and any applications therefor, included in the Company Proprietary
Rights, specifying, where applicable, the jurisdictions in which each such
Company Proprietary Right has been issued or registered or in which an
application for such issuance and registration has been filed, including
the respective registration or application numbers and the names of all
registered owners. Except as set forth on Schedule 3.17, none of the
Company's or its Subsidiaries' currently marketed software products has
been registered for copyright protection with the United States Copyright
Office or any foreign offices nor has the Company or any of its
Subsidiaries been requested to make any such registration. Set forth on
Schedule 3.17 is a complete list of all material licenses, sublicenses and
other agreements as to which the Company or any of its Subsidiaries is a
party and pursuant to which the Company or any of its Subsidiaries or any
other person is authorized to use any Company Proprietary Right (excluding
End-User Licenses) or other trade secret material to the business of the
Company and its Subsidiaries, and includes the identity of all parties
thereto, a description of the nature and subject matter thereof, the
applicable royalty and the term thereof. Neither the Company nor any of its
Subsidiaries is in violation of any license, sublicense or agreement
described on such list except such violations as do not materially impair
the Company or its Subsidiaries' rights under such license, sublicense or
agreement. Except as disclosed in this Article 3, the execution and
delivery of this Agreement by the Company, and the consummation of the
transactions contemplated hereby, will neither cause the Company nor any of
its Subsidiaries to be in violation or default under any such license,
sublicense or agreement, nor entitle any other party to any such license,
sublicense or agreement to terminate or modify such license, sublicense or
agreement. Except as set forth on Schedule 3.17, the Company or one of its
Subsidiaries is the sole and exclusive owner or licensee of, with all
right, title and interest in and to (free and clear of any and all liens,
claims and encumbrances), the Company Proprietary Rights, and has sole and
exclusive rights (and is not contractually obligated to pay any
compensation to any third party in respect thereof) to the use thereof or
the material covered thereby in connection with the services or products in
respect of which the Company Proprietary Rights are being used. No claims
with respect to the Company Proprietary Rights have been asserted or, to
the knowledge of the Company, are threatened by any person nor are there
any valid grounds for any bona fide claims (a) to the effect that the
manufacture, sale, licensing or use of any of the products of the Company
and its Subsidiaries as now manufactured, sold or licensed or used or
proposed for manufacture, use, sale or licensing by the Company and its
Subsidiaries infringes on any copyright, patent, trademark, service mark
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or trade secret, (b) against the use by the Company or any of its
Subsidiaries of any trademarks, service marks, trade names, trade secrets,
copyrights, patents, technology, know-how or computer software programs and
applications used in the Company's or any of its Subsidiaries' business as
currently conducted or as proposed to be conducted by the Company or any of
its Subsidiaries, or (c) challenging the ownership by the Company or any of
its Subsidiaries, validity or effectiveness of any of the Company
Proprietary Rights. All material registered trademarks, service marks and
copyrights held by the Company and its Subsidiaries are valid and
subsisting. To the knowledge of the Company there is no material
unauthorized use, infringement or misappropriation of any of the Company
Proprietary Rights by any third party, including any employee or former
employee of the Company or any of its Subsidiaries. No Company Proprietary
Right or product of the Company or any of its Subsidiaries is subject to
any outstanding decree, order, judgment, or stipulation restricting in any
manner the licensing thereof by the Company or any of its Subsidiaries.
Neither the Company nor any of its Subsidiaries has entered into any
agreement (other than exclusive distribution agreements) under which the
Company or its Subsidiaries are restricted from selling, licensing or
otherwise distributing any of its products to any class of customers, in
any geographic area, during any period of time or in any segment of the
market. The Company's products, packaging and documentation contain
copyright notices sufficient to maintain copyright protection on the
copyrighted portions of the Company Proprietary Rights.
3.17.3. EMPLOYEE AGREEMENTS. Except as set forth on Schedule 3.17,
each employee, officer and consultant of the Company and its Subsidiaries
has executed a confidentiality agreement in substantially the form attached
hereto as Schedule 3.17.3, providing the Company or one of its Subsidiaries
with title and ownership to the Company Proprietary Rights developed or
used by the Company and its Subsidiaries in their business. No employee,
officer or consultant of the Company and its Subsidiaries is in violation
of any term of any employment or consulting contract, proprietary
information and inventions agreement, non-competition agreement, or any
other contract or agreement relating to the relationship of any such
employee, officer or consultant with the Company or any previous employer.
3.18. INSURANCE CONTRACTS. Schedule 3.18 hereto lists all contracts of
insurance and indemnity (not shown in any other Schedule to this Agreement) in
force at the date hereof with respect to the Company and its Subsidiaries. Such
contracts of insurance and indemnity and those shown in other Schedules to this
Agreement (collectively, the "Company Insurance Contracts") insure against such
risks, and are in such amounts, as appropriate and reasonable considering the
Company and its Subsidiaries' property, business and operations. All of the
Company Insurance Contracts are in full force and effect, with no default
thereunder by the Company or its Subsidiaries which could permit the insurer to
deny payment of claims thereunder. The Company has not received notice from any
of its insurance carriers that any insurance premiums will be materially
increased in the future or that any insurance coverage provided under the
Company Insurance Contracts will not be available in the future on substantially
the same terms as now in effect. The Company has not received or given a notice
of cancellation with respect to any of the Company Insurance Contracts.
3.19. BANKING RELATIONSHIPS. Schedule 3.19 hereto shows the names and
locations of all banks and trust companies in which the Company or any of its
Subsidiaries has accounts, lines of credit or safety deposit boxes and, with
respect to each account, line of credit or safety deposit box, the names of all
persons authorized to draw thereon or to have access thereto.
3.20. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The information
supplied by the Company for inclusion in the Registration Statement shall not at
the time the Registration Statement is filed with the SEC and at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. The
information supplied by the Company for inclusion in the proxy
statement/prospectus to be sent to the stockholders of the Company and
stockholders of Parent in connection with the meeting of the Company's
stockholders to consider the Merger (the "Company Meeting") and in connection
with the meeting of Parent's stockholders to consider the issuance of shares of
Parent Stock pursuant to the Merger (the "Parent Meeting") (such proxy
statement/prospectus as amended or supplemented is referred to herein as the
"Proxy Statement") shall not, on the date the Proxy Statement is first mailed to
the Company's stockholders and Parent's stockholders, at the time of the Company
Meeting or
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Parent Meeting and at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not false or misleading; or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Company
Meeting or Parent Meeting which has become false or misleading. The Proxy
Statement will comply as to form in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder. If at any time prior
to the Effective Time any event relating to the Company or any of its
affiliates, officers or directors should be discovered by the Company which
should be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement, the Company shall promptly inform Parent.
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to any information supplied by Parent or Merger Sub which is
contained in any of the foregoing documents.
3.21. POOLING. To the knowledge of the Company, based on consultation with
the Company's independent accountants, neither the Company nor any of its
directors, officers or shareholders has taken any action that would prevent
Parent from accounting for the Merger as a pooling of interests under GAAP.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub, jointly and severally, represent and warrant to the
Stockholders as follows:
4.1. CORPORATE STATUS OF PARENT AND ITS SUBSIDIARIES. Parent and each of
its Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, with the
requisite corporate power to own, operate and lease its properties and to carry
on its business as now being conducted. Parent and its Subsidiaries are duly
qualified or licensed to do business as foreign corporations and are in good
standing in all jurisdictions in which the character of the properties owned or
held under lease by each or the nature of the business transacted by each makes
qualification necessary, except where failure to be so qualified would not have
a Parent Material Adverse Effect.
4.2. CAPITAL STOCK.
4.2.1. AUTHORIZED STOCK OF PARENT. The authorized capital stock of
Parent consists of (a) 26,200,000 shares of Parent Stock, of which
12,474,686 shares are issued and outstanding as of February 29, 1996 and
(b) 1,600,000 shares of Preferred Stock, $1.00 par value per share, of
which no shares are issued and outstanding. All of the outstanding shares
of Parent Stock have been duly authorized and validly issued, were not
issued in violation of any person's preemptive rights, and are fully paid
and nonassessable. Each share of Parent Stock issued pursuant to the Merger
shall be validly issued, fully paid and nonassessable.
4.2.2. AUTHORIZED STOCK OF MERGER SUB. The authorized capital stock
of Merger Sub consists of 1,000 shares of Merger Sub Stock, of which 100
shares are issued and outstanding. All of the outstanding shares of Merger
Sub Stock have been duly authorized and validly issued, were not issued in
violation of any person's preemptive rights, and are fully paid and
nonassessable.
4.2.3. CONVERTIBLE SECURITIES OF PARENT. There are no outstanding
subscriptions, options, warrants, conversion rights or other rights,
securities, agreements or commitments obligating Parent to issue, sell or
otherwise dispose of shares of its capital stock, or any securities or
obligations convertible into, or exercisable or exchangeable for, any
shares of its capital stock, other than (a) the transactions contemplated
by this Agreement, (b) as disclosed in Schedule 4.2.3 hereto or (c)
pursuant to the Parent's Amended and Restated 1986 Incentive and
Nonqualified Stock Option Plan and Parent's 1992 Stock Purchase Plan
(together, the "Parent Stock Plans"). Since February 9, 1996, Parent has
not issued, sold or otherwise disposed of any shares of its capital stock,
other than as described on Schedule 4.2.3 hereto and pursuant to the Parent
Stock Plans. Except (a) for the transactions contemplated by this
Agreement, (b) as set forth on Schedule 4.2.3 and (c) for options and
rights granted pursuant to the
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Parent Stock Plans, neither Parent nor any Subsidiary is a party to or
bound by any outstanding options, restrictions or other obligations,
agreements or commitments to sell, repurchase, redeem or acquire any
outstanding shares of capital stock or other equity securities of Parent or
any Subsidiary. 2,006,524 shares of Parent Stock are subject to options
outstanding as of March 11, 1996 under Parent's Amended and Restated 1986
Incentive and Nonqualified Stock Option Plan and 4,550,000 shares of Parent
Stock are reserved for issuance under the Parent Stock Plans.
4.3. SUBSIDIARIES. A list of Parent's Subsidiaries and their respective
jurisdictions of incorporation is set forth on Schedule 4.3 hereto. Except as
set forth on Schedule 4.3, immediately prior to the Closing, Parent will
beneficially and of record own all of the outstanding securities of its
Subsidiaries (except for directors qualifying shares, nominee shares and the
like), free and clear of all liens, charges, pledges, security interests,
encumbrances, and other restrictions and agreements with respect thereto. All of
the outstanding shares of capital stock of Parent's Subsidiaries have been duly
authorized and validly issued, were not issued in violation of any person's
preemptive rights, and are fully paid and nonassessable. Except as contemplated
by this Agreement, there are no outstanding subscriptions, options, warrants,
conversion rights or other rights, securities, agreements or commitments
obligating Parent or any of its Subsidiaries to issue, sell or otherwise dispose
of any shares of capital stock, or any securities or obligations convertible
into, or exercisable or exchangeable for, any shares of capital stock, of any of
Parent's Subsidiaries.
4.4. AUTHORITY FOR AGREEMENT; NONCONTRAVENTION.
4.4.1. AUTHORITY OF PARENT. Each of Parent and Merger Sub has the
corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the boards of directors of
Parent and Merger Sub and the stockholder of Merger Sub and no other
corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby, other than the approval of the
issuance of the shares of Parent Stock pursuant to the Merger by the vote
of the holders of a majority of Parent Stock. This Agreement and the other
agreements contemplated hereby to be signed by Parent or Merger Sub have
been duly executed and delivered by Parent and Merger Sub, as the case may
be, and constitute valid and binding obligations of Parent and Merger Sub,
as the case may be, enforceable against Parent and Merger Sub in accordance
with their terms, subject to the qualifications that enforcement of the
rights and remedies created hereby and thereby are subject to (a)
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium
and other laws of general application affecting the rights and remedies of
creditors and (b) general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
4.4.2. NO CONFLICT. Except as set forth on Schedule 4.4.2 hereto,
neither the execution and delivery of this Agreement by Parent or Merger
Sub, nor the performance by Parent or Merger Sub of its obligations
hereunder, nor the consummation by Parent or Merger Sub of the transactions
contemplated hereby will (a) conflict with or result in a violation of any
provision of the charter documents or by-laws of Parent or its Subsidiaries
(including Merger Sub), or (b) with or without the giving of notice or the
lapse of time, or both, conflict with, or result in any violation or breach
of, or constitute a default under, or result in any right to accelerate or
result in the creation of any lien, charge or encumbrance pursuant to, or
right of termination under, any provision of any note, mortgage, indenture,
lease, instrument or other agreement, Permit, concession, grant, franchise,
license, judgment, order, decree, statute, ordinance, rule or regulation to
which Parent, Merger Sub or any of Parent's other Subsidiaries is a party
or by which any of them or any of their assets or properties is bound or
which is applicable to any of them or any of their assets or properties. No
authorization, consent or approval of, or filing with or notice to, any
Governmental Entity is necessary for the execution and delivery of this
Agreement by Parent or Merger Sub or the consummation by Parent or Merger
Sub of the transactions contemplated hereby, except for (i) the filing of
the Certificate of Merger with the Secretary of State of the State of
Delaware, (ii) the filing of a Form 8-K and Form 10-C with the SEC within
fifteen days and ten days, respectively, after the Closing, (iii) the
filing of the Registration Statement with the SEC in accordance with the
Securities Act, (iv) the filing of the Proxy Statement with the SEC in
accordance with the Exchange Act, (v) any
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filings as may be required under applicable state securities laws and the
laws of any foreign country, and (vi) such other consents, authorizations,
filings, approvals and registrations which if not obtained or made would
not have a Parent Material Adverse Effect.
4.5. SEC STATEMENTS, REPORTS AND DOCUMENTS. Parent has timely filed all
required forms, reports, statements and documents with the SEC since January 1,
1993. Parent heretofore has delivered or made available to counsel for the
Company true and complete copies of (a) its Annual Reports on Form 10-K for the
fiscal years ended June 30, 1994 and 1995, respectively, (b) its Quarterly
Reports on Form 10-Q for the fiscal quarters ended September 30, 1995 and
December 31, 1995, respectively, (c) all proxy statements relating to Parent's
meetings of stockholders (whether annual or special) held since June 30, 1994,
(d) all other forms, reports, statements and documents filed or required to be
filed by it with the SEC since June 30, 1994, and (e) all amendments and
supplements to all such reports and registration statements filed by Parent with
the SEC (the documents referred to in clauses (a), (b), (c), (d) and (e) being
hereinafter referred to as the "Parent Reports"). As of their respective dates,
the Parent Reports complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder, and did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements (including any
related notes) of Parent included in the Parent Reports were prepared in
conformity with GAAP applied on a consistent basis (except as otherwise stated
in the financial statements), and present fairly the consolidated financial
position, results of operations and changes in financial position of Parent and
its consolidated Subsidiaries as of the dates and for the periods indicated,
subject, in the case of unaudited interim consolidated financial statements, to
(i) the absence of certain notes thereto and (ii) normal year-end audit
adjustments which are not in the aggregate material. The consolidated balance
sheet of Parent and its Subsidiaries as at December 31, 1995, including the
notes thereto, is hereinafter referred to as the "Parent Balance Sheet." Parent
has heretofore furnished or made available to the Company a correct and complete
copy of any amendments or modifications, which have not yet been filed with the
SEC but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by Parent with the SEC pursuant to
the Securities Act or the Exchange Act.
4.6. ABSENCE OF MATERIAL ADVERSE CHANGES AND UNDISCLOSED
LIABILITIES. Since the date of the Parent Balance Sheet, (a) Parent has not
suffered any Parent Material Adverse Effect, nor has there occurred or arisen
any event, condition or state of facts of any character that could reasonably be
expected to result in a Parent Material Adverse Effect and (b) there have been
no dividends or other distributions declared or paid in respect of, or any
repurchase or redemption by Parent or its Subsidiaries of, any of the shares of
capital stock of Parent or its Subsidiaries, or any commitment related to the
foregoing except as contemplated by this Agreement and the transactions
contemplated hereby. Parent and its Subsidiaries, considered as a whole, have no
material Liabilities that are not fully reflected or provided for on, or
disclosed in the notes to, the Parent Balance Sheet or elsewhere in the Parent
Reports, except (i) Liabilities incurred in the ordinary course of business
since the date of the Parent Balance Sheet, none of which individually or in the
aggregate has had or could reasonably be expected to have a Parent Material
Adverse Effect, (ii) Liabilities permitted or contemplated by this Agreement,
and (iii) Liabilities expressly disclosed on the Schedules delivered hereunder.
4.7. COMPLIANCE WITH APPLICABLE LAW, CHARTER AND BY-LAWS. Each of Parent
and its Subsidiaries has all requisite Permits from all Governmental Entities
necessary to conduct its business as currently conducted, and to own, lease and
operate its properties in the manner currently held and operated, except as set
forth on Schedule 4.7 hereto. All of Parent's and its Subsidiaries' Permits are
in full force and effect. Each of Parent and its Subsidiaries is in compliance
in all material respects with all the terms and conditions related to such
Permits. There are no proceedings in progress, pending or, to the knowledge of
Parent, threatened, which may result in revocation, cancellation, suspension, or
any material adverse modification of any of such Permits. The business of Parent
and its Subsidiaries is not being conducted in violation of any applicable law,
statute, ordinance, regulation, rule, judgment, decree, order, Permit,
concession, grant or other authorization of any Governmental Entity (including
the applicable provisions of the Securities Act and the Exchange Act),
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except for any violations that, in the aggregate, do not and could not
reasonably be expected to have a Parent Material Adverse Effect or prevent or
materially delay the consummation of the transactions contemplated hereby.
Neither Parent nor any of its Subsidiaries is in default or violation of any
provision of its charter documents or its by-laws.
4.8. LITIGATION AND AUDITS. Except for any claim, action, suit or
proceeding disclosed in the Parent Reports or set forth on Schedule 4.8 hereto,
(a) there is no investigation by any Governmental Entity with respect to Parent
or its Subsidiaries pending or, to the knowledge of Parent, threatened, nor has
any Governmental Entity indicated to Parent or any of its Subsidiaries an
intention to conduct the same; (b) there is no claim, action, suit, arbitration
or proceeding pending or threatened against or involving Parent or any of its
Subsidiaries, or any of its or their assets or properties, at law or in equity,
or before any arbitrator or Governmental Entity, that, if adversely determined,
either singly or in the aggregate, would have a Parent Material Adverse Effect
or prevent or materially delay the consummation of the transactions contemplated
hereby; and (c) there are no judgments, decrees, injunctions or orders of any
arbitrator or Governmental Entity outstanding against Parent or any of its
Subsidiaries.
4.9. TAX MATTERS.
4.9.1. FILING OF RETURNS. Except as set forth on Schedule 4.9 hereto,
Parent and its Subsidiaries have prepared and filed on a timely basis with
all appropriate governmental authorities all returns and other documents in
respect of Taxes that they are required to file on or prior to the Closing,
and all such returns or other documents are correct and complete in all
material respects.
4.9.2. PAYMENT OF TAXES. Parent and its Subsidiaries have paid in
full all Taxes accruing due on or before the Closing and, in the case of
Taxes accruing on or before the Closing that are not due on or before the
Closing, Parent has made adequate provision in its books and records and
financial statements for such payment.
4.9.3. WITHHOLDING. Parent and its Subsidiaries have withheld from
each payment made to any of their present or former employees, officers and
directors all amounts required by law to be withheld and have, where
required, remitted such amounts within the applicable periods to the
appropriate governmental authorities.
4.9.4. ASSESSMENTS. There are no assessments of Parent or its
Subsidiaries with respect to Taxes that have been issued and are
outstanding. Except as set forth on Schedule 4.9, no Governmental Entity
has examined or audited Parent or its Subsidiaries in respect of Taxes.
Except as set forth on Schedule 4.9, neither Parent nor any of its
Subsidiaries has received any indication in writing from any Governmental
Entity that an assessment in respect of Parent or any of its Subsidiaries
is proposed. Neither Parent nor any of its Subsidiaries have executed or
filed any agreement extending the period of assessment or collection of any
Taxes.
4.9.5. ACCESS TO RETURNS. The Company has been provided with a copy
of or access to all federal, state, local and foreign income Tax returns
filed by Parent and its Subsidiaries since January 1, 1992. The Company has
been provided with a copy of or access to all assessments, extensions and
waivers resulting from any audits of Parent or its Subsidiaries by a
Governmental Entity in respect of Taxes, and all such assessments and
related penalties and interest have been paid in full unless being
contested in good faith by Parent or its Subsidiaries.
4.10. EMPLOYEE BENEFIT PLANS; COMPLIANCE WITH ERISA.
4.10.1. LIST OF PLANS. Schedule 4.10 hereto contains a correct and
complete list of all pension, profit sharing, retirement, deferred
compensation, welfare, legal services, medical, dental or other employee
benefit or health insurance plans, life insurance or other death benefit
plans, disability, stock option, stock purchase, stock compensation, bonus,
vacation pay, severance pay and other similar plans, programs, or
agreements, and every material written personnel policy relating to any
persons employed by Parent or in which any person employed by parent is
eligible to participate and which is currently maintained or was maintained
at any time in the last five calendar years by Parent or by any ERISA
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Affiliate (collectively, the "Parent Plans"). Parent has made available to
the Company complete copies, as of the date hereof, of all of the Parent
Plans that have been reduced to writing, together with all documents
establishing or constituting any related trust, annuity contract, insurance
contract or other funding instrument, and summaries of those that have not
been reduced to writing. Parent has made available to the Company complete
copies of current plan summaries, employee booklets, personnel manuals and
other material documents or written materials concerning the Parent Plans
that are in the possession of Parent as of the date hereof. Parent does not
have any "defined benefit plans" as defined in Section 3(35) of ERISA.
4.10.2. ERISA. Neither Parent nor any ERISA Affiliate has incurred
any "withdrawal liability" calculated under Section 4211 of ERISA and there
has been no event or circumstance which would cause them to incur any such
liability. Neither Parent nor any ERISA Affiliate has ever maintained a
Parent Plan providing health or life insurance benefits to former
employees, other than as required pursuant to Section 4980B of the Code or
to any state law conversion rights. No plan previously maintained by Parent
or its ERISA Affiliates which was subject to ERISA has been terminated; no
proceedings to terminate any such plan have been instituted within the
meaning of Subtitle C of Title IV of ERISA; and no reportable event within
the meaning of Section 4043 of said Subtitle C of Title IV of ERISA with
respect to which the requirement to file a notice with the Pension Benefit
Guaranty Corporation has not been waived has occurred with respect to any
such Parent Plan, and no liability to the Pension Benefit Guaranty
Corporation has been incurred by Parent or its ERISA Affiliates. With
respect to all the Parent Plans, Parent and every ERISA Affiliate are in
material compliance with all requirements prescribed by all statutes,
regulations, orders or rules currently in effect, and have in all material
respects performed all obligations required to be performed by them.
Neither Parent nor any ERISA Affiliate, nor any of their directors,
officers, employees or agents, nor any trustee or administrator of any
trust created under the Parent Plans, have engaged in or been a party to
any "prohibited transaction" as defined in Section 4975 of the Code and
Section 406 of ERISA which could subject Parent or its affiliates,
directors or employees or the Parent Plans or the trusts relating thereto
or any party dealing with any of the Parent Plans or trusts to any tax or
penalty on "prohibited transactions" imposed by Section 4975 of the Code.
Except as set forth on Schedule 4.10, neither the Parent Plans nor the
trusts created thereunder have incurred any "accumulated funding
deficiency," as such term is defined in Section 412 of the Code and
regulations issued thereunder, whether or not waived.
4.10.3. PLAN DETERMINATIONS. Each Parent Plan intended to qualify
under Section 401(a) of the Code has been determined by the Internal
Revenue Service to so qualify, and the trusts created thereunder have been
determined to be exempt from tax under Section 501(a) of the Code; copies
of all determination letters have been delivered to Parent; and, to the
knowledge of Parent, nothing has occurred since the date of such
determination letters which might cause the loss of such qualification or
exemption. With respect to each Parent Plan which is a qualified profit
sharing plan, all employer contributions accrued for plan years ending
prior to the Closing under the Parent Plan terms and applicable law have
been made.
4.10.4. FUNDING. Except as set forth on Schedule 4.10:
(a) all contributions, premiums or other payments due or required
to be made to the Parent Plans as of the date hereof have been made as
of the date hereof or are properly reflected on the Parent Balance
Sheet;
(b) there are no actions, liens, suits or claims pending or, to the
knowledge of Parent, threatened (other than routine claims for benefits)
with respect to any Parent Plan;
(c) to the knowledge of Parent, no event has occurred, and there
exists no condition or set of circumstances, which presents a material
risk of a partial termination (within the meaning of Section 411(d)(3)
of the Code) of any Parent Plan;
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(d) each Parent Plan that is a "group health plan" (as defined in
Section 607(1) of ERISA) has been operated at all times in substantial
compliance with the provisions of COBRA and any applicable, similar
state law; and
(e) with respect to any Parent Plan that is qualified under Section
401(k) of the Code, individually and in the aggregate, no event has
occurred, and to the knowledge of Parent, there exists no condition or
set of circumstances in connection with which Parent could be subject to
any liability that is reasonably likely to have a Parent Material
Adverse Effect (except liability for benefits claims and funding
obligations payable in the ordinary course) under ERISA, the Code or any
other applicable law.
4.11. EMPLOYMENT-RELATED MATTERS. (a) Neither Parent nor any of its
Subsidiaries is a party to any collective bargaining agreement or other contract
or agreement with any labor organization or other representative of any of the
employees of Parent or any of its Subsidiaries; (b) there is no labor strike,
dispute, slowdown, work stoppage, lockout or other labor controversy that is
pending or threatened against or otherwise affecting Parent or any of its
Subsidiaries, and neither Parent nor any of its Subsidiaries has experienced the
same since January 1, 1992; and (c) all salaries, wages, vacation pay, bonuses,
commissions and other compensation payable by Parent or its Subsidiaries to the
employees of Parent and its Subsidiaries before the date hereof have been paid
in all material respects as of the date hereof.
4.12. ENVIRONMENTAL.
4.12.1. ENVIRONMENTAL LAWS. Except for matters which, individually or
in the aggregate, would not have a Parent Material Adverse Effect, (a)
Parent and each of its Subsidiaries is in compliance with all applicable
Environmental Laws in effect on the date hereof; (b) Parent and each of its
Subsidiaries have not received any written communication that alleges that
Parent or any of its Subsidiaries is not in compliance in all material
respects with all applicable Environmental Laws in effect on the date
hereof; (c) to the knowledge of Parent, there are no circumstances that may
prevent or interfere with full compliance in the future with all applicable
Environmental Laws; (d) all material Permits and other governmental
authorizations currently held by Parent and each of its Subsidiaries
pursuant to the Environmental Laws are in full force and effect, Parent and
its Subsidiaries are in compliance with all of the terms of such Permits
and authorizations, and no other Permits or authorizations are required by
Parent or its Subsidiaries for the conduct of its and their business on the
date hereof; and (e) the management, handling, storage, transportation,
treatment, and disposal by Parent and each of its Subsidiaries of all
Materials of Environmental Concern has been in compliance with all
applicable Environmental Laws.
4.12.2. ENVIRONMENTAL CLAIMS. Except for Environmental Claims which,
individually or in the aggregate, would not have a Parent Material Adverse
Effect, there is no Environmental Claim pending or, to the knowledge of the
Parent, threatened against or involving Parent or any of its Subsidiaries
or against any person or entity whose liability for any Environmental Claim
Parent or any of its Subsidiaries has or may have retained or assumed
either contractually or by operation of law.
4.12.3. NO BASIS FOR CLAIMS. Except for matters which, individually
or in the aggregate, would not have a Parent Material Adverse Effect, to
the knowledge of Parent, there are no past or present actions or activities
of Parent or any of its Subsidiaries, or any circumstances, conditions,
events or incidents, including the storage, treatment, release, emission,
discharge, disposal or arrangement for disposal of any Material of
Environmental Concern, that could reasonably form the basis of any
Environmental Claim against Parent or any of its Subsidiaries or against
any person or entity whose liability for any Environmental Claim Parent or
any of its Subsidiaries may have retained or assumed either contractually
or by operation of law.
4.13. NO BROKER'S OR FINDER'S FEES. Except as set forth on Schedule 4.13
hereto, Parent has not paid or become obligated to pay any fee or commission to
any broker, finder, financial advisor or intermediary in connection with the
transactions contemplated by this Agreement.
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4.14. ASSETS OTHER THAN REAL PROPERTY.
4.14.1. TITLE. Parent or one of its Subsidiaries has good and
marketable title to all of the tangible assets shown on the Parent Balance
Sheet, in each case, free and clear of any Encumbrances, except for (a)
assets disposed of since the date of the Parent Balance Sheet in the
ordinary course of business and in a manner consistent with past practices,
(b) liabilities, obligations and Encumbrances reflected in the Parent
Balance Sheet or otherwise in the Parent Financial Statements, (c)
Permitted Encumbrances, and (d) liabilities, obligations and Encumbrances
set forth on Schedule 4.14 hereto.
4.14.2. INVENTORY. The inventory reflected on the Parent Balance
Sheet contains no material amount of slow-moving or obsolete items that
have not been reserved for. The values at which such inventories are
carried on the Parent Balance Sheet reflect the normal inventory valuation
policies of Parent and are carried in accordance with GAAP, consistently
applied.
4.14.3. CONDITION. All receivables shown on the Parent Balance Sheet
and all receivables accrued by Parent since the date of the Parent Balance
Sheet, have been collected or are collectible in all material respects in
the aggregate amount shown, less any allowances for doubtful accounts
reflected therein, and, in the case of receivables arising since the date
of the Parent Balance Sheet, any additional allowance in respect thereof
calculated in a manner consistent with the allowance reflected in the
Parent Balance Sheet. All material plant, equipment and personal property
owned by Parent and its Subsidiaries and regularly used in its and their
businesses is in good operating condition and repair, ordinary wear and
tear excepted.
4.15. REAL PROPERTY.
4.15.1. PARENT REAL PROPERTY. Neither Parent nor any of its
Subsidiaries owns any real property.
4.15.2. PARENT LEASES. Schedule 4.15 lists all of the Parent Leases.
Complete copies of the Parent Leases, and all material amendments thereto
(which are identified on Schedule 4.15), have been made available by Parent
to the Company. The Parent Leases grant leasehold estates free and clear of
all Encumbrances granted by or caused by the actions of Parent or its
Subsidiaries. To the knowledge of Parent, the Parent Leases are in full
force and effect and are binding and enforceable against each of the
parties thereto in accordance with their respective terms. Except as set
forth on Schedule 4.15, neither Parent nor any of its Subsidiaries, nor, to
the knowledge of Parent, any other party to a Parent Lease, has committed a
material breach or default under any Parent Lease, nor has there occurred
any event that with the passage of time or the giving of notice or both
would constitute such a breach or default, nor are there any facts or
circumstances that would reasonably indicate that Parent or any of its
Subsidiaries is likely to be in material breach or default thereunder. No
material construction, alteration or other leasehold improvement work with
respect to the real property covered by any of the Parent Leases remains to
be paid for or to be performed by Parent or any of its Subsidiaries. No
Parent Leases have an unexpired term which including any renewal or
extensions of such term provided for in the Parent Lease could exceed fifty
years.
4.15.3. CONDITION. All buildings, structures and fixtures, or parts
thereof, used by Parent or any of its Subsidiaries in the conduct of its
business are in good operating condition and repair, ordinary wear and tear
excepted, and are insured with coverages that are usual and customary for
similar properties and similar businesses or are required, pursuant to the
terms of the Parent Leases, to be insured by third parties.
4.16. AGREEMENTS, CONTRACTS AND COMMITMENTS. All contracts, leases,
instruments, licenses and other agreements required to be filed as an exhibit to
the Parent Reports or disclosed by Parent on a Schedule hereto (collectively,
"Parent Agreements") are valid and in full force and effect and neither Parent
nor any of its Subsidiaries has, nor has any other party thereto, breached any
provision of, or defaulted under the terms of, nor, to the knowledge of Parent,
are there any facts or circumstances that would reasonably indicate that Parent
or any of its Subsidiaries is likely to be in breach or default under any such
contract, lease, instrument, license or agreement, except for any breaches or
defaults that, in the aggregate, do not have and could not reasonably be
expected to have a Parent Material Adverse Effect.
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4.17. INTELLECTUAL PROPERTY.
4.17.1. RIGHT TO INTELLECTUAL PROPERTY. Except as set forth on
Schedule 4.17.1 hereto, Parent and its Subsidiaries own, or have perpetual,
fully paid, worldwide rights to use, all patents, trademarks, trade names,
service marks, copyrights, and any applications therefor, maskworks, net
lists, schematics, technology, know-how, computer software programs or
applications (in both source code and object code form), and tangible or
intangible proprietary information or material (excluding Commercial
Software) that are used in and are material to the business of Parent and
its Subsidiaries as currently conducted (the "Parent Proprietary Rights").
4.17.2. NO CONFLICT. The execution and delivery of this Agreement by
Parent, and the consummation of the transactions contemplated hereby, will
neither cause Parent nor any of its Subsidiaries to be in violation or
default under any material license, sublicense or agreement to which Parent
or any of its Subsidiaries is a party and pursuant to which Parent or any
of its Subsidiaries or any other person is authorized to use any Parent
Proprietary Right (excluding End-User Licenses) or other trade secret
material to the business of Parent and its Subsidiaries, nor entitle any
other party to any such license, sublicense or agreement to terminate or
modify such license, sublicense or agreement. No claims with respect to the
Parent Proprietary Rights have been asserted or, to the knowledge of
Parent, are threatened by any person nor are there any valid grounds for
any bona fide claims (a) to the effect that the manufacture, sale,
licensing or use of any of the products of Parent and its Subsidiaries as
now manufactured, sold or licensed or used or proposed for manufacture,
use, sale or licensing by Parent and its Subsidiaries infringes on any
copyright, patent, trademark, service mark or trade secret, (b) against the
use by Parent or any of its Subsidiaries of any trademarks, service marks,
trade names, trade secrets, copyrights, patents, technology, know-how or
computer software programs and applications used in Parent's or any of its
Subsidiaries' business as currently conducted or as proposed to be
conducted by Parent or any of its Subsidiaries, or (c) challenging the
ownership by Parent or any of its Subsidiaries, validity or effectiveness
of any of the Parent Proprietary Rights. To the knowledge of Parent there
is no material unauthorized use, infringement or misappropriation of any of
the Parent Proprietary Rights by any third party, including any employee or
former employee of Parent or any of its Subsidiaries. No Parent Proprietary
Right or product of Parent or any of its Subsidiaries is subject to any
outstanding decree, order, judgment, or stipulation restricting in any
manner the licensing thereof by Parent or any of its Subsidiaries. Neither
Parent nor any of its Subsidiaries has entered into any agreement (other
than exclusive distribution or third party reseller agreements) under which
Parent or its Subsidiaries are restricted from selling, licensing or
otherwise distributing any of its products to any class of customers, in
any geographic area, during any period of time or in any segment of the
market.
4.18. INSURANCE CONTRACTS. Schedule 4.18 hereto lists all contracts of
insurance and indemnity (not shown in any other Schedule to this Agreement) in
force at the date hereof with respect to Parent and its Subsidiaries. Such
contracts of insurance and indemnity and those shown in other Schedules to this
Agreement (collectively, the "Parent Insurance Contracts") insure against such
risks, and are in such amounts, as appropriate and reasonable considering Parent
and its Subsidiaries' property, business and operations. All of the Parent
Insurance Contracts are in full force and effect, with no default thereunder by
Parent or its Subsidiaries which could permit the insurer to deny payment of
claims thereunder. Parent has not received notice from any of its insurance
carriers that any insurance premiums will be materially increased in the future
or that any insurance coverage provided under the Parent Insurance Contracts
will not be available in the future on substantially the same terms as now in
effect. Parent has not received or given a notice of cancellation with respect
to any of the Parent Insurance Contracts.
4.19. POOLING. To the knowledge of Parent, based on consultation with
Parent's independent accountants, neither Parent nor any of its directors,
officers or shareholders has taken any action that would prevent Parent from
accounting for the Merger as a pooling of interests under GAAP.
4.20. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. Subject to the
accuracy of the representations of the Company made in Section 3.20, the
registration statement on Form S-4 (including any amendments or supplements
thereto, the "Registration Statement"), pursuant to which the shares of Parent
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Stock to be issued in the Merger will be registered with the SEC shall not, at
the time the Registration Statement is filed with the SEC and at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. The
information in the Proxy Statement to be sent to the stockholders of the Company
and stockholders of Parent in connection with the Company Meeting and the Parent
Meeting shall not, on the date the Proxy Statement is first mailed to the
Company's stockholders and Parent's stockholders, at the time of the Company
Meeting or Parent Meeting and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not false or misleading; or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Company
Meeting or Parent Meeting which has become false or misleading. The Proxy
Statement will comply as to form in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder. If at any time prior
to the Effective Time any event relating to Parent, Merger Sub or any of their
respective affiliates, officers or directors should be discovered by Parent or
Merger Sub which should be set forth in an amendment to the Registration
Statement or a supplement to the Proxy Statement, Parent or Merger Sub shall
promptly inform the Company. Notwithstanding the foregoing, Parent and Merger
Sub make no representation or warranty with respect to any information supplied
by the Company which is contained in any of the foregoing documents.
ARTICLE 5
CONDUCT PRIOR TO THE EFFECTIVE TIME
5.1. CONDUCT OF BUSINESS OF THE COMPANY. Except as set forth on Schedule
5.1 hereto, between the date of this Agreement and the Effective Time or the
date, if any, on which this Agreement is earlier terminated pursuant to its
terms, the Company and each of its Subsidiaries shall, except to the extent that
Parent shall otherwise consent in writing, (i) carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, pay its debts and taxes when due subject to good faith
disputes over such debts or taxes, pay or perform other material obligations
when due subject to good faith disputes over such obligations, and use all
reasonable efforts consistent with past practices and policies to preserve
intact the Company's present business organizations, keep available the services
of its present officers and employees and preserve its relationships with
customers, suppliers and others having business relationships with it, to the
end that the Company's and each of its Subsidiaries' goodwill and ongoing
business be unimpaired at the Effective Time, and (ii) promptly notify Parent of
any event or occurrence not in the ordinary course of business of the Company
and each of its Subsidiaries which will have or could reasonably be expected to
have a Company Material Adverse Effect. In addition, between the date of this
Agreement and the Effective Time or the date, if any, on which this Agreement is
earlier terminated pursuant to its terms, the Company and each of its
Subsidiaries shall not, except to the extent that Parent shall otherwise consent
in writing:
(a) amend its charter documents or by-laws;
(b) declare or pay any dividends or distributions on the Company's
outstanding shares of capital stock nor purchase, redeem or otherwise
acquire for consideration any shares of the Company's capital stock or
other securities except in accordance with agreements existing as of the
date hereof or as permitted under the Company Option Plans;
(c) issue or sell any shares of its capital stock, effect any stock
split or otherwise change its capitalization as it exists on the date
hereof, or issue, grant, or sell any options, stock appreciation or
purchase rights, warrants, conversion rights or other rights, securities or
commitments obligating it to issue or sell any shares of its capital stock,
or any securities or obligations convertible into, or exercisable or
exchangeable for, any shares of its capital stock, other than the issuance
of shares of Company Common Stock pursuant to the conversion, exercise or
exchange of securities therefor outstanding as of the date hereof in
accordance with their terms;
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(d) borrow or agree to borrow any funds or voluntarily incur, or
assume or become subject to, whether directly or by way of guaranty or
otherwise, any obligation or Liability, except (i) obligations incurred in
the ordinary course of business consistent with past practices and (ii)
obligations under the Company's line of credit with Silicon Valley Bank
(and its line of credit, if any, with any other lender reasonably
acceptable to Parent) (A) not to exceed $5.5 million in the aggregate
outstanding at any time from the date hereof through the day immediately
preceding the Net Worth Calculation Date and (B) not to exceed $5.0 million
in the aggregate outstanding at any time from the Net Worth Calculation
Date through the Effective Time;
(e) pay, discharge or satisfy any claim, obligation or Liability in
excess of $50,000 (in any one case) or $100,000 (in the aggregate), other
than the payment, discharge or satisfaction in the ordinary course of
business of obligations reflected on or reserved against in the Company
Balance Sheet, or incurred since the date of the Company Balance Sheet in
the ordinary course of business consistent with past practices or in
connection with this transaction;
(f) except as required by applicable law, adopt or amend in any
material respect, any agreement or plan (including severance arrangements)
for the benefit of its employees;
(g) sell, mortgage, pledge or otherwise encumber or dispose of any of
its assets which are material, individually or in the aggregate, to the
business of the Company and its Subsidiaries, except in the ordinary course
of business consistent with past practices and except with respect to
securing its obligations to Silicon Valley Bank (and another lender
reasonably acceptable to Parent) and Parent;
(h) acquire by merging or consolidating with, or by purchasing any
equity interest in or a material portion of the assets of, any business or
any corporation, partnership interest, association or other business
organization or division thereof, or otherwise acquire any assets which are
material, individually or in the aggregate, to the business of the Company
and its Subsidiaries, except in the ordinary course of business consistent
with past practices;
(i) subject to Section 5.1(o), increase the following amounts payable
or to become payable: (i) the salary of any of its directors or officers,
other than increases in the ordinary course of business consistent with
past practices and not exceeding, in any case, ten percent (10%) of the
director's or officer's salary on the date hereof, (ii) any other
compensation of its directors or officers, including any increase in
benefits under any bonus, insurance, pension or other benefit plan made for
or with any of those persons, other than increases that are provided in the
ordinary course of business consistent with past practices to broad
categories of employees and do not discriminate in favor of the
aforementioned persons, and (iii) the compensation of any of its other
employees, consultants or agents except in the ordinary course of business
consistent with past practices;
(j) dispose of, permit to lapse, or otherwise fail to preserve the
rights of the Company or any of its Subsidiaries to use the Company
Proprietary Rights or enter into any settlement regarding the breach or
infringement of, any Company Proprietary Rights, or modify any existing
rights with respect thereto, other than in the ordinary course of business
consistent with past practices, and other than any such disposal, lapse,
failure, settlement or modification that does not have and could not
reasonably be expected to have a Company Material Adverse Effect;
(k) sell, or grant any right to exclusive use of, all or any part of
the Company Proprietary Rights;
(l) enter into any contract or commitment or take any other action
that is not in the ordinary course of its business or could reasonably be
expected to have an adverse impact on the transactions contemplated
hereunder or that would have or could reasonably be expected to have a
Company Material Adverse Effect;
(m) amend in any material respect any agreement to which the Company
or any of its Subsidiaries is a party the amendment of which will have or
could reasonably be expected to have a Company Material Adverse Effect;
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(n) waive, release, transfer or permit to lapse any claims or rights
(i) that has a value, or involves payment or receipt by it, of more than
$50,000 or (ii) the waiver, release, transfer or lapse of which would have
or could reasonably be expected to have a Company Material Adverse Effect;
(o) intentionally take any action, including the acceleration of
vesting of any options or other rights to acquire shares of the capital
stock of the Company, which would be reasonably likely to interfere with
Parent's ability to account for the Merger as a pooling of interests under
GAAP;
(p) take any action that would materially decrease the Company's net
worth, provided, however, that payments by the Company of reasonable legal
and accounting fees related to the Merger shall not be deemed to be a
breach of this Section 5.1(p);
(q) make any change in any method of accounting or accounting practice
other than changes required to be made in order that the Company's
financial statements comply with GAAP; or
(r) agree, whether in writing or otherwise, to take any action
described in this Section 5.1.
5.2. CONDUCT OF BUSINESS OF PARENT. Between the date of this Agreement and
the Effective Time or the date, if any, on which this Agreement is earlier
terminated pursuant to its terms, Parent and each of its Subsidiaries shall,
except to the extent that the Company shall otherwise consent in writing, (i)
carry on its business in the usual, regular and ordinary course in substantially
the same manner as heretofore conducted, pay its debts and taxes when due
subject to good faith disputes over such debts or taxes, pay or perform other
material obligations when due subject to good faith disputes over such
obligations, and use all reasonable efforts consistent with past practices and
policies to preserve intact its present business organizations, keep available
the services of its present officers and employees and preserve its
relationships with customers, suppliers and others having business relationships
with it, to the end that Parent's and each of its Subsidiaries' goodwill and
ongoing business be unimpaired at the Effective Time, and (ii) promptly notify
the Company of any event or occurrence not in the ordinary course of business of
Parent and each of its Subsidiaries which will have or could reasonably be
expected to have a Parent Material Adverse Effect. In addition, between the date
of this Agreement and the Effective Time or the date, if any, on which this
Agreement is earlier terminated pursuant to its terms, Parent and each of its
Subsidiaries shall not, except to the extent that the Company shall otherwise
consent in writing:
(a) amend the charter documents or by-laws of Parent or Merger Sub;
(b) declare or pay any dividends or distributions on Parent's
outstanding shares of capital stock nor purchase, redeem or otherwise
acquire for consideration any shares of Parent's capital stock or other
securities except in accordance with agreements existing as of the date
hereof or as permitted under the Parent Stock Plans;
(c) issue or sell any shares of Parent's capital stock, effect any
stock split or otherwise change Parent's capitalization as it exists on the
date hereof, or issue, grant, or sell any options, stock appreciation or
purchase rights, warrants, conversion rights or other rights, securities or
commitments obligating Parent to issue or sell any shares of its capital
stock, or any securities or obligations convertible into, or exercisable or
exchangeable for, any shares of its capital stock, other than (i) the
issuance of shares of Parent Stock pursuant to the conversion, exercise or
exchange of securities therefor outstanding as of the date hereof in
accordance with their terms and (ii) options to purchase shares of Parent
Stock to be granted consistent with past practice;
(d) sell, mortgage, pledge or otherwise encumber or dispose of any of
its assets which are material, individually or in the aggregate, to the
business of Parent and its Subsidiaries, except in the ordinary course of
business consistent with past practices;
(e) dispose of, permit to lapse, or otherwise fail to preserve the
rights of Parent and its Subsidiaries to use the Parent Proprietary Rights
or enter into any settlement regarding the breach or infringement of, any
Parent Proprietary Rights, or modify any existing rights with respect
thereto, other than in the ordinary course of business consistent with past
practices, and other than any such disposal, lapse, failure,
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settlement or modification that does not have and could not reasonably be
expected to have a Parent Material Adverse Effect;
(f) enter into any contract or commitment or take any other action
that is not in the ordinary course of its business or could reasonably be
expected to have an adverse impact on the transactions contemplated
hereunder or that would have or could reasonably be expected to have a
Parent Material Adverse Effect, other than guaranteeing payment of
indebtedness of the Company;
(g) amend in any material respect any agreement to which Parent or any
of its Subsidiaries is a party the amendment of which will have or could
reasonably be expected to have a Parent Material Adverse Effect;
(h) waive, release, transfer or permit to lapse any claims or rights
(i) that has a value, or involves payment or receipt by it, of more than
$100,000 or (ii) the waiver, release, transfer or lapse of which would have
or could reasonably be expected to have a Parent Material Adverse Effect;
(i) intentionally take any action, including the acceleration of
vesting of any options or other rights to acquire shares of the capital
stock of Parent, which would be reasonably likely to interfere with
Parent's ability to account for the Merger as a pooling of interests under
GAAP; or
(j) agree, whether in writing or otherwise, to take any action
described in this Section 5.2.
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1. PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT. As promptly as
practicable after the execution of this Agreement, Parent and the Company shall
prepare and file with the SEC the Proxy Statement, and Parent shall prepare and
file with the SEC the Registration Statement in which the Proxy Statement will
be included as a prospectus. Each of Parent and the Company shall use its best
efforts to have the Registration Statement declared effective as soon thereafter
as practicable; provided, however, that Parent shall have no obligation to agree
to account for the Merger as a "purchase" in order to cause the Registration
Statement to become effective. The Proxy Statement shall include the
recommendations of (i) the Board of Directors of the Company in favor of the
Merger which shall not be withdrawn, modified or withheld except in compliance
with the fiduciary duties of the Company's Board under applicable law and (ii)
the Board of Directors of Parent in favor of the Merger which shall not be
withdrawn, modified or withheld except in compliance with the fiduciary duties
of Parent's Board under applicable law.
6.2. MEETING OF STOCKHOLDERS. Promptly after the Registration Statement is
declared effective by the SEC, the Company shall take all action necessary in
accordance with the GCL and its certificate of incorporation and by-laws to
convene the Company Meeting to be held as promptly as practicable for the
purpose of voting upon this Agreement and the Merger. The Company shall consult
with Parent and use all reasonable efforts to hold the Company Meeting on the
same day as the Parent Meeting. Promptly after the Registration Statement is
declared effective by the SEC, Parent shall take all action necessary in
accordance with the Massachusetts Business Corporation Law and its articles of
organization and by-laws to convene the Parent Meeting to be held as promptly as
practicable for the purpose of voting upon this Agreement and the issuance of
shares of Parent Stock to the Stockholders in the Merger as contemplated hereby.
Parent shall consult with the Company and use all reasonable efforts to hold the
Parent Meeting on the same day as the Company Meeting.
6.3. EXCLUSIVITY. From and after the date of this Agreement until the
earlier of the Effective Time and termination of this Agreement in accordance
with Article 9 hereof, the Company and its Subsidiaries will not, directly or
indirectly, through their respective affiliates, agents, officers and directors,
(a) solicit, initiate, participate in discussions or negotiations or otherwise
cooperate in any way with, or provide any information to any person, entity or
group concerning, any tender offer, exchange offer, merger, business
combination, sale of substantial assets, sale of shares of capital stock or
similar transaction involving the Company or any of its Subsidiaries or (b)
effect, or enter into any agreement to effect, any such transaction. The Company
will
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promptly communicate to Parent the terms of any proposal or offer or request for
information which it or any of its Subsidiaries may receive in respect of any
such proposed transaction.
6.4. EXPENSES. Each party hereto shall be responsible for its own costs
and expenses in connection with the Merger, including fees and disbursements of
consultants, investment bankers and other financial advisors, brokers and
finders, counsel and accountants.
6.5. POOLING ACCOUNTING. Parent and the Company shall each use its best
efforts to cause the business combination to be effected by the Merger to be
accounted for as a pooling of interests under GAAP. Each of Parent and the
Company shall use its best efforts to cause its Affiliates not to take any
action that would adversely affect the ability of Parent to account for the
business combination to be effected by the Merger as a pooling of interests
under GAAP.
6.6. AFFILIATE AGREEMENTS. Set forth on Schedule 6.6 is a list of those
persons who are, in Parent's or the Company's reasonable judgment, as the case
may be, Affiliates of Parent or the Company, as the case may be. Each of Parent
and the Company shall provide the other such information and documents as the
other shall reasonably request for purposes of reviewing such list. The Company
shall use its best efforts to deliver or cause to be delivered to Parent prior
to the Closing from each of the Affiliates of the Company, an executed Affiliate
Agreement in the form attached hereto as Exhibit D (each a "Company Affiliate
Agreement", collectively, the "Company Affiliate Agreements"). Parent shall use
its best efforts to deliver or cause to be delivered to the Company prior to the
Closing from each of the Affiliates of Parent, an executed Affiliate Agreement
in the form attached hereto as Exhibit E (each a "Parent Affiliate Agreement",
collectively, the "Parent Affiliate Agreements"). Parent shall be entitled to
place appropriate legends on the certificates evidencing any shares of Parent
Stock to be received by such Affiliates of the Company pursuant to the terms of
this Agreement, and to issue appropriate stop transfer instructions to the
transfer agent for Parent Stock, consistent with the terms of the Company
Affiliate Agreements.
6.7. BLUE SKY LAWS. Parent shall take such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of shares of Parent Stock pursuant hereto and the
transactions contemplated hereby except that it will not be required to execute
a general consent to service of process in jurisdictions where it has not
already done so. The Company shall use its best efforts to assist Parent as may
be necessary to comply with the securities and blue sky laws of all
jurisdictions which are applicable in connection with the issuance of Parent
Stock pursuant hereto.
6.8. STOCK OPTIONS.
6.8.1. EXERCISABLE FOR PARENT STOCK. Parent agrees that, at the
Effective Time, each outstanding Stock Option, whether vested or unvested,
will become an option exercisable into Parent Stock. Each such Stock Option
shall continue to have, and be subject to, the same terms and conditions
set forth in the option agreement for such Stock Option and the Company
Option Plan, except that (a) such Stock Option shall be exercisable (when
vested) for that number of whole shares of Parent Stock equal to the
product of the number of shares of Company Common Stock that were issuable
upon exercise of such Stock Option immediately prior to the Effective Time
multiplied by the Exchange Ratio, rounded down to the nearest whole number
of shares of Parent Stock, and (b) the per share exercise price for shares
of Parent Stock issuable upon exercise of such Stock Option shall be equal
to the quotient determined by dividing the exercise price per share of
Company Common Stock at which such Stock Option was exercisable immediately
prior to the Effective Time by the Exchange Ratio, rounded up to the
nearest whole cent. After the Effective Time, Parent or the Surviving
Corporation shall issue to each holder of an outstanding Stock Option a
document evidencing the foregoing. Parent intends that the assumption and
substitution of Stock Options that constitute "incentive stock options," as
defined in Section 422(b) of the Code, will not constitute a modification
of such options, as defined in Section 424 of the Code.
6.8.2. FORM S-8. Parent shall file a registration statement on Form
S-8 for the shares of Parent Stock issuable with respect to Stock Options
no later than sixty days after the Closing Date, and Parent shall use its
best efforts to cause such registration statement to become effective then
and remain effective for as long as the Stock Options are outstanding.
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6.9. WARRANTS. Parent agrees that, at the Effective Time, each outstanding
Warrant will become a warrant exercisable for Parent Stock. Each such Warrant
shall continue to have, and be subject to, the same terms and conditions set
forth in the agreement for such Warrant, except that (a) such Warrant shall be
exercisable (when vested) for that number of whole shares of Parent Stock equal
to the product of the number of shares of Company Common Stock that were
issuable upon exercise of such Warrant immediately prior to the Effective Time
multiplied by the Exchange Ratio, rounded down to the nearest whole number of
shares of Parent Stock, and (b) the per share exercise price for shares of
Parent Stock issuable upon exercise of such Warrant shall be equal to the
quotient determined by dividing the exercise price per share of Company Common
Stock at which such Warrant was exercisable immediately prior to the Effective
Time (after giving effect to any adjustment to such exercise price required by
such Warrant as a result of the Merger) by the Exchange Ratio, rounded up to the
nearest whole cent. After the Effective Time, Parent or the Surviving
Corporation shall issue to each holder of an outstanding Warrant a document
evidencing the foregoing.
6.10. BOARD REPRESENTATION. As of the date hereof, Parent's Board of
Directors has five members and two vacancies. The Board of Directors of Parent
shall take appropriate action so that, effective upon the Effective Time, (a)
one vacancy shall be filled by William Goddard and (b) the other vacancy shall
be filled by a person selected by Parent and the Holder's Agent, provided,
however, if Parent and the Holder's Agent are unable to agree on a person to
fill such vacancy, then the vacancy shall remain unfilled until the stockholders
of Parent elect a person to fill such vacancy.
6.11. TAX-FREE REORGANIZATION. Parent and the Company shall each use all
reasonable efforts to cause the Merger to be treated as a reorganization within
the meaning of Section 368 of the Code.
6.12. ACCESS AND INFORMATION. The Company and Parent shall afford to the
other and to its officers, employees, accountants, counsel and other authorized
representatives full and complete access, upon 24 hours advance telephone
notice, during regular business hours, throughout the period prior to the
earlier of the Effective Time or the termination of this Agreement pursuant to
its terms, to its offices, properties, books and records and those of its
Subsidiaries, and shall use reasonable efforts to cause its representatives and
independent public accountants to furnish to the other party such additional
financial and operating data and other information as to its business,
customers, vendors and properties and those of its Subsidiaries as the other
party may from time to time reasonably request.
6.13. PUBLIC DISCLOSURE. Except as otherwise required by law, any press
release or other public disclosure of information regarding the proposed
transaction (including the negotiations with respect to the Merger and the terms
and existence of this Agreement) shall be developed by Parent, subject to the
Company's review. The Company and Parent agree that each party's non-disclosure
obligations contained in the Nondisclosure Agreement dated October 11, 1995
signed by the Company and Parent shall remain in full force and effect in
accordance with the terms of such Agreement.
6.14. NO SOLICITATION OF EMPLOYEES. Parent and the Company agree that
between the date of this Agreement and the Effective Time or the date one year
after the date, if any, on which this Agreement is earlier terminated pursuant
to its terms, neither party shall solicit, induce or recruit any of the other
party's employees to leave their employment.
6.15. ESCROW AGREEMENT. At the Closing, Parent and the Holder's Agent
shall enter into the Escrow Agreement with the Escrow Agent.
6.16. COMPANY CLOSING CERTIFICATE. At or prior to the Closing, the Company
shall deliver to Parent a certificate signed on behalf of the Company by the
President and Chief Financial Officer of the Company (the "Company Closing
Certificate"), which shall set forth the Actual Negative Net Worth.
6.17. CADMOUNT ACKNOWLEDGMENT. At or prior to the Closing, Cadmount shall
execute an acknowledgment (the "Cadmount Acknowledgment"), such acknowledgment
to be substantially in the form of Exhibit F attached hereto.
6.18. OBTAINING LICENSE AGREEMENTS. The Company acknowledges that, from
time to time, certain of its customers have obtained software and other Company
Proprietary Rights from the Company and its
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Subsidiaries without entering into or becoming subject to written license
agreements. Between the date of this Agreement and the Closing, the Company
shall use all commercially reasonable efforts to identify those customers, and
to obtain from such customers, where possible when such customers order
additional products or services from the Company or renew maintenance with the
Company, signed license agreements in a form substantially similar to the
standard license agreements the Company now uses to license its software and
other Company Proprietary Rights.
6.19. DIRECTORS AND OFFICERS INDEMNIFICATION. From and after the Effective
Time, Parent and the Surviving Corporation shall indemnify, defend and hold
harmless each person who is now, or has been at any time prior to the date
hereof, an officer or director of the Company (the "Indemnified Parties") to the
same extent that such Indemnified Parties are currently indemnified by the
Company pursuant to the Company's Certificate of Incorporation and By-Laws for
acts or omissions in their capacities as officers or directors of the Company
occurring on or prior to the Effective Time.
6.20. NASDAQ LISTING. Parent agrees to authorize for listing on the Nasdaq
National Market the shares of Parent Stock issuable in connection with the
Merger, upon official notice of issuance.
6.21. 401(K) MATCHING CONTRIBUTION POLICY. The Company shall eliminate,
effective at or before the Effective Time and in a manner reasonably
satisfactory to Parent, any requirement or policy that the Company provide
matching contributions to participants in its 401(k) plan.
6.22. NO INCREASE IN DEBT. From the Net Worth Calculation Date through the
Effective Time, the Company shall not increase its aggregate obligations under
the Company's line of credit with Silicon Valley Bank (and its line of credit,
if any, with any other bank reasonably acceptable to Parent) above the aggregate
amount of such obligations as of the Net Worth Calculation Date.
6.23. REASONABLE EFFORTS. Subject to terms and conditions herein provided,
each of the parties agrees to use all reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the Merger and the other transactions contemplated by this Agreement.
Without limiting the generality of the foregoing, the Company and Parent each
will use all reasonable efforts to obtain all approvals, authorizations,
consents and waivers from, and give all notices to, any public or private third
parties that are necessary on its part in order to effect the transactions
contemplated hereby.
ARTICLE 7
CONDITIONS PRECEDENT
7.1. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF EACH PARTY. The
obligations of the parties hereto to effect the Merger shall be subject to the
fulfillment at or prior to the Closing of the following conditions:
7.1.1. STOCKHOLDER APPROVAL. This Agreement and the transactions
contemplated hereby shall have been approved by the requisite vote under
applicable law of the stockholders of the Company. The issuance of the
shares of Parent Stock pursuant to the Merger shall have been approved by
the stockholders of Parent by the vote required by Section 6(i) of Part III
of Schedule D to the By-Laws of the National Association of Securities
Dealers, Inc.
7.1.2. REGISTRATION STATEMENT EFFECTIVE. The SEC shall have declared
the Registration Statement effective. No stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have
been issued and no proceeding for that purpose, and no similar proceeding
in respect of the Proxy Statement, shall have been initiated or threatened
in writing by the SEC; and all requests for additional information on the
part of the SEC shall have been complied with to the reasonable
satisfaction of the parties hereto.
7.1.3. NO INJUNCTION. No injunction or restraining or other order
issued by a court of competent jurisdiction that prohibits or materially
restricts the consummation of the Merger or the other transactions
contemplated hereby shall be in effect (each party agreeing to use all
reasonable efforts to
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have any injunction or other order immediately lifted), and no action or
proceeding shall have been commenced or threatened in writing seeking any
injunction or restraining or other order that seeks to prohibit, restrain,
invalidate or set aside consummation of the Merger or any of the other
transactions contemplated hereby.
7.1.4. ILLEGALITY. There shall not have been any action taken, and no
statute, rule or regulation shall have been enacted, by any state or
federal government agency that would prohibit or materially restrict the
consummation of the Merger or the other transactions contemplated hereby.
7.1.5. ESCROW AGREEMENT. Parent, the Holder's Agent and the Escrow
Agent shall have entered into the Escrow Agreement as contemplated by
Section 6.15 hereof.
7.1.6. OPINION OF ACCOUNTANTS. Parent shall have received a letter
from Coopers & Lybrand L.L.P. regarding that firm's concurrence with the
conclusions of Parent's management as to the appropriateness of pooling of
interests accounting for the Merger under Accounting Principles Board
Opinion No. 16 if closed and consummated in accordance with this Agreement.
7.1.7. TAX OPINIONS. Parent shall have received a written opinion
from its counsel, Foley, Hoag & Eliot in form and substance reasonably
satisfactory to it, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code. The
Company and the Stockholders shall have received a written opinion from the
Company's counsel, Testa, Hurwitz & Thibeault, in form and substance
reasonably satisfactory to the Company, to the effect that the Merger will
constitute a reorganization within the meaning of Section 368(a) of the
Code and that no gain or loss will be recognized by the Stockholders solely
upon their receipt of Parent Stock in the Merger in exchange for Company
Common Stock. The parties to this Agreement agree to make reasonable
representations as requested by such counsel for the purpose of rendering
such opinions.
7.1.8. FORMULA PRICE PER SHARE. The Formula Price Per Share shall not
be less than $3.28 (appropriately adjusted to reflect fully the effect of
any stock split, reverse stock split, stock dividend, reorganization,
recapitalization, or like change with respect to Parent Stock occurring
after the date hereof and prior to the Effective Time).
7.2. CONDITIONS PRECEDENT TO OBLIGATION OF PARENT AND MERGER SUB TO EFFECT
THE MERGER. The obligation of Parent and Merger Sub to effect the Merger shall
be subject to the fulfillment at or prior to the Closing of the following
additional conditions:
7.2.1. REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Agreement shall be true and
correct in all material respects on and as of the Effective Time, except
for changes contemplated by this Agreement and except for those
representations and warranties which address matters only as of a
particular date (which shall remain true and correct as of such date), with
the same force and effect as if made on and as of the Effective Time,
except in all such cases, for such breaches, inaccuracies or omissions of
such representations and warranties which have neither had nor reasonably
would be expected to have a Company Material Adverse Effect; and the
Company shall have delivered to Parent a certificate to that effect, dated
the date of the Closing and signed on behalf of the Company by the
President and Chief Financial Officer of the Company.
7.2.2. AGREEMENTS AND COVENANTS. The Company shall have performed in
all material respects all of its agreements and covenants set forth herein
that are required to be performed at or prior to the Effective Time; and
the Company shall have delivered to Parent a certificate to that effect,
dated the date of the Closing and signed on behalf of the Company by the
President and Chief Financial Officer of the Company.
7.2.3. LEGAL OPINION. Parent and Merger Sub shall have received an
opinion from Testa, Hurwitz & Thibeault, counsel to the Company, in
substantially the form attached hereto as Exhibit G hereto.
7.2.4. CLOSING DOCUMENTS. The Company and the Holder's Agent shall
have delivered to Parent and Merger Sub such closing documents as Parent
shall reasonably request (other than additional opinions of counsel).
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7.2.5. AFFILIATE AGREEMENTS. Each of the parties identified by the
Company pursuant to Section 6.6 hereof as being an Affiliate of the Company
shall have delivered to Parent an executed Company Affiliate Agreement
which shall be in full force and effect.
7.2.6. THIRD PARTY CONSENTS. All third party consents or approvals
listed in Schedule 7.2.6 hereto shall have been obtained by the Company and
shall be effective and shall not have been suspended, revoked, or stayed by
action of any such third party.
7.2.7. MATERIAL ADVERSE EFFECT. Since the date of this Agreement, the
Company shall not have suffered a Company Material Adverse Effect.
7.2.8. COMPANY CLOSING CERTIFICATE. The Company shall have delivered
the Company Closing Certificate to Parent.
7.2.9. CADMOUNT NOTE. The Cadmount Note shall have been converted
into Company Common Stock and there shall be no amounts due under the
Cadmount Note.
7.2.10. CADMOUNT ACKNOWLEDGMENT The Company and Cadmount shall have
entered into the Cadmount Acknowledgment as contemplated by Section 6.17
hereof.
7.2.11. FAIRNESS OPINION. Parent shall have received at the time of
the mailing by Parent of the Proxy Statement to its stockholders an update
from Stratagem of Stratagem's written opinion dated February 16, 1996 that
the Merger is fair to Parent's stockholders from a financial point of view.
7.2.12. VOTING AGREEMENT. The Amended and Restated Voting Agreement
dated May 1, 1995 between the Company and Cadmount shall have been
terminated.
7.2.13. STOCKHOLDER LIST. The Company shall have delivered to Parent
the Stockholder List.
7.2.14. ELIMINATION OF MATCHING CONTRIBUTION TO 401(K) PLAN. The
Company shall have eliminated any requirement or policy to provide matching
contributions for its 401(k) plan as contemplated by Section 6.21 hereof.
7.3. CONDITIONS TO OBLIGATIONS OF THE COMPANY TO EFFECT THE MERGER. The
obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Closing of the following additional conditions:
7.3.1. REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall be
true and correct in all material respects on and as of the Effective Time,
except for changes contemplated by this Agreement and except for those
representations and warranties which address matters only as of a
particular date (which shall remain true and correct as of such date), with
the same force and effect as if made on and as of the Effective Time,
except in all such cases, for such breaches, inaccuracies or omissions of
such representations and warranties which have neither had nor reasonably
would be expected to have a Parent Material Adverse Effect; and Parent
shall have delivered to the Company a certificate to that effect, dated the
date of the Closing and signed on behalf of Parent by the President and
Chief Financial Officer of Parent.
7.3.2. AGREEMENTS AND COVENANTS. Parent and Merger Sub shall have
performed in all material respects all of their agreements and covenants
set forth herein that are required to be performed at or prior to the
Effective Time; and Parent shall have delivered to the Company a
certificate to that effect, dated the date of the Closing and signed on
behalf of Parent by the President and Chief Financial Officer of Parent.
7.3.3. LEGAL OPINION. The Company shall have received an opinion from
Foley, Hoag & Eliot, counsel to Parent, in substantially the form attached
hereto as Exhibit H hereto.
7.3.4. CLOSING DOCUMENTS. Parent and Merger Sub shall have delivered
to the Company such closing documents as the Company shall reasonably
request (other than additional opinions of counsel).
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7.3.5. AFFILIATE AGREEMENTS. Each of the parties identified by Parent
pursuant to Section 6.6 hereof as being an Affiliate of Parent shall have
delivered to the Company an executed Parent Affiliate Agreement which shall
be in full force and effect.
7.3.6. MATERIAL ADVERSE EFFECT. Since the date of this Agreement,
Parent shall not have suffered a Parent Material Adverse Effect.
7.3.7. NASDAQ LISTING. The shares of Parent Stock issuable to
stockholders of the Company in connection with the Merger shall have been
authorized for listing and eligible for trading on the Nasdaq National
Market upon official notice of issuance.
ARTICLE 8
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
8.1. SURVIVAL OF REPRESENTATIONS.
8.1.1. THE COMPANY'S REPRESENTATIONS. All representations and
warranties made by the Company in this Agreement or any certificate or
other writing delivered by the Company pursuant hereto or in connection
herewith shall survive the Closing and any investigation at any time made
by or on behalf of Parent and shall terminate on the first anniversary of
the Effective Date (except that Parent Claims pending on the first
anniversary of the Effective Date shall continue until resolved pursuant to
this Article 8). The covenants made by the Company, the Stockholders and
the Holder's Agent in this Agreement or any certificate or other writing
delivered by the Company or any of its Affiliates, the Stockholders or the
Holder's Agent pursuant hereto or in connection herewith shall survive the
Closing and any investigation at any time made by or on behalf of Parent.
8.1.2. PARENT'S REPRESENTATIONS. All representations and warranties
made by Parent and Merger Sub in this Agreement or any certificate or other
writing delivered by Parent, Merger Sub or any of their respective
Affiliates pursuant hereto or in connection herewith shall terminate at the
Effective Time, and only the covenants of Parent, Merger Sub and their
respective Affiliates that by their terms survive the Effective Time shall
survive the Effective Time.
8.2. AGREEMENT TO INDEMNIFY. Subject to the terms and conditions of this
Article 8, the Stockholders agree to indemnify, defend and hold harmless Parent
and its Subsidiaries from and against any loss, liability, damage, cost or
expense (including costs and reasonable attorneys' fees and disbursements)
suffered, incurred or paid by Parent or any of its Subsidiaries which would not
have been suffered, incurred or paid if all the representations and warranties
of the Company contained in this Agreement or any certificate or other writing
delivered by the Company pursuant hereto or in connection herewith had been
true, complete and correct in all material respects (collectively, "Parent
Claims").
8.3. LIMITATION OF STOCKHOLDERS' LIABILITY.
8.3.1. LIMITATION OF PARENT CLAIMS. The obligations and liabilities
of the Stockholders hereunder with respect to indemnification for Parent
Claims shall be subject to the following limitations:
(a) The Stockholders shall be obligated to indemnify Parent only
with respect to those Parent Claims as to which Parent has given the
Holder's Agent written notice on or prior to a date one year after the
Closing.
(b) No indemnification shall be required to be made by the
Stockholders hereunder unless the amount of Parent Claims exceeds
$100,000 in the aggregate, in which case the Stockholders'
indemnification obligations shall apply to the amount of such Parent
Claims in excess of $100,000.
(c) All claims for indemnification pursuant to Section 8.2 hereof
shall be brought and recovered by Parent solely by the return to Parent
of property from the Escrow Fund. Without limiting the generality of the
foregoing, Parent shall not have any recourse against any Stockholder
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<PAGE> 38
individually, or any Stockholder's assets or property, for Parent
Claims, except for recovery against the Escrow Fund pursuant to the
terms of this Agreement and the Escrow Agreement.
(d) For purposes of determining the amount of property recoverable
from the Escrow Fund sufficient to satisfy a Parent Claim subject to
indemnification hereunder, the value of a share of Parent Stock shall be
equal to the Formula Price Per Share.
(e) Parent, the Surviving Corporation and the Stockholders
acknowledge and agree that any distribution of property from the Escrow
Fund to satisfy a Parent Claim hereunder shall be done so as to reduce
each Stockholder's interest in the Parent Stock in the Escrow Fund in a
pro rata manner based on the Stockholders' respective ownership
interests in the Parent Stock in the Escrow Fund.
8.3.2. EXCLUSIVE REMEDY. The indemnification provided in this Article
8 shall be Parent's and its Subsidiaries' exclusive remedy for any breach
by the Company of a representation or warranty contained in this Agreement
or any certificate or other writing delivered by the Company pursuant
hereto or in connection herewith. Notwithstanding the foregoing, nothing
contained herein shall limit a party's rights or remedies with respect to
claims resulting from or arising out of willful misconduct or fraud.
8.4. PROCESS OF INDEMNIFICATION FOR PARENT CLAIMS.
8.4.1. NOTICE FROM PARENT. Parent shall promptly notify the Holder's
Agent in writing of the assertion of any Parent Claim by a third party or
the discovery of any fact upon which Parent intends to base a Parent Claim
hereunder. Such notice shall set forth the amount of the Parent Claim and
specify the alleged basis of the Parent Claim. The delay or failure of
Parent to provide notice hereunder shall not in any way limit Parent's
indemnification rights hereunder except to the extent that the Stockholders
shall have been materially adversely affected by such delay or failure and
except that in any event such notice shall be made within the one year
period provided in Section 8.3.1(a) hereof.
8.4.2. RECOVERY BY PARENT. If the Holder's Agent does not dispute the
basis or amount of any Parent Claim within 30 days of receiving written
notice thereof, Parent shall have the right promptly to recover indemnity
as and to the extent provided herein and in the Escrow Agreement. If the
Holder's Agent disagrees with the basis of the Parent Claim or the amount
of damages caused thereby, then within 30 days of receiving written notice
thereof, the Holder's Agent shall give notice to Parent of such
disagreement (the "Dispute Notice") and, in that case, Parent shall have no
right to recover indemnity hereunder until such time, if at all, as (a) a
court of competent jurisdiction issues a final, non-appealable order
specifying the amount of Parent's recovery, in which case Parent shall have
the right promptly to recover the amount so specified (subject to the
limitations contained in Section 8.3 hereof) and (b) Parent and the
Holder's Agent agree in writing to the amount of Parent's recovery, in
which case Parent shall have the right promptly to recover the amount so
agreed. In the event Parent receives a Dispute Notice and the Parent Claim
that is the subject of the Dispute Notice has not been resolved by
agreement of Parent and the Holder's Agent, then Parent shall, not later
than six months after its receipt of the Dispute Notice, commence a
proceeding before a court of competent jurisdiction to adjudicate the
Parent Claim that is the subject of the Dispute Notice.
8.4.3. THIRD-PARTY PARENT CLAIMS. Parent agrees promptly to notify
the Holder's Agent of any Parent Claims asserted by third parties that are
reasonably likely to give rise to indemnification hereunder ("Third-Party
Parent Claims"). The Holder's Agent shall have the right to conduct and
control, through counsel of his own choosing, any Third-Party Parent Claim,
and Parent agrees to cooperate with the Holder's Agent and their counsel in
that regard. Parent agrees that it will not settle any Third-Party Parent
Claims without the consent of the Holder's Agent, which consent shall not
be unreasonably withheld. Parent further agrees that if the Holder's Agent
wishes to enter into a settlement with respect to a Third-Party Parent
Claim, Parent will cooperate in such settlement, provided that such
settlement includes as an unconditional term thereof the giving by the
third party to Parent of a release from all liability in respect of such
Third-Party Parent Claim.
37
<PAGE> 39
ARTICLE 9
TERMINATION
9.1. TERMINATION EVENTS. This Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) by mutual written consent of Parent and the Company;
(b) by Parent if there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of
the Company and such breach has not been cured within ten business days
after written notice to the Company (provided, that neither Parent nor
Merger Sub is in material breach of the terms of this Agreement, and
provided further, that no cure period shall be required for a breach which
by its nature cannot be cured) such that the conditions set forth in
Section 7.2.1 or Section 7.2.2 hereof, as the case may be, will not be
satisfied;
(c) by the Company if there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of
Parent or Merger Sub and such breach has not been cured within ten business
days after written notice to Parent (provided, that the Company is not in
material breach of the terms of this Agreement, and provided further, that
no cure period shall be required for a breach which by its nature cannot be
cured) such that the conditions set forth in Section 7.3.1 or Section 7.3.2
hereof, as the case may be, will not be satisfied;
(d) by any party hereto if: (i) there shall be a final, non-appealable
order of a federal or state court in effect preventing consummation of the
Merger; (ii) there shall be any final action taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to
the Merger by any Governmental Entity which would make consummation of the
Merger illegal or which would prohibit Parent's ownership or operation of
all or a material portion of the business or assets of the Company, or
compel Parent to dispose of or hold separate all or a material portion of
the business or assets of the Company or Parent as a result of the Merger;
(iii) if the Company's stockholders do not approve this Agreement and the
transactions contemplated hereby at the Company Meeting; (iv) if Parent's
stockholders do not approve this Agreement and the issuance of shares of
Parent Stock to the Stockholders in the Merger as contemplated hereby at
the Parent Meeting; or
(e) by any party hereto if the Merger shall not have been consummated
by June 30, 1996, provided that the right to terminate this Agreement under
this Section 9.1(e) shall not be available to any party whose failure to
fulfill any material obligation under this Agreement has been the cause of,
or resulted in, the failure of the Effective Time to occur on or before
such date.
Where action is taken to terminate this Agreement pursuant to this Section
9.1, it shall be sufficient for such action to be authorized by the board of
directors (as applicable) of the party taking such action.
9.2. EFFECT OF TERMINATION. In the event of termination of this Agreement
as provided in Section 9.1 hereof, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of the Parent, Merger
Sub, the Company or their respective officers, directors, stockholders or
Affiliates, except to the extent that a party hereto is in breach of any of its
representations, warranties, covenants or agreements set forth in this
Agreement, and provided that the provisions of Sections 6.4, 6.13 and 6.14
hereof and Article 10 hereof shall remain in full force and effect and survive
any termination of this Agreement.
ARTICLE 10
MISCELLANEOUS
10.1. AMENDMENTS AND SUPPLEMENTS. This Agreement may not be amended,
modified or supplemented by the parties hereto in any manner, except by an
instrument in writing signed on behalf of each of the parties hereto personally
or by their duly authorized officers or representatives.
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<PAGE> 40
10.2. NO WAIVER. The failure of any party hereto to enforce at any time
any of the provisions of this Agreement shall in no way be construed to be a
waiver of any such provision, nor in any way to affect the validity of this
Agreement or any part hereof or the right of such party thereafter to enforce
each and every such provision. No waiver of any breach of or non-compliance with
this Agreement shall be held to be a waiver of any other or subsequent breach or
non-compliance.
10.3. GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the substantive laws of The Commonwealth of
Massachusetts, without regard to its principles of conflicts of laws.
10.4. NOTICE. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered by hand, sent by facsimile
transmission with confirmation of receipt requested, sent via a reputable
overnight courier service with confirmation of receipt requested, or mailed by
registered or certified mail (postage prepaid and return receipt requested) to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice), and shall be deemed given on the date on
which delivered by hand or otherwise on the date of receipt as confirmed:
To Parent or Merger Sub:
Bachman Information Systems, Inc.
Eight New England Executive Park
Burlington, Massachusetts 01803
Attn: President
With a copy to:
John D. Patterson, Jr., Esq.
Foley, Hoag & Eliot
One Post Office Square
Boston, Massachusetts 02109
To the Company:
Cadre Technologies Inc.
222 Richmond Street
Providence, Rhode Island 02903
Attn: President
With a copy to:
William B. Simmons, Jr., Esq.
Testa, Hurwitz & Thibeault
High Street Tower
125 High Street
Boston, Massachusetts 02110
To the Holder's Agent:
James P. Lally
Kleiner Perkins Caufield & Byers
2750 Sandhill Road
Menlo Park, California 94025
With a copy to:
William B. Simmons, Jr., Esq.
Testa, Hurwitz & Thibeault
High Street Tower
125 High Street
Boston, Massachusetts 02110
39
<PAGE> 41
10.5. ENTIRE AGREEMENT. This Agreement and the documents and instruments
and other agreements among the parties hereto as contemplated by or referred to
herein (including the Nondisclosure Agreement dated October 11, 1995 between
Parent and the Company) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all other prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof, including the Letter of Intent dated December 6,
1995, as amended, between Parent and the Company. Each party hereto acknowledges
that, in entering this Agreement and completing the transactions contemplated
hereby, such party is not relying on any representation, warranty, covenant or
agreement not expressly stated in this Agreement or in the agreements among the
parties contemplated by or referred to herein.
10.6. ASSIGNABILITY. This Agreement is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder, except as
otherwise expressly provided herein. Neither this Agreement nor any of the
rights and obligations of the parties hereunder shall be assigned or delegated,
whether by operation of law or otherwise, without the written consent of all
parties hereto, except that certain rights and obligations of Merger Sub and the
Company may be assigned and delegated to the Surviving Corporation as a result
of the Merger without any further consent hereunder.
10.7. VALIDITY. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
10.8. SPECIFIC PERFORMANCE. The parties hereto acknowledge that damages
alone may not adequately compensate a party for violation by another party of
this Agreement. Accordingly, in addition to all other remedies that may be
available hereunder or under applicable law, any party shall have the right to
any equitable relief that may be appropriate to remedy a breach or threatened
breach by any other party hereunder, including the right to enforce specifically
the terms of this Agreement by obtaining injunctive relief in respect of any
violation or non-performance hereof.
10.9. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which together shall constitute one and the same agreement.
* * * * *
IN WITNESS WHEREOF, the parties have duly executed this Agreement and Plan
of Merger as of the date first above written.
BACHMAN INFORMATION SYSTEMS, INC.
By: /s/ Peter J. Boni
Title: President
B.C. ACQUISITION CORP.
By: /s/ Peter J. Boni
Title: President
CADRE TECHNOLOGIES INC.
By: /s/ William H. D. Goddard
Title: Director
40
<PAGE> 42
EXHIBIT B
LETTER OF TRANSMITTAL
FOR SURRENDER OF
COMMON STOCK
OF
CADRE TECHNOLOGIES INC.
For submitting certificates formerly representing shares of Common Stock of
Cadre Technologies Inc., pursuant to the Agreement and Plan of Merger dated as
of March 25, 1996 (the "Merger Agreement") among Bachman Information Systems,
Inc. ("Bachman"), B.C. Acquisition Corp. ("Merger Sub") and Cadre Technologies
Inc. ("Cadre").
This Letter of Transmittal should be completed, signed and submitted, together
with your certificates formerly representing shares of Cadre Technologies Inc.
Common Stock to:
STATE STREET BANK & TRUST COMPANY
<TABLE>
<CAPTION>
By Mail: By Hand:
------------------------ ------------------------
<S> <C>
State Street Bank &
Trust Bank of Boston
Corporate Reorganization c/o Boston Equiserve
P.O. Box 9061 Corporate Reorganization
Boston, MA 02205 55 Broadway, 3rd Floor
New York, NY 10006
</TABLE>
By Overnight Mail:
State Street Bank and Trust
Corporate Organization
2 Heritage Drive
N. Quincy, MA 02171
Telephone Number: (800) 426-5523
Fax Number: (617) 774-4519
Confirm: (617) 774-4511
In connection with the merger (the "Merger") of Merger Sub, a wholly-owned
subsidiary of Bachman with and into Cadre, and, pursuant to Section 2.9 of the
Merger Agreement, the undersigned encloses herewith and surrenders the following
certificates (the "Certificates") formerly representing shares of Cadre Common
Stock (the "Shares"). You are hereby authorized and instructed to prepare in the
name and deliver to the address indicated below a certificate representing the
appropriate number of whole shares of Parent Stock (as defined in the Merger
Agreement) to be issued in exchange for the Shares evidenced by the enclosed
Certificate(s), less the portion thereof (approximately 10%) previously
delivered into escrow in respect of such Shares pursuant to Section 2.9 of the
Merger Agreement.
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<PAGE> 43
CERTIFICATE(S) ENCLOSED
<TABLE>
<CAPTION>
NAME AND ADDRESS OF
REGISTERED OWNER CERTIFICATE NO. NUMBER OF SHARES
- --------------------- ---------------- ------------------
<S> <C> <C>
</TABLE>
The undersigned hereby represents and warrants that the undersigned has
full power and authority to submit, sell, assign and transfer the Certificates
and the Shares and that the Shares are owned by the undersigned and are free and
clear of all liens, charges and encumbrances and not subject to any adverse
claim. The undersigned agrees to indemnify, defend and hold harmless Bachman and
its affiliates from and against any loss, liability, damage, cost or expense
(including costs and reasonable attorneys' fees and disbursements) suffered,
incurred or paid by Bachman or its affiliates which would not have been
suffered, incurred or paid if the representations and warranties of the
undersigned in this Letter of Transmittal had been true, complete and correct in
all material respects. The undersigned will, upon request, execute any
additional documents necessary or desirable to complete the transfer of the
Shares. All authority herein conferred shall survive the death or incapacity of
the undersigned, and all obligations of the undersigned hereunder shall be
binding upon the heirs, personal representatives, successors and assigns of the
undersigned.
By signing below, under penalties of perjury, the undersigned certifies (1)
that the Taxpayer Identification or Social Security Number set forth below is
the undersigned's correct Taxpayer Identification or Social Security Number, (2)
that all other information provided herein is true and accurate and (3) that the
undersigned is not subject to backup withholding because (a) the undersigned has
not been notified that the undersigned is subject to backup withholding as a
result of a failure to report all interest or dividends or (b) the Internal
Revenue Service has notified the undersigned that the undersigned is no longer
subject to backup withholding. (The undersigned must cross out subpart (3) of
the certification if the Internal Revenue Service has notified the undersigned
that the undersigned is subject to backup withholding due to the under reporting
of dividends or interest on tax returns and notice has not been received from
the Internal Revenue Service advising that backup withholding has been
terminated.) NOTE: FAILURE TO COMPLETE AND RETURN THIS INFORMATION WILL RESULT
IN BACKUP WITHHOLDING ON PAYMENTS DUE TO YOU.
2
<PAGE> 44
IMPORTANT: THIS LETTER OF TRANSMITTAL AND ALL OTHER DOCUMENTS AND
INSTRUMENTS REQUIRED HEREBY SHOULD BE MAILED OR DELIVERED TO STATE STREET BANK &
TRUST COMPANY ("STATE STREET") AT THE ADDRESSES SET FORTH ABOVE. THE METHOD OF
DELIVERY TO STATE STREET IS AT YOUR OPTION AND RISK, BUT, IF SENT BY MAIL,
REGISTERED MAIL IS SUGGESTED. UNLESS AND UNTIL ANY OUTSTANDING CERTIFICATES ARE
SURRENDERED TO STATE STREET, NO DIVIDENDS OR DISTRIBUTIONS OF ANY KIND PAYABLE
TO HOLDERS OF RECORD OF SHARES OF PARENT STOCK SHALL BE PAID TO SUCH HOLDER. NO
INTEREST WILL ACCRUE ON ANY CASH PAYMENT DUE OR UNPAID DIVIDENDS OR
DISTRIBUTIONS.
- -----------------------------------
(Signature)
Name:
Phone No:
Identification or Social
Security No:
- -----------------------------------
(Signature)
Name:
Phone No:
Identification or Social
Security No:
- --------------------------------------------------------------------------------
(DO NOT WRITE BELOW THIS LINE)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTION DEPOSITED
CADRE TECHNOLOGIES INC. IN ESCROW FOR
SHARES RECEIVED FROM BACHMAN COMMON STOCK ISSUED ACCOUNT OF THE
THIS SHAREHOLDER DIRECTLY TO THIS SHAREHOLDER STOCKHOLDER
- --------------------------------- --------------------------------- -----------------
CERT. NO. NO. OF SHARES CERT. NO. NO. OF SHARES NO. OF SHARES
<S> <C> <C> <C> <C>
- ------------ ----------------- ------------ ----------------- -----------------
- ------------ ----------------- ------------ ----------------- -----------------
- ------------ ----------------- ------------ ----------------- -----------------
- ------------ ----------------- ------------ ----------------- -----------------
</TABLE>
Dated as of , 1996
All Registered Owners must sign
exactly as name(s) appear on
Certificate(s). If anyone other
than the Registered Owner or an
attorney, personal representative,
trustee, custodian, guardian, other
fiduciary or officer of a Taxpayer
corporation signs the Letter of
Transmittal, proper and
satisfactory evidence of authority
to act must be submitted herewith.
Dated as of , 1996
All Registered Owners must sign
exactly as name(s) appear on
Certificate(s). If anyone other
than the Registered Owner or an
attorney, personal representative,
trustee, custodian, guardian, other
fiduciary or officer of a Taxpayer
corporation signs the Letter of
Transmittal, proper and
satisfactory evidence of authority
to act must be submitted herewith.
<PAGE> 45
EXHIBIT C
ESCROW AGREEMENT
This Escrow Agreement, dated as of this day of , 1996 (this
"Agreement"), is by and among Bachman Information Systems, Inc., a Massachusetts
corporation ("Parent"), James P. Lally, as agent with power of attorney (the
"Holder's Agent") for the stockholders of Cadre Technologies Inc., a Delaware
Corporation (the "Company"), and State Street Bank and Trust Company, a
Massachusetts banking corporation, as escrow agent (the "Escrow Agent").
WHEREAS, pursuant to an Agreement and Plan of Merger by and among Parent,
B.C. Acquisition Corp, a Delaware corporation and wholly-owned subsidiary of
Parent ("Merger Sub") and the Company dated as of March 25, 1996 (the "Merger
Agreement," a true and correct copy of which is annexed hereto as Exhibit B;
capitalized terms used but not defined herein shall have the respective meanings
ascribed to them in the Merger Agreement), the parties thereto have agreed,
subject to the terms and conditions set forth therein, to merge Merger Sub with
and into the Company and thereby to convert all of the Company Common Stock into
shares of Parent Stock;
WHEREAS, pursuant and subject to the Merger Agreement, the stockholders of
the Company (the "Stockholders") have agreed to indemnify Parent for certain
claims that Parent may incur; and
WHEREAS, pursuant to the Merger Agreement, Parent is transferring
concurrently herewith to the Escrow Agent as security for potential Parent
Claims incurred by Parent, an aggregate of shares of Parent Stock (which
amount represents approximately ten percent of each Stockholder's portion of the
total number of shares of Parent Stock into which such Stockholder's Company
Common Stock has been converted), to be held by the Escrow Agent upon the terms
and conditions set forth herein (for purposes of this Agreement, the term
"Escrow Fund" shall refer to the shares of Parent Stock held by the Escrow Agent
from time to time pursuant to this Agreement).
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, the parties hereto agree as follows:
1. ESTABLISHMENT OF ESCROW.
(a) Parent and the Holder's Agent hereby appoint the Escrow Agent to serve
as agent for the purpose of holding and distributing the Escrow Fund upon the
terms and conditions herein set forth, and the Escrow Agent accepts such
appointment subject to the terms and conditions hereof. Simultaneously with the
execution of this Agreement, Parent has deposited with the Escrow Agent
shares of Parent Stock (the "Deposit"), which shares represent a part
of the shares of Parent Stock issuable pursuant to the Merger in respect of
shares of Company Common Stock outstanding immediately prior to the Effective
Time as set forth in Section 2.9.2 of the Merger Agreement. The Escrow Agent
hereby acknowledges receipt of the Deposit, which consists of one certificate
for each Stockholder, each such certificate representing the number of shares of
Parent Stock set forth opposite such Stockholder's name on Exhibit A hereto.
(b) If at any time during the term of this Agreement, a stock dividend,
reclassification, readjustment or other change is declared or made in the
capital structure of Parent, Parent shall notify the Escrow Agent of such event,
identifying the number of new, substituted or additional shares or securities to
be issued to each Stockholder (together with a revised Exhibit A hereto) and
cause delivery of stock certificates evidencing all new, substituted or
additional shares, or other securities, issued by reason of any such change with
respect to the shares of Parent Stock to be deposited in escrow hereunder, and
such certificates evidencing all new, substituted or additional shares, or other
securities, issued by reason of any such change shall be deposited with the
Escrow Agent and shall for all purposes constitute part of the Escrow Fund
hereunder and be deemed shares of Parent Stock as such term is used herein.
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<PAGE> 46
2. DISTRIBUTION OF THE ESCROW FUND.
(a) Parent shall notify in writing the Escrow Agent and the Holder's Agent
of any Parent Claim specifying the amount of the Parent Claim and the number of
shares of Parent Stock, after giving effect to the limitations and the manner of
calculating such number of shares, as set forth in Article 8 of the Merger
Agreement, sufficient to satisfy such Parent Claim and a reasonably detailed
summary of the basis for such Parent Claim.
(b) Upon resolution of any Parent Claim permitting recovery from the Escrow
Fund in accordance with the terms of the Merger Agreement, the Escrow Agent
shall:
(i) in the case of a Parent Claim submitted to a judicial proceeding
where the court has awarded recovery to Parent and the Escrow Agent has
not received a court order prohibiting it from making a distribution out
of the Escrow Fund to satisfy such recovery, ten days after receipt of
notice sent by Parent to the Holder's Agent and the Escrow Agent
indicating that the award from such proceeding is non-appealable and
final and attaching a copy of such award specifying the amount of such
recovery; or
(ii) in the case of a Parent Claim settled by written agreement between
Parent and the Holder's Agent, upon receipt of a copy of such agreement,
specifying the amount of such recovery; or
(iii) in the case of a Parent Claim where the Holder's Agent is deemed
to have agreed to a recovery because he has not objected to notice
seeking such recovery in the manner and within the time set forth in
Section 8.4.2 of the Merger Agreement and the Escrow Agent has not
received a court order prohibiting it from making a distribution out of
the Escrow Fund to satisfy such recovery, ten days after receipt of
notice sent by Parent to the Holder's Agent and the Escrow Agent
specifying the amount of such recovery and indicating that the Holder's
Agent has failed to object to such recovery in the manner and within the
time set forth in Section 8.4.2 of the Merger Agreement,
deliver to Parent certificates representing a number of shares of Parent Stock
sufficient to satisfy such recovery as set forth in the Parent Claim, in the
amount of the award as contemplated in Section 2(b)(i), the settlement agreement
contemplated under Section 2(b)(ii), or the notice of claim under Section
2(b)(iii), together with instruments of transfer executed and delivered by the
Holder's Agent in accordance with Section 2(d) hereof.
(c) Any distribution of shares of Parent Stock to satisfy a Parent Claim
pursuant to Section 2(b) hereof shall be done so as to reduce each Stockholder's
interest in shares of Parent Stock held in the Escrow Fund in a pro rata manner
based on the Stockholders' respective ownership interests in the shares of
Parent Stock in the Escrow Fund.
(d) In order that the Escrow Agent may distribute the shares of Parent
Stock from the Escrow Fund as provided in this Agreement, Parent agrees to
deliver to the Escrow Agent upon surrender of a certificate then held by the
Escrow Agent (i) a new certificate or certificates representing the shares of
Parent Stock to be distributed hereunder, issued in the name of the distributee
and (ii) if necessary, new certificates representing shares of Parent Stock
issued in the name of the appropriate Stockholders to be retained by the Escrow
Agent as part of the Escrow Fund. The Holder's Agent shall execute and deliver
such instruments of transfer, stock powers and instructions to the Escrow Agent
as may be reasonably requested to give effect to the provisions of this
Agreement. Parent shall notify the Escrow Agent of the name and address of its
transfer agent.
3. RIGHT TO RELY; INDEMNITY; PERFORMANCE; LIMITATION OF LIABILITY OF ESCROW
AGENT.
(a) The Escrow Agent shall be entitled to rely on, and be protected and
acting upon or refraining from acting upon, any written notice, statement,
certificate, request or document (including copies of original documents)
believed by it to be genuine and to have been signed or sent by the proper
person or persons or on other evidence or information deemed by it to be
reliable. The Escrow Agent shall have no responsibility whatsoever with respect
to the undertakings of any other party hereto or to any notices or undertakings
of anyone not a party hereto. The Escrow Agent (i) shall not be responsible for
any of the agreements referred to herein but shall be obligated only for the
performance of such duties as are specifically set forth herein; (ii)
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<PAGE> 47
shall not be obligated to take any legal or other action hereunder which might
in its judgment involve any expense or liability unless it shall have been
furnished with acceptable indemnification; and (iii) may consult outside counsel
satisfactory to it, and the opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in accordance with the opinion of such
counsel.
(b) Parent agrees to indemnify and hold harmless the Escrow Agent and each
of its directors, officers and agents appointed and acting in accordance with
this Agreement (collectively, the "Indemnified Parties") against all claims,
losses, damages, costs, penalties, fines and reasonable expenses (including
reasonable expenses of the Escrow Agent's legal counsel) which may be paid,
incurred or suffered by the Indemnified Parties by reason of or as a result of
the Escrow Agent's entering into this Agreement or compliance with its duties
set forth in this Agreement, or any written instructions delivered to the Escrow
Agent by Parent pursuant hereto, except to the extent that any such claim, loss,
damage, cost, penalty, fine or expense results from fraud, gross negligence,
wilful misconduct or bad faith on the part of such Indemnified Parties. In no
case shall Parent be liable under this indemnity for any claim against any of
the Indemnified Parties unless Parent shall be notified by the Escrow Agent of
the written assertion of a claim or of any action commenced against the
Indemnified Parties, promptly after any of the Indemnified Parties shall have
received any such written assertion of a claim or shall have been served with a
summons or other first legal process giving information as to the nature and
basis of the claim. Subject to clause (ii) below, Parent shall be entitled to
participate at its own expense in the defense and, if Parent so elects at any
time after receipt of such notice, it may assume the defense of any suit brought
to enforce any such claim. The Escrow Agent shall have the right to employ
separate counsel in any such suit and participate in the defense thereof but the
fees and expenses of such counsel shall be at the expense of the Escrow Agent
unless: (i) the employment of such counsel has been authorized by Parent; or
(ii) the counsel retained by Parent would be inappropriate due to actual or
potential different interests between the Escrow Agent and any other party
represented by such counsel retained by Parent in such a proceeding (in which
case Parent shall not have the right to assume the defense of such suit on
behalf of the Escrow Agent but shall be liable to pay the reasonable fees and
expenses of counsel for the Escrow Agent).
(c) In performing its duties hereunder, the Escrow Agent shall exercise
that degree of care, skill and diligence that a prudent professional agent would
exercise in comparable circumstances, but shall be liable only for fraud, gross
negligence, wilful misconduct or bad faith. The Escrow Agent has read and is
familiar with the provisions of Article 8 of the Merger Agreement.
(d) It is further agreed that if any controversy arises, between the
parties hereto or with any third person, with respect to the Escrow Fund or any
part of the subject matter of this Agreement, its terms or conditions, the
Escrow Agent shall not be required to determine the same or take any action in
the premises, but may await the settlement of any such controversy by final
appropriate legal proceedings or otherwise as it may require, notwithstanding
anything in this Agreement to the contrary, and in such event the Escrow Agent
shall not be liable for interest or damages.
(e) The Escrow Agent shall not be responsible for any delay or failure in
performance resulting from acts beyond its control. Such acts shall include but
not be limited to acts of God, strikes, lockouts, riots, acts of war,
governmental regulations, fire, communication line failures, power failures or
disasters.
4. RESIGNATION, REMOVAL, SUCCESSOR.
(a) The Escrow Agent may resign as escrow agent under this Agreement and
thereby become discharged from the obligations hereby created, by notice in
writing given to Parent and the Holder's Agent not less than thirty days before
such resignation is to take effect.
(b) The Escrow Agent may be removed at any time by an instrument or
concurrent instruments in writing delivered to the Escrow Agent and signed by
Parent and the Holder's Agent.
(c) If at any time hereafter the Escrow Agent shall give notice of its
resignation pursuant to Section 4(a) hereof, shall be removed pursuant to
Section 4(b) hereof, or shall be dissolved or otherwise become incapable of
acting, or the position of the Escrow Agent shall become vacant for any other
reason, Parent and
3
<PAGE> 48
the Holder's Agent shall promptly appoint a successor Escrow Agent. Upon such
appointment such successor shall execute, acknowledge and deliver to its
predecessor, and also to Parent and the Holder's Agent, an instrument in writing
accepting such appointment hereunder and agreeing to be bound by the terms and
provisions of this Agreement. Thereupon such successor Escrow Agent, without any
further act, shall become fully vested with all the rights, immunities, and
powers, and shall be subject to all of the duties and obligations of its
predecessor and such predecessor Escrow Agent shall promptly deliver the Escrow
Fund to such successor.
(d) In the event that a successor Escrow Agent has not been appointed
within thirty days of the date of any such resignation, removal, dissolution,
incapacity or vacancy, the Escrow Agent shall deposit the Escrow Fund with the
clerk of a court of competent jurisdiction and shall interplead all of the
parties hereto. Upon so depositing the Escrow Fund and filing its pleading, this
Agreement shall terminate as to the Escrow Agent.
(e) In the event the Escrow Agent is merged or consolidated with any other
entity, and as a result thereof the Escrow Agent ceases to exist as a separate
entity, or the Escrow Agent sells substantially all of its corporate trust
business to another entity, then such entity, without any further act, shall
become fully vested with all the rights, immunities, and powers, and shall be
subject to all of the duties and obligations of the Escrow Agent.
5. TERMINATION. This Agreement shall terminate one year from the date
hereof (the "Termination Date"); provided, however, that if Parent has provided
notice of a Parent Claim in accordance with Section 2(a) hereof prior to 5:00
p.m., Eastern standard time, on the Termination Date, and such Parent Claim
remains unresolved as of such time and date, then this Agreement shall continue
in effect until all such Parent Claims shall have been resolved in accordance
with the Merger Agreement and the provisions hereof. On the Termination Date,
the Escrow Agent shall distribute the remaining Escrow Fund, if any, to the
Stockholders pro rata based upon their respective ownership interests in the
shares of Parent Stock in the Escrow Fund, provided however, that in the event
one or more Parent Claims remain unresolved on the Termination Date, the Escrow
Agent shall keep in the Escrow Fund the number of shares of Parent Stock
specified in the "Pending Claims Notice" as hereinafter defined. For these
purposes, the "Pending Claims Notice" shall mean a notice given by Parent to the
Escrow Agent and the Holder's Agent dated not more than five days prior to the
Termination Date which identifies those Parent Claims that are unresolved on the
date of the Pending Claims Notice ("Pending Claims") and which includes Parent's
reasonable estimate of the amount of each such Pending Claim (the "Estimate").
The Pending Claims Notice shall also specify the number of shares of Parent
Stock that shall remain in escrow and remain subject to the terms of this
Agreement, such number of shares to be determined in the case of each Pending
Claim by taking the Estimate for such Pending Claim divided by the Formula Price
Per Share. Upon resolution of a Pending Claim, if Parent is permitted to recover
from the Escrow Fund in the circumstances provided in Section 2(b) hereof, the
Escrow Agent shall distribute shares of Parent Stock to Parent in the manner
provided in Section 2(b) hereof, and any shares of Parent Stock that are not
distributed to Parent with respect to such Pending Claim shall be distributed to
the Stockholders pro rata based upon their respective ownership interests in the
shares of Parent Stock in the Escrow Fund. Parent shall not have any
responsibility to distribute all or any portion of the Escrow Fund to the
Stockholders.
6. CONFLICT WITH MERGER AGREEMENT. In the case of a conflict between the
provisions of this Agreement and the Merger Agreement, the provisions of the
Merger Agreement shall govern.
7. VOTING AND DIVIDENDS. Notwithstanding that a share of Parent Stock is
held in the Escrow Fund, nothing contained in this Agreement shall in any way
limit the rights of the Stockholders to exercise the votes attaching to such
shares of Parent Stock or to receive dividends thereon.
8. FEES. Parent agrees to pay, and shall be solely responsible for, all
fees, disbursements and other expenses charged by the Escrow Agent for the
performance of the Escrow Agent's services hereunder. Property in the Escrow
Fund shall not be used to pay any such fees, disbursements or other expenses.
4
<PAGE> 49
9. AMENDMENTS AND SUPPLEMENTS. This Agreement may not be amended, modified
or supplemented by the parties hereto in any manner, except by an instrument in
writing signed on behalf of each of the parties hereto personally or by their
duly authorized officers or representatives.
10. NO WAIVER. The failure of any party hereto to enforce at any time any
of the provisions of this Agreement shall in no way be construed to be a waiver
of any such provision, nor in any way to affect the validity of this Agreement
or any part hereof or the right of such party thereafter to enforce each and
every such provision. No waiver of any breach of or non-compliance with this
Agreement shall be held to be a waiver of any other or subsequent breach or
non-compliance.
11. GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with, the substantive laws of The Commonwealth of
Massachusetts, without regard to its principles of conflicts of laws.
12. NOTICE. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered by hand, sent by facsimile
transmission with confirmation of receipt requested, sent via a reputable
international courier service with confirmation of receipt requested, or mailed
by registered or certified mail (postage prepaid and return receipt requested)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice), and shall be deemed given on the date on
which delivered by hand or otherwise on the date of receipt as confirmed:
To Parent:
Bachman Information Systems, Inc.
8 New England Executive Park
Burlington, Massachusetts 01803
Attn: President
With a copy to:
John D. Patterson, Jr., Esq.
Foley, Hoag & Eliot
One Post Office Square
Boston, Massachusetts 02109
To the Holder's Agent:
James P. Lally
Kleiner Perkins Caufield & Byers
2750 Sandhill Road
Menlo Park, California 94025
With a copy to:
William B. Simmons, Jr., Esq.
Testa, Hurwitz & Thibeault
125 High Street
Boston, Massachusetts 02110
To the Escrow Agent:
State Street Bank and Trust Company
150 Royall Street
Mail Stop 45-02-62
Canton, Massachusetts 02021
Attention: Thomas Belamarich
5
<PAGE> 50
13. CONSTRUCTION OF AGREEMENT. A reference to a Section shall mean a
Section in this Agreement unless otherwise expressly stated. The titles and
headings herein are for reference purposes only and shall not in any manner
limit the construction of this Agreement which shall be considered as a whole.
The words "include," "includes" and "including" when used herein shall be deemed
in each case to be followed by the words "without limitation."
14. ENTIRE AGREEMENT, ASSIGNABILITY, ETC. This Agreement and the Merger
Agreement and the documents and other agreements among the parties hereto and
thereto as contemplated by or referred to herein or therein constitute the
entire agreement among the parties with respect to the subject matter hereof and
supersede all other prior agreements and understandings, both written and oral,
between the parties with respect to such subject matter. This Agreement is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder, except as otherwise expressly provided herein and shall not
be assignable by operation of law or otherwise.
15. VALIDITY. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which together shall constitute one and the same Agreement.
* * * * *
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
BACHMAN INFORMATION SYSTEMS, INC.
By:
Title:
------------------------------------
James P. Lally, as agent with
power of attorney for the
Stockholders
STATE STREET BANK AND TRUST COMPANY
By:
Title:
6
<PAGE> 51
EXHIBIT A
<TABLE>
<CAPTION>
Name of Stockholder Number of Shares of Parent Stock Held in Escrow
<S> <C>
</TABLE>
7
<PAGE> 52
EXHIBIT B
[COPY OF MERGER AGREEMENT]
8
<PAGE> 53
EXHIBIT D
AFFILIATE AGREEMENT (CADRE)
, 1996
Bachman Information Systems, Inc.
8 New England Executive Park
Burlington, Massachusetts 01803
Ladies and Gentlemen:
Pursuant to the terms of the Agreement and Plan of Merger dated as of March
25, 1996 (the "Agreement"), by and among Bachman Information Systems, Inc., a
Massachusetts corporation ("Parent"), B.C. Acquisition Corp., a Delaware
corporation and wholly owned subsidiary of Parent ("Merger Sub"), and Cadre
Technologies Inc., a Delaware corporation (the "Company"), Parent will acquire
the Company through the merger of Merger Sub with and into the Company (the
"Merger"). Subject to the terms and conditions of the Agreement, at the
Effective Time (as defined in the Agreement), outstanding shares of the common
stock, par value $.01 per share, of the Company (the "Company Common Stock")
will be converted into the right to receive shares of common stock, par value
$.01 per share, of Parent (the "Parent Common Stock") on the basis described in
the Agreement.
The undersigned (the "Stockholder") has been advised that, as of the date
hereof, the Stockholder may be deemed to be an "affiliate" of the Company, as
the term "affiliate" is (i) defined for purposes of paragraphs (c) and (d) of
Rule 145 of the Rules and Regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act"), and/or (ii) used in and for purposes of
Accounting Series Releases 130 and 135, as amended, of the Commission, although
nothing contained herein shall be construed as an admission of such fact.
The Stockholder understands that the representations, warranties and
covenants set forth herein will be relied upon by Parent, stockholders of
Parent, the Company, other stockholders of the Company and their respective
counsel and accounting firms.
The Stockholder represents and warrants to and agrees with Parent that:
1. The Stockholder has full power to execute and deliver this Affiliate
Agreement and to make the representations and warranties herein and to perform
the Stockholder's obligations hereunder.
2. The Stockholder has carefully read this Affiliate Agreement and the
Agreement and discussed the requirements and other applicable limitations upon
the Stockholder's ability to sell, transfer or otherwise dispose of Parent
Common Stock, to the extent the Stockholder felt necessary, with the
Stockholder's counsel or counsel for the Company.
3. The Stockholder shall not make any sale, transfer, exchange, pledge or
other disposition of Parent Common Stock in violation of the Act or the Rules
and Regulations.
4. The Stockholder has been advised that the issuance of shares of Parent
Common Stock to the Stockholder in connection with the Merger has been or will
be registered with the Commission under the Act on a Registration Statement on
Form S-4. However, the Stockholder has also been advised that, since, at the
time the Merger is to be submitted for a vote of the stockholders of the Company
the Stockholder may be deemed to be an affiliate of the Company and the
distribution by the Stockholder of any Parent Common Stock will not have been
registered under the Act, the Stockholder may not sell, transfer or otherwise
dispose of Parent Common Stock issued to the Stockholder in the Merger unless
(i) such sale, transfer or other disposition has been registered under the Act,
(ii) such sale, transfer or other disposition is made in conformity with the
requirements of Rule 145 promulgated by the Commission under the Act, or (iii)
in the
1
<PAGE> 54
opinion of counsel reasonably acceptable to Parent, such sale, transfer or other
disposition is otherwise exempt from registration under the Act.
5. Parent is under no obligation to register the sale, transfer or other
disposition of Parent Common Stock by the Stockholder or on its behalf under the
Act or to take any other action necessary in order to make compliance with an
exemption from such registration available.
6. Stop transfer instructions will be given to Parent's transfer agent
with respect to the Parent Common Stock and there will be placed on the
certificates for the Parent Common Stock issued to the Stockholder, or any
substitutions therefor, a legend stating in substance:
"The shares represented by this certificate were issued in a transaction
to which Rule 145 promulgated under the Securities Act of 1933 applies.
The shares represented by this certificate may only be transferred in
accordance with the terms of an Affiliate Agreement dated ,
1996, between the registered holder hereof and Parent, a copy of which
agreement is on file at the principal offices of Parent."
7. The legend set forth in paragraph 6 above shall be removed by delivery
of substitute certificates without such legend if the Stockholder shall have
delivered to Parent a copy of a letter from the staff of the Commission, or an
opinion of counsel in form and substance reasonably satisfactory to Parent, to
the effect that such legend is not required for purposes of the Act.
8. The Stockholder will not sell, exchange, transfer, pledge, dispose of
or grant any option, establish any "short" or put-equivalent position with
respect to or enter into any similar transaction intended to reduce the
Stockholder's risk relative to the shares of Parent Common Stock received by the
Stockholder in connection with the Merger, except for de minimis sales with the
prior written consent of Parent, during the period beginning from the date
hereof, and ending on the second day after the day Parent publicly announces
financial results covering at least 30 days of combined operations of the Parent
and the Company. Parent, at its discretion, may cause stop transfer orders
consistent with the foregoing to be placed with its transfer agent with respect
to the certificates for Parent Common Stock.
9. (a) The Stockholder currently is the beneficial owner of that number of
shares of Company Common Stock set forth in Appendix A hereto (the "Company
Securities") and, except as otherwise set forth in Appendix A, (i) has held the
Company Securities at all times since March 31, 1994 and (ii) did not acquire
any of the Company Securities in contemplation of the Merger;
(b) Except as otherwise set forth in Appendix A hereto, the Stockholder
has not engaged in a Sale (as defined below) of any shares of Company Common
Stock (including the Company Securities) (i) at any time since March 31, 1994 or
(ii) in contemplation of the Merger;
(c) The Stockholder has no present plan or intention (a "Plan") to engage
in a sale, exchange, transfer, distribution (including a distribution by a
partnership to its partners or by a corporation to its stockholders), redemption
or reduction in any way of the Stockholder's risk of ownership by short sale or
otherwise, or other disposition, directly or indirectly (such actions being
collectively referred to herein as a "Sale") of more than 50% of Parent Common
Stock to be received by the Stockholder in the Merger. For purposes of the
preceding sentence, shares of Company Common Stock (or the portion thereof) (i)
with respect to which the Stockholder will receive consideration in the Merger
other than Parent Common Stock (including, without limitation, cash to be
received in lieu of fractional shares of Parent Common Stock) and/or (ii) with
respect to which a Sale (A) occurred after March 31, 1994 or otherwise in
contemplation of the Merger or (B) will occur prior to the Merger, shall be
considered shares of Company Common Stock exchanged for Parent Common Stock in
the Merger and then disposed of pursuant to a Plan;
(d) The Stockholder has no Plan to exercise dissenters' rights in
connection with the Merger;
(e) The Stockholder is not aware of, or participating in, any Plan on the
part of the stockholders of the Company to engage in a Sale or Sales of the
Parent Common Stock to be received in the Merger such that the aggregate fair
market value, as of the Effective Date of the Merger, of the shares subject to
such Sales would exceed 50% of the aggregate fair market value of all shares of
outstanding Company Common Stock
2
<PAGE> 55
immediately prior to the Merger. For purposes of the preceding sentence, shares
of Company Common Stock (or the portion thereof) (i) with respect to which a
Company stockholder receives consideration in the Merger other than Parent
Common Stock (including, without limitation, cash received pursuant to the
exercise of dissenters' rights or in lieu of fractional shares of Parent Common
Stock) or (ii) with respect to which a Sale occurs prior to and in contemplation
of the Merger, shall be considered shares of outstanding Company Common Stock
exchanged for Parent Common Stock in the Merger and then disposed of pursuant to
a Plan;
(f) The representations contained herein shall be true and correct at all
times from the date hereof through the date on which the Merger occurs; and
(g) The Stockholder has consulted with such legal and financial counsel as
the Stockholder has deemed appropriate in connection with the execution of this
Affiliate Agreement.
10. The Stockholder understands that the Company, Merger Sub, Parent and
their respective stockholders, as well as legal counsel to the Company and
Parent (in connection with rendering their tax opinions) will be relying on (a)
the truth and accuracy of the representations contained herein and (b) the
Stockholder's performance of the obligations set forth herein.
11. Except for the Company Securities and options to purchase that number
of shares of Company Common Stock set forth in Appendix A hereto, the
Stockholder does not beneficially own any shares of Company Common Stock or any
other equity securities of the Company or any options, warrants or other rights
to acquire any equity securities of the Company.
12. All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered by hand, sent by facsimile transmission with
confirmation of receipt requested, sent via a reputable overnight courier
service with confirmation of receipt requested, or mailed by registered or
certified mail (postage prepaid and return receipt requested) to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice), and shall be deemed given on the date on which
delivered by hand or otherwise on the date of receipt as confirmed:
(a) If to Stockholder, at the address set forth below Stockholder's
signature at the end hereof.
(b) If to Parent:
Bachman Information Systems, Inc.
8 New England Executive Park
Burlington, Massachusetts 01803
Attn: President
or to such other address as either party hereto may designate for itself by
notice given as herein provided.
13. This Affiliate Agreement may be executed in one or more counterparts,
all of which together shall constitute one and the same agreement.
14. This Affiliate Agreement shall be enforceable by, and shall inure to
the benefit of and be binding upon, the parties hereto and their respective
successors and assigns. As used herein, the term "successors and assigns" shall
mean, where the context so permits, heirs, executors, administrators, trustees
and successor trustees, and personal and other representatives.
15. This Affiliate Agreement shall be governed by, and construed and
enforced in accordance with, the substantive laws of The Commonwealth of
Massachusetts, without regard to its principles of conflicts of laws.
16. If a court of competent jurisdiction determines that any provision of
this Affiliate Agreement is not enforceable or enforceable only if limited in
time and/or scope, this Affiliate Agreement shall continue in full force and
effect with such provision stricken or so limited.
3
<PAGE> 56
17. Counsel to and accountants for the parties to the Agreement shall be
entitled to rely upon this Affiliate Agreement as needed.
Very truly yours
(print name of stockholder above)
By:
Address:
Accepted this day of , 1996,
by BACHMAN INFORMATION SYSTEMS, INC.
By:
Title:
4
<PAGE> 57
APPENDIX A
Stockholder:
Entity:
(individual, corporation, partnership, other - please specify)
Total Number of shares of Company Common Stock owned on the date hereof:
Total Number of shares of Company Common Stock owned on March 31, 1994:
Total Number of shares of Company Common Stock disposed of in a Sale (i) after
March 31, 1994 or (ii) otherwise in contemplation of the Merger:
Total Number of shares of Company Common Stock acquired (i) after March 31, 1994
or (ii) otherwise in contemplation of the Merger:
Please specify the date and number of shares of Company Common Stock acquired or
disposed of in each transaction (i) after March 31, 1994 or (ii) otherwise in
contemplation of the Merger:
Please describe any plans or intent to dispose of, in a Sale, shares of Company
Common Stock prior to the Merger or shares of Parent Common Stock after the
Merger (attach a separate sheet if necessary):
Total Number of options to purchase Company Common Stock owned on the date
hereof:
5
<PAGE> 58
EXHIBIT E
AFFILIATE AGREEMENT (BACHMAN)
This AFFILIATE AGREEMENT ("Affiliate Agreement") is entered into as of the
day of , 1996 between Bachman Information Systems, Inc., a
Massachusetts corporation ("Parent"), and the undersigned stockholder
("Stockholder") of Parent.
Pursuant to the terms of the Agreement and Plan of Merger dated as of March
25, 1996 (the "Agreement"), by and among Parent, B.C. Acquisition Corp., a
Delaware corporation and wholly owned subsidiary of Parent ("Merger Sub"), and
Cadre Technologies Inc., a Delaware corporation (the "Company"), Parent will
acquire the Company through the merger of Merger Sub with and into the Company
(the "Merger").
1. The Stockholder hereby represents, warrants and agrees that:
(a) The Stockholder may be deemed to be an "affiliate" of Parent, as
the term "affiliate" is (i) defined for purposes of paragraphs (c) and (d)
of Rule 145 of the Rules and Regulations of the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended,
and/or (ii) used in and for purposes of Accounting Series Releases 130 and
135, as amended, of the Commission, although nothing contained herein shall
be construed as an admission of such fact.
(b) The Stockholder will not sell, exchange, transfer, pledge, dispose
of or grant any option, establish any "short" or put-equivalent position
with respect to or enter into any similar transaction intended to reduce
the Stockholder's risk relative to the shares of Parent's capital stock
owned by the Stockholder (the "Parent Shares"), except for de minimis sales
with the prior written consent of Parent, during the period beginning from
the date hereof, and ending on the second day after the day Parent publicly
announces financial results covering at least thirty days of combined
operations of Parent and the Company. Parent, at its discretion, may cause
stop transfer orders to be placed with its transfer agent with respect to
the certificates for Parent Shares.
2. All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered by hand, sent by facsimile transmission with
confirmation of receipt requested, sent via a reputable overnight courier
service with confirmation of receipt requested, or mailed by registered or
certified mail (postage prepaid and return receipt requested) to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice), and shall be deemed given on the date on which
delivered by hand or otherwise on the date of receipt as confirmed:
(a) If to Stockholder, at the address set forth below Stockholder's
signature at the end hereof.
(b) If to Parent:
Bachman Information Systems, Inc.
8 New England Executive Park
Burlington, Massachusetts 01803
Attn: President
or to such other address as either party hereto may designate for itself by
notice given as herein provided.
3. This Affiliate Agreement may be executed in one or more counterparts,
all of which together shall constitute one and the same agreement.
4. This Affiliate Agreement shall be enforceable by, and shall inure to
the benefit of and be binding upon, the parties hereto and their respective
successors and assigns. As used herein, the term "successors and assigns" shall
mean, where the context so permits, heirs, executors, administrators, trustees
and successor trustees, and personal and other representatives.
5. This Affiliate Agreement shall be governed by, and construed and
enforced in accordance with, the substantive laws of The Commonwealth of
Massachusetts, without regard to its principles of conflicts of laws.
<PAGE> 59
6. If a court of competent jurisdiction determines that any provision of
this Affiliate Agreement is not enforceable or enforceable only if limited in
time and/or scope, this Affiliate Agreement shall continue in full force and
effect with such provision stricken or so limited.
7. Counsel to and accountants for the parties to the Agreement shall be
entitled to rely upon this Affiliate Agreement as needed.
* * * * *
2
<PAGE> 60
IN WITNESS WHEREOF, the parties hereto have caused this Affiliate Agreement
to be executed as of the date first written above.
BACHMAN INFORMATION SYSTEMS, INC.
By:
Title:
STOCKHOLDER
------------------------------------
(print name of stockholder above)
By:
Address:
------------------------------------
3
<PAGE> 61
EXHIBIT F
FORM OF CADMOUNT ACKNOWLEDGMENT
[Date]
Bachman Information Systems, Inc.
8 New England Executive Park
Burlington, MA 01803
Cadre Technologies Inc.
222 Richmond Street
Providence, RI 02903
Ladies and Gentlemen:
This letter is being delivered to you in connection with an Agreement and
Plan of Merger dated as of March 25, 1996 (the "Merger Agreement") among Bachman
Information Systems, Inc. ("Bachman"), B.C. Acquisition Corp. ("Merger Sub") and
Cadre Technologies Inc. ("Cadre") pursuant to which Cadre will merge with and
into Merger Sub and become a wholly-owned subsidiary of Bachman (the "Merger").
The Merger Agreement requires that, as a condition to the closing of the Merger,
the undersigned make certain acknowledgments with respect to a Share Purchase
Agreement dated May 1, 1995 between the undersigned and Cadre (the "Share
Purchase Agreement"; capitalized terms used but not defined herein shall have
the respective meanings given to them in the Share Purchase Agreement).
Therefore, for good and valuable consideration, the receipt of which is hereby
acknowledged, the undersigned represents, acknowledges and agrees as follows:
1. Upon consummation of the Merger, the Cadre Shares then held in the
Escrow Account will be converted into shares of common stock, par value
$.01 per share, of Bachman Information Systems, Inc. ("Bachman Stock")
using the Exchange Ratio set forth in the Merger Agreement. The terms of
the Escrow Agreement will remain unchanged in all other respects.
2. International Computers Limited ("ICL") has an option (the
"Option") to acquire 62,832 Cadre Shares pursuant to the software agreement
between Westmount and ICL dated November 1990, as amended (the "Software
Agreement"). In order to satisfy exercise of the Option, the undersigned
agrees as follows: (i) in the event ICL exercises the Option prior to July
1, 1996, then Cadre shall be permitted to withdraw 62,832 Cadre Shares (or
the number of shares of Bachman Stock equal to 62,832 multiplied by the
Exchange Ratio set forth in the Merger Agreement) from the Escrow Account
and register them in the name of ICL as contemplated by Section 4.3 of the
Share Purchase Agreement and such shares shall remain in escrow subject to
release as contemplated by Section 4.10 of the Share Purchase Agreement and
(ii) in the event ICL has not exercised the option prior to July 1, 1996,
then Cadre and the undersigned shall, in order to be able to satisfy any
future exercise of the Option by ICL, keep in escrow an additional 62,832
Cadre Shares (or the number of shares of Bachman Stock equal to 62,832
multiplied by the Exchange Ratio set forth in the Merger Agreement) above
and beyond the number of Cadre Shares required to remain in escrow pursuant
to Section 4.10 of the Share Purchase Agreement, and such shares shall
remain in escrow until such time as ICL has exercised the Option, in which
case such shares will be registered in the name of ICL and subject to
release from escrow to ICL as set forth in Section 4.10 of the Share
Purchase Agreement.
3. Effective upon consummation of the Merger, the Amended and
Restated Voting Agreement dated May 1, 1995 between the undersigned and
Cadre shall be terminated and of no further force or effect.
* * * * *
<PAGE> 62
In witness whereof, the undersigned has caused this letter to be signed as
an instrument under seal as of the date first written above.
Sincerely,
Stichting Administratiekantoor
Cadmount
By:
Accepted:
Bachman Information Systems, Inc.
By:
Cadre Technologies Inc.
By:
2
<PAGE> 1
EXHIBIT 5.1
Draft
[FOLEY, HOAG & ELIOT LLP]
June 14, 1996
BACHMAN Information Systems, Inc.
8 New England Executive Park
Burlington, Massachusetts 01803
Gentlemen:
We are familiar with the Registration Statement on Form S-4 (the
"Registration Statement") filed today with the Securities and Exchange
Commission by BACHMAN Information Systems, Inc., a Massachusetts corporation
(the "Company"), relating to an aggregate of 4,850,000 shares of the Company's
common stock, $0.01 par value per share (the "Common Stock"), to be issued in
connection with the proposed merger of a subsidiary of the Company into Cadre
Technologies Inc.
Based upon the foregoing, we are of the opinion that (a) the Company has
corporate power sufficient for the issuance in the manner set forth in the S-4
Registration Statement of the shares of its Common Stock issued or to be issued
pursuant to the provisions of the Agreement and Plan of Merger dated March 25,
1996 (the "Merger Agreement"), (b) the Company has taken all necessary corporate
action required to authorize the issuance and sale of 4,850,000 shares upon
consummation of the proposed merger, and (c) when the merger is effective under
the provisions of the Merger Agreement and corresponding Articles of Merger have
been filed with the Massachusetts State Secretary, the shares will be validly
and legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as part of the S-4
Registration Statement.
Very truly yours,
FOLEY, HOAG & ELIOT LLP
By DAVID W. WALKER
------------------------
A Partner
DWW/dsl
<PAGE> 1
EXHIBIT 8.1
[Draft of Opinion to be Delivered at Closing]
[ ], 1996
Bachman Information Systems, Inc.
Eight New England Executive Park
Burlington, Massachusetts 01803
Re: Merger of B.C. Acquisition Corp.
into Cadre Technologies Inc.
----------------------------
Gentlemen:
This opinion is delivered to you for the purpose of satisfying a condition
set forth in Section 7.1.7 of the Agreement and Plan of Merger dated March 25,
1996 (the "Agreement") by and among Bachman Information Systems, Inc., a
Massachusetts corporation ("Bachman"), B.C. Acquisition Corp., a Delaware
corporation and wholly owned subsidiary of Bachman ("Sub"), and Cadre
Technologies Inc., a Delaware corporation ("Cadre"), pursuant to which Sub will
merge with and into Cadre. Capitalized terms not defined herein shall have the
meanings set forth in the Agreement.
We are counsel to Bachman and, as such, have participated in the Merger. In
providing this opinion, we have received, and have relied on, the statements,
covenants, representations and warranties contained in the Agreement, the
Company Affiliate Agreements, the Escrow Agreement, the representation
certificates of Bachman and Sub dated [ ], 1996, of Cadre dated [ ], 1996, and
of certain Stockholders delivered in connection with this opinion (collectively,
the "Representation Certificates"), and such other documents as we have
considered necessary or advisable in rendering this opinion. Although we have
made inquiries with respect to such matters as we have considered necessary or
advisable in rendering this opinion, we have not made any independent review or
investigation as to factual matters in connection herewith.
We have assumed for purposes hereof that (i) the copies or originals of the
agreements, instruments and other documents furnished to us are accurate (if a
copy) or authentic (if an original), and those that are agreements or
instruments have been or will be duly executed and delivered by all parties
thereto; (ii) the Merger will be consummated as set forth in the foregoing
documents, including, without limitation, the Agreement, the Parent Affiliate
Agreements, the
<PAGE> 2
Bachman Information Systems, Inc.
[ ], 1996
Page 2
Company Affiliate Agreements, the Escrow Agreement and the Representation
Certificates; (iii) the representations made in the foregoing documents or
otherwise made in connection therewith are, and will continue to be, true and
complete, and no default or waiver exists in connection with the foregoing
documents; and (iv) no actions will be taken, no change in the foregoing
documents will occur, and no other events will occur, that would have the effect
of altering the facts, documents or assumptions upon which this opinion is
based.
We express no opinion herein with respect to the laws of any state or
jurisdiction other than the federal income tax laws of the United States of
America, or with respect to any issue not specifically addressed below, or with
respect to whether the parties to the Merger are eligible or would receive a
favorable advance ruling from the Internal Revenue Service regarding any issue
addressed below. In particular, we express no opinion regarding (i) whether any
Stockholder will recognize income or gain as a result of the Merger or whether
any Stockholder who has provided or will provide services to Cadre, Bachman or
Sub will recognize income as a result of, or in connection with, such services,
and the effect of any such income, including, without limitation, the effect of
any such income on the basis and holding period of Parent Stock received by such
Stockholder in the Merger, (ii) other than as specifically addressed below, the
corporate income tax consequences of the Merger to Bachman, Sub and Cadre, (iii)
the effect, if any, of the "golden parachute" provisions of Sections 280G, 3121
and 4999 of the Code, the alternative minimum tax provisions of Sections 55, 56
and 57 of the Code, or the provisions of Sections 305, 306, 357 and 424 of the
Code, and the adjusted basis of any equity interest in Cadre held by Bachman
after the Merger, (iv) the corporate income tax consequences to Bachman, Sub and
Cadre of any transactions entered into in connection with or contemporaneously
with the Merger, (v) the effect of the Merger on any federal income tax
attributes or elections of Bachman, Sub and Cadre, (vi) the effect of the Merger
on any transaction in which Cadre stock or any option, warrant, escrowed stock,
convertible security, contractual right or other right to acquire Cadre stock
was received, and (vii) the income tax consequences of the Merger that may be
relevant to particular classes of Cadre Stockholders, such as dealers in
securities and foreign persons.
The following opinions are based on present provisions of the Code, final
and temporary Treasury regulations thereunder, administrative interpretations
thereof and court decisions. Consequently, future changes in the Code, Treasury
regulations or administrative interpretations thereof, or future court
decisions, might result in federal income tax consequences that are materially
different from that described herein, and might apply retroactively to
transactions previously consummated.
Based upon and subject to the foregoing, it is our opinion that, for
federal income tax purposes:
1. The Merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Code, with each of Bachman, Sub and Cadre qualifying as a
"party to the reorganization" under Section 368(b) of the Code.
<PAGE> 3
Bachman Information Systems, Inc.
[ ], 1996
Page 3
2. Bachman and Sub will not recognize material amounts of gain or loss
solely as a result of the Merger.
We are furnishing this letter to you solely for the purpose of satisfying
the condition set forth in Section 7.1.7 of the Agreement. This opinion may not
be used, quoted, referred to or relied upon for any other purpose or by any
other person or entity without our prior written consent, except for all
references to this opinion contained in the Registration Statement.
Very truly yours,
FOLEY, HOAG & ELIOT LLP
By:
--------------------
A Partner
<PAGE> 1
EXHIBIT 8.2
[FORM OF TESTA, HURWITZ & THIBEAULT, LLP
OPINION TO BE DELIVERED AT CLOSING]
, 1996
Cadre Technologies Inc.
222 Richmond Street
Providence, RI 02903
Ladies and Gentlemen:
This opinion is being delivered to you for the purpose of satisfying a
condition set forth in Section 7.1.7 of the Agreement and Plan of Merger dated
March 25, 1996, by and among Bachman Information Systems, Inc., a Massachusetts
corporation ("Bachman"), B.C. Acquisition Corp., a Delaware corporation and
wholly-owned subsidiary of Bachman ("Merger Sub"), and Cadre Technologies Inc.,
a Delaware corporation ("Cadre") (the "Merger Agreement"). Pursuant to the
Merger Agreement, Merger Sub will merge with and into Cadre (the "Merger"), and
Cadre will become a wholly-owned subsidiary of Bachman.
We have acted as legal counsel to Cadre in connection with the Merger. As
such, and for the purpose of rendering this opinion, we have examined and are
relying upon (without any independent investigation or review thereof) the truth
and accuracy, at all relevant times, of the statements, covenants,
representations and warranties contained in the following documents:
1. The Merger Agreement (including Exhibits);
2. Representations made to us by Bachman and Merger Sub;
3. Representations made to us by Cadre;
4. The Bachman Affiliate Agreements;
5. The Cadre Affiliate Agreements;
6. The Prospectus/Joint Proxy Statement filed by Bachman with a
Registration Statement on Form S-4 with the Securities and Exchange Commission
pursuant to the Securities Act of 1933 (the "Registration Statement"); and
7. Such other instruments and documents related to the formation,
organization and operation of Bachman, Cadre and Merger Sub or to the
consummation of the Merger and the transactions contemplated thereby as we have
deemed necessary or appropriate.
Except as otherwise provided, capitalized terms referred to herein have the
meanings set forth in the Merger Agreement or the Registration Statement. All
section references, unless otherwise indicated, are to the Internal Revenue Code
of 1986, as amended (the "Code"). In connection with rendering this opinion, we
have assumed or obtained representations (and are relying thereon, without any
independent investigation or review thereof) to the effect that:
1. Original documents (including signatures) are authentic, documents
submitted to us as copies conform to the original documents, and there has been
due execution and delivery of all documents where due execution and delivery are
prerequisites to effectiveness thereof.
2. The Merger will be effective under the applicable state law.
3. The continuity of interest requirement as specified in Treas. Reg. sec.
1.368-1(b) and as interpreted by certain Internal Revenue Service rulings and
federal judicial decisions will be satisfied.
4. All conditions to the closing of the Merger have been or will be (by
the Effective Time of the Merger) satisfied.
<PAGE> 2
Based on our examination of the foregoing items and subject to the
assumptions, exceptions, limitations and qualifications set forth herein, we are
of the opinion that:
1. The Merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Code, with each of Bachman, Merger Sub, and Cadre
qualifying as a "party to the reorganization" under Section 368(b) of the Code.
2. No gain or loss will be recognized by holders of Cadre Common Stock
upon their receipt in the Merger of Bachman Common Stock solely in exchange for
Cadre Common Stock.
3. The aggregate tax basis of the Bachman Common Stock received in the
Merger will be the same as the aggregate tax basis of Cadre Common Stock
surrendered in exchange therefor.
4. The holding period of the Bachman Common Stock received in the Merger
will include the period for which the Cadre Common Stock surrendered in exchange
therefor was held, provided that the Cadre Common Stock is held as a capital
asset at the time of the Merger.
5. A stockholder who exercises dissenters' rights with respect to a share
of Cadre Common Stock and receives payment for such share in cash will generally
recognize gain or loss, for federal income tax purposes, measured by the
difference between the holder's basis in such share and the amount of cash
received, provided that the payment is neither essentially equivalent to a
dividend within the meaning of Section 302 of the Code nor has the effect of a
distribution of a dividend within the meaning of Section 356(a)(2) of the Code
(collectively, a "Dividend Equivalent Transaction"). Such gain or loss generally
will be capital gain or loss, provided that the Cadre Common Stock is held as a
capital asset at the time of the Merger, and will be long-term capital gain or
loss if the Cadre Common Stock has been held for more than one year at the time
of the Merger. A sale of Cadre Common Stock pursuant to an exercise of
dissenters' rights will generally not be a Dividend Equivalent Transaction if,
as a result of such exercise, the stockholder exercising dissenters' rights owns
no shares of Bachman Common Stock (either actually or constructively within the
meaning of Section 318 of the Code). If, however, a stockholder's sale for cash
of Cadre Common Stock pursuant to an exercise of dissenters' rights is a
Dividend Equivalent Transaction, then such stockholder may recognize income for
federal income tax purposes in an amount up to the entire amount of cash so
received.
6. Cadre will not recognize material amounts of gain or loss solely as a
result of the Merger.
In addition to the assumptions set forth above, this opinion is subject to
the exceptions, limitations and qualifications set forth below.
1. This opinion represents and is based upon our best judgment regarding
the application of United States federal income tax laws arising under the Code,
existing judicial decisions, administrative regulations and published rulings
and procedures. Our opinion is not binding upon the Internal Revenue Service or
the courts, and the Internal Revenue Service is not precluded from successfully
asserting a contrary position. Furthermore, no assurance can be given that
future legislative, judicial or administrative changes, on either a prospective
or retroactive basis, would not adversely affect the accuracy of the conclusions
stated herein. Nevertheless, we undertake no responsibility to advise you of any
new developments in the application or interpretation of the federal income tax
laws.
2. This opinion addresses only the specific tax issues set forth above,
and does not address any other federal, state, local or foreign tax consequences
that may result from the Merger or any other transaction (including any
transaction undertaken in connection with the Merger). In particular, we express
no opinion regarding (i)whether and the extent to which any holder of Cadre
Common Stock who has provided or will provide services to Cadre, Bachman or
Merger Sub will have compensation income under any provision of the Code; (ii)
the effects of such compensation income, including but not limited to the effect
upon the basis and holding period of the Bachman Common Stock received by any
such holder in the Merger; (iii) the potential application of the "golden
parachute" provisions of the Code (Sections 280G, 3121(v)(2) and 4999), the
alternative minimum tax provisions of the Code (Sections 55, 56 and 57) or
Sections 108, 305, 306, 357, 424 and 708 of the Code, or the regulations
promulgated thereunder; (iv)other than as specifically set forth in this
opinion, the tax consequences of the Merger to Bachman, Merger Sub or Cadre,
including without limitation
2
<PAGE> 3
the recognition of any gain and the survival and/or availability, after the
Merger, of any of the federal income tax attributes or elections of Cadre, after
application of any provision of the Code, any regulations promulgated thereunder
and any judicial interpretations thereof; (v) the basis of any equity interest
in Cadre acquired by Bachman in the Merger; (vi) the tax consequences of any
transaction in which Cadre Common Stock or a right to acquire such stock was
received; and (vii) the tax consequences of the Merger (including the opinion
set forth above) as applied to specific stockholders of Cadre and/or holders of
options or warrants for Cadre Common Stock in light of their particular
circumstances, including but not limited to dealers in securities, corporate
shareholders subject to the alternative minimum tax, foreign persons, and
holders of shares acquired upon exercise of stock options or in other
compensatory transactions, including without limitation the tax consequences to
the holders of options and warrants for Cadre Common Stock of Bachman's
assumption of outstanding options and warrants for Cadre Common Stock.
3. No opinion is expressed as to any transaction other than the Merger as
described in the Merger Agreement (including, without limitation, the Cadre Loan
or guarantee thereof, the Cadmount Agreement and escrow, or the acquisition by
Cadre of Westmount Technology B.V.) or to any transaction whatsoever, including
the Merger, if all the transactions described in the Merger Agreement are not
consummated in accordance with the terms of the Merger Agreement and without
waiver or breach of any material provision thereof or if all of the
representations, warranties, statements and assumptions upon which we relied are
not true and accurate at all relevant times. In the event any one of the
statements, representations, warranties, or assumptions upon which we have
relied to issue this opinion is incorrect, our opinion might be adversely
affected and may not be relied upon. We express no opinion concerning the
statements of law or legal conclusions contained in the discussion set forth in
the Registration Statement entitled "Carryforward of Net Operating Losses and
Tax Credits."
4. This opinion is intended solely for the purpose of satisfying a
condition set forth in Section 7.1.7 of the Merger Agreement; it may not be
relied upon for any other purpose or by any other person or entity, and may not
be made available to any other person or entity without our prior written
consent. We hereby consent to the inclusion of this opinion letter as an exhibit
to the Registration Statement.
Very truly yours,
TESTA, HURWITZ & THIBEAULT, LLP
3
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement
of Bachman Information Systems, Inc. on Form S-4 of our reports dated August 15,
1995, except as to the information presented in Note 17, for which the date is
September 19, 1995, on our audits of the consolidated financial statements and
financial statement schedule of Bachman Information Systems, Inc. as of June 30,
1995 and 1994, and for each of the three years in the period ended June 30,
1995, which reports are included in the Annual Report on Form 10-K of Bachman
Information Systems, Inc. for the year ended June 30, 1995. We also consent to
the reference to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
June 13, 1996
3
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Bachman Information
Systems, Inc. on Form
S-4 of our report dated February 2, 1996 on the consolidated financial
statements of Cadre Technologies, Inc. and its subsidiaries (which report
expresses an unqualified opinion and includes an explanatory paragraph referring
to an uncertainty regarding Cadre's ability to continue as a going concern),
appearing in the Prospectus/Joint Proxy Statement, which is part of this
Registration Statement.
We also consent to the reference to us under the heading "experts" in such
Prospectus/Joint Proxy Statement.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
June 11, 1996
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<ARTICLE> 5
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
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ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM
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<SECURITIES> 0
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5,493
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
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