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As Filed with the Securities and Exchange Commission on June 20, 1994
Registration No. 33-53429
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CONTROL DATA SYSTEMS, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 41-1718075
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4201 LEXINGTON AVENUE NORTH
ARDEN HILLS, MINNESOTA 55126-6198
(612) 482-2401
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
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JAMES E. OUSLEY, President and Chief Executive Officer
Control Data Systems, Inc.
4201 Lexington Avenue North
Arden Hills, Minnesota 55126-6198
(612) 482-2401
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
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Copies to:
DAVID C. GRORUD, ESQ.
Fredrikson & Byron, P.A.
1100 International Centre
900 Second Avenue South
Minneapolis, Minnesota 55402
(612) 347-7032
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Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement as determined by
market conditions and other factors.
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If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being offered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. /X/
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PROSPECTUS
CONTROL DATA SYSTEMS, INC.
816,283 SHARES OF COMMON STOCK, $.01 PAR VALUE
This Prospectus relates to up to 816,283 shares (the "Shares") of Common
Stock of Control Data Systems, Inc. (the "Company") which may be offered for
resale by persons (the "Selling Shareholders") who acquired the shares in
connection with the Company's acquisition of Evernet Systems, Inc. in June 1993.
A Selling Shareholder may offer its shares from time to time for sale at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, or at negotiated prices. Offers and sales will be made through
agents that have not yet been determined as of the date hereof except as
described below and/or, as to certain of the Selling Shareholders, pursuant to
the Sales Agency Agreement as described below. Sales may also be made to
dealers or directly to purchasers. See "Plan of Distribution". The Company
will not receive any proceeds from sales of the Shares.
The Company's Common Stock is traded in the Nasdaq National Market under
the symbol "CDAT." The last reported sale price of the Company's Common Stock
on June ___, 1994, as reported by the Nasdaq National Market, was $_____ per
share.
The Company will bear all expenses of the offering (estimated to be
$25,000), except that the Selling Shareholders will pay any applicable brokerage
discounts or commissions, as well as fees and disbursements of counsel to and
experts for the Selling Shareholders.
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FOR INFORMATION CONCERNING CERTAIN RISKS RELATING
TO AN INVESTMENT IN THE COMPANY'S COMMON STOCK
SEE "INVESTMENT CONSIDERATIONS."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is June ___, 1994.
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No person is authorized to give any information or to make any
representations, other than those contained or incorporated by reference in this
Prospectus, in connection with the offering contemplated hereby, and, if given
or made, such information or representations must not be relied upon as having
been authorized by the Company. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any securities other than the
registered securities to which it relates. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any securities in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of the Company since the date
hereof or that the information contained or incorporated by reference herein is
correct as of any time subsequent to its date.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C., 20549, and at the Commission's regional offices in New York
(7 World Trade Center, Suite 1300, New York, New York 10048) and Chicago
(Suite 1400, Northwestern Atrium Center, 500 West Madison, Chicago, Illinois
60661). Copies of such material can be obtained from the Public Reference
Section of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission are hereby
incorporated by reference in this Prospectus:
1. The Company's Annual Report on Form 10-K (Commission File No. 0-20252)
for its 1993 fiscal year ended January 1, 1994.
2. The Company's Quarterly Report on Form 10-Q (Commission File
No. 0-20252) for its fiscal quarter ended April 2, 1994.
3. The description of the Company's Common Stock, $.01 par value, which
is contained or incorporated by reference in the Company's
Registration Statement on Form 10 (Commission File No. 0-20252) filed
under the Exchange Act, including any amendment or report filed for
the purpose of updating such description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Shares shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents. Any statement contained in a document
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incorporated by reference or deemed to be incorporated by reference in this
Prospectus shall be deemed to be modified or superseded for all purposes of this
Prospectus to the extent that a statement contained herein, therein or in any
subsequently filed document which also is incorporated or deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of such person, a copy of any or all of the documents
incorporated herein by reference (not including the exhibits to such documents,
unless such exhibits are specifically incorporated by reference in such
documents). Requests for such copies should be directed to Ralph W. Beha,
General Counsel and Secretary, Control Data Systems, Inc., 4201 Lexington Avenue
North, Arden Hills, Minnesota 55126-6198; telephone (612) 482-2401.
THE COMPANY
The Company is a systems integrator, developing and implementing open
systems solutions for the operational problems of customers worldwide. The
Company relies upon its computer professionals to provide the consulting
services required to define, develop, install and maintain computer-based
solutions. The Company has a growing family of open systems technology partners
and suppliers offering a range of hardware platforms and software products which
the Company then customizes for a particular customer environment. These
integration/consulting services--Control Data Brainware-TM---are based upon the
Company's 37 years of experience in implementing leading edge solutions for
complex computing environments. The Company serves customers in technical,
government and commercial markets.
The Company was established through Ceridian Corporation's transfer of its
Computer Products business to the Company and Ceridian's subsequent
distribution, in July 1992, of the Company's stock as a dividend to Ceridian's
stockholders. Since August, 1992 the Common Stock of the Company has been
traded on the Nasdaq National Market.
For the first 32 years of its history, the Company integrated its own
proprietary brand of computers. In 1989 it began a transition from the
development, manufacture and marketing of its own computers to the remarketing
of standard UNIX and/or Intel-based computer systems which, coupled with
networking and distributed applications, form what is often referred to as the
client/server computing environment. Today its integration services include
network design, installation and maintenance; application design and deployment;
remote and on-site systems management; electronic mail integration; and
manufacturing design, engineering and production.
The Company's principal offices are located at 4201 Lexington Avenue North,
Arden Hills, Minnesota 55126.
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INVESTMENT CONSIDERATIONS
The following factors should be carefully considered in evaluating an
investment in any shares of Common Stock offered hereby.
OPERATING RESULTS
Since 1989, the Company has been in a transition from being a developer and
manufacturer of a proprietary line of computers to being a systems integrator
developing and implementing open systems solutions for customers using products
developed and manufactured by third parties. This transition has caused year to
year declines in the revenues for sales and maintenance of its proprietary
products, which have been only partially offset by increasing integration
services revenues. For example, sales of proprietary products decreased from
$171.0 million in 1991 to $52.7 million in 1993. This trend, combined with a
growing proportion of lower margin open systems hardware products for the
Company, are expected to cause lower gross margins in 1994 and beyond. While
gross margins on particular product and service offerings vary widely, the
Company anticipates that average overall gross margins in the systems
integration business will be between 10 to 15 percentage points lower than in
the proprietary systems manufacturing business. In order to continue generating
consistent profits, it will be necessary to increase revenue volumes at a
greater rate than in past years when gross margins were at a higher level, and
to maintain lower overall expense levels as a percentage of revenue.
FLUCTUATIONS IN OPERATING RESULTS
Fluctuations in the Company's operating results, particularly from quarter
to quarter, are expected to continue for a number of reasons. The Company's
operations are highly decentralized and geographically dispersed, which
constrains the ability to reduce certain infrastructure costs if revenue volumes
unexpectedly decline. Historically, the Company has experienced increased
market demand for its products in the fourth calendar quarter as a result of its
customers' purchasing cycles. Order-to-installation cycles are shortening,
reducing backlog and diminishing the predictability of the Company's revenue
stream. In addition, the Company continues to focus on obtaining larger
contracts with large commercial and government customers. The timing of these
larger contracts may exacerbate quarter to quarter fluctuations. There can be
no assurance that the Company will maintain consistently profitable operations.
The market price of the Company's shares may rise or fall in response to
quarterly fluctuations in operating results to the extent that they deviate
substantially from the expectations of market analysts.
GOVERNMENT CONTRACTS
The Company estimates that contracts with the United States government
represented approximately 13.7%, 13.4%, and 15.0% of the Company's total
revenue in fiscal years 1993, 1992, and 1991, respectively. Generally, the
Company's contracts with the U.S. government contain provisions to the effect
that the contracts may be terminated at the convenience of the customer, and
that in the event of such termination, the Company would be entitled to receive
payment based on the cost incurred and the anticipated profit on the work
completed prior to termination. Unlike the large-scale proprietary computer
business, however, in which both government and commercial fixed-price contracts
entailed substantial risk of cost overruns, delay penalties, or cancellation
prior to completion, the longer-term systems integration contracts being entered
into by the Company, both with government and commercial customers, generally do
not entail manufacture by the Company of computers from its proprietary lines or
entail the development and manufacturing risks and expenses associated with such
manufacture, and, therefore, in the systems integration business the Company is
afforded greater opportunity to match costs to revenues more closely over time.
RESTRUCTURING
In June 1992, the Company recorded a restructuring charge of $114.9 million
and a charge of $14.9 million related to a change in valuation of spare parts
inventory. As of April 2, 1994, the Company still had $25 million of
restructure obligations, $15 million of which are expected to be paid in 1994.
Although in the past 20 months progress was made in reaching the Company's
transition objectives, the transition is not entirely complete. As a result,
the Company expects to continue to reduce the size of its infrastructure and
associated operating expenses, as well as redeploy certain personnel, with a
view to competing effectively as a worldwide systems integrator. The current
restructure reserves assume that the Company's transition will be completed by
the end of fiscal 1994. Consequently, these reserves only cover current and
future payments related to restructure actions and events planned for 1994 or
taken in prior years. These reserves do not provide for any significant
severance actions in fiscal 1995 and beyond, the early termination of lease
contracts for office or warehouse facilities beyond those already closed or
planned to be closed, or additional proprietary hardware finished goods or spare
parts inventory reserves beyond those budgeted in fiscal 1994.
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In light of continuing rapid change in the computer industry and other
uncertainties facing the Company, there can be no assurance that additional
restructuring actions or charges will not be required or that such charges could
not have a material adverse effect on the operations or financial results of the
Company.
NEED FOR CAPITAL
The Company's cash and short-term investments totaled $78.1 million at
April 2, 1994. In addition, as of April 2, 1994, the Company has available up
to $33.5 million under bank lines of credit in certain international
subsidiaries and a U.S. credit agreement which provides up to $10.0 million in
unsecured short-term financing. The above mentioned funds are expected to be
sufficient to meet the Company's operating requirements in 1994. To the extent
it may be necessary to supplement these sources of cash, the Company could seek
financing from strategic investors and through future debt or equity financing
in the public or private markets. The ability of the Company to borrow money or
to sell debt or equity securities will depend on its results of operations,
financial condition and business prospects, as well as on conditions then
prevailing in the computer industry and the relevant capital markets. There can
be no assurance that such additional capital will be available to the Company or
will be available on terms that are favorable to the Company.
INTERNATIONAL SALES
The Company's international revenues constituted 65.2%, 70.8%, and 68.0%,
of the Company's total revenues in 1993, 1992, and 1991, respectively. The
Company expects that international sales will continue to represent a
significant portion of its revenues in the future. The Company will continue to
be subject to the normal risks of conducting business internationally, including
political instability, unexpected changes in regulatory requirements,
fluctuating exchange rates, tariffs and other barriers, difficulties in staffing
and managing foreign subsidiary operations and potentially adverse tax
consequences. Other risks inherent in certain foreign countries include longer
payment cycles and greater difficulties in accounts receivable collection.
Longer payment cycles and greater difficulties in accounts receivable
collection have resulted in the Company historically taking significantly larger
reserves against receivables in foreign subsidiary operations than in domestic
operations, and the Company continues to follow this practice wherever prudent.
There can be no assurance that these factors will not at some point in the
future have a material impact on the operating results of the Company in any
given financial period. In addition, there can be no assurance that the Company
will be successful in transitioning the business of each of its foreign
subsidiary operations into the systems integration business model, due to the
diverse market, cultural and business environments in the various foreign
operations.
ABILITY TO HIRE AND RETAIN TECHNICAL RESOURCES
As the Company continues to expand its system integration activities it
will need to be able to hire and retain, in sufficient numbers, personnel with
appropriate technical skills in systems integration. There can be no assurance
that the Company will be able to acquire these resources at the time they are
required or at competitive rates. If unsuccessful, Company's revenues may be
negatively impacted and/or its operating costs may increase to fund the training
costs to develop internally such technical skills in sufficient numbers.
COMPETITION
Competition in the systems integration market is intense and is based on a
variety of factors including customer satisfaction, reputation, price,
performance, product quality, software availability, connectivity, networking,
compatibility with industry standards, marketing and
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distribution capability, customer support, name recognition and financial
strength. Further, given the Company's reliance on its suppliers, their
relative competitive positions will have an impact on the Company's own position
in the marketplace. The Company competes throughout the world with numerous
local, regional, national, and international system integrators. Several of the
Company's competitors have significantly greater financial and operational
resources than the Company, and there can be no assurance that the Company's
results of operations will not be adversely affected by such competition.
DIVIDEND POLICY
The Company has not paid any dividends on its Common Stock. The Company
currently intends to retain earnings for use in its business and does not
anticipate paying cash dividends in the foreseeable future to stockholders.
SELLING SHAREHOLDERS
The Selling Shareholders, the number of shares of Common Stock held by
each of them prior to any sales under this Prospectus, and the number of shares
of Common Stock of the Company for which each Selling Shareholder holds Company
warrants are as follows:
Shareholder Shares Owned Warrant Shares
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First Century Partnership III 65,572 25,605
David L. Anderson 4,031 1,574
Anvest, L.P. 331 129
Mihran A. Aroian 156 85
Aspen Venture Partners, L.P. 113,613 50,859
Austin Ventures, L.P. 117,710 50,429
G. Leonard Baker, Jr. 4,031 1,574
Tench Coxe 793 311
EMP & Co. 6,212 1,663
Focus & Co. 7,986 2,139
James C. Gaither 131 54
Genstar Investment Corporation 1,955 763
Hank & Co. FBO Citiventure II 131,045 35,087
Kleiner Perkins Caufield & Byers V 138,549 60,172
KPCB Zaibatsu Fund I 4,502 2,420
Mellon Bank, N.A. FBO Bell Atlantic 118,917 31,840
Master Pension Trust
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Leo L. and Janet G. Nussbaum, Trustees 1,305 349
Omega Partners 1,927 753
Ronald L. Perkins 604 236
Pitt & Co. FBO GTE Service Corp. 31,651 8,475
Saunders Holdings, L.P. 331 129
Sutter Hill Ventures, L.P. 56,228 21,955
TOW Partners, L.P. 4,355 1,701
Paul M. & Marsha R. Wythes, Trustees 1,903 743
William H. Younger, Jr. 2,445 955
None of the Selling Shareholders has been an officer or director of, or has
had a position or other material relationship with, the Company. Each of these
Selling Shareholders was a holder of preferred stock of Evernet Systems, Inc.,
which the Company acquired for cash, Common Stock, and Company warrants in
June 1993. The Shares covered by this Prospectus were issued by the Company
in that acquisition, and these Shares are registered under the Securities Act of
1933 pursuant to registration rights granted in that acquisition. The warrants
listed above were also issued in that acquisition. They have an exercise price
of $12.863 per share, subject to certain adjustments, and they are exercisable
at any time during the three years that commenced on June 4, 1993. Prior to the
acquisition of Evernet Systems, Inc. by the Company, the Selling Shareholders
collectively had the power to designate certain members of the Evernet Board of
Directors.
Each of the Selling Shareholders has requested the registration of all of
the Shares of the Company's Common Stock which such Selling Shareholder acquired
in the Evernet acquisition, and each Selling Shareholder has expressed an
intention to sell up to all of those Shares depending on market conditions. The
shares issuable upon exercise of the warrants are not now being registered under
the Securities Act of 1993.
PLAN OF DISTRIBUTION
The Shares of Common stock offered hereby may be sold by the Selling
Shareholders from time to time. Sales may be made at market prices prevailing
at the time of sale, at prices related to such prevailing market prices, or at
negotiated prices. No commitments as to any sales have been made as of the date
of this Prospectus.
Offers and sales will be made through agents that, except as described
below, have not yet been determined and/or, as to certain of the Selling
Shareholders, pursuant to the Sales Agency Agreement discussed below. Sales may
also be made to dealers or directly to purchasers. Sales through agents will be
made subject to customary commissions. Sales may be made on a "net" basis.
Five of the Selling Shareholders, who collectively own a total of 295,811
shares of Common Stock, hold their shares in accounts managed by an investment
advisor (the "Advisor") which, in its discretion, may arrange for sales of
shares held by one, some, or all of those holders. Any such sales will be made
as the Advisor determines will be most advantageous to the holders, which is
expected to be to a market maker or through brokers, not presently
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identified, at the lowest available transaction costs, although sales may be
made to dealers or to ultimate purchasers. While the Advisor is not required to
do so, it may arrange for sales in which all of these five Selling Shareholders
would participate, either proportionately in accordance with the number of
shares of Common Stock owned by each of them or on some other basis. These five
Selling Shareholders are EMP & Co., Focus & Co., Hank & Co. FBO Citiventure II,
Melon Bank FBO Bell Atlantic Master Pension Trust, and Pitt & Co. FBO GTE
Service Corp. The Advisor is Chancellor Capital Management, Inc. While the
Advisor has discretionary authority over each of the five accounts referred to
above, there is no other affiliation between the Advisor and any of these five
Selling Shareholders.
Two of the Selling Shareholders (First Century Partnership III and Omega
Partners), holding a total of 67,499 shares of Common Stock, are related
investment limited partnerships. One of these partnerships has as its general
partner a partnership composed of a corporate managing partner and four
individual partners; and the other has two individual general partners, both of
whom are partners in the general partner of the first investment partnership.
These two investment partnerships typically make purchases and sales of
securities on a side-by-side, though not necessarily proportionate, basis, and
they expect to make generally similar, though not necessarily proportionate,
dispositions of their shares of Common Stock. The corporate managing partner
of the general partner of the first investment partnership is a subsidiary of
Smith Barney Holdings Inc. and, until approximately two years ago, the four
individual partners were full-time employees of Smith Barney Inc. While these
four individuals have all separated from Smith Barney Inc., they remain
eligible for certain Smith Barney Inc. employee benefits, have made
arrangements for the sharing of certain fees and responsibilities, and are
otherwise subject to contractual arrangements relating to their separation,
pursuant to an agreement they entered into with Smith Barney Inc. at the time
of the separation. The two investment partnerships expect to use Smith Barney
Inc. as their selling broker for dispositions of their shares of Common Stock,
and it is possible that Smith Barney Inc. might purchase some of their shares
as principal. No commitment has been made at this time as to the timing,
amount, or terms of any sales of their shares of Common Stock by these
partnerships to or through Smith Barney Inc. Any sales these partnerhsips may
make through Smith Barney Inc. as agent will be handled as ordinary and
customary brokerage transactions.
Sixteen of the Selling Shareholders, who collectively own a total of
339,204 shares of Common Stock (the "Participating Shareholders") and the
Company intend to enter into a Sales Agency Agreement (the "Sales Agency
Agreement") with Kidder, Peabody & Co. Incorporated ("Kidder, Peabody"). A copy
of the form Sales Agency Agreement is filed as an Exhibit to the Registration
Statement, of which this Prospectus constitutes a part, and is incorporated by
reference herein. Subject to the terms and conditions of the Sales Agency
Agreement, the Participating Shareholders may sell up to all of the Shares of
Common Stock from time to time through Kidder, Peabody as their sales agent.
Such sales, if any, will be made by means of ordinary brokers' transactions
utilizing the Nasdaq National Market. Sales made pursuant to the Sales Agency
Agreement will be effected during a series of one or more pricing periods
("Pricing Periods"), each consisting of five consecutive calendar days. During
any Pricing Period, no more than 20,000 shares ("Average Market Price Shares")
will be sold subject to the calculation of Net Proceeds as defined below. The
aggregate number of Average Market Price Shares sold in all Pricing Periods will
not exceed the number of shares of Common Stock beneficially owned by the
Participating Shareholders. For each Pricing Period, an Average Market Price
(as hereinafter defined) will be computed. With respect to any Pricing Period,
the "Average Market Price" will equal the average of the arithmetic mean of the
daily high and low sale prices of the Common Stock reported on the Nasdaq
National Market for each trading day of such Pricing Period. The sixteen
Selling Shareholders who will be parties to the Sales Agency Agreement are
David L. Anderson; Anvest, L.P.; G. Leonard Baker Jr.; Tench Coxe; James C.
Gaither; Ronald L. Perkins; Sutter Hill Ventures, L.P.; Saunder Holdings, L.P.;
TOW Partners, L.P.; The Wythes Living Trust; William H. Younger, Jr.; Austin
Ventures, L.P.; Genstar Investment Corporation; The Nussbaum Trust; Kleiner
Perkins Caufield & Buyers V; and KPCB Zaibatsu Fund I.
The net proceeds to the Participating Shareholders with respect to sales of
Average Market Price Shares will equal 95% of the Average Market Price
multiplied by the number of such shares of Common Stock sold during the Pricing
Period (subject to adjustment in certain circumstances), plus Excess Proceeds
(as defined below), if any. The compensation to Kidder, Peabody for such sales
in any Pricing Period will equal the difference between the actual sale prices
at which Average Market Price Shares are sold and the net proceeds to the
Participating Shareholders for such sales, but in no case will it exceed ten
percent of such actual sales prices. To the extent that such actual sales
prices are less than the Average Market Price, the compensation to Kidder,
Peabody will be correspondingly reduced; to the extent that such actual sales
prices are greater than the Average Market Price, the compensation to Kidder,
Peabody will be correspondingly increased (but in no event will it exceed ten
percent of the actual sales price). In the event that the average actual sales
price in any Pricing Period equals 95% of the Average Market Price (or less) for
such Pricing Period, all of the proceeds from such sales will be for the account
of the Participating Shareholders and no compensation will be payable to Kidder,
Peabody. To the extent that Kidder, Peabody's compensation under the foregoing
formula would otherwise exceed ten percent of the actual sales prices in any
Pricing Period, the excess over ten percent will constitute additional net
proceeds to the Participating Shareholders (the "Excess Proceeds").
Any shares of Common Stock other than Average Market Price Shares
("Additional Shares") sold by Kidder, Peabody during the Pricing Period on
behalf of the Participating
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Shareholders will be at a fixed commission rate of $0.10 per share. In no event
will the compensation to Kidder, Peabody be in excess of any applicable
requirements of the National Association of Securities Dealers, Inc. ("NASD").
All sales of Average Market Price Shares made during any Pricing Period
pursuant to the Sales Agency Agreement, and all calculations of net proceeds to
the Participating Shareholders with respect to such sales, will be made PRO RATA
(to the nearest 100 shares) in accordance with the number of shares of Common
Stock owned by the Participating Shareholders who elect in advance to
participate in sales of Common Stock during such Pricing Period. Sales of
Additional Shares made during any Pricing Period will be made PRO RATA (to the
nearest 100 shares) in accordance with the number of shares of Common Stock
owned by such Participating Shareholders, less the sum of (i) any Average
Market Price Shares sold for them during such Pricing Period and (ii) any
shares which such Participating Shareholder shall have instructed Kidder,
Peabody not to sell as Additional Shares during such Pricing Period.
Settlements of sales of Additional Shares will occur on the fifth business
date following the date on which such sales were made. Settlements for sales of
Average Market Price Shares will occur on a weekly basis on each Monday (or on
the next succeeding business day if such Monday is not a business day) following
the end of each Pricing Period. Purchases of Common stock from Kidder, Peabody
as sales agent for the Participating Shareholders will settle regular way in
accordance with the rules of the NASD. Compensation to Kidder, Peabody with
respect to sales of Average Market Price Shares will be paid out of the proceeds
of such settlements. There is no arrangement for funds to be received in an
escrow, trust or similar arrangement.
At the end of each Pricing Period, the Company will file a Prospectus
Supplement under Rule 424(b)(3) promulgated under the Securities Act of 1933,
which Prospectus Supplement will set forth the number of such shares of Common
Stock sold by each Selling Shareholder through Kidder, Peabody as sales agent
(identifying separately the number of Average Market Price Shares and any
Additional Shares), the high and low prices at which Average Market Price Shares
were sold during such Pricing Period, the net proceeds to each of the
Participating Shareholders, and the compensation payable by the Participating
Shareholders to Kidder, Peabody with respect to such sales pursuant to the
formula set forth above. Kidder, Peabody as sales agent will act on a best
efforts basis. Pursuant to the Sales Agency Agreement, the Company and the
Participating Shareholders will agree to provide indemnification and
contribution to Kidder, Peabody against certain civil liabilities, including
liabilities under the Securities Act of 1933, as amended. In connection with
the sale of the Common Stock of the Selling Shareholders, Kidder, Peabody may be
deemed an "underwriter," as that term is used in the Securities Act of 1933; and
the compensation of Kidder, Peabody may be deemed to be underwriting commissions
or discounts.
The offering of the Common Stock pursuant to the Sales Agency Agreement
will terminate upon the earlier of (i) the sale of all Shares of Common Stock
subject thereto, (ii) termination of the Sales Agency Agreement, and (iii) the
five-month anniversary of the date of this Prospectus (the "Term"); provided,
however, that if any time during the Term, the Company determines that the
maintenance of the Registration Statement, including this Prospectus, as current
and accurate in accordance with the Securities Act of 1933, as amended, and the
rules and regulations thereunder of the Commission would require the disclosure
of nonpublic information, the disclosure of which could reasonably be expected
to have a material adverse effect upon a significant financing, negotiation,
contracting, acquisition, disposition, merger or other comparable transaction
(collectively, "Significant Transactions"), then, by written notice by the
Company to Kidder, Peabody and each Shareholder: (A) in the event that
9
<PAGE>
at such time thirty or more days remain in the Term, the Company may cause the
suspension of sales of the Common Stock pursuant to the Prospectus for such
reasonable period of time as may be necessary to avoid such adverse effect on
such Significant Transaction in which case the Term shall be extended for the
number of days that such suspension shall have been in effect, and (B) in the
event that at such time fewer than thirty days remain in the Term, the Company
may terminate the effectiveness of the Registration Statement. The Sales Agency
Agreement may be terminated at any time as to any Participating Shareholder(s)
by such Participating Shareholder(s) (except during the pendency of a Pricing
Period in which such Participating Shareholder(s) has (have) elected to
participate) or by Kidder, Peabody, but no such termination will affect the
obligations of the Participating Shareholder(s) as to sales that shall have been
executed prior to the date of such termination.
10
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated expenses in connection with this offering are as follows:
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission Filing Fee . . . . . $ 2,885
NASD Filing Fee . . . . . . . . . . . . . . . . . . . . 937
Printing and Engraving Fees and Expenses. . . . . . . . 1,000*
Legal Fees and Expenses . . . . . . . . . . . . . . . . 18,000*
Accounting Fees and Expenses. . . . . . . . . . . . . . 2,000*
Miscellaneous . . . . . . . . . . . . . . . . . . . . . 178*
------
Total Expenses. . . . . . . . . . . . . . . . . . . . . $25,000*
------
------
<FN>
- ---------------
*Estimated
</TABLE>
Item 15. Indemnification of Directors and Officers.
The Delaware General Corporation Law provides that a director of a
corporation (i) shall be indemnified by the corporation for expenses in defense
of any action or proceeding if the director is sued by reason of his service to
the corporation, to the extent that such person has been successful in defense
of such action or proceeding, or in defense of any claim, issue or matter raised
in such litigation, (ii) may, in actions other than actions by or in the right
of the corporation, be indemnified for expenses, judgments, fines and amounts
paid in settlement of such litigation, even if he is not successful on the
merits, if he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interest of the corporation (and in a criminal
proceeding, if he did not have reasonable cause to believe his conduct was
unlawful) and (iii) may be indemnified by the corporation for expenses (but not
judgments or settlements) of any action by the corporation or of a derivative
action, even if he is not successful, provided that he acted in good faith and
in a manner reasonably believed to be in or not opposed to the best interests of
the corporation, and provided that no indemnification is permitted without court
approval if the director was adjudged liable to the corporation. The Company's
Bylaws generally provide for indemnification of its directors as set forth in
the Delaware General Corporation Law. The Company maintains a directors and
officers liability insurance policy and, in addition, has entered into indemnity
agreements with its directors and executive officers which constitute binding
agreements of the Company to indemnify such persons.
Item 16. Exhibits
1 Form of Sales Agency Agreement among the Company, Certain Selling
Shareholders and Kidder, Peabody & Co. Incorporated.
II-1
<PAGE>
4.1** The Registrant's Certificate of Incorporation, as amended to date
(incorporated by reference to Exhibit 3.1, filed under cover of
Form SE dated July 9, 1992, to the Registrant's Form 8 Amendment
No. 1 dated July 10, 1992 to its Registration Statement on Form 10
dated May 27, 1992) (SEC File No. 0-20252).
4.2** Restated Bylaws of the Registrant, as amended to date (incorporated
by reference to Exhibit 99 to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended July 3, 1993) (SEC File
No. 0-20252).
5** Opinion and Consent of Fredrikson & Byron, P.A.
23.1 Consent of KPMG Peat Marwick.
23.2** Consent of Fredrikson & Byron, P.A. (included in their opinion filed
as Exhibit 5).
24** Power of Attorney from certain directors and officers (included on
the "Signatures" pages hereto).
- ---------------
** Previously filed.
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually
or in the aggregate, represents a fundamental change in the
information set forth in the Registration Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the information required to be included in a post-
effective amendment by those paragraphs is contained in periodic
reports filed by the Registrant pursuant to section 13 or section
15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for the purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new
II-2
<PAGE>
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.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d)
of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in
the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the 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 final
adjudication of such issue.
II-3
<PAGE>
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 the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Arden Hills, State of Minnesota, on the 17th day of
June, 1994.
CONTROL DATA SYSTEMS, INC.
By James E. Ousley*
---------------------------------
James E. Ousley, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the date indicated.
Signature Title
- --------- -----
James E. Ousley* President, Chief Executive
- ------------------------ Officer and Director (prin-
James E. Ousley cipal executive officer)
(Signatures continued on next page)
II-4
<PAGE>
Joseph F. Killoran* Vice President and
- ------------------------ Chief Financial Officer,
Joseph F. Killoran (principal financial
and accounting officer)
W. Donald Bell* Director
- ------------------------
W. Donald Bell
Grant A. Dove* Director
- ------------------------
Grant A. Dove
Marcello A. Gumucio* Director
- ------------------------
Marcello A. Gumucio
- ------------------------ Director
W. Douglas Hajjar
Keith A. Libbey* Director
- ------------------------
Keith A. Libbey
Mark W. Perry* Director
- ------------------------
Mark W. Perry
- ---------------
* By /s/ Joseph F. Killoran
- ---------------------------
Joseph F. Killoran,
Pro Se and
Attorney-in-Fact
Date: June 17, 1994
II-5
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
EXHIBIT INDEX
to
Amendment No. 1
to
Form S-3 Registration Statement
(Reg. No. 33-53429)
------------------------
CONTROL DATA SYSTEMS, INC.
------------------------
Page Number in
Sequential Numbering
of All Pages
Including Exhibits
--------------------
Exhibit
- -------
1 Form of Sales Agency Agreement among the
Company, certain Selling Shareholders and Kidder,
Peabody & Co. Incorporated . . . . . . . . . . . . 20
4.1 The Registrant's Certificate of Incorporation,
as amended to date . . . . . . . . . . . . . . . . *
4.2 The Registrant's Bylaws, as amended to date. . . . *
5 Opinion and consent of Fredrikson & Byron, P.A.. . **
23.1 Consent of KPMG Peat Marwick . . . . . . . . . . . 42
23.2 Consent of Fredrikson & Byron, P.A.. . . . . . . . See Exhibit 5
24 Power of Attorney from certain directors
and officers . . . . . . . . . . . . . . . . . . . **
- ----------------
* Incorporated by reference (SEC File No. 0-20252).
** Previously filed.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
EXHIBIT 1
CONTROL DATA SYSTEMS, INC.
COMMON STOCK, $.01 PAR VALUE
SALES AGENCY AGREEMENT
<PAGE>
June , 1994
KIDDER, PEABODY & CO. INCORPORATED
10 Hanover Square
New York, New York 10005
Gentlemen:
Control Data Systems, Inc., a Delaware corporation (the "COMPANY"),
and the several shareholders of the Company listed on Schedule 1 hereto (the
"SELLING SHAREHOLDERS"), confirm their agreement with Kidder, Peabody & Co.
Incorporated (the "SALES AGENT"), as follows:
1. DESCRIPTION OF SECURITIES. The Selling Shareholders propose to
sell through the Sales Agent up to 339,209 shares (the "MAXIMUM AMOUNT") of
common stock, $.01 par value (the "STOCK"), on the particular terms set forth in
Section 4 hereof.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the Sales Agent that:
(a) A registration statement on Form S-3 (Registration No.
33-53429) with respect to the Stock, including a form of prospectus, has been
prepared by the Company in conformity with the requirements of the Securities
Act of 1933 (the "ACT") and the rules and regulations ("RULES AND REGULATIONS")
of the Securities and Exchange Commission (the "COMMISSION") thereunder, and has
been filed with the Commission and has become effective. Such registration
statement and prospectus may have been amended or supplemented prior to the date
of this Agreement. Any such amendment or supplement was so prepared and filed,
and any such amendment or supplement filed after the effective date of such
registration statement has become effective. No stop order suspending the
effectiveness of the registration statement has been issued, and no proceeding
for that purpose has been instituted or threatened by the Commission. Copies of
such registration statement and prospectus, any such amendment or supplement and
all documents incorporated by reference therein that were filed with the
Commission on or prior to the date of this Agreement have been delivered to the
Sales Agent. Such registration statement, as it may have heretofore been
amended, is referred to herein as the "REGISTRATION STATEMENT," and the final
form of prospectus included in the Registration Statement, as amended or
supplemented from time to time, is referred to herein as the "PROSPECTUS." Any
reference herein to the Registration Statement, the Prospectus or any amendment
or supplement thereto shall be deemed to refer to and include the documents
incorporated (or deemed to be incorporated) by reference therein, and any
reference herein to the terms "amend," "amendment" or "supplement" with respect
to the Registration Statement or Prospectus shall be deemed to refer to and
include the filing after the execution hereof of any document with the
Commission deemed to be incorporated by reference therein.
<PAGE>
(b) The Company and each of its subsidiaries has been duly
incorporated and is an existing corporation in good standing under the laws of
its jurisdiction of incorporation, has full power and authority (corporate and
other) to conduct its business as described in the Registration Statement and
Prospectus, and is duly qualified to do business in each jurisdiction in which
it owns or leases real property or in which the conduct of its business requires
such qualification except where the failure to be so qualified, considering all
such cases in the aggregate, will not have a material adverse effect on the
business, properties, financial position or results of operations of the Company
and its subsidiaries considered as a whole; and (except as otherwise stated in
the Registration Statement or as is not material to the business, properties,
financial position or results of operations of the Company) all of the
outstanding shares of capital stock of each such subsidiary have been duly
authorized and validly issued, are fully paid and nonassessable and are owned
beneficially by the Company subject to no security interest, other encumbrance
or adverse claim.
(c) The outstanding shares of Stock have been duly authorized
and are validly issued, fully paid and nonassessable and conform to the
description thereof in the Prospectus. The shareholders of the Company have no
preemptive rights with respect to the Stock.
(d) Except as set forth in the Prospectus, there is not pending
or, to the knowledge of the Company, threatened any action, suit or proceeding
to which the Company or any of its subsidiaries is a party, before or by any
court or governmental agency or body, that could reasonably be expected to
result in any material adverse change in the condition (financial or other),
business, prospects, net worth or results of operations of the Company and its
subsidiaries considered as a whole or that could reasonably be expected to
materially and adversely affect the properties or assets thereof considered as a
whole.
(e) All necessary action has been duly and validly taken by the
Company to authorize the execution, delivery and performance of this Agreement.
This Agreement has been duly and validly authorized, executed and delivered by
the Company and constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles. The
performance of this Agreement and the consummation of the transactions
contemplated herein or therein will not result in a breach or violation of any
of the terms and provisions of, or constitute a default under, any statute, any
agreement or instrument to which the Company is a party or by which it is bound
or to which any of the property of the Company is subject, the Company's charter
or by-laws, or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company or any of its properties
(except such breaches, violations or defaults which, individually or in the
aggregate, do not have a material adverse effect on the business, properties,
financial position or results of operations of the Company and its subsidiaries
considered as a whole); no consent, approval, authorization or order of, or
filing with, any court or governmental agency or body is
2
<PAGE>
required for the consummation by the Company of the transactions contemplated by
this Agreement, in connection with the sale of the Stock by the Selling
Shareholders, except such as may be required under the Act or state securities
or blue sky laws.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS. Each
of the Selling Shareholders represents and warrants to, and agrees with, the
Sales Agent that:
(a) Such Selling Shareholder has, and on each Closing Date will
have, valid and unencumbered title to the shares of Stock to be sold by such
Selling Shareholder hereunder and full right, power and authority to enter into
this Agreement and to sell, assign, transfer and deliver such shares of Stock
hereunder; and upon delivery of and payment for such shares of Stock hereunder,
the purchasers thereof will acquire valid and unencumbered title thereto through
the Sales Agent.
(b) Such Selling Shareholder has not taken and will not take,
directly or indirectly, any action designed to, or that might reasonably be
expected to, cause or result in stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the Stock.
(c) The consummation by such Selling Shareholder of the
transactions herein contemplated and the fulfillment by such Selling Shareholder
of the terms hereof will not result in a breach of any of the terms and
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust or other agreement or instrument to which such Selling Shareholder is a
party, or of any order, rule or regulation applicable to such Selling
Shareholder of any court or of any regulatory body or administrative agency or
other governmental body having jurisdiction.
(d) Such Selling Shareholder agrees that the shares of Stock to
be sold by such Selling Shareholder are subject to the interests of the Sales
Agent, and that the obligations of such Selling Shareholder hereunder shall not
be terminated except as provided in this Agreement or in any power of attorney
appointing an attorney-in-fact for such Selling Shareholder, by any act of such
Selling Shareholder, by operation of law, whether, in the case of an individual
Selling Shareholder, by the death or incapacity of such Selling Shareholder, in
the case of a trust or estate, by the death or incapacity of the trustee or
trustees or the executor or executors or the termination of such trust or estate
or, in the case of a corporate or partnership Selling Shareholder, by its
liquidation or dissolution, or by the occurrence of any other event. If any
individual Selling Shareholder, trustee or executor should die or become
incapacitated, any such trust or estate should be terminated or any such
corporation or partnership should be liquidated or dissolved, or if any other
event should occur before the delivery of the Stock hereunder, certificates for
the Stock shall be delivered in accordance with the terms and conditions of this
Agreement as if such death, incapacity, termination, liquidation, dissolution or
other event had not occurred, whether or not any attorney-in-fact for the
Selling Shareholder shall have received notice thereof.
3
<PAGE>
(e) To the extent that any statements or omissions made in the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, are made in reliance upon, and in conformity with, written information
furnished by such Selling Shareholder for use in the preparation thereof, each
part of the Registration Statement, when such part become or becomes effective,
did not or will not contain an 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 not misleading, and the Prospectus and any amendment or
supplement thereto, on the date of filing thereof with the Commission and on
each Closing Date, did not or will not include an untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein
not misleading.
(f) Without having undertaken to determine independently the
accuracy or completeness of either the representations and warranties of the
Company contained herein, such Selling Shareholder has no reason to believe that
the representations and warranties of the Company contained in Section 2 of this
Agreement are not true and correct, is familiar with the Prospectus (not
including any documents incorporated by reference therein), and has no knowledge
of any material fact, condition or information not disclosed in the Prospectus
which has adversely affected or may adversely affect the business of the Company
or any of its subsidiaries; and the sale of the Stock by such Selling
Shareholder pursuant hereto is not prompted by any information concerning the
Company or any of its subsidiaries which is not set forth in the Registration
Statement or the Prospectus or the documents incorporated by reference therein.
(g) All necessary action has been duly and validly taken by such
Selling Shareholder to authorize the execution, delivery and performance of this
Agreement. This Agreement has been duly and validly authorized, executed and
delivered by such Selling Shareholder and constitutes the legal, valid and
binding obligation of such Selling Shareholder, enforceable against such Selling
Shareholder in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles. The performance of this Agreement and the
consummation of the transactions contemplated herein or therein will not result
in a breach or violation of any of the terms and provisions of, or constitute a
default under, any statute, any agreement or instrument to which such Selling
Shareholder is a party or by which it is bound or to which any of the property
of such Selling Shareholder is subject, such Selling Shareholder's charter, by-
laws or other governing documents (if such Selling Shareholder is not a natural
person), or any order, rule or regulation of any court or governmental agency
or body having jurisdiction over such Selling Shareholder or any of its
properties; no consent, approval, authorization or order of, or filing with, any
court or governmental agency or body is required for the consummation by the
Selling Shareholders of the transactions contemplated by this Agreement, in
connection with the sale of the Stock by the Selling Shareholders, except such
as may be required under the Act or state securities or blue sky laws.
4
<PAGE>
4. SALE AND DELIVERY OF SECURITIES. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Selling Shareholders agree to sell
through the Sales Agent, and the Sales Agent agrees to sell, as sales agent for
the Selling Shareholders, on a best efforts basis, up to the Maximum Amount of
Stock on the terms set forth herein. The Stock, up to the Maximum Amount, is to
be sold during one or more pricing periods (each a "PRICING PERIOD"), each
Pricing Period consisting of five consecutive calendar days. The Sales Agent
from time to time shall designate, by notice to the Selling Shareholders,
Pricing Period(s) and the number of shares of Stock (not to exceed 20,000
shares for all Selling Shareholders in the aggregate) to be sold by the Sales
Agent subject to the calculation of Net Proceeds set forth below during each
such Pricing Period (the "AVERAGE MARKET PRICE SHARES"). Subject to the terms
and conditions hereof, the Sales Agent shall use its best efforts to (i) sell
all of the Average Market Price Shares during each such Pricing Period, and
(ii) sell the entire Maximum Amount. The Sales Agent shall sell the shares of
Stock by means of ordinary brokers' transactions on the NASDAQ National Market
System. Each Selling Shareholder shall have the right, upon written notice to
the Sales Agent, to suspend or terminate the offering of Stock owned by such
Selling Shareholder; PROVIDED, HOWEVER, that no Selling Shareholder may so
suspend or terminate the offering of Stock during the pendency of a Pricing
Period in which such Selling Shareholder has elected to participate; and
PROVIDED FURTHER that such suspension or termination shall not affect or impair
such Selling Shareholder's obligations with respect to shares of Stock sold
hereunder prior to the receipt of such notice by the Sales Agent. With respect
to sales in any Pricing Period, each Participating Shareholder (as defined in
Section 6(a)) shall receive Net Proceeds pro rata in accordance with the number
of shares of Stock sold for their respective accounts as set forth in the sixth
succeeding paragraph below in this Section 4.
With respect to any Pricing Period, sales of Average Market Price
Shares shall be made for the accounts of each Participating Shareholders (as
defined in Section 6(a)) pro rata (to the nearest 100 shares) in accordance with
the number of shares of Stock beneficially owned by such Shareholder at the
beginning of such Pricing Period (as set forth in the Notice (as defined in
Section 6(a)) from such Shareholder). The net proceeds (the "NET PROCEEDS") to
the Participating Shareholders for the Average Market Price Shares sold by the
Sales Agent during a Pricing Period will equal the sum of (i) the product of (x)
95% times (y) the average of the arithmetic mean of the high and low sales
prices of the common stock of the Company reported on the NASDAQ National Market
System for each trading day of such Pricing Period (the "AVERAGE MARKET PRICE"),
times (z) the number of Average Market Price Shares sold during such Pricing
Period, plus (ii) Alternative Proceeds (defined below), if any, plus
(iii) Excess Proceeds (defined below), if any. The compensation to the Sales
Agent with respect to the sale of Average Market Price Shares sold hereunder
shall equal the difference between the aggregate gross sales prices at which
such sales are actually effected by the Sales Agent and the Net Proceeds.
During any Pricing Period, sales of Stock shall not be effected at or
below the price that is $.875 below the last reported bid price of the Stock on
the trading day immediately preceding the Election Date, or such other price as
may be specified by the Sales Agent in the notice designating a Pricing Period
(the "PRICE LIMIT"). If as a result of the Price Limit the Sales Agent is on
any day during such Pricing Period unable to sell shares of Stock in an amount
greater than or equal to the average daily number of Average Market Price Shares
actually sold during such Pricing Period, then (i) that day's high and low sales
prices of common stock of the Company reported on the NASDAQ National Market
System shall not be included in the
5
<PAGE>
calculation of Average Market Price and (ii) the net proceeds payable to the
Selling Shareholders (the "ALTERNATIVE PROCEEDS") and the compensation payable
to the Sales Agent in respect of any sales of Average Market Price Shares
effected that day (the "ALTERNATIVE SHARES") by the Sales Agent shall be equal
to 95% and 5%, respectively, of the weighted average sales prices at which the
Sales Agent has actually effected sales of Stock during that day, and the
Alternative Shares shall be excluded from the number used in clause (i)(z) in
the preceding paragraph.
To the extent that the compensation payable to the Sales Agent
hereunder would otherwise exceed ten percent of the aggregate gross sales prices
of the Average Market Price Shares during any Pricing Period, such excess over
ten percent shall constitute "EXCESS PROCEEDS" payable to the Selling
Shareholders.
During any Pricing Period, the Sales Agent may sell shares
("ADDITIONAL SHARES") of Stock (subject to the Price Limit) in an amount of
1,000 shares or more (subject to any limitations placed on sales of Additional
Shares pursuant to a Notice as set forth in Section 6(a)), in addition to the
sale of Average Market Price Shares (such Additional Shares to be included in
the Maximum Amount). Any such sales shall be made for (and net proceeds thereof
shall be paid to) the accounts of the Participating Shareholders (as defined in
Section 6(a)) PRO RATA (to the nearest 100 shares) in accordance with the number
of shares beneficially owned by such Shareholders at the beginning of the
Pricing Period (as set forth in such Shareholders' Notices), less the sum of
(i) any shares sold for them as Average Market Price Shares and (ii) any shares
such Shareholders shall have instructed the Sales Agent in such Notices not to
sell as Additional Shares. The compensation to the Sales Agent for sales of the
Additional Shares sold in any Pricing Period shall be $0.10 per share. The sale
of Additional Shares during any day shall be confirmed in writing by the Sales
Agent to the Selling Shareholders following the end of the Pricing Period. All
other shares sold during a Pricing Period not so confirmed shall be deemed
Average Market Price Shares.
The Sales Agent shall provide written confirmation (the
"Confirmation") to each Selling Shareholder and to the Company following the
close of business on the final day of each Pricing Period setting forth the
number of Average Market Price Shares and Additional Shares sold by such Selling
Shareholder and by all Selling Shareholders in the aggregate during the Pricing
Period, the gross proceeds from the sale of such shares, the high and low prices
at which Average Market Price Shares were sold during such Pricing Period, the
Net Proceeds to such Selling Shareholder (and to all Selling Shareholders in the
aggregate), the amount of Excess Proceeds, if any, the amount of Alternative
Proceeds, if any, the compensation payable by such Selling Shareholder (and by
all Selling Shareholders in the aggregate) to the Sales Agent with respect to
such sales and the Average Market Price for such Pricing Period. Such
Confirmation will rely without independent verification on information supplied
by the Selling Shareholders in their respective Notices. The Selling
Shareholders and the Sales Agent hereby acknowledge that the Company will be
relying upon such information without independent verification in preparing the
Prospectus Supplement (as described below) with respect to each Pricing Period.
Settlement for sales of Additional Shares will occur on the fifth
business day following the date on which such sales are made. Settlement for
sales of Average Market Price Shares will occur on a weekly basis as follows:
on each Monday (or the next succeeding
6
<PAGE>
business day if such Monday is not a business day) following the end of a
Pricing Period (each a "CLOSING DATE"), the Average Market Price Shares sold
through the Sales Agent during such Pricing Period will be delivered by each
Selling Shareholder to the Sales Agent against payment of the Net Proceeds for
such Pricing Period. All Net Proceeds shall be delivered to the Participating
Shareholders during the Pricing Period pro rata (to the nearest 100 Shares) in
accordance with the number of shares of Stock beneficially owned by such Selling
Shareholders (as set forth in the Notices) immediately prior to the commencement
of the applicable Pricing Period. At each such settlement, the Company and the
Selling Shareholders shall affirm in writing each representation, warranty,
covenant and other agreement contained in this Agreement.
The Company covenants and agrees with the Sales Agent that within two
(2) business days of the termination of each Pricing Period, the Company will
file a Prospectus Supplement under Rule 424(b)(3) promulgated under the Act,
which Prospectus Supplement will set forth the number of Average Market Price
Shares and Additional Shares sold through the Sales Agent by Participating
Shareholders, the high and low prices at which such shares of Stock were sold
during such Pricing Period, the Net Proceeds to the Participating Shareholders
and the compensation payable by the Participating Shareholders to the Sales
Agent with respect to such sales; provided, however, that in no event will the
Company be required to file such a Prospectus Supplement earlier than one
(1) business day following the date on which the Confirmation with respect to
the relevant Pricing Period is given by the Sales Agent in writing to the
Company and its counsel by fascimile or hand delivery. The obligations of the
Sales Agent to sell the Stock shall be subject to the continuing accuracy of the
representations and warranties of the Company herein, to the performance by the
Company and the Selling Shareholders of their obligations hereunder and to the
continuing satisfaction of the additional conditions specified in Section 7(a)
through (i) of this Agreement.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees with
the Sales Agent and the Selling Shareholders that:
(a) The Company shall cause the Registration Statement to remain
effective for five (5) calendar months (as may be extended as provided below,
the "Term") after the date on which such Registration Statement was initially
declared effective (the "Effective Date"); provided, however, that if at any
time during the Term, the Company determines that the maintenance of such
Registration Statement and Prospectus as current and accurate in accordance with
the Act and the Rules and Regulations would require the disclosure of nonpublic
information, the disclosure of which could reasonably be expected to have a
material adverse effect upon a significant financing, negotiation, contracting,
acquisition, disposition, merger or other comparable transaction (collectively,
"Significant Transactions"), then, by written notice by the Company to the Sales
Agent and each Selling Shareholder: (i) in the event that at such time 30 or
more days remain in the Term, the Company may cause the suspension of sales of
Stock pursuant to the Registration Statement for such reasonable period of time
as may be necessary to avoid such adverse effect on such Significant
Transaction, in which case the Term shall be extended for the number of days
that such suspension shall have been in effect, and (ii) in the event that at
such time fewer than 30 days remain in the Term, the Company may terminate the
effectiveness of the Registration Statement. During the period in which a
prospectus relating to the Stock is required to be delivered under the Act, the
Company will
7
<PAGE>
notify the Sales Agent promptly of the time when any subsequent amendment to the
Registration Statement has become effective or any subsequent supplement to the
Prospectus has been filed and of any request by the Commission for any amendment
or supplement to the Registration Statement or Prospectus or for additional
information; and it will furnish to the Sales Agent at or prior to the filing
thereof a copy of any such prospectus supplement or any document that upon
filing is deemed to be incorporated by reference in the Registration Statement
or Prospectus.
(b) The Company will advise the Sales Agent, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement, of the suspension of the qualification of the Stock for offering or
sale in any jurisdiction, or of the initiation or threatening of any proceeding
for any such purpose; and it will promptly use its best efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such a stop order
should be issued.
(c) Within the time during which a prospectus relating to the
Stock is required to be delivered under the Act, the Company will comply as far
as it is able with all requirements imposed upon it by the Act and by the Rules
and Regulations, as from time to time in force, so far as necessary to permit
the continuance of sales of or dealings in the Stock as contemplated by the
provisions hereof and the Prospectus.
(d) The Company will (i) use its best efforts to qualify the
Stock for sale under the securities laws of such jurisdictions as the Selling
Shareholders or the Sales Agent shall reasonably designate and to continue such
qualifications in effect so long as required for the distribution of the Stock,
except that the Company shall not be required in connection therewith to qualify
as a foreign corporation or to execute a general consent to service of process
in any jurisdiction, and (ii) provide the Sales Agent and the Selling
Shareholders with customary memoranda as to the status of the Stock under the
securities laws of such jurisdictions.
(e) The Company will furnish to the Sales Agent copies of the
Registration Statement, the Prospectus (including all documents incorporated by
reference therein) and all amendments and supplements to the Registration
Statement or Prospectus that are filed with the Commission during the period in
which a prospectus relating to the Stock is required to be delivered under the
Act (including all documents filed with the Commission during such period that
are deemed to be incorporated by reference therein), in each case as soon as
available and in such quantities as the Sales Agent may from time to time
reasonably request.
(f) The Company, whether or not the transactions contemplated
hereunder are consummated or this Agreement is terminated, will pay all expenses
incident to the performance of its obligations hereunder, will pay the expenses
of its printing of the Prospectus and Prospectus Supplements, and will reimburse
the Sales Agent for any expenses (including fees and disbursements of counsel up
to $3,750, together with any additional fees and disbursements for any
additional services performed at the specific request of the Company) incurred
by it in connection with the matters referred to in Section 5(d) hereof and the
8
<PAGE>
preparation of memoranda relating thereto and for any filing fee of the National
Association of Securities Dealers, Inc. relating to the Stock. The Company
shall not in any event be liable to the Sales Agent for loss of anticipated
profits from the transactions covered by this Agreement.
(g) The Company will, at any time during the term of this
Agreement, as supplemented from time to time, advise the Sales Agent immediately
after it shall have received notice or obtain knowledge thereof, of any
information or fact that would alter or affect any certificate and other
document provided to the Sales Agent pursuant to Section 7 herein.
6. COVENANTS OF THE SELLING SHAREHOLDERS. Each of the Selling
Shareholders covenants and agrees with the Agent and the Company that:
(a) On or before 5 p.m., New York City time, on the date (an
"ELECTION DATE") which is the Friday prior to the commencement of any Pricing
Period, each Selling Shareholder shall notify the Sales Agent in writing (the
"NOTICE") of its decision to sell, or not to sell, shares of Stock during that
Pricing Period under the terms of this Agreement. Any Selling Shareholder who
has so elected to sell shares of Stock through the Sales Agent during any
Pricing Period (a "PARTICIPATING SHAREHOLDER") shall in such Notice (i) state
the number of shares of Stock beneficially owned by such Selling Shareholder on
such Election Date, (ii) state the limitation, if any, on the number of such
Participating Shareholder's shares of Stock that the Agent may sell as
Additional Shares during such Pricing Period (it being understood and agreed
that in the absence of any such expressly stated limitation in the Notice the
Sales Agent is hereby authorized to sell such Participating Shareholder's shares
of Stock as Additional Shares without restriction), (iii) state that such
Selling Shareholder agrees not to sell any of such shares until the end of the
Pricing Period except through the Sales Agent pursuant to this Agreement. A
Participating Shareholder shall not sell any Stock (other than through the Sales
Agent), directly or indirectly, from (and including) the Election Date until the
end of any Pricing Period during which such Participating Shareholder has
elected to sell Stock through the Sales Agent. If a Selling Shareholder shall
fail to give timely Notice to the Sales Agent of its election to become a
Participating Shareholder with respect to a Pricing Period, such Selling
Shareholder shall be deemed not to be a Participating Shareholder for such
Pricing Period, unless otherwise agreed by the Sales Agent.
(b) In order to document the Sales Agent's compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal Responsibility
Act of 1982 and the Interest and Dividend Tax Compliance Act of 1983 with
respect to the transactions herein contemplated, each of the Selling
Shareholders agrees to deliver to the Sales Agent prior to or at the
Commencement Date (as defined in Section 7(d)) a properly completed and executed
United States Treasury Department Form W-9 (or other applicable form or
statement specified by Treasury Department regulations in lieu thereof).
7. CONDITIONS OF SALES AGENT'S OBLIGATIONS. The obligations of the
Sales Agent to sell the Stock as provided herein shall be subject to the
accuracy, as of the date hereof, and as of each Closing Date for any Pricing
Period contemplated under this Agreement, of the representations and warranties
of the Company herein, to the performance
9
<PAGE>
by the Company and the Selling Shareholders of their obligations hereunder and
to the following additional conditions:
(a) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceeding for that purpose
shall have been instituted or, to the knowledge of the Company, the Selling
Shareholders or the Sales Agent, threatened by the Commission, and any request
of the Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to the
Sales Agent's satisfaction.
(b) The Sales Agent shall not have advised the Company that the
Registration Statement or Prospectus, or any amendment or supplement thereto,
contains an untrue statement of fact that in the Sales Agent's opinion is
material, or omits to state a fact that in the Sales Agent's opinion is material
and is required to be stated therein or is necessary to make the statements
therein not misleading.
(c) Except as contemplated in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, there shall not have been, on a consolidated basis, any
material change in the capital stock of the Company or any material increase in
short-term or long-term debt of the Company and its subsidiaries, or any
material adverse change, or any development involving a prospective material
adverse change, in the condition (financial or other), business, prospects, net
worth or results of operations of the Company and its subsidiaries considered as
a whole, or any change in the rating assigned to any securities of the Company
by Moody's Investors Service, Standards & Poors or any similar national rating
agency, that, in the Sales Agent's judgment, makes it impractical or inadvisable
to offer or deliver the Stock on the terms and in the manner contemplated in the
Prospectus.
(d) The Sales Agent shall have received from the Company a
certificate, or certificates, signed by two authorized officers, including the
principal financial or accounting officer (unless such officer is unavailable),
of the Company, dated as of the Commencement Date and dated as of each Closing
Date contemplated by this Agreement, to the effect that, to the best of their
knowledge based upon reasonable investigation:
i) The representations and warranties of the Company in
this Agreement are true and correct, as if made at and as of the Commencement
Date or the Closing Date for such Pricing Period (as the case may be), and the
Company has complied with all the agreements and satisfied all the conditions on
its part to be performed or satisfied at or prior to the Commencement Date and
each such Closing Date (as the case may be);
ii) No stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceeding for that purpose has
been instituted or is threatened, by the Commission; and
10
<PAGE>
iii) There has occurred no event required to be set forth in
an amendment or supplement to the Registration Statement or Prospectus that has
not been so set forth and there has been no document required to be filed under
the Exchange Act and the rules and regulations of the Commission thereunder that
upon such filing would be deemed to be incorporated by reference in the
Prospectus that has not been so filed.
(e) The Sales Agent shall have received from each Selling
Shareholder a certificate, dated as of the Commencement Date and dated as of the
Closing Date contemplated by this Agreement, to the effect that:
i) The representations and warranties of such Selling
Shareholder in this Agreement are true and correct, as if made at and as of the
Commencement Date or the Closing Date for such Pricing Period (as the case may
be), and such Selling Shareholder has complied with all the agreements and
satisfied all the conditions to be performed or satisfied by such Selling
Shareholder at or prior to the Commencement Date and each such Closing Date (as
the case may be); and
ii) Such Selling Shareholder, after a careful examination
of the Prospectus (not including the documents incorporated by reference) does
not know of an untrue statement of a material fact included in the Registration
Statement or the omission from the Registration Statement of any material fact
required to be stated therein or necessary to make the statements therein not
misleading.
(f) Each Selling Shareholder shall have delivered to the Sales
Agent on or prior to the Commencement Date a properly completed and executed
United States Treasury Department Form W-9 (or other applicable form or
statement specified by Treasury Department regulations).
(g) The Company shall have furnished to the Sales Agent such
further certificates and documents as the Sales Agent shall have reasonably
requested. All such certificates and other documents will be in compliance with
the provisions hereof only if they are in the form set forth herein or, if not
set forth herein, satisfactory in form and substance to the Sales Agent. The
Company will furnish the Sales Agent with such conformed copies of such
certificates and other documents as the Sales Agent shall reasonably request.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company and the Selling Shareholders, jointly and
severally, will indemnify and hold harmless the Sales Agent against any losses,
claims, damages or liabilities, joint or several, to which the Sales Agent may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any part of the registration statement when such part became
effective, or in the Registration Statement, the Prospectus, or any amendment or
supplement thereto, or arise out
11
<PAGE>
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Sales Agent for any legal or
other expenses reasonably incurred by it in connection with investigating or
defending against such loss, claim, damage, liability or action as such expenses
are incurred; PROVIDED, HOWEVER, that the Company shall not be liable in any
such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by the Sales Agent or the
Selling Shareholders specifically for use in the preparation thereof. In no
event, however, shall the liability of any Selling Shareholder for
indemnification under this Section 8(a) exceed the proceeds received by such
Selling Shareholder from the Sales Agent as a result of the sale of Stock held
by such Selling Shareholder (plus any amounts received by such Selling
Shareholder under this Section 8), less any amounts such Selling Shareholder
shall have paid pursuant to Section 8(d).
(b) The Sales Agent will indemnify and hold harmless the Company
and the Selling Shareholders against any losses, claims, damages or liabilities
to which the Company or the Selling Shareholders may become subject, under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in any part of the
registration statement when such part became effective, or in the Registration
Statement, the Prospectus or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made therein in reliance upon and in conformity with written
information furnished to the Company by the Sales Agent, specifically for use in
the preparation thereof, and will reimburse the Company and the Selling
Shareholders for any legal or other expenses reasonably incurred by the Company
and the Selling Shareholders in connection with investigating or defending
against any such loss, claim, damage, liability or action as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability that it may have to
any indemnified party otherwise than under such subsection (except and only to
the extent that such omission so to notify results directly in actual prejudice
to the indemnifying party). In case any such action shall be brought against
any indemnified party, and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
in, and, to the extent that it shall wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (who shall not, except with the consent
of the indemnified party, be counsel to the indemnifying party), and after
notice from the indemnifying party to such indemnified party of its election so
to assume
12
<PAGE>
the defense thereof, the indemnifying party shall not be liable to such
indemnified party under such subsection for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation.
(d) If the indemnification provided for in this Section 8 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above, in
such proportion as is appropriate to reflect the relative benefits received by
all indemnified parties on the one hand and the indemnifying parties on the
other from the sale of the Stock and the relative fault of the indemnified
parties on the one hand and the indemnifying parties on the other in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Selling Shareholders on the
one hand and the Sales Agent on the other shall be deemed to be in the same
proportion as the total proceeds from the sale of the Stock (before deducting
expenses) received by the Company and the Selling Shareholders bear to the total
compensation or profit (before deducting expenses) received or realized by the
Sales Agent from the sale of the Stock on behalf of the Selling Shareholders.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, the Selling Shareholders or the Sales Agent and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The Company, each of the
Selling Shareholders and the Sales Agent agree that it would not be just and
equitable if contributions pursuant to this subsection (d) were to be determined
by pro rata allocations or by any other method of allocation that does not take
account of the equitable considerations referred to in the first sentence of
this subsection (d). The amount paid by an indemnified party as a result of the
losses, claims, damages or liabilities referred to in the first sentence of this
subsection (d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
against any action or claim that is the subject of this subsection (d).
Notwithstanding the provisions of this subsection (d), no Selling Shareholder
shall be required to contribute to the amounts paid or payable by the Sales
Agent any amount in excess of the proceeds such Shareholder shall have received
as a result of sales of Stock (plus any amounts previously received by such
Shareholder pursuant to this Section 8), less the amount, if any, that such
Shareholder shall have paid pursuant to Section 8(a), and the Sales Agent shall
not be required to contribute any amount in excess of the lesser of (i) the
compensation payable to the Sales Agent hereunder and (ii) the amount by which
the total actual sales price at which the Stock sold by the Sales Agent exceeds
the amount of any damages that the Sales Agent has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(e) The obligations of the Company and the Selling Shareholders
under this Section 8 shall be in addition to any liability that the Company or
the Selling Shareholders
13
<PAGE>
may otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls the Sales Agent within the meaning of the Act; and
the obligations of the Sales Agent under this Section 8 shall be in addition to
any liability that the Sales Agent may otherwise have and shall extend, upon the
same terms and conditions, to each director of the Company or of any Selling
Shareholder (including any person who, with his consent, is named in the
Registration Statement as about to become a director of the Company), to each
officer of the Company or of any Selling Shareholder who has signed the
Registration Statement and to each person, if any, who controls the Company or
controls any Selling Shareholder within the meaning of the Act.
9. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties and agreements of the Company and the Selling
Shareholders herein or in certificates delivered pursuant hereto, and the
agreements of the Sales Agent contained in Section 8 hereof, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of the Sales Agent or any controlling persons, or the Company or
the Selling Shareholders (or any of their officers, directors or any controlling
persons), and shall survive delivery of and payment for the Stock.
10. [This section is reserved.]
11. TERMINATION.
(a) The Sales Agent shall have the right by giving notice as
hereinafter specified at any time at or prior to any Closing Date, to terminate
this Agreement if (i) the Company or the Selling Shareholders shall have failed,
refused or been unable, at or prior to such Closing Date, to perform any
agreement on their part to be performed hereunder, (ii) any other condition of
the Sales Agent's obligations hereunder is not fulfilled, (iii) trading on the
New York Stock Exchange, the American Stock Exchange or the NASDAQ National
Market System shall have been wholly suspended, (iv) a banking moratorium shall
have been declared by Federal or New York authorities, or (v) an outbreak of or
material escalation in major hostilities in which the United States is involved,
a declaration of war by Congress, any other substantial national or
international calamity or any other event or occurrence of a similar character
shall have occurred since the execution of this Agreement that, in the Sales
Agent's judgment, makes it impractical or inadvisable to proceed with the
completion of the sale of and payment for the Stock to be sold by the Sales
Agent on behalf of the Selling Shareholders. Any such termination shall be
without liability of any party to any other party except that the provisions of
Section 5(g) and Section 8 hereof shall at all times be effective. If the Sales
Agent elects to terminate this Agreement as provided in this Section, the Sales
Agent shall provide the required notice promptly by telephone, telex or
telecopy, confirmed by letter.
(b) Each Selling Shareholder shall have the right, by
giving written notice to the Sales Agent, to terminate this Agreement (solely
with respect to such Selling Shareholder), and the Sales Agent shall have the
right to terminate this Agreement with respect to any Selling Shareholder(s) by
giving notice to such Selling Shareholder(s), in each case in the sole
discretion of such party; PROVIDED, HOWEVER, that no Selling Shareholder may
14
<PAGE>
terminate this Agreement during the pendency of a Pricing Period in which such
Selling Shareholder has elected to sell shares of Stock; and PROVIDED FURTHER,
that no such termination will affect or impair the obligations of the
Participating Shareholders as to sales that shall have been executed prior to
the date of such termination. Any termination of this Agreement shall be
effective on the date specified in such notice of termination; provided that
such termination shall not be effective until the close of business on the date
of receipt of such notice by the Sales Agent. If such termination shall occur
during a Pricing Period, any Additional Shares and Average Market Price Shares
shall settle in accordance with the provisions of the second to last paragraph
of Section 4 hereof.
12. NOTICES. All notices or communications hereunder shall be in
writing and if sent to the Sales Agent shall be mailed, delivered, telexed or
telecopied and confirmed to the Sales Agent at Kidder, Peabody & Co.
Incorporated, 10 Hanover Square, New York, New York 10005, c/o Peter Klein,
17th Floor, OR if sent to the Company, shall be mailed, delivered, telexed or
telecopied and confirmed to the Company at 4201 Lexington Avenue North, Arden
Hills, MN 55126, General Counsel, with a copy to Fredrikson & Byron, P.A., 1100
International Centre, 900 Second Avenue South, Minneapolis, MN 55402 Attention:
David C. Grorud, Esq., OR if sent to a Selling Shareholder shall be mailed,
telexed or telecopied and confirmed to the Selling Shareholders at the address
specified on the signature pages hereto. Each party to this Agreement may
change such address for notices by sending to the parties to this Agreement
written notice of a new address for such purpose.
13. PARTIES. This Agreement shall inure to the benefit of and be
binding upon the Company, the Selling Shareholders and the Sales Agent and their
respective successors and the controlling persons, officers and directors
referred to in Section 8 hereof, and no other person will have any right or
obligation hereunder.
14. APPLICABLE LAW. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York without
regard to the principles of conflicts of laws. If the foregoing correctly sets
forth the understanding between the Company, the Selling Shareholders and the
Sales Agent, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between the Company,
the Selling Shareholders and the Sales Agent. Alternatively, the execution of
this Agreement by the Company and the Selling Shareholders and its acceptance
15
<PAGE>
by or on behalf of the Sales Agent may be evidenced by an exchange of
telegraphic or other written communications.
Very truly yours,
CONTROL DATA SYSTEMS, INC.
By:__________________________
Title:_______________________
16
<PAGE>
ADDRESS
DAVID L. ANDERSON
_____________________________
ANVEST, L.P.
By:__________________________
General Partner
G. LEONARD BAKER, JR.
_____________________________
TENCH COXE
_____________________________
JAMES C. GAITHER
_____________________________
RONALD L. PERKINS
_____________________________
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<PAGE>
ADDRESS
SUTTER HILL VENTURES, L.P.
By:___________________________
General Partner
SAUNDERS HOLDINGS, L.P.
By:___________________________
General Partner
TOW PARTNERS, L.P.
By:___________________________
General Partner
WYTHES LIVING TRUST
By:___________________________
Paul M. Wythes, Trustee
WILLIAM H. YOUNGER, JR.
_______________________________
18
<PAGE>
ADDRESS
AUSTIN VENTURES
By:__________________________
Title:_______________________
GENSTAR INVESTMENT
CORPORATION
By:__________________________
Title:_______________________
THE LEO L. NUSSBAUM AND
JANET G. NUSSBAUM TRUST DATED
APRIL 25, 1991
By:__________________________
Leo L. Nussbaum, Trustee
By:___________________________
Janet G. Nussbaum, Trustee
KLEINER PERKINS CAUFIELD &
BYERS V
By:__________________________
Title:_______________________
19
<PAGE>
ADDRESS
KPCB ZAIBATSU FUND I
By:__________________________
Title:_______________________
ACCEPTED as of the date
first above written
KIDDER, PEABODY & CO. INCORPORATED
By:__________________________
Title:_______________________
20
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SCHEDULE 1
Selling Shareholders Number of Shares of Stock
- -------------------- -------------------------
21
<PAGE>
EXHIBIT 23.1
We consent to the use of our reports incorporated herein.
KPMG PEAT MARWICK
Minneapolis, Minnesota
June 17, 1994
