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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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SCHEDULE 13E-3/A
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
(AMENDMENT NO. 2)
TECH SQUARED INC.
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(Name of the Issuer)
Tech Squared Inc. Digital River, Inc.
MacUSA, Inc. Joel A. Ronning
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(Name(s) of Person(s)Filing Statement)
COMMON STOCK, NO PAR VALUE
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(Title of Class of Securities)
878302108
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(CUSIP Number of Class of Securities)
Tech Squared Inc. Digital River, Inc.
Attention: Charles E. Reese, Jr. Attention: Robert E. Strawman
6690 Shady Oak Road 9625 W. 76th Street, Suite 150
Eden Prairie, Minnesota 55344 Eden Prairie, Minnesota 55344
(612) 832-5622 (612) 830-9042
MacUSA, Inc. Joel A. Ronning
Attention: Charles E. Reese, Jr. 9625 W. 76th Street, Suite 150
6690 Shady Oak Road Eden Prairie, Minnesota 55344
Eden Prairie, Minnesota 55344 (612) 830-9042
(612) 832-5622
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(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Persons(s) Filing Statement)
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COPIES TO:
Louis A. Goodman, Esq. Michael W. Schley, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP Larkin, Hoffman, Daly & Lindgren, Ltd.
One Beacon Street 7900 Xerxes Avenue South, Suite 1500
Boston, Massachusetts 02108 Bloomington, Minnesota 55431
(617) 573-4800 (612) 896-3800
Michael J. Sullivan
Cooley Godward LLP
One Maritime Plaza, 20th Floor
San Francisco, California 94111
(415) 693-2000
This statement is filed in connection with (check the appropriate box):
a. /X/ The filing of solicitation materials or an information statement subject
to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under the Securities
Exchange Act of 1934.
b. / / The filing of a registration statement under the Securities Act of 1933.
c. / / A tender offer.
d. / / None of the above.
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Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies. /X/
Calculation of Filing Fee
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Transaction
Valuation Amount of Filing Fee
$59,278,500* $11,856**
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*Transaction Valuation has been calculated by using the sum
of (1) the estimated consideration of $3,125,000 to be
received by Tech Squared from the sale of its
operating assets and (2) the total value of the 2,650,000 shares of Digital
River, Inc. ("Digital River") common stock, based on a price per share of $21.19
determined in accordance with Rule 0-11(a)(4), to be received by Tech Squared
in the transaction described herein and in the Preliminary Proxy
Statement-Prospectus on Schedule 14A incorporated herein by reference.
**1/50th of 1% of Transaction Value, calculated in accordance with Rule 0-11.
/X/ Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount previously paid: $11,856 Filing party: Tech Squared Inc.
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Form or registration no.: Preliminary 14A Dated filed: August 10, 1999
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INTRODUCTION
This Amendment No. 2 to the Rule 13e-3 Transaction Statement on
Schedule 13E-3 (this "Schedule 13E-3"), originally filed with the Securities
and Exchange Commission (the "Commission") on August 10, 1999, and amended on
October 14, 1999, is being filed by Tech Squared Inc., a Minnesota
corporation ("Tech Squared"), Digital River, Inc., a Delaware corporation
("Digital River"), MacUSA, Inc., a Minnesota corporation ("MacUSA") and Joel
A. Ronning pursuant to Section 13(e) of the Securities Exchange Act of 1934,
as amended, and Rule 13e-3 thereunder, in connection with the voluntary
dissolution of Tech Squared pursuant to the Plan of Liquidation and
Dissolution and the transactions contemplated thereby.
Concurrently with the filing of this Schedule 13E-3, Tech Squared is
filing with the Securities and Exchange Commission the Preliminary Proxy
Statement-Prospectus, as amended (the "Preliminary Proxy Statement-Prospectus"),
relating to the special meeting of Tech Squared shareholders. At the special
meeting, Tech Squared shareholders will consider and vote upon the voluntary
dissolution of Tech Squared pursuant to the Plan of Liquidation and
Dissolution. The Preliminary Proxy Statement-Prospectus is also the
prospectus of Digital River related to the issuance of Digital River shares
to Tech Squared and the distribution of such shares by Tech Squared to its
shareholders pursuant to the Plan of Liquidation and Dissolution. The
Preliminary Proxy Statement-Prospectus is referenced hereto as Exhibit E, and
a copy of the Plan of Liquidation and Dissolution is attached as Annex A to
the Preliminary Proxy Statement-Prospectus.
The following Cross Reference Sheet, prepared pursuant to General
Instruction F to Schedule 13E-3, shows the location in the Preliminary Proxy
Statement-Prospectus of the information required to be included in this Schedule
13E-3. The information set forth in the Preliminary Proxy Statement-Prospectus,
including all annexes and exhibits thereto, is hereby expressly incorporated
herein by reference as set forth in the Cross Reference Sheet and the responses
in this Schedule 13E-3, and such responses are qualified in their entirety by
reference to the information contained in the Preliminary Proxy
Statement-Prospectus and the annexes and exhibits thereto. The Preliminary Proxy
Statement-Prospectus is subject to completion or amendment. Capitalized terms
used but not defined in this Schedule 13E-3 shall have the meanings given to
them in the Preliminary Proxy Statement-Prospectus.
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CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
Rule 13e-3 Transaction All references are to portions
Statement Item Number of the Preliminary Proxy Statement-Prospectus
and Caption which are incorporated herein by reference
- ---------------------- --------------------------------------------------
<S> <C>
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) . . . . . . . . "Summary of the Proxy Statement-Prospectus -- The Companies"
(b) . . . . . . . . "The Special Meeting of Tech Squared Shareholders --
Shareholder Record Date for the Special Meeting"
(c) . . . . . . . . "Comparative Per Share Market Price Data"
(d) . . . . . . . . "Summary of the Transaction and Special Factors -- Tech
Squared Selected Historical Financial Data"
(e) . . . . . . . . Not applicable.
(f) . . . . . . . . Not applicable.
ITEM 2. IDENTITY AND BACKGROUND
(a) . . . . . . . . *
(b) - (d) . . . . . Exhibit 1 - "Tech Squared Annual Report on Form 10-K as
amended on October [ ], 1999, for the fiscal year ended
December 31, 1998 - Item 10 - Directors, Executive
Officers, Promoters and Control Persons"
(e) & (f) . . . . . *
(g) . . . . . . . . *
ITEM 3. PAST CONTACTS, TRANSACTIONS AND NEGOTIATIONS
(a) (1) . . . . . . "The Voluntary Dissolution and the Plan of Liquidation
and Dissolution - Background of the Transaction";
"Intercompany Agreement and Agreements with Affiliates"
(a) (2) . . . . . "The Voluntary Dissolution and the Plan of Liquidation
and Dissolution - Background of the Transaction";
"Intercompany Agreement and Agreements with Affiliates"
(b) . . . . . . . . "Intercompany Agreement and Agreements with Affiliates";
"The Voluntary Dissolution and the Plan of Liquidation
and Dissolution - Background of Transaction"
ITEM 4. TERMS OF THE TRANSACTION.
(a) . . . . . . . . "Summary of the Transaction and Special Factors - Plan
of Liquidation and Dissolution"; "Summary of the
Transaction and Special Factors - Sale of Operating
Assets";"Summary of the Transaction and Special Factors
- The Acquisition
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Agreement"; "Summary of the Transaction and Special
Factors - The Liquidating Trust Agreement"; "The
Voluntary Dissolution and the Plan of Liquidation and
Dissolution - General"; "The Voluntary Dissolution and
the Plan of Liquidation and Dissolution - The Sale of
Operating Assets"; "The Voluntary Dissolution and the
Plan of Liquidation and Dissolution - The Acquisition
Agreement"; "The Voluntary Dissolution and the Plan of
Liquidation and Dissolution - The Liquidating Trust
Agreement"
(b) . . . . . . . . "The Voluntary Dissolution and the Plan of Liquidation
and Dissolution - The Voting Agreements"
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a) . . . . . . . . "Summary of the Transaction and Special Factors - Plan
of Liquidation and Dissolution"; "The Voluntary
Dissolution and the Plan of Liquidation and Dissolution
- General"
(b) . . . . . . . . "Summary of the Transaction and Special Factors - Plan
of Liquidation and Dissolution"; "Summary of the
Transaction and Special Factors - the Sale of Operating
Assets"; "Summary of the Transaction and Special
Factors - The Acquisition Agreement"; "The Voluntary
Dissolution and the Plan of Liquidation and Dissolution
- General"; "The Voluntary Dissolution and the Plan of
Liquidation and Dissolution - The Sale of Operating
Assets"; "The Voluntary Dissolution and the Plan of
Liquidation and Dissolution - The Acquisition Agreement"
(c) . . . . . . . . None
(d) . . . . . . . . "Summary of the Transaction and Special Factors - Plan of
Liquidation and Dissolution"; "The Voluntary Dissolution and
the Plan of Liquidation and Dissolution - Delisting and
Deregistration of Tech Squared Common Stock After the
Transaction"
(e) . . . . . . . . "Summary of the Transaction and Special Factors - Plan of
Liquidation and Dissolution"; "Summary of the Transaction
and Special Factors - the Sale of Operating Assets";
"Summary of the Transaction and Special Factors - The
Acquisition Agreement"; "The Voluntary Dissolution and the
Plan of Liquidation and Dissolution - General"; "The
Voluntary Dissolution and the Plan of Liquidation and
Dissolution - The Sale of Operating Assets"; "The Voluntary
Dissolution and the Plan of Liquidation and Dissolution -
The Acquisition Agreement"
(f) . . . . . . . . "The Voluntary Dissolution and the Plan of Liquidation and
Dissolution - Delisting and Deregistration of Tech Squared
Common Stock After the Transaction"
(g) . . . . . . . . "The Voluntary Dissolution and the Plan of Liquidation and
Dissolution - Delisting and Deregistration of Tech Squared
Common Stock After the Transaction"
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ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) . . . . . . . . "The Voluntary Dissolution and the Plan of Liquidation
and Dissolution - General"; "Expenses"
(b) . . . . . . . . "Expenses"
(c) . . . . . . . . Not applicable
(d) . . . . . . . . Not applicable
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a) . . . . . . . . "Summary of the Transaction and Special Factors - Reasons
for the Transaction"; "The Voluntary Dissolution and the
Plan of Liquidation and Dissolution - Background of the
Transaction"; "The Voluntary Dissolution and the Plan of
Liquidation and Dissolution - Tech Squared's Reasons for the
Transaction"; "The Voluntary Dissolution and the Plan of
Liquidation and Dissolution - Digital River's Reasons for
the Transaction"
(b) . . . . . . . . "Summary of the Transaction and Special Factors - Reasons
for the Transaction"; "The Voluntary Dissolution and the
Plan of Liquidation and Dissolution - Background of the
Transaction";"The Voluntary Dissolution and the Plan of
Liquidation and Dissolution - Tech Squared's Reasons for the
Transaction"; "The Voluntary Dissolution and the Plan of
Liquidation and Dissolution - Opinion of Tech Squared's
Financial Advisor"
(c) . . . . . . . . "Summary of the Transaction and Special Factors - Reasons
for the Transaction"; "The Voluntary Dissolution and the
Plan of Liquidation and Dissolution - Tech Squared's Reasons
for the Transaction"; "The Voluntary Dissolution and the
Plan of Liquidation and Dissolution - Opinion of Tech
Squared's Financial Advisor"
(d) . . . . . . . . "Summary of the Transaction and Special Factors - Plan of
Liquidation and Dissolution"; "Summary of the Transaction
and Special Factors - Certain Material United States Federal
Income Tax Consequences of the Transaction"; "Summary of the
Transaction and Special Factors - Accounting Treatment of
the Exchange"; "Risk Factors - Risks Relating to the
Transaction"; "The Voluntary Dissolution and the Plan of
Liquidation and Dissolution - Certain Material United States
Federal Income Tax Consequences of the Transaction"; "The
Voluntary Dissolution and the Plan of Liquidation and
Dissolution - Accounting Treatment of the Transaction"; "The
Voluntary Dissolution and the Plan of Liquidation and
Dissolution - Delisting and Deregistration of Tech Squared
Common Stock After the Transaction"; "Comparison of Rights
of Holders of Tech Squared Common Stock and Digital River
Common Stock"
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a) . . . . . . . . "Summary of the Transaction and Special Factors -
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Recommendation of Tech Squared's Board of Directors";
"The Voluntary Dissolution and the Plan of Liquidation
and Dissolution - Digital River's Reasons for the
Transaction"; "The Voluntary Dissolution and the Plan of
Liquidation and Dissolution - Digital River's
Determination that the Transaction is Fair to Tech
Squared's Shareholders"; "The Voluntary Dissolution and
the Plan of Liquidation and Dissolution - Recommendation
of Tech Squared's Board of Directors"
(b) . . . . . . . . "Summary of the Transaction and Special Factors -
Recommendation of Tech Squared's Board of Directors"; "The
Voluntary Dissolution and the Plan of Liquidation and
Dissolution - Recommendation of Tech Squared's Board of
Directors"; "Summary of the Transaction and Special Factors
- Reasons for the Transaction"; "The Voluntary Dissolution
and the Plan of Liquidation and Dissolution - Recommendation
of Tech Squared's Board of Directors"; "The Voluntary
Dissolution and the Plan of Liquidation and Dissolution -
Tech Squared's Reasons for the Transaction"; "The Voluntary
Dissolution and the Plan of Liquidation and Dissolution -
Opinion of Tech Squared's Financial Advisor"; Annex E -
"Opinion of SG Cowen Securities Corporation"; Annex F -
"Opinion of Arthur Andersen LLP"; Annex G - "Opinion of
Broadview International LLC"
(c) . . . . . . . . "Summary of the Transaction and Special Factors -
Shareholder Approval"
(d) . . . . . . . . "Summary of the Transaction and Special Factors -
Recommendation of Tech Squared's Board of Directors";
"The Voluntary Dissolution and the Plan of Liquidation
and Dissolution - Recommendation of Tech Squared's Board
of Directors"
(e) . . . . . . . . "Summary of the Transaction and Special Factors -
Recommendation of Tech Squared's Board of Directors";
"The Voluntary Dissolution and the Plan of Liquidation
and Dissolution - Recommendation of Tech Squared's Board
of Directors"
(f) . . . . . . . . Not applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a) and (b) (1-3) . "Summary of the Transaction and Special Factors -Tech
Squared's Financial Advisor and its Opinion"; "The Voluntary
Dissolution and the Plan of Liquidation and Dissolution -
Opinion of Tech Squared's Financial Advisor"; Annex E -
"Opinion of SG Cowen Securities Corporation"; Annex F -
"Opinion of Arthur Andersen LLP"; Annex G - "Opinion of
Broadview International LLC"
(b)(4) . . . . . . None
(b)(5) . . . . . . Summary of the Transaction and Special Factors - Tech
Squared's Financial Advisor and its Opinion"; "The
Voluntary Dissolution and the Plan of Liquidation and
Dissolution - Opinion of Tech Squared's Financial
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Advisor"; Annex E - "Opinion of SG Cowen Securities
Corporation"; Annex G - "Opinion of Broadview
International LLC"
(b)(6) . . . . . . "The Voluntary Dissolution and the Plan of Liquidation
and Dissolution - Opinion of Tech Squared's Financial
Advisor"; Annex E - "Opinion of SG Cowen Securities
Corporation"; Annex F - "Opinion of Arthur Andersen
LLP"; Annex G - "Opinion of Broadview International
LLC"
(c) . . . . . . . . Annex E - "Opinion of SG Cowen Securities Corporation";
Annex F - "Opinion of Arthur Andersen LLP"; Annex G -
"Opinion of Broadview International LLC"
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) . . . . . . . . "Share Ownership By Principal Shareholders, Management
and Directors of Tech Squared"
(b) . . . . . . . . "Share Ownership By Principal Shareholders, Management
and Directors of Tech Squared"
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS
WITH RESPECT TO THE ISSUER'S SECURITIES
. . . . . . . . "The Voluntary Dissolution and the Plan of Liquidation
and Dissolution - The Voting Agreements"
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN
PERSONS WITH REGARD TO THE TRANSACTION.
(a) . . . . . . . . "Summary of the Transaction and Special Factors -
Shareholder Approval"; "The Voluntary Dissolution and the
Plan of Liquidation and Dissolution - The Voting Agreements"
(b) . . . . . . . . "Summary of the Transaction and Special Factors -
Recommendation of Tech Squared's Board of Directors";
"The Special Meeting of Tech Squared Shareholders -
Purpose of the Special Meeting"
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) . . . . . . . . "Summary of the Transaction and Special Factors -
Dissenters' and Appraisal Rights"; "The Voluntary
Dissolution and the Plan of Liquidation and Dissolution
-Dissenters' and Appraisal Rights"
(b) . . . . . . . . None
(c) . . . . . . . . Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a) . . . . . . . . "Summary of the Transaction and Special Factors - Tech
Squared Historical Financial Data"; "Summary of the Proxy
Statement-Prospectus - Comparative Per Share Data"
(b) . . . . . . . . Not applicable.
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ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) . . . . . . . . Not applicable.
(b) . . . . . . . . "The Special Meeting of Tech Squared Shareholders -
Proxies"; "Expenses"
ITEM 16. ADDITIONAL INFORMATION
The Preliminary Proxy Statement-Prospectus on Schedule 14A and the
annexes and exhibits attached thereto are incorporated herein by reference
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
*
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* The Item is located in the Schedule 13e-3 only.
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ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The information concerning Tech Squared Inc. set forth in
"Summary of the Proxy Statement-Prospectus -- The Companies" of the Preliminary
Proxy Statement-Prospectus is incorporated herein by reference.
(b) The information set forth in "The Special Meeting of Tech
Squared Shareholders -- Shareholder Record Date for the Special Meeting" of the
Preliminary Proxy Statement-Prospectus is incorporated herein by reference.
(c) The information set forth in "Comparative Per Share Market
Price Data" of the Preliminary Proxy Statement-Prospectus is incorporated herein
by reference.
(d) The information set forth in "Summary of the Transaction
and Special Factors -- Tech Squared Selected Historical Financial Data" of the
Preliminary Proxy Statement-Prospectus is incorporated herein by reference.
(e) Not applicable.
(f) Not applicable.
ITEM 2. IDENTITY AND BACKGROUND
(a) This statement is filed by Tech Squared, the issuer of the
class of equity securities which is the subject of the Rule 13e-3 transaction,
as well as on behalf of Digital River, MacUSA and Mr. Joel A. Ronning, all of
whom are affiliates of Tech Squared.
(b) - (d) For Tech Squared, its officers and directors and Mr.
Ronning, see the information set forth in Exhibit 1 - "Tech Squared Annual
Report on Form 10-K as amended on October [ ], 1999, for the fiscal year ended
December 31, 1998 - Item 10 - Directors, Executive Officers, Promoters and
Control Persons" of the Preliminary Proxy Statement-Prospectus which is
incorporated herein by reference.
For information concerning Digital River and its officers, see
the information set forth in Exhibit A to this Schedule 13e-3, which contains an
excerpt from Digital River's Annual Report on Form 10-K filed on March 3, 1999,
for the fiscal year ended December 31, 1998, incorporated herein by reference,
pursuant to General Instruction D to Schedule 13e-3. For information concerning
Digital River and its directors, see the information set forth in Exhibit B to
this Schedule 13e- 3, which contains an excerpt from Digital River's Definitive
Proxy Statement on Schedule 14A, filed on March 23, 1999, incorporated herein by
reference, pursuant to General Instruction D to Schedule 13e-3. The nominees for
election to the Board of Directors of Digital River, Thomas F. Madison and
Charles E. Reese, Jr., were both elected. However, Mr. Reese recused himself
from Digital River's Board of Director's on June 25, 1999, and formally resigned
from the Board on July 9, 1999.
MacUSA has the same directors and executive officers as Tech
Squared.
(e) & (f) During the last five years, none of Tech Squared,
Digital River, MacUSA and Mr. Ronning, and, to the best knowledge of Tech
Squared, Digital River and MacUSA, none of the officers and directors of Tech
Squared, Digital River and MacUSA have been (i) convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) party
to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining further
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violations of, or prohibiting activities subject to, federal or state securities
laws or finding any violation of such laws.
(g) Each of the executive officers and directors of Tech
Squared, Digital River, and MacUSA, including Mr. Ronning, are United States
citizens.
ITEM 3. PAST CONTACTS, TRANSACTIONS AND NEGOTIATIONS
(a) (1) The information set forth in "The Voluntary
Dissolution and the Plan of Liquidation and Dissolution - Background of the
Transaction" and "Intercompany Agreement and Agreements with Affiliates" of the
Preliminary Proxy Statement-Prospectus is incorporated herein by reference.
(a) (2) The information set forth in "The Voluntary
Dissolution and the Plan of Liquidation and Dissolution - Background of the
Transaction" and "Intercompany Agreement and Agreements with Affiliates" of the
Preliminary Proxy Statement-Prospectus is incorporated herein by reference.
In the normal course of business, Mr. Ronning has had
conversations with officers and employees of Digital River and MacUSA regarding
the election of Tech Squared directors. However, none of these conversations
were pursuant to the transactions contemplated within this Schedule 13e-3.
(b) The information set forth in "Intercompany Agreement and
Agreements with Affiliates" and "The Voluntary Dissolution and the Plan of
Liquidation and Dissolution - Background of Transaction" of the Preliminary
Proxy Statement-Prospectus is incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a) The information set forth in "Summary of the Transaction
and Special Factors - Plan of Liquidation and Dissolution," "Summary of the
Transaction and Special Factors - Sale of Operating Assets," "Summary of the
Transaction and Special Factors - The Acquisition Agreement," "Summary of the
Transaction and Special Factors - The Liquidating Trust Agreement," "The
Voluntary Dissolution and the Plan of Liquidation and Dissolution - General,"
"The Voluntary Dissolution and the Plan of Liquidation and Dissolution - The
Sale of Operating Assets," "The Voluntary Dissolution and the Plan of
Liquidation and Dissolution - The Acquisition Agreement" and "The Voluntary
Dissolution and the Plan of Liquidation and Dissolution - The Liquidating Trust
Agreement" of the Preliminary Proxy Statement- Prospectus is incorporated herein
by reference.
(b) The information set forth in "The Voluntary Dissolution
and the Plan of Liquidation and Dissolution - The Voting Agreements" of the
Preliminary Proxy Statement-Prospectus is incorporated herein by reference.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a) The information set forth in "Summary of the Transaction
and Special Factors - Plan of Liquidation and Dissolution" and "The Voluntary
Dissolution and the Plan of Liquidation and Dissolution - General" of the
Preliminary Proxy Statement-Prospectus is incorporated herein by reference.
(b) The information set forth in "Summary of the Transaction
and Special Factors - Plan of Liquidation and Dissolution," "Summary of the
Transaction and Special Factors - the Sale of Operating Assets," "Summary of the
Transaction and
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Special Factors - The Acquisition Agreement," "The Voluntary Dissolution and the
Plan of Liquidation and Dissolution - General," "The Voluntary Dissolution and
the Plan of Liquidation and Dissolution - The Sale of Operating Assets" and "The
Voluntary Dissolution and the Plan of Liquidation and Dissolution - The
Acquisition Agreement" of the Preliminary Proxy Statement-Prospectus is
incorporated herein by reference.
(c) None
(d) The information set forth in "Summary of the Transaction
and Special Factors - Plan of Liquidation and Dissolution" and "The Voluntary
Dissolution and the Plan of Liquidation and Dissolution - Delisting and
Deregistration of Tech Squared Common Stock After the Transaction" of the
Preliminary Proxy Statement-Prospectus is incorporated herein by reference.
(e) The information set forth in "Summary of the Transaction
and Special Factors - Plan of Liquidation and Dissolution," "Summary of the
Transaction and Special Factors - the Sale of Operating Assets," "Summary of the
Transaction and Special Factors - The Acquisition Agreement," "The Voluntary
Dissolution and the Plan of Liquidation and Dissolution - General," "The
Voluntary Dissolution and the Plan of Liquidation and Dissolution - The Sale of
Operating Assets" and "The Voluntary Dissolution and the Plan of Liquidation and
Dissolution - The Acquisition Agreement" of the Preliminary Proxy
Statement-Prospectus is incorporated herein by reference.
(f) The information set forth in "The Voluntary Dissolution
and the Plan of Liquidation and Dissolution - Delisting and Deregistration of
Tech Squared Common Stock After the Transaction" of the Preliminary Proxy
Statement-Prospectus is incorporated herein by reference.
(g) The information set forth in "The Voluntary Dissolution
and the Plan of Liquidation and Dissolution - Delisting and Deregistration of
Tech Squared Common Stock After the Transaction" of the Preliminary Proxy
Statement-Prospectus is incorporated herein by reference.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in "The Voluntary Dissolution
and the Plan of Liquidation and Dissolution - General" and "Expenses" of the
Preliminary Proxy Statement-Prospectus is incorporated herein by reference.
(b) The information set forth in "Expenses" of the Preliminary
Proxy Statement-Prospectus is incorporated herein by reference.
(c) Not applicable
(d) Not applicable
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a) The information set forth in "Summary of the Transaction
and Special Factors - Reasons for the Transaction," "The Voluntary Dissolution
and the Plan of Liquidation and Dissolution - Background of the Transaction,"
"The Voluntary Dissolution and the Plan of Liquidation and Dissolution - Tech
Squared's Reasons for the Transaction" and "The Voluntary Dissolution and the
Plan of Liquidation and Dissolution - Digital River's Reasons for the
Transaction" of the Preliminary Proxy Statement-Prospectus is incorporated
herein by reference.
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(b) The information set forth in "Summary of the Transaction
and Special Factors - Reasons for the Transaction," "The Voluntary Dissolution
and the Plan of Liquidation and Dissolution - Background of the Transaction,"
"The Voluntary Dissolution and the Plan of Liquidation and Dissolution - Tech
Squared's Reasons for the Transaction" and "The Voluntary Dissolution and the
Plan of Liquidation and Dissolution - Opinion of Tech Squared's Financial
Advisor" of the Preliminary Proxy Statement-Prospectus is incorporated herein by
reference.
(c) The information set forth in "Summary of the Transaction
and Special Factors - Reasons for the Transaction," "The Voluntary Dissolution
and the Plan of Liquidation and Dissolution - Tech Squared's Reasons for the
Transaction" and "The Voluntary Dissolution and the Plan of Liquidation and
Dissolution Opinion of Tech Squared's Financial Advisor" of the Preliminary
Proxy Statement-Prospectus is incorporated herein by reference.
(d) The information set forth in "Summary of the Transaction
and Special Factors - Plan of Liquidation and Dissolution," "Summary of the
Transaction and Special Factors - Certain Material United States Federal Income
Tax Consequences of the Transaction," "Summary of the Transaction and Special
Factors - Accounting Treatment of the Exchange," "Risk Factors - Risks Relating
to the Transaction," "The Voluntary Dissolution and the Plan of Liquidation and
Dissolution - Certain Material United States Federal Income Tax Consequences of
the Transaction," "The Voluntary Dissolution and the Plan of Liquidation and
Dissolution - Accounting Treatment of the Transaction," "The Voluntary
Dissolution and the Plan of Liquidation and Dissolution - Delisting and
Deregistration of Tech Squared Common Stock After the Transaction" and
"Comparison of Rights of Holders of Tech Squared Common Stock and Digital River
Common Stock" of the Preliminary Proxy Statement-Prospectus is incorporated
herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a) The information set forth in "Summary of the Transaction
and Special Factors - Recommendation of Tech Squared's Board of Directors," "The
Voluntary Dissolution and the Plan of Liquidation and Dissolution - Digital
River's Reasons for the Transaction," "The Voluntary Dissolution and the Plan of
Liquidation and Dissolution - Digital River's Determination that the Transaction
is Fair to Tech Squared's Shareholders" and "The Voluntary Dissolution and the
Plan of Liquidation and Dissolution - Recommendation of Tech Squared's Board of
Directors" of the Preliminary Proxy Statement-Prospectus is incorporated herein
by reference.
(b) The information set forth in "Summary of the Transaction
and Special Factors - Recommendation of Tech Squared's Board of Directors," "The
Voluntary Dissolution and the Plan of Liquidation and Dissolution -
Recommendation of Tech Squared's Board of Directors," "Summary of the
Transaction and Special Factors - Reasons for the Transaction," "The Voluntary
Dissolution and the Plan of Liquidation and Dissolution - Recommendation of Tech
Squared's Board of Directors," "The Voluntary Dissolution and the Plan of
Liquidation and Dissolution - Tech Squared's Reasons for the Transaction," "The
Voluntary Dissolution and the Plan of Liquidation and Dissolution - Opinion of
Tech Squared's Financial Advisor," Annex E - "Opinion of SG Cowen Securities
Corporation," Annex F - "Opinion of Arthur Andersen LLP" and Annex G - "Opinion
of Broadview International LLC" of the Preliminary Proxy Statement-Prospectus is
incorporated herein by reference.
(c) The information set forth in "Summary of the Transaction
and Special Factors - Shareholder Approval" of the Preliminary Proxy Statement-
Prospectus is incorporated herein by reference.
13
<PAGE>
(d) The information set forth in "Summary of the Transaction
and Special Factors - Recommendation of Tech Squared's Board of Directors" and
"The Voluntary Dissolution and the Plan of Liquidation and Dissolution -
Recommendation of Tech Squared's Board of Directors" of the Preliminary Proxy
Statement-Prospectus is incorporated herein by reference.
(e) The information set forth in "Summary of the Transaction
and Special Factors - Recommendation of Tech Squared's Board of Directors" and
"The Voluntary Dissolution and the Plan of Liquidation and Dissolution -
Recommendation of Tech Squared's Board of Directors" of the Preliminary Proxy
Statement-Prospectus is incorporated herein by reference.
(f) Not applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a) and (b) (1-3). The information set forth in "Summary of
the Transaction and Special Factors -Tech Squared's Financial Advisor and its
Opinion," "The Voluntary Dissolution and the Plan of Liquidation and
Dissolution - Opinion of Tech Squared's Financial Advisor," Annex E -"Opinion
of SG Cowen Securities Corporation," Annex F - "Opinion of Arthur Andersen
LLP" and Annex G - "Opinion of Broadview International LLC" of the
Preliminary Proxy Statement-Prospectus is incorporated herein by reference.
The information set forth in Exhibit C of this Schedule 13e-3,
regarding the Fairness Opinion Presentation made by SG Cowen Securities
Corporation to the Board of Directors of Tech Squared on July 11, 1999, is
incorporated herein by reference, pursuant to General Instruction D to Schedule
13e-3.
The information set forth in Exhibit D of this Schedule 13e-3,
regarding the Presentation made by Broadview International LLC to the Board of
Directors of Digital River on July 9, 1999, is incorporated herein by reference,
pursuant to General Instruction D to Schedule 13e-3.
(b)(4) None
(b)(5) The information set forth in "Summary of the
Transaction and Special Factors - Tech Squared's Financial Advisor and its
Opinion," "The Voluntary Dissolution and the Plan of Liquidation and Dissolution
- - Opinion of Tech Squared's Financial Advisor," Annex E - "Opinion of SG Cowen
Securities Corporation," and Annex G - "Opinion of Broadview International LLC"
of the Preliminary Proxy Statement-Prospectus is incorporated herein by
reference.
(b)(6) The information set forth in "The Voluntary Dissolution
and the Plan of Liquidation and Dissolution - Opinion of Tech Squared's
Financial Advisor," Annex E - "Opinion of SG Cowen Securities Corporation,"
Annex F "Opinion of Arthur Andersen LLP" and Annex G - "Opinion of Broadview
International LLC" of the Preliminary Proxy Statement-Prospectus is incorporated
herein by reference.
The information set forth in Exhibit C of this Schedule
13e-3, regarding the Fairness Opinion Presentation made by SG Cowen Securities
Corporation to the Board of Directors of Tech Squared on July 11, 1999, is
incorporated herein by reference, pursuant to General Instruction D to Schedule
13e-3.
The information set forth in Exhibit D of this Schedule
13e-3, regarding the Presentation made by Broadview International LLC to the
Board of Directors of Digital River on July 9, 1999, is incorporated herein by
reference, pursuant to General Instruction D to Schedule 13e-3.
14
<PAGE>
(c) The information set forth in Annex E - "Opinion of SG
Cowen Securities Corporation," Annex F - "Opinion of Arthur Andersen LLP" and
Annex G - "Opinion of Broadview International LLC" of the Preliminary Proxy
Statement-Prospectus is incorporated herein by reference.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) The information set forth in "Share Ownership By
Principal Shareholders, Management and Directors of Tech Squared" of the
Preliminary Proxy Statement-Prospectus is incorporated herein by reference.
(b) The information set forth in "Share Ownership By
Principal Shareholders, Management and Directors of Tech Squared" of the
Preliminary Proxy Statement-Prospectus is incorporated herein by reference.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS
WITH RESPECT TO THE ISSUER'S SECURITIES.
The information set forth in "The Voluntary Dissolution and
the Plan of Liquidation and Dissolution - The Voting Agreements" of the
Preliminary Proxy Statement-Prospectus is incorporated herein by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN
PERSONS WITH REGARD TO THE TRANSACTION.
(a) The information set forth in "Summary of the Transaction
and Special Factors - Shareholder Approval" and "The Voluntary Dissolution and
the Plan of Liquidation and Dissolution - The Voting Agreements" of the
Preliminary Proxy Statement-Prospectus is incorporated herein by reference.
(b) The information set forth in "Summary of the Transaction
and Special Factors - Recommendation of Tech Squared's Board of Directors" and
"The Special Meeting of Tech Squared Shareholders - Purpose of the Special
Meeting" of the Preliminary Proxy Statement-Prospectus is incorporated herein by
reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth in "Summary of the Transaction
and Special Factors - Dissenters' and Appraisal Rights" and "The Voluntary
Dissolution and the Plan of Liquidation and Dissolution - Dissenters' and
Appraisal Rights" of the Preliminary Proxy Statement-Prospectus is incorporated
herein by reference.
(b) None
(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a) Pursuant to General Instruction D to Schedule 13E-3, Tech
Squared's Annual Report on Form 10-K for the fiscal year ended December 31,
1998, as amended on October [ ], 1999 and its Quarterly Report on Form 10-Q for
the quarter ended June 30, 1999 have been delivered with the Preliminary Proxy
Statement
15
<PAGE>
Prospectus on Schedule 14A. Tech Squared's audited financial statements for
the periods covered therein are incorporated herein by reference.
The information set forth in "Summary of the Transaction and
Special Factors - Tech Squared Historical Financial Data" and "Summary of the
Proxy Statement-Prospectus - Comparative Per Share Data" of the Preliminary
Proxy Statement-Prospectus is incorporated herein by reference.
(b) Not applicable.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) Not applicable.
(b) The information set forth in "The Special Meeting of Tech
Squared Shareholders - Proxies" and "Expenses" of the Preliminary Proxy
Statement-Prospectus is incorporated herein by reference.
ITEM 16. ADDITIONAL INFORMATION.
The Preliminary Proxy Statement-Prospectus on Schedule 14A and the
annexes and exhibits attached thereto are incorporated herein by reference.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
Item 17 of this Schedule 13e-3 is hereby amended and
supplemented as follows:
(a) Not applicable.
(b) Annex E - "Opinion of SG Cowen Securities Corporation,"
Annex F "Opinion of Arthur Andersen LLP" and Annex G - "Opinion of Broadview
International LLC" of the Preliminary Proxy Statement-Prospectus
(incorporated herein by reference).
Exhibit C of this Schedule 13e-3
Exhibit D of this Schedule 13e-3.
(c) Annex D - "Voting Agreements" of the Preliminary Proxy
Statement-Prospectus (incorporated herein by reference).
(d) Preliminary Proxy Statement-Prospectus, as amended, and
the annexes and exhibits attached thereto (incorporated by reference to the
Proxy Statement-Prospectus, as amended, filed by Tech Squared Inc. on October
29, 1999).
The information set forth in Exhibit A and Exhibit B to this
Schedule 13e-3 (filed herewith).
(e) Not applicable.
(f) None.
16
<PAGE>
SIGNATURES
After due inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and
correct.
Dated: October 29, 1999 TECH SQUARED INC.
/s/ Jeffrey F. Martin
------------------------------------
Name: Jeffrey F. Martin
Title: Chief Financial Officer
DIGITAL RIVER, INC.
/s/ Joel A. Ronning
------------------------------------
Name: Joel A. Ronning
Title: Chief Executive Officer
MACUSA, INC.
/s/ Charles E. Reese, Jr.
------------------------------------
Name: Charles E. Reese, Jr.
Title: Chief Executive Officer
/s/ Joel A. Ronning
------------------------------------
Name: Joel A. Ronning
Title: Individually
Signature Page to Schedule 13e-3
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
A . . . . Excerpt from Digital River's Annual Report on Form 10-K filed on
March 3, 1999, for the fiscal year ended December 31, 1998
B . . . . Excerpt from Digital River's Definitive Proxy Statement on Schedule
14A, filed on March 23, 1999
C . . . . Materials used in the Fairness Opinion Presentation made by SG Cowen
Securities Corporation to the Board of Directors of Tech Squared on
July 11, 1999
D . . . . Materials used in the Presentation made by Broadview International
LLC to the Board of Directors of Digital River on July 9, 1999, is
incorporated herein by reference, pursuant to General Instruction D
to Schedule 13e-3
E . . . . Proxy Statement-Prospectus, as amended (incorporated by reference
to the Proxy Statement-Prospectus, as amended, filed by Tech Suqared
Inc. on October 14, 1999)
<PAGE>
EXHIBIT A
EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth information regarding the Company's
executive officers as of December 31, 1998:
NAME AGE POSITION
- ---------------------- --------- ------------------------------
Joel A. Ronning 42 Chief Executive Officer
Perry W. Steiner 33 President
Robert E. Strawman 39 Chief Financial Officer and Treasurer
Kelly J. Wical 42 Chief Technology Officer
Draper M. Jaffray 36 Vice President of Business Development
Terence M. Strom 54 Vice President of Marketing
Gregory R.L. Smith 32 Secretary and Controller
Randy J. Womack 34 Chief Information Officer
Mr. Ronning founded the Company in February 1994 and has been
President and Chief Executive Officer and a director of the Company since
that time. From February 1994 to July 1998, Mr. Ronning was also President of
the Company. Since May 1995, Mr. Ronning has served as Chairman of the Board
of Directors of Tech Squared Inc., a direct catalog marketer of software and
hardware products. From May 1996 to July 1998, Mr. Ronning served as Chief
Executive Officer, Chief Financial Officer and Secretary of Tech Squared.
From May 1995 to August 1996, Mr. Ronning also served as the President of
Tech Squared. Mr. Ronning is the founder of MacUSA, Inc., a wholly-owned
subsidiary of Tech Squared, and has served as a director of MacUSA, Inc.
since April 1990. From April 1990 to July 1998, Mr. Ronning also served as
the Chief Executive Officer of MacUSA, Inc. Mr. Ronning also serves as a
director of the Software Publishers Association and JASC, Inc.
Mr. Steiner joined the Company in July 1998 as President and has
served as a director of the Company since April 1998. From January 1997 to
July 1998, Mr. Steiner served as Vice President of Wasserstein Perella & Co.,
Inc., an investment banking firm, and as Vice President of Wasserstein
Perella Ventures, Inc., the general partner of Wasserstein Adelson Ventures,
L.P., a venture capital fund. From June 1993 to December 1996, Mr. Steiner
was a principal of TCW Capital, a group of leveraged buyout funds managed by
Trust Company of the West. Mr. Steiner also serves as a director of Tech
Squared.
Mr. Strawman joined the Company in April 1998 as Chief Financial
Officer and Treasurer. From September 1995 to April 1998, Mr. Strawman served as
Director of Finance and Vice President of Finance for Caribou Coffee Company,
Inc., a gourmet coffee retailer. From 1989 to 1995, Mr. Strawman held various
financial positions at Software Etc. Stores, Inc., a specialty retailer of
software, most recently as Chief Financial Officer.
Mr. Wical joined the Company in April 1997 as Chief Technology Officer.
From 1992 to April 1997, Mr. Wical was Director of Development and Chief
Scientist/Architect of the Context Server Division of Oracle Corporation. From
1987 to 1992, Mr. Wical was co-founder and Vice President of Research and
Development for Artificial Linguistics, Inc., a developer of text management
software.
Mr. Jaffray joined the Company in December 1996 as Vice President of
Business Development. From January 1996 to December 1996, Mr. Jaffray was a
partner in The Firm, a computer products manufacturers representative. From 1991
to 1995, Mr. Jaffray served as Director of Sales for Tech Squared.
A-1
<PAGE>
Mr. Strom joined the Company as Vice President of Marketing in August
1998. From June 1993 to February 1997, Mr. Strom held various positions at
Egghead, Inc., a computer software retailer, most recently as Chief Executive
Officer. From January 1990 to June 1993, Mr. Strom held various positions at
Best Buy Co., Inc., a consumer electronics retailer, most recently as Senior
Vice President of Marketing.
Mr. Smith joined the Company as Controller in June 1997 and has served
as Secretary and Controller since December 1997. From November 1995 to June
1997, Mr. Smith was Manager, External Reporting and Investor Relations at Secure
Computing Corporation, a developer of network and Internet security products.
From June 1988 to November 1995, Mr. Smith held various positions with Ernst &
Young LLP.
Mr. Womack joined the Company in October 1997 as Chief Information
Officer. From May 1997 to September 1997, Mr. Womack was Director of Engineering
at Xerox Corporation. From 1992 to 1997, Mr. Womack held various positions,
including Development Manager at Oracle Corporation. From 1989 to 1992, Mr.
Womack was Director of Technical Services at Artificial Linguistics, Inc.
A-2
<PAGE>
Exhibit B
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2002 ANNUAL
MEETING
THOMAS F. MADISON
Mr. Madison has served as a director of the Company since August 1996.
Since January 1993 he has been the President and Chief Executive Officer of MLM
Partners, a consulting and small business investment company. From February 1994
to September 1994, Mr. Madison served as Vice Chairman and Chief Executive
Officer at Minnesota Mutual Life Insurance Company. From June 1987 to December
1992, Mr. Madison was President of US WEST Communications Markets, a division of
US WEST, Inc. Mr. Madison also serves on the Boards of Directors of Valmont
Industries Inc., Eltrax Systems, Inc., Reliant Energy Minnegasco, a division of
Reliant Energy, ACI Telecentrics, Span Link Communications and Delaware Group of
Funds.
CHARLES E. REESE, JR.
Mr. Reese has served as a director of the Company since July 1996. In
August 1996, Mr. Reese joined Tech Squared, Inc. as President and Chief
Operating Officer and has served as a director of Tech Squared since April 1996.
In March 1999, Mr. Reese was also named Chief Executive Officer of Tech Squared.
From April 1995 to August 1996, Mr. Reese served as Vice President of Sales and
Marketing for the Weidt Group, Inc., a privately-held custom software
development firm specializing in Internet Web site design and development. From
July 1987 to April 1995, Mr. Reese served as Vice President of Sales at
Lasermaster Corp., a manufacturer and seller of high-resolution plain paper
typesetters, chemical-free image setters and large format color printers.
* * *
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2000 ANNUAL MEETING
TIMOTHY C. CHOATE
Mr. Choate has served as a director of the Company since May 1998.
Mr. Choate has been Chairman of FreeShop International, Inc. since its
inception in June 1997 and has been President and Chief Executive Officer
since March 1998. Mr. Choate co-founded Online Interactive, Inc., the
original parent company of FreeShop International, Inc., in June 1994, and
served as President, Chief Executive Officer and Chairman until February,
1997 and Chairman until July 1997. Mr. Choate served as a Vice President of
Micro Warehouse, Inc. from July 1997, when it acquired Online Interactive,
Inc., until February 1998. From February 1991 to May 1994, Mr. Choate held
various positions at Softdisk Publishing, LLC, most recently as President.
From February 1989 until February 1991, Mr. Choate was a Senior Marketing
Manager at Prodigy Services Company.
WILLIAM LANSING
Mr. Lansing has served as a director of the Company since November 1998. In
May 1998, Mr. Lansing joined Fingerhut Companies, Inc. as President and Chief
Operating Officer. From October 1996 to May 1998, Mr. Lansing served as Vice
President for Business Development for General Electric Corporation. From
January 1996 to October 1996, he was Chief Operating Officer at Prodigy, an
online joint venture of IBM Corporation and Sears Roebuck and Co. From September
1986 to December 1995, Mr. Lansing was at McKinsey & Co. where he was a partner
leading the consulting firm's Internet practice. Mr. Lansing began his career in
1984 at Davis Polk & Wardwell as a securities lawyer.
CHRISTOPHER J. SHARPLES
Mr. Sharples has served as a director of the Company and Digital River
Ltd., a wholly-owned subsidiary of the Company, since April 1998. Since 1973,
Mr. Sharples has served as a director of GNI Ltd., a firm specializing in
the derivatives market, which he co-founded in 1972. Since 1995, Mr. Sharples
has been Chairman of Lombard Street Research, an economic research firm. From
November 1996 to December 1998, Mr. Sharples served as Chairman of Datastream
International Ltd., a supplier of on-line historical financial and economic
information to investment professionals. From 1981 to December 1998 Mr.
Sharples served as Chairman of ICV Ltd., a financial information company.
Both Datastream International Ltd. and ICV Ltd. are subsidiaries of Primark
Corporation, a information services company. From 1987 to 1995, Mr. Sharples
was Chairman of the Association of Futures Brokers & Dealers and the
B-1
<PAGE>
Securities and Futures Authority, front line regulatory organizations
designated under the laws of Great Britain.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2001 ANNUAL MEETING
JOEL A. RONNING
Mr. Ronning founded the Company in February 1994 and has been Chief
Executive Officer and a director of the Company since that time. From February
1994 to July 1998, Mr. Ronning was also President of the Company. Since May
1995, Mr. Ronning has served as Chairman of the Board of Directors of Tech
Squared, Inc., a direct catalog marketer of software and hardware products. From
May 1995 to July 1998, Mr. Ronning served as Chief Executive Officer, Chief
Financial Officer and Secretary of Tech Squared. From May 1995 to August 1996,
Mr. Ronning also served as the President of Tech Squared. Mr. Ronning is the
founder of MacUSA, Inc., a wholly-owned subsidiary of Tech Squared, and has
served as a director of MacUSA, Inc. since April 1990. From April 1990 to July
1998, Mr. Ronning also served as the Chief Executive Officer of MacUSA, Inc. Mr.
Ronning also serves as a director of the Software Publishers Association and
JASC, Inc.
PERRY W. STEINER
Mr. Steiner joined the Company in July 1998 as President and has served as
a director of the Company since April 1998. From January 1997 to July 1998, Mr.
Steiner served as Vice President of Wasserstein Perella & Co., Inc., an
investment banking firm, and as Vice President of Wasserstein Perella Ventures,
Inc., the general partner of Wasserstein Adelson Ventures, L.P., a venture
capital fund. From June 1993 to December 1996, Mr. Steiner was a principal of
TCW Capital, a group of leveraged buyout funds managed by Trust Company of the
West. Mr. Steiner serves as a director of Tech Squared, Inc.
J. PAUL THORIN
Mr. Thorin has served as a director of the Company since June 1996. Since
April 1996, Mr. Thorin has served as General Counsel of Fujitsu America Inc., a
subsidiary of Fujitsu Limited and since June 1997 as its Vice President and
General Counsel. From April 1990 to March 1996, Mr. Thorin held the position of
Associate Corporate Counsel of Fujitsu America Inc.
B-2
<PAGE>
Exhibit C
CONFIDENTIAL
PRESENTATION TO
PROJECT TRIANGLE
FAIRNESS OPINION PRESENTATION TO THE BOARD OF DIRECTORS
[LOGO]
C-1
<PAGE>
Project
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- --------------------------------------------------------------------------------
July 11, 1999
THE FOLLOWING MATERIALS ARE PREPARED SOLELY FOR DISCUSSION AT THE MEETING OF THE
BOARD OF DIRECTORS OF TECH SQUARED INC. SCHEDULED FOR JULY 11, 1999.
IN PREPARING THIS PRESENTATION, WE HAVE, WITH YOUR CONSENT, RELIED UPON CERTAIN
INFORMATION PROVIDED BY TECH SQUARED AND DIGITAL RIVER, AS WELL AS OTHER
PUBLICLY AVAILABLE INFORMATION. WE HAVE NOT INDEPENDENTLY VERIFIED ANY OF SUCH
INFORMATION AND HAVE RELIED ON IT BEING COMPLETE AND ACCURATE IN ALL MATERIAL
RESPECTS.
THIS PRESENTATION IS BASED ON THE BUSINESS AND OPERATIONS OF TECH SQUARED AND
DIGITAL RIVER AS REPRESENTED TO US AS OF JULY 11, 1999 AND DOES NOT PURPORT TO
TAKE INTO CONSIDERATION ANY INFORMATION OR EVENT ARISING SUBSEQUENT TO THAT
DATE. SG COWEN MAKES NO REPRESENTATION OR WARRANTY THAT THERE HAS BEEN NO
MATERIAL CHANGE OF THE INFORMATION PROVIDED OR REVIEWED BY US IN CONNECTION
HEREWITH.
THE INFORMATION CONTAINED HEREIN IS CONFIDENTIAL AND HAS BEEN PREPARED
EXCLUSIVELY FOR THE BENEFIT AND USE OF THE BOARD OF DIRECTORS OF THE COMPANY IN
ITS CONSIDERATION OF THE PROPOSED TRANSACTION AND MAY NOT BE USED FOR ANY OTHER
PURPOSE OR REPRODUCED, DISSEMINATED, QUOTED OR REFERRED TO AT ANY TIME, IN ANY
MANNER OR FOR ANY PURPOSE WITHOUT OUR PRIOR WRITTEN CONSENT. THIS PRESENTATION
IS NOT FOR THE BENEFIT OF, AND DOES NOT CONVEY ANY RIGHTS OR REMEDIES TO, ANY
HOLDER OF SECURITIES OF THE COMPANY OR ANY OTHER PERSON.
THIS PRESENTATION IS SUBJECT TO THE ASSUMPTIONS, QUALIFICATIONS AND LIMITATIONS
SET FORTH HEREIN AND IN OUR RELATED FAIRNESS OPINION LETTER AND DOES NOT
CONSTITUTE A RECOMMENDATION BY SG COWEN TO THE BOARD OF DIRECTORS OR
SHAREHOLDERS OF THE COMPANY ON HOW TO VOTE WITH RESPECT TO THE PROPOSED
TRANSACTION.
C-2
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Project
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TABLE OF CONTENTS
1. TRANSACTION OVERVIEW
2. TRANSACTION CONSIDERATIONS
3. VALUATION PERSPECTIVES
APPENDICES
A. Form of Fairness Opinion
B. Transaction Impact
C. TS Overview
D. DR Overview
E. Premiums Paid Analysis Detail
F. Historic Stock Price Analysis
G. Liability Reserve Analysis
<PAGE>
Project
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TRANSACTION OVERVIEW
C-3
<PAGE>
Project
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TRANSACTION OVERVIEW
- --------------------------------------------------------------------------------
SUMMARY TRANSACTION TERMS
OFFER PRICE Convert TS option into 3.00MM common shares of
DR Exchange substantially all TS assets (3.00MM
shares plus $1.2MM in cash) for 2.65MM newly
issued shares of DR
Satisfy liabilities and liquidate company
delivering approximately 2.47MM shares to the TS
shareholders, which equates to 0.1698 shares of DR
in exchange for each TS share ($5.98 per share
based on DR share price of $35.25 as of July 9,
1999)
FORM OF CONSIDERATION DR Common Stock
OTHER KEY DEAL POINTS Buyer assumes no liabilities
Creation of liquidating trust to satisfy potential
contingent liabilities
TYPE OF TRANSACTION Exchange reorganization followed by liquidation
TAX/ACCOUNTING TREATMENT Purchase of assets, Tax-free reorganization/368(a)
(1)(C) followed by liquidation
REGISTRATION OF SHARES Shares to be registered under the Securities Act
ISSUED of 1933
POST-CLOSING STRUCTURE TS shareholders will become DR shareholders and
beneficiaries of the liquidating trust
LOCK-UP OF SHARES Joel Ronning, Chairman & Chuck Reese, CEO have
ISSUED/RESTRICTIONS OR agreed to lock-up agreements with a weighted
DISPOSITION average term of 6 months
OF SHARES
PRE-SIGNING CONDITIONS Agreement not to sell option shares
Board approval
C-4
<PAGE>
Project
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TRANSACTION OVERVIEW
- --------------------------------------------------------------------------------
SUMMARY TRANSACTION TERMS
CONDITIONS TO CLOSING TS shareholder approval
HSR waiting period expired
Option stock transfer completed
Sale of operating businesses
Opinion on tax-free nature of reorganization
Preparation for dissolution
Limitation on dissenting shares
FEES & EXPENSES Each party generally is responsible for its own
fees whether or not the transaction is
completed;
In certain circumstances, parallel provision,
abandoning party is responsible for the expenses
of other party
PUBLIC ANNOUNCEMENTS DR & TS are to consult with each other before
issuing any press release or otherwise making
any public statement with respect to the
Agreement
Mutually agree to expeditiously review
C-5
<PAGE>
Project
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TRANSACTION OVERVIEW
- --------------------------------------------------------------------------------
SUMMARY TRANSACTION TERMS
GOVERMENT/ Hart-Scott-Rodino ("HSR") filings
REGULATORY APPROVALS
TERMINATION By mutual consent
By either party not in breach of its obligations
if the closing has not occurred by April 15
By either party if TS shareholder vote is
unsuccessful
Termination by DR if DR enters into another
transaction that its Board determines in good
faith to be in the best interest of DR and its
stockholders
TIMING Signing of definitive agreement on Sunday, July
11
SEC Filing of preliminary proxy statement in
July
Mailing of proxy statement in August/early
September
Closing by late October, subject to
SEC review
C-6
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TRANSACTION OVERVIEW
- --------------------------------------------------------------------------------
TAX BENEFITS OF TRANSACTION
- TS could exercise their option for 3.00MM DR shares but TS would
be subject to a corporate tax and there would be an additional
tax at the shareholder level as a result of the distribution of
those shares. The proposed transaction avoids a corporate tax
and generates a value of approximately $5.98 per share while the
taxable transaction generates a value of $3.91 per share
<TABLE>
<CAPTION>
Value of Proposed Transaction
<S> <C>
New DR Shares Issued 2.650
Shares in Reserve 0.180
Net DR Shares 2.470
Implied Market Value $87.1
Implied TS Per Share Value $5.98
Premium to Market Value 52%
<CAPTION>
Value if Shares Distributed in Taxable Transaction
<S> <C>
Implied Market Value of 3.00MM Shares $106
40% Tax on Sale of Shares $(42)
Excess Liabilities $(7)
DR Value Available to TS Shareholders $57
Value of TS Per Share $3.91
</TABLE>
C-7
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Project
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TRANSACTION CONSIDERATIONS
C-8
<PAGE>
Project
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TRANSACTION CONSIDERATIONS
- --------------------------------------------------------------------------------
TRANSACTION RATIONALE (TS)
- The market value of the 3.00MM DR shares held by TS under its
option agreement with Joel A. Ronning is greater than the
current firm value of TS. As a result, a transaction with a
premium to the current trading value of TS can be structured
- Arthur Andersen believes that a transaction can be consummated
that will not create tax liability at either the corporate or
shareholder level. As of Monday, July 12th, the tax treatment
sought in this transaction may be affected by legislation
- With the disposition of the operating businesses, maintaining a
listing as an independent public company is no longer necessary,
thus a liquidation of TS is a reasonable alternative
- The proposed Transaction will increase the liquidity of the TS
shareholders investment
- TS became an inadvertent investment company on August 11, 1998
when DR when public. On August 11, 1999 the Company's one-year
safe harbor exemption from registering as an investment company
under the Investment Company Act of 1940 will end. If the
Company was required to register as an investment company, the
Company believes that it would be required to exercise the
option shares such that TS's stake in DR represents less than
40% of its total assets
C-9
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TRANSACTION CONSIDERATIONS
- --------------------------------------------------------------------------------
TRANSACTION RATIONALE (DR)
- Exchanging 2.65MM DR shares for 3.00MM DR shares enhances
shareholder value by reducing the number of shares outstanding.
Wall Street analysts include all 3.00MM DR shares in their
models. If the proposed transaction is consummated only 2.65MM
DR shares will be issued
- Executing this transaction will focus Joel Ronning on the
development of DR by more effectively aligning his economic and
business interests
- Executing this transaction will reduce the number of shares held
by a single entity
- Executing this transaction will remove a 15% block which could
fall into the hands of an unfriendly suitor
C-10
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Project
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TRANSACTION CONSIDERATIONS
- --------------------------------------------------------------------------------
POTENTIAL TRANSACTION RISKS
TAX-DRIVEN TRANSACTION RISK
The Company expects to receive an opinion from Arthur Andersen stating that
the Transaction should qualify as a tax-free reorganization under Section 368
(a) (1)(C) of the tax code. The risk remains that the IRS could deem this
Transaction an invalid reorganization, subjecting shareholders to a double
tax. SG Cowen is not opining as to the tax-free nature of this transaction.
It should be noted that Arthur Andersen performs audits for and renders tax
advice to both DR and TS.
- -TERMINATION CLAUSE
DR has the right to terminate the Transaction if its Board decides to enter
into another transaction that the Board determines in good faith to be in the
best interests of the DR and its stockholders.
- -LIQUIDATING TRUST
In this Transaction, DR is not assuming any liabilities. As a result, a
liquidating trust will need to be created and funded with any cash available
at closing and by escrowing some of the newly issued DR common shares. The
escrow is a mechanism to insure that any third-party claims can be satisfied.
The Company has identified two primary contingent liabilities, which the
liquidating trust must satisfy: the Apple Lawsuit and the TABOR environmental
liability. The Acquisition Agreement requires TS to fund the Liquidity Trust
with at least $7.2MM in assets. Management believes that $7.2MM will be
sufficient to satisfy the contingent liabilities. Management further believes
the cash TS will have at closing plus 6% of the proceeds, approximately
$6.3MM at Friday's close, will be sufficient to satisfy these liabilities.
The liabilities could be greater or less than the 6%.
C-11
<PAGE>
Project
Triangle
- --------------------------------------------------------------------------------
VALUATION PERSPECTIVES
C-12
<PAGE>
Project
Triangle
VALUATION PERSPECTIVES
- --------------------------------------------------------------------------------
IMPLIED PREMIUMS PAID ANALYSIS
<TABLE>
<CAPTION>
(CHART)
<S> <C>
ONE DAY PRIOR ONE MONTH PRIOR
DR Offer 52% DR Offer 50%
Merger Premiums 37% Merger Premiums 52%
Squeeze Outs 8% Squeeze Outs 23%
Equity Minority Stakes 5% Equity Minority Stakes 11%
</TABLE>
C-13
<PAGE>
Project
Triangle
VALUATION PERSPECTIVES
- --------------------------------------------------------------------------------
PREMIUMS PAID SUMMARY
Implied Premium to Market
<TABLE>
<CAPTION>
SHARE PRICE IMPLIED PREMIUM
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Premium to Closing Price on 07/09/99 $ 3.94 52%
Premium to Closing Price on 07/02/99 4.06 47
Premium to Closing Price on 06/09/99 4.00 50
Premium to last 20 days high 4.44 35
Premium to last 20 days low 3.38 77
Premium to last 40 days high 4.44 35
Premium to last 40 days low 2.88 108
Premium to last 6 months high 6.47 (7)
Premium to last 6 months low 2.75 118
Premium to last 1 year high 6.81 (12)
Premium to last 1 year low 0.47 1,173
</TABLE>
C-14
<PAGE>
Project
Triangle
VALUATION PERSPECTIVES
- --------------------------------------------------------------------------------
RELATED TRANSACTION ANALYSIS
Under the terms of the proposed transaction, TS shareholders will receive 2.65MM
shares for the 3.00MM share option or a 12% discount. Another 180,000 shares or
6% will be contributed to the liquidating trust, leaving 22% of the implied tax
benefit accruing to TS shareholders. In the comparable Petrie Stores
transaction, Petrie Stores shareholders exchanged 39.9MM shares for 36.5MM Toys
"R" Us shares or an 8% discount. Twenty-four percent of the value was
contributed to a liquidating trust leaving only 8% of the implied tax benefit
accruing to Petrie shareholders.
C-15
<PAGE>
TOYS "R" US/PETRIE STORES TRANSACTION PROFILE
TRANSACTION DESCRIPTION
- - Petrie sold retail operations for cash (Petrie had a
tax loss to offset this gain). Petrie exchanged its
39.9MM shares of Toys "R" Us for 36.5MM newly issued
Toys "R" Us shares. The 3.3MM share difference
represents a discount in the transaction of 8.3%.
Petrie formed a liquidating trust to satisfy
contingent liabilities
TRANSACTION OVERVIEW
ANNOUNCEMENT DATE CLOSING DATE
04/19/1994 01/24/1995
Financial Statistics(a)
<TABLE>
<CAPTION>
Petrie Stores Corp. Toys "R" Us(c)
------------------------------- ------------------------------
$ Multiple $ Multiple
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity Mkt. Value $ 1,276 $ 9,090
Agg. Mkt. Value 1,221 10,984
LTM Revenue(b) 8,746 0.1x 8,439 1.3x
LTM Operating Income 2,738 0.4 790 13.9
LTM Net Income 532 2.3 498 22.1
Last Trade Pre-ann. $24.38 $32.75
Issues
</TABLE>
Notes: - Petrie and Toys "R" Us reflects a tax-free reorganization under
Section 368(a)(1)(C) of the Code
- Toys "R" Us transfers to Petrie 3,326,699 fewer shares of Common
Stock than Petrie originally held
- Shares put into a liquidating trust to satisfy contingent
liabilities valued at $180MM
- Largest owner of Petrie Stores' stock is Milton Petrie with
28.1MM shares (60% of Petrie S/O)
- No overlap between the Petrie and Toys "R" Us Boards of
Directors
(a) As of announcement.
(b) Based on net sales ending January 28, 1995.
(c) LTM includes thirteen weeks ended October 29, 1994.
C-16
<PAGE>
TOYS "R" US/PETRIE STORES TRANSACTION PROFILE
TARGET AND ACQUIRER
OVERVIEWS
<TABLE>
<CAPTION>
Year
Headquarters Employees Established Key Executives Description
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Target Secaucus, NY 3(a) 1932 Hilda Kirschbaum Petrie operated a chain of
Gerstein approximately 1,700 women's
PRES., CEO specialty stores. The Company
H. Bartlett Brown had stores in all 50 states,
TREAS., Puerto Rico, the U.S. Virgin
PRIN. FIN. OFFICER Islands and the District of
Columbia. Petrie's stores
generally followed the usual
pattern of the retail apparel
industry, with sales highest
during the Christmas, Easter and
back-to-school periods.
Acquirer Paramus, NJ 55,000 1928 Michael Goldstein Toys "R" Us is engaged in the
VICE CHRMN., CEO operation of approximately 1,059
children's specialty retail
Robert C. Nakasone stores consisting of
PRES., COO approximately 591 United States
and 264 international toy stores
under the names "Toys `R' Us"
and approximately 204 children's
clothing stores under the name
"Kids `R' Us".
</TABLE>
ACQUIRER TRADING HISTORY
- [graph]
C-17
<PAGE>
- --------------------------------------------------------------------------------
CHART SHOWING ACQUIROR TRADING HISTORY
Graph shows prices and volumes from 2/8/94 through 6/30/94. Price was generally
between $30 and $33. Volume was generally between 1,500,000 and 2,500,000.
(a) All retail operations were assumed by Petrie Retail, thus the only
employees at Petrie Stores were the three board members: H. Bartlett,
Hilda Kirschbaum Gerstein and Stephanie R. Joseph.
C-18
<PAGE>
- --------------------------------------------------------------------------------
OPTION VALUATION ANALYSIS
Summary Option Terms
Life of Option 1 Month The Expiration Date of the option is
December 31, 2000. However, due to
constraints imposed by the Investment
Company Act of 1940 on TS, the company
believes it may have to exercise the
option by August 11, 1999.
Transferability/ None The Option is non-transferable. Thus
Marketability the option can only be exercised by
TS.
Exercise Price $0.93
Corporate Tax on Sale 40% If TS exercises and distributes the
shares it will incur a corporate tax
of 40% on the proceeds.
DR Beta 3.4
C-19
<PAGE>
- --------------------------------------------------------------------------------
OPTION VALUATION ANALYSIS
Option Valuation Methodologies
Black-Scholes Valuation Model Since the exercise price for
the option is almost zero,
then there is little value in
holding the option. The
holder of the option could
hold or exercise the option
for $.93. In either case
there is no further risk or
reward in choosing one
alternative over the other.
<TABLE>
<CAPTION>
STRIKE PRICE TIME VALUE(a)
- ------------ ----------
<S> <C> <C>
0% (Current Option) $ 0
50% $ 0 In the Black-Scholes valuation there is
75% $ 3 minimal value to the option element of
100% $ 14 the asset, leaving only the value of the
underlying stock, which is the
difference between the stock price and
$.93 for the 3MM shares.
Even if the option had a significant
exercise price, the option value would
be significantly reduced because of the
extremely short life of the option and
the lack of transferability.
Trading Market Value There is no market for this option
because it is not transferable. Thus the
market value is zero.
Other Valuation Techniques We considered the Monte Carlo and Hull
models which because of the nominal
strike price would result in similar
conclusions to the Black-Scholes
valuation model.We also assessed and
calculated results of the Traders Rule,
Shelton Model, Peacock Rule, Hans Rule
and Sobol Rule. These option valuation
methodologies are less comprehensive and
substantiated than the Black-Scholes
valuation model. So we have relied
substantially on the Black-Scholes
valuation model as our primary valuation
methodology.
</TABLE>
C-20
<PAGE>
- --------------------------------------------------------------------------------
As a result of the minimal exercise price, lack of transferability and the short
life of the option the option value is minimal. If TS did exercise the option
and distribute the shares, TS would incur a 40% tax, reducing the current market
value of the 3MM shares from $106MM to $63MM versus the proposed transaction
value of $93MM.
(a) Assumes 5% interest rate, 115% volatility (US$ in MM).
C-21
<PAGE>
Project
Triangle
VALUATION PERSPECTIVES
- --------------------------------------------------------------------------------
DR COMPARABLE PUBLIC COMPANY ANALYSIS
DR Comparable Public Company Analysis
(US$ IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
OPERATING STATISTICS(a)
-----------------------------------------------------------------
ADJ. MKT. CY99E/ CY99E/
VALUE/ CY98 CY98
STOCK PRICE CY00E ADJ. MARKET REVENUE REVENUE CY98 LTM CY99E CY00E
7/9/99 REV VALUE(b) GR. RATE GR. RATE REV REV REV REV
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
E-COMMERCE SOLUTIONS & SERVICES
Amazon $126.88 6.2x $20,538 272% 47% $610 $816 $2,268 $3,330
Beyond.com 28.00 3.8 1,038 239 122 37 50 124 275
Broadvision 72.00 16.1 1,937 58 50 51 59 80 120
DoubleClick 100.00 15.2 3,809 100 56 80 89 161 250
Ticketmaster 32.88 21.0 2,253 76 52 40 53 71 108
US Internetworking 41.00 14.1 1,499 628 255 4 9 30 107
Vignette 71.00 15.2 1,865 407 50 16 23 82 123
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIAN 15.0X $ 1,937 239% 52% $ 40 $ 53 $ 82 $ 123
- ------------------------------------------------------------------------------------------------------------------------------------
Digital River 33.44 6.2 625 192 64 21 30 61 100
</TABLE>
(a) Estimates normalized for calendar year-end. All estimates are from SG Cowen
Securities, First Call, Investext, or Street
(b) Adjusted market value defined as equity market value plus total debt less
cash and cash equivalents.
C-22
<PAGE>
Project
Triangle
- --------------------------------------------------------------------------------
APPENDIX
C-23
<PAGE>
Project
Triangle
- --------------------------------------------------------------------------------
FORM OF FAIRNESS OPINION
C-24
<PAGE>
Project
Triangle
- --------------------------------------------------------------------------------
TRANSACTION IMPACT
C-25
<PAGE>
Project
Triangle
TRANSACTION IMPACT
- --------------------------------------------------------------------------------
TRANSACTION IMPACT ON DR BALANCE SHEET
Transaction Impact on DR Balance Sheet
(US$ IN THOUSANDS)
<TABLE>
<CAPTION>
FYE JUNE 30, DR 3/31/99 ESTIMATED TRXN. IMPACT PRO-FORMA DR 3/31/99
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $50,445 $1,200 $51,645
Short-term investments 19,949 -- 19,949
Accounts receivable, net 743 -- 743
Prepaid expenses and other 366 -- 366
--------- ------- --------
Total current assets 71,503 1,200 72,703
NET PP&E 4,411 -- 4,411
OTHER ASSETS 125 -- 125
PATENTS -- -- --
--------- -------- --------
TOTAL ASSETS $76,039 $1,200 $ 77,239
--------- -------- --------
--------- -------- --------
CURRENT LIABILITIES
Accounts payable $ 4,835 $ -- $ 4,835
Accrued payroll 688 -- 688
Other current liabilities 531 -- 531
--------- -------- --------
Total current liabilities 6,054 -- 6,054
STOCKHOLDERS' EQUITY
Common Stock 197 (4) 194
ADDITIONAL PAID-IN CAPITAL 94,449 1,204 95,653
</TABLE>
C-26
<PAGE>
Project
Triangle
TRANSACTION IMPACT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DEFERRED COMPENSATION (1,194) -- (1,194)
ACCUMULATED DEFICIT (23,467) -- (23,467)
--------- -------- -------
TOTAL LIABILITIES $76,039 $1,200 $77,239
--------- -------- -------
--------- -------- -------
</TABLE>
C-27
<PAGE>
Project
Triangle TRANSATION IMPACT
- --------------------------------------------------------------------------------
TRANSACTION IMPACT ON DR INCOME STATEMENT
TRANSACTION IMPACT ON DR INCOME STATEMENT
(US$ IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CY98
FYE DEC. 31, -------------------------------------------- CY98
Q1-MAR Q2-JUN Q3-OCT Q4-DEC TOTAL
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $2,270 $3,476 $5,758 $9,407 $20,911
Cost of revenues 1,896 2,895 4,819 7,877 17,487
-------- ------- ------- -------- -------
Inc./(loss) before inc. taxes (1,555) (3,797) (3,940) (4,506) (13,798)
Net income (loss) $(1,555) $(3,797) $(3,940) $(4,506) $(13,798)
======== ======== ======== ======= ========
Diluted EPS(a) $ (0.16) $ (0.29) $ (0.26) $ (0.26) $ (1.00)
======= ======= ======== ======= ========
EPS based on adj. Shares
Diluted shares outstanding 9,946 13,305 14,894 17,276 13,855
Adj. S/O for transaction(b)
Revenue per share w/o trxn. $ 0.23 $ 0.26 $ 0.39 $ 0.54 $ 1.51
Revenue per share w/ trxn.
Accretion to Diagonal
REVENUE GROWTH (Y-Y) NA NA NA NA 746%
REVENUE GROWTH (Q-Q) NA 53% 66% 63% NA
Gross Margins
GROSS MARGIN 16% 17% 16% 16% 16%
Ratios
COGS 84% 83% 84% 84% 84%
<CAPTION>
CY99E
FYE DEC. 31, ------------------------------------------- CY99E CY00E
Q1-MAR Q2-JUN Q3-OCT Q4-DEC TOTAL TOTAL
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $11,707 $14,000 $15,700 $19,200 $60,607 $100,500
Cost of revenues 9,804 11,620 13,000 15,898 50,322 82,574
-------- ------- -------- -------- ------- --------
Inc./(loss) before inc. taxes (5,344) (7,125) (9,405) (6,653) (28,527) (23,009)
Net income (loss) $(5,344) $(7,125) $(9,405) $(6,653) $(28,527) $(23,009)
======= ======= ======= ======= ======== =========
Diluted EPS(a) $ (0.27) $ (0.36) $ (0.47) $ (0.33) $ (1.43) $ (1.12)
======== ======= ======== ======== ========= =========
EPS based on adj. Shares $ (0.28) $ (0.36) $ (0.48) $ (0.34) $ (1.45) $ (1.14)
======== ======= ======== ======== ========= =========
Diluted shares outstanding 19,632 19,980 20,100 20,200 19,978 20,550
Adj. S/O for transaction(b) 19,282 19,630 19,750 19,850 19,628 20,000
Revenue per share w/o trxn. $ 0.60 $ 0.70 $ 0.78 $ 0.95 $ 3.03 $ 4.89
Revenue per share w/ trxn. $ 0.61 $ 0.71 $ 0.79 $ 0.97 $ 3.09 $ 4.98
Accretion to Diagonal 2% 2% 2% 2% 2% 2%
REVENUE GROWTH (Y-Y) 416% 303% 173% 104% 190% 66%
REVENUE GROWTH (Q-Q) 24% 20% 12% 22% NA NA
Gross Margins
GROSS MARGIN 16% 17% 17% 17% 17% 18%
RATIOS
COGS 84% 83% 83% 83% 83% 82%
</TABLE>
Source: Diagonal research model from Solomon Smith Barney dated May 26, 1999.
(a) Calculation includes amortization of goodwill.
(b) Based on the difference in shares between the full number of Diagonal
shares Triangle is entitled to minus the shares Triangle receives.
C-28
<PAGE>
Project
Triangle TS OVERVIEW
- -------------------------------------------------------------------------------
C-29
<PAGE>
PROFILE OF TS
www.tech2.com
5198 West 76th Street,
Edina, MN 55439
(612) 832-5622 (phone)
(612) 832-5709 (fax)
Incorporated: 1988
Employees: 70
COMPANY DESCRIPTION
- - Tech Squared, Inc. markets and distributes mid- to high-end microcomputer
hardware, software, and peripherals. The Company sells these products
directly to businesses in the desktop publishing, graphic arts, pre-press,
and computer animation industries
MANAGEMENT AND DIRECTORS
EXECUTIVES
Chuck Reese(a) PRESIDENT, DIRECTOR, CEO, COO, DIRECTOR DIGITAL RIVER
Jeffrey Martin(a)(b) CHIEF FINANCIAL OFFICER, DIRECTOR
DIRECTORS
Joel Ronning CHAIRMAN TS. CHAIRMAN DR, CEO, DIGITAL RIVER
Richard Runbeck(b) PRESIDENT, RUNBECK & ASSOCIATES
Perry Steiner(c) PRESIDENT, DIGITAL RIVER
(a) Board of Directors.
(b) Special Committee.
(c) Resigned from the board on June 28, 1999.
CURRENT EVENTS
- - 05/20/99 Tech Squared transfers all of the outstanding shares in Tabor
Resources Corp. to Conjecture Silver Mines, for the assumption of
liabilities
- - 03/02/99 Chuck Reese is named Chief Executive Officer
- - 12/17/98 Tech Squared exercises a portion of its option on Digital River
stock. 200,000 shares were exercised and sold. The company still
holds an option to purchase 3,000,000 shares which represent
approximately 15% of Digital River
C-30
<PAGE>
Project
Triangle
TS OVERVIEW
- -------------------------------------------------------------------------------
C-31
<PAGE>
Project
Triangle
TS OVERVIEW
- -------------------------------------------------------------------------------
PROFILE OF TS
<TABLE>
<CAPTION>
Market Information Director and Officer Ownership
<S> <C> <C> <C> <C>
Current Price $ 3.94 NUMBER PERCENT
Shares Outstanding 14.5 -----------------------------------------------------------
Market Cap. $ 57
Adj. Market Cap. 53 INSTITUTIONAL INVESTORS
Cash 4 None
Debt 0
`99 P/E NM INSIDERS
`00 P/E NM Joel Ronning 6.2 43%
LQA Rev.(a) $ 44 Chuck Reese 0.8 6
`99 Rev.(a) NA --- ---
LQA Rev. Mult. 1.2x All Directors and Officers 7.0 48%
`99 Rev. Mult. NA
</TABLE>
Mergers and Acquisitions
DATE VALUE COMPANY BUSINESS
- ------------------------------------------------------------------------------
None
(a) US$ in millions.
C-32
<PAGE>
Project
Triangle
TS OVERVIEW
- -------------------------------------------------------------------------------
TS SHARE PRICE GRAPH AND TRADING STATISTICS
LAST 10 TRADING DAYS
07/09/99 $3.94
07/08/99 4.03
07/07/99 4.00
07/06/99 3.94
07/05/99 4.06
07/04/99 4.06
07/03/99 4.06
07/02/99 4.06
07/01/99 4.00
06/30/99 4.44
FINANCIAL DATA
- -----------------------------
Shares Out. 14.5
Closing Price $ 3.94
Market Cap. 57
Debt 0
Cash 4
Adj. Mkt. Cap. 53
PRICE/VOLUME GRAPH 1
Insert Graph Here
PRICE/VOLUME GRAPH 2
Insert Graph here
(Graphs show details of price and trading volume which are summarized below
under the title of "Market Information".)
Market Information
<TABLE>
<CAPTION>
AVERAGE PRICE PRICE HIGH/LOW AVERAGE DAILY VOLUME TOP 5 TRADERS FOR THE LAST 5 DAYS #OF SECURITIES %OF TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10 Days $4.06 $4.44/$3.94 5,808 USCC Trading 122 25%
30 Days 3.80 4.44/3.38 5,440 Knight Securities 106 22
3 Months 3.64 4.44/2.88 6,568 Schwab Mash Institutional 69 14
6 Months 4.09 6.47/2.88 12,999 Spear Leeds & Kellogg Capital 44 9
--- ---
TOTAL INSTITUTIONAL 492 81%
</TABLE>
C-33
<PAGE>
Project
Triangle
TS OVERVIEW
- -------------------------------------------------------------------------------
TS PRICE/VOLUME DISTRIBUTION GRAPH
SEPTEMBER TO JUNE -- NINE MONTH PRICE/VOLUME DISTRIBUTION CHART
(Graph shows a price to volume distribution for prices ranging from $.50 to
$6.50 and volumes between 500,000 and 5,000,000.)
DECEMBER TO JUNE -- SIX MONTH PRICE/VOLUME DISTRIBUTION CHART
(Graph shows a price to volume distribution for prices ranging from $3.00 to
$6.50 and volumes between 500,000 and 5,000,000.)
C-34
<PAGE>
Project
Triangle
TS OVERVIEW
- -------------------------------------------------------------------------------
TS BOARD OF DIRECTOR BIOGRAPHIES
JOEL A. RONNING, CHAIRMAN
Mr. Ronning has been a member of the Company's Board of Directors, Chief
Executive Officer, Chief Financial Officer and Secretary of the Company since
May 10, 1995. From May 10, 1995 to August 1996, Mr. Ronning also served as the
Company's President. Mr. Ronning is the founder of MacUSA, Inc., a wholly-owned
subsidiary of the Company, and has served as a member of the MacUSA Board of
Directors and its Chief Executive Officer since April 1990.
CHARLES E. REESE, JR., PRESIDENT, CHIEF EXECUTIVE OFFICER, CHIEF OPERATING
OFFICER AND DIRECTOR
Mr. Reese has served as a director since June 1996 and has served as President
and Chief Operating Officer of the Company since August 1996. Mr. Reese is also
a member of the Board of Directors of DR. From April 1995 to August 1996, he was
Vice President of Sales and Marketing of the Weidt Group, a custom software and
Internet site developer based in Minnetonka, Minnesota. Mr. Reese served as Vice
President of Sales from July 1987 to April 1995, for LaserMaster Technologies,
Inc., an Eden Prairie, Minnesota based developer, manufacturer and marketer of
DR color printers and chemical-free filmsetters.
PERRY W. STEINER, DIRECTOR
Mr. Steiner joined Digital River as President and has served as a director since
April 1998. From January 1997 to July 1998, Mr. Steiner served as Vice President
of Wasserstein Perella & Co., Inc., an investment banking firm, and as Vice
President of Wasserstein Perella Ventures, Inc., the general partner of
Wasserstein Adelson Ventures, L.P., a venture capital fund. From June 1993 to
December 1996, Mr. Steiner was a principal of TCW Capital, a group of leveraged
buyout funds managed by Trust Company of the West. Mr. Stiener resigned from the
board June 28, 1999, effective immediately.
C-35
<PAGE>
Project
Triangle
TS OVERVIEW
- -------------------------------------------------------------------------------
TS BOARD OF DIRECTOR BIOGRAPHIES
RICHARD J. RUNBECK, DIRECTOR
Mr. Runbeck has served as a director of the Company since July 1996. Since
October 1985 he has been the President of Runbeck & Associates, P.A., an
accounting firm located in Brooklyn Center, Minnesota. Mr. Runbeck is a member
of the Board of Directors of Ontrack Data International, Inc., a provider of
data recovery services based in Eden Prairie, Minnesota.
JEFFREY MARTIN, CHIEF FINANCIAL OFFICER, DIRECTOR
Mr. Martin has operated in his current capacity since his employment in November
1998. From March 1996 to November 1998 he served as Vice President and CFO of
Utiligent LLC, an Anderson Consulting Enterprise. From January 1988 to March
1996 Mr. Martin served as Vice President and Chief Financial Officer for Addco
Holdings Co. Mr. Martin holds an undergraduate degree in Accounting and Finance
from Oxburg College and a MBA in Finance from the University of Saint Thomas.
C-36
<PAGE>
Project
Triangle
- -------------------------------------------------------------------------------
DR OVERVIEW
C-37
<PAGE>
Project
Triangle
DR OVERVIEW
- -------------------------------------------------------------------------------
PROFILE OF DR
www.digitalriver.com
9625 West 76th Street
Suite 150
Eden Prairie, MN 55444
(612) 253-1234 (phone)
(612) 830-1154 (fax)
Incorporated: 1994
Employees: 148
COMPANY DESCRIPTION
- Digital River provides comoprehensive electronic commerce outsourcing
solutions to software publishers and online retailers. The Company provides
a suite of electronic commerce services services to its software publisher
and online retailer clients, including electronic software delivery ("ESD").
The Company also provides data mining and merchandising services to assist
clients in increasing Internet page view traffic to, and sales through,
their webstores.
MANAGEMENT AND DIRECTORS
<TABLE>
<S> <C>
EXECUTIVES
Joel Ronning(a) CHIEF EXECUTIVE OFFICER
Perry Steiner(a) PRESIDENT, FMR. VP WASSERSTEIN
Robert Strawman CHIEF FINANCIAL OFFICER AND TREASURER
Kelly Wical CHIEF TECHNOLOGY OFFICER
DIRECTORS
William Lansing FINGERHUT CO., FRM. VP, GENERAL ELECTRIC, FRM. COO PRODIGY
Thomas Madison(b) PRESIDENT, CEO MLM PARTNERS
Charles Reese(c) CEO TECH SQUARED
Christopher Sharples(b) CHRM., LOMBARD STREET RESEARCH, FRM. CHRM., DATASTREAM
Paul Thorin(b) GENERAL COUNSEL, FUJITSU AMERICA
Timothy Choate CEO, FREESHOP INTL., FRM. VP MICROWAREHOUSE
(a) Board of Directors.
(b) Special Committee.
(c) Recussed himself from Board participation on June 25, 1999.
</TABLE>
CURRENT EVENTS
- 07/09/99 Digital River acquires Universal Commerce Inc., owner of Register
Now. Digital River gives $2.0MM in cash and stock worth $7.3MM
C-38
<PAGE>
Project
Triangle
DR OVERVIEW
- -------------------------------------------------------------------------------
- 07/01/99 Digital River announces an agreement with Sega of America to
provide an integrated web solution for Sega's online store
- 06/23/99 Digital River partners with MYSoftware to deliver direct
marketing software over the Internet
- 06/21/99 Digital River reaches an agreement with T-bob Entertainment to
provide end-to-end transaction processing services
C-39
<PAGE>
Project
Triangle
DR OVERVIEW
- -------------------------------------------------------------------------------
PROFILE OF DR
<TABLE>
<CAPTION>
Market Information Director and Officer Ownership
<S> <C> <C> <C> <C>
Current Price $ 35.25 # %
----------------------------------------------------------------
Shares Out. 20.2
Market Cap. $ 710
Adj. Market Cap. 636 INSTITUTIONAL INVESTORS
Cash 74 Tech Squared 3.0 15%
Debt 0 Fujitsu Limited 2.2 11
`99 P/E NM Essex Investment Management 1.4 7
`00 P/E NM Wasserstein Adelson Ventures 1.0 5
LQA Rev.(a) $ 47 INSIDERS
`99 Rev.(a) 61 Christopher Sharples 1.2 6
LQA Rev. Mult. 14x Joel Ronning 0.3 2
---- ----
`99 Rev. Mult. 10x
All Directors and Officers (13 persons) 4.9 24%
<CAPTION>
Mergers and Acquisitions
DATE VALUE COMPANY BUSINESS
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
07/09/99 $ 9.3 Universal Commerce Inc. E-commerce Outsourcing
04/16/99 28.0 Maagnum Internet Grp. Internet Service Provider (ISP)
04/16/99 7.0 Public Software Library Internet Service Provider (ISP)
</TABLE>
(b) US$ in MM.
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- -------------------------------------------------------------------------------
DR SHARE PRICE GRAPH AND TRADING STATISTICS
LAST 10 TRADING DAYS
<TABLE>
<S> <C>
07/09/99 $35.25
07/08/99 35.00
07/07/99 33.25
07/06/99 33.44
07/02/99 33.56
07/01/99 31.94
06/30/99 33.25
06/29/99 28.38
06/28/99 27.25
06/25/99 25.50
</TABLE>
FINANCIAL DATA
- -----------------------------
<TABLE>
<S> <C>
Shares Out. 20.2
Closing Price $ 35.25
Market Cap. 710
Debt 0
Cash 74
Adj. Mkt. Cap. 636
</TABLE>
PRICE/VOLUME GRAPH 1
Insert Graph Here
PRICE/VOLUME GRAPH 2
Insert Graph here
(Graphs show details of price and trading volume which are summarized below
under the title of "Market Information".)
Market Information
<TABLE>
<CAPTION>
AVERAGE PRICE PRICE HIGH/LOW AVERAGE DAILY VOLUME TOP 5 TRADERS FOR THE LAST 5 DAYS # OF SECURITIES % OF TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10 Days $ $35.25/$25.50 72,436 Knight Securities 979 19%
31.24 0
30 Days 26.70 35.25/20.69 79,823 BT Alex. Brown 865 17
3 Months 32.45 48.00/20.69 77,480 Schwab Mash Institutional 681 13
6 Months 35.53 56.75/20.69 83,561 Herzog Heine 398 8
Bear Sterns and Company 345 7
------ -----
TOTAL INSTITUTIONAL 5,181 63%
</TABLE>
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DR OVERVIEW
- -------------------------------------------------------------------------------
DR PRICE/VOLUME DISTRIBUTION GRAPH
SEPTEMBER TO JUNE -- NINE MONTH PRICE/VOLUME DISTRIBUTION CHART
(Graph shows a price to volume distribution for prices ranging from $21.50 to
$54.50 and volumes between 1,000,000 and 7,000,000.)
DECEMBER TO JUNE -- SIX MONTH PRICE/VOLUME DISTRIBUTION CHART
(Graph shows a price to volume distribution for prices ranging from $21.50 to
$48.50 and volumes between 500,000 and 5,000,000.)
C-42
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- -------------------------------------------------------------------------------
DR INCOME STATEMENT(a)
<TABLE>
<CAPTION>
CY 1998
CY 1997 ----------------------------------------- CY 1998
FYE DEC. 31 TOTAL Q1-MAR Q2-JUN Q3-OCT Q4-DEC TOTAL
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 2,472 $ 2,270 $ 3,476 $ 5,758 $ 9,407 $ 20,911
Cost of revenues 2,052 1,896 2,895 4,819 7,877 17,487
------- ------- ------- ------- ------- -------
Gross profit 420 374 581 939 1,530 3,424
Operating expenses
Sales & Marketing 1,501 1,060 2,373 3,105 2,976 9,514
Product dev. & op. 1,528 703 908 1,292 2,529 5,432
General & admin. 929 208 1,205 751 1,007 3,171
Amort. of goodwill -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Total operating exp. $ 3,958 $ 1,971 $ 4,486 $ 5,148 $ 6,512 $ 18,117
Income/(loss) from operations (3,538) (1,597) (3,905) (4,209) (4,982) (14,693)
Interest income (expense) 53 42 108 269 476 895
Inc./(loss) before inc. taxes (3,485) (1,555) (3,797) (3,940) (4,506) (13,798)
Prov./(benefit) for inc. taxes -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Net income (loss) $(3,485) $(1,555) $ (3,797) $ (3,940) $ (4,506) $(13,798)
======== ======== ======== ======== ======== ========
Basic EPS(b) $ (0.46) $ (0.16) $ (0.29) $ (0.26) $ (0.26) $ (1.01)
========== ========== ========== ========== ========== ==========
Diluted EPS(b) $ (0.46) $ (0.16) $ (0.29) $ (0.26) $ (0.26) $ (1.01)
========== ========== ========== ========== ========== ==========
Basic weighted avg. SO 7,514 9,946 13,305 14,894 17,276 13,691
Diluted shares outstanding 7,514 9,946 13,305 14,894 17,276 13,691
REVENUE GROWTH (Y-Y) NA NA NA NA NA 746%
REVENUE GROWTH (Q-Q) NA NA 53% 66% 63% NA
GROSS MARGINS
GROSS MARGIN 17% 16% 17% 16% 16% 16%
RATIOS
COGS 83% 84% 83% 84% 84% 84%
<CAPTION>
CY 1999 E
-------------------------------------------- CY 1999E CY2000E
FYE DEC. 31 Q1-MARA Q2-JUN Q3-OCT Q4-DEC TOTAL TOTAL
- ------------------------------------------------------------------------------------------------------
<S> <S> <C> <C> <C> <C> <C>
Revenues $11,707 $14,000 $15,700 $19,200 $ 60,607 $100,500
Cost of revenues 9,804 11,620 13,000 15,898 50,322 82,574
------- ------- ------- ------- ------- ----------
Gross profit 1,903 2,380 2,700 3,302 10,285 17,926
Operating expenses
Sales & Marketing 3,622 4,000 4,300 4,200 16,122 14,700
Product dev. & op. 3,564 4,000 4,100 4,050 15,714 14,300
General & admin. 955 975 975 975 3,880 4,000
Amort. of goodwill -- 1,200 3,300 1,200 5,700 9,600
------- ------- ------- ------- -------- -------
Total operating exp. $ 8,141 $10,175 $12,675 $10,425 $ 41,416 $ 42,600
Income/(loss) from operations (6,238) (7,795) (9,975) (7,123) (31,131) (24,674)
Interest income (expense) 894 670 570 470 2,604 1,665
Inc./(loss) before inc. taxes (5,344) (7,125) (9,405) (6,653) (28,527) (23,009)
Prov./(benefit) for inc. taxes -- -- -- -- -- --
------- -------- -------- -------- -------- ----------
Net income (loss) $ (5,344) $ (7,125) $ (9,405) $ (6,653) $ (28,527) $ (23,009)
======== ========== ========== ========== ========== ==========
Basic EPS(b) $ (0.27) $ (0.36) $ (0.47) $ (0.33) $ (1.43) $ (1.12)
========== ========== ========== ========== ========== ==========
Diluted EPS(b) $ (0.27) $ (0.36) $ (0.47) $ (0.33) $ (1.43) $ (1.12)
========== ========== ========== ========== ========== ==========
Basic weighted avg. SO 19,632 19,980 20,100 20,200 19,978 20,550
Diluted shares outstanding 19,632 19,980 20,100 20,200 19,978 20,550
REVENUE GROWTH (Y-Y) 416% 303% 173% 104% 190% 66%
REVENUE GROWTH (Q-Q) 24 20 12 22 NA NA
GROSS MARGINS
GROSS MARGIN 16% 17% 17% 17% 17% 18%
RATIOS
COGS 84% 83% 83% 83% 83% 82%
</TABLE>
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Margin NM NM NM NM NM NM NM NM NM NM NM NM
- -------------------------------
Tax Rate NM NM NM NM NM NM NM NM NM NM NM NM
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Diagonal research model from Salomon Smith Barney dated May 26, 1999.
(a) US$ in millions, except per share data.
(b) Calculation includes amortization of goodwill.
C-44
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- -------------------------------------------------------------------------------
DR BALANCE SHEET
Condensed Consolidated Balance Sheet, March 31, 1999
(US$ IN THOUSANDS)
CURRENT ASSETS CURRENT LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Cash & cash equivalents $ 50,445 Accounts payable $ 4,835
Short-term investments 19,949 Accrued payroll 688
Accounts receivable, net 743 Other current liabilities 531
--------
Prepaid expenses & other 366 TOTAL CURRENT LIABILITIES $ 6,054
----------
TOTAL CURRENT ASSETS $ 71,503
Net PP&E 4,411 Stockholder's Equity
Common Stock 197
--------
Other Assets 125 Additional paid-in capital 94,449
---------
Patents -- Deferred compensation (1,194)
---------- -----------
TOTAL ASSETS $ 76,039 Accumulated deficit (23,467)
========== -----------
TOTAL LIABILITIES $ 76,039
===========
</TABLE>
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- -------------------------------------------------------------------------------
DR ANALYST COVERAGE
<TABLE>
<CAPTION>
DATE FIRM CY 1999 EPS CY 2000 EPS RATING
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
07/07/99 Dain Rauscher Wessels $ (1.12) $ (0.61) Strong Buy
06/02/99 Wedbush Morgan Securities (1.15) (0.68) Buy
05/26/99 Salomon Smith Barney (1.14) (0.65) Buy
04/26/99 U.S. Bancorp Piper Jaffray (1.46) (1.17) Buy
04/25/99 Suntrust Equitable (1.43) (1.22) Strong Buy
04/23/99 BancBoston Robertson Stephens (1.14) (0.70) Buy
03/04/99 BT Alex Brown (1.17) (0.70) Strong Buy
02/0199 Pacific Crest Securities (1.20) (0.72) Market Perform
- --------------------------------------------------------------------------------------------------------------------------------
Mean (1.23) (0.81)
Median (1.16) (0.70)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: First Call, Analyst ratings from Bloomberg.
C-46
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- --------------------------------------------------------------------------------
DR BOARD OF DIRECTOR BIOGRAPHIES
JOEL A. RONNING, CHIEF EXECUTIVE OFFICER, CHIEF FINANCIAL OFFICER AND SECRETARY
Joel has been a member of the Company's Board of Directors and the Chief
Executive Officer, Chief Financial Officer and Secretary of the Company since
May 10, 1995. From May 10, 1995 to August 1996, Mr. Ronning also served as the
Company's President. Mr. Ronning is the founder of MacUSA, Inc., a wholly-owned
subsidiary of the Company, and has served as a member of the MacUSA Board of
Directors and its Chief Executive Officer since April 1990. Mr. Ronning is also
the Chief Executive Officer and a director of DR, in which the Company holds a
23% ownership interest as of April 23, 1998.
PERRY W. STEINER, PRESIDENT, DIRECTOR
Perry joined the Company in July, 1998 as President and has served as a director
since April 1998. From January 1997 to July 1998, Mr. Steiner served as Vice
President of Wasserstein Perella & Co., Inc., an investment banking firm, and as
Vice President of Wasserstein Perella Ventures, Inc., the general partner of
Wasserstein Adelson Ventures, L.P., a venture capital fund. From June 1993 to
December 1996, Mr. Steiner was a principal of TCW Capital, a group of leveraged
buyout funds managed by Trust Company of the West.
WILLIAM LANSING, DIRECTOR
Bill has served as a director since November 1998. In May 1998, Mr. Lansing
joined Fingerhut Companies, Inc. as President and Chief Operating Officer. From
October 1996 to May 1998, Mr. Lansing served as Vice President for Business
Development at General Electric Corporation. From January 1996 to October 1996,
he was Chief Operating Officer at Prodigy, an online joining venture of IBM
Corporation and Sears Roebuck and Co. From September 1986 to December 1995, Mr.
Lansing was at McKinsey & Co. where he was a partner leading the consulting
firm's Internet practice. Mr. Lansing began his career in 1984 at Davis Polk &
Wardwell as a securities lawyer.
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- --------------------------------------------------------------------------------
DR BOARD OF DIRECTOR BIOGRAPHIES
THOMAS F. MADISON, DIRECTOR
Tom has served as a director since August 1996. Since January 1993, has been the
President and Chief Executive Officer of MLM Partners, a consulting and small
business investment company. From February 1994 to September 1994, Mr. Madison
served as Vice Chairman and Chief Executive Officer at Minnesota Mutual Life
Insurance Company. From June 1987 to December 1992, Mr. Madison was President of
US WEST Communications Markets, a division of US WEST, Inc. Mr. Madison also
serves on the Boards of Directors of Valmont Industries Inc., Eltrax Systems,
Inc., Reliant Energy Minnegasco, a division of Reliant Energy, ACI Telecentrics,
Span Link Communications and Delaware Group of Funds.
CHARLES E. REESE, JR., PRESIDENT AND CHIEF OPERATING OFFICER
Chuck has served as a director since June 1996 and has served as President and
Chief Operating Officer of the Company since August 1996. Mr. Reese is also a
member of the Board of Directors of DR. August 1996, he was Vice President of
Sales and Marketing of the Weidt Group, a custom software and Internet site
developer based in Minnetonka, Minnesota. Mr. Reese served as Vice President of
Sales from July 1987 to April 1995, for LaserMaster Technologies, Inc., an Eden
Prairie, Minnesota based developer, manufacturer and marketer of DR color
printers and chemical-free filmsetters.
CHRISTOPHER J. SHARPLES, DIRECTOR
Chris has served as a director since April 1998. Since 1973, Mr. Sharples has
served as a director of GNI Ltd., a firm specializing in the derivatives market,
which he co-founded in 1972. Since 1995, Mr. Sharples has been Chairman of ICV
Ltd., a financial information company. Both Datastream International Ltd. and
ICV Ltd. are subsidiaries of Primark Corporation, an information services
company. From 1987 to 1995, Mr. Sharples was Chairman of the Association of
Futures
C-48
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DR OVERVIEW
- --------------------------------------------------------------------------------
Brokers & Dealers and the Securities and Futures Authority, front line
regulatory organizations designated under the laws of Great Britain.
DR BOARD OF DIRECTORS BIOGRAPHIES
TIMOTHY C. CHOATE, DIRECTOR
Tim has served as a director of the Company since May 1998. Mr. Choate has been
Chairman of FreeShop International, Inc. since its inception in Jun 1997 and has
been President and Chief Executive Officer since March 1998. Mr. Choate
co-founded Online Interactive, Inc., the original parent company of FreeShop
International, Inc., in June 1994, and served as President, Chief Executive
Officer and Chairman until February, 1997 and Chairman until July 1997. Mr.
Choate served as a Vice President of Micro Warehouse, Inc. from July 1997, when
it acquired Online Interactive, Inc., until February 1998. From February 1991 to
May 1994, Mr. Choate held various positions at Softdisk Publishing, LLC, most
recently as President. From February 1989 until February 1991, Mr. Choate was a
Senior Marketing Manager at Prodigy Services Company.
J. PAUL THORIN, DIRECTOR
Paul has served as a director of the Company since June 1996. Since April 1996,
Mr. Thorin has served as General Counsel of Fujitsu America Inc., a subsidiary
of Fujitsu Limited and since June 1997 as its Vice President and General
Counsel. From April 1990 to March 1996, Mr. Thorin held the position of
Associate Corporate Counsel of Fujitsu America Inc.
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PREMIUMS PAID ANALYSIS DETAIL
C-50
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- --------------------------------------------------------------------------------
PREMIUMS PAID -- EQUITY MINORITY STAKES
<TABLE>
(DISCOUNT)/PREMIUM
--------------------------
TRANS. SHARES 1 DAY 1 WEEK 1 MONTH
# DATE SELLER ACQUIROR VAL.(a) ACQUIRED PRIOR PRIOR PRIOR
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
37 06/17/96 Acrodyne Communications Inc Bentley Capital Management $1 5.4 (2)% (3)% 3%
38 05/20/96 MIDCOM Communications Inc Investor Group 6 5.2 5 0 8
39 05/10/96 VideoServer Inc Investor Group 21 5.4 (11) (7) 12
40 05/07/96 Cooper & Chyan Technology Inc Synopsys lnc 18 9.9 (12) (18) 8
41 05/01/96 Cellular Communications Inc Investor Group 52 5.1 0 1 2
42 04/23/96 Data Translation Inc Investor Group 10 6.5 (8) 2 23
43 04/19/96 MAI Systems Corp Investor Group 3 8.3 (16) (19) (10)
44 04/17/96 Performance Technologies Inc Investor Group 3 5.3 4 5 12
45 04/16/96 Data Dimensions Inc Investor Group 8 8.1 4 12 0
46 03/28/96 Noise Cancellation Tech Inc Investor 2 5.6 (52) (50) (50)
47 03/20/96 Skysat Communications Network Palomar Medical Technologies 1 15.3 60 78 167
48 03/15/96 General Communication Inc MCI Communications Corp 13 23.0 30 28 37
49 03/07/96 Netcom On-Line Communication Investor Group 24 6.3 46 46 18
50 02/08/96 COMSAT Corp Investor 72 7.2 (1) 14 17
51 02/07/96 Catalyst Semiconductor Inc United Microelectronics Corp 4 10.0 (2) 14 12
52 02/02/96 SI Handling Systems Inc Trigan Investments LP 1 6.7 (2) (5) (4)
53 01/18/96 PSINet Inc Investor Group 69 7.9 70 57 18
54 01/17/96 Avant! Corp Investor Group 133 19.9 196 168 160
55 01/10/96 NetVantage Inc Investor Group 5 19.6 (27) (26) (22)
56 01/03/96 MECC Wyser Pratte Management Co Inc 15 5.3 32 34 19
57 12/27/95 LifeRate Systems Inc Medtronic Inc 5 20 (16) 9 3
58 12/20/95 Phoenix Technologies Ltd Intel Corp 11 6.5 (13) (4) 0
</TABLE>
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- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
59 12/18/95 Broadway & Seymour Inc Investor 10 6.1 6 7 2
60 12/13/95 Interface Systems Inc Investor Group 2 6.1 (28) (7) 12
61 12/11/95 Structural Dynamics Research Investor Group 24 5.7 1 3 10
62 12/11/95 Broderbund Software Inc Investor 60 5.0 1 (6) (9)
</TABLE>
Source: Securities Data Corporation.
(a) Dollars in millions.
C-52
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- --------------------------------------------------------------------------------
PREMIUMS PAID -- EQUITY MINORITY STAKES
<TABLE>
<CAPTION>
(DISCOUNT)/PREMIUM
-------------------------
TRANS. SHARES 1 DAY 1 WEEK 1 MONTH
# DATE SELLER ACQUIROR VAL.(a) ACQUIRED PRIOR PRIOR PRIOR
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
63 12/08/95 Network Imaging Corp Investor Group $ 4 6.7 (24)% (24)% (3)%
64 11/13/95 Conner Peripherals Inc Investor Group 57 5.2 (6) 4 15
65 11/03/95 AST Research Inc Samsung Electronics Co Ltd 100 9.7 241 237 256
66 10/11/95 Kopin Corp Telecom Holding Co Ltd 27 15.0 6 6 5
67 10/11/95 Tokheim Corp Investor 4 7.2 5 11 11
68 10/11/95 Cambex Corp Investor Group 6 5.6 29 26 7
69 09/29/95 Penril DataComm Networks Inc Pequot General Partners 7 16.2 (32) (27) (30)
70 09/18/95 RasterOps Corp Investor Group 3 7.9 (59) (61) (55)
71 08/31/95 Walker Interactive Systems Inc Investor Group 4 5.2 (12) (10) (10)
72 08/28/95 ESCO Electronics Corp Investor Group 5 5.5 9 9 (3)
73 07/13/95 Microcom Inc Investor Group 9 5.2 5 4 25
74 06/30/95 Base Ten Systems Inc Investor 7 8.8 (4) (9) 33
75 06/14/95 Andros Inc SAC Capital Management LP 5 6.2 (3) 1 (2)
76 06/13/95 Computer Learning Centers Inc Investor Group 2 6.9 3 7 0
77 05/16/95 Larson-Davis Inc Investor 0 8.0 (88) (88) (86)
78 04/07/95 Precision Systems Inc Vulcan Ventures Inc 9 12.0 47 67 72
79 04/07/95 Precision Systems Inc Vulcan Ventures Inc 5 10.0 (6) 7 10
80 03/10/95 Tekelec Investor Group 10 5.3 1 8 7
81 02/27/95 AST Research Inc Samsung Electronics Co Ltd 128 13.1 47 45 59
82 02/27/95 AST Research Inc Samsung Electronics Co Ltd 124 12.7 47 45 59
83 02/15/95 Autolnfo Inc Steel Partners II LP 2 9.4 11 7 34
84 02/13/95 Byron Preiss Multimedia Co Simon & Schuster Inc 6 20.0 17 24 33
</TABLE>
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- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
85 02/09/95 AST Research Inc Samsung Electronics Co Ltd 126 14.5 30 29 41
86 01/19/95 Ross Systems Inc Investor Group 5 9.5 10 15 29
87 01/17/95 Penultimate Corp Makro GmbH 1 23.4 114 67 36
88 12/27/94 Tech-Sym Corp Investor Group 7 53.0 13 11 12
Source: Securities Data Corporation.
</TABLE>
(a) Dollars in millions.
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- --------------------------------------------------------------------------------
PREMIUMS PAID -- EQUITY MINORITY STAKES
<TABLE>
<CAPTION>
(DISCOUNT)/PREMIUM
---------------------------
TRANS. SHARES 1 DAY 1 WEEK 1 MONTH
# DATE SELLER ACQUIROR VAL.(a) ACQUIRED PRIOR PRIOR PRIOR
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
89 12/22/94 Sundstrand Corp Investor Group $ 9 5.2 4% 9% 7%
90 12/19/94 Hadco Corp Investor Group 5 6.5 (21) (17) (14)
91 12/01/94 NAI Technologies Inc Fundamental Management Corp 1 5.4 (4) 5 2
92 11/30/94 Reliance Electric Co Investor Group 46 7.0 (40) (40) (38)
93 11/28/94 Titan Corp Investor Group 4 5.8 13 16 8
94 11/09/94 Reflectone Inc Investor Group 0 6.0 10 10 14
95 11/01/94 Platinum Software Corp Investor Group 12 6.4 19 5 26
96 10/28/94 LTX Corp Investor Group 6 5.6 (16) (8) (12)
97 10/19/94 Acclaim Entertainment Inc Tele-Communications Inc 81 10.0 7 (2) 3
98 10/13/94 Robotic Vision Systems Inc Investor Group 4 5.0 21 21 51
99 09/19/94 Harvard Industries Inc Investor Group 5 5.3 (17) (1) (2)
100 09/16/94 Harvard Industries Inc Investor Group 9 9.3 (16) 1 0
101 08/23/94 Zing Technologies Inc Investor 0 6.8 6 6 6
102 08/09/94 Digital Sound Corp Investor Group 5 13.6 9 2 27
103 07/19/94 Gupta Corporation Oracle Systems Corp 11 7.7 3 19 2
104 06/14/94 Sprint Corp Investor Group 4,071 20.0 24 25 26
105 05/13/94 ARI Network Services Vulcan Northwest Inc 5 10.7 12 19 16
106 05/03/94 Computer Task Group Inc Stock Employee Compensation 13 15.2 (3) 3 8
107 05/03/94 Structural Dynamics Research Govt of Singapore Investment 20 5.2 25 29 7
108 04/29/94 CSP Inc Investor Group 2 7.3 3 9 1
109 04/27/94 Policy Management Systems Corp General Atlantic Partners NY 38 7.5 0 (9) (3)
110 04/26/94 Dataware Technologies Inc Investor Group 5 8.2 8 17 5
</TABLE>
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- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
111 04/04/94 Satellite Technology Mgmt Inc Berjaya Group Bhd 7 11.4 60 38 43
112 04/04/94 Satellite Technology Mgmt Inc Berjaya Group Bhd 4 6.6 46 26 30
113 03/16/94 Manatron Inc Investor 2 15.6 (7) (7) (6)
114 03/11/94 CommNet Cellular Inc Investor Group 13 6.0 5 4 0
Source: Securities Data Corporation.
</TABLE>
(a) Dollars in millions.
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- --------------------------------------------------------------------------------
PREMIUMS PAID -- EQUITY MINORITY STAKES
<TABLE>
<CAPTION>
(DISCOUNT)/PREMIUM
---------------------------
TRANS. SHARES 1 DAY 1 WEEK 1 MONTH
# DATE SELLER ACQUIROR VAL.(a) ACQUIRED PRIOR PRIOR PRIOR
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
115 02/18/94 Intl Microcomputer Software Tudor Investment Corp $ 2 5.7 39% 21% 39%
116 01/21/94 Video Lottery Technologies Inc Electronic Data Systems Corp 68 20.0 39 51 64
117 01/19/94 Lynch Corp (Gabelli Group) Investor Group 2 8.1 (2) (2) (6)
118 11/30/93 Lo-Jack Corp Benefit Capital Management 4 8.2 (43) (41) (44)
119 11/23/93 CXR Corp Daniel Dror & Co 1 16.2 (9) (9) 7
120 11/01/93 Telematics International Inc Mentor Partners LP 16 6.1 22 18 34
121 10/25/93 VTEL Corp Intel Corp 14 10.9 44 24 21
122 10/25/93 VTEL Corp Intel Corp 10 10.0 29 11 9
123 10/21/93 MagneTek Inc Singapore 26 6.7 20 20 13
124 10/21/93 Compression Labs Inc Fletcher Capital Markets Inc 10 5.6 (15) (16) 0
125 10/20/93 Future Now Inc Intelligent Electronics Inc 9 7.1 1 (1) 19
126 10/04/93 Metricom Inc Vulcan Ventures Inc 18 12.4 (5) 20 43
127 09/14/93 Telematics International Inc Investor Group 16 6.4 10 6 20
128 07/27/93 Legent Corp Investor Group 59 8.5 102 108 2
129 07/23/93 PerfectData Corp Flamemaster Corp 1 16.4 18 18 13
130 06/03/93 Apogee Robotics Inc PELT 0 10.0 15 15 7
131 06/02/93 MCI Communications Corp British Telecommunications PLC 3,465 16.8 (28) (28) (19)
132 05/03/93 IntelliCorp Informix Corp 2 15.0 (30) (32) 12
133 04/27/93 RasterOps Corp Scitex Corp Ltd 10 13.0 60 39 23
134 01/21/93 Spinnaker Software Corp Special Situations Fund 2 11.4 0 12 (2)
135 01/19/93 Lexicon Corp Investor Group 0 5.1 9 13 13
136 11/06/92 Archive Corp Alpine Associates LP 13 8.5 51 56 54
</TABLE>
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- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
137 10/26/92 Unique Mobility Inc Alcan Aluminium Ltd 1 5.4 (52) (50) (58)
138 09/22/92 Alliant Techsystems Inc Investor Group 15 6.6 13 19 41
139 09/10/92 Gateway Communications Inc Adage Inc 1 6.0 (3) 0 63
140 07/07/92 Data Switch Corp Beall Technologies Inc 1 9.4 (29) (13) 5
Source: Securities Data Corporation.
</TABLE>
(a) Dollars in millions.
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- --------------------------------------------------------------------------------
PREMIUMS PAID -- EQUITY MINORITY STAKES
<TABLE>
<CAPTION>
(DISCOUNT)/PREMIUM
--------------------------
TRANS. SHARES 1 DAY 1 WEEK 1 MONTH
# DATE SELLER ACQUIROR VAL.(a) ACQUIRED PRIOR PRIOR PRIOR
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
141 07/06/92 Andros Inc Investor Group $ 4 6.8 5% 3% (0)%
142 07/02/92 BMC Industries Inc Galileo Industrie Ottiche SpA 4 7.7 34 58 15
143 06/29/92 Edmark Corp Roanoke Investors LP 2 14.0 (5) (5) (5)
144 06/16/92 WordStar International Inc Elron Electronic Industries 2 6.4 (11) (6) (26)
145 06/02/92 Emerson Radio Corp Otake Trading Co 11 8.9 16 10 10
146 03/18/92 Convex Computer Corp Hewlett-Packard Co 18 5.2 7 3 (1)
147 03/16/92 Tektronix Inc Investor Group 69 11.4 23 27 10
148 03/11/92 Lo-Jack Corp Benefit Capital Management 6 7.0 74 70 62
149 12/06/91 Sequa Corp Investor Group 19 7.8 50 45 19
150 09/23/91 Valid Logic Systems Inc Alpine Associates LP 9 5.0 86 98 98
151 08/29/91 NCR Corp Capital Group Companies Inc 647 9.3 81 88 112
152 08/05/91 Sterling Electronics Corp Adage lnc 1 5.7 5 11 17
153 06/18/91 Information International Inc Investor Group 2 6.6 (7) (1) 18
154 05/17/91 Alpha Microsystems Alphabet Technologies Inc 2 14.1 78 121 113
155 05/17/91 Alpha Microsystems Alphabet Technologies Inc 1 6.7 67 107 100
156 05/03/91 Intermec Corp Bear Stearns Cos Inc 14 7.4 (27) (26) (10)
157 05/03/91 Encore Computer Corp Morrison-Knudsen Corp 5 6.1 (2) 2 63
158 04/04/91 Harman International Inds Inc 21 International Holdings Inc 7 9.1 30 41 24
159 02/08/91 Seagate Technology Inc Salomon Brothers Inc (Salomon) 143 16.8 (6) 1 15
160 11/26/90 Informix Corp ASCII Corp 7 5.0 150 142 125
161 11/15/90 Samna Corp Investor Group 4 5.9 69 57 80
162 11/01/90 ESCO Electronics Corp Investor Group 5 9.5 64 58 22
</TABLE>
C-59
<PAGE>
Project
Triangle
PREMIUMS PAID ANALYSIS DETAIL
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
163 10/22/90 Measurex Corp Harnischfeger Industries Inc 17 5.5 (9) (5) (1)
164 09/28/90 Emerson Radio Corp Tomei lndustrial (Holdings) Ltd 8 5.6 43 25 25
165 09/11/90 ASK Computer Systems Inc Electronic Data Systems Corp 40 19.7 35 35 17
166 09/11/90 ASK Computer Systems Inc Hewlett-Packard Co 20 9.8 35 35 17
Source: Securities Data Corporation.
</TABLE>
(a) Dollars in millions.
C-60
<PAGE>
Project
Triangle
PREMIUMS PAID ANALYSIS DETAIL
- --------------------------------------------------------------------------------
PREMIUMS PAID -- EQUITY MINORITY STAKES
<TABLE>
<CAPTION>
(DISCOUNT)/PREMIUM
------------------------------
TRANS. SHARES 1 DAY 1 WEEK 1 MONTH
# DATE SELLER ACQUIROR VAL.(a) ACQUIRED PRIOR PRIOR PRIOR
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
167 06/18/90 Network Systems Corp Investor Group $ 25 5.6 (1)% 0% 7%
168 06/01/90 Telephone and Data Systems Inc Investor Group 146 16.2 2 1 15
169 06/01/90 Aerovox Inc Investor Group 2 7.6 3 3 20
170 05/31/90 Corning Inc Market Street Trust Co 271 5.8 3 (2) 6
171 05/18/90 Graphic Scanning Corp Investor Group 17 5.3 14 15 11
172 05/02/90 Triad Systems Corp Investor Group 5 13.7 7 7 7
173 04/10/90 Altera Corp Investor Group 12 5.7 5 5 2
174 03/30/90 Brite Voice Systems Inc Investor 5 16.3 (4) (5) (5)
175 02/09/90 Scientific Software-Intercomp Investor Group 1 5.0 17 40 8
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIAN 5% 7% 11%
- ------------------------------------------------------------------------------------------------------------------------------------
Source: Securities Data Corporation.
</TABLE>
(a) Dollars in millions.
C-61
<PAGE>
Project
Triangle
PREMIUMS PAID ANALYSIS DETAIL
- --------------------------------------------------------------------------------
PREMIUMS PAID -- SQUEEZE OUTS
<TABLE>
<CAPTION>
(DISCOUNT)/PREMIUM
--------------------------
TRANS. SHARES 1 DAY 1 WEEK 1 MONTH
DATE SELLER ACQUIROR VAL.(a) ACQUIRED PRIOR PRIOR PRIOR
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
04/19/99 Seagate Software Inc(Seagate) Seagate Technology Inc Pending -- NA NA NA
09/29/98 Newmont Gold Co Newmont Mining Corp $265 10.43 (5)% 21% 62%
09/23/98 Ryerson Tull Inc Inland Steel Industries Inc 61 5.35 (9) (12) (41)
03/27/98 Intl Specialty Prods ISP Holdings Inc 325 20.29 4 2 15
08/26/96 Bankers Life Holding (Conseco) Conseco Inc 121 5.84 15 10 12
06/06/94 Ogden Projects Inc(Ogden Corp) Ogden Corp 110 6.00 6 18 20
03/01/94 FoxMeyer Corp (Natl Intergroup) National Intergroup Inc 80 5.51 7 9 11
02/24/92 Unocal Exploration Corp Unocal Corp 118 10.06 18 18 23
02/06/92 Spelling Entertainment Inc Charter Co (American Financial) 43 5.83 53 45 45
09/18/91 Arkla Exploration Co Arkla Inc 93 6.00 8 29 30
03/01/91 Metcalf & Eddy Cos Inc Air & Water Technologies Corp 51 2.65 22 17 24
11/12/90 US WEST NewVector Group Inc US WEST Inc 433 9.71 48 54 86
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIAN 8% 18% 23%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Dollars in millions.
C-62
<PAGE>
Project
Triangle
- --------------------------------------------------------------------------------
HISTORIC STOCK PRICE ANALYSIS
C-63
<PAGE>
Project
Triangle
HISTORIC STOCK PRICE ANALYSIS
- --------------------------------------------------------------------------------
RELATIVE STOCK PRICE PERFORMANCE (SINCE 8/11/98)
(Graph shows relative stock performance of TR verses DR and the NASDAQ for the
period from 8/11/98 to 7/9/99.)
C-64
<PAGE>
Project
Triangle
HISTORIC STOCK PRICE ANALYSIS
- --------------------------------------------------------------------------------
YTD RELITIVE PRICE PERFORMANCE
(Graph shows relative stock performance of TR verses DR for the period from
1/1/99 to 7/9/99.)
C-65
<PAGE>
Project
Triangle
- --------------------------------------------------------------------------------
LIABILITY RESERVE ANALYSIS
C-66
<PAGE>
Project
Triangle
LIABILITY RESERVE ANALYSIS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANALYSIS OF CASH AT CLOSING(1)
- ------------------------------------------------------------------------------------------------------------------------------------
ITEM TIMING AMOUNT
<S> <C> <C> <C> <C> <C>
Cash on hand (Current) $2,187 Trust Liabilities
Proceeds from Disposition (8/31/99) 2,800 Apple Lawsuit ($5,793)
Cash from Option Proceeds (at closing) 776 Tax on Dissenter Shares (1000)
Cash from Notes Receivable (at closing) 134 Apple Legal Defense (100)
Cash from Operations to 8/31/99 (at closing) 0 Unidentified Contingent Liabilities (307)
Cash used from 8/31/99 to Closing (at closing) (225) Total Liabilities ($7,200)
DR Cash Payment (at closing) (1,200) Trust Assets
Retention Plan (at closing) (925) Cash Remaining $ 855
SG Cowen Fees (at closing) (575) DR Shares 6,345
Legal Fees (at closing) (350) Total Assets 7,200
Arthur Anderson Fees (at closing) (300) Number of DR Shares Required 180.00
D&O Insurance Costs (at closing) (300)
Bayview Capital (at closing) (185)
Preferred Stock Redemption (at closing) (115)
Line of Credit Payback (at closing) (100)
Proxy/Share Mtg Expense (at closing) (125)
Liquidation Costs (at closing) (25)
Cushion (at closing) (617)
Excess Cash 855
</TABLE>
Project
Triangle
LIABILITY RESERVE ANALYSIS
- --------------------------------------------------------------------------------
(1) Analysis based on company estimates
C-67
<PAGE>
Exhibit D
CONFIDENTIAL
- --------------------------------------------------------------------------------
NEW YORK
SILICON VALLEY
BOSTON
LONDON
TOKYO
DEFENDER / TEMPEST
Transaction Analysis
Prepared For
Defender Board Of Directors
October 13, 1999
BROADVIEW INT'L LLC
MEMBER NASD
MEMBER SIPC
D-1
<PAGE>
DEAL TERMS
- -------------------------------------------------------------------------------
STRUCTURE - Both parties agree to effect a Type C
Reorganization: DR will issues shares in
exchange for all of the assets of TS. These
assets consist primarily of an option for
3,000,000 shares of DR stock and net cash
following the sale of its existing
businesses. All liabilities, known and
unknown, will remain the responsibility of
the TS shareholders and will be assigned to a
liquidating trust to be administered by TS.
Currently, it is estimated that approximately
8% of the gross shares received by TS
shareholders in the transaction will be put
into this trust to cover outstanding
liabilities of TS estimated at $7.2 million.
CONSIDERATION - Both parties agree that DR will issue
2,650,000 shares in exchange for TS assets
equating to an 11.7% discount to the number
of shares issuable upon exercise of the
option. An additional downward adjustment
will be made for any additional net cash
balance.
CONTINGENCIES - Both parties would propose that the closing
of the transaction be contingent upon a
definitive resolution that pending tax
legislation will not adversely affect the
tax-free status of the Transaction.
LOCK-UP - In order to facilitate efficient trading of
DR, TS senior management agrees to lock-up
one-third of their stock for 90 days,
one-third for 180 days and one third for 270
days. TS senior management claims to control
approximately 60% of the fully-diluted shares
of TS.
REGULATORY ISSUES - Arthur Andersen recommends that both parties
announce on Sunday, July 11, or earlier, to
maximize the potential for the Transaction to
be included under the current downstream
merger legislation.
POOLING ISSUE - Both Parties agree to provide a fiduciary out
for DR if an unsolicited transaction arises
where pooling accounting treatment is deemed
necessary.
D-2
<PAGE>
TRANSACTION BENEFITS
- -------------------------------------------------------------------------------
TAX-FREE - Effects tax free repurchase of the option to
REPURCHASE buy 3.0 MM shares of DR at a discount of
OF SHARES AT 11.7%. Based on DR's closing price as of
A DISCOUNT 7/7/99 ($33.25), the transaction represents a
savings of $11.6 MM less expenses and fees of
$1.5MM, netting a total savings of $10.1 MM.
CLEARS UP - Alleviates any confusion amongst industry
WALL STREET analysts in reference to ownership between DR
CONFUSION and TS.
REFOCUSES - Eliminates unnecessary distractions for
MANAGEMENT management and continues good faith between
the Board of Directors and the founder.
ENSURES - Assures that approximately 50% of the shares
ORDERLY issued will not be sold for an average of six
TRADING months.
D-3
<PAGE>
TRANSACTION RISKS
- -------------------------------------------------------------------------------
POOLABILITY - Transaction hinders Defender poolability for
up to two years after the close of the
transaction. However, Arthur Anderson
believes that DR could regain poolability as
early as six to nine months from the closing
of the transaction.
REGULATORY - Transaction faces proposed adverse tax
CONCERN legislation against Type C Reorganizations.
It must be grandfathered under the current
law to close.
LIABILITY RISK - In the event that the liquidating trust does
not sufficiently cover TS liabilities, DR
runs the slight risk of inheriting those
liabilities as well as potential associated
lawsuits.
D-4
<PAGE>
BOARD OF DIRECTOR CONCERNS
- ------------------------------------------------------------------------------
CLOSING ASSETS - HOW MUCH CASH WILL TS HAVE AT CLOSING?
- TS advisors indicate that current liabilities
will result in limited cash at the close of
the transaction. Current estimates indicate
approximately $800K in net cash will be
available to DR at closing.
OPTION LANGUAGE - DOES TS HAVE TO EXERCISE THE OPTION BEFORE
CLOSE?
- MacUSA must exercise its "option" to acquire
the shares from Joel Ronning.
MECHANICS OF - WHAT ARE THE MECHANICS OF LIQUIDATING TRUSTS?
LIQUIDATING
TRUST - Similar to an escrow account. DR has no role
in setting up, managing or liquidating the
trust.
- Shares will be deposited and a trustee shall
be appointed by TS shareholders to manage and
administer the trust. This may involve
selling the shares.
LOCK-UP OF >5% - THE LOCK-UP OF SHAREHOLDERS SHOULD INCLUDE
SHAREHOLDERS ALL SHAREHOLDERS HOLDING GREATER THAN 5% OF
TS SHARES.
- Only two current shareholders own more than
5%, Joel Ronning and Charles Reese. Both
shareholders have agreed to the lock-up.
D-5
<PAGE>
TEMPEST BALANCE SHEET(1) (MAY 1999)
- -------------------------------------------------------------------------------
($ in thousands)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalent $1,919
Restricted cash 274
Accounts receivable, net of allowance
for doubtful receivables of $382,000 and
$365,000 respectively 2,300
Inventories, net of reserve for obsolescence 1,558
Available for sale securities 40
Prepaids and other current assets 558
--------
TOTAL CURRENT ASSETS 6,648
Property and equipment, net 488
Mining Assets 0
Investment in Digital River 120,000
--------
$127,136
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving line of credit $1
Current maturities of long-term debt 0
Accounts payable 2,225
Accrued compensation and benefits 183
Accrued expenses 791
Dividend payable --
-------
TOTAL CURRENT LIABILITIES 3,200
Dividends payable
Deferred income tax 44,837
Redeemable pref. Stock, 12% cumulative
convertible, $1 par value; 1,000,000 shares
authorized; 160,000 shares issued and
outstanding 248
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Common stock; no par value; 25,000,000
shares authorized. 12,102,950 and 11,603,075
issues and outstanding --
Stock subscription receivable (134)
Additional paid-in capital 4,301
Retained earnings (deficit) 2,350
Unrealized gain on available-for-sale
securities 72,337
--------
TOTAL STOCKHOLDERS' EQUITY 78,854
--------
$127,139
--------
--------
</TABLE>
(1) Numbers provided by Tempest advisors and may not balance due to rounding.
D-6
<PAGE>
ANTICIPATED TS LIABILITIES
- ------------------------------------------------------------------------------
($ in thousands)
LIABILITY RESERVE ANALYSIS
<TABLE>
<S> <C> <C>
Cash on hand $2,187
Disposition of other assets $2,200
------
Total Cash Available to settle liabilities $4,387
Current Liabilities
Tax on Dissenter Shares (1,000)
Retention Plan (925)
SG Cowen (550)
Arthur Anderson (300)
Legal Fees(2) (250)
Preferred Stock Redemption (165)
Bayview Capital (161)
Post Operations Sale (125)
Line of Credit Payback (100)
Liquidation Costs (25)
Total Liabilities (3,601)
------
Net Cash Available to DR $786
Other Liabilities to be reserved for in Liquidating Trust:
Apple Lawsuit(1) (5,793)
Apple Legal Defense (100)
Other (1,300)
------
Total (7,193)
</TABLE>
(1) Calculated using 775,000 shares at $5.75 per share including a 30% tax.
(2) Includes Advisor Legal Fees.
D-7
<PAGE>
CURRENT TEMPEST CAPITALIZATION TABLE
- ------------------------------------------------------------------------------
($ in thousands)
<TABLE>
<CAPTION>
INSIDER # OF SHARES %
----------- --
<S> <C> <C>
Joel Ronning(1) 6,574 44%
Charles Reese(1) 963 6%
---------- -------
All Insiders 7,537 50%
OTHER SHAREHOLDERS
Matador Cptl Mgmt 510 3%
Nicholas-Applegate 282 2%
Stanley Tenenbaum 142 1%
Public Float 6,072 40%
---------- -------
All Other Shareholders 7,006 47%
Preferred Shares(2) 128 1%
Total Outstanding Options 427 3%
Treasury Stock(3) (70) (0%)
FULLY DIL. SHARES OUTSTANDING 15,028 100%
</TABLE>
(1) Includes options.
(2) Assumes .8 conversion rate on 160,000 shares.
(3) Assumes exercise proceeds of $5.90 per option which generates $.4MM, assumes
shares are brought back at $5.50 per share.
D-8
<PAGE>
POTENTIAL STOCK-FOR-STOCK TRANSACTION TIMETABLE
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
[Calendar] [Calendar] [Calendar] [Calendar]
JULY AUGUST SEPTEMBER OCTOBER
Week of: 5 12 19 26 2 9 16 23 30 6 13 20 27 4 11 18 25
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TRANSACTION EVALUATION
(6/30-7/9)
Discussion of Price and Terms
Due Diligence (6/30-7/9)
DEFINITIVE AGREEMENT
Negotiate Agreement (6/30-7/9)
Execute Agreement (7/9)
HART SCOTT RODINO
File HSR (7/19)
Termination of Waiting Period (8/9)
REGISTRATION STATEMENT (S-4)
Prepare Filing (7/30-8/6)
SEC Review and Clearance (8/6-9/20)
BOARD/SHAREHOLDER VOTE
Review Fairness Opinion (7/9)
and Approve Transaction
Prepare Mailing (9/20-9/24)
Shareholder Review and Vote (9/27-10/29)
Closing (10/29)
</TABLE>
D-9
