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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. 1)
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. 1 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, 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.
*
</TABLE>
* 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.
(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 (to be filed by amendment).
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
14, 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 13, 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).
* To be filed by amendment.
<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 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
