SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 31, 1997
------------------------------
NICHOLS RESEARCH CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-15295 63-0713665
- -------------------------------------------------------------------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
4040 South Memorial Parkway, Huntsville, Alabama 35802-1326
- -------------------------------------------------------------------------------
(Address, including zip code, of principal executive offices)
(205) 883-1140
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On August 27, 1997, Nichols Research Corporation ("Nichols Research"), a
Delaware corporation, entered into an Agreement of Merger (the "Agreement") to
acquire all of the issued and outstanding capital stock of TXEN, Inc., an
Alabama corporation ("TXEN"), from the shareholders of TXEN pursuant to that
Agreement. The closing of the transaction took place on August 29, 1997, and
the merger became effective on August 31, 1997.
Before August 31, 1997, Nichols Research owned 999,500 shares of the
Class B Common Stock of TXEN. These shares represented 100% of the Class B
Common Stock outstanding and 19.9% of all of the Common Stock of TXEN, Inc.,
outstanding. The other outstanding Common Stock of TXEN was composed of
4,000,500 shares of Class A Common Stock.
Pursuant to the Agreement, effective August 31, 1997, TXEN merged into
Nichols Select Corporation (the "Subsidiary"), a Delaware corporation and a
wholly owned subsidiary of Nichols Research. As a result of the merger, the
Class B Common Stock owned by Nichols Research was cancelled without
consideration. Further, the Class A Common Stock of TXEN was exchanged for
1,084,148 shares of Nichols Research's $.01 par value Common Stock valued at
approximately $26.3 million and $17,550,265.13 in cash. The purchase price was
allocated among the Class A shareholders of TXEN in accordance with each such
shareholder's interest in TXEN. The specific number of shares of Nichols
Research Common Stock delivered to the TXEN shareholders pursuant to the
Agreement was determined by negotiations between the parties, and not by any
formula or other objective method. The purchase price was determined by a
formula contained in a Stock Purchase Option Agreement dated December, 1994,
and an amendment to that Option Agreement dated July 1996, between Nichols
Research, TXEN and the shareholders of TXEN. The purchase price formula was
77 1/2 % of Nichols Research's average price to earnings ratios for the four
months ended June 30, 1997, multiplied by TXEN's net after-tax earnings for its
fiscal year ended June 30, 1997. This purchase price formula contained in the
Option Agreement and amendment thereto was determined by negotiations between
the parties.
Chris H. Horgen, Chief Executive Officer and Chairman of the Board of
Nichols Research, owned 245,000 shares of TXEN Class A Common Stock prior to
the merger. Pursuant to the merger, Mr. Horgen received $2,687,006.15 in cash
and received no Nichols Research Common Stock.
At closing, Nichols Research, the Subsidiary and the shareholders of
TXEN also entered into an Escrow Agreement. From the cash paid at closing, the
TXEN shareholders placed $877,513.26 in escrow until September 1, 1998, to
apply against any indemnification obligations that arise under the Agreement
before the escrow termination date.
The Agreement provides that in the event Nichols Research determines to
file a registration statement registering any of its Common Stock under the
Securities Act of 1933, then Nichols Research will permit the TXEN shareholders
to include their shares in that offering and registration statement upon
meeting certain conditions.
At closing, Thomas L. Patterson amended his Employment Agreement with
the Subsidiary. Pursuant to that amended Employment Agreement, Thomas L.
Patterson will continue to serve as President of the Subsidiary for a two (2)
year term. In addition to provisions governing the salary to be paid to Mr.
Patterson, the Employment Agreement contains provisions concerning payments to
be paid by the Subsidiary in the event of the employee's termination of
employment with the Subsidiary. The Employment Agreement also contains a
covenant not to compete, a nonsolicitation agreement and an agreement not to
disclose confidential information of the Subsidiary.
Some of the cash used to acquire the TXEN shares came from existing
reserves and some of the cash was borrowed by Nichols Research under an
existing credit agreement between Nichols Research, SouthTrust Bank of Alabama,
N.A., First Alabama Bank, and Corestates Bank, N.A.
The 1,084,148 shares of Nichols Research Common Stock owned by the TXEN
shareholders represent approximately 8.37% of the Nichols Research Common Stock
issued and outstanding.
As a result of the merger, Nichols Research currently owns 100% of the
outstanding shares of the Subsidiary. The Subsidiary provides information
technology products and services to the managed healthcare industry, including
computerized claims processing and administration services.
For additional information regarding the Agreement, the Escrow Agreement
and the amended Employment Agreement, please refer to the copies of those
documents which are incorporated herein by reference and included as Exhibits
to this Current Report on Form 8-K. The foregoing discussion is qualified in
its entirety by reference to such documents.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
Financial Statements of TXEN, Inc.
(b) Pro Forma Financial Information.
As of the date of filing of this Current Report on Form 8-K, it is
impracticable for Nichols Research to provide the pro forma financial
information required by this Item 7(b). In accordance with Item 7(b) of Form
8-K, such financial statements shall be filed by Amendment to this Form 8-K no
later than 60 days after September 11, 1997.
(c) Exhibits.
The Exhibits to this Report are listed in the Exhibit Index set forth
elsewhere herein.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NICHOLS RESEARCH CORPORATION
(Registrant)
By: Michael J. Mruz
--------------------------------
Michael J. Mruz
Chief Executive Officer
Date: September 10, 1997
INDEX TO EXHIBITS
-----------------
Exhibit
No. Description
- ------- -----------
2.1 Agreement of Merger
2.2 Escrow Agreement
2.3 Amendment to Employment Agreement with Thomas L. Patterson
2.4 Stock Purchase Option Agreement dated December 16, 1994, among
Nichols Research, TXEN, and shareholders of TXEN - incorporated
by reference to exhibits filed with the Company's Annual Report
on Form 10-K for the fiscal year ended August 31, 1995, under
the Securities Exchange Act of 1994.
2.5 Amendment Number One to Stock Purchase Option Agreement among
Nichols Research, TXEN, and the shareholders of TXEN dated July
16, 1996 - incorporated by reference to exhibits filed with the
Company's registration statement on Form S-3 under the Securi-
ties Act of 1933, File No. 333-08787.
99.1 Text of Press Release dated August 29, 1997, issued by Nichols
Research Corporation
99.2 Financial Statements of TXEN, Inc.
99.3 Pro Forma Financial Information of TXEN, Inc. - To be filed by
Amendment.
99.4 Employment Agreement with Thomas L. Patterson