SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Technalysis Corporation
- - - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- - - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock
- - - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
2,202,803
- - - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
$14.00 Cash per share
- - - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$30,839,242
- - - --------------------------------------------------------------------------------
(5) Total fee paid:
$6,167.85
- - - --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- - - --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- - - --------------------------------------------------------------------------------
(3) Filing Party:
- - - --------------------------------------------------------------------------------
(4) Date Filed:
- - - --------------------------------------------------------------------------------
TECHNALYSIS CORPORATION
6700 FRANCE AVENUE SOUTH
MINNEAPOLIS, MN 55435
-------------------------------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
-------------------------------------------------
To The Stockholders of
TECHNALYSIS CORPORATION:
A special meeting of the stockholders of Technalysis Corporation will be
held at the corporate offices of Technalysis Corporation (the "Company") at 6700
France Avenue South, Minneapolis, Minnesota, on Monday, April 1, 1996, at 10:00
a.m., for the following purposes:
1. To consider and vote upon approval of an Agreement and Plan of Merger,
dated January 10, 1996, between the Company and Compuware Corporation, a
Michigan corporation, providing for the merger of the Company with and into
Compuware Corporation, pursuant to which each outstanding share of the
Company's common stock (other than shares as to which the holders have perfected
their appraisal rights under Minnesota law) will be converted into the right to
receive $14.00 in cash, without interest, all as more fully described in the
accompanying Proxy Statement and the Agreement and Plan of Merger, a copy of
which is attached as Exhibit I to the Proxy Statement.
2. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES THAT THE AGREEMENT AND PLAN
OF MERGER IS IN THE BEST INTERESTS OF THE STOCKHOLDERS OF THE COMPANY AND
RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE AGREEMENT AND PLAN OF MERGER.
Only stockholders of record at the close of business on February 20, 1996
will be entitled to notice of and to vote at the meeting or any adjournment
thereof.
YOUR VOTE IS IMPORTANT. SINCE ADOPTION OF THE AGREEMENT AND PLAN OF MERGER
REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF THE COMPANY'S OUTSTANDING SHARES
OF COMMON STOCK, A FAILURE TO VOTE, IN PERSON OR BY PROXY, WILL HAVE THE SAME
EFFECT AS A NEGATIVE VOTE. PLEASE PROMPTLY COMPLETE, SIGN AND RETURN THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED, SELF-ADDRESSED ENVELOPE, WHETHER OR NOT
YOU INTEND TO BE PRESENT AT THE MEETING. YOU MAY NEVERTHELESS VOTE IN PERSON IF
YOU DO ATTEND THE MEETING. NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED
STATES.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ MILAN L. ELTON
----------------------------------
Milan L. Elton,
Secretary
Minneapolis, Minnesota
February 23, 1996
TECHNALYSIS CORPORATION
6700 FRANCE AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55435
PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 1, 1996
This Proxy Statement is being furnished to the stockholders of Technalysis
Corporation, a Minnesota corporation (the "Company"), in connection with the
solicitation on behalf of the Company's Board of Directors of proxies to be used
at the Special Meeting of Stockholders to be held at the Company's offices at
6700 France Avenue South, Minneapolis, Minnesota, on Monday, April 1, 1996, at
10:00 a.m., and any adjournment thereof (the "Special Meeting"). This Proxy
Statement, the Notice and the accompanying proxy card and related materials are
first being mailed to the Company's stockholders on or about February 23, 1996.
At the Special Meeting, stockholders will be asked to consider and vote
upon the approval of an Agreement and Plan of Merger, dated January 10, 1996
(the "Merger Agreement"), between the Company and Compuware Corporation, a
Michigan corporation ("Compuware"). A copy of the Merger Agreement is attached
as Exhibit I to this Proxy Statement. Under the terms of the Merger Agreement,
(i) the Company will be merged with and into Compuware (the "Merger"), and (ii)
each outstanding share of the Company's Common Stock, $.10 par value ("Common
Stock"), other than shares as to which the holders have perfected their
appraisal rights in accordance with Sections 302A.471 and 302A.473 of the
Minnesota Business Corporation Act, as amended, will be converted into the right
to receive $14.00 in cash, without interest. If the Merger is not consummated
for any reason, the Board of Directors expects to continue the business of the
Company as described under "BUSINESS OF THE COMPANY."
Copies of the Company's Annual Report to Stockholders for the year ended
December 31, 1994, and its Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995, are being furnished herewith to all stockholders.
PROXY STATEMENT
TABLE OF CONTENTS
PAGE
----
SUMMARY OF PROXY STATEMENT . . . . . . . . . . . . . . . . . 1
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . 4
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . 5
Background of the Merger . . . . . . . . . . . . . . . . . 5
Recommendation of the Board of Directors . . . . . . . . . 7
Opinion of Financial Advisor . . . . . . . . . . . . . . . 7
Agreement and Plan of Merger . . . . . . . . . . . . . . . 9
Interests of Certain Persons in the Merger . . . . . . . . 12
Financing of the Merger. . . . . . . . . . . . . . . . . . 13
Federal Income Tax Consequences. . . . . . . . . . . . . . 13
Rights of Dissenting Stockholders. . . . . . . . . . . . . 14
BUSINESS OF COMPUWARE CORPORATION . . . . . . . . . . . . . 16
BUSINESS OF THE COMPANY. . . . . . . . . . . . . . . . . . . 17
MARKET PRICES OF COMMON STOCK. . . . . . . . . . . . . . . . 17
SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . . 18
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT. . . . . . . . . . . . . . . . . . . 19
INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . 20
OTHER MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 20
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING . . . . . . . 21
DOCUMENTS INCORPORATED BY REFERENCE. . . . . . . . . . . . . 21
EXHIBITS:
I. Agreement and Plan of Merger
II. Opinion of Houlihan Lokey Howard & Zukin
III. Sections 302A.471 and 302A.473 of the Minnesota Business Corporation Act
SUMMARY OF PROXY STATEMENT
THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN INFORMATION CONTAINED IN THIS
PROXY STATEMENT. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION CONTAINED ELSEWHERE IN THIS PROXY STATEMENT AND THE EXHIBITS
ATTACHED HERETO. STOCKHOLDERS ARE URGED TO READ THE ENTIRE PROXY STATEMENT,
INCLUDING THE EXHIBITS AND THE OTHER DOCUMENTS ACCOMPANYING THE PROXY STATEMENT.
THE SPECIAL MEETING
The Special Meeting of Stockholders (the "Special Meeting") of Technalysis
Corporation, a Minnesota corporation (the "Company"), will be held at the
Company's offices at 6700 France Avenue South, Minneapolis, Minnesota, on
Monday, April 1, 1996, at 10:00 a.m. At the Special Meeting, stockholders will
be asked (i) to consider and vote upon approval of an Agreement and Plan of
Merger, dated January 10, 1996 (the "Merger Agreement"), between the Company and
Compuware Corporation, a Michigan corporation ("Compuware"), and (ii) to
transact such other business as may properly come before the Special Meeting, or
any adjournment thereof. The affirmative vote of the holders of a majority of
the outstanding shares of the Company's Common Stock entitled to vote is
required for approval of the Merger Agreement. See "General Information."
THE MERGER
Under the terms of the Merger Agreement, the Company will be merged with
and into Compuware Corporation (the "Merger"), and each outstanding share of
Common Stock of the Company (other than shares as to which the holders shall
have perfected their appraisal rights under Minnesota law) will be converted
into the right to receive $14.00 in cash, without interest. Thereafter, the
separate existence of the Company will cease. A copy of the Merger Agreement is
attached as Exhibit I to this Proxy Statement. See "THE MERGER - Agreement and
Plan of Merger."
RECOMMENDATION OF THE BOARD OF DIRECTORS OF THE COMPANY
The Board of Directors of the Company believes that the Merger is in the
best interests of, and is fair to, the Company's stockholders. The Board has
unanimously approved the Merger Agreement and unanimously recommends the
approval of the Merger Agreement by the stockholders of the Company. See "THE
MERGER - Recommendation of the Board of Directors."
OPINION OF INVESTMENT BANKER
Houlihan Lokey Howard & Zukin, an investment banking firm, has delivered a
written opinion to the Board of Directors of the Company, based upon the review
and analysis described therein and subject to the assumptions set forth therein,
to the effect that the consideration to be received as a result of the Merger by
the stockholders is fair from a financial point of view. Stockholders are urged
to read the opinion, which is set forth as Exhibit II to this Proxy Statement.
See "THE MERGER - Opinion of Investment Banker."
1
EFFECTIVE TIME OF THE MERGER
The Merger shall become effective at such time as the Certificate of Merger
is duly filed with the Secretary of State of the State of Minnesota and the
Secretary of State of the State of Michigan, or such later date set forth in the
Certificate of Merger (the "Effective Time"). See "THE MERGER - Agreement and
Plan of Merger."
CONDITIONS TO CONSUMMATION OF THE MERGER; TERMINATION; CERTAIN COVENANTS
Under the Merger Agreement, the respective obligations of the Company and
Compuware to consummate the Merger are subject to satisfaction, at or before the
Effective Time, of certain conditions, including approval by the Company's
stockholders. The Merger Agreement may also be terminated for a number of
reasons, including the failure by the parties to complete the Merger by May 31,
1996. Pending completion of the Merger, the Company has agreed to conduct its
business in the ordinary course and to provide reasonable access to its
properties, books and records to representatives of Compuware. See "THE MERGER
- - - - Agreement and Plan of Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Company's directors and executive officers beneficially own, in the
aggregate, 564,129 shares (25.7 percent) of the Company's outstanding Common
Stock and will receive $7,897,806 in the Merger for such shares. Executive
officers and other employees may enter into new employment agreements with
Compuware.
FINANCING OF THE MERGER
The total funds required for the financing of the Merger will be
approximately $30,800,000. Compuware intends to finance the Merger with
existing funds. See "THE MERGER - Financing of the Merger."
FEDERAL INCOME TAX CONSEQUENCES
If the Merger is consummated, the receipt by a stockholder of $14.00 in
cash per share as a result of the Merger will be a taxable transaction for
federal income tax purposes, and each stockholder will recognize gain or loss
equal to the difference between such stockholder's basis in the Common Stock of
the Company surrendered and the amount of cash received. Each stockholder is
urged to consult a tax advisor with respect to the tax consequences of the
Merger. See "THE MERGER - Federal Income Tax Consequences."
RIGHTS OF DISSENTING STOCKHOLDERS
Stockholders of the Company who do not wish to accept the $14.00 per share
in cash to be paid under the terms of the Merger Agreement may dissent from the
Merger and elect to have a judicial determination of the fair value of their
shares of Common Stock at the Effective Time of the Merger (exclusive of any
element of value arising from the accomplishment or expectation of the Merger)
by complying with the requirements of
2
Sections 302A.471 and 302A.473 of the Minnesota Business Corporation Act, as
amended, the full text of which is attached as Exhibit III to this Proxy
Statement. See "THE MERGER - Rights of Dissenting Stockholders."
BUSINESS OF COMPUWARE
Compuware is an international corporation with fiscal 1995 revenues of
$533.9 million. Compuware develops, markets and supports an integrated line of
software products designed to improve programmer and applications productivity
across commercial platforms. In addition, Compuware professional services
provide large corporate and public sector clients who work across a broad range
of technologies with information systems planning, development, implementation,
maintenance and training. See "BUSINESS OF COMPUWARE."
BUSINESS OF THE COMPANY
The Company is engaged in the business of providing computer systems and
programming services to customers throughout the United States. See "BUSINESS
OF THE COMPANY."
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded in the NASDAQ National Market System.
(Symbol: TECN). The closing sale price of the Common Stock has ranged from
$10.50 to $13.75 between January 1, 1994 and the date hereof. On January 9,
1995, the last trading day prior to the public announcement of the Merger, the
closing sale price for the Common Stock was $12.00. See "MARKET PRICES OF COMMON
STOCK."
3
GENERAL INFORMATION
At the Special Meeting, stockholders will be asked to consider and vote
upon the approval of an Agreement and Plan of Merger, dated January 10, 1996
(the "Merger Agreement"), between the Company and Compuware Corporation, a
Michigan corporation ("Compuware"). A copy of the Merger Agreement is attached
as Exhibit I to this Proxy Statement. Under the terms of the Merger Agreement,
(i) the Company will be merged with and into Compuware (the "Merger"), (ii) each
outstanding share of the Company's Common Stock, $.10 par value ("Common
Stock"), other than shares as to which the holders have perfected their
appraisal rights in accordance with Sections 302A.471 and 302A.473 of the
Minnesota Business Corporation Act, as amended, will be converted into the right
to receive $14.00 in cash, without interest.
The Board of Directors has fixed the close of business on February 20, 1996
as the record date for the determination of stockholders entitled to notice of
and to vote at the Special Meeting. As of such date, there were 2,202,803
shares of Common Stock outstanding and entitled to vote, which were held of
record by approximately 320 stockholders. Each share entitles the holder
thereof to one vote, exercisable in person or by properly executed proxy, on
each matter to be considered at the Special Meeting. The presence, in person or
by proxy, of the holders of a majority of the outstanding shares of Common Stock
entitled to vote is necessary to constitute a quorum at the Special Meeting.
The affirmative vote of the holders of a majority of the outstanding shares of
Common Stock entitled to vote is required for the approval of the Merger
Agreement and the transactions contemplated thereby. The Common Stock does not
have cumulative voting rights.
All shares represented at the Special Meeting by proxies in the form
accompanying this Proxy Statement which are received prior to or at the Special
Meeting will be voted in accordance with the instructions thereon, provided the
proxies are properly signed and dated. If no instructions are indicated
thereon, the proxies will be voted FOR the approval of the Merger Agreement. A
failure to vote on the Merger Agreement, in person or by proxy, will have the
same effect as a negative vote.
The Board of Directors knows of no other matters which are expected to come
before the Special Meeting. If any other matters are presented at the Special
Meeting, the persons named in the proxies will have discretion to vote thereon
in accordance with their judgment.
Execution of a proxy will not prevent a stockholder from attending the
Special Meeting or from revoking his or her proxy and voting in person. Any
stockholder giving a proxy may revoke it at any time before it is voted by
giving the Secretary of the Company a written notice of revocation bearing a
later date than the proxy, by submitting a properly executed, later-dated proxy
or by voting in person at the Special Meeting. Attendance at the Special
Meeting will not, in and of itself, constitute a revocation of a proxy. Any
written notice revoking a proxy should be sent to Technalysis Corporation, 6700
France Avenue South, Minneapolis, Minnesota 55435, Attention: Secretary.
The cost of solicitation of proxies pursuant to this Proxy Statement will
be borne by the Company. In addition to solicitation by use of the mails,
proxies may also be solicited
4
by certain directors, officers and employees of the Company in person or by
telephone or telegram. Such persons will receive no additional compensation for
such services. The Company will reimburse brokerage firms, banks and certain
other institutions holding stock in their names or those of their nominees on
behalf of other persons for reasonable out-of-pocket expenses in forwarding
proxies and proxy material to such persons.
THE MERGER
BACKGROUND OF THE MERGER
From time to time over the last ten years, various persons have contacted
management of the Company regarding the possibility of acquiring the Company.
Although none of these inquiries resulted in a definitive agreement before the
Merger Agreement, management of the Company came to believe that an acquisition
of the Company could be in the best interests of the Company's stockholders.
Prior to the first offer by Compuware, as described below, management believed
that the Company's Common Stock was undervalued in the public market. In
addition, because the average daily trading volume for the Common Stock was
quite low historically, stockholders could not sell a significant number of
shares without adversely affecting the price. In the opinion of management,
there was a serious lack of liquidity for the stockholders. For additional
reasons why the Company entered into the Merger Agreement, see "Recommendation
of the Board of Directors."
In early 1993, the Company signed a letter of intent to enter into a merger
agreement with Compuware. Under terms of the letter of intent, shareholders of
the Company were to receive $16.75 of Compuware common stock for each share of
the Company's outstanding common stock. The actual shares that would have been
received were subject to a collar which created a maximum and minimum number of
shares that could be received based on the market value of Compuware stock at
the time of closing. Due to a significant decline in the market value of
Compuware common stock (which would have resulted in the Company's shareholders
receiving a value for their Company shares much lower than the $16.75 per
share), merger discussions were terminated prior to the actual signing of a
definitive agreement. In connection with the discussions relating to the
proposed transaction, the Company's Board of Directors did a significant amount
of due diligence concerning both the possibility of a sale, and in particular, a
sale to Compuware. During the entire period of time that the proposed
transaction was bring discussed, no other potential buyers approached the
Company.
In late 1994 and early 1995, discussions again took place between the
Company and Compuware. Although no formal agreement was reached, prolonged
negotiations took place and a significant amount of time was spent by the
Company's Board of Directors considering both the possibility of a sale and,
specifically, a sale to Compuware. Although there was never a formal
announcement of the discussions, the Company's common stock price moved from the
$10 range to the $12 range based on certain statements made by stock analysts
suggesting that the Company was for sale. The $12 per share stock price
remained constant throughout 1995. It is the opinion of the Company's
management that the continuing rumors of a possible sale held the market price
of the Company's Common Stock at a higher level than should have been expected
based on the Company's operating performance. During
5
1995, two other companies approached the Company to inquire about the
possibility of a sale.
In the fall of 1995, Victor A. Rocchio, the Chairman and CEO of the
Company, experienced medical problems that forced him to cut back his activities
significantly. With this and other business factors in mind, Compuware again
approached the Company in late 1995.
The Company's Board of Directors was notified about Compuware's continuing
interest in the Company, and determined the Company should carry on negotiations
for a possible transaction. As a result of the negotiations, Compuware made
another offer to acquire the Company in December 1995. The Company's Board of
Directors determined that if they were going to consider the offer, the Company
should also have discussions with the other two companies that had inquired
about possibly acquiring it. One of these other companies did a significant
amount of due diligence and the other did a limited amount. While they both
indicated they were interested in further discussions, the amount that each
company suggested as a possible purchase price was less than the amount offered
by Compuware. During this time, members of the Board of Directors, with the
assistance of legal counsel, entered into negotiations with Compuware concerning
the terms of a possible merger. The Board of Directors also retained Houlihan,
Lokey, Howard & Zukin, Inc. ("Houlihan Lokey"), a national specialty investment
banking group, to assist the Board of Directors in evaluating the proposals and
to provide a fairness opinion to the Board of Directors with respect to the
proposal received from Compuware.
On January 9, 1996, the Board of Directors met with its legal counsel and
representatives from Houlihan Lokey to review the current proposal from
Compuware to acquire the Company in a cash merger for $14.00 per share. The
Board of Directors reviewed the proposal, discussed the values of the Company's
Common Stock suggested by the other two companies that had indicated an interest
in acquiring the Company, and listened to a presentation by representatives from
Houlihan Lokey regarding their preliminary evaluation of the value of the
Company's Common Stock and the fairness of the offer by Compuware. The Board of
Directors reviewed the proposal and the current draft of the Merger Agreement in
great detail and had extensive discussions regarding the relative nature of the
current fixed, $14.00 cash per share offer versus the variable, $16.75 stock per
share offer made in early 1993. Other items of consideration were the decline
in the Company's revenues and earnings since 1993, and Mr. Rocchio's
announcement to the Board that he intended to retire from the Company effective
February 15, 1996 due to health reasons.
At the end of the same meeting, the Board of Directors took formal action
unanimously approving the offer from Compuware, subject to receipt of a fairness
opinion from Houlihan Lokey and negotiation of a definitive merger agreement.
Late that afternoon, the Company made a public announcement of its intent to be
acquired by Compuware. The Merger Agreement was signed effective January 10,
1996.
6
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has unanimously approved the Merger
Agreement and believes that the Merger is in the best interests of the
stockholders of the Company. The Board of Directors unanimously recommends to
the stockholders that they vote FOR approval of the Merger Agreement. The Board
of Directors believes that the Company's stockholders will benefit from the
Merger.
In reaching these conclusions, the Board of Directors considered many
factors including, but not limited to, the following:
1. The terms of the Merger Agreement, including the $14.00 in cash to be
paid to the Company's stockholders for each share of the Company's common
stock they hold.
2. The opinion of Houlihan Lokey that the $14.00 per share in cash to be
paid to the stockholders is fair from a financial point of view.
3. The ability of Compuware to consummate the Merger promptly and the
availability of sufficient financing to do so.
4. The expressions of interest to acquire the Company made by other
companies.
5. The historical and recent market prices of the Common Stock and the
relative lack of liquidity for the Company's stockholders.
6. The operating results of the Company over the past several years and
in particular the results for the nine months ended September 30, 1995.
7. The present need for a change in management of the Company, resulting
from the announcement by Mr. Rocchio, the Chairman and Chief Executive
Officer, of his intention to retire due to health reasons.
OPINION OF FINANCIAL ADVISOR
At the January 9, 1996 meeting of the Company's Board of Directors,
Houlihan Lokey delivered its preliminary opinion, which it later confirmed in
writing on February 15, 1996, to the effect that, based upon the matters
presented to the Board, as of such date, the transaction contemplated by the
Merger Agreement is fair to Technalysis shareholders, from a financial point of
view.
Houlihan Lokey is a nationally recognized investment banking firm with
special expertise in, among other things, valuing businesses and securities and
rendering fairness opinions. Houlihan Lokey is continually engaged in the
valuation of businesses and securities in connection with mergers and
acquisitions, leveraged buyouts, private placements of debt and equity,
corporate reorganizations, employee stock ownership plans, corporate and other
purposes. The Board selected Houlihan Lokey because of its experience and
expertise
7
in performing valuation and fairness analyses. Houlihan Lokey received a fee of
$62,500, plus reimbursement of out-of-pocket expenses, in connection with its
fairness opinion analysis. Houlihan Lokey does not beneficially own nor has it
ever beneficially owned any interest in the Company.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. The
following is a brief summary and general description of the valuation
methodologies followed by Houlihan Lokey. The summary does not purport to be a
complete statement of the analyses and procedures applied, the judgments made or
the conclusion reached by Houlihan Lokey. Houlihan Lokey believes, and so
advised the Board, that its analyses must be considered as a whole, and that
selecting portions of its analyses and the factors considered by it, without
considering all factors and analyses, could create an incomplete view of the
process underlying its analyses and opinion.
In connection with its opinion, Houlihan Lokey has reviewed, among other
things, (i) the Company's annual reports to shareholders and Form 10-Ks for the
five fiscal years ended December 31, 1994, 10-Qs for the quarterly periods ended
March 30, 1995, June 30, 1995, and September 30, 1995 and internal financials
for the fiscal year ended December 31, 1995 (which Company management has
identified as the most current financial information available); and (ii)
reviewed the Company's internal projections for fiscal 1996, dated approximately
December 15, 1995. In addition, Houlihan Lokey has interviewed certain members
of the senior management of the Company regarding the operations, financial
condition, future prospects and projected operations and performance of the
Company and has visited the Company's headquarters in Edina, Minnesota.
Houlihan Lokey has also reviewed the reported prices and trading activity of the
Company's common stock, compared certain financial and stock market information
for the Company with that of certain other similar companies with
publicly-traded securities, reviewed certain recent business combinations in the
computer software services industry, reviewed a summary of discussions with
other parties potentially interested in acquiring the Company, and performed
such other studies and analyses as it considered appropriate.
As a basis for its fairness analysis, Houlihan Lokey determined an
appropriate range of value for the Company, relative to the cash purchase price
to be paid by Compuware. Houlihan Lokey applied the following valuation
methodologies in determining appropriate ranges of value for the Company.
SELECTED COMPARABLE PUBLIC COMPANY ANALYSIS. Houlihan Lokey reviewed
selected financial, operating and stock market information for the Company in
comparison with corresponding information of selected comparable public
companies. The selected comparable public companies in the computer programming
services industry were: Analysts International Corp., CACI International,
Computer Data Systems Inc., Computer Horizons Corporation, Computer Task Group
Inc., Compuware Corp, and Keane, Inc. (collectively referred to as the
"Comparative Public Companies"). The purpose of these analyses was to ascertain
how the Company compared to its respective peers in relation to certain
financial indicators. The multiples and ratios for each of the selected
companies were based on the
8
most recent publicly available information and selected analysts earnings
estimates, adjusted to correlate with the Company's respective fiscal year
ending dates.
HISTORICAL STOCK TRADING ANALYSIS. Houlihan Lokey reviewed the trading
prices and volumes for the Company's common stock and the relationship between
price movements of the Company's common stock and the price movements of the
common stocks of the Comparable Public Companies.
COMPARABLE TRANSACTION ANALYSIS. Houlihan Lokey performed analyses of
certain recent transactions in the computer programming services and other
related industries.
These analyses were prepared solely for the purposes of Houlihan Lokey
providing its opinion and are not appraisals or representations of prices at
which businesses or securities may actually be sold. Analyses based on
forecasts of future results are not necessarily indicative of actual future
results, which may be more or less favorable than suggested by such analyses.
These analyses are based upon numerous factors and events that are beyond the
control of the parties and their respective advisors. Hence, none of the
Company, Houlihan Lokey, or any other person, assumes responsibility if future
results are materially different from those forecast.
Houlihan Lokey has not independently verified the accuracy and completeness
of the information supplied to it with respect to the Company and does not
assume any responsibility with respect to it. Houlihan Lokey has not made any
physical inspection or independent appraisal of any of the properties or assets
of the Company. Houlihan Lokey's opinion is necessarily based on business,
economic, market and other conditions as they exist and can be evaluated by it
at the date of its opinion.
AGREEMENT AND PLAN OF MERGER
GENERAL. The Merger Agreement provides that, subject to the adoption of
the Merger Agreement by the stockholders of the Company and the satisfaction or
waiver of certain other conditions, the Company will be merged with and into
Compuware and the separate existence of the Company will cease. At the
effective time of the Merger, each share of Common Stock then issued and
outstanding (other than dissenting shares) will, by virtue of the Merger and
without any action on the part of the holders of such shares, be converted into
the right to receive $14.00 in cash, without interest. Stockholders who do not
vote in favor of the Merger Agreement and who otherwise comply with the
provisions of Sections 302A.471 and 302A.473 of the Minnesota Business
Corporation Act have the right to seek a judicial determination of the fair
value of their shares of Common Stock and to be paid such amount. See "Rights
of Dissenting Stockholders." After the Merger, holders of Common Stock will
possess no interest in or rights as stockholders of the Company; their only
right in respect of their shares of Common Stock will be to receive payment as
described above. The Merger will be treated as a purchase for accounting
purposes.
All references to and summaries of the Merger Agreement in this Proxy
Statement are qualified in their entirety by reference to the text of the Merger
Agreement, which is attached as Exhibit I to this Proxy Statement.
9
EFFECTIVE TIME. The effective time of the Merger will occur at such time
as the Certificate of Merger is duly filed with the Secretary of State of the
State of Minnesota and the Secretary of State of the State of Michigan or such
later date as may be set forth in the Certificate of Merger, all in accordance
with the Minnesota Business Corporation Act and the Michigan Business
Corporation Act, as amended (the "Effective Time"). The required filings are
expected to be made as soon as practicable after the approval of the Merger
Agreement by the Company's stockholders at the Special Meeting and the
satisfaction or waiver of all other conditions to the consummation of the
Merger. See "Conditions to the Merger."
PAYMENT FOR SHARES. The Merger Agreement provides that State Street Bank
shall serve as Compuware's agent (the "Paying Agent"), for the purpose of
exchanging the certificates formerly representing shares of Common Stock for the
$14.00 to be paid for each of such shares in the Merger.
As soon as practicable after the Effective Time, Compuware will send, or
will cause the Paying Agent to send, a Letter of Transmittal to each holder of a
certificate or certificates theretofore evidencing Common Stock of record as of
the Effective Time, other than certificates representing dissenting shares,
advising such holder of the effectiveness of the Merger and the procedure for
sending the Paying Agent such certificates in exchange for the cash to be
received therefor as a result of the Merger.
Upon surrender to the Paying Agent of such certificates, together with a
properly completed Letter of Transmittal and other documents as may be
reasonably requested, such holders will be entitled to receive a check
representing $14.00 multiplied by the number of shares of Common Stock
represented by such surrendered certificates. Until so surrendered, after the
Effective Time each certificate shall be deemed to represent for all purposes
only the right to receive such cash, and no other right, with regard to the
Company or Compuware. After the Effective Time, there shall be no further
registration of transfers of shares of Common Stock. If payment for shares of
Common Stock surrendered is to be paid to a person other than the registered
holder of such shares, the certificate so surrendered must be properly endorsed
or otherwise in proper form for transfer. Holders of options granted under the
Company's Incentive Stock Option Plans will receive equivalent options to
purchase Compuware Common Stock.
Any portion of the Merger consideration remaining with the Paying Agent six
months after the Effective Time will be turned over to Compuware, after which
time stockholders will be entitled to look, subject to applicable escheat and
other similar laws, only to Compuware for payment for their shares of Common
Stock.
STOCKHOLDERS SHOULD NOT SURRENDER THEIR COMMON STOCK CERTIFICATES BEFORE
RECEIVING TRANSMITTAL MATERIALS FROM THE PAYING AGENT AND, ACCORDINGLY, SHOULD
NOT SEND ANY STOCK CERTIFICATES WITH THE ENCLOSED PROXY CARD.
CONDITIONS TO THE MERGER. Under the Merger Agreement, the obligations of
both the Company and Compuware are subject to the satisfaction, at or before the
Effective Time, of
10
certain conditions or the waiver thereof. If any condition required to be
satisfied by a party is not satisfied by such party, and is not waived by the
other party, the Merger will not be consummated. Among such conditions are that
(i) the stockholders of the Company have duly approved the Merger Agreement;
(ii) the Board of Directors of Compuware has duly approved the Merger
Agreement; (iii) any applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 shall have expired or been terminated; (iv)
no final, nonappealable injunction or other order by any governmental entity
which prevents the consummation of the Merger has been issued and remains in
effect, and (v) all necessary consents, authorizations and approvals shall have
been obtained. On February 5, 1996, the U.S. Federal Trade Commission informed
the Company and Compuware that the Merger is exempt from filing a notification
under the Hart-Scott-Rodino Act.
The obligation of Compuware to consummate the Merger is further subject to
a number of additional conditions, any of which may be waived in whole or in
part to the extent permitted by applicable law. These additional conditions are
that (i) all representations and warranties of the Company contained in the
Merger Agreement shall continue to be true and correct; (ii) the Company shall
have performed or complied with those actions, undertakings, covenants or
agreements set forth in the Merger Agreement; (iii) on the closing date, shares
held by stockholders exercising their right to dissent shall aggregate no more
than five percent of the outstanding Common Stock; (iv) Compuware shall have
completed its due diligence investigation and the results of the investigation
shall be acceptable to Compuware, and (v) there shall have been no material
adverse change in the business or financial condition of the Company.
The obligation of the Company to complete the Merger is also subject to a
number of additional conditions, any of which may be waived in whole or in part
to the extent permitted by applicable law. These additional conditions are that
(i) all representations and warranties of Compuware contained in the Merger
Agreement shall continue to be true and correct; (ii) Compuware shall have
performed or complied with those actions, undertakings, covenants or agreements
set forth in the Merger Agreement; and (iii) the Company shall have received an
unqualified favorable fairness opinion from its investment banker by February
15, 1996.
The representations and warranties made by both the Company and Compuware
in the Merger Agreement include various representations and warranties typically
found in such agreements. See Articles 2 and 3 of the Merger Agreement attached
hereto as Exhibit I.
CERTAIN COVENANTS. With respect to the conduct of the Company's business
prior to the Effective Time, the Company has agreed that it will not, among
other things, (i) make any change in its Articles of Incorporation or Bylaws;
(ii) issue or sell any shares of its capital stock, issue any other securities
or make any other changes in its capital structure; (iii) declare, pay or make
any dividend with respect to, or purchase or redeem, any of the Common Stock,
except the $.10 per share dividend paid on February 8, 1996; or (iv) enter into,
amend, modify or terminate any material agreement, commitment or transaction.
The Company has also agreed that it will not directly or indirectly,
solicit, initiate, encourage submission of, negotiate or participate in any
proposals or offers from any person
11
other than Compuware relating to any merger with the Company or acquisition or
purchase of all or a material amount of the Company's assets or capital stock,
except that the Company can passively receive acquisition proposals from third
parties and can engage in discussions to clarify such proposals. The Company
has also agreed to notify Compuware promptly of any such proposal or offer after
it is made.
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time, whether before or after its adoption by the stockholders of
the Company, (i) by the mutual written consent of the Company and Compuware,
(ii) by either the Company or Compuware if the Merger has not been consummated
by May 31, 1996, provided that such termination may not be effected by a party
whose failure to fulfill any of its obligations under the Merger Agreement was
the reason for such non-consummation, or (iii) by either the Company or
Compuware in the event of a material misrepresentation, material breach of
warranty or breach of a material obligation by the other party. The Merger
Agreement also provides that Compuware may terminate the agreement if the
Company's Board of Directors withdraws or modifies its recommendation of the
Merger to the Company's stockholders. The Merger Agreement also provides that
the Company may terminate the agreement if it does not receive a favorable
fairness opinion by February 15, 1996. In the event of termination of the
Merger Agreement, neither party will have any liability to the other unless the
termination results from a party's material breach of any representation,
warranty covenant or obligation. The Merger Agreement does not have a provision
requiring the payment of a separate termination fee by either party in the event
of termination.
AMENDMENTS TO THE MERGER AGREEMENT. The Merger Agreement may be amended,
modified or supplemented at any time before the Effective Time by written
agreement of the Boards of Directors of both the Company and Compuware.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
As of February 20, 1996, directors and executive officers of the Company
beneficially owned, in the aggregate, 564,129 shares (25.7 percent) of the
Company's outstanding Common Stock. Such directors and executive officers will
receive an aggregate of $7,897,806 for their shares of Common Stock upon
consummation of the Merger, and are expected to vote for the Merger. These
executive officers and other employees of the Company may enter into new
employment agreements with Compuware, but no such agreements have been entered
into as of the date hereof. Victor A. Rocchio, Chairman of the Company, is
entitled to receive consulting payments from Compuware after the effective time
and through December 31, 1996 pursuant to his existing agreement with the
Company. Under this agreement, he will receive $12,332 per month.
FINANCING OF THE MERGER
The total funds required to pay the Merger consideration of $14.00 per
share for each outstanding share of Common Stock will be approximately $30.8
million. Compuware intends to finance this amount with existing funds.
12
FEDERAL INCOME TAX CONSEQUENCES
The following is a general description of the federal income tax
consequences of the Merger. However, it does not take into account the facts
and circumstances of any particular stockholder of the Company. Each
stockholder should consult his or her adviser about the specific tax
consequences to him or her of the Merger, including the application and effect
of state, local, foreign, and other tax laws.
Except for shares acquired upon the exercise of stock options immediately
prior to the Merger, stockholders will recognize gain or loss for federal income
tax purposes measured by the difference between the tax basis of their shares
and the cash received therefor. Such gain or loss will be treated as a capital
gain or loss if the Company shares exchanged for cash are held as capital assets
on the Effective Date. The receipt of cash pursuant to the exercise of
dissenter's rights with respect to the Merger will be a taxable transaction to
stockholders receiving such cash, and a dissenting stockholder will recognize
gain or loss measured by the difference between the cash so received and such
stockholder's tax basis in the Company shares exchanged therefor. Such gain or
loss will be treated as a capital gain or loss if such shares are held as
capital assets on the Effective Date.
With respect to shares acquired upon exercise of stock options immediately
prior to the Merger, stockholders will recognize income for federal tax purposes
measured by the difference between their exercise price for the options and the
cash received therefor. Such income will be treated as additional income to
such stockholders taxable as ordinary income. Such income may be subject to
federal income tax withholding.
Under the backup withholding rules contained in the Internal Revenue Code,
the Paying Agent may be required to withhold 31 percent of the gross amount of
any payments to certain stockholders. In order to avoid such backup
withholding, each stockholder (other than corporations and other persons exempt
from such backup withholding) should provide the Paying Agent with a Form W-9
with such stockholder's taxpayer identification number (i.e., social security
number or employer identification number) in accordance with instructions to be
included in the Letter of Transmittal.
THE FEDERAL INCOME TAX DISCUSSION IN THIS PROXY STATEMENT IS BASED UPON
CURRENT LAW AND IS INTENDED FOR GENERAL INFORMATION ONLY. EACH STOCKHOLDER IS
URGED TO CONSULT HIS OR HER OWN TAX ADVISER CONCERNING THE SPECIFIC TAX
CONSEQUENCES OF THE MERGER TO SUCH STOCKHOLDER, INCLUDING THE APPLICABILITY AND
EFFECT OF STATE, LOCAL, AND OTHER TAX LAWS.
RIGHTS OF DISSENTING STOCKHOLDERS
Pursuant to Sections 302A.471 and 302A.473 (the "Sections") of the
Minnesota Business Corporation Act, holders of the Company's Common Stock are
entitled to assert appraisal rights in connection with the Merger and obtain
payment of the "fair value" of their Common Stock, provided that such
stockholders comply with the requirements of the Sections. The following is a
summary of the statutory procedures to be followed by holders
13
of Common Stock electing to exercise their appraisal rights in order to perfect
such rights under the Sections and is qualified in its entirety by reference to
the Sections, the full text of which is attached to this Proxy Statement as
Exhibit III. The Sections should be reviewed carefully by stockholders who wish
to assert their appraisal rights or who wish to preserve the right to do so,
since failure to comply with those procedures will result in the loss of such
appraisal rights.
Holders of the Company's Common Stock who elect to exercise appraisal
rights must satisfy each of the following conditions: (i) such holders must file
with the Company before the taking of the vote with respect to the Merger
written notice of their intention to demand payment of the fair value of their
shares of Common Stock (this written notice must be in addition to and separate
from any proxy or vote against the Merger; neither voting against nor a failure
to vote for the Merger will constitute such a notice within the meaning of the
Sections), and (ii) such holders must not vote in favor of the Merger (a failure
to vote will satisfy this requirement, but a vote in favor of the Merger, by
proxy or in person, will constitute a waiver of such holder's appraisal rights
and will nullify any previously filed written notice of intent to demand
payment). The Company will consider a signed proxy that is returned by a
stockholder without indicating a direction as to how it should be voted as
constituting such a waiver and a vote for the Merger. If the Merger is
consummated, stockholders who fail to comply with either of these conditions
will be entitled to receive $14.00 per share in cash as provided in the Merger
Agreement, but will have no appraisal rights with respect to their shares.
All written notices should be addressed to: Technalysis Corporation, 6700
France Avenue South, Minneapolis, Minnesota 55435, Attention: Secretary, and
filed before the taking of the vote on the Merger at the Special Meeting and
should be executed by, or with the consent of, the holder of record. The notice
must reasonably inform the Company of the identity of the stockholder and the
intention of such stockholder to demand appraisal rights. In the notice the
stockholder's name should be stated as it appears on the stock certificates. A
notice may be given by a beneficial owner of shares only if a written consent of
the stockholder of record is submitted to the Company at the time of or prior to
the assertion of the right to appraisal.
After a vote approving the Merger, the Company will give written notice to
each stockholder who has filed a written notice of intent to demand appraisal
and who did not vote in favor of the Merger setting forth the address to which a
demand for payment and stock certificates must be sent by such stockholder in
order to obtain payment, and the date by which they must be received. This
notice shall also include a form for demanding payment to be completed by the
stockholder and a request for certification of the date on which the stockholder
(or the person on whose behalf the stockholder is asserting appraisal rights)
acquired beneficial ownership of the shares of Common Stock. Stockholders who
fail to demand payment or deposit their stock certificates as required by the
notice within 30 days after the notice is given will irrevocably forfeit their
appraisal rights and will be bound by the terms of the Merger.
If a demand for payment and deposit of stock certificates is duly made by a
stockholder who was a beneficial owner on or before January 9, 1996, the date of
the first
14
public announcement of the Merger (the "Public Announcement Date"), then upon
the Effective Date or the receipt of the demand, whichever is later, the Company
will pay the stockholder an amount which the Company estimates to be the fair
value of the shares of Common Stock, with interest, if any. For the purpose of
a stockholder's appraisal rights under the Sections, "fair value" means the
value of the shares of Common Stock immediately before the Effective Date and
"interest" means interest commencing five days after the Effective Date until
the date of payment at the rate provided in the Sections.
If a stockholder who became a beneficial owner of shares of Common Stock on
or prior to the Public Announcement Date believes the payment received from the
Company is less than the fair value of the shares of Common Stock, with
interest, if any, such stockholder must give written notice to the Company of
his or her own estimate of the fair value of the shares of Common Stock, with
interest, if any, within 30 days after the date of the Company's remittance and
demand payment of the difference between his or her estimate and the Company's
remittance. If the stockholder fails to give written notice of such estimate to
the Company within the 30-day time period, such stockholder will be entitled
only to the amount remitted by the Company.
The Company may withhold its remittance with respect to shares of Common
Stock for which the stockholder demanding payment was not the beneficial owner
on the Public Announcement Date. Following the Effective Date, the Company
shall mail to each such stockholder which has validly demanded payment its
estimate of the fair value of such stockholder's shares of Common Stock and
offer to pay this amount, with interest, if any, to the stockholder upon receipt
of such stockholder's agreement to accept this amount in full satisfaction. If
such stockholder believes that the Company's offer is for less than the fair
value of the shares of Common Stock, with interest, if any, such stockholder
must give written notice to the Company of his or her own estimate of the fair
value of the shares of Common Stock, with interest, if any, and demand payment
of this amount. This demand must be mailed to the Company within 30 days after
the mailing of the Company's offer. If the stockholder fails to make this
demand within the 30-day time period, such stockholder shall be entitled only to
the amount offered by the Company.
If the Company and the stockholder (including both a stockholder who
purchased shares of Common Stock prior to the Public Announcement Date and a
stockholder who purchased shares of Common Stock after the Public Announcement
Date who have complied with their respective demand requirements) cannot settle
the stockholder's demand within 60 days after the Company receives the
stockholder's estimate of the fair value of his or her shares of Common Stock,
then the Company shall file an action in a court of competent jurisdiction in
Hennepin County, Minnesota, requesting that the court determine the fair value
of Common Stock with interest, if any. All stockholders whose demands are not
settled within the applicable 60-day settlement period shall be made parties to
this proceeding.
After notice to the stockholder, the court shall institute proceedings to
determine the fair value of the shares of Common Stock. The court may appoint
one or more persons as appraisers to receive evidence and make recommendations
to the court. The court shall determine the fair value of the shares of Common
Stock, taking into account any and all
15
factors the court finds relevant, computed by any method or combination of
methods that the court, in its discretion, sees fit to use. The fair value of
the shares of Common Stock as determined by the court is binding on all
stockholders. If the court determines that the fair value of the shares of
Common Stock is in excess of the amount, if any, which the Company has remitted
to the dissenting stockholders, then the court will enter a judgment in favor of
the dissenting stockholders in an amount equal to such excess, plus interest.
Costs of the court proceeding shall be determined by the court and assessed
against the Company except that part or all of these costs may be assessed
against stockholders whose action in demanding supplemental payments are found
by the court to be arbitrary, vexatious or not in good faith.
If the court finds that the Company did not substantially comply with the
Sections, the court may assess the fees and expenses, if any, of attorneys or
experts against the Company. Such fees and expenses may also be assessed
against any party if the court finds that such party has acted arbitrarily,
vexatiously or not in good faith.
BUSINESS OF COMPUWARE CORPORATION
Compuware provides software products and professional services designed to
increase the productivity of the information systems departments of its target
market, the 15,000 largest enterprises worldwide. These companies invest
substantial resources to build and maintain large, complex mission-critical
applications. As a result, this target market can benefit most from Compuware's
product and professional services offerings. Compuware has historically focused
on the run-time environment in the mainframe market, where it has extensive
experience and has established long-term customer relationships. Compuware is
leveraging its experience and relationships by entering the client/server
market, with products and professional services in the application development,
run-time and systems management environments. For the year ended March 31,
1995, Compuware had total revenues of $533,877,000, net income of $62,097,000,
and earnings per share of $1.30. As of December 31, 1994, Compuware had
$39,643,000 of cash and cash equivalents.
Compuware was incorporated in Michigan in 1973. Compuware's executive
offices are located at 31440 Northwestern Highway, Farmington Hills, Michigan
48334-2564, and its telephone number is (810) 737-7300.
BUSINESS OF THE COMPANY
The Company was incorporated in Minnesota in 1967, and provides computer
software analysis, design and programming services to computer users and
manufacturers throughout the United States. These services are provided on
either an hourly rate or fixed price basis. Opportunities for both types of
contracts are developed by calling on potential customers, repeat business and
referrals. Most of the Company's revenue is generated from analysis, design and
programming contracts in the development of general business applications on an
hourly-rate basis. Services are provided primarily at the customer's location,
utilizing the customer's computer system.
16
The Company contracts primarily on a time and material basis at a
negotiated hourly rate which varies depending on the skill of the technical
personnel assigned to a given project and the customer rates prevailing in the
area. The contract term generally runs from two to six months although, in some
cases, the contract can run for more than one year. Fees for services rendered
on a time and material basis are payable monthly.
MARKET PRICES OF COMMON STOCK
Since February 19, 1985, the Common Stock of the Company has traded on the
NASDAQ National Market System under the symbol TECN. The information contained
in the following table was derived from NASDAQ's National Market System
Statistical Reports. The price ranges set forth the low and high prices of
transactions as reported for the quarters indicated.
PRICE RANGE
----------------------------------
LOW HIGH
--- ----
1994 1st Quarter 10-1/2 12-1/4
2nd Quarter 11 12-1/2
3rd Quarter 10-3/4 11-3/4
4th Quarter 10-1/4 11-3/4
1995 1st Quarter 10-1/4 12-1/4
2nd Quarter 11-1/2 12
3rd Quarter 11 12-3/4
4th Quarter 12 12-3/4
1996 1st Quarter
(through February 20) 12 13-1/2
The approximate number of record holders of Common Stock as of February 20,
1996 was 320.
Annual dividends on the Common Stock of the Company have been paid since
1972. Payment of semi-annual dividends began for fiscal year 1989. The total
dividends paid for and 1994 and 1995 were $.57 per share and $.39 per share,
respectively.
SELECTED FINANCIAL DATA
The following selected financial data for the five years ended December 31,
1994 have been derived from the Company's Annual Report to Stockholders for the
year ended December 31, 1994, a copy of which accompanies this Proxy Statement.
The following selected financial data for the nine-month periods ended September
30, 1995 and 1994 have been derived from the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1995, a copy of which accompanies this
Proxy Statement:
17
YEARS ENDED DECEMBER 31
-----------------------------------------------------------------------
1994 1993 1992 1991 1990
Revenues $16,844,569 $17,886,361 $19,144,082 $18,420,849 $20,531,385
Earnings Before Taxes 2,054,942 2,494,779 1,969,108 3,148,104 3,604,632
Net Earnings 1,222,942 1,484,779 1,214,608 1,888,104 2,162,632
Total Assets 8,919,767 9,061,158 8,933,870 8,619,952 7,918,472
Long Term Obligations -0- -0- -0- -0- -0-
Per Common Share:
Net Earnings $.56 $.68 $.56 $.87 $1.00
Cash Dividends .57 .55 .53 .51 .48
Book Value 3.52 3.54 3.40 3.36 2.98
NINE MONTHS ENDED SEPTEMBER 30
------------------------------
1995 1994
Revenues $14,063,137 $12,675,931
Earnings Before Taxes 800,886 1,722,075
Net Earnings 476,886 1,025,075
Total Assets 8,265,674 8,647,903
Long Term Obligations -0- -0-
Per Common Share:
Net Earnings $.22 $.47
Cash Dividends .29 .28
Book Value 3.48 3.74
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of Common Stock of the
Company beneficially owned as of February 20, 1996 by each person known to the
Company to be the beneficial owner of five percent or more of the Company's
Common Stock, by each director and executive officer, and by all directors and
executive officers as a group, and the percentage of outstanding shares so owned
at that time:
18
SHARES PERCENTAGE
NAME OWNED OWNED
---- ------ -----
Wellington Management Company 183,700 8.37%
75 State Street
Boston, MA 02109
T. Rowe Price Associates, Inc. 168,800 7.7%
100 East Pratt Street
Baltimore, MD 21202
Victor A. Rocchio, 338,525(1) 15.4%
Chairman, Treasurer and
Director
Milan L. Elton, 114,750 5.2%
President and CEO, Secretary
and Director
Robert S. Erickson, 59,347 2.7%
Director
Edward D. Zimmer, 39,100 1.8%
Director
John M. Schulzetenberg, 1,000 *
Director
Franklin E. Triplett, 11,407 *
Director
All directors and officers as 564,129(1) 25.7%
a group (6 in number)
- - - ---------------------
* Less than one percent.
(1) Includes 35,025 shares owned by Mr. Rocchio's spouse.
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of McGladrey & Pullen, LLP has been retained by the
Company since 1992 to examine the Company's accounts, and to perform other
appropriate accounting services. Representatives of the firm are not expected
to attend the Special Meeting.
OTHER MATTERS
As of the date of this statement, management of the Company has no
knowledge of any other business which will be presented for consideration at the
meeting. However, if any matters other than those referred to above should
properly come before the meeting, it is
19
the intention of the persons named in the enclosed Proxy to vote such Proxy in
accordance with their best judgment.
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
It is not now anticipated that there will be an annual meeting in 1996.
However, if the Merger is not consummated, an annual meeting will be held later
in 1996, and stockholder proposals will be submitted if received within a
reasonable period of time before the meeting.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission are incorporated by reference:
(a) The Company's Annual Report on Form 10-K for the year ended December
31, 1994;
(b) The sections in the Company's Annual Report to the stockholders for
the year ended December 31, 1994 titled Selected Financial Data, Management's
Discussion and Analysis of Financial Condition and Results of Operations, and
Market for the Registrant's Common Equity and Related Stockholder Matters; and
(c) All other reports filed by the Company pursuant to Section 13 or 15 of
the Securities Exchange Act of 1934 since December 31, 1994.
The Company will provide without charge to each stockholder, upon written
or oral request and by first class mail or other equally prompt means, a copy of
any or all of the documents referred to above which have been incorporated in
this Proxy Statement by reference, other than exhibits to such documents which
are not specifically incorporated by reference into the information that this
Proxy Statement incorporates. Requests for such copies should be directed to
Mr. Milan L. Elton, President, Technalysis Corporation, 6700 France Avenue
South, Minneapolis, Minnesota 55435; telephone number
(612) 925-5900.
20
EXHIBIT I
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Agreement"), dated as of January 10,
1996, is between Technalysis Corporation, a Minnesota corporation
("Technalysis") and Compuware Corporation, a Michigan corporation ("Compuware").
Recitals
The Board of Directors of each of Compuware and Technalysis has deemed it
advisable and in the best interests of their respective companies and such
companies' shareholders that Technalysis be merged with and into Compuware (the
"Merger") and, accordingly, has approved this Agreement.
The parties agree as follows:
1. THE MERGER.
1.1 TERMS OF THE MERGER.
(a) On the Effective Date of the Merger as defined in Section
1.1(c) below, Technalysis will be merged with and into Compuware,
which will be, and is sometimes referred to as, the "Surviving
Corporation." On the Effective Date of the Merger, the separate
existence of Technalysis will cease, and the Surviving Corporation
will have all the rights and liabilities of each of Technalysis and
Compuware.
(b) The closing of the Merger (the "Closing") will occur on (i)
the 1st day of April 1996 or (ii) a different date as is mutually
agreeable to the parties. The date on which the Closing occurs will
be referred to as the ("Closing Date."
(c) Simultaneously with the Closing, Technalysis and Compuware
(i) will execute and file all required certificates and documents with
the appropriate governmental agencies or authorities, and (ii) will
take all such other actions as may be required under applicable law to
make the Merger effective. The date on which the Merger shall be
effective in accordance with the Certificates of Merger shall be the
"Effective Date of the Merger."
(d) The Merger will be structured so that it will be accounted
for by Compuware as a purchase.
1
1.2 MERGER CONSIDERATION AND CONVERSION OF SHARES.
(a) For purposes of this Agreement, the following terms will
have the following meanings:
(i) "Compuware Stock Price" means the average closing price
of shares of the common stock of Compuware ("Compuware Common
Stock"), as quoted on the National Association of Securities
Dealers Automated Quotation System National Market system (the
"NASDAQ/NM") for the five business days prior to the Closing
Date.
(ii) "Technalysis Common Stock" means the shares of common
stock of Technalysis quoted on the NASDAQ/NM.
(iii) "Outstanding Technalysis Common Stock" means the
number of shares of outstanding Technalysis Common Stock at the
close of business on the Effective Date of the Merger.
(iv) "Exchange Rate" means $14.00 cash.
(v) "Merger Consideration" means the cash paid for all the
shares of Technalysis Common Stock.
(vi) "Exchange Ratio" means the amount calculated by
dividing $14.00 by the Compuware Stock Price.
(b) Except as otherwise provided, on the Effective Date of the
Merger, each share of Outstanding Technalysis Common Stock will be
cancelled and retired and will cease to exist.
(i) Such consideration will be paid at the Closing as
follows:
(A) In exchange for such shares of Outstanding
Technalysis Common Stock, Compuware will make
payment pursuant to Section 1.3 to each holder of
Technalysis Common Stock equal to the product of
the number of shares of Technalysis Common Stock
transferred by such holder to Compuware multiplied
by the Exchange Rate.
(c) By virtue of the Merger and without any further action,
every share of Technalysis Common Stock, every option, whether
exercised or unexercised, or right to convert into or to acquire any
shares of Technalysis Common Stock, outstanding as of the Effective
Date of the Merger, unless otherwise specifically provided for in this
Section 1.2 or Section 1.7, will be cancelled and retired and will
cease to exist and will not be converted into
2
stock or other securities, or the right to acquire stock or
other securities, of the Surviving Corporation or into cash or the
right to receive cash.
(d) Notwithstanding anything to the contrary in this Agreement
the maximum amount that Compuware will be required to pay to or for
the benefit of the holders of Outstanding Technalysis Common Stock,
assuming that there are no dissenting shareholders pursuant to
applicable law, will be the amount as defined in Section 1.2(b)(i)(A).
1.3 EXCHANGE OF CERTIFICATES.
(a) Compuware has designated State Street to act as exchange
agent (the "Exchange Agent") in connection with the Merger. The
actions of the Exchange Agent, and the exchange of any certificate
representing shares of Outstanding Technalysis Common Stock
("Certificate" or "Certificates") will be governed by the terms and
conditions of an Exchange Agreement among Compuware, Technalysis and
the Exchange Agent, in the form attached hereto as Exhibit 1.3(a) (the
"Exchange Agreement").
(b) Until surrendered and exchanged in accordance with the
Exchange Agreement, each Certificate will, after the Effective Date of
the Merger, represent solely the right to receive the portion of the
Merger Consideration for the number of shares of Technalysis Common
Stock evidenced by such Certificate and will have no other rights.
From and after the Effective Date of the Merger, the Surviving
Corporation would be entitled to treat any Certificate that has not
yet been surrendered for exchange as having been converted,
notwithstanding any failure to surrender such Certificate.
(c) At the Effective Date of the Merger, the stock transfer
books of Technalysis will be closed and no transfer of shares of
Technalysis Common Stock will thereafter be made. If, after the
Effective Date of the Merger, any Certificate representing any such
shares is presented, it will be cancelled, retired and exchanged as
provided in this Agreement.
1.4 FURTHER ASSURANCES. Each party and its officers and directors
will execute and deliver all proper documents and do all things necessary
or proper to vest title in any property or rights of Technalysis in the
Surviving Corporation or otherwise to carry out the purposes of this
Agreement.
1.5 BOARD OF DIRECTORS. As soon as practicable after the date of
this Agreement, Technalysis, acting through its Board of Directors, will:
(a) give notice of and hold a meeting of its shareholders, or
otherwise solicit the requisite consent of such shareholders, for the
purpose of adopting and approving this Agreement and all agreements
and documents executed and/or delivered in connection with this
Agreement or the Merger
3
(collectively, including this Agreement, the "Merger Agreements"), the
Merger and the other transactions contemplated by the Merger
Agreements (the "Transactions");
(b) recommend, through its Board of Directors, such shareholder
approval; and
(c) use its best efforts to obtain the necessary vote or written
consent of its shareholders required by applicable law in favor of
adoption and approval of the Merger Agreements and the Transactions.
1.6 DISSENTERS' RIGHTS; EFFECT OF ACCEPTANCE OF THE MERGER
CONSIDERATION.
(a) Notwithstanding anything to the contrary in this Agreement,
any shares of Outstanding Technalysis Common Stock outstanding
immediately prior to the Effective Date of the Merger held by a holder
who has demanded and perfected the right, if any, for appraisal of
such shares in accordance with applicable law and who, as of the
Effective Date of the Merger, has not effectively withdrawn or lost
such right to such appraisal will not be converted into or represent a
right to receive the Merger Consideration, but such holder will be
entitled only to such rights as are granted by applicable law, and the
Merger Consideration will be reduced with respect to the shares of
Outstanding Technalysis Common Stock with respect to which the dissent
right is exercised.
(b) Technalysis will give Compuware prompt written notice of any
documents or communications served pursuant to applicable law or
otherwise received by Technalysis relating to any shareholder's rights
of appraisal or dissent.
(c) Technalysis will not, except with the prior written consent
of Compuware, make any payment with respect to any demands for
appraisals of any shares of Outstanding Technalysis Common Stock,
offer to settle or settle any such demands or approve any withdrawal
of any such demands.
(d) By voting for the Merger or by voting against the Merger and
not demanding and perfecting any appraisal or dissenters' rights and
accepting any of the Merger Consideration, a shareholder of
Technalysis will be deemed to have adopted and approved of the terms
and conditions of the Merger Agreements.
1.7 TECHNALYSIS OPTIONS. The Technalysis Corporation 1982 Incentive
Stock Option Plan and the Technalysis Corporation 1992 Incentive Stock
Option Plan (the "Option Plans") and options to acquire shares of
Technalysis Common Stock under the Option Plans (the "Technalysis Options")
will be treated as follows:
4
(a) By virtue of the Merger and without any further action on
the part of any person or entity:
(i) Compuware will assume the obligations of Technalysis
under the Option Plans, and the Option Plans will become known as
the Compuware Corporation Incentive Stock Option Plan (the "New
Compuware Option Plan").
(ii) Each Technalysis Option will be automatically converted
into an option under the New Compuware Option Plan (each a "New
Compuware Option" and collectively, the "New Compuware Options")
to purchase the number of shares of Compuware Common Stock equal
to the number of shares of Technalysis Common Stock for which
such Technalysis Option was exercisable immediately prior to the
Merger multiplied by the Exchange Ratio. The exercise price for
the New Compuware Options will be the exercise price for the
Technalysis Option divided by the Exchange Ratio. All of the
other terms and conditions of such New Compuware Option will be
identical to the terms and conditions of such Technalysis Option
immediately prior to the Merger, except that Technalysis Options
for 8,000 shares of Technalysis Common Stock granted under the
1992 Incentive Stock Option Plan will be fully vested.
(iii) Notwithstanding the foregoing, no fractional
shares of Compuware Common Stock will be issued with respect to
any such New Compuware Option and any rights for fractional
shares of Compuware Common Stock thereunder shall be null and
void.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF TECHNALYSIS. Technalysis
represents, warrants and covenants to Compuware, as of the date of this
Agreement, through and including and as of the Effective Date of the
Merger, as follows:
2.1 ORGANIZATION; QUALIFICATION. Technalysis is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite power and authority
to own, lease and operate its properties and to carry on its business as it
is now being conducted and as proposed to be conducted. Technalysis is duly
qualified or licensed and is in good standing to do business in each
jurisdiction in which the nature of the business conducted by it has made
its qualification or licensing a legal requirement, except where failure to
qualify would not be material.
2.2 JURISDICTIONS OF QUALIFICATION SCHEDULE 2.2 . Attached hereto is
a true and complete list of each jurisdiction in which Technalysis is
qualified or licensed to do business.
2.3 NO SUBSIDIARIES OR OTHER INVESTMENTS OR INTERESTS. Except as set
forth on Schedule 2.3 attached hereto, Technalysis does not have or own, or
have any
5
right to acquire, and has never had or owned, or had any right to
acquire, directly or indirectly, any securities or other direct or
indirect ownership or other interest in any corporation or other entity.
2.4 CAPITALIZATION. The authorized capital stock of Technalysis
consists of 5,000,000 shares of Technalysis Common Stock, 2,202,803 shares
of which are issued and outstanding at December 18, 1995. All of the
shares of Technalysis Common Stock have identical rights, benefits and
attributes.
(a) All the outstanding shares of Technalysis Common Stock are
duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights.
(b) Substantially all of the outstanding shares of Technalysis
Common Stock have been duly registered with the Commission in
accordance with all applicable laws, rules and regulations and of such
shares all have been duly listed on the NASDAQ/NM in accordance with
all applicable rules and regulations.
(c) To Technalysis' knowledge, Schedule 2.4(d) attached hereto
lists all persons or entities who beneficially own 5% or more of the
issued and outstanding shares of Technalysis Common Stock.
(d) Since January 1, 1992, Technalysis has not issued any shares
of Technalysis Common Stock other than pursuant to the exercise of
Technalysis Options outstanding, which additional shares of
Technalysis Common Stock and the holders thereof are accurately and
completely described on Schedule 2.4(e) attached hereto.
(e) Except as set forth in Schedule 2.4(f) attached hereto,
there are no voting trusts or other agreements or understandings to
which Technalysis is a party or of which Technalysis has knowledge
with respect to the voting of any of the capital stock of Technalysis.
2.5 TECHNALYSIS OPTIONS AND RIGHTS TO ACQUIRE STOCK.
(a) Schedule 2.5 attached hereto is a true and complete list and
description of all of the Technalysis Options. On or prior to the
Effective Date of the Merger, Technalysis will provide Compuware with
true and complete copies of all of such agreements and documents.
(b) Each of the Option Plans, including, without limitation, all
amendments thereto and modification thereof (i) was adopted in
compliance with and complies with all applicable laws, rules and
regulations, and (ii) was approved by the shareholders and the Board
of Directors of Technalysis. Without limiting the generality of the
foregoing, all shareholder, Board of Director or other approvals have
been obtained that are required under
6
applicable laws, rules and regulations or that are required for each
of the Option Plans to obtain the benefits of "qualified" status under
the Code and the benefits of the rules and regulations of the
Commission. With respect to each of the Option Plans, all required
registration statements (including, without limitation, Form S-8
registration statements) have been filed with the Commission, and all
notifications for listing all shares obtainable on the exercise of all
of the Technalysis Options have been filed with NASDAQ-NM.
(c) Other than the Technalysis Options and the agreements and
documents listed on Schedule 2.5 there is no subscription, option,
warrant, call, right, convertible security, contract, agreement,
commitment, understanding or arrangement relating to the issuance,
sale, delivery or transfer of Technalysis or of any of the securities
of Technalysis, to which Technalysis is a party.
2.6 AUTHORITY RELATIVE TO THE MERGER AGREEMENTS.
(a) Before the Closing Date, the Board of Directors of
Technalysis (i) will approve the Merger Agreements and the
Transactions, (ii) will authorize the execution, delivery and
performance of the Merger Agreements and (iii) will direct that the
Merger Agreements and the Transactions be submitted to the
shareholders of Technalysis for approval and adoption at a meeting or
by written consent. No other corporate authorizations or proceedings
on the part of Technalysis are necessary to consummate any of the
Transactions.
(b) Each of the Merger Agreements to which Technalysis is a
party will be duly and validly executed and delivered by Technalysis
and will constitute a valid and binding agreement of Technalysis,
enforceable against Technalysis in accordance with its respective
terms.
(c) Technalysis has the power and authority to execute and
deliver the Merger Agreements and, upon appropriate vote or consent of
its Board of Directors and its shareholders in accordance with
applicable law and Section 1.6 above, to consummate the Transactions.
2.7 NO CONFLICTS; CONSENTS. The execution and delivery of the Merger
Agreements, the consummation of the Transactions, and compliance by
Technalysis with any of the provisions of the Merger Agreements will not:
(a) violate any provision of the Articles of Incorporation or
Bylaws of Technalysis or any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to
Technalysis or any of its properties or assets, except where such
failure would not be material;
(b) violate, or conflict with, or result in a breach of any
provision of or constitute a default under, or any event which, with
or without due
7
notice or lapse of time, or both, would constitute a default under,
or result in the termination of, or accelerate the performance
required by, or result in the creation of any Lien, defined in
Section 2.11(a) below, upon any of the properties or assets of
Technalysis under, any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to
which Technalysis is a party, or by which Technalysis or any of its
properties or assets may be bound or affected, including, without
limitation, any agreement, arrangement, document, policy or obligation
disclosed or required to be disclosed in any of the Exhibits or
Schedules to this Agreement, except where such failure would not be
material; or
(c) require any consent, approval, authorization or permit of or
from, or filing with or notification to, any court, government,
governmental authority or other regulatory or administrative agency or
commission, domestic or foreign including, without limitation the
NASDAQ (each, a "Governmental Entity"), except (i) pursuant to the
Securities Act and the Securities Exchange Act of 1934, as amended
("Exchange Act"), (ii) filing articles and certificates of merger
pursuant to the laws of any state, (iii) filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), or (iv) consents, approvals, authorizations, permits,
filings or notifications which, if not obtained or made, will not, in
any Material way, have an adverse effect on the Merger or the
business, prospects, assets, properties or condition (financial or
otherwise) of Technalysis.
2.8 REPORTS. Technalysis agrees to furnish Compuware with true and
complete copies of its (a) Annual Reports on Form 10-K for the years ended
December 31, 1992, 1993 and 1994, as filed with the Commission (b) proxy
statements relating to all meetings of its shareholders, whether annual or
special, since 1989, (c) all other reports or registration statements filed
by or on behalf of Technalysis with the Commission since December 31, 1989,
(d) audited annual statements for years ended December 31, 1992, 1993, 1994
and 1995 when completed. As of their respective dates, such reports and
statements did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
2.9 REAL PROPERTY. Technalysis does not own or have any right to
acquire any real property.
2.10 PERSONAL PROPERTY.
(a) Except as disclosed on Schedule 2.10(a) attached hereto,
Technalysis has good and marketable title to, and the right to use,
all of the personal property reflected in the audited December 31,
1995 financial statements of Technalysis when available, or acquired
since the date of such financial statements, free and clear of all
liens, security interests, charges and claims ("Liens").
8
(b) Technalysis has maintained its real property, personal
property, buildings, fixtures and structures in a reasonable,
businesslike manner. Except as provided in Schedule 2.10(b) attached
hereto, there are no defects in such property, buildings, fixtures and
structures and such real and personal property, buildings, fixtures
and structures are in good operating condition and repair, ordinary
wear and tear excepted, except where such defects would not be
material.
2.11 REAL AND PERSONAL PROPERTY LEASES. Schedule 2.11 attached hereto
is a true and complete list of all leases of real or personal property to
which Technalysis is a party, whether as lessor or lessee.
2.12 LICENSES AND PERMITS. Schedule 2.12 attached hereto is a true
and complete list of all licenses, franchises, permits, registrations and
other authorizations, and all applications therefor (collectively, the
"Permits"), of any Governmental Entity necessary to, or required by,
Technalysis in the conduct of its business. Except as described in
Schedule 2.12, Technalysis has maintained all of the Permits in full force
and effect, is in compliance with the terms and conditions of the Permits,
except where such failure would not be material, and has not received
notice of any violation thereof. Technalysis has, and after the Merger the
Surviving Corporation will have, the continued unrestricted right to use
the Permits. Technalysis has not received any notice that any revocation
or limitation of any of the Permits is threatened or pending.
2.13 CERTAIN TRANSACTIONS.
(a) Schedule 2.13(a) attached hereto is a true and complete list
and brief description of all contracts, agreements or other
transactions entered into or agreed to within the past three years
(including, without limitation, all oral contracts and outstanding
bids or offers for the foregoing), involving Technalysis with respect
to which any officer, director, employee or shareholder of
Technalysis, or any person related to any of the foregoing by blood or
marriage, is or was a party or is or was in any other way involved.
True and complete copies of all such contracts and all documentation
relating to such transactions, including, without limitation, all
amendments thereto and modifications thereof, have been delivered to
Compuware prior to the date of this Agreement.
(b) Schedule 2.13(b) attached hereto is a true and complete list
and description of each (i) customer of Technalysis who has received
products or services from Technalysis and (ii) to the best knowledge
of Technalysis, each supplier of products or services to Technalysis,
for value aggregating more than $25,000 annually within any of the
past three years, together with the dollar amounts purchased for each
of such years.
2.14 COMPLIANCE WITH APPLICABLE LAW. Except as provided in Schedule
2.14 attached hereto, to the best of Technalysis' knowledge, the business
and
9
activities of Technalysis (a) are presently being conducted in compliance
with all requirements of law and all requirements of any Governmental
Entities having jurisdiction over Technalysis, its business or activity
and (b) were not conducted in violation of any of such laws or such
requirements within the past five years. Technalysis has not failed
to file with any Governmental Entity or other third party any statement,
report, information or form required by any applicable law, regulation or
order. To the best of Technalysis' knowledge, there is no pending or
threatened change of any law, regulation, order, license or permit,
including, without limitation, the Permits, which could adversely affect
the business, prospects, assets, properties or condition (financial or
otherwise) of Technalysis. Except as provided in Schedule 2.14,
Technalysis has not, within the past five years, received a notice of
violation of, been threatened with a charge of violating, or been under
investigation with respect to a possible violation of, any provision of any
requirement, or decree of any Governmental Entity which has not been
complied with, rescinded or resolved. Except as set forth in Schedule
2.14, no investigation or review by any Governmental Entity concerning any
such possible violation by Technalysis is pending or, to the knowledge of
Technalysis, threatened, nor has any Governmental Entity indicated an
intention to conduct the same.
2.15 FINANCIAL STATEMENTS.
(a) Technalysis agrees to deliver to Compuware true and complete
copies of the audited financial statements of Technalysis as of
December 31, 1992, 1993, 1994 and 1995, when delivered, as audited by
McGladrey & Pullen, independent certified public accountants, together
with the notes thereto and all supplemental information in respect
thereof. Unaudited financial statements for 1995 will be provided to
Compuware. Prior to the Effective Date of the Merger, Technalysis
shall deliver to Compuware within thirty (30) days after the end of
each calendar month after December 31, 1995, true and complete copies
of the unaudited financial statements of Technalysis for each such
month after December 31, 1995. All of the foregoing, together with
any financial statements in the reports furnished to Compuware as
described in Section 2.8 above, are referred to as the "Financial
Statements". Technalysis has, on or before the date of this Agreement,
delivered to Compuware true and complete copies of all management
letters received by Technalysis since December 31, 1989.
(b) The audited Financial Statements are true and complete, are
in accordance with the books and records of Technalysis and have been
prepared in accordance with GAAP, on a basis consistent with such
statements for prior periods. Each of the audited balance sheets
included in the Financial Statements fairly presents, as of its date,
the financial condition and assets and liabilities of Technalysis.
Each of the audited income statements and statements of changes in
financial position included in the Financial Statements fairly
presents the results of operations of Technalysis for the relevant
period.
10
(c) Except as set forth on Schedule 2.16, Technalysis has not
written off, nor will it write off any material account, note or other
receivable or other asset set since the 1994 Financial Statements.
2.16 RECEIVABLES. Except as set forth on Schedule 2.16, all account,
note and other receivables of Technalysis ("Receivables") shown in any of
the Financial Statements, including the most recent monthly Financial
Statements, arose in the ordinary course of business at the aggregate
amounts thereof and are valid, current and collectible within customary
payment terms, net of the amount of allowance for doubtful accounts. The
amount of allowance for doubtful accounts on the most recent Financial
Statement shall not be greater than the amount therefor as set forth in
Technalysis' audited December 31, 1995 Financial Statements ("Allowance")
when delivered. None of the Receivables is subject to any offset,
recoupment, set-off or counter-claim and there are no facts or
circumstances, whether asserted or unasserted, that could give rise to any
such claim. Except as set forth on Schedule 2.16 attached hereto, no
Receivables are contingent upon any obligation or contract. No person or
entity has any Lien on any of the Receivables, and no agreement for
deduction or discount has been made or authorized with respect to any of
the Receivables. All Receivables, whether or not reflected on any of the
Financial Statements, are valid obligations of the debtor and have arisen
only in the ordinary course of business in accordance with the debtor's
normal credit policies.
2.17 ABSENCE OF UNDISCLOSED LIABILITIES. Technalysis does not have any
claim, liability, commitment, obligation or indebtedness, whether as
primary obligor, guarantor or otherwise, and whether accrued, absolute,
contingent or otherwise known or unknown, and whether due or to become due,
other than (a) those reflected in the audited December 31, 1995 Financial
Statements when delivered, (b) routine accounts payable incurred by
Technalysis in the ordinary course of business since December 31, 1995 when
delivered which have not been invoiced to Technalysis as of the date of
this Agreement, (c) those disclosed in Schedule 2.17 attached hereto, or
(d) any other items which are not material.
2.18 GUARANTEES. Technalysis does not have any power of attorney
outstanding or any obligation or liability as guarantor, surety, cosigner,
endorser, co-maker, indemnitor or in any other capacity in respect to the
obligations of any person, corporation, partnership, joint venture,
association, organization or other entity.
2.19 TAX MATTERS.
(a) Technalysis has provided Compuware with true and complete
copies of the consolidated federal, state, local and foreign income
tax returns filed by Technalysis since January 1, 1985, and state
sales and use tax returns filed by Technalysis since January 1, 1992.
(b) Except as set forth on Schedule 2.19(b) attached hereto,
Technalysis has duly filed all tax or tax information returns with
respect to any
11
taxes which it is required to have filed on or prior to the date of
this Agreement. All such tax or tax information returns are, or
will be when filed, true and complete. Except as set forth on
Schedule 2.19(b) attached hereto, Technalysis has duly paid all taxes
due and payable to any federal, state, county, local, foreign or other
taxing authority, or claimed to be due and payable, including, without
limitation, any penalty or interest relating to any of such taxes.
(c) Except for those withholdings set forth on Schedule 2.19(c)
attached hereto, all taxes which Technalysis was required by law to
withhold or collect have been duly withheld or collected and, to the
extent required, have been paid over to the proper Governmental
Entities on a timely basis, including, without limitation, all taxes
in connection with amounts owing to employees, creditors, independent
contractors and third parties.
(d) Except as set forth on Schedule 2.19(d) attached hereto,
none of the tax returns of Technalysis have been examined by the
Internal Revenue Service (the "IRS"), any other taxing authority or
any other Governmental Entity, and no inquiry with respect to
Technalysis' taxes or tax returns is being made or has been made by
the IRS, any other taxing authority or any other Governmental Entity.
Except as set forth on Schedule 2.19(d) attached hereto, no state of
facts exists which could constitute grounds for any material tax
liability with respect to Technalysis or any of its properties or
assets. There are no outstanding agreements or waivers extending the
statutory period of limitations applicable to any tax return of
Technalysis for any period.
(e) None of the assets owned by Technalysis has an adjusted
basis for federal tax purposes in excess of the fair market value of
such asset.
(f) Technalysis has not made any payments nor is it obligated to
make any payments that would not be deductible under Section 28OG of
the Code. Technalysis has not made, nor is Technalysis required to
make, any adjustment under Section 481(a) of the Code by reason of a
change in accounting methods or otherwise.
(g) Except as disclosed on Schedule 2.19(g) attached hereto,
Technalysis is not a party to any joint venture or partnership.
(h) Technalysis' total liability for unpaid federal, state,
local and foreign taxes due for each reporting period beginning after
the most recent reporting period for which a return or report has been
filed and ending on or before the Closing Date will not exceed such
liability as disclosed in the Financial Statements.
2.20 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Schedule 2.20 attached hereto, since November 30, 1995, Technalysis has
conducted
12
its business in the usual and customary manner, in the ordinary
course and consistent with past practices and, without limiting the
generality of the foregoing:
(a) Technalysis has not made any change in its Articles of
Incorporation, Bylaws or authorized or issued or sold securities,
other than shares of Technalysis Common Stock issued pursuant to the
Technalysis Options. Technalysis has not (i) issued or sold any
options, warrants to purchase, scrip, rights to subscribe for, calls
or commitments of any character whatsoever relating, to any shares of
capital stock, bonds or other securities of Technalysis, (ii)
purchased or entered into any arrangement or contract with respect to
the purchase or voting of shares of its capital stock, (iii) entered
into any call, demand, contract, understanding or arrangement with
respect to any shares of its capital stock, bonds or other securities,
(iv) adjusted, split, combined or reclassified any of its capital
stock, bonds or other securities, or (v) made any other changes in its
capital structure.
(b) Technalysis has not borrowed any amount and has not
incurred, assumed, become subject to or guaranteed any liability,
whether absolute or contingent.
(c) Technalysis has not made any changes in its practices or
methods of accounting other than as disclosed in the Financial
Statements.
(d) Technalysis has not made any change in or introduced any
pension, retirement, profit sharing or bonus arrangement or other
employee welfare, benefit arrangement or other Benefit Plan (as
defined in Section 2.25(a) below).
(e) Technalysis has not suffered any adverse change in its
business, prospects, operations, operating results, properties,
assets, liabilities, working capital, cash, reserves, earnings or
condition (financial or otherwise).
(f) Technalysis has not suffered any event or condition of any
character which, either individually or in the aggregate, could
adversely affect its business, prospects, operations, operating
results, properties, assets, liabilities, working capital, reserves,
earnings or condition (financial or otherwise).
(g) Technalysis has not suffered any damage, destruction or
loss, whether covered by insurance or not.
(h) Technalysis has not declared, set aside, made or paid any
dividend in excess of ten cents (.10) per share, distribution or
payment, whether in cash, stock, property or any combination thereof
with respect to any of its securities (including, without limitation,
Technalysis Common Stock) nor has it reclassified any of such
securities (including, without limitation, Technalysis Common Stock).
13
(i) Technalysis has not instituted any change with respect to
the management or supervisory personnel of Technalysis. Technalysis
has used its best efforts to preserve intact all of its business
organizations and to retain the services of its officers and key
employees.
(j) Technalysis has not increased any salary, wages,
compensation or fringe or other benefits payable or to become payable
to its officers, directors or employees, except for any such increases
that are required by state or federal minimum wage laws without
Compuware's concurrence.
(k) Technalysis has exercised its best efforts to maintain the
good will of suppliers, customers and employees of, and others having
business relationships with, Technalysis.
(l) The Board of Directors of Technalysis has not adopted any
resolution giving to any holder of Technalysis Common Stock appraisal,
dissenters' or similar rights.
(m) No amendment has been made to any Benefit Plan and no
arrangement has been adopted which would be a "Benefit Plan."
(n) Technalysis has not made any tax election nor has it settled
or compromised any income or other tax liability or refund.
(o) Technalysis has not paid, discharged or satisfied any claim,
liability or obligation, whether absolute, accrued, asserted or
unasserted, contingent or otherwise, other than the payment discharge
or satisfaction, in the ordinary course of business consistent with
past practices or in accordance with their terms, of liabilities
reflected or reserved against in the balance sheet.
(p) Technalysis has not entered into, amended, modified or
terminated any material agreement, commitment or transaction.
(q) Technalysis has not made any provision for price discounts,
markdowns or other special considerations in respect of its goods or
services.
(r) Technalysis has not entered into any agreement or
understanding to do any of the foregoing.
2.21 CERTAIN AGREEMENTS. Except as set forth on Schedule 2.21
attached hereto, Technalysis is not a party to, nor is it negotiating in
respect of, any oral or written agreement, offer, bid or commitment which
creates or would create if accepted a liability or obligation on the party
of Technalysis or a third party.
14
2.22 PATENTS, TRADEMARKS AND SIMILAR RIGHTS.
(a) Schedule 2.22(a) attached hereto contains a true and
complete listing of all patents, trademarks, service marks, trade
names and registered copyrights included in the Proprietary Rights,
(as defined in Subsection (b) below), and all applications, filings
and registrations with respect thereto, and all of said Proprietary
Rights are valid and in full force and effect.
(b) Except as indicated on Schedule 2.22(b) attached hereto,
Technalysis is the sole owner, free from any Liens, of all patents,
trademarks, service marks, trade names, copyrights, licenses, trade
secrets, source codes and object codes, inventions, intellectual
property rights, know-how and other rights that are owned or used by
Technalysis or that are necessary or appropriate for the operation of
its business as presently conducted or as proposed to be conducted
(each, a "Proprietary Right" and collectively, the "Proprietary
Rights").
2.23 MATTERS RELATING TO THE PROPRIETARY RIGHTS.
(a) Schedule 2.23(a) attached hereto contains a true and
complete list and description of all contracts, oral or written,
pursuant to which Technalysis has authorized any person or entity to
use, or pursuant to which any person or entity has the right to use,
any of the Proprietary Rights owned or used by Technalysis, including,
without limitation, on a temporary or trial basis.
(b) Schedule 2.23(b) attached hereto contains a true and
complete list and description of all royalty or contingent
compensation arrangements or other contracts, oral or written,
regarding or pertaining to any Proprietary Rights.
2.24 STATUS OF THE PROPRIETARY RIGHTS. Except as noted in Schedule
2.24 attached hereto:
(a) No Proprietary Right presently being used, licensed or sold,
or contemplated to be used, licensed or sold, by Technalysis infringes
on any rights owned or held by any other person or entity, the
Proprietary Rights are sufficient to, and include all intellectual
property rights necessary to, operate the business of Technalysis as
presently conducted.
(b) To the best of Technalysis' knowledge, there is no pending
or threatened claim or litigation against Technalysis or any other
person or entity contesting or, if decided adversely, affecting the
right of Technalysis to use, license or sell any Proprietary Right.
(c) No pending or proposed patent, trademark, service mark,
trade name, copyright, license, trade secret, source code or object
code, invention,
15
intellectual property right, know-how or other right presently being
licensed, sold or employed, or proposed to be licensed, sold or
employed, by any person or entity infringes on, or may infringe
on, or adversely affects, or may adversely affect, any Proprietary
Right, nor, to the best of Technalysis' knowledge, is there any
pending or proposed statute, law, rule, regulation, standard
or code that may adversely affect any Proprietary Right presently
being used, licensed or sold, or proposed to be used, licensed or
sold, by Technalysis.
(d) Technalysis uses and has used its best efforts to secure and
maintain its rights in the Proprietary Rights. Without limiting the
generality of the foregoing, each of Technalysis' employees has
executed an agreement providing that (i) such employee will hold in
confidence and will not disclose to any other person or entity in any
way, or otherwise use in any way, trade secrets of Technalysis or
products or other proprietary, trade secret or confidential
information of Technalysis and (ii) any ideas, inventions or
intellectual property rights conceived, created, developed or enhanced
while such employee was employed by or otherwise associated with
Technalysis or with any of Technalysis' affiliates or customers,
whether by or with the help of such employee or otherwise, will be the
sole and exclusive property of Technalysis, or of a customer of
Technalysis in cases in which such customer has a written agreement
with Technalysis so providing. Each such agreement is valid and
enforceable and in full force and effect and, to the best of
Technalysis' knowledge, none has been violated by any signatory
employee. True and complete copies of each such agreement, including,
without limitation, all amendments or modifications thereof have been
delivered to Compuware prior to the date of this Agreement.
2.25 ERISA COMPLIANCE.
(a) Schedule 2.25(a) attached hereto contains a list and brief
description of all "employee pension benefit plans" (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) (sometimes referred to herein as "Pension
Plans"), all "employee welfare benefit plans" (as defined in Section
3(1) of ERISA) and all other bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase,
stock option, stock bonus, phantom stock, retirement, vacation,
severance, disability, death benefit, welfare, Christmas bonus,
hospitalization, medical or other plan, arrangement or understanding,
whether or not legally binding, providing benefits to any current or
former employee, officer or director of Technalysis, or maintained or
contributed to by Technalysis for the benefit of any employee, officer
or director of Technalysis currently or within the last five years
(collectively, "Benefit Plans").
(b) On or prior to the date of this Agreement, Technalysis has
delivered to Compuware true and complete copies of (i) each Benefit
Plan or,
16
in the case of any unwritten Benefit Plans, descriptions thereof
(ii) the most recent annual report on Form 5500 filed with the
IRS with respect to each Benefit Plan, if any such report was
required, (iii) the most recent summary plan description for each
Benefit Plan for which such summary plan description is required, (iv)
each trust agreement and group annuity contract relating to any
Benefit Plan, and (v) the most recent actuarial report relating to any
Benefit Plan.
(c) Except as disclosed in Schedule 2.25(c) attached hereto, all
Pension Plans have been the subject of determination letters from the
IRS to the effect that such Pension Plans are qualified and exempt
from federal income taxes, and no such determination letter has been
revoked nor has revocation been threatened, nor has any such Pension
Plan been amended since the date of its most recent determination
letter or application therefor in any respect that could adversely
affect its qualification or increase its costs.
(d) Except as disclosed on Schedule 2.25(d) attached hereto, no
Pension Plan that Technalysis maintains, or to which Technalysis is or
was previously obligated to contribute, had, as of the respective last
annual valuation date for each Pension Plan, any "unfunded benefit
liabilities," based on actuarial assumptions which have been furnished
to Compuware. None of the Pension Plans has an "accumulated funding
deficiency," whether or not waived. None of Technalysis, any officer
of Technalysis or any of the Benefit Plans which are subject to ERISA,
including, without limitation, the Pension Plans, or any trusts
created thereunder, or any trustee or administrator thereof, has
engaged in a "prohibited transaction" or any other breach of fiduciary
responsibility that could subject Technalysis or any officer of
Technalysis to the tax or penalty on prohibited transactions or to any
liability under ERISA. Except as disclosed on Schedule 2.25(d)
attached hereto, neither any of such Pension Plans nor any of such
trusts have been terminated, nor has there been any "reportable event"
with respect to which the 30-day notice requirement has not been
waived and Technalysis is not aware of any other reportable events
with respect thereto during the last five years. Technalysis has never
had an obligation to contribute to a "multiemployer plan" as defined
in Section 3(37) of ERISA. No liability to the Pension Benefit
Guaranty Corporation (the "PBGC") has been or is expected to be
incurred with respect to any Benefit Plan by reason of a Benefit Plan
termination. The PBGC has not instituted proceedings to terminate any
Benefit Plan. Except as noted on Schedule 2.25(d), there is no
Benefit Plan to which Title IV of ERISA applies which has terminated
and whose "date of termination" occurred after September 11, 1974 or
any such Benefit Plan to which Title IV of ERISA applies which has
partially terminated. No event has occurred, and there exists no
condition or set of circumstance which presents a material risk of the
termination or partial termination of any such Benefit Plan, which
could result in a liability on the part of Technalysis to the PBGC.
17
(e) With respect to any Benefit Plan that is an employee welfare
benefit plan, except as disclosed in Schedule 2.25(e) attached hereto,
(i) no such Benefit Plan is a welfare benefits fund, (ii) each such
Benefit Plan that is a group health plan complies in all material
respects with the applicable requirements of the Code and the Social
Security Act and (iii) each such Benefit Plan, including, without
limitation, any such Plan covering retirees or other former employees,
may be amended or terminated without liability to Compuware or
Technalysis on or at any time after the Effective Date of the Merger.
(f) Each Benefit Plan and all related trust or other agreements
conform in form and operation to, and comply with, all applicable laws
and regulations, including, without limitation, ERISA and the Code,
and all reports or information relating to each such Benefit Plan
required to be filed with any Governmental Entity or disclosed to
participants have been timely filed and disclosed.
(g) Technalysis has not announced a plan to create or amend, nor
does it have any legally binding commitment to create or amend, any
Benefit Plan or to create any new arrangement which would be a Benefit
Plan.
(h) All insurance premiums with respect to any Benefit Plan,
including, without limitation, premiums to the PBGC, have been paid in
full. Except as disclosed on Schedule 2.25(h) attached hereto, there
are no retrospective adjustments provided for under any insurance
contracts maintained pursuant to any Benefit Plan with regard to
policy years or other periods ending on or before the Effective Date
of the Merger.
(i) No Benefit Plan, or the deduction of any contributions
thereto by Technalysis, has been the subject of audit by the IRS or
the Department of Labor, and no litigation or asserted claims exist
against Technalysis or any Benefit Plan or fiduciary with respect
thereto, other than such benefit claims as are made in the normal
operation of a Benefit Plan. There are no known facts which could
give rise to any action, suit, grievance, arbitration or other claim
in connection with any Benefit Plan.
(j) With respect to any Benefit Plan which covers current or
former employees, officers or directors who are not residents of the
United States of America, any references in this Section 2.26 to
ERISA, the Code or any other applicable law will be read to mean any
applicable law of similar import for the jurisdiction in which such
individuals reside.
2.26 LABOR AND EMPLOYMENT-RELATED MATTERS.
(a) Except as set forth in Schedule 2.26(a) attached hereto,
Technalysis is in compliance with all federal, state, local, foreign
and other laws respecting employment and employment practices, terms
and conditions
18
of employment and wages and hours, and there are no arrears in the
payment of wages, taxes, unemployment insurance contributions or
workers' compensation assessments or penalties.
(b) None of the employees of Technalysis is represented by any
labor union. There is no pending question, petition, claim or
assertion or any organizational campaign concerning representation of
any employees of Technalysis. Technalysis is not a party to or bound
by any collective bargaining agreement. Except as set forth on
Schedule 2.28, there is no pending litigation or other proceeding or
basis for any unasserted claim against Technalysis by any employee or
group of employees of Technalysis, including, without limitation,
claims for contract, tort, discrimination, employee benefits, wrongful
termination or any common law or statutory claims.
(c) Technalysis has provided Compuware with a true and complete
list of the payroll of Technalysis as of December 31, 1995 and,
without limiting the generality of Section 2.20 above, will provide
Compuware with a revised such list as of the Effective Date of the
Merger. Except as set forth on Schedule 2.26(c) attached hereto,
Technalysis has not entered into any agreement, made any
representation or taken any action that could cause any of its
employees to be terminable other than at will, with or without cause,
or to be terminable only upon or with the incurrence or payment of any
severance or other obligation or liability, except as provided
generally to employees pursuant to applicable state or federal law.
(d) Any person or entity who is an independent contractor of
Technalysis or who is not expressly held out to be an employee of
Technalysis is an independent contractor, and not an employee, of
Technalysis.
(e) Any ideas, inventions or other intellectual property rights
conceived, created, developed or enhanced while any person or entity
was acting as an employee or independent contractor of Technalysis or
any of its affiliates or of any customer of Technalysis, whether by or
with the help of such employee or independent contractor or otherwise,
is the sole and exclusive property of Technalysis, or of a customer of
Technalysis in cases in which such customer has a written agreement
with Technalysis so providing, and will be, from and after the
Effective Date of the Merger, the sole and exclusive property of the
Surviving Corporation.
(f) Each employee and independent contractor of Technalysis is
not, under any applicable law, rule, regulation or guideline, an
employee or a "leased employee" of any other person or entity,
including, without limitation, any customer of Technalysis.
(g) Except as set forth on Schedule 2.26(a) Technalysis has
deducted and remitted to the relevant Governmental Entities all income
taxes, unemployment insurance contributions and other taxes or amounts
which it is
19
required to deduct and remit to any Governmental Entity and
Technalysis has made all required filings in respect thereof.
(h) The consummation of the Transactions will not (i) entitle
any current or former employee of Technalysis to severance pay, or any
other payment from Technalysis, or (ii) accelerate the time of payment
or vesting of any Technalysis Options, except for the Technalysis
Options for 8,000 shares of Technalysis Common Stock granted under the
1992 Incentive Stock Option Plan, or increase the amount of
compensation due to any such employee or former employee.
(i) Compuware will fulfill the obligations of Vic Rocchio's
Employment Agreement until its expiration on December 31, 1996.
2.27 INSURANCE. Schedule 2.27 attached hereto is a true and complete
list of all policies of liability, fire, workers' compensation and other
forms of insurance owned or held by or for the benefit of Technalysis or
its properties or assets, including, without limitation, any self
insurance, specifying any notice or other information possessed by
Technalysis regarding possible claims under, cancellation of or premium
increases thereon. All current premiums have been paid with respect to all
of such policies. Each of such policies is underwritten by unaffiliated
insurers, is sufficient for all applicable requirements of law and provides
insurance, including, without limitation, liability and products' liability
insurance, in such amounts and against such risks as is customary for
companies engaged in similar business to protect their properties, assets,
business and operations.
2.28 LEGAL PROCEEDINGS, ETC. Except as set forth in Schedule 2.28
attached hereto, there are no legal, administrative, arbitration or other
actions, suits or proceedings or governmental claims or investigations or
proceedings of any customer advisory board or similar organization pending
or threatened, to the best of Technalysis' knowledge, against, or brought
by or on behalf of Technalysis or affecting its business, prospects,
assets, properties or condition (financial or otherwise). Except as set
forth in Schedule 2.28, neither Technalysis nor any of its properties or
assets are subject to any existing order, decree, injunction or judgment,
whether entered by consent, stipulation or otherwise, before or in
connection with, any Governmental Entity. Without limiting the generality
of the foregoing, except as set forth in Schedule 2.28, there are no
products' liability claims, warranty claims or other claims whatsoever
which, if decided adversely, could have a Material adverse effect on any
businesses, prospects, assets, properties or condition (financial or
otherwise) of Technalysis.
2.29 ENVIRONMENTAL MATTERS.
(a) To the best of Technalysis' knowledge, there is no past or
present violation of, and there is no pending or threatened action,
suit or proceeding relating to any alleged violation of, any federal,
state, local, foreign or other laws, ordinances, rules, regulations,
policies or guidelines
20
(collectively, "Environmental Laws") relating to the environment or
the health or safety of persons or otherwise governing, directly or
indirectly, the use, generation, storage, treatment, transportation,
manufacture, refinement, handling, production, release or disposal
of any hazardous substances, wastes or materials (collectively,
"Environmental Substances") in, on, under or at any of the real or
personal properties presently or formerly owned, operated, used or
leased by, or in connection with the business or operations of
Technalysis. There is no basis for any such action, suit or
proceeding. There are no Environmental Substances in, on, under or
at any of such properties.
(b) Technalysis has not received any request for information,
notice of claim, demand or other notification that it may be
potentially responsible for any threatened or actual release of any
Environmental Substances. Technalysis has not transported or arranged
for transportation of any Environmental Substances to any location
which is the subject of any enforcement action or other investigation
which may lead to any claims against Technalysis.
2.30 FINDER'S FEES. No broker, finder or other person or entity is
entitled to any brokerage fee, commission or finder's fee in connection
with any of the Merger Agreements or any of the Transactions on account of
any actions or agreements of Technalysis or any of its representatives.
2.31 NO GOLDEN PARACHUTES. Except as set forth on Exhibit 2.31
attached hereto, no person or entity is entitled to any compensation or
other payment in connection with any of the Merger Agreements or any of the
Transactions. No approval of any shareholder of Technalysis or of any
other person or entity is required or was obtained, nor is any other action
required or was obtained under the Code or otherwise, including, without
limitation, proper disclosure, to avoid any payments made or deemed made
under or in connection with any of the Merger Agreements or any of the
Transactions from being characterized as "parachute payments" within the
meaning of the Code and the regulations thereunder.
2.32 TECHNALYSIS' BOARD OF DIRECTORS' ACTION. The Board of Directors
of Technalysis, at a meeting duly called, will by the requisite vote of all
directors present (a) determine that the Merger Agreements to which
Technalysis is a party and the Transactions are advisable and in the best
interests of Technalysis and its shareholders, (b) resolve to recommend the
approval of the Merger Agreements and the Transactions by the holders of
Technalysis Common Stock and direct that the Merger Agreements and the
Transactions be submitted for consideration by the holders of Technalysis
Common Stock at a special meeting of such holders and (c) adopt a
resolution to elect not to be subject, to the extent permitted by
applicable law, to any takeover law, including without limitation, those
that may purport to be applicable to or in connection with any of the
Merger Agreements or any of the Transactions.
21
2.33 ENFORCEABILITY AND STATUS OF THE CONTRACTS. Each contract,
lease, insurance policy or other item listed in or set forth on or required
to be listed in or set forth on any Exhibit or Schedule to this Agreement,
including, without limitation, Schedule 2.11 Schedule 2.13(a), Schedule
2.21, Schedule 2.23(a), Schedule 2.23(b), Schedule 2.25(a) or Schedule 2.27
(collectively, the "Contracts"), is valid and enforceable and in full force
and effect. There is no default under any of the Contracts by a party
thereto, or any event which with or without due notice or lapse of time or
both, would constitute such a default by a party thereto. Technalysis and
each other party to any of the Contracts has fully paid and performed all
of its obligations and duties accrued or due under all of the Contracts.
True and complete copies of all of the Contracts, including, without
limitation, all amendments thereto and modifications will be delivered to
Compuware during due diligence, and true and complete copies of all of the
Contracts will be delivered to Compuware prior to the Effective Date of the
Merger. Technalysis shall not cause any of the Contracts to terminate
without Compuware's prior written consent. Except as set forth on Schedule
2.33, each outstanding bid and proposal to provide goods and to perform
Services and each Contract in force as of the Effective Date of the Merger
was bid and entered into in contemplation of profitability in accordance
with standard industry practices.
2.34 DISCLOSURE. There is no fact or circumstance known to
Technalysis which adversely affects, or which in the future may adversely
affect, the business, prospects, operations, operating results, properties,
assets, liabilities, working capital, reserves, earnings or financial or
other condition of Technalysis, which fact or circumstance has not been set
forth in this Agreement or the Schedules to this Agreement. No
representation or warranty by Technalysis in any of the Merger Agreements
and no statement contained in any document, including, without limitation,
the financial statements and disclosure schedules, certificate or other
writing furnished or to be furnished by or on behalf of Technalysis
pursuant to or in connection with any of the Merger Agreements or any of
the Transactions contains any untrue statement of a material fact or omits
any material fact necessary to make the statements herein or therein, in
light of the circumstances under which they were made, not misleading.
Without limiting the generality of the foregoing, Technalysis has disclosed
to Compuware all transactions, events, facts and circumstances relevant to
the Merger qualifying for the tax treatment set forth in Section 1.1(d)
above. The terms "know of," "knowledge" and variations thereof as used in
this Agreement will include those matters of which Technalysis has
reasonable grounds to know. Any schedule not attached at the time the
Merger Agreement is executed will be completed and attached within 30 days
after such execution, with the mutual agreement of the parties.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF COMPUWARE. Compuware
represents, warrants and covenants to Technalysis, as of the date of this
Agreement, through and including and as of the Effective Date of the
Merger, as follows:
3.1 ORGANIZATION; QUALIFICATION. Compuware is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Michigan and has all requisite power and authority to own, lease
and operate its
22
properties and to carry on its business as now being conducted.
Compuware is duly qualified or licensed and is in good standing
to do business in each jurisdiction in which the nature of the
business conducted by it has made its qualification or licensing
a legal requirement.
3.2 AUTHORITY RELATIVE TO THE MERGER AGREEMENTS.
(a) The Board of Directors of Compuware has approved the
execution of the Agreement. Upon approval by the Board of Directors
of Compuware of the Merger and the Transactions, no other corporate
authorizations or proceedings on the part of Compuware is necessary to
consummate any of the Transactions.
(b) Each of the Merger Agreements to which Compuware is a party
has been duly and validly executed and delivered by Compuware and
constitutes valid and binding agreements of Compuware, enforceable
against Compuware in accordance with its respective terms.
(c) Compuware has the power and authority to enter into the
Merger Agreements and to consummate the Transactions.
3.3 NO CONFLICTS; CONSENTS. The execution and delivery of the Merger
Agreements, the consummation of the Transactions and compliance by
Compuware with any of the provisions of the Merger Agreements will not:
(a) violate any provision of the Articles of Incorporation or
Bylaws of Compuware or any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to Compuware or
any of its properties or assets;
(b) violate, or conflict with, or result in a breach of any
provision of, or constitute a default under, or any event which, with
or without due notice or lapse of time, or both, would constitute a
default under, or result in the termination of, or accelerate the
performance required by, or result in the creation of any Lien upon
any of the properties or assets of Compuware under any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Compuware is a party, or by which
Compuware or any of its properties or assets may be bound or affected,
including, without limitation, any agreement, arrangement, document,
policy or obligation disclosed or required to be disclosed in any of
the Exhibits or Schedules to this Agreement; or
(c) require any consent, approval, authorization or permit of or
from, filing with or notification to, any Governmental Entity, except
(i) pursuant to the Securities Act and the Exchange Act, (ii) filing
articles and certificates of merger pursuant to the laws of any state,
(iii) filings required under the securities or blue sky laws of the
various states, (iv) filings under
23
the HSR Act, or (v) consents, approvals, authorizations, permits,
filings or notifications which, if not obtained or made, will not,
individually or in the aggregate, have a material adverse effect on
the Merger or the business, prospects, assets, properties or condition
(financial or otherwise) of Compuware.
3.4 DISCLOSURE MATERIALS. Any information which is provided by
Compuware about Compuware to Technalysis for inclusion in the disclosure
materials prepared by Technalysis will be true and complete in all material
respects.
3.5 FINDER'S FEES. No broker, finder or other person or entity is
entitled to any brokerage fee, commission or finders fee in connection with
any of the Merger Agreements or any of the Transactions on account of any
actions or agreements of Compuware or any of their representatives.
3.6 REQUIRED ACTION. All action required to be taken by or on the
part of Compuware to authorize the execution, delivery and the Merger
Agreements by Compuware and the consummation of the Transactions will have
been duly and validly taken by the Board of Directors of Compuware.
3.7 REPORTS. As of the Effective Date of the Merger, Compuware has
filed all required reports, registration statements and other filings with
the Commission. As of their respective dates, such reports, statements and
filings did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
4. COVENANTS OF THE PARTIES.
4.1 DUE DILIGENCE. Subsequent to the date of this Agreement,
Compuware and its representatives will conduct a review of certain
materials made available to them by or on behalf of Technalysis. Prior to
the Effective Date of the Merger, Technalysis and its officers, directors,
employees and agents, have given and will give to Compuware, its counsel,
accountants and other authorized representatives, full access to all of
Technalysis' assets, properties, personnel, technology and technical
information, books of account, leases, agreements, commitments and records,
and will furnish Compuware and its representatives with all such
information concerning Technalysis as Compuware may request. Technalysis
will also provide to Compuware, promptly after the end of the applicable
calendar month after December 31, 1995, and no later than thirty days after
each calendar month, unaudited financial statements for each such month and
quarter ending on or after the date of this Agreement but before the
Effective Date of the Merger. All such financial statements will
automatically be deemed to be subject to the representations and warranties
specified in Section 2.15. Only those items listed on a Schedule and agreed
to by Compuware will relieve Technalysis or any Former Technalysis Holder
from any liability under or in connection with any of the Merger Agreements
or any of the Transactions or affect, in any manner, the representations,
warranties, covenants or
24
agreements of Technalysis under any of the Merger Agreements or any other
term or condition of any of the Merger Agreements.
4.2 ACQUISITION PROPOSALS.
(a) Technalysis will not, without the consent of Compuware, nor
will it authorize or permit any officer, director or employee of or
any investment banker, financial advisor, attorney or other advisor or
representative of Technalysis to, directly or indirectly, (i) solicit,
initiate or encourage the submission of any Acquisition Proposal (as
defined in subsection (c) below), (ii) enter into any agreement with
respect to any Acquisition Proposal, or (iii) participate in any
discussions or negotiations regarding, or furnish to any person or
entity any information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition
Proposal except to the extent needed to clarify the terms of such
Acquisition Proposal. Without limiting the foregoing, it is
understood that any violation of this section by any employee,
director or officer of Technalysis or any investment banker, financial
advisor, attorney or other advisor retained by Technalysis, whether or
not such person is purporting to act on behalf of Technalysis or
otherwise, will be deemed to be a breach of this section by
Technalysis. The prohibitions set forth in this Section 4.2 are not
intended to prohibit Technalysis' Board of Directors from passively
receiving acquisition proposals from third parties.
(b) Technalysis will promptly advise Compuware orally and in
writing of any Acquisition Proposal or any inquiry with respect to, or
which could lead to, any Acquisition Proposal, the terms and
conditions of such inquiry or Acquisition Proposal (including
financial) and the identity of the person or entity making any such
Acquisition Proposal or inquiry. Technalysis will keep Compuware fully
informed of the status and details of any such Acquisition Proposal or
inquiry.
(c) "Acquisition Proposal" means any proposal for a merger or
other business combination involving Technalysis or to acquire in any
manner, directly or indirectly, including, without limitation, through
any reverse acquisition in which Technalysis is the acquirer in form,
(i) a material equity interest in Technalysis, (ii) any material
amount of any security of Technalysis that has power to vote, approve
or consent to any corporate action or (iii) any assets of Technalysis
that could not be sold by Technalysis in the ordinary course of
business.
4.3 SUPPLEMENTAL INFORMATION AND DOCUMENTS. From time to time prior
to the Effective Date of the Merger, Technalysis will deliver to Compuware
and Compuware will deliver to Technalysis supplemental or other information
and documents, including, without limitation, concerning events, facts or
circumstances subsequent to the date of this Agreement which could render
any statement,
25
representation, warranty, covenant or other agreement in any of the Merger
Agreements or any information contained in any Exhibit or Schedule
inaccurate or incomplete or which documents would have been required to
have been delivered if existing prior to the date of this Agreement.
Technalysis' obligations pursuant to this Section 4.3 will not limit
or affect any right or remedy Compuware might otherwise have under
any of the Merger Agreements or otherwise with respect to any such
supplemental or other information or documents, including, without
limitation pursuant to Section 5 or Section 7 below. Technalysis will
cooperate, and will cause its employees to cooperate, with Compuware and
all of its representatives with respect to making available all information
requested by Compuware and its representatives.
4.4 FILINGS. The parties will file with the United States Department
of Justice (the "Department") and the Federal Trade Commission (the "FTC")
notifications with respect to this Agreement and the Merger pursuant to the
HSR Act. Compuware will pay the filing fees, required to file documents
under the HSR Act. The parties will promptly comply with any request by
the Department or the FTC for additional documents or information. The
parties will prepare and give or make any necessary notices or filings
under any other federal, state, local, foreign or other laws, rules and
regulations which may be required in connection with any of the Merger
Agreements or any of the Transactions.
4.5 CERTAIN LITIGATION. Technalysis will give Compuware the
opportunity to participate in the defense or settlement of any litigation
against Technalysis or its officers or directors relating to any of the
Merger Agreements or any of the Transactions; provided, however, that no
such settlement will be agreed to without Compuware's written consent.
4.6 BEST EFFORTS. Subject to the terms and conditions in this
Agreement, each party will use its best efforts to do or cause to be done
all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective, as soon as reasonably
practicable, all of the terms and conditions of the Merger Agreements and
the Transactions, including, without limitation, the obtaining of all
consents, authorizations, orders and approvals of any third party, whether
private or governmental, required in connection with such party's
execution, delivery or the Merger Agreements and the Transactions and the
satisfaction of all other conditions to the Closing set forth in Section 5,
and each party will cooperate with the other in all of the foregoing. The
parties will use their best efforts to consummate and make effective the
Transactions as soon as practicable following satisfaction of the
conditions to the Closing set forth in Section 5.
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF COMPUWARE. The
obligations of Compuware under this Agreement are subject to the
satisfaction of the following conditions at or prior to the Effective Date
of the Merger:
26
(a) No action or proceeding will have been instituted or
threatened against Technalysis which materially affects or may
materially affect its business, prospects, assets, properties or
condition (financial or otherwise). No action or proceeding will have
been instituted or threatened by any Governmental Entity or other
person or entity before any court, arbitrator or Governmental Entity
to restrain, prevent, condition or obtain material damages in respect
of any of the Merger Agreements or any of the Transactions, which, in
the opinion of Compuware, makes it inadvisable to consummate such
Transactions.
(b) All actions, undertakings, covenants or agreements required
pursuant to any of the Merger Agreements to be performed by
Technalysis on or prior to the Effective Date of the Merger have been
so performed or complied with in all material respects.
(c) All representations and warranties made by Technalysis in
any of the Merger Agreements are true and correct in all material
respects at and as of the Effective Date of the Merger, with the same
force and effect as though such representations and warranties had
been made at and as of the Effective Date of the Merger, except as
expressly permitted by this Agreement or as otherwise agreed to in
writing by Compuware, and Compuware will not have discovered any
material error, misstatement or omission in any of such
representations or warranties. The Chairman and Chief Executive
Officer or the Vice-President/Secretary/Controller of Technalysis will
deliver to Compuware a Certificate, dated as of the Effective Date of
the Merger, signed by them, certifying as to the matters covered by
Sections 5.1(b) and (c).
(d) All action required to be taken by or on the part of
Technalysis to authorize the execution, delivery and the Merger
Agreements by Technalysis and the consummation of the Transactions
will have been duly and validly taken by the Board of Directors and
shareholders of Technalysis, and Compuware will have received copies
of the resolutions evidencing such authorization certified by the
Secretary of Technalysis.
(e) Compuware will have received from Best & Flanagan, counsel
to Technalysis, an opinion in the form attached hereto as Exhibit
5.1(e).
(f) All courts of law, Governmental Entities and other third
parties, the consent, authorization or approval of which is necessary
under any applicable law, rule, order or regulation for the
consummation by Technalysis of the Transactions, will have consented
to, authorized, permitted or approved such Transactions.
(g) The holders of not more than 5% of Outstanding Technalysis
Common Stock will have perfected statutory appraisal, dissenters' or
similar rights to which such holders may be entitled under applicable
law in connection with the Merger.
27
(h) The Merger Agreements and the Transactions will have been
approved by the holders of Technalysis Common Stock in accordance with
Technalysis' Articles of Incorporation, Bylaws and applicable law.
(i) Technalysis will have furnished Compuware with a certificate
of its officers in the form attached hereto as Exhibit 5.1(i).
(j) Compuware will have completed its due diligence
investigation of Technalysis and of the financial condition, operating
results and prospects of Technalysis and of Technalysis Common Stock,
including, without limitation, all meetings requested by Compuware
with some or all of Technalysis' customers, and the results of such
investigation are acceptable to Compuware. Any supplemental
information or documents submitted to Compuware pursuant to Section
4.3 above shall be reasonably acceptable to Compuware.
(k) Technalysis will have executed and delivered all other
documents reasonably requested by Compuware or otherwise necessary or
appropriate for the consummation of any of the Transactions,
including, without limitation, all documents required to be executed
and/or delivered by or on behalf of Technalysis at or prior to the
Closing pursuant to this Agreement.
(l) There has been no material adverse change in the business,
prospects, operations or condition (financial or otherwise) of
Technalysis or any event, condition, occurrence, action taken or
omission made which, either individually or in the aggregate, might
adversely affect the business, prospects, operations or condition
(financial or otherwise) of Technalysis. Compuware shall have approved
any updates or amendments to any Schedule to this Agreement.
(m) All action required to be taken by or on the part of
Compuware to authorize the execution, delivery and the Merger
Agreements by Compuware and the consummation of the Transactions will
have been duly and validly taken by the Board of Directors of
Compuware.
5.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF TECHNALYSIS. Unless
waived by Technalysis, the obligations of Technalysis under this Agreement
are subject to the satisfaction of the following conditions at or prior to
the Effective Date of the Merger:
(a) No action or proceeding will have been instituted or
threatened by any Governmental Entity or other person or entity before
any court, arbitrator or Governmental Entity to restrain, prevent,
condition or obtain material damages in respect of any of the Merger
Agreements or any of the Transactions, which, in the opinion of
Technalysis, makes it inadvisable to consummate such Transactions.
28
(b) All actions, undertakings, covenants or agreements required
pursuant to any of the Merger Agreements to be performed by Compuware
on or prior to the Effective Date of the Merger have been so performed
or complied with in all material respects.
(c) All representations and warranties made by Compuware in any
of the Merger Agreements are true and correct in all material respects
at and as of the Effective Date of the Merger, with the same force and
effect as though such representations and warranties had been made at
and as of the Effective Date of the Merger, except as expressly
permitted by this Agreement or as otherwise agreed to in writing by
Technalysis, and Technalysis will not have discovered any material
error, misstatement or omission in any of such representations or
warranties. An officer of Compuware will deliver to Technalysis a
Certificate, dated as of the Effective Date of the Merger, signed by
him or her, certifying as to the matters covered by Sections 5.2(b)
and (c).
(d) All action required to be taken by or on the part of
Compuware to authorize the execution, delivery and the Merger
Agreements by Compuware and the consummation of the Transactions will
have been duly and validly taken by the Board of Directors of
Compuware, and Technalysis will have received copies of the
resolutions evidencing such authorization certified by the Secretary
of Compuware.
(e) Technalysis will have received from Honigman Miller Schwartz
and Cohn, counsel to Compuware, an opinion in the form of Exhibit
5.2(e) attached hereto.
(f) All courts of law, Governmental Entities and other third
parties, the consent, authorization or approval of which is necessary
under any applicable law, rule, order or regulation or under any
contract, commitment or other agreement of Compuware, for the
consummation by Compuware of the Transactions, will have consented to,
authorized, permitted or approved such Transactions.
(g) Compuware will have furnished Technalysis with a certificate
of its officers in the form attached hereto as Exhibit 5.2(g).
(h) Compuware will have executed and delivered all other
documents reasonably requested by Technalysis or otherwise necessary
or appropriate for the consummation of any of the Transactions,
including, without limitation, all documents required to be executed
and/or delivered by or on behalf of Compuware at or prior to the
Closing pursuant to this Agreement.
(i) Technalysis will have received an unqualified favorable
fairness opinion regarding the Merger from its investment banker prior
to mailing its
29
proxy statement to the holders of Technalysis Common Stock, but no
later than February 15, 1996.
(j) The Merger Agreements and the Transactions will have been
approved by the holders of Technalysis Common Stock in accordance with
Technalysis' Articles of Incorporation, Bylaws and applicable law.
5.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH PARTY. The
respective obligations of each party to effect the Merger are subject to
the satisfaction of the following conditions at or prior to the Effective
Date of the Merger:
(a) The waiting period applicable to the consummation of the
Merger under the HSR Act will have expired or been terminated.
(b) No final, nonappealable injunction or other order by any
Governmental Entity which prevents the consummation of the Merger will
have been issued and remain in effect.
6. TERMINATION; AMENDMENT.
6.1 TERMINATION. This Agreement may be terminated at any time on or
prior to the Effective Date of the Merger, whether before or after approval
of the Merger by the shareholders of Technalysis as follows:
(a) by mutual written consent of Compuware and Technalysis,
properly authorized by their respective Boards of Directors; or
(b) by Compuware or Technalysis (i) if the Effective Date of the
Merger has not occurred on or prior to May 31, 1996, unless the
failure of such occurrence is due to the failure of the party seeking
to terminate this Agreement pursuant to this Section 6.1(b) to perform
or observe the representations, warranties, covenants, conditions and
agreements to be performed or observed by it on or before the
Effective Date of the Merger; or (ii) if this Agreement is not
approved by the requisite vote of the shareholders of Technalysis,
provided, however, that Technalysis will be entitled to terminate this
Agreement on this basis only if it has fully complied with the
provisions of this Agreement; or
(c) by Compuware or Technalysis (i) if at the time of such
termination there has occurred or arisen any change as described in
Section 2.20(e) or (f), or (ii) if there has been any breach in any
material respect of any representation, warranty, covenant or
obligation of the other party under any of the Merger Agreements and
such breach has not been remedied within 5 Business Days after receipt
by the breaching party of notice in writing from the non-breaching
party specifying the nature of such breach and requesting that it be
remedied; or
30
(d) by Compuware if Technalysis fails to recommend, or withdraws
or modifies in a manner adverse to Compuware its recommendation, to
Technalysis' shareholders to approve any of the Merger Agreements or
any of the Transactions; or
(e) by Technalysis, if Technalysis does not receive its fairness
opinion. However, Technalysis shall use its best efforts to obtain
its fairness opinion no later than February 15, 1996, prior to mailing
its proxy statement to the holders of Technalysis Common Stock.
(f) In the event of termination, both parties agree to return
all materials and any information and any copies provided under
Section 4.1 to each other within seven (7) business days of receiving
a termination notice. Both parties agree not to disclose such
information to any third parties. Further, both parties agree to keep
such information confidential.
6.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement pursuant to Sections 6.1(a), (b) or (e) no party will have any
liability or further obligation to the other party, except as provided in
this Section 6.2 or in Section 8.11. Any termination pursuant to the other
provisions of Section 6.1 will not affect the terminating party's right to
pursue all remedies available under applicable law arising from the other
party's misrepresentation, breach or failure to satisfy the conditions as
provided in any of the Merger Agreements.
6.3 AMENDMENT, WAIVER, ETC. Subject to applicable law and to this
Section 6.3, at any time prior to the consummation of the Merger, whether
before or after approval of the Transactions by Technalysis' shareholders,
Technalysis and Compuware may, by action authorized by their respective
Boards of Directors, (a) mutually amend this Agreement, (b) extend the time
for the performance of any of the obligations or other acts of any other
person or entity, (c) waive any inaccuracies in the representations or
warranties contained in any of the Merger Agreements, or (d) waive
compliance with any of the agreements or conditions contained in Section 5.
Notwithstanding the foregoing, after any approval of the Merger by
Technalysis' shareholders, there will not be, without further approval of
such shareholders, any amendment, extension or waiver of this Agreement
which reduces the amount or changes the form of consideration to be
delivered to Technalysis' shareholders. This Agreement may not be amended
except by a writing signed by all of the parties by persons authorized to
execute such writing. Any agreement of a party to any extension or waiver
will be valid only if set forth in a writing signed on behalf of such party
by a person authorized to execute such writing, but any waiver or failure
to insist on strict compliance with any obligation, covenant, agreement or
condition will not operate as a waiver of or estoppel with respect to, any
subsequent or other failure.
7. CLOSING. On the Closing Date, the parties will take such actions and
execute and deliver such documents as are described in this Agreement,
including, without limitation, in this Section 7, and will take such
further actions and execute and deliver
31
such other documents as the other party may reasonably request or as
otherwise necessary or appropriate for the consummation of any of the
Transactions.
7.1 DELIVERIES TO THE EXCHANGE AGENT. Compuware will transfer or
otherwise make available to the Exchange Agent certificates for Compuware
Common Stock to be issued in the Merger, and the Exchange Agent will have
executed a receipt therefor.
7.2 DELIVERIES BY COMPUWARE. Compuware will execute and/or deliver or
cause to be executed and/or delivered:
(a) Articles and/or Certificates of Merger to be filed in
respect of the Merger;
(b) the Exchange Agreement;
(c) officers' certificates as provided in Section 5.2(c);
(d) an opinion of counsel as provided in Section 5.2(e); and
(e) assignment and consent documents, if required.
7.3 DELIVERIES BY TECHNALYSIS. Technalysis will execute and/or
deliver or cause to be executed and/or delivered:
(a) Articles and/or Certificates of Merger to be filed in
respect of the Merger;
(b) certified Articles of Incorporation with respect to
Technalysis;
(c) good standing certificates with respect to Technalysis;
(d) resignations in form and substance acceptable to Compuware,
effective as of the Effective Date of the Merger, of the directors and
officers of Technalysis;
(e) a certificate of the Secretary of Technalysis in such form
and substance as Compuware may request relating to bylaws,
resolutions, incumbency of officers and such other matters as
Compuware may reasonably request;
(f) the Exchange Agreement;
(g) officers' certificates as provided in Section 5.1(c);
(h) an opinion of counsel as provided in Section 5.1(e), and
32
(i) assignment and consent documents, such as may be needed to
assign proprietary information and/or Contracts, if required.
8. MISCELLANEOUS.
8.1 GOVERNING LAW; JURISDICTION. This Agreement will be governed by
and construed in accordance with the laws of the State of Michigan, without
regard to principles of conflicts of laws. The parties consent to the
personal jurisdiction of the state and federal courts of the State of
Michigan and select such courts as the sole proper forums within which to
adjudicate disputes under or relating to any of the Merger Agreements or
any of the Transactions.
8.2 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
8.3 INTERPRETATION. The headings contained in this Agreement are
solely for the purposes of reference, are not part of the agreement of the
parties and will not in any way affect the meaning or interpretation of
this Agreement.
8.4 ENTIRE AGREEMENT. This Agreement, including, without limitation,
the Exhibits, Schedules, documents, certificates and instruments referred
to in this Agreement, embodies the entire agreement and understanding of
the parties with respect to its subject matter. There are no restrictions,
promises, representations, warranties, covenants or undertakings, other
than those expressly set forth or referred to in this Agreement. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to its subject matter.
8.5 SEVERABILITY. If any provision of this Agreement is determined
to be illegal or invalid, such illegality or invalidity will have no effect
on the other provisions of this Agreement, and all other provisions of this
Agreement will remain valid, operative and enforceable.
8.6 NOTICES. Any notice or other communication required or which may
be given under this Agreement will be sufficient if in writing and
delivered personally, telecopied or telexed, mailed, certified, registered
or first class mail, postage prepaid, or sent by overnight courier, and
will be deemed given when so delivered personally, telecopied or telexed,
if mailed, two days after the date of mailing, or if sent by overnight
courier, one day after the date of sending, as follows, or at such other
addresses as the addressee may from time to time designate in writing
pursuant to this Section 8.6:
To Compuware: Compuware Corporation
31440 Northwestern Highway
Farmington Hills, Michigan 48334-2564
Facsimile: (810) 737-1822
Attention: President
33
with a copy to: Compuware Corporation
31440 Northwestern Highway
Farmington Hills, Michigan 48334-2564
Facsimile: (810) 737-7690
Attention: General Counsel
To Technalysis: Technalysis Corporation
6700 France Avenue South
Minneapolis, Minnesota 55435
Facsimile: (612) 925-6082
Attention: Chairman of the Board
with a copy to: Technalysis Corporation
6700 France Avenue South
Minneapolis, Minnesota 55435
Facsimile: (612) 925-6082
Attention: Vice President/Secretary/Controller
8.7 NO WAIVER. No waiver of any breach of any agreement or provision
contained in any of the Merger Agreements will be deemed a waiver of any
preceding or succeeding breach thereof or of any other agreement or
provision contained in any of the Merger Agreements. No extension of time
for any obligation or act will be deemed an extension of time for the
performance of any other obligation or act.
8.8 SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and
inure to the benefit of the parties to this Agreement and their respective
successors, but will not be assignable by any party except by operation of
law.
8.9 PRESS RELEASES. On or before the Effective Date of the Merger,
no party will issue or authorize to be issued any press release or similar
announcement concerning any of the Merger Agreements or any of the
Transactions without the prior approval of the other party; provided,
however, that Compuware and Technalysis will be permitted to make such
disclosures as necessary to comply with any applicable securities laws or
stock exchange or NASDAQ/NM policies.
8.10 REMEDIES CUMULATIVE. Rights and remedies provided by this
Agreement are cumulative and in addition to any other rights and remedies
which any party may have under any other agreement, including, without
limitation, under any of the other Merger Agreements, at law or in equity.
In addition, the rights and remedies of any party arising out of, or
otherwise in respect of, any inaccuracy in, omission from, or breach of any
representation, warranty, covenant or agreement contained in any of the
Merger Agreements will in no way be limited by the fact that the act,
omission, occurrence or other state of facts upon which any claim of any
such inaccuracy or breach is based may also be the subject matter of any
other representation, warranty, covenant, agreement, Schedule or Exhibit
contained in any
34
other agreement between the parties, including, without limitation, any
of the other Merger Agreements, as to which there is no inaccuracy,
omission or breach.
8.11 FEES AND EXPENSES. Except as expressly provided in this
Agreement, each party will bear its own fees and expenses incurred in
connection with the Merger Agreements and the Transactions, including,
without limitation, counsel fees, brokerage or financial advisor fees and
accounting fees, regardless of whether any of the Transactions are
consummated.
8.12 NO CONSTRUCTION AGAINST DRAFTER. The Merger Agreements have been
reviewed by the parties and their counsel and are being entered into among
competent persons, who are experienced in business and represented by
counsel. Therefore, any ambiguous language in any of such agreements will
not necessarily be construed against any particular party as the drafter of
such language.
8.13 PARTIES IN INTEREST. With the exception of the parties to this
Agreement, there will exist no right of any person to claim a beneficial
interest in any of the Merger Agreements or any rights by virtue of any of
the Merger Agreements.
8.14 INDEMNIFICATION. With respect to any actions by the individual
members of the Technalysis Board of Directors which are (i) necessary to
consummate the Merger Agreements and the Transactions and (ii) performed in
accordance with the terms of such Merger Agreements and Transactions and
(iii) are executed in good faith thereof, Compuware agrees to indemnify and
defend said individual directors from and against any claims asserted
against them by former Technalysis shareholders related to the Merger
Agreements and the Transactions. These rights are in addition to any
indemnification rights under the Compuware Bylaws or Michigan law.
Indemnification under the Compuware Bylaws or Michigan law shall not exceed
the total sum of $5,000,000.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the date first written above.
TECHNALYSIS CORPORATION, COMPUWARE CORPORATION,
a Minnesota corporation A Michigan corporation
By: /S/ MILAN L. ELTON By: /S/ ELIOT R. STARK
--------------------- -----------------------------
Its: Vice President Its: Senior Vice President
--------------- ----------------------
35
EXHIBIT II
DRAFT
February 15, 1996
Technalysis Corporation
Board of Directors
6700 France Avenue South
Minneapolis, MN 55435
To the Board of Directors:
We understand that Technalysis Corporation ("Technalysis" or the "Company")
has entered into a transaction whereby 100% of the outstanding common stock of
Technalysis will be acquired by Compuware Corporation ("Compuware") for
consideration consisting of $14.00 per share in cash (the "Transaction"),
pursuant to an Agreement and Plan of Merger between Technalysis and Compuware
dated as of January 10, 1996 (the "Merger Agreement"). Pursuant to the
Transaction, the gross consideration to be received by Technalysis shareholders,
based upon 2,202,803 outstanding shares as of December 31, 1995, will be
approximately $30.8 million.
You have requested our opinion (the "Opinion") as to whether the
consideration to be received by Technalysis shareholders in the Transaction is
fair to such shareholders, from a financial point of view. The Opinion does not
address the Company's underlying business decision to effect the Transaction.
We have not been retained to, and did not, initiate any discussions with third
parties with respect to the possible acquisition of Technalysis.
In Connection with this Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
In analyzing the Transaction and value of the Company, Houlihan Lokey has
conducted extensive due diligence including, without limitation, a review of the
following items -
1. Public disclosure for Technalysis filed on form 10-K for the
five fiscal years ended December 31, 1994 and on form 10-Q
for the quarters ended March 31, June 30, and September 30,
1995;
2. Internal financial statements for the fiscal year ended
December 31, 1995 (which management has represented as being
the most current financial information available);
3. Public disclosure filed on forms 10-K and 10-Q for certain
publicly-traded companies considered similar to Technalysis;
4. Various internal financial reports and analyses of
Technalysis;
DRAFT
5. Financial projections for fiscal 1996 prepared by
Technalysis management on approximately December 15,1995;
6. Certain contracts and business agreements of Technalysis;
7. Technalysis client lists;
8. Historical common stock trading and volume information of
Technalysis and certain public companies considered similar
to Technalysis;
9. An overview of prior offers to purchase the Company;
10. Industry information;
11. News articles and publications related to the Company and
certain publicly-traded companies considered similar to
Technalysis;
12 Interviews conducted with Technalysis management at the
Company's headquarters;
13. The Merger Agreement; and
14. A variety of other financial and narrative information.
We have relied upon and assumed, without independent verification, that the
fiscal 1996 projections provided to us have been reasonably prepared and reflect
the best currently available estimates of the future financial results and
condition of Technalysis, and that there has been no material change in the
assets, financial condition, business or prospects of Technalysis since the date
of the most recent financial statements made available to us dated as of
December 31, 1995, except as reflected in the financial projections for
Technalysis referred to above.
We have not independently verified the accuracy and completeness of the
information supplied to us with respect to Technalysis and do not assume any
responsibility with respect to it. However, nothing has come to our attention
during the course of this engagement which has led us to believe that any
information upon which we relied in connection with rendering of the Opinion is
inaccurate in any material respect or that it is unreasonable for us to rely
upon any such information. We have not made any physical inspection or
independent appraisal of any of the properties or assets of Technalysis. Our
opinion is necessarily based on business, economic, market and other conditions
as they exist and can be evaluated by us as of the date of this letter.
Based upon the foregoing, and in reliance thereon, it is our opinion that,
as of the date hereof, the consideration to be received by Technalysis
shareholders in the Transaction is fair to such shareholders, from a financial
point of view.
Sincerely,
---------------------------------
Houlihan Lokey Howard & Zukin
EXHIBIT III
SECTIONS 302A.471 AND 302A.473 OF THE
MINNESOTA BUSINESS CORPORATION ACT
302A.471. RIGHTS OF DISSENTING SHAREHOLDERS
SUBDIVISION 1. ACTIONS CREATING RIGHTS. A shareholder of a corporation
may dissent from, and obtain payment for the fair value of the shareholder's
shares in the event of, any of the following corporate actions:
(a) An amendment of the articles that materially and adversely
affects the rights or preferences of the shares of the dissenting
shareholder in that it:
(1) alters or abolishes a preferential right of the shares;
(2) creates, alters, or abolishes a right in respect of the
redemption of the shares, including a provision respecting a sinking
fund for the redemption or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of the
shares to acquire shares, securities other than shares, or rights to
purchase shares or securities other than shares;
(4) excludes or limits the right of a shareholder to vote on a
matter, or to cumulate votes, except as the right may be excluded or
limited through the authorization or issuance of securities of an
existing or new class or series with similar or different voting
rights; except that an amendment to the articles of an issuing public
corporation that provides that section 302A.671 does not apply to a
control share acquisition does not give rise to the right to obtain
payment under this section;
(b) A sale, lease, transfer, or other disposition of all or
substantially all of the property and assets of the corporation , but not
including a transaction permitted without shareholder approval in section
302A.661, subdivision 1, or a disposition in dissolution described in
section 302A.725, subdivision 2, or a disposition pursuant to an order of a
court, or a disposition for cash on terms requiring that all or
substantially all of the net proceeds of disposition be distributed to the
shareholders in accordance with their respective interests within one year
after the date of disposition;
(c) A plan of merger, whether under this chapter or chapter 332B, to
which the corporation is a party, except as provided in subdivision 3;
(d) A plan of exchange, whether under this chapter or chapter 332B,
to which the corporation is a party as the corporation whose shares will be
acquired by the acquiring corporation, if the shares of the shareholder are
entitled to be voted on the plan; or
(e) Any other corporate action taken pursuant to a shareholder vote
with respect to which the articles, the bylaws, or a resolution approved by
the board directs that dissenting shareholders may obtain payment for their
shares.
SUBD. 2. BENEFICIAL OWNERS. (a) A shareholder shall not assert
dissenters' rights as to less than all of the shares registered in the name of
the shareholder, unless the shareholder dissents with respect to all the shares
that are beneficially owned by another person but registered in the name of the
shareholder and discloses the name and address of each beneficial owner on whose
behalf the shareholder dissents. In that event, the rights of the dissenter
shall be determined as if the shares as to which the shareholder has dissented
and the other shares were registered in the names of different shareholders.
(b) The beneficial owner of shares who is not the shareholder may assert
dissenters' rights with respect to shares held on behalf of the beneficial
owner, and shall be treated as a dissenting shareholder under the terms of this
section and section 302A.473, if the beneficial owner submits to the corporation
at the time of or before the assertion of the rights a written consent of the
shareholder.
SUBD. 3. RIGHTS NOT TO APPLY. Unless the articles, the bylaws, or a
resolution approved by the board otherwise provide, the right to obtain payment
under this section does not apply to a shareholder of the surviving corporation
in a merger, if the shares of the shareholder are not entitled to be voted on
the merger.
SUBD. 4. OTHER RIGHTS. The shareholders of a corporation who have a right
under this section to obtain payment for their shares do not have a right at law
or in equity to have, a corporate action described in subdivision 1 set aside or
rescinded, except when the corporate action is fraudulent with regard to the
complaining shareholder or the corporation.
302A.473. PROCEDURES FOR ASSERTING DISSENTERS' RIGHTS
SUBDIVISION 1. DEFINITIONS. (a) For purposes of this section, the terms
defined in this subdivision have the meanings given them.
(b) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action referred to in section 302A.471, subdivision 1 or
the successor by merger of that issuer.
(c) "Fair value of the shares" means the value of the shares of a
corporation immediately before the effective date of the corporate action
referred to in section 302A.471, subdivision 1.
(d) "Interest" means interest commencing five days after the effective
date of the corporate action referred to in section 302A.471, subdivision 1, up
to and including the date of payment, calculated at the rate provided in section
549.09 for interest on verdicts and judgments.
SUBD. 2. NOTICE OF ACTION. If a corporation calls a shareholder meeting
at which any action described in section 302A.471, subdivision 1 is to be voted
upon, the notice of the
2
meeting shall inform each shareholder of the right to dissent and shall
include a copy of section 302A.471 and this section and a brief description
of the procedure to be followed under these sections.
SUBD. 3. NOTICE OF DISSENT. If the proposed action must be approved by
the shareholders, a shareholder who wishes to exercise dissenters' rights must
file with the corporation before the vote on the proposed action a written
notice of intent to demand the fair value of the shares owned by the shareholder
and must not vote the shares in favor of the proposed action.
SUBD. 4. NOTICE OF PROCEDURE; DEPOSIT OF SHARES. (a) After the proposed
action has been approved by the board and, if necessary, the shareholders, the
corporation shall send to all shareholders who have complied with subdivision 3
and to all shareholders entitled to dissent if no shareholder vote was required,
a notice that contains:
(1) The address to which a demand for payment and certificates of
certificated shares must be sent in order to obtain payment and the date by
which they must be received;
(2) Any restrictions on transfer of uncertificated shares that will
apply after the demand for payment is received;
(3) A form to be used to certify the date on which the shareholder,
or the beneficial owner on whose behalf the shareholder dissents, acquired
the shares or an interest in them and to demand payment; and
(4) A copy of section 302A.471 and this section and a brief
description of the procedures to be followed under these sections.
(b) In order to receive the fair value of the shares, a dissenting
shareholder must demand payment and deposit certificated shares or comply with
any restrictions on transfer of uncertificated shares within 30 days after the
notice required by paragraph (a) was given, but the dissenter retains all other
rights of a shareholder until the proposed action takes effect.
SUBD. 5. PAYMENT; RETURN OF SHARES. (a) After the corporate action takes
effect, or after the corporation receives a valid demand for payment, whichever
is later, the corporation shall remit to each corporation dissenting shareholder
who has complied with subdivisions 3 and 4 the amount the corporation estimates
to be the fair value of the shares, plus interest, accompanied by:
(1) The corporation's closing balance-sheet and statement of income
for a fiscal year ending not more than 16 months before the effective date
of the corporate action, together with the latest available interim
financial statements;
(2) An estimate by the corporation of the fair value of the shares
and a brief description of the method used to reach the estimate; and
3
(3) A copy of section 302A.471 and this section, and a brief
description of the procedure to be followed in demanding supplemental
payment.
(b) The corporation may withhold the remittance described in paragraph (a)
from a person who was not a shareholder on the date the action dissented from
was first announced to the public or who is dissenting on behalf of a person who
was not a beneficial owner on that date. If the dissenter has complied with
subdivisions 3 and 4, the corporation shall forward to the dissenter the
materials described in paragraph (a), a statement of the reason for withholding
the remittance, and an offer to pay to the dissenter the amount listed in the
materials if the dissenter agrees to accept that amount in full satisfaction.
The dissenter may decline the offer and demand payment under subdivision 6.
Failure to do so entitles the dissenter only to the amount offered. If the
dissenter makes demand, subdivisions 7 and 8 apply.
(c) If the corporation fails to remit payment within 60 days of the
deposit of certificates or the imposition of transfer restrictions on
uncertificated shares, it shall return all deposited certificates and cancel all
transfer restrictions. However, the corporation may again give notice under
subdivision 4 and require deposit or restrict transfer at a later time.
SUBD. 6. SUPPLEMENTAL PAYMENT; DEMAND. If a dissenter believes that the
amount remitted under subdivision 5 is less than the fair value of the shares
plus interest, the dissenter may give written notice to the corporation of the
dissenter's own estimate of the fair value of the shares, plus interest, within
30 days after the corporation mails the remittance under subdivision 5, and
demand payment of the difference. Otherwise, a dissenter is entitled only to
the amount remitted by the corporation.
SUBD. 7. PETITION; DETERMINATION. If the corporation receives a demand
under subdivision 6, it shall, within 60 days after receiving the demand, either
pay to the dissenter the amount demanded or agreed to by the dissenter after
discussion with the corporation or file in court a petition requesting that the
court determine the fair value of the shares, plus interest. The petition shall
be filed in the county in which the registered office of the corporation is
located, except that a Surviving foreign corporation that receives a demand
relating to the shares of a constituent domestic corporation shall file the
petition in the county in this state in which the last registered office of the
constituent corporation was located. The petition shall name as parties all
dissenters who have demanded payment under subdivision 6 and who have not
reached agreement with the corporation. The corporation shall, after filing the
petition, serve all parties with a summons and a copy of the petition under the
rules of civil procedure. Nonresidents of this state may be served by
registered or certified mail or by publication as provided by law. Except as
otherwise provided, the rules of civil procedure apply to this proceeding. The
jurisdiction of the court is plenary and exclusive. The court may appoint
appraisers, with powers and authorities the court deems proper, to receive
evidence on and recommend the amount of the fair value of the shares. The court
shall determine whether the shareholder or shareholders in question have fully
complied with the requirements of this section, and shall determine the fair
value of the shares, taking into account any and all factors the court finds
relevant, computed by any method or combination of methods that the court, in
its discretion, sees fit to use, whether or not used by the corporation or by a
dissenter. The fair value of the shares as determined by the court is binding
on all shareholders, wherever located. A dissenter is entitled to judgment in
cash for the amount by which the fair value of the shares as determined
4
by the court, plus interest, exceeds the amount, if any, remitted under
subdivision 5, but shall not be liable to the corporation for the amount, if
any, by which the amount, if any, remitted to the dissenter under subdivision
5 exceeds the fair value of the shares as determined by the court, plus
interest.
SUBD. 8. COSTS; FEES; EXPENSES. (a) The court shall determine the costs
and expenses of a proceeding under subdivision 7, including the reasonable
expenses and compensation of any appraisers appointed by the court, and shall
assess those costs and expenses against the corporation, except that the court
may assess part or all of those costs and expenses against a dissenter whose
action in demanding payment under subdivision 6 is found to be arbitrary,
vexatious, or not in good faith.
(b) If the court finds that the corporation has failed to comply
substantially with this section, the court may assess all fees and expenses of
any experts or attorneys as the court deems equitable. These fees and expenses
may also be assessed against a person who has acted arbitrarily, vexatiously, or
not in good faith in bringing the proceeding, and may be awarded to a party
injured by those actions.
(c) The court may award, in its discretion, fees and expenses to an
attorney for the dissenters out of the amount awarded to the dissenters, if any.
Laws 1981, c. 270 Section 81, eff. July 1, 1981. Amended by Laws 1987, c. 104,
Sections 30 to 33.
5
APPENDIX A
SELECTED FINANCIAL DATA
- - - -------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31 1994 1993 1992 1991 1990
- - - -------------------------------------------------------------------------------------
REVENUES $16,844,569 $17,886,361 $19,144,082 $18,420,849 $20,531,385
- - - -------------------------------------------------------------------------------------
EARNINGS BEFORE TAXES 2,054,942 2,494,779 1,969,108 3,148,104 3,604,632
- - - -------------------------------------------------------------------------------------
NET EARNINGS 1,222,942 1,484,779 1,214,608 1,888,104 2,162,632
- - - -------------------------------------------------------------------------------------
TOTAL ASSETS 8,919,767 9,061,158 8,933,870 8,619,952 7,918,472
- - - -------------------------------------------------------------------------------------
LONG TERM OBLIGATIONS -0- -0- -0- -0- -0-
- - - -------------------------------------------------------------------------------------
PER COMMON SHARE:
NET EARNINGS $.56 $.68 $.56 $.87 $1.00
CASH DIVIDENDS .57 .55 .53 .51 .48
- - - -------------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
- - - -------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
The Company's source of funding to meet liquidity requirements, capital
expenditures, and dividends over the past three years has been cash flow from
operations. Net cash provided from operating activities decreased to $257,207
in 1994 from $2,159,387 in 1993. This decrease was primarily related to costs
incurred for additional services performed in connection with a contract with
the State of Minnesota. At December 31, 1994, the Company was negotiating for
the final approval of these change orders, which were performed at the request
of the customer, and had neither billed nor completely recognized the revenues
related to such change orders. Management believes the Company's current cash
position and the cash flow generated by operating activities will continue to
be adequate for short-term and long-term liquidity and future dividend
requirements.
- - - -------------------------------------------------------------------------------
RESULTS OF OPERATIONS
Revenues decreased approximately 6% for 1994 as compared to 1993 due to a
reduction in revenue in the Company's remote offices and because of the
unrecognized revenues for certain change orders awaiting approval on the
State of Minnesota contract. Management anticipates that the change orders
will be approved by the customer in 1995 and the Company will recognize
significant additional revenues on the contract during 1995 and beyond.
Expenses decreased approximately 4% due to the monthly average number of
personnel being less for 1994 as compared to 1993 even though the number of
personnel at the end of 1994 was higher than at the end of 1993. As a result,
net earnings for the year ended December 31, 1994 decreased approximately 18%
compared to the year ended December 31, 1993.
Revenues decreased approximately 7% for 1993 as compared to 1992 due to the
soft economy. Expenses, however, decreased approximately 10% for the same
period, due primarily to the absence of substantial legal expenses with the
IRS tax case that occurred in 1992 and was resolved in 1993 and due to the
completion of a fixed price contract in 1992 that required more hours to
complete than anticipated. As a result, net earnings for the year ended
December 31, 1993 increased approximately 22% compared to the year ended
December 31, 1992.
- - - -------------------------------------------------------------------------------
IMPLEMENTATION OF NEW ACCOUNTING STANDARD
The Company adopted the provisions of FASB Statement No. 115, ACCOUNTING FOR
CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES, as of January 1, 1994.
At January 1, 1994, the adoption of Statement 115 had no effect on the
Company's financial statements. At December 31, 1994, the Company had an
investment in available-for-sale securities at a cost of $1,146,102 and a
fair market value of $1,057,255. Management believes that this unrealized
loss is temporary.
MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Since July 1, 1981, the common stock of the Company has traded on the
national-Over-The-Counter (NASDAQ) market. Since February 19, 1985, the stock
has been listed under NASDAQ's National Market System under the symbol TECN.
The information for the table below was taken from NASDAQ's National Market
System Statistical Reports. The price range sets forth the low and high
prices of transactions as reported for the quarters indicated.
PRICE RANGE
-----------
LOW HIGH
1993 1st Quarter* 9 3/4 15 3/4
2nd Quarter* 9 1/4 15 1/2
3rd Quarter 10 12 1/4
4th Quarter 10 12 1/2
1994 1st Quarter 10 1/2 12 1/4
2nd Quarter 11 12 1/2
3rd Quarter 10 3/4 11 3/4
4th Quarter 10 1/4 11 3/4
1995 January (1-31) 10 1/4 11 1/2
The approximate number of holders of record of Common Stock as of January 31,
1995 was 342.
Annual dividends on the Common Stock of the Company have been paid since
1972. Payment of semi-annual dividends began for fiscal year 1989. The total
dividends paid for 1993 and 1994 were $.55/share and $.57/share,
respectively. Semi-annual dividends are expected to continue in the future at
comparable levels.
*On March 17, 1993, the Company announced its intent to be acquired by
Compuware Corp. On June 1, 1993, however, the discussions terminated due to
the inability to reach an agreement on the final determination of valuation.
TECHNALYSIS CORPORATION
PROXY
SPECIAL STOCKHOLDERS' MEETING
APRIL 1, 1996
The undersigned stockholder of Technalysis Corporation hereby appoints
Victor A. Rocchio, Edward D. Zimmer, and Robert S. Erickson, and each of them,
his or her proxy, with full power of substitution, to attend the special meeting
of the stockholders of Technalysis Corporation, to be held at the corporate
offices of Technalysis Corporation at 6700 France Avenue South, Minneapolis,
Minnesota, on Monday, April 1, 1996, at 10:00 a.m., and at any and all
adjournments thereof, and there to act for to vote all stock of the undersigned,
in the manner specified below, upon the following matters.
1. To consider and vote upon approval of an Agreement and Plan of
Merger, dated January 10, 1996, between the Company and Compuware
Corporation, a Michigan corporation, providing for the merger of the Company
with and into Compuware Corporation, pursuant to which each outstanding share
of the Company's common stock (other than shares as to which the holders
have perfected their appraisal rights under Minnesota law) will be converted
into the right to receive $14.00 in cash, without interest.
/ / FOR / / AGAINST / / ABSTAIN
2. In their discretion on any other matter that may properly come
before the meeting or any adjournment or adjournments thereof.
PLEASE FILL IN, SIGN ON REVERSE SIDE AND MAIL IN THE ENCLOSED ENVELOPE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR APPROVAL OF THE AGREEMENT
AND PLAN OF MERGER.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF NOTICE OF THE MEETING AND OF
THE PROXY STATEMENT.
DATED THIS ____ DAY OF _________________, 1996.
_______________________________
_______________________________________
(PLEASE SIGN EXACTLY AS YOUR NAME
APPEARS HEREON. IF SIGNED FOR ESTATES,
TRUSTS OR CORPORATIONS, TITLE OR
CAPACITY SHOULD BE STATED. IF SHARES
HELD JOINTLY, EACH HOLDER MUST SIGN.)