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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF
THE SECURITIES EXCHANGE ACT OF 1934
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SCS/COMPUTE, INC.
(NAME OF SUBJECT COMPANY)
SCS/COMPUTE, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $.10 PER SHARE
(TITLE OF CLASS OF SECURITIES)
784030 10 8
(CUSIP NUMBER OF CLASS OF SECURITIES)
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SCS/COMPUTE, INC.
2252 WELSCH INDUSTRIAL COURT
ST. LOUIS, MISSOURI 63146
ATTENTION: ROBERT W. NOLAN, SR.
(314) 997-7766
(NAME, ADDRESS, AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF
THE PERSON(S) FILING STATEMENT)
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WITH A COPY TO
JOHN R. SHORT, ESQ.
PEPER, MARTIN, JENSEN, MAICHEL AND HETLAGE
TWENTY-FOURTH FLOOR
720 OLIVE STREET
ST. LOUIS, MISSOURI 63101
(314) 421-3850
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is SCS/Compute, Inc., a Delaware
corporation (the "Company"). The address of the principal executive offices of
the Company is 2252 Welsch Industrial Court, St. Louis, Missouri 63146. The
title of the class of equity securities to which this Statement relates is the
common stock, par value $.10 per share, of the Company (the "Common Stock").
ITEM 2. TENDER OFFER OF THE BIDDER
The Statement relates to the tender offer by SCS Subsidiary, Inc., a
Delaware corporation ("Purchaser") and a direct wholly owned subsidiary of
Thomson U. S. Holdings Inc., a Delaware corporation ("Parent") and an indirect
wholly owned subsidiary of The Thomson Corporation, a corporation organized
under the laws of Ontario, Canada, disclosed in a Tender Offer Statement on
Schedule 14D-1 (the "Schedule 14D-1), dated December 27, 1995, to purchase all
outstanding shares of Common Stock, other than 1,082,570 shares owned directly
by Robert W. Nolan, Sr., which shares are the subject of a stock purchase
agreement between Purchaser and Mr. Nolan, Sr., at a price of $6.75 per share
(such amount, or any greater amount per Share paid pursuant to the Offer, being
hereafter referred to as the "Per Share Amount"), net to the seller in cash,
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated December 27, 1995 (the "Offer to Purchase") and the related Letter of
Transmittal (which together constitute the "Offer").
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of December 19, 1995, (the "Merger Agreement"), among Parent, Purchaser and
the Company. The Merger Agreement provides that, among other things, as promptly
as practicable after the consummation of the Offer and satisfaction or waiver of
the conditions to the Merger, Purchaser will be merged with and into the Company
(the "Merger") and the Company will continue as the surviving corporation (the
"Surviving Corporation"). A copy of the Merger Agreement is attached hereto as
Exhibit 2 and incorporated herein by reference.
According to the Schedule 14D-1, the principal executive offices of
Purchaser and Parent are located at Metro Center, One Station Place, Stamford,
Connecticut 06902.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and address of the Company, which is the person filing this
Statement, are SCS/Compute, Inc., 2252 Welsch Industrial Court, St. Louis,
Missouri 63146.
(b) Each material contract, agreement, arrangement and understanding
between the Company or its affiliates and (i) its executive officers, directors
or affiliates or (ii) Purchaser, Parent and their executive officers, directors
or affiliates, is described in the Company's Information Statement set forth on
Schedule I hereto or set forth below.
STOCK OPTIONS AND WARRANTS
The Company maintains the SCS/Compute, Inc. Stock Option Plan (the "Plan")
which provides for the grant of stock options (the "Options"). As of December
15, 1995, options for 130,000 shares of Common Stock were outstanding. Pursuant
to action by the Board of Directors of the Company on December 14, 1995, all
outstanding options not then exercisable were vested as of that date. The
Company has no outstanding warrants and has never issued stock appreciation
rights.
Pursuant to the terms of the Merger Agreement, all outstanding stock
options that are outstanding at the time the Merger becomes effective, whether
or not then exercisable, will be canceled, and each holder of such canceled
Option will be entitled to receive from Purchaser, in consideration for the
cancellation of such Option, an amount in cash equal to the product of (i) the
number of shares previously subject to such Option and (ii) the excess, if any,
of the Per Share Amount over the exercise price per share of such Option.
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INCENTIVE COMPENSATION PLAN AND CONTINGENT BONUS PAYMENTS
In order to retain and motivate key employees, the Company's Board of
Directors adopted an incentive compensation plan (the "Incentive Plan") on July
14, 1986. The Incentive Plan is designed to provide additional performance
incentives to the Company's executive officers. Under the Incentive Plan
effective for the fiscal year ended January 31, 1995, each participant received
a bonus based on a percentage of pre-tax, pre-executive bonus profits of the
Company. Amounts earned under the Incentive Plan for the year ended January 31,
1995 are included under the caption "Bonus" in the Summary Compensation Table in
the Information Statement attached hereto as Schedule I. A similar Incentive
Plan is in effect for the fiscal year ending January 31, 1996.
At the meeting of the Board of Directors on December 14, 1995, the Board,
in recognition of the efforts of the principal executive officers in the
operation of the Company and the financial benefit to the shareholders of the
Offer and Merger and in lieu of long term compensation packages, awarded (with
employee directors abstaining as to resolutions in which they had an interest)
the principal executive officers of the Company bonuses of $575,000 in the
aggregate, the payment of which is subject to the completion of the Offer and
the Merger.
EMPLOYMENT AGREEMENT AND CONSULTING AGREEMENT
The following is a summary of the form of Employment Agreement to be
entered into by the Company and Robert W. Nolan, Sr., President and Chief
Executive Officer of the Company, a copy of which is filed as an exhibit to this
Schedule 14D-9 and of the form of Consulting Agreement which is attached to the
Employment Agreement as an exhibit. Such summary is qualified in its entirety by
reference to the Employment Agreement and the Consulting Agreement.
As of the Effective Time of the Merger Agreement, the Company will enter
into an Employment Agreement and a Consulting Agreement with Mr. Nolan. The
Employment Agreement has a term of five years, subject to earlier termination
and the Consulting Agreement has a term of three years to commence upon the
earlier of expiration of the term of the Employment Agreement or termination of
Mr. Nolan's employment thereunder. Under the Employment Agreement, Mr. Nolan
will receive an initial annual salary of $260,000 which will be increased each
year to reflect any increase in the consumer price index for all urban consumers
in the St. Louis, Missouri area for the prior calendar year. Mr. Nolan will be
eligible for two types of incentive compensation, the amounts of which will be
based on Company performance: (i) an annual bonus payable each year during the
term of the Employment Agreement, and (ii) a long-term incentive payment
("LTIP") payable in the third, fourth and fifth years of the Employment
Agreement. Neither incentive payment will be payable unless certain levels of
Company performance are reached. Eligibility for further incentive payments
ceases upon termination of the Employment Agreement, except as provided below.
The Employment Agreement may be terminated by either party for any reason at any
time prior to its expiration. If Mr. Nolan resigns during the first two years of
the term or is terminated at any time for cause, he will receive no severance
payments. If he resigns during the third, fourth or fifth years of the term, Mr.
Nolan will be entitled to continue to receive, as severance, his then base
salary for one year following the date of resignation. If the Employment
Agreement is terminated by reason of Mr. Nolan's death or disability or if the
Company terminates his employment either without cause or for failure of the
Company to meet minimum financial performance standards, he will be entitled to
continue to receive, as severance, his then base salary for two years from the
date of termination. In addition, if termination is by reason of death or
disability or is without cause, Mr. Nolan shall be entitled to receive the
annual bonus amount he would have received for the year in which the termination
occurs based on the approved budget for such year. Further, if such termination
by reason of death or disability or without cause occurs in the second or third
year of the term, he will be entitled to receive a pro-rated portion of any LTIP
he would have been entitled to receive in the third year based on the approved
budget for the third year and if the termination occurs in the fourth or fifth
year of the term, he will be entitled to the full LTIP he would have been
entitled to receive in the year of termination based on the approved budget for
such year. The Consulting Agreement, the term of which follows that of the
Employment Agreement, provides for a total fee of $1,050,000, payable monthly
over the three year term at an initial
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annual rate of $400,000 which will decrease to $250,000 in the final year of the
term. For two years from the termination date of the Employment Agreement, Mr.
Nolan has agreed not to compete with the Company and for three years from the
termination of the Employment Agreement Mr. Nolan, Sr. has agreed not to solicit
or hire any of its employees (excluding Robert W. Nolan, Jr.) and consultants.
Mr. Nolan has also agreed to protect the status of all confidential information
relating to the Company.
INDEMNIFICATION UNDER DELAWARE LAW
AND THE COMPANY'S CHARTER
The Company is a Delaware Corporation. Reference is made to Section 145 of
the Delaware General Corporation Law (the "Delaware Law), which provides that a
corporation may indemnify any person who is, or is threatened to be made, a
party to any threatened, pending or completed legal action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of such corporation), by reason of the fact that such person
is or was an officer, director, employee or agent of such corporation, or is or
was serving at the request of such corporation as a director, officer, employee
or agent of another corporation or enterprise. The indemnity may include
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by the indemnified person in
connection with such action, suit or proceeding, provided such officer,
director, employee or agent acted in good faith and in a manner he reasonably
believed to be in or not opposed to the corporation's best interests and, for
criminal proceedings, had no reasonable cause to believe that his conduct was
unlawful. A Delaware corporation may indemnify officers and directors in an
action by or in the right of the corporation under the same conditions, except
that no indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses that
such officer or director actually and reasonably incurred.
Reference is also made to Section 102(b)(7) of the Delaware Law, which
enables a corporation in its original certificate of incorporation or an
amendment thereto to eliminate or limit the personal liability of a director to
the corporation or its stockholders, for violations of the director's fiduciary
duty, except (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the Delaware Law (providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases or
redemptions) or (iv) for any transaction from which a director derived an
improper personal benefit.
Article XI of the Certificate of Incorporation of the Company provides
that, except under certain circumstances, directors of the Company shall not be
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duties as a director.
Article VII of the Company's Restated By-Laws provides that the Company
shall indemnify any officer or director to the fullest extent permitted by the
General Corporation Law of the State of Delaware for liability and expense
incurred by such officer or director as a result of any action, or threatened
action arising out of activities performed as directors or officers of the
Company and may indemnify any person who is, was or has agreed to become an
employee or agent of the Company or is, was or has agreed to serve at the
request of the Company as an employee or agent of another corporation or
enterprise.
The Merger Agreement provides that the By-laws of the Surviving Corporation
shall contain provisions no less favorable with respect to indemnification,
advancement of expenses and related matters than are set forth in Article VII of
the By-laws of the Company as in affect on the date of the Merger Agreement,
which provisions shall not be amended, repealed or otherwise modified for a
period of three years from the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who at the Effective Time were
directors, officers, employees, fiduciaries or agents of the Company, unless
such modification shall be required by law.
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The Merger Agreement also provides that the Company shall, to the fullest
extent permitted under applicable law and regardless of whether the Merger
becomes effective, indemnify and hold harmless, and after the Effective Time,
the Surviving Corporation shall, to the fullest extent permitted under
applicable law, indemnify and hold harmless, each present and former director,
officer, employee, fiduciary and agent of the Company (collectively, the
"Indemnified Parties") against all costs and expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and settlement
amounts paid in connection with any claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), whether
civil, criminal, administrative or investigative, arising out of or pertaining
to any action or omission in his or her capacity as an officer, director,
employee, fiduciary or agent of the Company, whether occurring before or after
the Effective Time, for a period of three years after the date of the Merger
Agreement. In the event of any such claim, action, suit, proceeding or
investigation, the Merger Agreement provides that (i) the Company or the
Surviving Corporation, as the case may be, shall pay the reasonable fees and
expenses of counsel selected by the Indemnified Parties, which counsel shall be
reasonably satisfactory to the Company or the Surviving Corporation, promptly
after statements therefor are received and (ii) the Company and the Surviving
Corporation shall cooperate in the defense of any such matter; provided,
however, that neither the Company nor the Surviving Corporation shall be liable
for any settlement effected without its written consent (which consent may not
be unreasonably withheld); and provided, further, that neither the Company nor
the Surviving Corporation shall be obligated to pay the fees and expenses of
more than one counsel for all Indemnified Parties in any single action except to
the extent that two or more of such Indemnified Parties shall have conflicting
interests in the outcome of such action; and provided, further, that, in the
event that any claim for indemnification is asserted or made within such
three-year period, all rights to indemnification in respect of such claim shall
continue until the disposition of such claim.
Parent, Purchaser and the Company have also agreed that in the event the
Company or the Surviving Corporation or any of their respective successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then and in each such case, proper provision shall be made so
that the successors and assigns of the Company or the Surviving Corporation, as
the case may be, or at Parent's option, Parent, shall assume the foregoing
indemnity obligations.
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement, a copy of which is
filed as an Exhibit to this Schedule 14D-9. Such summary is qualified in its
entirety by reference to the Merger Agreement.
The Offer. The Merger Agreement provides for the commencement of the Offer
as promptly as reasonably practicable, but in no event later than five business
days after the initial public announcement of Purchaser's intention to commence
the Offer. The obligation of Purchaser to accept for payment Shares tendered
pursuant to the Offer is subject to the satisfaction of the Minimum Condition
and certain other conditions that are described in Section 14 of the Offer to
Purchase. Purchaser and Parent have agreed that no change in the Offer may be
made which decreases the price per Share payable in the Offer, which reduces the
maximum number of Shares to be purchased in the Offer or which imposes
conditions to the Offer in addition to those set forth in Section 14 of the
Offer to Purchase.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, and in accordance with Delaware Law, at the Effective
Time, Purchaser shall be merged with and into the Company. As a result of the
Merger, the separate corporate existence of Purchaser will cease and the Company
will continue as the Surviving Corporation and will become a direct, wholly
owned subsidiary of Parent. Upon consummation of the Merger, each issued and
then outstanding Share (other than any Shares owned by Purchaser, Parent or any
direct or indirect wholly owned subsidiary of Parent or of the Company
immediately prior to the Effective Time and any Shares which are held by
stockholders who have not voted in favor of the Merger or consented thereto in
writing and who shall have demanded properly in writing appraisal for such
Shares in accordance with Delaware Law) shall be cancelled or converted
automatically into the right
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to receive an amount equal to $6.75 per Share or any greater amount per Share
paid pursuant to the Offer (such amount, the "Per Share Amount") in cash.
The Merger Agreement provides that the directors of Purchaser immediately
prior to the Effective Time will be the initial directors of the Surviving
Corporation and that the officers of the Company immediately prior to the
Effective Time will be the initial officers of the Surviving Corporation. The
Merger Agreement provides that, at the Effective Time, unless otherwise
determined by Parent prior to the Effective Time, the Certificate of
Incorporation of Purchaser will be the Certificate of Incorporation of the
Surviving Corporation; provided, however, that, at the Effective Time, Article I
of the Certificate of Incorporation of the Surviving Corporation will be amended
to read as follows: "The name of the corporation is SCS/Compute, Inc." The
Merger Agreement also provides that the By-laws of Purchaser, as in effect
immediately prior to the Effective Time, will be the By-laws of the Surviving
Corporation.
Agreements of Parent, Purchaser and the Company. Pursuant to the Merger
Agreement, the Company shall, in accordance with applicable law and the
Company's Certificate of Incorporation and By-laws, duly call, give notice of,
convene and hold a special meeting of its stockholders as soon as practicable
following consummation of the Offer for the purpose of considering and taking
action on the Merger Agreement and the transactions contemplated thereby (the
"Stockholders' Meeting"). If Purchaser acquires at least a majority of the
outstanding Shares, Purchaser will have sufficient voting power to approve the
Merger, even if no other stockholder votes in favor of the Merger.
The Merger Agreement provides that the Company shall, as soon as
practicable following consummation of the Offer, file with the Securities and
Exchange Commission (the "Commission") under the Exchange Act, and use its best
efforts to have cleared by the Commission, a proxy statement and related proxy
materials (the "Proxy Statement") with respect to the Stockholders' Meeting and
shall cause the Proxy Statement to be mailed to stockholders of the Company at
the earliest practicable time. The Company has agreed, subject to its fiduciary
duties under applicable law as advised by counsel, to include in the Proxy
Statement the recommendation of the Board that the stockholders of the Company
approve and adopt the Merger Agreement and the transactions contemplated thereby
and to use its best efforts to obtain such approval and adoption. Parent and
Purchaser have agreed to cause all Shares then owned by them and their
subsidiaries to be voted in favor of approval and adoption of the Merger
Agreement and the transactions contemplated thereby.
The Merger Agreement provides that, in the event that Purchaser shall
acquire at least 90 percent of the then outstanding Shares, all necessary and
appropriate action shall be taken to cause the Merger to become effective as
soon as reasonably practicable after such acquisition, without a meeting of the
Company's stockholders, in accordance with Delaware Law.
Pursuant to the Merger Agreement, the Company has covenanted and agreed
that, between the date of the Merger Agreement and the Effective Time, unless
Parent shall otherwise agree in writing, the business of the Company shall be
conducted only in, and the Company shall not take any action except in, the
ordinary course of business and in a manner consistent with past practice; and
the Company shall use its best efforts to preserve substantially intact the
business organization of the Company, to keep available the services of the
current officers, employees and consultants of the Company and to preserve the
current relationships of the Company with customers, suppliers and other persons
with which the Company has significant business relations. The Merger Agreement
provides that by way of amplification and not limitation, and except as
contemplated therein, the Company shall not between the date of the Merger
Agreement and the Effective Time, directly or indirectly do, or propose to do,
any of the following, without the prior written consent of Parent: (a) amend or
otherwise change its Certificate of Incorporation or By-laws; (b) issue, sell,
pledge, dispose of, grant, encumber, or authorize the issuance, sale, pledge,
disposition, grant or encumbrance of (i) any shares of capital stock of any
class of the Company, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of such capital stock, or any other
ownership interest (including, without limitation, any phantom interest), of the
Company (except for the issuance of a maximum of 130,000 Shares issuable
pursuant to Options outstanding on the date of the Merger Agreement) or (ii) any
assets of the Company, except for sales in the ordinary course of business and
in a manner consistent with past practice;
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(c) declare, set aside, make or pay any dividend or other distribution, payable
in cash, stock, property or otherwise, with respect to any of its capital stock;
(d) reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock; (e) (i) acquire
(including, without limitation, by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership, other business organization or
any division thereof or any material amount of assets, (ii) incur any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise as an accommodation become responsible for,
the obligations of any person, or make any loans or advances, except in the
ordinary course of business and consistent with past practice, (iii) enter into
any contract or agreement other than in the ordinary course of business,
consistent with past practice, (iv) authorize any single capital commitment
which is in excess of $50,000 or capital expenditures which are, in the
aggregate, in excess of $100,000 for the Company, or (v) enter into or amend any
contract, agreement, commitment or arrangement with respect to any of the
foregoing matters; (f) increase the compensation payable or to become payable to
its officers or employees, except for increases in accordance with past
practices in salaries or wages of employees of the Company who are not officers
of the Company, or grant any severance or termination pay to, or enter into any
employment or severance agreement with any director, officer or other employee
of the Company, or establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or employee; (g) take any
action, other than reasonable and usual actions in the ordinary course of
business and consistent with past practice, with respect to accounting policies
or procedures (including, without limitation, procedures with respect to the
payment of accounts payable and collection of accounts receivable); (h) make any
tax election or settle or compromise any material federal, state, local or
foreign income tax liability; (i) settle or compromise any pending or threatened
suit, action or claim which is material or which relates to the transactions
contemplated by the Merger Agreement; (j) pay, discharge or satisfy any claim,
liability or obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business and consistent with past practice, of liabilities
reflected or reserved against in the balance sheet of the Company as at January
31, 1995 or subsequently incurred in the ordinary course of business and
consistent with past practice; (k) sell, assign, transfer, license, sublicense,
pledge or otherwise encumber any of the Company's Intellectual Property (as
defined in the Merger Agreement); or (l) announce an intention, commit or agree
to do any of the foregoing.
The Merger Agreement provides that, promptly upon the purchase by Purchaser
of Shares pursuant to the Offer, and from time to time thereafter, Purchaser
shall be entitled to designate up to such number of directors, rounded up to the
next whole number, on the Board as shall give Purchaser representation on the
Board equal to the product of the total number of directors on the Board (giving
effect to the directors elected pursuant to this sentence), multiplied by the
percentage that the aggregate number of Shares beneficially owned by Purchaser
or any affiliate of Purchaser following such purchase bears to the total number
of Shares then outstanding, and the Company shall, at such time, promptly take
all actions necessary to cause Purchaser's designees to be elected as directors
of the Company, including increasing the size of the Board or securing the
resignations of incumbent directors, or both. The Merger Agreement also provides
that, at such times, the Company shall use its best efforts to cause persons
designated by Purchaser to constitute the same percentage as persons designated
by Purchaser shall constitute of the Board of each committee of the Board, in
each case only to the extent permitted by applicable law. Until the earlier of
(i) the time Purchaser acquires a majority of the then outstanding Shares on a
fully diluted basis and (ii) the Effective Time, the Company has agreed to use
its best efforts to ensure that all the members of the Board and each committee
of the Board as of the date of the Merger Agreement who are not employees of the
Company shall remain members of the Board and of such committees.
The Merger Agreement provides that following the election or appointment of
Purchaser's designees in accordance with the immediately preceding paragraph and
prior to the Effective Time, any amendment of the Merger Agreement or the
Certificate of Incorporation or By-laws of the Company, any termination of the
Merger Agreement by the Company, any extension by the Company of the time for
the performance of any of the obligations or other acts of Parent or Purchaser
or waiver of any of the Company's rights thereunder, will
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require the concurrence of a majority of those directors of the Company then in
office who were neither designated by Purchaser nor are employees of the
Company.
Pursuant to the Merger Agreement, until the Effective Time, the Company
shall, and shall cause the officers, directors, employees, auditors and agents
of the Company to, afford the officers, employees and agents of Parent and
Purchaser complete access at all reasonable times to the officers, employees,
agents, properties, offices, plants and other facilities, books and records of
the Company, and shall furnish Parent and Purchaser with all financial,
operating and other data and information as Parent or Purchaser, through its
officers, employees or agents, may reasonably request and Parent and Purchaser
have agreed to keep such information confidential in accordance with the Mutual
Nondisclosure Agreement dated October 10, 1995 between the Company and RIA Inc.
The Merger Agreement provides that the Company shall not, directly or
indirectly, through any officer, director, agent or otherwise, solicit, initiate
or encourage the submission of any proposal or offer from any person relating to
any acquisition or purchase of all or (other than in the ordinary course of
business) any portion of the assets of, or any equity interest in, the Company
or any business combination with the Company or participate in any negotiations
regarding, or furnish to any other person any information with respect to, or
otherwise cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other person to do or seek any of the
foregoing; provided, however, that nothing contained in this paragraph shall
prohibit the Board from responding to any unsolicited proposal made in writing
to acquire the Company pursuant to a merger, consolidation, share exchange,
business combination or other similar transaction or to acquire all or
substantially all of the assets of the Company, to the extent the Board, after
consultation with independent counsel, determines in good faith that such action
is required for the Board to comply with its fiduciary duty to stockholders
imposed by Delaware Law. The Merger Agreement requires the Company immediately
to cease and cause to be terminated all existing discussions or negotiations
with any parties conducted prior to the date of the Merger Agreement with
respect to any of the foregoing. The Company has also agreed to notify Parent
promptly if any such proposal or offer, or any inquiry or contact with any
person with respect thereto, is made and, in any such notice to Parent, to
indicate in reasonable detail the identity of the person making such proposal,
offer, inquiry or contact and the terms and conditions of such proposal, offer,
inquiry or contact. The Company has also agreed not to release any third party
from, or waive any provision of, any confidentiality or standstill agreement to
which the Company is a party.
Pursuant to the Merger Agreement, Parent intends that, for a period of one
year immediately following the Effective Time, it shall, or shall cause the
Surviving Corporation to, continue to maintain employee benefit and welfare
plans, programs, contracts, agreements, policies and executive incentives and
perquisites, other than equity-based plans, for the benefit of active and
retired employees of the Company or the Surviving Corporation which in the
aggregate provide benefits that are no less favorable to employees than the
benefits provided to such active and retired employees on the date of the Merger
Agreement.
The Merger Agreement provides that, subject to its terms and conditions,
each of the parties thereto shall (i) make promptly its respective filings, and
thereafter make any other required submissions, under the HSR Act with respect
to the transactions contemplated by the Merger Agreement and (ii) use its
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by the Merger Agreement, including, without
limitation, using its reasonable best efforts to obtain all licenses, permits
(including, without limitation, environmental permits), consents, approvals,
authorizations, qualifications and orders of governmental authorities and
parties to contracts with the Company as are necessary for the consummation of
such transactions and to fulfill the conditions to the Offer and the Merger.
In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of the Merger Agreement, the
proper officers and directors of each party to the Merger Agreement are required
to use their reasonable best efforts to take all such action.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto including
representations by the Company as to the absence of certain
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changes or events concerning the Company's business, compliance with law,
litigation, employee benefit plans, labor matters, trademarks, patents and
copyrights, environmental matters, material contracts, brokers, opinions from
financial advisors and taxes.
Conditions to the Merger. Under the Merger Agreement, the respective
obligations of each party to effect the Merger are subject to the satisfaction
at or prior to the Effective Time of the following conditions: (a) the Merger
Agreement and the transactions contemplated thereby shall have been approved and
adopted by the affirmative vote of the stockholders of the Company to the extent
required by Delaware Law and the Company's Certificate of Incorporation; (b) any
waiting period (and any extension thereof) applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated; (c) no foreign,
United States or state court of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any law, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) which is then in effect and has the effect of making the acquisition
of Shares by Parent or Purchaser or any affiliate of either of them illegal or
otherwise restricting, preventing or prohibiting consummation of the
transactions contemplated by the Merger Agreement; and (d) Purchaser or its
permitted assignee shall have purchased all Shares validly tendered and not
withdrawn pursuant to the Offer; provided, however, that this condition shall
not be applicable to the obligations of Parent or Purchaser if, in breach of the
Merger Agreement or the terms of the Offer, Purchaser fails to purchase any
Shares validly tendered and not withdrawn pursuant to the Offer.
Termination; Fees and Expenses. The Merger Agreement provides that it may
be terminated and the Merger and the other Transactions may be abandoned at any
time prior to the Effective Time, notwithstanding any requisite approval and
adoption of the Merger Agreement and such transactions by the stockholders of
the Company: (a) by mutual written consent duly authorized by the Boards of
Directors of Parent, Purchaser and the Company; (b) by either Parent, Purchaser
or the Company if (i) the Effective Time shall not have occurred on or before
March 31, 1996; provided, however, that the right to terminate the Merger
Agreement shall not be available to any party whose failure to fulfill any
obligation under the Merger Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date or (ii) any court
of competent jurisdiction in the United States or other United States
governmental authority shall have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the Merger and such
order, decree, ruling or other action shall have become final and nonappealable;
(c) by Parent if (i) due to an occurrence or circumstance that would result in a
failure to satisfy any condition set forth in Section 14 of the Offer to
Purchase, Purchaser shall have (A) failed to commence the Offer within 30 days
following the date of the Merger Agreement, (B) terminated the Offer without
having accepted any Shares for payment thereunder, or (C) failed to pay for
Shares pursuant to the Offer within 60 days following the commencement of the
Offer, unless such failure to pay for Shares shall have been caused by or
resulted from the failure of Parent or Purchaser to perform in any material
respect any material covenant or agreement of either of them contained in the
Merger Agreement or the material breach by Parent or Purchaser of any material
representation or warranty of either of them contained in the Merger Agreement
or (ii) prior to the purchase of Shares pursuant to the Offer, the Board or any
committee thereof shall have withdrawn or modified in a manner adverse to
Purchaser or Parent its approval or recommendation of the Offer, the Merger
Agreement, the Merger or any other Transaction or shall have recommended another
merger, consolidation, business combination with, or acquisition of, the Company
or its assets or another tender offer for Shares, or shall have resolved to do
any of the foregoing; or (d) by the Company, upon approval of the Board, if (i)
Purchaser shall have (A) failed to commence the Offer within 30 days following
the date of the Merger Agreement, (B) terminated the Offer without having
accepted any Shares for payment thereunder or (C) failed to pay for Shares
pursuant to the Offer within 60 days following the commencement of the Offer,
unless such failure to pay for Shares shall have been caused by or resulted from
the failure of the Company to perform in any material respect any material
covenant or agreement of it contained in the Merger Agreement or the material
breach by the Company of any material representation or warranty of it contained
in the Merger Agreement or (ii) prior to the purchase of Shares pursuant to the
Offer, the Board shall have withdrawn or modified in a manner adverse to
Purchaser or Parent its approval or recommendation of the Offer, the Merger
Agreement or the Merger in order to approve the execution by the Company of a
definitive agreement providing for the acquisition of the Company or its assets
or a merger or other business
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combination or in order to approve a tender offer or exchange offer for Shares
by a third party, in either case, as determined by the Board in the exercise of
its good faith judgment and after consultation with its legal counsel and
financial advisors, on terms more favorable to the Company's stockholders than
the Offer and the Merger taken together; provided, however, that such
termination shall not be effective until the Company has made payment to Parent
of the Fee (as hereinafter defined) required to be paid pursuant to the Merger
Agreement and has deposited with a mutually acceptable escrow agent $500,000 for
reimbursement to Parent and Purchaser of Expenses (as hereinafter defined).
In the event of the termination of the Merger Agreement, the Merger
Agreement provides that it shall forthwith become void and there shall be no
liability thereunder on the part of any party thereto except under the
provisions of the Merger Agreement related to fees and expenses described below
and under certain other provisions of the Merger Agreement which survive
termination.
The Merger Agreement provides that in the event that (a) any person shall
have commenced a tender or exchange offer for 10% or more (or which, assuming
the maximum amount of securities which could be purchased, would result in any
person beneficially owning 10% or more) of the then outstanding Shares or
otherwise for the direct or indirect acquisition of the Company or all or
substantially all of its assets for per Share consideration having a value
greater than the Per Share Amount (a "Competing Proposal") and (i) the Board
does not recommend against the Competing Proposal, (ii) the Offer shall have
remained open for at least 20 business days, (iii) the Minimum Condition shall
not have been satisfied, and (iv) this Agreement shall have been terminated
pursuant to the provisions described above; or (b) the Merger Agreement is
terminated (i) pursuant to the provisions described in clause (c)(ii) or clause
(d)(ii) of the second preceding paragraph; then, in any such event, the Company
shall pay Parent promptly (but in no event later than one business day after the
first of such events shall have occurred) a fee of $1,000,000 (the "Fee"), which
amount shall be payable in immediately available funds, plus all Expenses up to
$500,000 in the aggregate. The term "Expenses" shall mean all out-of-pocket
expenses and fees of each of Parent, Purchaser and their respective shareholders
and affiliates (including, without limitation, fees and expenses payable to all
banks, investment banking firms, other financial institutions and other persons
and their respective agents and counsel for arranging, committing to provide or
providing any financing for the Transactions or structuring the Transactions and
all fees of counsel, accountants, experts and consultants to Parent and
Purchaser, and all printing and advertising expenses and all costs and expenses
incurred by or on behalf of Parent and Purchaser in connection with the
collection under and enforcement of the preceding paragraph) actually incurred
or accrued by either of them or on their behalf in connection with such
transactions, including, without limitation, the financing thereof, and actually
incurred or accrued by banks, investment banking firms, other financial
institutions and other persons and assumed by Parent or Purchaser in connection
with the negotiation, preparation, execution and performance of the Merger
Agreement, the structuring and financing of such transactions, and any financing
commitments or agreements relating thereto. Except as set forth in this
paragraph, all costs and expenses incurred in connection with the Merger
Agreement and such transactions shall be paid by the party incurring such
expenses, whether or not such transactions are consummated.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
RECOMMENDATION OF THE BOARD OF DIRECTORS. The Board of Directors (with Mr.
Robert W. Nolan, Sr. not participating solely because of his interest in the
transaction) unanimously approved the Merger Agreement and the transactions
contemplated thereby and determined that each of the Offer and Merger is fair
to, and in the best interests of, the stockholders of the Company. The Board
(again with Mr. Robert W. Nolan, Sr. not participating solely because of his
interest in the transaction) unanimously recommends that all holders of Shares
accept the Offer and tender their Shares pursuant to the Offer.
BACKGROUND OF THE OFFER
In April of 1995, Robert W. Nolan Sr., President and Chief Executive
Officer of the Company, Theodore Schroeder, Vice President, Sales and Marketing
for the Company and Euan Menzies, the then President and Chief Executive Officer
of Research Institute of America Inc. ("RIA Inc."), an indirect wholly owned
subsidiary of Parent, had a brief telephone conversation regarding the market
for tax and accounting software
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and the positioning of their respective companies in such market. On May 1,
Stephen Wahrlich, Vice President of Business Development for RIA Inc., met with
Mr. Nolan and engaged in a general discussion of the marketplace, including
various competitive factors and general market direction.
On October 3, Messrs. Wahrlich, Ronald Aylward, Chairman of Aylward and
Associates, a business consultant to the Company, Nolan and David Shea, Senior
Vice President of Business Development for the Research Institute of America
Group ("RIAG"), one of several businesses comprising TF&PPG, met at the main
offices of RIA, Inc. in New York City. At this meeting, further discussion about
the market for tax and accounting software, the Company's vision and
philosophies and potential joint working relationships between the Company and
RIAG took place. In anticipation of further discussions, the Company and RIA
Inc. entered into a Mutual Nondisclosure Agreement dated as of October 10, 1995
(the "Nondisclosure Agreement") regarding any confidential information
concerning the operations of their respective businesses that might be
discussed.
On October 20, Messrs. Menzies (now President and Chief Executive Officer
of RIAG), Shea, Wahrlich, Nolan Sr., Aylward, Robert Nolan, Jr., Vice President
Operations and Product Development, Schroeder and Charles Wilson, Executive Vice
President, Treasurer and Secretary of the Company met at the main offices of the
Company in St. Louis, Missouri. At the meeting, executives of the Company
presented their vision for future growth of the market for tax and accounting
software and plans for the Company's future. The group discussed whether those
plans were consistent with the vision of RIAG and whether the pursuit of a
possible business relationship between the companies would be fruitful. At the
conclusion of this meeting, Messrs. Menzies, Nolan Sr., Shea, Wahrlich and
Aylward met separately to discuss further the possibilities of a closer working
relationship between the Company and RIAG.
On October 25, Mr. Menzies telephoned Mr. Nolan Sr. to indicate that RIAG
was interested in entering into exploratory discussions with the Company
regarding the acquisition of the Company and to discuss the potential range of
purchase prices that RIAG might be willing to offer to acquire the Company.
On October 26, Messrs. Menzies and Shea initiated a conference call with
Messrs. Nolan Sr. and Wilson to further discuss a possible acquisition of the
Company and a potential range of values for the Company.
On November 10, Messrs. Nolan Sr. and Aylward for the Company and Messrs.
Shea and Menzies of RIAG met to discuss a potential acquisition price. Numerous
meetings were held during the day and the parties agreed to perform further work
and analysis regarding the operations of the Company.
On November 12, Mr. Shea met with Messrs. Nolan Sr. and Wilson at the main
offices of the Company in St. Louis, Missouri and discussed the operations of
the Company, past and current financial performance and projections for
operations for the current year.
On November 15, Messrs. Menzies and Nolan Sr. met at the offices of the
Company and continued their discussions concerning the operations of the Company
and a possible acquisition of the Company by RIAG.
On November 28, Messrs. Menzies, Shea, Nolan Sr., Wilson, Aylward and
representatives from Peper, Martin, Jensen, Maichel and Hetlage ("Peper") and
Price Waterhouse, legal counsel and auditors, respectively, for the Company, met
at the offices of Price Waterhouse in St. Louis to discuss the process and
schedule for pursuing a possible merger between RIAG and the Company.
On December 1, 4 and 5 various representatives of the parties met in St.
Louis and Seattle, Washington to discuss further the operations of the Company.
On December 7, Messrs. Menzies, Shea, Nolan Sr., Wilson, Schroeder, Nolan,
Jr., Aylward, and representatives of Peper and legal and human resources
advisers for RIAG met at the offices of Peper to discuss the operations of the
business and steps necessary to pursue a merger between RIAG and the Company,
including a possible tender offer for substantially all the outstanding Shares
of the Company.
Subsequent to the December 7 meeting, drafts of agreements with respect to
the proposed transaction were prepared by Shearman & Sterling, outside counsel
for the Purchaser.
Subsequent to the receipt of these drafts agreements between December 8 and
December 15, numerous meetings were held in person and by telephone between
Messrs. Menzies, Shea, Nolan Sr., Wilson and representatives of Peper regarding
the terms of a possible merger and the form and content of the draft agreements.
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On December 14, 1995, a special committee of the Board of Directors (the
"Special Committee") of the Company was formed, consisting of Messrs. Robert C.
Chlebowski and Irwin M. Jarett, Ph.D., the non-employee directors of the
Company. At a meeting held on December 14, 1995, the Special Committee discussed
the proposed merger and voted unanimously to recommend to the Board that the
Board approve the merger of the Company and Purchaser, subject to resolution of
the remaining business and legal issues in the draft Merger Agreement.
On December 14, the members of the Board of Directors of the Company met at
the offices of Peper in St. Louis to discuss the proposed merger. Late in the
afternoon at this meeting, the Board unanimously (with Mr. Nolan, Sr. not
participating solely because of his interest in the transaction) voted to
approve the merger of the Company and Purchaser, subject to resolution of the
remaining business and legal issues in the draft Merger Agreement.
From December 14 through December 19, representatives of the parties and
their respective counsels continued to work to finalize the terms of the Merger
Agreement and the Stock Purchase Agreement.
Late in the evening on December 19, the Merger Agreement and the Stock
Purchase Agreement were executed. On the morning of December 20, the Company
issued a press release to announce publicly the transaction.
REASONS FOR THE BOARD'S CONCLUSIONS
In approving the Merger Agreement and the transactions contemplated thereby
and recommending that all stockholders tender their Shares pursuant to the
Offer, the Board considered a number of factors including, without limitation,
the following:
(i) the terms and conditions of the Offer and the Merger Agreement;
(ii) various presentations by management of the Company at Board
meetings held on and before December 14, 1995 regarding the historical
financial performance and condition of the Company, including the prospects
if the Company were to remain independent and the various uncertainties
associated with those prospects and current industry, economic and market
conditions;
(iii) the prospects for obtaining additional financing for the
proposed activities of the Company in pursuit of its business objectives
such as making acquisitions, including the difficulty of accessing the
public capital markets at the present time based on the Company's recent
financial history;
(iv) the business and strategic objectives of the Company, and the
attendant risks involved in achieving these objectives, including the
continued expansion and development of the product line to correctly
position the Company's product offerings in a rapidly changing
technological environment;
(v) the risk, through the potential inability of the Company to
maintain adequate product development and market penetration, of decreasing
the value of the Company to a potential single acquiror interested in the
Company as a whole;
(vi) the relative attractiveness of the Company to other potential
acquirors in view of the strategic and synergistic nature of the proposed
combination with Thomson U. S. Holdings Inc., including the extent and
nature of other contacts with potential acquirors during the past year;
(vii) the relationship of the Offer price to historical market price
of the Shares over the last two years, including that the $6.75 per share
Offer price represents a premium of over 150% over the closing price for
the shares of $2 5/8 on December 13, 1995 (the day immediately preceding
the consideration of the proposed merger of the Company with the Purchaser
by the Board);
(viii) the financial and valuation analyses presented to the Board by
Fister & Associates, Inc. ("Fister"), financial advisor to the Company, at
the Board Meeting on December 14, 1995, including the market prices and
financial data relating to other companies engaged in businesses considered
comparable to the Company, and the prices and premiums paid in recent
selected acquisitions of companies considered by Fister to be comparable to
that of the Company;
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(ix) the opinion of Fister that the consideration to be received by
the stockholders of the Company, pursuant to the Offer and the Merger, is
fair to the Company's stockholders from a financial point of view. A
written opinion (the "Opinion") by Fister dated December 19, 1995, which
sets forth a description of the factors considered, the assumptions made
and the scope of review undertaken, is attached as Exhibit 4 and is
incorporated by reference herein. STOCKHOLDERS ARE URGED TO READ THE
OPINION CAREFULLY AND IN ITS ENTIRETY.
(x) the approval of the Per Share Amount by a Special Committee of the
Board consisting of the independent directors and the recommendation of the
Special Committee that the Board approve the Merger Agreement and recommend
that all shareholders tender their shares in response to the Offer;
(xi) the likelihood that the proposed merger would be consummated,
including the experience, reputation and financial condition of Parent;
(xii) the effect of the transaction on the Company's relationships
with its employees and customers;
(xiii) the fact that pursuant to the Merger Agreement the Company is
not prohibited from responding to any unsolicited proposal made in writing
to acquire the Company pursuant to a merger, consolidation, share exchange,
business combination, or other similar transaction or to acquire all or
substantially all of the assets of the Company, to the extent the Board,
after consultation with independent legal counsel, determines in good faith
that such action is in the best interest of its stockholders and consistent
with the Board's fiduciary duty to the Company's stockholders under
Delaware Law; and
(xiv) the termination provisions of the Merger Agreement, which were a
condition to Parent's proposal, providing that Parent could be entitled to
a fee of $1 million and reimbursement of expenses up to $500,000 upon the
termination of the Merger Agreement under certain circumstances.
The members of the Board evaluated the factors listed above in light of
their knowledge of the business and operations of the Company and their business
judgment. In view of the wide variety of factors considered in connection with
its evaluation of the Offer and the Merger, the Board did not find it
practicable to, and did not, quantify or otherwise attempt to assign relative
weights to the specific factors considered in reaching its determination. The
Board recognized that Purchaser, if it purchases a sufficient number of Shares
to satisfy the Minimum Condition, will have sufficient voting power to approve
the Merger without the affirmative vote of any other stockholder of the Company.
While consummation of the Offer would result in the remaining stockholders of
the Company receiving a premium for their Shares over the trading prices of the
Shares prior to the announcement of the Offer and the Merger, it would eliminate
any opportunity for the stockholders of the Company other than Parent to
participate in the potential future growth prospects of the company. The Board,
however, believed that this was reflected in the Offer price to be paid and also
recognized that there can be no assurance of growth, if any, to be attained by
the Company in the future.
OPINION OF FINANCIAL ADVISOR
Fister was retained by the Company to provide an evaluation of the
fairness, from a financial point of view, to the Company's stockholders of the
consideration to be received in the Offer and the Merger.
On December 14, 1995, in connection with the evaluation of the proposed
terms of the Offer, the Merger and the Merger Agreement by the Special Committee
and the Board, Fister made a presentation to the Board with respect to the
results of the valuation study conducted by Fister. At that time, Fister
reviewed the information and financial data described below with the Board and
rendered its oral opinion as of that date that the proposed consideration to be
offered to the Company's stockholders in the Offer and the Merger was fair from
a financial point of view to the stockholders of the Company. A copy of Fister's
written opinion dated December 19, 1995, which sets forth assumptions made,
matters considered and limitations of the review undertaken by Fister is
attached as Exhibit 4 to this Schedule 14D-9 and is incorporated herein by
reference. Stockholders are urged to read the opinion carefully and in its
entirety.
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No limitations were imposed by the Company or its Board on the scope of
Fister's investigation or the procedures to be followed by Fister in rendering
the Opinion, except that Fister did not solicit any proposals from any third
party with respect to a purchase of all or a part of the Company's business.
Fister was not requested to and did not make any recommendation to the Board as
to the form or amount of consideration to be offered to the Company's
stockholders in the Offer or the Merger, which was determined through
negotiations between the Company and Parent. In arriving at the Opinion, Fister
did not ascribe a specific range of values to the Company, but made its
determination as to the fairness, from a financial point of view, of the
consideration to be received by the Company's stockholders in the Offer and the
Merger on the basis of the financial and comparative analyses described below.
The Opinion is directed solely to the Board and is not intended to be and does
not constitute a recommendation to any Company stockholder as to whether to
accept the consideration to be offered to such stockholder in connection with
the Offer or the Merger. The Opinion does not in any manner address the
Company's underlying business decision to proceed with or effect the Offer or
the Merger.
In arriving at the Opinion, Fister reviewed and analyzed: (1) publicly
available information concerning the Company which Fister believed to be
relevant to its inquiry, including its Form 10-K dated January 31, 1995, and its
Form 10-Q dated October 31, 1995; (2) financial and operating information with
respect to the business, operations, and prospects of the Company furnished to
it by the Company (including, without limitations, projections for the fiscal
years 1995-2000 prepared by management of the Company); (3) a trading history of
the Company's common stock and comparison of that trading history with those of
other companies which it deemed relevant; (4) a comparison of the historical
financial results and present financial condition of the Company with other
companies it deemed relevant; (5) an analysis of the computer software and
services industries; and (6) an analysis of sale transactions in the software
industry during 1995. In addition, Fister had discussions with management of the
Company concerning its business, operations, assets, financial condition and
prospects and undertook such other studies, analyses, and investigations as it
deemed appropriate.
In arriving at the Opinion, Fister assumed and relied upon the accuracy and
completeness of the financial and other information used by it without assuming
any responsibility for independent verification of such information and further
relied upon the assurances of management of the Company that they were not aware
of any facts that would make any such information inaccurate or misleading. For
the purpose of its analysis, Fister also reviewed the financial projections of
the Company which, upon advice of the Company, Fister assumed were reasonably
prepared on a basis reflecting the best then available estimates and judgments
of the management of the Company as to the future financial performance of the
Company. In arriving at the Opinion, Fister did not conduct a physical
inspection of the properties and facilities of the Company and did not make nor
obtain any evaluations or appraisals of the assets or liabilities of the
Company. The Opinion was necessarily based upon market, economic and other
conditions as they existed on, and could be evaluated as of, the date of the
presentation to the Board of Directors of the Company.
The following paragraphs summarize the financial and comparative analysis
performed by Fister and presented to the Board in connection with the December
14, 1995 oral opinion. The summary does not represent a complete description of
the analyses and studies conducted by Fister. The information presented below is
based on the financial condition of the Company as of a date or dates shortly
before the December 14, 1995 meeting of the Board of Directors of the Company.
(A) COMPARABLE MARKET VALUE AND TRANSACTION ANALYSIS. Fister analyzed the
valuations accorded other companies in the software industry on the basis of
recent acquisitions and the market price of publicly traded companies. Weighting
the results of these analyses, Fister developed a range of values for the common
stock of the Company, taking into account the repayment of the debt and the
redemption of (but not the conversion of) the Company's outstanding shares of
Series A Preferred Stock and certain other expenses.
Fister developed three separate representative valuations for the Company
as described below.
(1) Transactions in which both parties were public companies. This analysis
was performed by selecting other companies involved in domestic merger or
acquisition transactions in 1995 according to the following criteria: (i) both
companies were publicly traded, (ii) the acquired company was classified under
the Standard
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Industry Code ("SIC") as either Prepackaged Computer Software (SIC 7372) or
Computers, Peripheral Equipment & Software (SIC 5045), and (iii) where each of
the ratios of the price to earnings, book value, and cash flow was greater than
zero. Seven transactions were selected on the basis of these criteria: (i)
Platinum Technology Inc. and Altai, Inc., (ii) Computer Associates
International, Inc. and Legent Corp., (iii) IBM Corp. and Lotus Development
Corp., (iv) Mentor Graphics Corp. and Microtec Research Group, (v) Sybase Inc.
and Powersoft Corp., (vi) Platinum Technology Inc. and Trinzic Corp., and (vii)
Silicon Graphics and Wavefront Technologies Inc. After determining the
price/earnings and price/book ratios for each of these transactions, Fister
applied the resulting ratios to the financial measures of the Company's
performance. Fister averaged the highest and lowest of the valuations calculated
in this manner to obtain a representative valuation.
(2) Transactions in which at least one party was a public company. This
analysis was performed by selecting other companies involved in domestic merger
or acquisition transactions in 1995 according to the following criteria: (i) the
acquiror was a publicly traded company and the acquiree was either publicly
traded or private, (ii) the acquired company was classified under the Standard
Industry Code ("SIC") as either Prepackaged Computer Software (SIC 7372) or
Computers, Peripheral Equipment & Software (SIC 5045), and (iii) where each of
the ratios of the price to earnings, book value, and cash flow was greater than
zero. Thirteen transactions were selected on the basis of these criteria. After
determining the price/earnings and price/book ratios for each of these
transactions, Fister applied the resulting ratios to the financial measures of
the Company's performance. Fister selected those transactions believed to be
comparable to the present transaction and utilized the (a) the price/earnings
ratio and the price/book value ratio, and (b) the price/earnings ratio alone to
obtain representative valuations.
(3) Valuation of Representative Publicly Traded Companies. Fister used the
Value Line Computer Software and Services Industry Report (the "Report") as
representative of the current market valuation for companies believed to be
comparable to the Company. After determining the price/ earnings and price/book
value ratio for these companies, Fister determined valuations of the Company
utilizing (a) the price/earnings ratio and the price/book ratio, and (b) the
price/earnings ratio alone. Fister computed an average of the valuations using
(a) all companies in the Report (8 companies) and (b) only those companies in
the Report with revenues less than $500 million per year (3 companies).
Fister utilized each of these representative valuations and weighted each
according to its judgment as to the validity of that procedure in establishing
an objective valuation of the Company's common stock in the current business
situation of the Company given its financial performance and competitive
position together with current market and economic conditions as they existed on
the date of the Opinion. On the basis of these analyses, Fister determined an
estimated comparable market value for the Company using (a) the figures
developed in each of the three analyses described above using the price/earnings
and price/book ratios, and (b) the figures developed in each of the three
analyses described above using the price/earnings ratio alone. After deducting
the amount of debt owed by the Company, the cost to redeem the Company's
outstanding shares of Series A Preferred Stock, and certain other expenses,
Fister calculated the value of the Company's common stock to be in the range of
$2.94 to $4.36 per share.
(B) DISCOUNTED CASH FLOW ANALYSIS. Fister considered using a discounted
cash flow analysis to analyze the current value to a financial buyer of a
business activity. However, Fister determined not to use a discounted cash flow
analysis because the operating history of the Company in the software business
was, in its judgment, insufficient to provide a reliable basis for the
projections and estimates required for a such an analysis.
The preparation of a fairness opinion involves various determinations as to
the most appropriate and relevant methods of financial and comparative analysis
and the application of those methods to the particular circumstances. In
arriving at the Opinion, Fister did not attribute any particular weight to any
analysis or factor considered by it, but rather made qualitative judgments as to
the significance and relevancy of each analysis and factor. Accordingly, Fister
believes that the analyses must be considered as a whole and that considering
selected portions of its analyses and of the factors considered by it, without
considering all analyses and factors, could create an incomplete or misleading
view of the process underlying the Opinion. Fister made
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certain assumptions as to industry performance, general business and economic
conditions, and other matters that are beyond the Company's control. Any
estimates contained in these analyses relating to the value of businesses do not
purport to be appraisals or to reflect the prices at which businesses actually
may be sold.
Fister is a private investment banking firm and is regularly engaged in the
valuation of businesses and securities in connection with mergers, acquisitions,
underwriting, private placements and valuations for corporate, estate, and other
purposes.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Company retained Fister to act as its financial advisor with respect to
Merger and the transactions contemplated in the Merger Agreement, and to provide
an analysis and opinion as to the fairness, from a financial standpoint, of the
consideration to be received by shareholders. Pursuant to a letter agreement
dated December 5, 1995 between the Company and Fister, the Company will pay
Fister a fee of approximately $10,000.
Except as disclosed herein, neither the Company nor any person acting on
its behalf currently intends to employ, retain, or compensate any other person
to make solicitations or recommendations to security holders on its behalf
concerning the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
THE STOCK PURCHASE AGREEMENT
(a) The following is a summary of the Stock Purchase Agreement, a copy of
which is filed as an Exhibit to this Schedule 14D-9. Such summary is qualified
in its entirety by reference to the Stock Purchase Agreement.
Parent, Purchaser and Robert W. Nolan, Sr. (the "Stockholder") have entered
into the Stock Purchase Agreement pursuant to which the Stockholder has agreed
to sell to the Purchaser 1,082,570 Shares at a per Share price equal to the per
Share price payable in the Offer. In addition, the Stockholder has appointed
Purchaser, or any nominee of Purchaser, during the term of the Stock Purchase
Agreement as his attorney and proxy to vote each of the Shares subject to such
agreement (i) in favor of the Merger Agreement and the transactions contemplated
thereby, (ii) against any other proposal for the acquisition of the Company or
its assets or a merger or other business combination of the Company with any
third party, and (iii) against any other proposal that would, or is reasonably
likely to, result in any of the conditions to Purchaser's obligations under the
Merger Agreement not being fulfilled.
In addition, the Stockholder has agreed not to (i) take any action or omit
to take any action that is inconsistent with compliance by the Company with the
terms of the Merger Agreement and (ii) without the prior written consent of
Purchaser, (x) sell, tender pursuant to the Offer or any other tender offer,
pledge, encumber, assign, transfer, exchange or otherwise dispose of, or enter
into any contract, option or other arrangement or understanding with respect to
the sale, tender, pledge, encumbrance, assignment, transfer, exchange or
disposition of, any of his Shares; (y) acquire any additional shares of Company
Common Stock or warrants, options or other rights to purchase any Shares; or (z)
grant any proxies (other than pursuant to the Stock Purchase Agreement) with
respect to his Shares, deposit any of his Shares into a voting trust or enter
into a voting agreement with respect to any of his Shares.
The obligations of the Stockholder and Purchaser to consummate the purchase
and sale contemplated by the Stock Purchase Agreement are subject to (i) any
waiting periods under the HSR Act applicable to the purchase of the Shares
having been expired or terminated, (ii) there being no preliminary or permanent
injunction or other order by any court of competent jurisdiction prohibiting or
otherwise restraining such purchase and sale, (iii) the Stockholder having
continued to be employed as Chief Executive Officer of the Company with duties
and responsibilities comparable to the duties and responsibilities he has
performed in the past and having entered into an employment agreement (described
below) with the Company substantially in the form attached as an exhibit to the
Stock Purchase Agreement, (iv) no event or events shall have occurred
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or be reasonably likely to occur which have, or could reasonably be expected to
have, a Material Adverse Effect (as defined in the Stock Purchase Agreement) on
the Company, and (v) all conditions to Purchaser's obligations to accept for
payment the Shares tendered pursuant to the Offer having been satisfied.
The Stock Purchase Agreement contains various customary representations and
warranties of the parties thereto, including a representation by the Stockholder
that all of the representations and warranties of the Company in the Merger
Agreement are true, complete and correct.
The Stock Purchase Agreement provides that the Stockholder shall indemnify
Parent and any subsidiary or affiliate of Parent, and any director, officer or
employee of the foregoing, against and hold each of them harmless from all
losses arising out of the breach of any representation or warranty or of any
covenant or agreement of the Stockholder contained in the Stock Purchase
Agreement. The Stock Purchase Agreement also provides that Parent and Purchaser,
jointly and severally, shall indemnify the Stockholder against and hold the
Stockholder harmless from all losses arising out of the breach of certain
representations and warranties and of any covenant or agreement of Parent or
Purchaser contained in the Stock Purchase Agreement. The maximum amount of loss
which may be recovered by Parent from the Stockholder is an amount equal to the
aggregate price paid to the Stockholder for his Shares, except that for a breach
of his representation that the Company's representations and warranties
contained in the Merger Agreement are true, complete and correct the maximum
amount is $2,000,000. The maximum amount of loss which may be recovered by the
Stockholder from Parent and Purchaser is an amount equal to the aggregate
purchase price paid to the Stockholder for his Shares.
(b) To the best of the Company's knowledge, to the extent permitted by
applicable securities laws, rules or regulations, each executive officer,
director, and affiliate of the Company (other than Mr. Robert W. Nolan, Sr., who
is selling his shares to the Purchaser pursuant to the Stock Purchase Agreement
as described in subsection (a) hereof) currently intends to tender all Shares
over which he or she has sole dispositive power to Purchaser pursuant to the
Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTION BY SUBJECT COMPANY
(a) The Company is not engaged in any negotiation in response to the Offer
which relates to or would result in (i) an extraordinary transaction, such as a
merger or reorganization, involving the Company; (ii) a purchase, sale or
transfer of a material amount of assets by the Company; (iii) a tender offer for
or other acquisition of securities by or of the Company; or (iv) any material
change in the present capitalization or dividend policy of the Company.
(b) Except as described in Items 3(b) or 4 above, there are no
transactions, Board resolutions, agreements in principle or signed contracts in
response to the Offer that relate to or would result in one or more of the
events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
The Information Statement attached on Schedule I hereto is being furnished
in connection with the possible designation by the Purchaser, pursuant to the
Merger Agreement, of certain persons to be appointed to the Board other than at
a meeting of the Company's stockholders.
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ITEM 9. MATERIAL TO FILED AS EXHIBITS
EXHIBIT NO.
- ------------
Exhibit 1 -- Letter to Stockholders of the Company dated December 27, 1995.*
Exhibit 2 -- Agreement and Plan of Merger, dated as of December 19, 1995, among Thomson U. S.
Holdings, Inc., SCS Subsidiary, Inc., and SCS/Compute, Inc.
Exhibit 3 -- Engagement Letter dated December 5, 1995 between the Company and Fister &
Associates, Inc.
Exhibit 4 -- Opinion of Fister & Associates, Inc. dated December 19, 1995.*
Exhibit 6 -- Stock Purchase Agreement dated as of December 19, 1995
Exhibit 7 -- Form of Employment Agreement between Robert W. Nolan, Sr. and the Company,
including, as an exhibit thereto, the form of Consulting Agreement between
Robert W. Nolan, Sr. and the Company.
Exhibit 8 -- Mutual Nondisclosure Agreement dated October 10, 1995 between the Company and
RIA Inc.
Exhibit 9 -- Press Release issued by the Company, dated December 20, 1995
- ---------------
* Included in Schedule 14D-9 mailed to stockholders.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
SCS/Compute, Inc.
/s/ ROBERT W. NOLAN, SR.
Dated: December 27, 1995 --------------------------------------
Robert W. Nolan, Sr.
Chairman of the Board and
Chief Executive Officer
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SCHEDULE I
SCS/COMPUTE, INC.
2252 Welsch Industrial Court
Saint Louis, Missouri 63146
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
NO VOTE OR OTHER ACTION OF THE COMPANY'S STOCKHOLDERS IS REQUIRED IN
CONNECTION WITH THIS INFORMATION STATEMENT. NO PROXIES ARE BEING SOLICITED AND
YOU ARE REQUESTED NOT TO SEND THE COMPANY A PROXY.
This Information Statement is being mailed on or about December 27, 1995 as
a part of the Company's Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9") to the holders of record of the Shares at the close of
business on or about December 15, 1995. You are receiving this Information
Statement in connection with the possible election of persons designated by the
Purchaser to a majority of the seats on the Board of Directors of the Company.
The Merger Agreement requires the Company to use its reasonable best efforts to
cause the Purchaser Designees (as defined below) to be elected to the Board of
Directors under the circumstances described therein. This Information Statement
is required by Section 14(f) of the Exchange Act and Rule 14f-1 thereunder. See
"Board of Directors and Executive Officers Right to Designate Directors; The
Purchaser Designees."
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used herein and not
otherwise defined herein shall have the meaning set forth in the Schedule 14D-9.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
December 27, 1995. The Offer is scheduled to expire at midnight, New York City
time, on Thursday, January 25, 1996 unless the Offer is extended.
Following the election of the Purchaser Designees and prior to the
consummation of the Merger, any amendment of the Merger Agreement or the
Certificate of Incorporation or By-Laws of the Company, any termination of the
Merger Agreement by the Company, any extension by the Company of the time for
the performance of any of the obligations or the acts of Parent or the Purchaser
or waiver of any of the Company's rights thereunder shall require the
concurrence of a majority of the directors of the Company who are neither (i)
designees of the Purchaser nor (ii) employees of the Company.
The information contained in this Information Statement concerning the
Purchaser and the Purchaser Designees has been furnished to the Company by the
Purchaser, and the Company assumes no responsibility for the accuracy or
completeness of such information.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
GENERAL
The shares of Common Stock, par value $.10 per share (the "Shares") are the
only class of voting securities of the Company outstanding. Each Share is
entitled to one vote. As of December 19, 1995 there were 2,571,977 Shares
outstanding. The Board of Directors currently consists of four members. Each
director holds office until such director's successor is elected and qualified
or until such director's earlier resignation or removal.
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RIGHT TO DESIGNATE DIRECTORS; THE PURCHASER DESIGNEES
Pursuant to the Merger Agreement, promptly upon the purchase by the
Purchaser of Shares pursuant to the Offer or the Stock Purchase Agreement, and
from time to time thereafter, the Purchaser shall be entitled to designate up to
such number of directors (the "Purchaser Designees"), rounded up to the next
whole number, on the Company's Board of Directors as shall give the Purchaser
representation equal to the product of the total number of directors on the
Board (giving effect to the directors elected pursuant to this sentence)
multiplied by the percentage that the aggregate number of Shares beneficially
owned by the Purchaser or any affiliate of the Purchaser bears to the total
number of Shares then outstanding, and the Company shall, at such time, promptly
take all actions necessary to cause the Purchaser Designees to be elected as
directors of the Company, including increasing the size of the Board or securing
(to the extent possible) the resignations of incumbent directors or both. At
such times, the Company shall use its reasonable best efforts to cause persons
designated by the Purchaser to constitute the same percentage as persons
designated by the Purchaser shall constitute of the Board of each committee of
the Board, in each case only to the extent permitted by applicable law.
Notwithstanding the foregoing, until the earlier of (i) the election or
appointment of the Purchaser's Designees to the Board and (ii) the Effective
Time, the Company shall use its reasonable best efforts to ensure that all of
the members of the Board of Directors and each committee of the Board of
Directors as of the date of the Merger Agreement who are not employees of the
Company shall remain members of the Board and of such committees.
The Purchaser has informed the Company that each of W. Michael Brown, Nigel
R. Harrison, Andrew G. Mills and David J. Hulland have consented to act as a
director. The information on Schedule I to Purchaser's Offer to Purchase with
respect to Messrs. Brown, Harrison, Mills and Hulland, a copy of which is being
mailed to the Company's stockholders together with this Schedule 14D-9, is
incorporated herein by reference.
It is expected that the Purchaser Designees may assume office at any time
following the purchase by the Purchaser of a majority of the Shares pursuant to
the Offer, which purchase cannot be earlier than midnight January 25, 1996, and
that, upon assuming office, the Purchaser Designees will thereafter constitute
at least a majority of the Board.
CURRENT DIRECTORS
The current directors of the Company are as follows:
PRINCIPAL OCCUPATION AND BUSINESS OR PROFESSIONAL DIRECTOR
NAME AND AGE EXPERIENCE DURING THE PAST FIVE YEARS SINCE
- ------------------------------ ------------------------------------------------- --------
Robert C. Chlebowski, 47...... President, St. Louis Leasing Corporation 1993
Irwin M. Jarett, Ph. D., 65... Chief Executive Officer, Graphic M*I*S, L.P. 1993
Robert W. Nolan, Jr., 30...... Vice President Operations and Product 1993
Development, SCS/Compute, Inc.
Robert W. Nolan, Sr., 52...... Chairman, President and Chief Executive Officer, 1981
SCS/Compute, Inc.
ROBERT A. CHLEBOWSKI is the President of St. Louis Leasing Corporation, a
computer leasing concern, a position he has held since 1986. He was named St.
Louis' Entrepreneur of the Year in 1992 by Ernst & Young, Merrill Lynch and Inc.
Magazine. He began his career in the leasing industry as a regional marketing
representative in 1978 for OPM Leasing. Mr. Chlebowski was appointed an
independent director of the Company on July 1, 1993, and has served in that
capacity since then. His present term expires in 1997. He is also a director of
Innovative Controls Systems, Inc. and Event Technologies.
DR. IRWIN M. JARETT earned a Ph.D. in Accounting and Management from
Louisiana State University and is co-founder and Chief Executive Officer of
Graphic M*I*S ("GMIS"), a Chicago-based software development and system
consulting firm, a position he has held since 1984. He is an internationally
known authority in computer graphics with 37 years of experience in accounting,
computers and information systems
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consulting and is the author of Financial Reporting Using Computer Graphics
published in 1993 by John Wiley and Sons. Dr. Jarett was appointed as an
independent director of the Company on October 7, 1993 and has served in that
capacity since that time. His present term expires in 1998.
ROBERT W. NOLAN, JR. has been employed by the Company since 1987. He served
in various marketing and sales positions from 1987 to 1989. Mr. Nolan, Jr. was
appointed Director of Eastern Division Operations in 1990 and was appointed Vice
President of Operations in May 1991, and Vice President of Product Development
in January 1993. He became a Director of the Company in March of 1993. His
present term expires in 1996. Mr. Nolan, Jr. is the son of Mr. Nolan, Sr.
ROBERT W. NOLAN, SR., a certified public accountant and co-founder of the
Company, has served as a Director of the Company since its formation in February
1981. Since April 1990, Mr. Nolan has served as the Chairman of the Board of
Directors. He is also serving as the Company's Chief Executive Officer, a
position he has held since September 1989. In past years, Mr. Nolan has served
as Treasurer of the Company and in 1992 resumed the duties of President, a
position he previously held from 1981 to 1990. He was re-elected as a director
for a three-year term at the Company's Annual Meeting held on June 29, 1994,
therefore, his present term expires in 1997.
BOARD COMMITTEES
The Board has established two permanent committees of the Board, the Audit
Committee and the Compensation Committee. The Board does not have a Nominating
Committee and the entire Board performs the function of a nominating committee.
The Audit Committee, composed of Mr. Chlebowski and Dr. Jarett, recommends
the appointment of a firm of independent public accountants to act as
independent auditor for the Company and reviews with the firm approved by the
shareholders auditing arrangements, scope of examination, the results of the
audit, the fees, and any problems identified in the system of internal
accounting controls. The Audit Committee met one time during fiscal 1994 and one
time thus far in fiscal 1995.
The Compensation Committee, composed of Mr. Nolan, Sr., Mr. Chlebowski and
Dr. Jarett, makes recommendations to the Board regarding salaries of officers
(including employee directors), administers the Company's Stock Option Plan and
in that capacity grants options subject to approval by the Board, reviews
salaries of key employees, and generally reviews and recommends any compensation
program affecting officers and key employees. The Compensation Committee met
twice during fiscal 1994 and five times thus far in fiscal 1995.
ATTENDANCE AT MEETINGS
During fiscal 1994 the Board of Directors held eight meetings, including
both regularly scheduled meetings and special meetings. All directors of the
Company attended more than 75% of the aggregate of all Board meetings and all
meetings of Committees of which they were members.
DIRECTORS' FEES
Each member of the Board of Directors who is not a Company employee
receives $1,500 per quarter for his services as a director and $600 for each
Board of Directors meeting attended. Additionally, such persons receive $300 for
each committee meeting attended which is not on the same day as a Board meeting
and $120 for each committee meeting attended which is on the same day as a Board
meeting. The Company pays the travel expenses of directors who are required to
travel to Board and Committee meetings.
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OFFICERS OF THE COMPANY
The following table provides certain information with respect to the
officers of the Company other than Robert W. Nolan, Sr. and Robert W. Nolan,
Jr., whose respective ages and business experience are described above under the
caption "Current Directors." Officers are appointed annually by the Board of
Directors to serve until their successors are elected and qualify.
NAME AGE OFFICE AND TITLE
- ----------------------------------------- --- -----------------------------------------
Charles G. Wilson........................ 46 Executive Vice President, Treasurer, and
Secretary
Theodore W. Schroeder.................... 49 Vice President Sales & Marketing
Michael J. Hagenhoff..................... 50 Vice President
CHARLES G. WILSON, a certified public accountant, has been the Company's
Executive Vice President since May 1990, and Secretary and Treasurer since
October 1989. He was the Vice President -- Finance from 1982 to 1990 and
Controller from 1981 to 1982.
THEODORE W. SCHROEDER joined the Company in August 1992, as Vice President
of Sales and Marketing. From November 1991 to July 1992, Mr. Schroeder held a
senior level marketing position with Electronic Data Systems of Dallas, Texas.
In July 1989, McDonnell Douglas Systems Integration Company appointed him
executive in charge of all worldwide marketing activities. Prior to that, Mr.
Schroeder held a variety of executive sales positions in the technology and
software fields.
MICHAEL J. HAGENHOFF was appointed a Vice President of the Company in March
1988. He served as Vice President of Corporate Mortgage Relocation, a division
of Citicorp Mortgage Inc. from 1986 to 1988. From 1968 to 1986, Mr. Hagenhoff
held various sales and sales management positions for Xerox Corporation and
Citicorp Mortgage.
CERTAIN TRANSACTIONS
The Board of Directors adopted (with Mr. Nolan, Sr. abstaining) a long term
incentive plan (the "LTIP") for Robert W. Nolan, Sr. at the meeting of the Board
of Directors on July 31, 1995. The LTIP was to have been in effect for years
starting February 1, 1995. Under the LTIP, "Stock Price" was defined as the
greater of the mean of the bid and ask price of the Company's Stock on the last
day of the fiscal year and the average price of the daily last sale for the
period February 1 to March 15 following the end of that fiscal year. The LTIP
provides for payment to Mr. Nolan, Sr. of $60,000 in each instance that the
Stock Price exceeds $3.00, $3.50 and $4.00 for the fiscal years ending January
31, 1996, 1997, and 1998 respectively. As described in the next paragraph, on
December 14, 1995, the Board awarded a bonus of $125,000 to Mr. Nolan, Sr. in
lieu of any payments under the LTIP.
At a meeting of the Board of Directors on December 14, 1995, the Board
(with employee directors abstaining as to resolutions in which they had an
interest) awarded bonuses to certain of the executive officers of the Company,
the payment of which is subject to the completion of the Offer and the Merger
described in the Schedule 14D-9 filed by the Company with the Securities and
Exchange Commission. The payees and amounts of such bonuses are as follows: Mr.
Robert W. Nolan, Sr. $125,000; Mr. Robert W. Nolan, Jr. $150,000; Mr. Theodore
W. Schroeder $150,000; and Mr. Charles G. Wilson $150,000.
The Board of Directors of the Company also approved (with employee
directors abstaining as to resolutions in which they had an interest) the
vesting of all options to acquire the Common Stock of the Company then
outstanding but not exercisable. The number of shares covered by the such
options and the holders thereof are as follows: Mr. Robert W. Nolan, Sr. 16,000
shares; Mr. Robert W. Nolan, Jr. 13,333 shares; Mr. Theodore W. Schroeder 13,333
shares, and Mr. Charles G. Wilson 13,333 shares. The options accelerated by this
action of the Board on December 14, 1995, would otherwise have become vested and
exercisable in the years 1996 and 1997.
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BENEFICIAL OWNERSHIP OF STOCK
The following table and accompanying footnotes set forth information as of
December 20, 1995 regarding all persons known to the Company to be the
beneficial owners of more than five percent of the Common Stock of the Company.
Also set forth is information regarding beneficial ownership of the common Stock
of the Company by the executive officers listed in the Summary Compensation
Table and by all executive officers and directors of the Company as a group.
Except as noted below, the owners have sole voting and investment power with
respect to such shares.
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE
- ---------------------------------------------------------------- ---------------- ----------
Robert W. Nolan, Sr............................................. 1,159,170(1) 44.04%
2252 Welsch Industrial Court
St. Louis, Missouri 63146
Nationwide Financial Services, Inc.............................. 188,100(2) 7.31%
One Nationwide Plaza
Columbus, Ohio 43216
Principal Mutual Life Insurance Company......................... (3) (3)
55 High Street
Des Moines, IA 50392-0800
Charles G. Wilson............................................... 51,250(4) 1.97%
Theodore W. Schroeder........................................... 25,000(5) 0.96%
Robert W. Nolan, Jr............................................. 29,300(6) 1.13%
All executive officers and directors as a group (6 persons)..... 1,265,820(7) 46.85%
Notes:
(1) Includes 60,000 shares which Mr. Nolan, Sr. has exercisable options to
purchase. Includes 16,600 shares held by Mr. Nolan, Sr.'s wife as trustee
under various trusts for their children over which Mr. Nolan, Sr. is deemed
to share voting and investing power but, with respect to which Mr. Nolan,
Sr. disclaims beneficial ownership.
(2) Based on information contained in Amendment No. 2 to Schedule 13D filed
March 12, 1990. Nationwide Financial Services, Inc. is the registered
investment advisor to the record owners of these shares, Nationwide
Separate Account Trust -- Common Stock Fund, and Nationwide Investing
Foundation -- Nationwide Growth Fund which owns 43,100 and 145,000 shares,
respectively. Each such other entity, and Nationwide Financial Services,
Inc., disclaims beneficial ownership of the shares owned of record as
described above.
(3) On April 30, 1994, the Company converted $3.5 million in outstanding
principal balance on its senior secured note with the Principal Mutual Life
Insurance Company (the "Principal") to 100,000 shares of its Series A
Cumulative Preferred Stock (the "Preferred Shares"). The Preferred Shares
carry liquidation and dividend preference over Common Stock, are redeemable
at a premium by the Company until July 1, 1999, and are convertible at any
time by the Principal into 33% of the then outstanding shares of the
Company's common stock. No redemption or conversion has occurred since the
issuance of the Preferred Shares.
(4) Includes 16,250 shares owned by Mr. Wilson and his wife over which he shares
voting and investment power. Includes 5,000 shares owned by Mr. Wilson's
minor children under the Missouri Uniform Gifts to Minors Act. Includes
30,000 shares which Mr. Wilson has exercisable options to purchase.
(5) Includes 20,000 shares which Mr. Schroeder has exercisable options to
purchase. Includes 5,000 shares over which Mr. Schroeder and his wife share
voting and investment power.
(6) Incudes 20,000 shares which Mr. Nolan, Jr. has exercisable options to
purchase. Includes 2,000 shares owned by Mr. Nolan, Jr. and his wife over
which he shares voting and investment power.
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(7) In addition to those shares designated as beneficially owned by the
directors and executive officers named in the table above, the amount
includes 1,000 shares owned by Robert A. Chlebowski and 100 shares owned by
Dr. Irwin M. Jarett. Mr. Chlebowski and Dr. Jarett are directors who are
not employees of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1994 and from February 1, 1995 to the present date, Robert W.
Nolan, Sr., Chairman of the Board of Directors, President and Chief Executive
Officer of the Company served on the Compensation Committee of the Board of
Directors.
At May 3, 1995, the Company had advances due from Mr. Nolan, Sr. totaling
$130,974, consisting of a salary advance of $75,000, and other outstanding
advances of $55,974 to companies that were owned by Mr. Nolan, Sr. Mr. Nolan,
Sr. has executed a promissory note in favor of the Company for the outstanding
advances bearing interest at the applicable federal rate maturing on May 15,
1998. No principal payments were made or required to be made through the date of
this Information Statement.
In November 1994, Mr. Nolan, Sr. accepted an invitation to sit on the Board
of Directors of St. Louis Leasing Corporation. Mr. Chlebowski, who is the
chairman of the Company's Compensation Committee, is the president of St. Louis
Leasing Corporation. The Board of Directors of St. Louis Leasing Corporation is
responsible for setting the compensation package for Mr. Chlebowski. Mr. Nolan,
Sr. resigned from the Board of Directors of St. Louis Leasing Corporation on
November 14, 1995.
During fiscal year 1993, the Company entered into a three-year agreement
with GMIS, whereby software developed by GMIS was merged with software developed
by the Company and jointly marketed. Dr. Jarett, a director of the Company, is
co-founder and Chief Executive Officer of GMIS. During fiscal 1994, the Company
paid to GMIS $70,984 pursuant to the terms of the contract. The Board of
Directors of the Company has determined that the contract is immaterial to the
Company, Dr. Jarett, and GMIS, and therefore, does not interfere with Dr.
Jarett's ability to serve as an independent director of the Company.
On January 31, 1994, the Company established an unsecured $1,000,000
line-of-credit bearing an interest rate of 11.75% per annum and maturing on June
1, 1994 with St. Louis Leasing Corporation. The president of St. Louis Leasing
Corporation, Robert A. Chlebowski, is also a director of the Company. This
life-of-credit has been periodically renewed. As of January 31, 1995, and as of
the date of this Information Statement the Company had no outstanding draws on
the line-of-credit.
During the fiscal year beginning February 1, 1995, the Company has entered
into operating leases for computer equipment in the approximate amount of
$60,000 with St. Louis Leasing Corporation, bringing the total of such leases to
an approximate amount of $84,000. These operating leases are entered into in the
normal course of business and at competitive interest rates. Mr. Chlebowski,
President of St. Louis Leasing Corporation, is a director of the Company and
Chairman of the Compensation Committee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
SCS/Compute, Inc. believes that executive compensation should be linked to
individual and Company performance, and the value delivered to shareholders. The
Company has developed an incentive pay program which provides competitive
compensation for its executive officers and other key employees, with both
short-term and long-term compensation based on Company performance and related
shareholder value.
During fiscal 1992, the Company employed TPF&C, a Towers Perrin Company, to
make a study on executive compensation and present the results of their study to
the Compensation Committee. The TPF&C report was examined, and the Committee
attempted to identify software competitors similar to SCS/Compute, Inc. and
determine the range and nature of compensation provided to management of those
companies. Based thereon, a compensation package was specifically designed for
Robert W. Nolan, Sr. and was adopted effective July 1, 1992. At the time of
adoption of Mr. Nolan, Sr.'s compensation package, the Compensation Committee
consisted of two independent directors and Mr. Nolan, Sr. Mr. Nolan, Sr.
abstained from voting on the adoption of his compensation package.
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The Committee believes that stock options are an effective long-term
instrument because they focus management's attention on total stockholder return
through share price appreciation. To this end, the Committee recommended, and
the Board approved, the grant of stock options to the executive officers of the
Company during the year ended January 31, 1995 (see "Option Grants in Last
Fiscal Year"). Options were granted to each executive officer based upon
individual and company performance during the fiscal year ended January 31, 1995
as of the date of grant.
In order to retain and motivate key employees, the Company's Board of
Directors adopted an Incentive Compensation Plan (the "Incentive Plan") on July
14, 1986. The Incentive Plan is designed to provide additional performance
incentives to the Company's executive officers. Under the Incentive Plan
effective for fiscal 1994, each participant was eligible to receive a bonus
based upon percentage of the pre-tax, pre-executive bonus profits of the
Company. Amounts earned under the Incentive Plan for the year ended January 31,
1995 are included under the caption "Bonus" in the Summary Compensation Table.
COMPENSATION COMMITTEE
Robert A. Chlebowski, Chairman
Dr. Irwin M. Jarett
Robert W. Nolan, Sr.
SUMMARY COMPENSATION TABLE
The table below shows information concerning the annual and long-term
compensation for services in all capacities to the Company for the past three
fiscal years paid to the chief executive officer and the other executive
officers of the Company whose total annual salary and bonus for fiscal 1994
exceeded $100,000.
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------- ------------
OTHER ANNUAL SECURITIES ALL OTHER
FISCAL COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (1) OPTIONS (2)
- ----------------------------------- ------ ------- ------ ------------ ------------ ------------
($) ($) ($) (#) ($)
Robert W. Nolan, Sr................ 1994 250,008 78,523 19,335 24,000 1,806
Chairman, President and 1993 250,008 0 19,000 0 1,841
Chief Executive Officer 1992 227,083 0 29,080 36,000 2,927
Charles G. Wilson.................. 1994 127,917 27,579 0 20,000 1,530
Executive Vice President, 1993 125,000 0 0 0 1,400
Secretary and Treasurer 1992 118,750 0 5,400 0 2,507
Theodore W. Schroeder.............. 1994(3) 118,747 36,829 0 20,000 573
Vice President 1993 109,992 0 0 0 574
Sales & Marketing 1992 50,413 0 0 0 126
Robert W. Nolan, Jr................ 1994 86,250 27,579 0 20,000 589
V.P. Operations and 1993 74,000 0 0 0 523
Product Development 1992 69,000 0 0 0 992
Notes:
(1) Includes auto allowance paid as follows: Mr. Nolan, Sr., $8,100 in 1992; Mr.
Wilson, $5,400 in 1992. Includes professional fees associated with personal
tax planning and compliance paid by the Company on behalf of Mr. Nolan,
Sr., $19,335 in 1994, $19,000 in 1993 and $20,980 in 1992.
(2) In fiscal 1994, includes Company matching contributions to the SCS/Compute,
Inc. 401(k) Plan as follows: Mr. Nolan, Sr., $915; Mr. Wilson, $913; Mr.
Nolan, Jr., $180. In fiscal year 1994, includes life insurance premiums
paid under the Company's employee benefit plans as follows: Mr. Nolan, Sr.,
$891; Mr. Wilson, $617; Mr. Schroeder, $573; Mr. Nolan, Jr., $409.
(3) Mr. Schroeder joined the Company on August 17, 1992.
25
27
STOCK OPTIONS
OPTION GRANTS IN LAST FISCAL YEAR
The table below shows information concerning the grants of stock options
pursuant to the SCS/Compute, Inc. Stock Option Plan (the "Plan") during fiscal
1994 to the named executive officers. No Stock Appreciation Rights have ever
been granted by the Company.
POTENTIAL
REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
- ---------------------------------------------------------------------------------------- ANNUAL RATES OF
PERCENT OF STOCK PRICE
NUMBER OF TOTAL APPRECIATION
SECURITIES OPTIONS FOR OPTION
UNDERLYING GRANTED TO TERM**
OPTIONS EMPLOYEES EXERCISE OR ----------------
GRANTED IN FISCAL BASE PRICE EXPIRATION 5% 10%
NAME (#)* YEAR ($/SH) DATE ($) ($)
- -------------------------------- ---------- ---------- ----------- ---------- ------ ------
Robert W. Nolan, Sr............. 24,000 28.57% 2.80 5/16/99 18,566 41,026
Charles G. Wilson............... 20,000 23.81% 2.80 5/16/99 15,472 34,189
Theodore W. Schroeder........... 20,000 23.81% 2.80 5/16/99 15,472 34,189
Robert W. Nolan, Jr............. 20,000 23.81% 2.80 5/16/99 15,472 34,189
Notes:
* The options granted to the above executive officers were the only options
granted under the Plan during fiscal 1994. The options granted become
exercisable on May 16, 1995, May 16, 1996, and May 16, 1997 in equal
increments.
** The dollar amounts under these columns are the result of calculations at the
5% and 10% rates set by the Securities and Exchange Commission, and
therefore are not intended to forecast possible future appreciation, if
any, of the stock price of the Company. The Company did not use an
alternative formula for a grant date valuation, as the Company is not aware
of any formula which will determine with reasonable accuracy a present
value based on future unknown factors.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The table below shows information concerning the fiscal year-end value of
unexercised stock options on January 31, 1995 held by each of the named
executive officers. No stock options were exercised during the year ended
January 31, 1995.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR END IN-THE-MONEY OPTIONS AT
(#)* FISCAL YEAR END ($)**
----------------------------- ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------- ----------- ------------- ----------- --------------
Robert W. Nolan, Sr...................... 30,000 30,000 0 0
Charles G. Wilson........................ 10,000 20,000 1,250 0
Theodore W. Schroeder.................... 0 20,000 0 0
Robert W. Nolan, Jr...................... 0 20,000 0 0
* Under the terms of the Company's Stock Option Plan, the Compensation
Committee retains discretion, subject to plan limits, to modify the terms
of outstanding options and to reprice the options.
** Represents the difference between the closing price of the Company's Common
Stock on January 31, 1995 as reported on the NASDAQ SmallCap Market and the
exercise price of the options, multiplied by the number of underlying
securities. No options held by Messrs. Nolan, Sr., Schroeder or Nolan, Jr.,
were in-the-money on January 31, 1995.
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28
STOCK PRICE PERFORMANCE CHART GRAPH
Set forth below is a line graph comparing the cumulative total shareholder
return on the Company's Common Stock, based on the market price of the Common
Stock, with the cumulative total return of companies on the NASDAQ Stock Market
Index of U. S. Companies and the cumulative total return of companies on the
NASDAQ Computer & Data Processing Services Stock Index.
SCS/COMPUTE, INC STOCK PRICE PERFORMANCE
Measurement Period SCS/Compute, Inc. NASDAQ U.S. NASDAQ Computer & DP
1/31/90 100 100 100
1/31/91 33 104 137
1/31/92 88 168 236
1/31/93 83 179 249
1/31/94 45 204 266
1/31/95 35 195 300
Assumes $100 invested on January 31, 1990 in SCS/Compute, Inc., NASDAQ
Index and NASDAQ Computer and Data Processing Index. No dividends have been paid
on the Common Stock during the five year period covered by the SCS/Compute, Inc.
Stock Price Performance Graph.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The Company's directors and executive officers and any persons holding more
than ten percent of the Company's Common Stock are required by Section 16 of the
Securities Exchange Act of 1934 to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the
Securities and Exchange Commission. Specific due dates for these reports have
been established and the Company is required to disclose in the Statement any
failure to file by these dates. To the Company's knowledge, all these filing
requirements were satisfied in fiscal 1994.
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29
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE
- ------------ ------------------------------------------------------------------------------- ----
Exhibit 1 -- Letter to Stockholders of the Company dated December 27, 1995.*
Exhibit 2 -- Agreement and Plan of Merger, dated as of December 19, 1995, among Thomson
U. S. Holdings, Inc., SCS Subsidiary, Inc., and SCS/Compute, Inc.
Exhibit 3 -- Engagement Letter dated December 5, 1995 between the Company and Fister &
Associates, Inc.
Exhibit 4 -- Opinion of Fister & Associates, Inc. dated December 19, 1995.*
Exhibit 6 -- Stock Purchase Agreement dated as of December 19, 1995
Exhibit 7 -- Form of Employment Agreement between Robert W. Nolan, Sr. and the Company,
including, as an exhibit thereto, the form of Consulting Agreement between
Robert W. Nolan, Sr. and the Company.
Exhibit 8 -- Mutual Nondisclosure Agreement dated October 10, 1995 between the Company
and RIA Inc.
Exhibit 9 -- Press Release issued by the Company, dated December 20, 1995
- ---------------
* Included in Schedule 14D-9 mailed to stockholders.