Registration of Securities Issued in a Business-Combination Transaction — Form S-4
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-4 Registration of Securities Issued in a 292 1.23M
Business-Combination Transaction
2: EX-5 Opinion Re. Securities Being Registered 2 12K
3: EX-8.1 Opinion Re. Fed. Income Tax Relating to Merger 2 13K
4: EX-8.2 Opinion Re. Fed. Income Tax Relating to Merger 1 9K
5: EX-10.45 Spss 2000 Equity Incentive Plan 8 37K
6: EX-10.46 Spss Qualified Employee Stock Purchase Plan 8 25K
7: EX-10.47 Spss Nonqualified Employee Stock Purchase Plan 7 22K
8: EX-15.1 Letter Re. Unaudited Financial Info. of Spss 1 8K
9: EX-21.1 Spss Subsidiaries 1 8K
10: EX-23.1 Consent of Kpmg LLP With Respect to Spss 1 8K
11: EX-23.2 Consent of Kpmg LLP With Respect to Showcase 1 8K
12: EX-23.5 Consent of Robert W. Baird & Co. 1 9K
13: EX-23.6 Consent of Merrill Lynch, Pierce, Fenner & Smith 1 9K
14: EX-23.7 Consent of Craig-Hallum Capital Group, Inc. 1 9K
15: EX-99.1 Form of Spss Proxy Card 2 11K
16: EX-99.2 Form of Showcase Proxy Card 2 10K
S-4 — Registration of Securities Issued in a Business-Combination Transaction
Document Table of Contents
| Page | (sequential) | | | | (alphabetic) | Top |
|---|
| | |
- Alternative Formats (Word, et al.)
- A Caution About Forward-Looking Statements
- Accounting Treatment
- Accounting Treatment of the Merger
- Actions by Written Consent of Stockholders
- Additional Information for Stockholders
- Additional Matters for Consideration by only SPSS Stockholders
- Ad Hoc Information Access, Enterprise Reporting and Analytics
- Agreement and Plan of Merger
- Amendments, Extensions and Waivers
- Anti-Takeover Statute
- Appraisal Rights
- Background of the Merger
- Beneficial Ownership of Spss Common Stock by Showcase Officers and Directors
- Board of Directors
- Board of Directors and Management of Spss Following the Merger
- Board of Directors; Executive Officers; Company Headquarters
- Board of Directors of SPSS After the Merger
- Board of Directors, The
- Calculation of Registration Fee
- Certain Legal Information
- Certain Relationships and Related Transactions
- Classified Board of Directors
- Class Vote for Certain Reorganizations
- Closing
- Closing Matters
- Companies, The
- Comparative Per Share Market Price and Dividend Information
- Comparison of Rights of Stockholders
- Comparison of SPSS/ShowCase Shareholder Rights
- Compensation Committee
- Competition
- Conditions
- Conditions to the Completion of the Merger
- Consideration to be Received in the Merger; Treatment of Stock Options
- Covenants
- Cumulative Voting for Directors
- Customer Service and Technical Support
- Data Warehouse Generation and Management
- Deployment Accelerators
- Description of SPSS Capital Stock
- Differences Regarding Amendment of Charters or Bylaws
- Dissenters' Appraisal Rights
- Dissenters' Rights of Appraisal
- Dividends
- Effective Time
- Electronic Access to SPSS Proxy Materials
- Employee Matters
- Employees
- Exchange of Certificates in the Merger
- Executive Compensation
- Executive Officers of the Company
- Exhibits and Financial Statement Schedules
- Expenses
- Experts
- Facilities
- Fairness Opinions
- Federal Securities Laws Consequences; Stock Transfer Restriction Agreements
- Filling Board Vacancies
- Financial Information About SPSS's Foreign and Domestic Operations and Export Sales
- Form S-4
- Fractional Shares
- Future Stockholder Proposals
- General
- How to Vote by Proxy
- Ibm
- Indemnification and Personal Liability of Directors and Officers
- Indemnification of Directors and Officers
- Index to Showcase Financial Statements and Supplemental Data
- Industry Background
- Information About the Meetings and Voting
- Inspection of Stockholder Lists
- Intellectual Property
- Interests of Certain Persons in the Merger
- Interests of Officers and Directors in the Merger
- ISO's
- Legal Matters
- Legal Proceedings
- Listing of SPSS Common Stock
- Listing of SPSS Stock
- Loans to Officers, Directors and Employees
- Management's Discussion and Analysis of Financial Condition and Results of Operations
- Management Services Agreement
- Manufacturing and Order Fulfillment
- Markets
- Material Federal Income Tax Consequences of the Merger
- Matters Relating to the Meetings
- Merger Agreement, The
- Merger, The
- Nonqualified Plan
- Number of Directors
- Officers and Directors
- Opinion of Robert W. Baird & Co
- Opinions of Financial Advisors to ShowCase
- Opinions of ShowCase's Financial Advisors
- Other Business; Adjournments
- Other Covenants and Agreements
- Ownership of SPSS After the Merger
- Performance Graph
- Product Development
- Proposal 3 -- Approval of 2000 Equity Incentive Plan
- Proposal 4 -- Approval of 2000 Qualified and Nonqualified Employee Stock Purchase Plans
- Proposed Merger, The
- Proxies
- Proxies for Participants in the SPSS Inc. Employee Stock Purchase Plan
- Publications and Student Software
- Qualified Plan
- Questions and Answers About the Merger
- Reasons for the Merger
- Recommendations to Stockholders
- Regulatory Approvals
- Regulatory Matters Relating to the Merger
- Reliance on Third Parties
- Removal of Directors
- Representations and Warranties
- Research and Development
- Restricted Shares
- Risk Factors
- Risk Factors Relating to SPSS
- Risk Factors Relating to the Merger and the Combined Company
- Sales and Marketing
- Seasonality
- Sections 302A.471 and 302A.473 of the Minnesota Business Corporation Act
- Security Ownership of Certain Beneficial Owners and Management of Showcase
- Security Ownership of Certain Beneficial Owners and Management of Spss
- ShowCase
- ShowCase Proposal
- ShowCase Services
- ShowCase Solution, The
- ShowCase's Products
- ShowCase's Reasons For the Merger
- Software Pricing
- Spss
- SPSS Common Stock
- Spss Inc
- SPSS Proposals
- SPSS's Analytical Solutions and Software Products
- SPSS's Reasons for the Merger
- Stock Exchange Listing; Delisting and Deregistration of ShowCase Common Stock
- Stockholder Power to Call Special Stockholders' Meeting
- Stockholder Votes Required
- Strategic Relationships
- Summary
- Summary of Material Differences Between Current Rights of ShowCase Shareholders and Rights Those Shareholders will have as SPSS Stockholders Following the Merger
- Summary Pro Forma Combined Comparative Per Share Data
- Summary Selected Consolidated Financial Information
- Summary Unaudited Pro Forma Condensed Selected Combined Financial Data
- Table of Contents
- Termination Fee Payable By ShowCase
- Termination of Merger Agreement
- The Board of Directors
- The Companies
- The Merger
- The Merger Agreement
- The Proposed Merger
- The ShowCase Solution
- Training and Consulting
- Unaudited Pro Forma Condensed Combining Financial Data
- Undertakings
- Voting Rights
- What ShowCase Shareholders Will Receive
- Where You Can Find More Information
|
| 1 | 1st Page - Filing Submission
|
| " | Form S-4
|
| " | Calculation of Registration Fee
|
| 5 | Table of Contents
|
| 13 | The Merger
|
| " | Questions and Answers About the Merger
|
| 17 | Summary
|
| " | The Companies
|
| " | Spss Inc
|
| 18 | Recommendations to Stockholders
|
| " | Stockholder Votes Required
|
| 19 | What ShowCase Shareholders Will Receive
|
| " | Ownership of SPSS After the Merger
|
| " | Conditions to the Completion of the Merger
|
| 20 | Termination of Merger Agreement
|
| 21 | Termination Fee Payable By ShowCase
|
| " | Board of Directors of SPSS After the Merger
|
| " | Regulatory Approvals
|
| " | Material Federal Income Tax Consequences of the Merger
|
| " | Listing of SPSS Common Stock
|
| " | Appraisal Rights
|
| 22 | Interests of Officers and Directors in the Merger
|
| " | Accounting Treatment of the Merger
|
| " | Opinion of Robert W. Baird & Co
|
| " | Opinions of Financial Advisors to ShowCase
|
| 23 | Summary Selected Consolidated Financial Information
|
| 24 | Summary Unaudited Pro Forma Condensed Selected Combined Financial Data
|
| 25 | Summary Pro Forma Combined Comparative Per Share Data
|
| 26 | Unaudited Pro Forma Condensed Combining Financial Data
|
| 35 | Comparative Per Share Market Price and Dividend Information
|
| 36 | A Caution About Forward-Looking Statements
|
| 37 | Risk Factors
|
| " | Risk Factors Relating to the Merger and the Combined Company
|
| 42 | Risk Factors Relating to SPSS
|
| 50 | The Proposed Merger
|
| " | General
|
| " | SPSS Proposals
|
| " | ShowCase Proposal
|
| " | Background of the Merger
|
| 52 | Reasons for the Merger
|
| 53 | SPSS's Reasons for the Merger
|
| 58 | ShowCase's Reasons For the Merger
|
| 62 | Accounting Treatment
|
| " | Dissenters' Appraisal Rights
|
| 67 | Regulatory Matters Relating to the Merger
|
| " | Expenses
|
| " | Dissenters' Rights of Appraisal
|
| " | Federal Securities Laws Consequences; Stock Transfer Restriction Agreements
|
| 68 | Spss
|
| 70 | Industry Background
|
| 71 | Markets
|
| 72 | SPSS's Analytical Solutions and Software Products
|
| 75 | Software Pricing
|
| " | Publications and Student Software
|
| 76 | Training and Consulting
|
| " | Sales and Marketing
|
| 77 | Customer Service and Technical Support
|
| " | Research and Development
|
| 78 | Manufacturing and Order Fulfillment
|
| " | Competition
|
| 80 | Intellectual Property
|
| 81 | Reliance on Third Parties
|
| 82 | Seasonality
|
| 83 | Employees
|
| 84 | Financial Information About SPSS's Foreign and Domestic Operations and Export Sales
|
| 85 | ShowCase
|
| 87 | The ShowCase Solution
|
| 88 | ShowCase's Products
|
| " | Ad Hoc Information Access, Enterprise Reporting and Analytics
|
| 89 | Data Warehouse Generation and Management
|
| " | Deployment Accelerators
|
| 90 | ShowCase Services
|
| 91 | Product Development
|
| 92 | Strategic Relationships
|
| " | Ibm
|
| 94 | Facilities
|
| " | Legal Proceedings
|
| " | Executive Officers of the Company
|
| 96 | Management's Discussion and Analysis of Financial Condition and Results of Operations
|
| 107 | Fairness Opinions
|
| 118 | Opinions of ShowCase's Financial Advisors
|
| 129 | Interests of Certain Persons in the Merger
|
| 130 | The Merger Agreement
|
| " | Closing Matters
|
| " | Closing
|
| 131 | Effective Time
|
| " | Consideration to be Received in the Merger; Treatment of Stock Options
|
| " | Exchange of Certificates in the Merger
|
| 132 | Fractional Shares
|
| " | Listing of SPSS Stock
|
| " | Board of Directors; Executive Officers; Company Headquarters
|
| 133 | Covenants
|
| 136 | Employee Matters
|
| " | Other Covenants and Agreements
|
| 137 | Representations and Warranties
|
| 138 | Conditions
|
| 141 | Amendments, Extensions and Waivers
|
| 142 | Board of Directors and Management of Spss Following the Merger
|
| " | Officers and Directors
|
| 145 | Executive Compensation
|
| 149 | Management Services Agreement
|
| 150 | Compensation Committee
|
| 153 | Performance Graph
|
| 154 | Security Ownership of Certain Beneficial Owners and Management of Spss
|
| 156 | Security Ownership of Certain Beneficial Owners and Management of Showcase
|
| 157 | Beneficial Ownership of Spss Common Stock by Showcase Officers and Directors
|
| " | Certain Relationships and Related Transactions
|
| 159 | Information About the Meetings and Voting
|
| " | Matters Relating to the Meetings
|
| 161 | Proxies
|
| " | How to Vote by Proxy
|
| " | Proxies for Participants in the SPSS Inc. Employee Stock Purchase Plan
|
| 163 | Other Business; Adjournments
|
| " | Electronic Access to SPSS Proxy Materials
|
| 164 | Certain Legal Information
|
| " | Comparison of SPSS/ShowCase Shareholder Rights
|
| 165 | Summary of Material Differences Between Current Rights of ShowCase Shareholders and Rights Those Shareholders will have as SPSS Stockholders Following the Merger
|
| " | Comparison of Rights of Stockholders
|
| 166 | Removal of Directors
|
| " | Cumulative Voting for Directors
|
| " | Filling Board Vacancies
|
| 167 | Stockholder Power to Call Special Stockholders' Meeting
|
| " | Actions by Written Consent of Stockholders
|
| " | Anti-Takeover Statute
|
| 168 | Loans to Officers, Directors and Employees
|
| 169 | Class Vote for Certain Reorganizations
|
| 170 | Inspection of Stockholder Lists
|
| " | Dividends
|
| " | Differences Regarding Amendment of Charters or Bylaws
|
| 171 | Number of Directors
|
| " | Classified Board of Directors
|
| " | Indemnification and Personal Liability of Directors and Officers
|
| 173 | Description of SPSS Capital Stock
|
| 174 | SPSS Common Stock
|
| " | Voting Rights
|
| " | Stock Exchange Listing; Delisting and Deregistration of ShowCase Common Stock
|
| 175 | Additional Matters for Consideration by only SPSS Stockholders
|
| " | Proposal 3 -- Approval of 2000 Equity Incentive Plan
|
| 177 | ISO's
|
| 178 | Restricted Shares
|
| 179 | Proposal 4 -- Approval of 2000 Qualified and Nonqualified Employee Stock Purchase Plans
|
| 181 | Qualified Plan
|
| " | Nonqualified Plan
|
| 182 | Legal Matters
|
| " | Experts
|
| 183 | Additional Information for Stockholders
|
| " | Future Stockholder Proposals
|
| " | Where You Can Find More Information
|
| 186 | Index to Showcase Financial Statements and Supplemental Data
|
| 208 | The Board of Directors
|
| 210 | Agreement and Plan of Merger
|
| 265 | Board of Directors
|
| 274 | Sections 302A.471 and 302A.473 of the Minnesota Business Corporation Act
|
| 279 | Item 20. Indemnification of Directors and Officers
|
| 280 | Item 21. Exhibits and Financial Statement Schedules
|
| 287 | Item 22. Undertakings
|
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 19, 2000
REGISTRATION NO. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SPSS INC.
(Exact name of Registrant as specified in its
charter)
[Enlarge/Download Table]
DELAWARE 7372 36-2815480
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
233 SOUTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
(312) 651-3000
(Address, including zip code, and telephone number, including
area code,
of Registrant's principal executive offices)
EDWARD HAMBURG
EXECUTIVE VICE PRESIDENT, CORPORATE OPERATIONS,
CHIEF FINANCIAL OFFICER, AND SECRETARY
SPSS Inc.
233 South Wacker Drive
Chicago, Illinois 60606
(312) 651-3000
(Name, address, including zip code, and
telephone number, including area code, of
agent for service)
Copies to:
Lawrence R. Samuels, Esq. Kenneth L. Cutler, Esq.
Ross & Hardies Dorsey & Whitney LLP
150 North Michigan Avenue 220 South Sixth Street
Chicago, Illinois 60601 Minneapolis, MN 55402
(312) 558-1000 (612) 340-2600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effectiveness of this Registration
Statement and the effective time of the merger of a wholly-owned
subsidiary of the Registrant with and into ShowCase Corporation as
described in the Agreement and Plan of Merger dated as of November 6,
2000.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
[Enlarge/Download Table]
==================================================================================================================================
PROPOSED
MAXIMUM
PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED (1) PER SHARE (2) PRICE(3) FEE(4)
----------------------------------------------------------------------------------------------------------------------------------
Common Stock, in connection with the ShowCase Corporation
Merger, $0.01 par value.................................. 3,725,000 $17.17 $63,958,250 $16,885
==================================================================================================================================
(1) This Registration Statement relates to common stock, par value $0.01 per
share, of SPSS Inc. ("SPSS") issuable to holders of common stock, par value
$0.01 per share, of ShowCase Corporation ("ShowCase") in the proposed merger of
SPSS Acquisition Sub Corp., a wholly owned subsidiary of SPSS, with and into
ShowCase. The amount of SPSS common stock to be registered has been determined
by multiplying the exchange ratio (0.333 shares of SPSS common stock for each
share of ShowCase common stock) by 11,182,404, the maximum aggregate number of
shares of ShowCase common stock that would be outstanding on the effective date
of the merger.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) and Rule 457(f)(i) by dividing the Proposed Maximum Aggregate
Offering Price (calculated in the manner described in footnote (3) below) by the
number of shares of SPSS common stock being registered.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) and Rule 457(f)(1) of the Securities Act, based on the
market value of ShowCase shares to be received by SPSS in the Merger, as
established by the average of the high and low sales prices of ShowCase common
stock in the NASDAQ National Market System on December 12, 2000, which was
$5.72.
(4) The registration fee was calculated pursuant to Rule 457(f)(l) by
multiplying the Proposed Maximum Aggregate Offering Price (calculated in the
manner described in footnote (3) above) by 0.000264.
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
TO THE STOCKHOLDERS OF SPSS INC. AND SHOWCASE CORPORATION:
MERGER PROPOSAL - YOUR VOTE IS VERY IMPORTANT
After careful consideration, the boards of directors of SPSS Inc. and
ShowCase Corporation have approved a merger designed to capitalize upon the
managerial, personnel and technology synergies which the companies believe can
be created by the proposed merger. We believe the combined company will be able
to create substantially more stockholder value than could be achieved by either
company individually. The combined company will be named SPSS Inc. and will be
headquartered in Chicago, Illinois.
If the merger is completed, ShowCase shareholders will receive 0.333
shares of SPSS common stock for each share of ShowCase common stock. Any
ShowCase shareholder who would otherwise receive a fractional share of SPSS
common stock will instead receive the cash value of the fractional share of SPSS
common stock. SPSS stockholders will continue to own their existing SPSS shares.
We estimate that SPSS may issue up to 3,725,000 shares of our common stock to
former ShowCase shareholders as a result of the merger. Upon completion of the
merger, SPSS stockholders will own approximately 75% of the combined company,
and former ShowCase shareholders will own approximately 25% of the combined
company, each calculated on a fully-diluted basis. The shares of the combined
company will be traded on the Nasdaq National Market under the symbol "SPSS."
The SPSS Board of Directors has approved the merger and has called a
special meeting of the SPSS stockholders at which you will be asked to approve
and adopt the Agreement and Plan of Merger and approve the issuance of up to
3,725,000 shares of SPSS common stock in the merger. The SPSS Board of Directors
unanimously recommends that you vote your shares at the special meeting for both
adoption of the Agreement and Plan of Merger and the issuance of the shares of
SPSS common stock in the merger. The date, time and place of the SPSS special
meeting are as follows:
____________, 2001
[10:00] A.M.
233 South Wacker Drive
Chicago, IL 60606
The ShowCase Board of Directors is asking the ShowCase shareholders to
approve and adopt the merger agreement and the merger. The ShowCase Board of
Directors has approved the merger and unanimously recommends its approval by
you. The date, time, and place of ShowCase's special meeting will be held:
____________, 2001
__________________
__________________
__________________
We cannot complete the merger unless the stockholders of SPSS and the
shareholders of ShowCase adopt the Agreement and Plan of Merger and the
stockholders of SPSS approve the issuance of the SPSS common stock in the
merger.
We are very enthusiastic about this merger and the strength and
capabilities we expect from the combined company.
[Download Table]
JACK NOONAN KENNETH H. HOLEC
President, Chief Executive Officer President, Chief Executive Officer and
and Director of SPSS Inc. Director of ShowCase Corporation
BEFORE YOU VOTE ON THE PROPOSALS YOU SHOULD CONSIDER THE RISK FACTORS
DESCRIBED ON PAGES ______ THROUGH ______ OF THIS DOCUMENT.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED THE SECURITIES TO BE ISSUED UNDER THIS DOCUMENT OR DETERMINED IF THE
INFORMATION PRESENTED IN THIS DOCUMENT IS ACCURATE OR ADEQUATE TO ALLOW YOU TO
MAKE A FULLY INFORMED DECISION TO APPROVE OR DISAPPROVE THE PROPOSALS TO BE
SUBMITTED AT THE SPECIAL MEETINGS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS JOINT PROXY STATEMENT/PROSPECTUS IS DATED __________ __, 2001, AND
IS BEING MAILED TO THE STOCKHOLDERS OF SPSS AND THE SHAREHOLDERS OF SHOWCASE ON
OR ABOUT __________ __, 2001.
THE INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS
NOT COMPLETE AND MAY BE CHANGED. THE SHARES OF SPSS COMMON STOCK TO BE ISSUED IN
THE MERGER MAY NOT BE ISSUED UNTIL THE REGISTRATION STATEMENT INTO WHICH THIS
JOINT PROXY STATEMENT/PROSPECTUS IS INCORPORATED IS DECLARED EFFECTIVE BY THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION. THIS JOINT PROXY
STATEMENT/PROSPECTUS IS NOT AN OFFER TO SELL SHARES OF SPSS COMMON STOCK AND WE
ARE NOT SOLICITING AN OFFER TO BUY SHARES OF SPSS COMMON STOCK IN ANY STATE
WHERE THE OFFER OR SALE OF THE SHARES OF SPSS COMMON STOCK TO BE ISSUED IN THE
MERGER IS NOT PERMITTED.
PRELIMINARY PROSPECTUS-SUBJECT TO COMPLETION,
DATED __________ __, 2000
[NOTE: THIS PAGE IS FOR SPSS BOOKLET ONLY]
[SPSS LOGO]
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS OF SPSS INC.
NOTICE IS HEREBY GIVEN that SPSS Inc. ("SPSS") will hold a special
meeting of its stockholders on __________ __, 2001 at [10:00] a.m., local time,
at 233 South Wacker Drive, Chicago, Illinois 60606, for the following purposes:
1. To consider and vote upon a proposal to adopt the Agreement
and Plan of Merger, dated as of November 6, 2000, among SPSS,
SPSS Acquisition Sub Corp., and ShowCase Corporation. A copy
of the Agreement and Plan of Merger is attached as Annex A to
the joint proxy statement/prospectus accompanying this notice;
2. To consider and vote upon a proposal to approve the issuance
of up to 3,725,00 shares of SPSS common stock to the former
shareholders of ShowCase Corporation as consideration for the
shares of ShowCase common stock to be acquired by SPSS in the
merger;
3. To consider and vote upon a proposal to approve the 2000
Equity Incentive Plan described under the heading "Proposal 3"
beginning on page __ of the joint proxy statement/prospectus
accompanying this notice;
4. To consider and vote upon a proposal to approve the 2000
Qualified and Nonqualified Employee Stock Purchase Plans
described under the heading "Proposal 4" beginning on page __
of the joint proxy statement/prospectus accompanying this
notice; and
5. To transact such other business as may properly come before
the special meeting and any adjournment or postponement.
Holders of record of SPSS common stock at the close of business on
__________ __, 2001 are entitled to receive this notice and to vote their shares
at the special meeting or any adjournment or postponement of that meeting. As of
__________ __, 2001, there were __________ shares of SPSS common stock
outstanding and those shares of SPSS common stock were held of record by _____
stockholders. Each share of SPSS common stock represented in person or by proxy
at the special meeting is entitled to one vote on each of the proposals
identified in the numbered paragraphs above as well as any other matter which is
properly submitted to a vote of the SPSS stockholders at the special meeting.
A list of stockholders entitled to vote at the SPSS special meeting
will be available at the special meeting for inspection by any SPSS stockholder
and will also be available to any SPSS stockholder at SPSS's offices, 233 South
Wacker Drive, Chicago, Illinois 60606 between the hours of 8:45 a.m. and 4:30
p.m. during the ten day period prior to the special meeting. You should contact
Edward Hamburg, the Secretary of SPSS, if you wish to inspect this list during
the ten day review period preceding the special meeting.
THE SPSS BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE YOUR
SHARES OF SPSS COMMON STOCK TO APPROVE EACH OF THE PROPOSALS IDENTIFIED IN THE
NUMBERED PARAGRAPHS ABOVE. EACH OF THESE PROPOSALS, ALONG WITH OTHER INFORMATION
YOU SHOULD TAKE INTO ACCOUNT IN CONSIDERING THE PROPOSALS, IS DESCRIBED IN
GREATER DETAIL IN THE JOINT PROXY STATEMENT/PROSPECTUS ACCOMPANYING THIS NOTICE.
By Order of the Board of Directors
EDWARD HAMBURG,
Executive Vice President, Corporate
Operations, Chief Financial Officer and
Secretary
__________ ___, 2001
SPSS Inc.
233 South Wacker Drive
Chicago, IL 60606
AS AN SPSS STOCKHOLDER,
THE MOST IMPORTANT THING
FOR YOU TO DO IS VOTE
Your vote is important. Please mark, sign, date and return the enclosed
proxy card as promptly as possible in the enclosed postage-paid envelope. In
this way, if you are unable to attend the special meeting in person, your shares
can still be voted. Remember, your vote is important, so please act today!
STOCKHOLDER QUESTIONS
For questions about the SPSS/ShowCase merger, call (800) 525-4980.
[NOTE: THIS PAGE IS FOR SHOWCASE BOOKLET ONLY]
[SHOWCASE LOGO]
4115 Highway 52 North, Suite 300
Rochester, Minnesota 55901-0144
Telephone (507) 288-5922
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF
SHOWCASE CORPORATION
NOTICE IS HEREBY GIVEN that ShowCase Corporation will hold a special
meeting of its shareholders, on _______________ __, 2001 at _______, local time,
at ______________________________________, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of November 6, 2000,
among SPSS, SPSS Acquisition Sub Corp., and ShowCase, and the
Merger. A copy of the Agreement and Plan of Merger is attached
as Annex A to the joint proxy statement/prospectus
accompanying this notice; and
2. To transact such other business as may properly come before
the special meeting and any adjournment or postponement.
Holders of record of ShowCase common stock at the close of business on
________ __, 2001 are entitled to receive this notice and to vote their shares
at the ShowCase special meeting or any adjournment or postponement of that
meeting. As of that date, there were _____ shares of common stock outstanding.
Each share of common stock is entitled to one vote on each matter properly
brought before the special meeting.
A list of the shareholders entitled to vote at the special meeting will
be available at the special meeting and for ten days prior to the meeting,
between the hours of 8:45 a.m. and 4:30 p.m. at the offices of ShowCase, at 4115
Highway 52 North, Suite 300, Rochester, Minnesota 55901-0144. You should contact
the Secretary of ShowCase if you wish to review this list of shareholders.
You are cordially invited to attend the meeting. However, whether or
not you plan to be personally present at the meeting, please mark, sign, date
and return the enclosed proxy card as promptly as possible in the enclosed
postage-paid envelope. In this way, if you are unable to attend in person, your
shares can still be voted at the ShowCase special meeting. If you later desire
to revote your proxy, you may do so at any time before it is exercised.
Remember, your vote is important, so please act today!
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO APPROVE
AND ADOPT THE MERGER AGREEMENT AND THE MERGER, BOTH OF WHICH ARE DESCRIBED IN
DETAIL IN THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS.
By Order of the Board of Directors
Craig W. Allen
Chief Financial Officer and Secretary
TABLE OF CONTENTS
THE MERGER....................................................................1
Questions and Answers About the Merger........................................1
Summary.......................................................................5
The Companies........................................................5
Recommendations to Stockholders......................................6
Stockholder Votes Required...........................................6
The Merger...........................................................6
What ShowCase Shareholders Will Receive..............................7
Ownership of SPSS After the Merger...................................7
Conditions to the Completion of the Merger...........................7
Termination of Merger Agreement......................................8
Termination Fee Payable By ShowCase..................................9
Board of Directors of SPSS After the Merger..........................9
Regulatory Approvals.................................................9
Material Federal Income Tax Consequences of the Merger...............9
Listing of SPSS Common Stock.........................................9
Appraisal Rights.....................................................9
Interests of Officers and Directors in the Merger...................10
Accounting Treatment of the Merger..................................10
Opinion of Robert W. Baird & Co.....................................10
Opinions of Financial Advisors to ShowCase..........................10
Summary Selected Consolidated Financial Information..........................11
Summary Unaudited Pro Forma Condensed Selected Combined Financial Data.......12
Summary Pro Forma Combined Comparative Per Share Data........................13
Unaudited Pro Forma Condensed Combining Financial Data.......................14
Comparative Per Share Market Price and Dividend Information..................23
A Caution About Forward-Looking Statements...................................24
Risk Factors.................................................................25
Risk Factors Relating to the Merger and the Combined Company........25
(i)
Risk Factors Relating to SPSS.............................................30
THE PROPOSED MERGER...........................................................38
General...................................................................38
SPSS Proposals............................................................38
ShowCase Proposal.........................................................38
Background of the Merger..................................................38
Reasons for the Merger....................................................40
SPSS's Reasons for the Merger........................................41
Factors Consider By, and Recommendation of, the Board of Directors
of SPSS..............................................................43
ShowCase's Reasons For the Merger....................................46
Factors Considered By, and Recommendations of, the Board of
Directors of ShowCase................................................46
Accounting Treatment......................................................50
Dissenters' Appraisal Rights..............................................50
Material Federal Income Tax Consequences of the Merger....................53
Regulatory Matters Relating to the Merger.................................55
Expenses..................................................................55
Dissenters' Rights of Appraisal...........................................55
Federal Securities Laws Consequences; Stock Transfer Restriction
Agreements................................................................55
THE COMPANIES.................................................................56
(ii)
SPSS.....................................................................56
Industry Background.................................................58
Markets.............................................................59
SPSS's Analytical Solutions and Software Products...................60
Software Pricing....................................................63
Publications and Student Software...................................63
Training and Consulting.............................................64
Sales and Marketing.................................................64
Customer Service and Technical Support..............................65
Research and Development............................................65
Manufacturing and Order Fulfillment.................................66
Competition.........................................................66
Intellectual Property...............................................68
Reliance on Third Parties...........................................69
Seasonality.........................................................70
Employees...........................................................71
Financial Information About SPSS's Foreign and Domestic Operations and
Export Sales........................................................72
SHOWCASE.................................................................73
(iii)
Industry Background................................................ 73
The ShowCase Solution.............................................. 75
ShowCase's Products................................................ 76
Ad Hoc Information Access, Enterprise Reporting and Analytics...... 76
Data Warehouse Generation and Management........................... 77
Deployment Accelerators............................................ 77
ShowCase Services.................................................. 78
Sales and Marketing................................................ 78
Product Development................................................ 79
Strategic Relationships............................................ 80
Competition........................................................ 81
Intellectual Property.............................................. 81
Employees.......................................................... 82
Facilities......................................................... 82
Legal Proceedings.................................................. 82
Executive Officers of the Company.................................. 82
Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................. 84
FAIRNESS OPINIONS............................................................ 95
Opinion of Robert W. Baird & Co......................................... 95
Opinions of ShowCase's Financial Advisors...............................106
INTERESTS OF CERTAIN PERSONS IN THE MERGER...................................117
THE MERGER AGREEMENT.........................................................118
General.................................................................118
Closing Matters.........................................................118
Consideration to be Received in the Merger; Treatment of
Stock Options...........................................................119
Exchange of Certificates in the Merger..................................119
(iv)
Fractional Shares...................................................... 120
Listing of SPSS Stock.................................................. 120
Board of Directors; Executive Officers; Company Headquarters........... 120
Covenants.............................................................. 121
Other Covenants and Agreements......................................... 124
Representations and Warranties......................................... 125
Conditions............................................................. 126
Termination of Merger Agreement........................................ 127
Amendments, Extensions and Waivers..................................... 129
BOARD OF DIRECTORS AND MANAGEMENT OF SPSS FOLLOWING THE MERGER.............. 130
Officers and Directors................................................. 130
Executive Compensation................................................. 133
Compensation Committee................................................. 138
Performance Graph...................................................... 140
(v)
[Enlarge/Download Table]
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF SPSS.............................142
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF SHOWCASE.........................144
BENEFICIAL OWNERSHIP OF SPSS COMMON STOCK BY SHOWCASE OFFICERS AND DIRECTORS.......................145
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................................................145
INFORMATION ABOUT THE MEETINGS AND VOTING..........................................................147
Matters Relating to the Meetings..............................................................147
Proxies.......................................................................................149
How to Vote by Proxy..........................................................................149
Proxies for Participants in the SPSS Inc. Employee Stock Purchase Plan........................149
Other Business; Adjournments..................................................................151
Electronic Access to SPSS Proxy Materials.....................................................151
CERTAIN LEGAL INFORMATION..........................................................................152
Comparison of SPSS/ShowCase Shareholder Rights................................................152
Summary of Material Differences Between Current Rights of ShowCase
Shareholders and Rights Those Shareholders will have as SPSS
Stockholders Following the Merger........................................................152
Comparison of Rights of Stockholders..........................................................153
(vi)
Voting Rights.........................................................153
Removal of Directors..................................................154
Cumulative Voting for Directors.......................................154
Filling Board Vacancies...............................................154
Stockholder Power to Call Special Stockholders' Meeting...............155
Actions by Written Consent of Stockholders............................155
Anti-Takeover Statute.................................................155
Loans to Officers, Directors and Employees............................156
Class Vote for Certain Reorganizations................................157
Appraisal Rights......................................................157
Inspection of Stockholder Lists.......................................158
Dividends.............................................................158
Differences Regarding Amendment of Charters or Bylaws.................158
Number of Directors...................................................159
Classified Board of Directors.........................................159
Indemnification and Personal Liability of Directors
and Officers..........................................................159
Description of SPSS Capital Stock.....................................161
Stock Exchange Listing; Delisting and Deregistration
of ShowCase Common Stock.........................................162
Additional Matters for Consideration by only SPSS Stockholders.............162
Proposal 3 -- Approval of 2000 Equity Incentive Plan..................163
Proposal 4 -- Approval of 2000 Qualified and Nonqualified Employee
Stock Purchase Plans....................................167
LEGAL MATTERS..............................................................170
(vii)
EXPERTS....................................................................170
Additional Information for Stockholders....................................171
Future Stockholder Proposals......................................171
Where You Can Find More Information...............................171
INDEX TO SHOWCASE FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA...............F-i
ANNEXES
A -- Agreement and Plan of Merger.......................................A-1
B -- Opinion of Robert W. Baird & Co....................................B-1
C -- Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated......C-1
D -- Opinion of Craig-Hallum Capital Group, Inc.........................D-1
E -- Sections 302A.471 and 302A.473 of the Minnesota Business
Corporation Act....................................................E-1
viii
THE MERGER
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY ARE THE TWO COMPANIES PROPOSING TO MERGE?
A: The boards of directors of SPSS and ShowCase believe that this merger will
create a stronger, more competitive company capable of achieving greater
financial strength, market share, operating efficiencies, technology
development, earning power and growth potential than either company would have
on its own.
Q: WHAT WILL BE THE STRENGTHS OF THE COMBINED COMPANY?
A: We expect the strengths of the combined company to be:
- A larger field sales force capable of selling the company's
analytical solutions and products;
- A larger professional services organization capable of
implementing the company's analytical solutions;
- Complementary technologies that extend the capabilities
provided in the company's analytical solutions and products;
- Additional senior management essential to executing the
company's strategies; and
- A stronger balance sheet, particularly with the addition of
cash to give the company greater operating flexibility and
more options to expand by acquisition.
Q: WHAT WILL BE THE NAME OF THE COMBINED COMPANY?
A: The combined company will be named SPSS Inc. Following the merger, Showcase
will be a wholly-owned subsidiary of SPSS.
Q: WILL THE SHOWCASE NAME BE ELIMINATED?
A: Although SPSS has no plan at this time to eliminate the ShowCase name, the
name may be eliminated in the future.
Q: WHAT WILL SHOWCASE SHAREHOLDERS RECEIVE FOR THEIR SHOWCASE SHARES?
A: ShowCase shareholders will receive 0.333 shares of SPSS common stock for each
share of ShowCase common stock. SPSS will not issue fractional shares in the
merger. As a result, the total number of shares of SPSS common stock that each
ShowCase shareholder will receive in the merger will be rounded down to the
nearest whole number, and each ShowCase shareholder
1
will receive a cash payment for the value of the remaining fraction of a share
of SPSS common stock that he or she would otherwise receive, if any.
Example: If you currently own 100 shares of ShowCase common stock, then
after the merger you will be entitled to receive 33 shares of SPSS common stock
and a check for the market value of one-third of a share of SPSS common stock at
the close of business on the date the merger becomes effective.
Q: WILL SPSS STOCKHOLDERS RECEIVE ANY SHARES AS A RESULT OF THE MERGER?
A: No. SPSS stockholders will continue to hold the SPSS shares they currently
own.
Q: WHO WILL MANAGE THE COMBINED COMPANY?
A: Subsequent to the merger, William Binch, Promod Haque and Kenneth Holec will
be named as directors of SPSS, bringing the total number of directors on the
SPSS Board of Directors to eight. No other changes will be made to the
management of the combined company.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working to complete the merger by February 28, 2001. However, it is
possible that factors outside the control of the parties could require us to
complete the merger at a later time.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO SHAREHOLDERS?
A: ShowCase shareholders who exchange their shares of ShowCase common stock for
shares of SPSS common stock pursuant to the merger will not recognize any gain
or loss on the exchange for United States federal income tax purposes, except
with respect to the cash, if any, received in lieu of fractional shares of SPSS
common stock. The merger will not have any tax consequences for SPSS
stockholders. To review the tax consequences to shareholders in greater detail,
see "Material Federal Income Tax Consequences of the Merger."
Q: WHAT WILL SHOWCASE SHAREHOLDERS' TAX BASIS BE IN THE SPSS COMMON STOCK
THEY RECEIVE IN THE MERGER?
A: Each ShowCase shareholder's tax basis in his or her shares of SPSS common
stock received in the merger will equal the shareholder's current tax basis in
his or her ShowCase common stock reduced by the amount of basis allocable to
fractional shares for which the shareholder receives a cash payment, if any.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY PROXY CARD?
A: Yes. You can change your vote at any time before your proxy is voted at your
company's shareholder meeting. You can do this in one of three ways:
- timely delivery of a valid, later-dated proxy;
2
- written notice to your company's Secretary before the meeting
that you have revoked your proxy; or
- voting by ballot at either the SPSS special meeting or the
ShowCase special meeting.
If you have instructed a broker to vote your shares, you must follow
directions from your broker to change those instructions.
Q: WHAT HAPPENS IF I DO NOT RETURN A PROXY CARD?
A: The failure to return your proxy card will have the same effect as voting
against the merger.
Q: WHEN AND WHERE ARE THE STOCKHOLDER MEETINGS?
A: The SPSS stockholder special meeting will take place on _________ __, 2001 at
the headquarters of SPSS, 233 South Wacker Drive, Chicago, Illinois 60606 at
[10:00 A.M.] The ShowCase special meeting will take place on ________ __, 2001
at ______________________.
Q: WHAT DO I NEED TO DO NOW?
A: After you carefully read this document, mail your signed proxy card in the
enclosed return envelope as soon as possible, so that your shares may be
represented at your meeting. In order to assure that your vote is obtained,
please vote your proxy as instructed on your proxy card even if you currently
plan to attend your meeting in person.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER
VOTE MY SHARES FOR ME?
A: No. If you do not provide your broker with instructions on how to vote your
"street name" shares, your broker will not be permitted to vote them on any of
the proposals submitted to the SPSS or ShowCase shareholders. If you do not give
voting instructions to your broker, you will, in effect, be voting against the
merger. You should therefore be sure to provide your broker with instructions on
how to vote your shares. Please check the voting form used by your broker to see
if it offers telephone or Internet voting.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, we will send ShowCase shareholders written
instructions for exchanging their stock certificates. SPSS stockholders will
keep their existing stock certificates.
Q: AM I ENTITLED TO DISSENTERS' RIGHTS?
A: SPSS stockholders are not entitled to any dissenters' rights in connection
with the merger under Delaware law. However, ShowCase shareholders are entitled
to dissenters' rights if they
3
comply with certain legal procedures and requirements, as outlined on pages
_____ and _____ of this joint proxy statement/prospectus.
Q: WHO DO I CALL IF I HAVE QUESTIONS ABOUT THE MEETINGS OR THE MERGER?
A: SPSS stockholders may call toll-free (800) 525-4980.
ShowCase shareholders may call toll-free (800) 829-3555.
4
SUMMARY
This summary highlights selected information from this joint proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger fully and for a more complete
description of the legal terms of the merger agreement, you should carefully
read this entire document and the documents to which we refer you. See "Where
You Can Find More Information."
THE COMPANIES
SPSS Inc.
233 South Wacker Drive
Chicago, Illinois 60606
(312) 651-3000
Internet address: www.spss.com
SPSS is a multinational company that provides software and professional
services for discovering what customers want and predicting what they will do.
SPSS software and services, individually and in combination, are primarily used
by commercial organizations to integrate and analyze data in the process of
formulating strategies and programs to create more profitable customer
relationships. This process is commonly called "data mining" or "data analysis
using advanced analytical techniques."
Headquartered in Chicago, SPSS has offices worldwide, over 1,000
employees and had revenues of approximately $140 million in 1999.
ShowCase Corporation
4115 Highway 52 North, Suite 300
Rochester, Minnesota 55901
(507) 288-5922
Internet address: www.showcasecorp.com
ShowCase is the leading provider of fully integrated, end-to-end,
business intelligence solutions for IBM AS/400 customers. ShowCase's STRATEGY
product suite and related services are designed to enable organizations to
rapidly implement business intelligence solutions that create increased value
from their operational and customer data. The sophisticated data warehousing and
management capabilities of ShowCase's product suite provide clients with highly
scalable and tightly integrated solutions. ShowCase's products enable
enterprise-wide distribution of information and allow end-user access and
analysis through familiar applications and Internet browsers. ShowCase has nine
years of experience delivering business intelligence solutions to their clients.
The ShowCase STRATEGY product suite, introduced in 1996, supports ad hoc
information access, enterprise reporting and analytics.
5
ShowCase is headquartered in Rochester, Minnesota, and has 12
offices, approximately 300 employees and had revenues of approximately
$39.5 million in the fiscal year ended March 31, 2000.
RECOMMENDATIONS TO STOCKHOLDERS
TO SPSS STOCKHOLDERS:
SPSS's board of directors believes the merger is advisable, fair to you
and in your best interests and recommends that you vote FOR the approval and
adoption of the Agreement and Plan of Merger and FOR the issuance of shares of
SPSS common stock in connection with the merger.
TO SHOWCASE SHAREHOLDERS:
ShowCase's board of directors believes the merger is advisable, fair to
you and in your best interests and unanimously recommends that you vote FOR the
proposal to approve and adopt the merger agreement and the merger.
STOCKHOLDER VOTES REQUIRED
FOR SPSS STOCKHOLDERS:
Approval of the Agreement and Plan Merger and share issuance proposal
requires the affirmative vote of at least a majority of the votes cast by the
holders of SPSS common stock. The directors, executive officers and affiliates
of SPSS currently hold ____% of the outstanding shares of SPSS common stock, as
of the record date of the SPSS meeting.
FOR SHOWCASE SHAREHOLDERS:
Approval of the Agreement and Plan Merger requires the affirmative vote
of at least a majority of the outstanding shares of ShowCase common stock. The
directors, executive officers and affiliates of ShowCase hold __% of the
outstanding shares of ShowCase common stock, as of the record date of the
ShowCase meeting.
THE MERGER
Under the terms of the proposed merger, a wholly-owned subsidiary of
SPSS, formed for the purpose of the merger, will merge with and into ShowCase.
As a result, ShowCase will become a wholly-owned subsidiary of SPSS.
The merger agreement is attached as Annex A to this joint proxy
statement/prospectus and is hereby incorporated by reference. We encourage you
to read the merger agreement carefully and fully as it is the legal document
that governs the merger. For a summary of the merger agreement, see "The Merger
Agreement."
6
WHAT SHOWCASE SHAREHOLDERS WILL RECEIVE
As a result of the merger, ShowCase shareholders will be entitled to
receive 0.333 shares of SPSS common stock for each share of ShowCase common
stock held by them. SPSS will not issue any fractional shares in the merger. As
a result, the total number of shares of SPSS common stock that each ShowCase
shareholder will receive in the merger will be rounded down to the nearest whole
number, and each ShowCase shareholder will receive a cash payment for the
remaining fraction of a share of SPSS common stock that he or she would
otherwise receive, if any. See "The Merger Agreement -- Exchange of Certificates
in the Merger."
OWNERSHIP OF SPSS AFTER THE MERGER
SPSS may issue up to 3,725,000 shares of SPSS common stock to
ShowCase shareholders in the merger. The shares of SPSS common stock to be
issued to ShowCase shareholders in the merger will represent approximately 25%
of the outstanding SPSS common stock after the merger. This information is based
on the number of SPSS and ShowCase shares outstanding on November 6, 2000, on a
fully diluted basis.
CONDITIONS TO THE COMPLETION OF THE MERGER
The completion of the merger depends upon the satisfaction or waiver of
a number of conditions, including the following:
- approval and adoption of the merger agreement and the merger
by the ShowCase shareholders and approval of the merger
agreement and the share issuance by the SPSS stockholders;
- expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, and
receipt of other material regulatory approvals;
- absence of any law or court order or litigation prohibiting
the merger or which would have a material adverse effect on
the combined company;
- receipt of opinions of counsel to SPSS and ShowCase that the
merger will qualify as a tax-free reorganization;
- material accuracy, as of closing, of the representations and
warranties made by each party;
- declaration by the SEC of the effectiveness of this joint
proxy statement/prospectus;
- receipt by ShowCase of waivers or consents to the transactions
contemplated by the merger agreement, to the extent ShowCase
is a party to any agreement pursuant to which the transactions
contemplated by the merger agreement would or might result in
the termination or modification of such agreement;
7
- receipt of a letter from the independent public accountants of
SPSS, dated the effective date of the merger that accounting
for the merger as a pooling of interests is appropriate;
- the shares of SPSS common stock to be issued in the merger
shall have been approved for listing on Nasdaq, subject to
official notice of issuance;
- no event or circumstance having occurred relating to any
governmental review or inquiry concerning any products or
business practices which is likely to have a material adverse
effect on ShowCase; and
- no event or circumstance having occurred relating to the
business, financial condition, prospects, assets or operations
of ShowCase or SPSS which is likely to have a material adverse
effect on ShowCase or SPSS, other than events or circumstances
resulting from the announcement of the merger, the general
economic environment and matters affecting the general
software industry.
TERMINATION OF MERGER AGREEMENT
SPSS and ShowCase can mutually agree to terminate the merger agreement
without completing the merger, and either party can terminate the merger
agreement if any of the following occurs:
- the merger has not been completed by February 28, 2001;
- a governmental authority or a court order permanently
prohibits the completion of the merger or refuses to grant any
material regulatory approval; or
- either SPSS's or ShowCase's stockholders do not give the
required approvals necessary to complete the merger.
SPSS may terminate the merger agreement if any of the following occurs:
- ShowCase's board of directors either fails to recommend the
merger to its shareholders, changes its recommendation, or
fails to call the ShowCase special meeting to vote on the
merger; or
- ShowCase breaches any of its representations, warranties or
covenants contained in the merger agreement, resulting in its
failure to satisfy one of the closing conditions to the
merger, and, if curable, that breach remains uncured for 30
days after written notice.
ShowCase may terminate the merger agreement if any of the following
occurs:
- SPSS's board of directors either fails to recommend to its
stockholders the approval and adoption of the Agreement and
Plan of Merger and the issuance of shares of SPSS common stock
in connection with the merger, changes its recommendation, or
fails to call the SPSS stockholders' meeting to vote on the
approval and adoption of the Agreement and Plan of Merger and
the issuance of shares of SPSS common stock in connection with
the merger;
8
- ShowCase's board of directors authorizes ShowCase to accept a
superior proposal, which SPSS was given an opportunity to
match; or
- SPSS breaches any of its representations, warranties or
covenants contained in the merger agreement, resulting in its
failure to satisfy one of the closing conditions to the
merger, and, if curable, that breach remains uncured for 30
days after written notice.
TERMINATION FEE PAYABLE BY SHOWCASE
ShowCase has agreed to pay SPSS a termination fee of $3.5 million in
the event ShowCase enters into any agreement with another person or entity
relating to the acquisition of ShowCase, its stock, assets or business, in whole
or in part, whether through direct purchase, merger, consolidation or other
business combination (other than sales of inventory in the ordinary course of
business).
BOARD OF DIRECTORS OF SPSS AFTER THE MERGER
SPSS's board of directors will consist of eight members, three of whom
now serve on the ShowCase board of directors and five of whom now serve on
SPSS's board of directors. The audit and compensation committees of SPSS will
remain unchanged after the merger.
REGULATORY APPROVALS
Completion of the merger will not occur until receipt of certain
regulatory approvals required for the transaction. The Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, provides that certain materials
and information must be furnished to and reviewed by the Antitrust Division of
the Justice Department or the Federal Trade Commission. SPSS and ShowCase filed
the required notification and report forms with the Antitrust Division and the
Federal Trade Commission on December 1, 2000. See "The Proposed Merger -
Regulatory Matters Relating to the Merger."
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
A ShowCase shareholder's receipt of SPSS common stock in the merger
generally will be tax-free for United States federal income tax purposes, except
for taxes which may result from any receipt of cash instead of fractional shares
of SPSS common stock.
LISTING OF SPSS COMMON STOCK
The shares of SPSS common stock to be issued in the merger will be
listed on the Nasdaq National Market under the ticker symbol "SPSS."
APPRAISAL RIGHTS
The holders of SPSS common stock do not have any dissenters' appraisal
rights under Delaware law in connection with the merger. ShowCase shareholders
have the right to dissent from the merger and obtain payment in cash of the
fair value of their shares of common stock under applicable provisions of
Minnesota law. In order to perfect appraisal rights, shareholders must give
written demand for appraisal of their shares before the taking of the vote on
the merger at the special meeting and must not vote in favor of the merger. A
copy of the applicable Minnesota statutory provisions is included as Annex E
to this joint proxy statement/prospectus and a summary of these
provisions can be found under the heading "Dissenters' Appraisal Rights" later
in this document.
9
INTERESTS OF OFFICERS AND DIRECTORS IN THE MERGER
When ShowCase shareholders consider their board of director's
recommendation that they vote in favor of the approval and adoption of the
merger agreement and the merger, ShowCase shareholders should be aware that a
number of ShowCase officers and directors may have interests in the merger that
may be different from, or in addition to, their interests as ShowCase
shareholders. See "Interests of Certain Persons in the Merger."
ACCOUNTING TREATMENT OF THE MERGER
SPSS and ShowCase expect the merger to qualify as a pooling of
interests for accounting and financial reporting purposes. This means that SPSS
and ShowCase will be treated for accounting and financial reporting purposes as
if they had always been combined.
OPINION OF ROBERT W. BAIRD & CO.
On November 6, 2000, Robert W. Baird & Co. delivered its oral opinion
(subsequently confirmed in writing) to the SPSS Board of Directors to the effect
that, as of such date, the exchange ratio was fair, from a financial point of
view, to SPSS. A copy of this opinion, setting forth the assumptions made,
matters considered, scope and limitations of the review undertaken and the
general procedures followed by Baird in rendering such opinion, is attached
hereto as Annex B. Holders of SPSS Common Stock are urged to read this opinion
carefully and in its entirety. THIS OPINION WAS DIRECTED TO THE SPSS BOARD OF
DIRECTORS AND DOES NOT REPRESENT A RECOMMENDATION TO SPSS STOCKHOLDERS WITH
RESPECT TO ANY MATTER RELATING TO THE MERGER. THE OPINION SPEAKS ONLY AS OF
NOVEMBER 6, 2000, AND BAIRD IS UNDER NO OBLIGATION TO CONFIRM ITS OPINION AS OF
ANY LATER DATE.
OPINIONS OF FINANCIAL ADVISORS TO SHOWCASE
The ShowCase board of directors received written opinions from Merrill
Lynch, Pierce, Fenner & Smith Incorporated and Craig-Hallum Capital Group, Inc.
that, as of November 6, 2000, the exchange ratio was fair to ShowCase
shareholders from a financial point of view. The Merrill Lynch opinion is
attached as Annex C and the Craig-Hallum opinion is attached as Annex D. These
opinions each set forth assumptions made, matters considered and limitations on
the reviews undertaken in connection with the opinions. We encourage you to read
these opinions in their entirety. THESE OPINIONS ARE DIRECTED TO THE BOARD OF
DIRECTORS OF SHOWCASE AND ARE NOT RECOMMENDATIONS TO STOCKHOLDERS WITH RESPECT
TO ANY MATTER RELATING TO THE MERGER. THE OPINIONS SPEAK ONLY AS OF THEIR
RESPECTIVE DATES, AND THE FINANCIAL ADVISORS OF SHOWCASE ARE UNDER NO OBLIGATION
TO CONFIRM THEIR OPINIONS AS OF A LATER DATE. FURTHER, THE SHOWCASE BOARD OF
DIRECTORS MAY NOT NECESSARILY REQUEST THAT THEIR FINANCIAL ADVISORS CONFIRM
THEIR OPINIONS AS OF A LATER DATE.
10
SUMMARY SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following financial information is provided to assist you in your
analysis of the financial aspects of the merger. The SPSS information is derived
from the audited consolidated financial statements of SPSS as of and for each of
the years ended December 31, 1995 through 1999. The SPSS information for the
nine months ended September 30, 1999 and 2000 and as of September 30,2000 is
derived from the unaudited consolidated financial statements of SPSS. We derived
the ShowCase information from the audited consolidated financial statements of
ShowCase as of and for each of the years ended March 31, 1996 through 2000. The
ShowCase information for the six months ended September 30, 1999 and 2000 and as
of September 30, 2000 is derived from the unaudited consolidated financial
statements of ShowCase. The information is only a summary and should be read in
conjunction with the historical financial statements of ShowCase included
elsewhere in this joint proxy statement/prospectus and the historical financial
statements of SPSS and related notes contained in the annual reports and other
information that has been filed with the SEC. See "Where You Can Find More
Information" regarding where you can obtain copies of this other information.
SPSS SUMMARY SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
[Enlarge/Download Table]
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------- ---------------------
1995 1996 1997 1998 1999 1999 2000
---- ---- ---- ---- ---- ---- ----
Net revenues $87,792 $100,943 $111,106 $123,472 $141,930 $101,262 $114,529
Net income 3,227 6,830 2,744 8,578 15,502 10,320 12,626
Basic earnings per share 0.36 0.74 0.29 0.90 1.61 1.08 1.29
Diluted earnings per share 0.34 0.69 0.27 0.85 1.52 1.01 1.19
[Enlarge/Download Table]
AS OF DECEMBER 31, AS OF SEPTEMBER 30, 2000
------------------------------------------------- ------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
Total assets $53,234 $63,840 $65,189 $94,303 $106,715 $120,424
Long-term obligations 3,590 3,680 3,194 3,860 5,404 4,997
Stockholders' equity 20,647 29,051 32,321 44,317 61,542 72,903
SHOWCASE SUMMARY SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
[Enlarge/Download Table]
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
-------------------------------------------------- ----------------------
1996 1997 1998 1999 2000 1999 2000
---- ---- ---- ---- ---- ---- ----
Revenues $13,278 $18,027 $23,755 $35,519 $39,523 $19,011 $23,935
Net income (loss) 814 50 (3,234) (616) (4,094) (1,379) (200)
Basic earnings (loss) per 0.21 0.01 (0.82) (0.14) (0.46) (0.19) (0.02)
share
Diluted earnings (loss) per 0.13 0.01 (0.82) (0.14) (0.46) (0.19) (0.02)
share
[Enlarge/Download Table]
AS OF MARCH 31, AS OF SEPTEMBER 30, 2000
-------------------------------------------------- ------------------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
Total assets $6,666 $11,400 $16,315 $19,926 $42,787 $43,534
Long-term obligations 446 682 1,157 933 914 744
Stockholders' equity 2,519 2,602 3,105 2,272 23,359 23,565
11
SUMMARY UNAUDITED PRO FORMA CONDENSED SELECTED COMBINED FINANCIAL DATA
It is intended that the merger will be accounted for under the
pooling-of-interests method of accounting, which means that for financial
reporting purposes it will be treated as if the companies had always been
combined. For a more detailed description of pooling-of-interests accounting,
see "The Proposed Merger - Accounting Treatment."
The following unaudited pro forma combined selected financial
information has been derived from, and should be read in conjunction with, the
Unaudited Pro Forma Condensed Combining Financial Statements and related notes
included elsewhere in this joint proxy statement/prospectus.
Presented below is the unaudited pro forma condensed selected combined
financial data that reflects the pooling-of-interests method of accounting and
that is intended to provide you with a better picture of what our businesses
might have looked like had they always been combined. As a result of various
factors, including any synergies which may have resulted, you should not rely on
the unaudited pro forma selected combined financial information as being
indicative of the historical results that would have occurred or the results
that may be achieved after the merger.
[Enlarge/Download Table]
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------- -----------------------
1997 1998 1999 1999 2000
---- ---- ---- ---- ----
Net revenues $134,861 $158,991 $181,453 $130,530 $147,377
Net income (loss) (490) 7,962 11,408 9,159 9,385
Basic income (loss) per share (0.05) 0.73 0.91 0.78 0.71
Diluted earnings (loss) per (0.05) 0.69 0.87 0.74 0.66
share
[Download Table]
AS OF SEPTEMBER 30, 2000
------------------------
Total assets $161,090
Long-term obligations 5,741
Stockholders' equity 94,637
12
SUMMARY PRO FORMA COMBINED COMPARATIVE PER SHARE DATA
The following table sets forth selected historical per share
information of SPSS and ShowCase and combined per share information after giving
effect to the merger between SPSS and ShowCase, under the pooling-of-interests
method of accounting, assuming that 0.333 shares of SPSS common stock had been
issued in exchange for each outstanding share of ShowCase common stock. You
should read this information in conjunction with the selected historical
financial information, included elsewhere in this document, and the historical
financial statements of SPSS and ShowCase and related notes that are included in
or incorporated in this document by reference. The summary pro forma combined
comparative per share data is derived from, and should be read in conjunction
with, the unaudited pro forma condensed combining financial statements and
related notes included elsewhere in this document.
The book value per share of SPSS common stock is computed by dividing
stockholders' equity by the number of shares of SPSS common stock outstanding on
those dates. The book value per share of ShowCase common stock is computed by
dividing stockholders' equity by the number of shares of ShowCase common stock
outstanding on those dates. The per share amounts under the column "Pro Forma
Combined" reflect the merger. The per share amounts under the column "Equivalent
ShowCase Pro Forma Combined" are calculated by multiplying the pro forma
combined per share amount for each period by the exchange ratio of 0.333.
[Enlarge/Download Table]
Historical Historical Pro Forma Equivalent ShowCase
SPSS(1) ShowCase(2) Combined Pro Forma Combined
------- ----------- -------- ------------------
Net income (loss) per share - basic:
Fiscal years ended:
1997 $0.29 $(0.82) $(0.05) $(0.02)
1998 0.90 (0.14) 0.73 0.24
1999 1.61 (0.46) 0.91 0.30
Nine months ended September 30(3):
1999 1.08 (0.18) 0.78 0.26
2000 1.29 (0.13) 0.71 0.24
Net income (loss) per share - diluted:
Fiscal years ended:
1997 0.27 (0.82) (0.05) (0.02)
1998 0.85 (0.14) 0.69 0.23
1999 1.52 (0.46) 0.87 0.29
Nine months ended September 30(3):
1999 1.01 (0.18) 0.74 0.25
2000 1.19 (0.13) 0.66 0.22
Book value per share:
Fiscal year ended 1999 6.38 2.22 6.49 2.16
September 30, 2000 7.31 2.19 6.98 2.33
-----------------
1. The SPSS years ended 1997, 1998 and 1999 reflect SPSS' calendar years
ended December 31, 1997, 1998 and 1999, respectively.
2. The ShowCase years ended 1997, 1998 and 1999 reflect the ShowCase
fiscal years ended March 31, 1998, 1999 and 2000, respectively.
3. The nine months ended September 30, 1999 and 2000 reflect the calendar
nine month periods for SPSS and ShowCase.
13
UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL DATA
The following unaudited pro forma condensed combining financial data
are qualified in their entirety by reference to, and should be read in
conjunction with, the historical consolidated financial statements of SPSS and
ShowCase and notes thereto included or incorporated by reference in this joint
proxy statement/prospectus.
UNAUDITED PRO FORMA CONDENSED COMBINING BALANCE SHEET
September 30, 2000
(In thousands)
[Enlarge/Download Table]
SPSS Showcase
Historical Historical Pro Forma
September 30, September 30, Pro Forma September 30,
Assets 2000 2000 Adjustments 2000
--------- --------- ----------- ---------
Current assets:
Cash and cash equivalents $ 8,712 $ 13,289 $ -- $ 22,001
Marketable securities -- 14,716 -- 14,716
Accounts receivable, net of allowances 49,438 11,217 (1,000) (B1) 59,655
Other current assets 12,259 1,494 (868) (B2) 12,885
--------- --------- --------- ---------
Total current assets 70,409 40,716 (1,868) 109,257
--------- --------- --------- ---------
Property and equipment, net 22,212 1,792 -- 24,004
Capitalized software costs, net of accumulated
amortization 14,612 1,000 (1,000) (B3) 14,612
Goodwill, net of accumulated amortization 8,514 26 -- 8,540
Other assets 4,677 -- -- 4,677
--------- --------- --------- ---------
Total assets $ 120,424 $ 43,534 $ (2,868) $ 161,090
========= ========= ========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ 9,250 $ -- $ -- $ 9,250
Accounts payable 7,906 1,714 (1,000) (B4) 8,620
Accrued expenses 10,143 5,352 -- 15,495
Income taxes and value added taxes payable 4,302 -- -- 4,302
Deferred revenues 10,406 12,134 (37) (B5) 22,503
Other current liabilities 517 25 -- 542
--------- --------- --------- ---------
Total current liabilities 42,524 19,225 (1,037) 60,712
--------- --------- --------- ---------
Non-current liabilities 4,997 744 -- 5,741
--------- --------- --------- ---------
Total liabilities 47,521 19,969 (1,037) 66,453
--------- --------- --------- ---------
Stockholders' equity:
Common stock 100 108 (71) (B6) 137
Additional paid in capital 52,159 31,777 71 (B6) 84,007
Accumulated other comprehensive income (loss) (4,978) 126 -- (4,852)
Deferred compensation -- (368) -- (368)
Retained earnings (accumulated deficit) 25,622 (8,078) (1,831) 15,713
--------- --------- --------- ---------
Total stockholders' equity 72,903 23,565 (1,831) 94,637
--------- --------- --------- ---------
Total liabilities and stockholders' equity $ 120,424 $ 43,534 $ (2,868) $ 161,090
========= ========= ========= =========
See accompanying notes to unaudited pro forma condensed combining financial
statements.
14
UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
[Enlarge/Download Table]
SPSS SHOWCASE
HISTORICAL HISTORICAL PRO FORMA
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, MARCH 31, PRO FORMA DECEMBER 31,
1997 1998 ADJUSTMENTS 1997
--------------------------------------------------------
Net revenues $111,106 $23,755 $ -- $134,861
-------- ------- ------- --------
Operating expenses:
Cost of revenues 21,412 6,222 -- 27,634
Sales and marketing 42,926 15,494 -- 58,420
Product development 18,081 3,051 -- 21,132
General and administrative 12,283 2,590 -- 14,873
Special general and administrative charges 5,616 -- -- 5,616
Merger related 4,306 -- -- 4,306
Acquired in-process technology 421 -- -- 421
-------- ------- ------- --------
Total operating expenses 105,045 27,357 -- 132,402
-------- ------- ------- --------
Operating income (loss) 6,061 (3,602) -- 2,459
Other income (expense) (128) 543 -- 415
-------- ------- ------- --------
Income (loss) before
income taxes 5,933 (3,059) -- 2,874
Income tax expense 3,189 175 -- 3,364
-------- ------- ------- --------
Net income (loss) $ 2,744 $(3,234) $ -- $ (490)
======== ======= ======= ========
Basic and diluted net income (loss) per share:
Basic net income (loss) per share $ 0.29 $(0.82) $ (0.05)
======== ====== =======
Shares used in computing basic net
income (loss) per share 9,333 3,928 10,642
======== ====== =======
Diluted net income (loss) per share $ 0.27 $(0.82) $ (0.05)
======== ====== =======
Shares used in computing diluted net
income (loss) per share 10,172 3,928 10,642
======== ====== =======
See accompanying notes to unaudited pro forma condensed combining financial
statements.
15
UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
[Enlarge/Download Table]
SPSS SHOWCASE
HISTORICAL HISTORICAL PRO FORMA
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, MARCH 31, PRO FORMA DECEMBER 31,
1998 1999 ADJUSTMENTS 1998
------------------------------------------------------------
Net revenues $123,472 $35,519 $ -- $158,991
-------- ------- ------- --------
Operating expenses:
Cost of revenues 22,624 9,445 -- 32,069
Sales and marketing 47,837 19,050 -- 66,887
Product development 20,862 4,371 -- 25,233
General and administrative 9,427 3,212 -- 12,639
Special general and administrative charges 445 -- -- 445
Merger related 1,948 -- -- 1,948
Acquired in-process technology 3,552 -- -- 3,552
-------- ------- ------- --------
Total operating expenses 106,695 36,078 -- 142,773
-------- ------- ------- --------
Operating income (loss) 16,777 (559) -- 16,218
Other income 205 143 -- 348
-------- ------- ------- --------
Income (loss) before income
taxes 16,982 (416) -- 16,566
Income tax expense 8,404 200 -- 8,604
-------- ------- ------- --------
Net income (loss) $ 8,578 $ (616) $ -- $ 7,962
======== ======= ======= ========
Basic and diluted net income (loss) per share:
Basic net income (loss) per share $ 0.90 $ (0.14) $ 0.73
======== ======= ========
Shares used in computing basic net
income (loss) per share 9,515 4,384 10,976
======== ======= ========
Diluted net income (loss) per share $ 0.85 $ (0.14) $ 0.69
======== ======= ========
Shares used in computing diluted net
income (loss) per share 10,104 4,384 11,565
======== ====== =======
See accompanying notes to unaudited pro forma condensed combining financial
statements.
16
UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
[Enlarge/Download Table]
SPSS SHOWCASE
HISTORICAL HISTORICAL PRO FORMA
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, MARCH 31, PRO FORMA DECEMBER 31,
1999 2000 ADJUSTMENTS 1999
------------------------------------------------------------
Net revenues $ 141,930 $39,523 $ -- $181,453
--------- ------- ------- --------
Operating expenses:
Cost of revenues 26,268 12,139 -- 38,407
Sales and marketing 54,672 22,245 -- 76,917
Product development 24,983 5,482 -- 30,465
General and administrative 9,773 4,466 -- 14,239
Merger related 1,611 -- -- 1,611
Acquired in-process technology 128 -- -- 128
--------- ------- ------- --------
Total operating expenses 117,435 44,332 -- 161,767
--------- ------- ------- --------
Operating income (loss) 24,495 (4,809) -- 19,686
Other income (expense) (372) 1,415 -- 1,043
--------- ------- ------- --------
Income (loss) before
income taxes 24,123 (3,394) -- 20,729
Income tax expense 8,621 700 -- 9,321
--------- ------- ------- --------
Net income (loss) $ 15,502 $(4,094) $ -- $ 11,408
========= ======= ======= ========
Basic and diluted net income (loss) per share:
Basic net income (loss) per share $ 1.61 $ (0.46) $ 0.91
========= ======= ========
Shares used in computing basic net
income (loss) per share 9,601 8,884 12,562
========= ======= ========
Diluted net income (loss) per share $ 1.52 $ (0.46) $ 0.87
========= ======= ========
Shares used in computing diluted net
income (loss) per share 10,192 8,884 13,153
========= ======= ========
See accompanying notes to unaudited pro forma condensed combining financial
statements.
17
UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
[Enlarge/Download Table]
SPSS SHOWCASE
HISTORICAL HISTORICAL PRO FORMA
NINE MONTHS ENDED NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, PRO FORMA SEPTEMBER 30,
1999 1999 ADJUSTMENTS 1999
----------------------------------------------------------------------
Net revenues $101,262 $29,268 $ -- $130,530
-------- ------- ------ --------
Operating expenses:
Cost of revenues 19,303 8,284 -- 27,587
Sales and marketing 39,129 15,835 -- 54,964
Product development 18,505 3,545 -- 22,050
General and administrative 8,007 2,950 -- 10,957
-------- ------- ------ --------
Total operating expenses 84,944 30,614 -- 115,558
-------- ------- ------ --------
Operating income 16,318 (1,346) -- 14,972
Other income (expense) (263) 550 -- 287
-------- ------- ------ --------
Income (loss) before
income taxes 16,055 (796) -- 15,259
Income tax expense 5,735 365 -- 6,100
-------- ------- ------ --------
Net income (loss) $ 10,320 $(1,161) $ -- $ 9,159
======== ======= ====== ========
Basic and diluted net income (loss) per share:
Basic net income (loss) per share $ 1.08 $ (0.18) $ 0.78
======== ======= ========
Shares used in computing basic net
income (loss) per share 9,594 6,406 11,729
======== ======= ========
Diluted net income (loss) per share $ 1.01 $ (0.18) $ 0.74
======== ======= ========
Shares used in computing diluted net
income (loss) per share 10,176 6,406 12,311
======== ======= ========
See accompanying notes to unaudited pro forma condensed combining financial
statements.
18
UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
[Enlarge/Download Table]
SPSS SHOWCASE
HISTORICAL HISTORICAL PRO FORMA
NINE MONTHS ENDED NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, PRO FORMA SEPTEMBER 30,
2000 2000 ADJUSTMENTS 2000
------------------------------------------------------------------------
Net revenues $114,529 $34,800 $(1,952)(B7) $147,377
-------- ------- ------- --------
Operating expenses:
Cost of revenues 22,081 10,447 (121)(B8) 32,407
Sales and marketing 46,014 18,216 -- 64,230
Product development 19,552 4,766 -- 24,318
General and administrative 6,656 3,693 -- 10,349
-------- ------- ------- --------
Total operating expenses 94,303 37,122 (121) 131,304
-------- ------- ------- --------
Operating income (loss) 20,226 (2,322) (1,831) 16,073
Other income 139 1,412 -- 1,551
-------- ------- ------- --------
Income (loss) before
income taxes 20,365 (910) (1,831) 17,624
Income tax expense 7,739 500 -- 8,239
-------- ------- ------- --------
Net income (loss) $ 12,626 $(1,410) $(1,831) $ 9,385
======== ======= ======= ========
Basic and diluted net income (loss) per share:
Basic net income (loss) per share $ 1.29 $(0.13) $ 0.71
======== ====== =======
Shares used in computing basic net
income (loss) per share 9,761 10,607 13,297
======== ====== =======
Diluted net income (loss) per share $ 1.19 $(0.13) $ 0.66
======== ====== =======
Shares used in computing diluted net
income (loss) per share 10,593 10,607 14,129
======== ====== =======
See accompanying notes to unaudited pro forma condensed combining financial
statements.
19
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS
NOTE A - DESCRIPTION OF AGREEMENT
On November 6, 2000, SPSS Inc. (SPSS) and ShowCase Corporation
(ShowCase) entered into an agreement, pursuant to which SPSS has agreed to
acquire ShowCase, a leading provider of fully integrated end-to-end business
intelligence solutions. Under the terms of the agreement, ShowCase will become a
wholly-owned subsidiary of SPSS.
SPSS has agreed to exchange approximately 3,725,000 shares of SPSS
common stock for all of the outstanding ShowCase common shares, at a rate of one
share of SPSS common stock for every three ShowCase common shares on a fully
diluted basis. In addition, SPSS has agreed to exchange outstanding options to
purchase ShowCase common stock for options to purchase approximately 600,000
shares of SPSS common stock. The agreement, which is expected to be consummated
in the first quarter of 2001, is subject to approval of the SPSS and ShowCase
shareholders and customary legal and regulatory conditions. The transaction is
expected to be accounted for as a pooling of interests and is reflected as such
in the accompanying unaudited pro forma condensed combining financial data.
The unaudited pro forma combined financial data are not necessarily
indicative of the operating results that would have been achieved had the
transaction been in effect as of the beginning of the periods presented and
should not be construed as representative of future operations. The consolidated
statements of operations for the nine months ended September 30, 1999 and 2000
include the impact of ShowCase's operating results for the quarters ended March
31, 1999 and 2000, respectively, which are also included in the pro forma
statements of operations for the years ended December 31, 1998 and 1999,
respectively, due to differences in reporting periods relative to SPSS. The
revenues and net income (loss) of ShowCase included in the pro forma statements
of operations for both the years ended December 31, 1998 and 1999 and the nine
months ended September 30, 1999 and 2000 are as follows:
[Enlarge/Download Table]
Periods ended December 31, 1998 and Periods ended December 31, 1999 and
September 30, 1999 September 30, 2000
---------------------------------------------------------------------------------------
(in thousands)
Revenues $10,257 $10,865
Net income (loss) 218 (1,210)
SPSS and ShowCase estimate that they will incur expenses related to the
merger of approximately $6 million, consisting primarily of transaction costs
for financial advisory fees, attorneys, accountants, financial printing and
other one-time charges related to the transaction.
20
These nonrecurring expenses will be charged to operations in the quarter in
which the merger is consummated. Such charges have not been reflected in the pro
forma financial statements.
The following table summarizes the assumed average shares outstanding
used in computing pro forma basic and diluted net income (loss) per share, using
the exchange ratio of 0.333 for the years ended December 31, 1997, 1998 and 1999
and for the nine months ended September 30, 1999 and 2000.
[Enlarge/Download Table]
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30
------------------------- ---------------
1997 1998 1999 1999 2000
--------------------------- ----------------
(In thousands)
SPSS average shares outstanding, basic 9,333 9,515 9,601 9,594 9,761
ShowCase assumed average shares outstanding, basic (1) 1,309 1,461 2,961 2,135 3,536
----- ----- ----- ----- -----
Pro forma average shares outstanding, basic 10,642 10,976 12,562 11,729 13,297
====== ====== ====== ====== ======
(1) ShowCase assumed average shares outstanding for the years ended
December 31, 1997, 1998 and 1999 represent ShowCase's fiscal years
ended March 31, 1998, 1999 and 2000, respectively.
[Enlarge/Download Table]
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30
--------------------------- ---------------
1997(2) 1998 1999 1999 2000
------- ---- ---- ---- ----
(In thousands)
SPSS average shares outstanding, diluted 9,333 10,104 10,192 10,176 10,593
ShowCase assumed average shares outstanding, 1,309 1,461 2,961 2,135 3,536
diluted (1) ------ ------ ------ ------ ------
Pro forma average shares outstanding, diluted 10,642 11,565 13,153 12,311 14,129
====== ====== ====== ====== ======
(1) ShowCase assumed average shares outstanding for the years ended
December 31, 1997, 1998 and 1999 represent ShowCase's fiscal years
ended March 31, 1998, 1999 and 2000, respectively.
(2) SPSS average shares outstanding represent the same number as basic
since the pro forma combined results reflect a net loss.
21
NOTE B - PRO FORMA ADJUSTMENTS
During the nine months ended September 30, 2000, SPSS entered into
software license agreements, whereby certain software was licensed to ShowCase.
During the same period, ShowCase entered into an agreement with SPSS to license
certain software to SPSS. The effects of these intercompany transactions have
been eliminated in the pro forma condensed combining balance sheet and the pro
forma condensed combining statements of operations in order to reflect pro forma
financial statements as if SPSS and ShowCase had been combined for all periods
presented. These adjustments are presented under the columns headed "Pro Forma
Adjustments."
(1) Accounts receivable
Adjustment to eliminate SPSS's receivable balance related to the
license of software to ShowCase.
(2) Other current assets
Adjustment to eliminate SPSS's inventory related to software purchased
from ShowCase and to eliminate ShowCase assets related to software
licensed from SPSS.
(3) Capitalized software costs
Adjustment to eliminate ShowCase's capitalized software related to the
license from SPSS.
(4) Accounts payable
Adjustment to eliminate accounts payable from ShowCase to SPSS related
to the license of software from SPSS.
(5) Deferred revenues
Adjustment to eliminate deferred revenues of ShowCase relating to the
license of software to SPSS.
(6) Common stock and additional paid-in capital
The pro forma adjustments between common stock and APIC reflects the
exchange of ShowCase common stock for SPSS common stock and the
resultant reclassification to reflect pro forma common stock at the par
value of SPSS common stock issued and outstanding had the merger been
consummated as of September 30, 2000.
(7) Net revenues
Adjustment to eliminate revenues recognized related to the licensing
transactions described above.
(8) Cost of revenues
Adjustment to eliminate cost of revenues related to the licensing
transactions described above.
NOTE C - RECLASSIFICATIONS
Certain ShowCase historical amounts have been reclassified to conform
to SPSS's historical presentation for purposes of the pro forma financial
statements.
22
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
SPSS common stock and ShowCase common stock are each listed on the
Nasdaq National Market. SPSS's and ShowCase's ticker symbols are "SPSS" and
"SHWC," respectively. As of __________ __, 2001, the most recent practicable
date prior to the mailing of this joint proxy statement/prospectus, shares of
SPSS common stock were held of record by _______ stockholders and shares of
ShowCase common stock were held of record by _______ shareholders.
The following table shows, for the calendar quarters indicated, based
on published financial sources: the high and low sale prices of shares of SPSS
and ShowCase common stock as reported on the Nasdaq National Market.
ShowCase common stock commenced trading on June 30, 1999 at the time of
its initial public offering.
[Download Table]
SPSS COMMON STOCK SHOWCASE COMMON STOCK
----------------- ---------------------
1997 HIGH LOW HIGH LOW
First Quarter 32 7/8 24 3/8 -- --
Second Quarter 32 3/4 24 5/8 -- --
Third Quarter 34 1/4 27 1/4 -- --
Fourth Quarter 28 5/8 17 1/2 -- --
1998
First Quarter 24 19 1/2 -- --
Second Quarter 25 1/8 18 1/2 -- --
Third Quarter 26 3/8 18 -- --
Fourth Quarter 22 11/16 17 -- --
1999
First Quarter 22 16 3/8 -- --
Second Quarter 25 11/16 16 3/8 9 5/8 8
Third Quarter 26 5/8 18 14 3/8 7 1/4
Fourth Quarter 25 3/4 16 5/16 10 2 15/16
2000
First Quarter 33 3/4 23 1/2 11 1/4 5 3/4
Second Quarter 32 1/2 22 10 3 7/8
Third Quarter 31 1/2 23 1/4 7 7/8 5 3/16
Fourth Quarter [--] [--] [--] [--]
2001
First Quarter
(through
_______ __, 2001) [--] [--] [--] [--]
On November 6, 2000, the last full trading day before SPSS publicly
announced the execution of the merger agreement with ShowCase, the per share
closing price of SPSS common stock was $25.00 and the per share closing price of
ShowCase common stock was $5.5625. On __________ ___, 2001, the most recent
practicable date prior to the mailing of this joint proxy statement/prospectus,
the per share closing price of the SPSS common stock was $_____ and the per
share closing price of the ShowCase common stock was $_____. Stockholders are
urged to obtain current market quotations prior to making any decision with
respect to the merger.
Neither SPSS nor ShowCase has ever declared a dividend, nor does either
company plan to declare a dividend prior to the merger. The dividend policy of
the combined company will be determined by its board of directors following the
merger. However, SPSS does not anticipate paying any dividends on SPSS common
stock in the foreseeable future because SPSS expects to retain future earnings
for use in the operation and expansion of its business.
23
A CAUTION ABOUT FORWARD-LOOKING STATEMENTS
SPSS and ShowCase have made forward-looking statements in this
document, and in documents that are incorporated by reference in this document,
that are subject to risks and uncertainties. These statements are based on the
beliefs and assumptions of each company's management. Generally, forward-looking
statements include information concerning possible or assumed future actions,
events or results of operations of SPSS, ShowCase and the combined company.
Forward-looking statements include the information in this document,
specifically, regarding:
- projections
- efficiencies/cost avoidance
- cost savings
- revenue synergies
- income and margins
- earnings per share
- growth
- economies of scale
- combined operations
- the economy
- future economic performance
- conditions to, and the timetable for, completing the merger
- future acquisitions
- management's plans
- business portfolios
- merger and integration-related expenses
- product launches
These statements may be preceded by, followed by or include the words
"believes," "expects," "anticipates," "intends," "plans," "estimates" or similar
expressions.
We claim the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995 for
all forward-looking statements.
FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF PERFORMANCE. YOU
SHOULD UNDERSTAND THAT THE FACTORS DISCUSSED IN "RISK FACTORS" BELOW COULD
AFFECT THE FUTURE RESULTS OF SPSS AND SHOWCASE, AND OF THE COMBINED COMPANY
AFTER THE COMPLETION OF THE MERGER, AND COULD CAUSE THOSE RESULTS OR OTHER
OUTCOMES TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED IN OUR
FORWARD-LOOKING STATEMENTS. ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY
KNOWN TO SPSS OR SHOWCASE, OR THAT SPSS AND SHOWCASE DO NOT CURRENTLY DEEM
MATERIAL, MAY ALSO AFFECT THE BUSINESS, FINANCIAL CONDITION AND OPERATING
RESULTS OF THE COMBINED COMPANY.
24
RISK FACTORS
RISK FACTORS RELATING TO THE MERGER AND THE COMBINED COMPANY
25
THE VALUE OF SPSS SHARES RECEIVED WILL FLUCTUATE.
The number of shares of SPSS common stock issued in the merger for each
share of ShowCase common stock is fixed. However, the market prices of SPSS
common stock and ShowCase common stock when the merger is completed may vary
from their market prices at the date of this document and at the date of the
stockholder meetings of SPSS and ShowCase. For example, during the 12 month
period ended on November 20, 2000, the most recent practical date prior to the
mailing of this joint proxy statement/prospectus, SPSS common stock traded
within a range from a low of $18.75 to a high of $34.875 and ended that period
at $19.50, and ShowCase common stock traded within a range from a low of $3.875
to a high of $11.25 and ended that period at $6.0625. See "Comparative Per Share
Market Price and Dividend Information" for more detailed share price
information.
At the time of their respective stockholder meetings, SPSS and ShowCase
stockholders will not know the exact value of the SPSS common stock that will be
issued in connection with the merger. The number of shares that ShowCase
stockholders will receive in the merger will not change, even if the market
price of SPSS common stock changes.
Recently, the stock market and, in particular, the securities of
technology companies have experienced extreme price and volume fluctuations.
These market fluctuations may adversely affect the market price of SPSS common
stock. The market price of SPSS common stock upon and after completion of the
merger could be lower than the market price on the date of the merger agreement
or the current market price.
Stockholders of SPSS and ShowCase are urged to obtain current market
quotations for SPSS and ShowCase common stock.
FAILURE TO RETAIN KEY EMPLOYEES COULD DIMINISH THE BENEFITS OF THE MERGER.
The successful combination of SPSS and ShowCase will depend in part on
the retention of personnel critical to the business and operations of the
combined company due to, for example, unique technical skills or management
expertise. SPSS may be unable to retain SPSS and ShowCase management and
technical, sales and customer support personnel that are critical to the
successful integration of SPSS and ShowCase, resulting in disruption of
operations, loss of key information, expertise or know-how and unanticipated
additional recruitment and training costs and otherwise diminishing anticipated
benefits of the merger.
WE MAY BE UNABLE TO SUCCESSFULLY INTEGRATE OUR OPERATIONS AND REALIZE THE
FULL COST SAVINGS WE ANTICIPATE.
The merger involves the integration of two companies that have
previously operated independently. The difficulties of combining the companies'
operations include:
- the necessity of coordinating geographically separated
organizations;
- combining teams and processes in various functional areas; and
26
- integrating personnel with diverse business backgrounds.
The process of integrating operations could cause an interruption of,
or loss of momentum in, the activities of one or more of the combined company's
businesses and the loss of key personnel. The diversion of management's
attention and any delays or difficulties encountered in connection with the
merger and the integration of the two companies' operations could have an
adverse effect on the business, results of operations, financial condition or
prospects of the combined company after the merger.
Among the factors considered by the SPSS and the ShowCase boards of
directors in connection with their respective approvals of the merger agreement
were the opportunities for economies of scale, as well as operating efficiencies
that could result from the merger. We cannot give any assurance that these
savings will be realized within the time periods contemplated or even if they
will be realized at all.
SALES OF SHOWCASE SOFTWARE COULD DECLINE IF RELATIONSHIPS WITH HYPERION
SOLUTIONS CORPORATION AND IBM ARE DISRUPTED BY THE MERGER.
The merger may have the effect of disrupting strategic relationships
with Hyperion Solutions Corporation and IBM. Hyperion Solutions may not continue
its contractual relationship with the combined company after the merger, with
the result that the combined company would not have the exclusive right to
distribute Hyperion's analytical online processing product, Essbase, as ported
to the AS/400, subject to limited distribution rights retained by Hyperion
Solutions. Additionally, if Hyperion Solutions elects not to continue other
license arrangements with the combined company, then in order to continue to
offer products with the capabilities provided by its Analyzer and Analyzer for
the Web products after the merger, the combined company would need to develop
the necessary technology internally, extend or replace the license agreement
with Hyperion Solutions or license technology from a third party. If the
combined company is unable to do so, the capabilities of its ShowCase product
suite would be significantly reduced.
Finally, the merger may have the effect of disrupting the reseller
relationship with IBM, if IBM elects not to continue its reseller agreement with
the combined company
WE WILL FACE INCREASED COMPETITION AFTER THE MERGER.
In addition to those companies with which we have historically
competed, we believe the combined company will face competition from additional
providers of decision support software, data warehousing and data mart software
as well as companies providing business intelligence solutions for AS/400
customers including Silvon and Infomanager. We will also compete with vendors
that provide business intelligence products implemented on Unix or Windows NT
platforms and then connected to the AS/400. These vendors include Brio
Technology, Business Objects, Cognos, Hyperion Solutions, Information Advantage,
MicroStrategy, Microsoft, Oracle, Computer Associates, Sagent Technology and SAS
Institute. In addition, enterprise resource planning software vendors including
Baan Company, PeopleSoft and SAP are beginning to offer decision
27
support and analytical modules primarily to support the analysis of data from
their own operational systems. One or more of these companies may expand their
technologies to support greater business intelligence functionality.
SALES OF SPSS AND SHOWCASE SOFTWARE COULD DECLINE IF CUSTOMER
RELATIONSHIPS ARE DISRUPTED BY THE MERGER.
The merger may have the effect of disrupting customer relationships.
SPSS and ShowCase customers may not continue their current buying patterns
during the pendency of, and following, the merger. Customers may defer
purchasing decisions as they evaluate the likelihood of successful integration
of SPSS's and ShowCase's software and the combined company's future research and
development strategy. Customers of SPSS may want the functionality of ShowCase's
software but may not want to purchase ShowCase's software.
Similarly, customers of ShowCase may want the functionality of SPSS's
software but may not want to purchase SPSS's software. For these and other
reasons, customers of SPSS or ShowCase may instead purchase offerings of
competitors. In addition, by increasing the breadth of SPSS's and ShowCase's
business, the merger may make it more difficult for the combined company to
enter into relationships with customers and strategic partners, some of whom may
view the combined company as a more direct competitor than either SPSS or
ShowCase as an independent company. Any significant delay or reduction in orders
for SPSS's or ShowCase's software and services could cause sales of the combined
company's software and services to decline.
SALES OF SHOWCASE SOFTWARE COULD DECLINE IF THE CURRENT LEVELS OF USE OF THE IBM
AS/400 AND IBM'S SUPPORT OF THE AS/400 DO NOT CONTINUE.
The server components of ShowCase software currently operate only on
the IBM AS/400. Sales by the combined company after the merger of ShowCase
software will depend on the continued use of the AS/400 and the continued
support of the AS/400 by IBM. Instead of using the AS/400, many computer users
have implemented client/server computer systems based on the UNIX or Windows NT
platforms. The current levels of use by AS/400 customers and support of the
AS/400 by IBM may not continue after the merger and the use of the AS/400 may
not increase in the future. To develop products that operate on platforms other
than the AS/400 would require the combined company to commit a substantial
investment of resources, and the combined company may not successfully introduce
these products on a timely or cost-effective basis or at all.
THE GROWTH OF OUR BUSINESS MAY BE AFFECTED BY THE GROWTH OF THE MARKET FOR
BUSINESS INTELLIGENCE SOFTWARE.
We anticipate that some of the combined company's revenues will be
attributable to the sale of business intelligence software and related
maintenance, support, consulting and professional services. Business
intelligence software enables organizations to transform data from disparate
sources into accessible, understandable and useful information. Although demand
for business intelligence software has grown in recent years, we cannot assure
that the
28
market will continue to grow or that, even if the market does grow, businesses
will adopt ShowCase products of the combined company. If such growth does not
occur, our business may be affected.
We believe that future growth in the market for business intelligence
software will depend in large part on the growth of e-business --
business-to-business, business-to-employee and business-to-customer
communications and transactions over the Internet, corporate intranets and
extranets. E-business has only recently emerged, and may not continue to grow.
Continued growth in e-business depends on a number of factors, including the
Internet's ability to efficiently handle increased activity and to operate as a
fast, reliable and secure network. Critical issues concerning the commercial use
of the Internet, including data corruption, security, bandwidth availability and
quality of service, remain and may negatively affect the growth of e-business,
and accordingly, the demand for business intelligence software.
WE WILL INCUR SIGNIFICANT EXPENSES AND RESTRUCTURING CHARGES IN
CONNECTION WITH THE MERGER TRANSACTION.
SPSS and ShowCase expect to incur pre-tax charges to operations,
currently estimated to be $6 million, to reflect costs associated with combining
the operations of the two companies, transaction fees and other costs related to
the merger. The majority of these costs will be recorded after the consummation
of the merger. This estimate includes anticipated one-time pre-tax charges of
approximately $3 million for transaction and merger-related costs and $3 million
of restructuring charges and other related costs. These amounts are preliminary
estimates and subject to change. Additional unanticipated costs may be incurred
in the integration of the businesses of SPSS and ShowCase. Although SPSS and
ShowCase expect that the elimination of duplicative costs, as well as the
realization of other efficiencies related to the integration of the businesses,
may offset additional expenses over time, we cannot give any assurance that this
net benefit will be achieved in the near term, or at all.
THE MERGER CAUSES DILUTION TO HISTORICAL SPSS EARNINGS
Although SPSS management believes the merger will not be dilutive to
expected earnings in 2001, it will have a dilutive effect on historical earnings
per share of SPSS due to the additional SPSS shares that will be issued in the
merger. On a historical basis for SPSS, diluted earnings per share were $1.52
for the year ended December 31, 1999, as compared to $0.87 on a pro forma basis
for the combined company. The pro forma figure does not include costs associated
with or benefits anticipated from the merger, such as synergies and related cost
savings, nor any transaction costs, merger-related costs or restructuring
charges. See "Unaudited Pro Forma Condensed Combining Financial Data" for
additional pro forma financial information for the combined company after the
merger.
OBTAINING REQUIRED APPROVALS AND SATISFYING CLOSING CONDITIONS MAY DELAY OR
PREVENT COMPLETION OF THE MERGER.
Completion of the merger is conditioned upon the receipt of all
material governmental authorizations, consents, orders and approvals, including
the expiration or termination of the applicable waiting periods, and any
extension of the waiting periods, under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended. SPSS and ShowCase intend to
29
vigorously pursue all required approvals. The requirement for these approvals
could delay the completion of the merger for a significant period of time after
SPSS and ShowCase stockholders have approved the proposals relating to the
merger at their respective stockholder meetings. See "The Merger Agreement --
Conditions" for a discussion of the conditions to the completion of the merger
and "The Proposed Merger -- Regulatory Matters Relating to the Merger" for a
description of the regulatory approvals necessary in connection with the merger.
No assurance can be given, however, that these approvals will be obtained or
that the required conditions to closing will be satisfied, and, if all such
approvals are obtained and the conditions are satisfied, no assurance can be
given as to the terms, conditions and timing thereof.
RISK FACTORS RELATING TO SPSS
OUR FINANCIAL RESULTS AND STOCK PRICE MAY
BE AFFECTED BY QUARTERLY FLUCTUATIONS.
SPSS's quarterly revenue and operating results have varied in the past
and may continue to do so in the future. Future revenues and operating results
will depend upon, among other factors:
- the number and timing of product updates and new product
introductions;
- delays in product development and introduction;
- purchasing schedules of its customers;
- changes in foreign currency exchange rates;
- product and market development expenditures;
- the timing of product shipments;
- changes in product mix;
- timing, costs and effects of acquisitions; and
- general economic conditions.
Because SPSS's expense levels are to a large extent based on its
forecasts of future revenues, operating results may be adversely affected if
such revenues fall below expectations. Accordingly, SPSS believes that
quarter-to-quarter comparisons of its results of operations may not be
meaningful and should not be relied upon as an indication of future performance.
SPSS has historically operated with very little backlog because its
products are generally shipped as orders are received. As a result, revenues in
any quarter are dependent on orders shipped and licenses renewed in that
quarter. SPSS has experienced a seasonal pattern in its operating results with
the fourth quarter typically having the highest operating income. For
30
example, excluding acquisition and other non-recurring charges, the percentage
of SPSS operating income realized in the fourth quarter was 36% in 1997, 35% in
1998 and 38% in 1999.
In addition, the timing and amount of SPSS's revenues are subject to a
number of factors that make estimation of operating results prior to the end of
a quarter uncertain. A significant portion of SPSS's operating expenses are
relatively fixed, and planned expenditures are based primarily on revenue
forecasts. More specifically, in the fourth quarter, the variable profit margins
on modest increases in sales volume at the end of the quarter are significant.
Should SPSS fail to achieve such fourth quarter revenue increases, net income
for the fourth quarter and the full year could be materially affected.
Generally, if revenues do not meet SPSS's expectations in any given quarter,
operating results will be adversely affected. SPSS was profitable in the seven
quarters from December 31, 1994 through June 30, 1997, but had a net loss of
$4,196,000 in the third quarter of 1997 due primarily to one-time acquisition
charges of $2,911,000 and a charge from the revaluation of certain assets of
$5,555,000. In 1998, SPSS was profitable in the first three quarters, but had a
net loss of $1,355,000 in the fourth quarter primarily due to a one-time
merger-related charge and write-off of acquired in-process technology of
$5,500,000 and a charge for revaluation of certain assets of $445,000. In 1999,
SPSS was profitable in all four quarters. There can be no assurance that
profitability on a quarterly or annual basis can be achieved or sustained in the
future.
SPSS MAY BE UNSUCCESSFUL IN INTEGRATING
RECENT ACQUISITIONS.
In recent years, SPSS has made a significant number of acquisitions,
including the acquisition of businesses based outside of the United States. SPSS
faces challenges and business integration issues with its November 1999
acquisition of Vento Software, Inc., a Florida corporation. Although persons
whom SPSS believes are qualified and trained are continuing to work with Vento
after its acquisition by SPSS, there can be no assurance that Vento will be able
to retain these employees or hire suitable replacements in the event they should
leave the employ of SPSS. If SPSS loses key personnel from Vento or is unable to
integrate Vento's business into its own effectively, SPSS may experience a
material adverse impact on its financial condition. While SPSS believes that it
has been successful in integrating the acquisitions it has made in the past,
there can be no assurance that the recent acquisition of Vento or future
acquisitions will be successfully integrated into SPSS.
SPSS MAY NOT RESPOND ADEQUATELY TO
RAPID TECHNOLOGICAL CHANGES.
The computer software industry is characterized by rapid technological
advances, changes in customer requirements, as well as frequent enhancements to
and introductions of technologies. SPSS's future success will depend upon its
ability to enhance its existing software and introduce new software that keep
pace with technological developments, respond to evolving customer requirements
and achieve market acceptance. In particular, SPSS believes it must
31
continue to respond quickly to users' needs for greater functionality, improved
usability and support for new hardware and operating systems. Any failure by
SPSS to respond adequately to technological developments and customer
requirements, or any significant delays in software development or introduction,
could result in loss of revenues. In the past, SPSS has, on occasion,
experienced delays in the introduction of new software and enhancements to
existing technology, primarily due to difficulties with particular operating
environments and problems with software provided by third parties. The extent of
these delays has varied depending upon the size and scope of the project and the
nature of the problems encountered. Such delays have most often resulted from
"bugs" encountered in working with new versions of operating systems and other
third party software, and bugs or unexpected difficulties in existing third
party software which complicate integration with SPSS's software. From time to
time, SPSS has discovered bugs in its software that are resolved through
maintenance releases or through periodic updates depending upon the seriousness
of the defect. There can be no assurance that SPSS will be successful in
developing and marketing new software or enhancements to existing technology on
a timely basis or that SPSS will not experience significant delays or defects in
its software in the future, which could have a material adverse effect on SPSS.
In addition, there can be no assurance that new software or enhancements to
existing technology developed by SPSS will achieve market acceptance or that
developments by others will not render SPSS's technologies obsolete or
noncompetitive.
SPSS MAY FACE BUSINESS DECLINES DUE TO
OUR INTERNATIONAL OPERATIONS.
Revenues from operations outside of North America accounted for
approximately 50% of SPSS's revenues in 1997, 47% of SPSS's revenues in 1998,
and 50% of SPSS's revenues in 1999. SPSS expects that revenues from
international operations will continue to represent a large percentage of its
net revenues and that this percentage may increase, particularly as SPSS further
"localizes" products by translating them into additional languages and expands
its operations through acquisitions of companies outside the United States.
International revenues are subject to a number of risks, including:
- greater difficulties in accounts receivable collection;
- longer payment cycles;
- exposure to currency fluctuations;
- financial, tax and accounting impact of the European Union's
adoption of the Euro as legal currency;
- political and economic instability; and
- the burdens of complying with a wide variety of foreign laws
and regulatory requirements.
SPSS also believes that it is exposed to greater levels of software
piracy in international markets because of the weaker protection afforded to
intellectual property in some foreign
32
jurisdictions. As SPSS expands its international operations, the risks described
above could increase and, in any event, could have a material adverse effect on
SPSS.
SPSS'S STOCK PRICE MAY EXPERIENCE VOLATILITY.
There has been significant volatility in the market prices of
securities of technology companies, including SPSS, and, in some instances, such
volatility has been unrelated to the operating performance of such companies.
Market fluctuations may adversely affect the price of SPSS common stock. SPSS
also believes that, in addition to factors such as interest rates and economic
conditions which affect stock prices generally, some, but not all, of the
factors which could result in fluctuations in SPSS stock price include:
- announcements of new products by SPSS or its competitors;
- quarterly variations in financial results;
- recommendations and reports of analysts;
- acquisitions; and
- other factors beyond SPSS's control.
SPSS RELIES ON THIRD PARTIES FOR CERTAIN SOFTWARE.
SPSS licenses software from third parties. Some of this licensed
software is embedded in SPSS's products, and some is offered as add-on products.
If such licenses are discontinued, or become invalid or unenforceable, there can
be no assurance that SPSS will be able to develop substitutes for this software
independently or to obtain alternative sources in a timely manner. Any delays in
obtaining or developing substitutes for licensed software could have a material
adverse effect on SPSS.
SPSS RELIES ON THIRD PARTIES FOR SOFTWARE DISTRIBUTION.
In January 1997, SPSS entered into a Banta Global Turnkey Software
Distribution Agreement under which Banta Global Turnkey manufactures, packages
and distributes SPSS's software products to SPSS's domestic and international
customers and certain international subsidiaries. The Banta agreement had an
initial three-year term and automatically renews thereafter for successive
periods of one year. The Banta agreement was renewed in January 2000. Either
party may terminate the Banta agreement for cause by written notice if the other
materially breaches its obligations. If Banta fails to perform adequately any of
its obligations under the Banta agreement, SPSS's operating results could be
materially adversely affected.
33
CHANGES IN PUBLIC EXPENDITURES
MAY ADVERSELY AFFECT SPSS.
A significant portion of SPSS's revenues comes from licenses of its
software directly to foreign and domestic government entities. In addition,
significant amounts of SPSS's revenues come from licenses to academic
institutions, healthcare organizations and private businesses that contract with
or are funded by government entities. Government appropriations processes are
often slow, unpredictable and subject to factors outside SPSS's control. In
addition, proposals are currently being made in certain countries to reduce
government spending. Reductions in government expenditures and termination or
renegotiation of government-funded programs or contracts could have a material
adverse effect on SPSS. In addition, declines in overall levels of economic
activity could also have a material adverse impact on SPSS.
SPSS MAY BE UNABLE TO CONTINUE TO COMPETE WITH
COMPANIES IN ITS INDUSTRIES THAT HAVE FINANCIAL
OR OTHER ADVANTAGES.
SPSS's historical market for statistical software is both highly
competitive and fragmented. SPSS is among the largest companies in the
statistical software market, and, based upon sales and comparative assessments
in trade publications, SPSS believes that it competes effectively against its
competitors, particularly on desktop computing platforms. SPSS considers its
primary worldwide competitor to be the larger and better-financed SAS Institute,
although SPSS believes that SAS's revenues are derived principally from products
for purposes other than statistical analysis and operate on large systems
platforms. StatSoft Inc. and Minitab, Inc. are also competitors, although their
annual revenues from these statistical products are believed to be considerably
less than the revenues of SPSS. In addition to competition from other
statistical software companies, SPSS also faces competition from providers of
software for specific statistical applications.
In the data mining, customer relationship management and business
performance measurement markets, SPSS faces competition from many larger and
more well-funded companies, including SAS, IBM, Informix, NCR, Oracle, and
others, as well as recent entrants, such as Attune, Broadbase, E.piphany and
NetPerceptions, many of whom specialize in customer relationship management in
e-commerce settings. With the exception of SAS, these competitors do not
currently offer the range of analytical capability SPSS offers, and as a result
are both competitors and potential partners for SPSS technology.
In all markets, SPSS competes primarily on the basis of the usability,
functionality, performance, reliability and connectivity of its software. The
significance of each of these factors varies depending upon the anticipated use
of the software and the analytical training and expertise of the customer. To a
lesser extent, SPSS competes on the basis of price. SPSS maintains pricing and
licensing policies to meet market demand. SPSS believes it is able to compete
successfully because of the highly usable interfaces, comprehensive analytical
capabilities, efficient performance characteristics, local language versions,
consistent quality, and connectivity features of its software, as well as its
worldwide distribution capabilities and widely recognized name.
34
In the future, SPSS may face competition from new entrants into its
markets. SPSS could also experience competition from companies in other sectors
of the broader market for business intelligence software, such as providers of
OLAP (On-Line Analytical Processing) and analytical application software, as
well as from companies in other sectors of the broader market for customer
relationship management software, such as providers of sales force automation
and campaign management software, who could add advanced analytical
functionality to their existing offerings. Some of these potential competitors
have significantly more capital resources, marketing experience and research and
development capabilities than SPSS. Competitive pressures from the introduction
of new solutions and products by these companies or other companies could have a
material adverse effect on SPSS. There can be no assurance that SPSS will be
able to compete successfully in the future.
SPSS DEPENDS ON KEY EXECUTIVES. A LOSS OF THESE
EXECUTIVES AND OTHER PERSONNEL COULD NEGATIVELY
IMPACT OUR OPERATIONS.
SPSS is dependent on the efforts of certain executives and key
employees, including its President and Chief Executive Officer, Jack Noonan.
SPSS's continued success will depend in part on its ability to attract and
retain highly qualified technical, managerial, sales, marketing and other
personnel. Competition for such personnel is intense. SPSS's inability to
continue to attract or retain such highly qualified personnel could have a
material adverse effect on SPSS's financial position and results of operation.
No life insurance policies are maintained on SPSS's key personnel.
SPSS MAY NOT RECEIVE THE FULL BENEFITS OF
ITS INTELLECTUAL PROPERTY PROTECTIONS.
The analytical algorithms incorporated in SPSS's software are not
proprietary. SPSS believes that the proprietary technology constituting a
portion of its software determines the speed and quality of displaying the
results of computations, the ability of its software to work in conjunction with
third party software, and the ease of use of its software. SPSS's success will
depend, in part, on its ability to protect the proprietary aspects of its
software. SPSS's attempts to protect its proprietary software with trade secret
laws and internal nondisclosure safeguards, as well as copyright and trademark
laws and contractual restrictions on copying, disclosure and transferability
that are incorporated into its software license agreements. SPSS licenses its
software only in the form of executable code, with contractual restrictions on
copying, disclosures and transferability. SPSS licenses its software for use on
mainframes, minicomputers, and distributed computer networks. SPSS licenses its
products for personal computers to end-users by use of a "shrink-wrap" license
that is not signed by licensees, as is customary in the packaged software
industry. It is uncertain whether such license agreements are legally
enforceable. The source code for all of SPSS software is protected as a trade
secret and as unpublished copyrighted work. In addition, SPSS has entered into
confidentiality and nondisclosure agreements with its key employees. Despite
these restrictions, it may be possible for competitors or users to copy aspects
of SPSS's software or to obtain information which SPSS regards as a trade
secret. SPSS has no patents, and judicial enforcement of copyright laws may
35
be uncertain, particularly outside of North America. Preventing unauthorized use
of computer software is difficult, and software piracy is expected to be a
persistent problem for the packaged software industry. These problems may be
particularly acute in international markets. In addition, the laws of certain
countries in which SPSS's software is or may be licensed do not protect SPSS's
software and intellectual property rights to the same extent as the laws of the
United States. Despite the precautions taken by SPSS, it may be possible for
unauthorized third parties to reverse engineer or copy SPSS's products or obtain
and use information that SPSS regards as proprietary. There can be no assurance
that the steps taken by SPSS to protect its proprietary rights will be adequate
to prevent misappropriation of its technology.
Although SPSS's software has never been the subject of an infringement
claim, there can be no assurance that third parties will not assert infringement
claims against SPSS in the future or that any such assertion will not result in
costly litigation or require SPSS to obtain a license to use the intellectual
property of third parties. There can be no assurance that such licenses will be
available on reasonable terms, or at all. There can also be no assurance that
SPSS's competitors will not independently develop technologies that are
substantially equivalent or superior to SPSS's technologies.
CERTAIN STOCKHOLDERS AND OFFICERS AND DIRECTORS MAY
CONTROL CORPORATE ACTIONS DUE TO THEIR
OWNERSHIP OF SPSS STOCK.
As of November 9, 2000, SPSS's executive officers and directors owned
beneficially approximately 19.75% of the outstanding shares of SPSS common
stock. The Norman H. Nie Revocable Trust Dated March 15, 1991 (the "Nie Trust")
and affiliates of the Nie Trust are entitled to nominate a director for
inclusion in the management slate for election to the Board if the Nie Trust
owns at least 12.5% of the outstanding shares of common stock. As of November 9,
2000, the Nie Trust and affiliates of the Nie Trust beneficially owned
approximately 10.07% of the outstanding shares of common stock.
Additionally, because of the combined voting power of the officers and
directors, these individuals acting as a group may be able to influence SPSS's
affairs and business, including any determination with respect to a change in
control of SPSS, future issuances of SPSS common stock or other securities,
declaration of dividends on SPSS common stock and the election of directors.
Such influence could have the effect of delaying, deferring or preventing a
change of control of SPSS which could deprive SPSS's stockholders of the
opportunity to sell their shares of common stock at prices higher than
prevailing market prices.
ANTI-TAKEOVER PROTECTIONS MAY MAKE IT
DIFFICULT FOR A THIRD PARTY TO ACQUIRE SPSS.
SPSS's Certificate of Incorporation and bylaws contain a number of
provisions, including provisions requiring an 80% super-majority stockholder
approval of certain actions and provisions for a classified Board of Directors,
which would make the acquisition of SPSS, by means of an unsolicited tender
offer, a proxy contest or otherwise, more difficult.
36
SPSS's bylaws provide for a staggered board of directors so that only
one-third of the total number of directors are replaced or re-elected each year.
Therefore, potential acquirers of SPSS may face delays in replacing the existing
directors.
SPSS's senior executive officers may be entitled to substantial
payments in the event of their termination without cause or constructive
termination following a change of control of SPSS. These payments could have the
effect of discouraging a potential acquirer from acquiring control of SPSS.
SALES OF SPSS STOCK AVAILABLE FOR FUTURE
USE COULD DEPRESS SPSS'S STOCK PRICE.
In addition to the shares of common stock which are outstanding, as of
November 9, 2000, there were vested options outstanding held by management to
purchase approximately 832,066 additional shares of common stock, with an
average exercise price of $14.43 per share, and unvested options to purchase
approximately 311,967 additional shares of common stock. SPSS has also
established a stock purchase plan available to employees of SPSS, which permits
employees to acquire shares of common stock at the end of each quarter at 85% of
the market price of the common stock as of the day after the end of the quarter.
No prediction can be made as to the effect, if any, that future sales,
or the availability of shares of SPSS common stock for future sales, will have
on the market price prevailing from time to time. Sales of substantial amounts
of common stock by SPSS or by stockholders who hold "restricted securities," or
the perception that such sales may occur, could adversely affect prevailing
market prices for the common stock.
37
THE PROPOSED MERGER
GENERAL
SPSS's board of directors is using this joint proxy
statement/prospectus to solicit proxies from the holders of SPSS common stock
for use at the SPSS special meeting. ShowCase's board of directors is also using
this document to solicit proxies from the holders of ShowCase common stock for
use at the ShowCase special meeting.
SPSS PROPOSALS
At the SPSS special meeting, holders of SPSS common stock are being
asked to vote on the approval and adoption of the merger agreement and the
issuance of SPSS common stock in connection with the merger.
THE MERGER WILL NOT BE COMPLETED UNLESS SPSS'S STOCKHOLDERS APPROVE
AND ADOPT THE MERGER AGREEMENT AND THE ISSUANCE OF SHARES OF SPSS COMMON STOCK
IN THE MERGER.
SHOWCASE PROPOSAL
At the ShowCase special meeting, holders of ShowCase common stock will
be asked to vote on the adoption or rejection of the merger and the merger
agreement.
THE MERGER WILL NOT BE COMPLETED UNLESS SHOWCASE'S SHAREHOLDERS APPROVE
AND ADOPT THE MERGER AGREEMENT AND THE MERGER.
BACKGROUND OF THE MERGER
At the April 27, 2000 ShowCase Board of Directors' Meeting, the
directors discussed the option of identifying several potential acquiring
companies for ShowCase as an alternative means of enhancing shareholder value.
After the June 6, 2000 ShowCase Board of Directors' meeting, Mr. Holec,
CEO of ShowCase, and Mr. Noonan, CEO of SPSS, discussed telephonically the
possibility of a merger between the two companies. These discussions considered
the synergies and the risks surrounding a merger such as product, customer,
employee and culture. Mr. Holec and Mr. Noonan agreed to have subsequent
meetings including selected members of each company's senior management to
determine if there was merit in continuing these discussions.
During the June 14, 2000 meeting of the SPSS Board of Directors, Mr.
Noonan presented the potential opportunity of acquiring ShowCase and received
approval to proceed with related discussions.
On June 28, 2000, Mr. Holec met with Mr. Noonan to discuss the possible
acquisition of ShowCase by SPSS.
38
On July 25, 2000, SPSS and ShowCase entered into a mutual
non-disclosure agreement.
During the July 27, 2000 meeting of the SPSS Board of Directors, the
directors reviewed and discussed preliminary financial analyses of a potential
acquisition of ShowCase and directed management to proceed and prepare detailed
examinations.
On July 27, 2000, several members of ShowCase's management team met
with members of SPSS's management team in Chicago for a presentation by SPSS of
their business.
On August 3, 2000, Mr. Holec discussed with the Board of Directors of
Showcase at its regular meeting the possibility of entering into merger
discussions with SPSS. The board authorized Mr. Holec to conduct further
discussions with SPSS and to engage an investment bank for assistance. Also,
since Mr. Noonan is a director of ShowCase, an executive committee of the Board
of Directors was established, comprised of all directors other than Mr. Noonan,
to conduct the business of ShowCase while discussions with SPSS were ongoing in
order to avoid conflicts of interest.
On August 11, 2000, ShowCase engaged Merrill Lynch to act as its
financial advisor in connection with a potential transaction with SPSS, and, if
requested by ShowCase, to render a fairness opinion.
On August 21, 2000, several members of SPSS's management team met with
members of ShowCase's management team in Rochester, Minnesota for further
discussions about product and market direction, as well as financial
implications of the potential merger.
During the September 11, 2000 meeting of the SPSS Board of Directors,
the directors reviewed and approved a draft letter of intent to acquire
ShowCase, discussed findings of initial due diligence reports, and examined more
detailed financial analyses of the proposed transaction. The directors also
directed management to engage Robert W. Baird & Co. to provide its opinion as to
whether or not the exchange ratio in the merger was fair, from a financial point
of view, to SPSS.
On September 13, 2000, SPSS provided ShowCase with a draft term sheet
to acquire ShowCase setting forth the proposed terms and conditions to be used
in drafting a merger agreement.
On September 15, 2000, SPSS engaged Robert W. Baird & Co. to provide
its opinion as to whether or not the exchange ratio in the merger was fair,
from a financial point of view, to SPSS.
On September 29, 2000, ShowCase engaged Craig-Hallum Capital Group,
Inc. to act as an additional financial adviser and to provide a second fairness
opinion regarding a potential transaction with SPSS.
During the weeks following, extensive additional due diligence was
conducted by the two companies along with further discussions regarding the
contract and timing of the transaction. SPSS and ShowCase supplemented the work
of their respective employees in due diligence efforts by contracting with
professional services firms.
On November 6, 2000, the SPSS Board of Directors held a special meeting
to review the terms of the definitive merger agreement with Ross & Hardies,
outside counsel to SPSS, and unanimously approved the terms of the agreement.
Also at this meeting, representatives of Robert W. Baird & Co. rendered an oral
opinion (subsequently confirmed in writing) to the effect that, as of November
6, 2000 and based on and subject to the matters described in its opinion, the
exchange ratio was fair, from a financial point of view, to SPSS. After full
discussion, the SPSS board unanimously approved the merger and merger agreement.
39
On November 6, 2000, ShowCase's board of directors held a special
meeting to review the terms of the definitive merger agreement with its outside
legal counsel, Dorsey & Whitney L.L.P. Also at this meeting, representatives of
Merrill Lynch rendered an oral opinion, which opinion was subsequently confirmed
by delivery of a written opinion dated November 6, 2000, to the effect that, as
of that date and based on and subject to the assumptions made, matters
considered and limitations on its review contained in its opinion, the exchange
ratio was fair, from a financial point of view, to the holders of ShowCase
common stock. Likewise, a representative of Craig-Hallum Capital Group rendered
an oral opinion, which opinion was subsequently confirmed by delivery of a
written opinion dated November 6, 2000, to the effect that, as of that date and
based on and subject to the assumptions made, matters considered and limitations
on its review contained in its opinion, the exchange ratio was fair, from a
financial point of view, to the holders of ShowCase common stock. After full
discussion, the ShowCase board unanimously approved the merger and merger
agreement.
On November 6, 2000, SPSS and ShowCase signed a definitive merger
agreement.
On November 7, 2000, the companies issued a joint press release
announcing the transaction and held a conference call to discuss the contents of
the press release.
REASONS FOR THE MERGER
While each of SPSS and ShowCase has excellent growth potential and
prospects for its immediate and long-term future as a stand-alone entity, we
both believe that a combination of the two companies will create a leading
software company with greater diversity, breadth and financial resources that
will have the opportunity to enhance stockholder value in ways that are unlikely
to be achieved by SPSS or ShowCase alone. Specifically, the combined company
would be positioned to realize the benefits of joining ShowCase's projected
strong revenue growth, SPSS's historical and projected profitability, as well as
the common and reinforcing strategic directions of both companies. The combined
company would have a broader technology base, more extensive sales, marketing,
and professional services organizations, and a stronger financial profile than
would each of the companies individually.
The following discussion of the parties' reasons for the merger
contains a number of forward-looking statements that reflect the current view of
SPSS and ShowCase with respect to future events that may have an effect on the
future financial performance of each of them or the combined company.
Forward-looking statements are subject to risks and uncertainties. Actual
results and outcomes may differ materially from the results and outcomes
discussed in the forward-looking statements. Cautionary statements that identify
important factors that could cause or contribute to differences in results and
outcomes include those discussed in the sections of this proxy
statement/prospectus entitled "Summary -- Forward-Looking Information" and "Risk
Factors."
40
SPSS'S REASONS FOR THE MERGER
SPSS's board of directors believes that a business combination with
ShowCase would be beneficial to SPSS by bringing:
- A larger field sales force capable of selling the company's
analytical solutions and products;
- A larger professional services organization capable of
implementing the company's analytical solutions;
- Complementary technologies that extend the capabilities
provided in the company's analytical solutions;
- Additional senior management essential to executing the
company's strategies; and
- A stronger balance sheet, particularly with the addition of
cash to give the company greater operating flexibility and
more options to expand by acquisition.
The conclusions reached by SPSS's board of directors with respect to
the factors described above support its determination that the merger and the
issuance of shares of SPSS common stock in the merger are in the best interests
of SPSS and its stockholders. In reaching its determination, SPSS's board of
directors also considered:
- The judgment, advice and analyses of SPSS's management with
respect to the potential strategic, financial and operational
benefits of the merger, including a favorable recommendation
of the merger by SPSS's management based in part on the
business, technical, financial, accounting and legal due
diligence investigations performed with respect to ShowCase;
- The results of operations and financial condition of SPSS and
ShowCase and the anticipated non-dilutive effect of the
combination on SPSS common stock, assuming that cost savings
and synergies are achieved as planned;
- The complementary fit between SPSS's and ShowCase's cultures
and market segments, which management believes will facilitate
integration of the two companies; and
- The terms of the merger agreement and related agreements,
including price and structure, which were considered by both
the board of directors and management of SPSS to provide a
fair and equitable basis for the merger.
SPSS's board of directors also considered a number of potentially
negative factors in its deliberations concerning the merger, including:
41
- Showcase's operational performance from the quarter ending
September 1999 through the quarter ending June 2000, in which
revenue growth and profitability were lower than the currently
projected rates;
- The challenges potentially confronted in getting ShowCase
operations to run within the SPSS business operating model
without affecting projected revenue growth;
- The difficulties potentially encountered in moving a segment
of the ShowCase sales force into activities involving the sale
of more comprehensive and complex analytical solutions;
- The possible extent to which ShowCase's franchise in the
market for software operating on IBM AS/400 computing systems
was a constraint on long-term growth; and the possible extent
to which ShowCase's relationship with Hyperion was a
constraint on long-term growth and future valuations of the
combined entity.
Significant Cost Savings. The combined company is expected to increase
its profitability through cost savings and operating efficiencies resulting from
the elimination of redundant facilities and functions which would exist in the
combined company in the United States, as well as in multiple organizations and
systems in over ten foreign countries, and the benefits of leveraging our
combined annual capital expenditures of approximately $12 million in 2000.
SPSS expects to achieve cost savings in 2001 through the ability to
consolidate separate stand-alone operations into a single entity, savings in
income tax payments through the use of ShowCase's research and development
credit carry-forwards and net-loss carry-forwards, as well as additional cost
savings realized through the integration of critical personnel, particularly in
management roles, field sales capability, and consulting expertise. SPSS
believes these cost savings will enable its acquisition of ShowCase to be
non-dilutive to earnings in 2001 and accretive in 2002.
While SPSS expects to be able to realize these cost savings, no
assurance can be given that the combined company will actually do so.
Combination of Operational Factors. SPSS expects the merger to provide
for significant opportunities in sales and marketing and in research and
development, including new opportunities for innovation in supporting existing
solutions and products and bringing new offerings to market. With the enhanced
marketing and development platform provided by the merger, the combined company
would be better positioned for future growth. While SPSS expects that the
combination of SPSS's and ShowCase's complementary technology platforms will
result in new opportunities for innovation in supporting existing solutions and
products and bringing new offerings to market, no assurance can be given that
the combined company will be able to do so.
The SPSS research and development staff currently includes
approximately 190 professionals organized into groups for software design,
algorithm development, software
42
engineering, documentation, quality assurance, and product localization. SPSS's
expenditures for research and development, including capitalized software, were
approximately $19.6 million in 1997, $22.8 million in 1998, and $27.6 million in
1999.
SPSS also uses independent contractors in its research and development
efforts. Sometimes SPSS uses these contractors to obtain technical knowledge and
capability that it lacks internally. SPSS has also outsourced maintenance,
conversion, and new programming for some products to enable its internal
development staff to focus on products that are of greater strategic
significance. SPSS sometimes uses independent contractors to augment its
development capacity at a lower cost.
FACTORS CONSIDERED BY, AND RECOMMENDATION OF, THE BOARD OF DIRECTORS OF
SPSS
At its meeting on November 6, 2000, SPSS's board of directors
unanimously:
- determined that the merger agreement and the merger are
advisable and fair to, and in the best interests of, SPSS and
its stockholders;
- directed that the proposed transaction be submitted for
consideration by the SPSS stockholders; and
- recommended that the SPSS stockholders vote FOR the
approval and adoption of the Agreement and Plan of Merger and
FOR approval of the issuance of shares of SPSS common stock
in connection with the merger.
In the course of reaching its decision to adopt the merger agreement,
SPSS's board of directors consulted with SPSS's management, as well as its legal
counsel and its financial advisors, and considered the following material
factors:
(1) information concerning the financial performance and
condition, results of operations, asset quality, prospects and
businesses of each of SPSS and ShowCase as separate entities
and on a combined basis, including:
- the revenues of the companies, their complementary
businesses and the potential for cost savings and
revenue enhancement;
- the recent and historical stock price performance of
SPSS common stock and ShowCase common stock; and
- the percentage of the combined company SPSS's
stockholders would own following the merger.
(2) the importance of market position, significant scale and scope
and financial resources to a company's ability to compete
effectively in the changing environment in the global software
market;
43
(3) the strategic nature of the transaction, which combines SPSS's
and ShowCase's complementary businesses, and creates a broader
company with enhanced global reach and greater resources,
enhanced future operating flexibility and increased
opportunity for growth;
(4) the potential benefits to be derived from a combination of the
two companies as described under "--Our Reasons for the
Merger," including potential cost savings and efficiencies
that would result from the merger;
(5) the current industry, economic and market conditions and
trends, including the likelihood of continuing consolidation
and increasing competition in the software industry;
(6) the nature of existing products to be sold by the combined
company and the fact that the customer base to be served will
be broader and more diverse;
(7) the broader and more diverse product line of the combined
company;
(8) the merger will present the opportunity for the stockholders
of SPSS to participate in a larger company with a more
diversified product line and, as stockholders of the combined
company, benefit from future growth of the combined company;
(9) the exchange ratio will enable SPSS stockholders to own
approximately 73.4% of the outstanding stock of the combined
company;
(10) the opinion of Robert W. Baird & Co. to the effect that, as of
November 6, 2000 and subject to the matters set out in its
opinion, the exchange ratio was fair, from a financial point
of view, to SPSS;
(11) the intended accounting of the merger as a pooling of
interests which results in combined financial statements
prepared on a basis consistent with the underlying view that
stockholder interests in the two companies have simply been
combined;
(12) the structure of the transaction as a tax-free reorganization
for United States federal income tax purposes;
(13) the name of the combined company will remain "SPSS Inc.";
(14) the headquarters of the combined company will be in Chicago,
Illinois;
44
(15) the ability to consummate the merger, including the conditions
to the merger requiring receipt of necessary regulatory
approvals in accordance with the terms of the merger
agreement;
(16) the importance of future leadership in ensuring achievement of
stockholder value opportunities resulting from the merger and
SPSS's board of directors' confidence in the abilities of the
senior management team of SPSS, based on the board of
directors' familiarity with their record at SPSS, and the fact
that such management team will continue to serve;
(17) the terms of the merger agreement, including composition of
the board of directors and the management structure of the
combined company;
(18) the board of directors' continuing belief in the stockholder
value opportunity represented by the strategic path the board
had previously chosen and the unique implementation
opportunity presented by the definitive transaction terms with
ShowCase; and
(19) the opportunity for SPSS stockholders to vote on the proposed
merger with ShowCase.
SPSS's board of directors considered all these factors in reaching the
conclusions and recommendations described above. These factors generally figured
positively, but the board also considered a number of potentially negative
factors in its deliberations concerning the merger, including:
- the terms of the merger agreement regarding third party
proposals and the merger being conditioned on the ability of
SPSS and ShowCase to account for the transaction as a pooling
of interests;
- the challenges of combining the businesses of two major
corporations and the risks of diverting management resources
for an extended period of time;
- the possibility of customer or supplier confusion after the
announcement of the proposed merger;
- the substantial accounting charges to be incurred in
connection with the merger, including costs of integrating the
businesses and transaction expenses arising from the merger;
- the potential negative effect on SPSS's stock price if revenue
and earnings expectations of the combined company are not met;
- the potential loss of ShowCase and SPSS employees critical to
the ongoing success of the ShowCase products and to the
successful integration of the SPSS and ShowCase product lines;
45
- the general difficulties of integrating products, technologies
and companies;
- the difficulty of managing separate operations at different
geographic locations;
- the possibility of cultural conflicts between the two
companies; and
- the other risks described in the section of this joint proxy
statement/prospectus entitled "Risk Factors."
The foregoing discussion is not exhaustive of all factors considered by
SPSS's board of directors. Moreover, in view of the variety of factors
considered in connection with its evaluation of the merger and the merger
agreement, SPSS's board of directors considered the factors as a whole and did
not find it practicable to, and did not, quantify or otherwise assign relative
weight to the specific factors considered in reaching its determination to
approve the merger and the merger agreement. In addition, each member of SPSS's
board of directors may have considered other factors on an individual basis,
including factors unknown to SPSS, or given different weight to different
factors considered.
For additional information concerning the matters discussed, and the
conclusions reached, at various meetings of SPSS's board of directors held
between June 14, 2000 and November 6, 2000, see "Background of the Merger."
THE SPSS BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT, THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED THEREBY AND
BELIEVES THAT THE TERMS OF THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF,
SPSS AND ITS STOCKHOLDERS. THE SPSS BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
VOTE FOR APPROVAL OF THE PROPOSAL REGARDING THE MERGER AGREEMENT AND ISSUANCE OF
SHARES IN CONNECTION WITH THE MERGER.
SHOWCASE'S REASONS FOR THE MERGER
FACTORS CONSIDERED BY, AND RECOMMENDATION OF, THE BOARD OF DIRECTORS OF
SHOWCASE
At its meeting on November 6, 2000, the ShowCase board of directors:
- determined that the merger agreement and the merger with SPSS
are advisable and fair to, and in the best interests of,
ShowCase and its shareholders;
- approved the merger agreement with SPSS;
- directed that the proposed transaction be submitted for
consideration by the ShowCase shareholders; and
- recommended that the ShowCase shareholders vote FOR approval
and adoption of the merger and the merger agreement.
46
In the course of reaching its decision to approve the merger agreement,
the ShowCase board of directors consulted with ShowCase's management, as well as
its outside legal counsel and its financial advisors, and considered the
following material factors:
(1) information concerning the financial performance and
condition, results of operations, asset quality, prospects and
businesses of each of ShowCase and SPSS as separate entities
and on a combined basis, including:
- the revenues of the companies, their complementary
businesses and the potential for cost savings and
revenue enhancement;
- the recent and historical stock price performance of
ShowCase common stock and SPSS common stock; and
- the percentage of the combined company ShowCase
shareholders would own following the merger.
(2) the increasing importance of market position, significant
scale and financial resources to a company's ability to
compete effectively in the changing global software market;
(3) the strategic nature of the transaction, which combines SPSS's
and ShowCase's complementary businesses, and creates a broader
company with enhanced global reach and greater resources,
enhanced future operating flexibility and increased
opportunity for growth;
(4) the potential benefits to be derived from a combination of the
two companies as described under "Our Reasons for the Merger,"
including potential cost savings and efficiencies that would
result from the merger;
(5) the current industry, economic and market conditions and
trends, including the likelihood of continuing consolidation
and increasing competition in the software industry;
(6) the nature of existing products to be sold by the combined
company and the fact that the customer base to be served would
be broader and more diverse;
(7) the opportunity for the shareholders of ShowCase to
participate in a larger company with a more diversified
product line and, as stockholders of the combined company to
benefit from future growth of the combined company;
(8) the fact that the exchange ratio (based on SPSS's trading
price at the close of business on November 6, 2000, the last
trading day
47
before the execution of the merger agreement was announced)
represented a premium of 49.7% over ShowCase's closing price
on November 6, 2000;
(9) the fact that the exchange ratio would enable ShowCase
shareholders to own approximately 25% of the outstanding stock
of the combined company;
(10) the analyses and presentations prepared by Merrill Lynch,
Pierce Fenner & Smith Incorporated and Craig-Hallum Capital
Group, Inc., and the written opinions of those firms to the
effect that, as of November 6, 2000, and subject to the
assumptions made, matters considered and limitations on their
reviews set out in their opinions, the exchange ratio was fair
from a financial point of view to ShowCase's common
shareholders. Merrill Lynch and Craig-Hallum Capital Group's
written opinions were addressed solely to the ShowCase board
of directors and contain a description of the assumptions
made, matters considered and limitation on the scope of the
review undertaken. Copies of the Merrill Lynch and
Craig-Hallum Capital Group opinions are attached as Annex C
and D, respectively. These opinions are described below, under
"Opinions of ShowCase's Financial Advisors";
(11) the intended accounting for the merger as a pooling of
interests which results in combined financial statements
prepared on a basis consistent with the underlying view that
shareholder interests in the two companies have simply been
combined;
(12) the ability to complete the merger as a reorganization for
United States federal income tax purposes in which ShowCase
shareholders generally would not recognize any gain or loss,
except for any gain or loss recognized in connection with cash
received for fractional shares of the combined company's
common stock;
(13) the ability to consummate the merger, including the conditions
to the merger requiring receipt of necessary regulatory
approvals in accordance with the terms of the merger
agreement;
(14) the provisions of the merger agreement which provide for a
termination fee of $3.5 million to be paid to SPSS under
certain circumstances;
(15) the likely impact of the merger with SPSS on ShowCase's
employees;
(16) the fact that the combined company would be headed by Jack
Noonan;
48
(17) the fact that the combined company would be named SPSS Inc.;
(18) the fact that the ShowCase name may not be preserved as a
divisional name in the combined company;
(19) the interests that certain executive officers and directors of
ShowCase may have with respect to the merger in addition to
their interests as shareholders of ShowCase generally. See
"Interests of Certain Persons in the Merger."
ShowCase's board of directors also identified and considered a variety
of potentially negative factors in its deliberations concerning the merger,
including:
- the risk that the operations of ShowCase and SPSS might not be
successfully integrated, including the risk that the two
companies' products are not technically compatible;
- the risk that the potential benefits sought in the merger
might not be fully realized;
- the possibility that the merger might not be completed, and
the effect of the public announcement of the merger on:
- ShowCase's sales and operating results;
- ShowCase's ability to attract and retain key
management, marketing and technical personnel; and
- the progress of ongoing ShowCase development
projects;
- the possibility of customer or supplier confusion after the
announcement of the proposed merger;
- the substantial accounting charges to be incurred in
connection with the merger, including costs of integrating the
businesses and transaction expenses arising from the merger;
- the potential loss of ShowCase and SPSS employees critical to
the ongoing success of the ShowCase products and to the
successful integration of the SPSS and ShowCase product lines;
- the difficulty of managing separate operations at different
geographic locations; and
- the other risks described in the section of this proxy
statement/prospectus entitled "Risk Factors."
The foregoing discussion is not exhaustive of all factors considered by
ShowCase's board of directors. Moreover, in view of the variety of factors
considered in connection with its evaluation of the merger agreement, ShowCase's
board of directors considered the factors as a
49
whole and did not find it practicable to, and did not, quantify or otherwise
assign relative weight to the specific factors considered in reaching its
determination to approve the merger and the merger agreement. In addition, each
member of ShowCase's board of directors may have considered other factors on an
individual basis, including factors unknown to ShowCase, or given different
weight to different factors considered.
THE SHOWCASE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT, THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED THEREBY AND
BELIEVES THAT THE MERGER AGREEMENT AND THE MERGER ARE ADVISABLE, FAIR TO, AND IN
THE BEST INTERESTS OF SHOWCASE AND ITS SHAREHOLDERS. THE SHOWCASE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT AND THE MERGER.
ACCOUNTING TREATMENT
The merger is intended to qualify as a pooling of interests. The
pooling of interests method of accounting assumes the companies had always been
combined, and the historical financial statements for periods prior to closing
of the merger are restated as though the companies had always been combined as
required under United States generally accepted accounting principles. The
assets and liabilities of SPSS and ShowCase will be carried forward by the
combined company at their historical recorded amounts, adjusted for intercompany
transactions. It is a condition to the merger that:
- SPSS receive a letter from KPMG LLP, Chicago, Illinois,
independent accountants for SPSS, dated approximately as of
the date on which the transactions contemplated by the merger
agreement are closed, stating that, subject to certain
conditions, SPSS's accounting for the merger as a pooling of
interests is appropriate if the merger is closed and
consummated in accordance with the merger agreement; and
- ShowCase receive a letter from KPMG LLP, Minneapolis,
Minnesota, independent accountants for ShowCase, dated
approximately as of the date on which the transactions
contemplated by the merger agreement are closed, regarding
their concurrence with ShowCase's conclusion, subject to
certain conditions, that no condition exists that would
preclude ShowCase from being a party to a business combination
to be accounted for as a pooling of interests.
DISSENTERS' APPRAISAL RIGHTS
Sections 302A.471 and 302A.473 of the Minnesota Business Corporation
Act provide each shareholder of ShowCase the right to dissent from the merger
and obtain payment for the "fair value" of the shareholder's shares following
the consummation of the merger.
The following summary of the applicable provisions of sections 302A.471
and 302A.473 of Minnesota law does not purport to be a complete statement of the
provisions and is qualified in its entirety by reference to the full texts of
these sections attached as Annex E to this proxy statement/prospectus. Any
shareholder who wishes to exercise dissenters' appraisal rights, or who wishes
to preserve the right to do so, should review these sections carefully because
failure
50
to comply with the procedures set forth in the sections will result in the loss
of dissenters' appraisal rights.
Under Minnesota law, shareholders of ShowCase have the right, by fully
complying with the applicable provisions of sections 302A.471 and 302A.473, to
dissent with respect to the merger and to receive from ShowCase payment in cash
of the "fair value" of their shares after the merger is completed. The term
"fair value" means the value of the shares immediately before the effective date
of the merger without any appreciation or depreciation in anticipation of the
merger.
All references in sections 302A.471 and 302A.473 and in this summary to
a "shareholder" are to a record holder of the shares as to which dissenters'
appraisal rights are asserted. A record holder is a shareholder who held
ShowCase common stock at the close of business on ________ __, 2001. A person
having beneficial ownership of shares that are held of record in the name of
another person, such as a broker, nominee, trustee or custodian, must act
promptly to cause the record holder to follow the steps summarized below
properly and in a timely manner in order to prefect any dissenters' appraisal
rights the beneficial owner may have.
Shareholders of record who desire to exercise their dissenters'
appraisal rights must satisfy all of the following conditions. A written notice
of intent to demand fair value for shares must be mailed or delivered to the
executive offices of ShowCase before the shareholder vote is taken to approve
the merger agreement. This written demand must be in addition to and separate
from any proxy or vote against approval of the merger agreement. Voting against,
abstaining from voting or failing to vote to approve the merger agreement does
not constitute a demand for appraisal within the meaning of Minnesota law.
Shareholders electing to exercise their dissenters' appraisal rights
under Minnesota law must not vote for approval of the merger agreement. A
shareholder's failure to vote against approval of the merger agreement will not
constitute a waiver of dissenters' appraisal rights. However, if a shareholder
returns a signed proxy but does not specify a vote against approval of the
merger agreement or direction to abstain, the proxy will be voted for approval
of the merger agreement, and the shareholder's dissenters' appraisal rights will
be waived.
A shareholder must assert dissenters' appraisal rights with respect to
all of the shares registered in the holder's name except where certain shares
are beneficially owned by another person but registered in the holder's name. If
a record owner, such as a broker, nominee, trustee or custodian, wishes to
dissent with respect to shares beneficially owned by another person, the
shareholder must dissent with respect to all of the shares and must disclose the
name and address of the beneficial owner on whose behalf the dissent is made. A
beneficial owner of those shares who is not the record owner of such shares may
assert dissenters' appraisal rights as to shares held on that person's behalf,
provided that the beneficial owner submits a written consent of the record owner
to ShowCase at or before the time the dissenters' appraisal rights are asserted.
A shareholder who elects to exercise dissenters' appraisal rights must
mail or deliver a written demand, before the vote is taken on approval of the
merger agreement, to the Chief Financial Officer of ShowCase at 4115 Highway 52
North, Suite 300, Rochester, Minnesota 55901-0144. The written demand should
specify the shareholder's name and mailing address,
51
the number of shares owned and that the shareholder intends to demand the fair
value of its, his or her shares.
After approval of the merger agreement by the shareholders at the
special meeting, ShowCase will send a written notice to each shareholder who
delivered a written demand for dissenters' appraisal rights. The notice will
contain the address to which the shareholder must send a demand for payment and
the stock certificates in order to obtain payment and the date by which they
must be received and other related information.
In order to receive fair value for a dissenting shareholder's shares,
the shareholder must, within 30 days after the date ShowCase gives the notice
described in the preceding paragraph, demand payment and send the stock
certificates, and all other information specified in the notice from ShowCase,
to the address specified in the notice. A dissenting shareholder will retain all
rights as a shareholder until the effective date of the merger. After a valid
demand for payment and the related stock certificates and other information is
received, or after the effective date of the merger, whichever is later,
ShowCase will remit to each dissenting shareholder who has complied with
statutory requirements the amount that ShowCase estimates to be the fair value
of the dissenting shareholder's shares, with interest starting five days after
the effective date of the merger at a rate prescribed by statute. ShowCase will
also send its closing balance sheet and statement of income for the fiscal year
ending no more than 16 months before the effective date of the merger, together
with the latest available interim financial statement, an estimate of the fair
value of the shareholder's shares and a brief description of the method used to
reach the estimate and a brief description of the procedure to be followed if
the dissenting shareholder decides to make a demand for a supplemental payment.
Copies of sections 302A.471 and 302A.473 of the Minnesota Business Corporation
Act are attached hereto as Annex E.
If the dissenting shareholder believes that the amount remitted by
ShowCase is less than the fair value of the holder's shares plus interest, the
shareholder may mail or deliver written notice to ShowCase of the holder's own
estimate of the fair value of the shares, plus interest, within 30 days after
the mailing date of the remittance and demand payment of the difference. This
notice must be delivered to the executive office of ShowCase at the address set
forth above. A shareholder who fails to give such written notice within this
time period is entitled only to the amount remitted by ShowCase.
Within 60 days after receipt of a demand for supplemental payment,
ShowCase must either pay the shareholder the amount demanded or agreed to by the
shareholder after discussion with ShowCase, or petition a court for the
determination of the fair value of the shares, plus interest. The petition must
name as parties all shareholders who have demanded supplemental payment and have
not reached an agreement with ShowCase. The court, after determining that the
shareholder or shareholders in question have complied with all the statutory
requirements, may use any valuation method or combination of methods it deems
appropriate to use, whether or not used by ShowCase or the dissenting
shareholder, and may appoint appraisers to recommend the amount of the fair
value of the shares. The court's determination will be binding on all
shareholders who properly exercised dissenters' appraisal rights and did not
agree with ShowCase as to the fair value of the shares. Dissenting shareholders
are entitled to judgment for the amount by which the court-determined fair value
per share, plus interest, exceeds the amount per share, plus interest, remitted
to the shareholders by ShowCase. The shareholders will not be
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liable to ShowCase for any amounts paid by ShowCase that exceed the fair value
of the shares as determined by the court, plus interest. The costs and expenses
of such a proceeding, including the expenses and compensation of any appraisers,
will be determined by the court and assessed against ShowCase, except that the
court may, in its discretion, assess part or all of those costs and expenses
against any shareholder whose action in demanding supplemental payment is found
to be arbitrary, vexatious or not in good faith. The court may award fees and
expenses to an attorney for the dissenting shareholders of the amount, if any,
awarded to these shareholders. Fees and expenses of experts or attorneys may
also be assessed against any person who acted arbitrarily, vexatiously or not in
good faith in bringing the proceeding.
Shareholders considering whether to exercise dissenters' appraisal
rights should bear in mind that the fair value of their shares determined under
sections 302A.471 and 302A.473 of the Minnesota Business Corporation Act could
be more than, the same as or less than the consideration they would receive
pursuant to the merger agreement if they did not seek appraisal of their shares.
Cash received pursuant to the exercise of dissenters' appraisal rights
may be subject to federal or state income tax. ANY HOLDER WHO FAILS TO COMPLY
FULLY WITH THE STATUTORY PROCEDURE SUMMARIZED ABOVE WILL FORFEIT ALL RIGHTS OF
DISSENT AND INSTEAD EACH OUTSTANDING SHARE OF SHOWCASE COMMON STOCK HELD BY THAT
HOLDER WILL BE CANCELED AND CONVERTED INTO THE RIGHT TO RECEIVE 0.333 OF A SHARE
OF SPSS COMMON STOCK.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a summary of the material anticipated United States
federal income tax consequences of the merger to ShowCase shareholders who hold
ShowCase common stock as a capital asset. The summary is based on the Code,
Treasury regulations thereunder and administrative rulings and court decisions
in effect as of the date of this Proxy Statement/Prospectus, all of which are
subject to change at any time, possibly with retroactive effect. This summary is
not a complete description of all of the tax consequences of the merger and, in
particular, may not address United States federal income tax considerations
applicable to shareholders subject to special treatment under United States
federal income tax law (including, for example, foreign persons, financial
institutions, dealers in securities, insurance companies, tax-exempt entities,
holders who acquired their shares of ShowCase common stock pursuant to the
exercise of an employee stock option or right or otherwise as compensation and
holders who hold ShowCase common stock as part of a hedge, straddle or
conversion transaction). In addition, this summary does not include the tax
consequences of the merger under applicable foreign, state or local laws.
Holders of ShowCase common stock are urged to consult their tax advisors
regarding the particular tax consequences of the merger to them, including the
effects of United States federal, state, local, foreign and other tax laws.
GENERAL
It is a condition to the obligation of SPSS and Merger Sub to
consummate the merger that SPSS shall have received an opinion of Ross &
Hardies, counsel to SPSS, dated the date of the closing, substantially to the
effect that, on the basis of the facts, representations and assumptions set
forth in such opinion which are consistent with the state of facts existing at
the effective time, the merger constitutes a "reorganization" within the meaning
of Section 368 of the Code. In rendering its opinion, Ross & Hardies may require
and rely upon representations and covenants, including those contained in
letters from SPSS, Merger Sub, ShowCase and others, reasonably satisfactory in
form and substance to Ross & Hardies. It is a condition to the obligation of
ShowCase to consummate the merger that ShowCase shall have received an opinion
of Dorsey & Whitney LLP, counsel to ShowCase, dated the date of the closing,
substantially to the effect that, on the basis of the facts, representations and
assumptions set forth in such opinion which are consistent with the state of
facts existing at the effective time, the merger constitutes a "reorganization"
within the meaning of Section 368 of the Code. In rendering its opinion, Dorsey
& Whitney LLP may require and rely upon representations and covenants, including
those contained in letters from SPSS, Merger Sub, ShowCase and others,
reasonably satisfactory in form and substance to Dorsey & Whitney LLP.
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On the basis of the foregoing opinions, it is expected that the
following material federal income tax consequences will result from the merger:
(i) No gain or loss will be recognized by ShowCase shareholders who exchange
their ShowCase common stock solely for SPSS common stock pursuant to the merger
(except with respect to cash received in lieu of a fractional share interest in
SPSS common stock);
(ii) The holding period of the SPSS common stock received by a ShowCase
shareholder who exchanges all of its ShowCase common stock for SPSS common stock
in the merger will include the period during which the ShowCase common stock
surrendered in exchange therefore was held; and
(iii) The basis of the SPSS common stock received by a ShowCase shareholder who
exchanges all of its ShowCase common stock for SPSS common stock in the merger
will be the same as the basis of the ShowCase common stock surrendered in
exchange therefore (subject to any adjustments required as the result of the
receipt of cash in lieu of a fractional share of SPSS common stock).
None of the tax opinions to be delivered to the parties in connection
with the merger as described herein are binding on the Internal Revenue Service
(the "IRS") or the courts, and neither SPSS nor ShowCase intends to request a
ruling from the IRS with respect to the merger. Accordingly, there can be no
assurances that the IRS will not challenge the conclusions reflected in such
opinions.
Based on the current ruling positions of the IRS, cash received by a
ShowCase shareholder in lieu of a fractional share interest in SPSS common stock
generally will be treated as received in redemption of such fractional share
interest, and a ShowCase shareholder should generally recognize capital gain or
loss for United States federal income tax purposes measured by the difference
between the amount of cash received and the portion of the tax basis of the
share of ShowCase common stock allocable to such fractional share interest. Such
capital gain or loss would be long-term capital gain or loss if the holding
period for such share of ShowCase common stock is greater than one year at the
effective time.
The foregoing discussion is intended to provide only a general summary
of the material federal income tax consequences of the merger, and is not a
complete analysis or description of all potential federal income tax
consequences of the merger. This discussion does not address tax consequences
that may vary with, or are contingent on, individual circumstances. In addition,
it does not address any non-income tax or any foreign, state or local tax
consequences of the merger. ACCORDINGLY, WE STRONGLY URGE EACH SHAREHOLDER OF
SHOWCASE TO CONSULT HIS OR HER TAX ADVISOR TO DETERMINE THE PARTICULAR UNITED
STATES FEDERAL, STATE OR LOCAL OR FOREIGN INCOME OR OTHER TAX CONSEQUENCES TO
THAT SHAREHOLDER OF THE MERGER.
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REGULATORY MATTERS RELATING TO THE MERGER
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and its associated rules, the merger may not be consummated until
notifications have been given and certain information and materials have been
furnished to and reviewed by the Antitrust Division of the United States
Department of Justice ("DOJ") and the Federal Trade Commission ("FTC") and the
required waiting period has expired or terminated. SPSS and ShowCase filed the
required notification and report forms under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, with the FTC and the DOJ on December 1,
2000. There can be no assurance that a challenge to the merger on antitrust
grounds will not be made or, if a challenge is made, that it would not be
successful. In addition, state antitrust authorities and private parties in
certain circumstances may bring legal action under the antitrust laws seeking to
enjoin the merger or seeking conditions.
EXPENSES
We have each agreed to pay our own costs and expenses incurred in
connection with the merger and the merger agreement. SPSS, however, will pay the
expenses incurred in connection with the filing with the SEC of this joint proxy
statement/prospectus and the related registration statement and the costs
associated with the printing and mailing of this joint proxy
statement/prospectus. Additionally, SPSS will also pay transfer and property
taxes imposed on ShowCase or its subsidiaries as a result of the completed
transaction.
DISSENTERS' RIGHTS OF APPRAISAL
Holders of SPSS common stock are not entitled to dissenters' appraisal
rights in connection with the merger under Delaware law.
Holders of ShowCase common stock have dissenters' appraisal rights
under Minnesota law that would give them the right to obtain the payment of cash
in exchange for their ShowCase common stock as a result of the merger. ShowCase
shareholders have the right to dissent from the merger and obtain payment in
cash of the fair value of their shares of common stock under applicable
provisions of Minnesota law. In order to perfect appraisal rights, shareholders
must give written demand for appraisal of their shares before the taking of the
vote on the merger at the special meeting and must not vote in favor of the
merger. A copy of the applicable Minnesota statutory provisions is included as
Annex E to the accompanying joint proxy statement/prospectus and a summary of
these provisions can be found under the heading "Dissenters' Appraisal Rights"
later in this document.
FEDERAL SECURITIES LAWS CONSEQUENCES; STOCK TRANSFER RESTRICTION AGREEMENTS
This joint proxy statement/prospectus does not cover any resales of the
SPSS common stock to be received by the shareholders of ShowCase upon completion
of the merger, and no person is authorized to make any use of this joint proxy
statement/prospectus in connection with any such resale.
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All shares of SPSS common stock received by ShowCase shareholders in
the merger will be freely transferable, except that shares of SPSS common stock
received by persons who are deemed to be "affiliates" of ShowCase under the
Securities Act of 1933, as amended, at the time of the ShowCase special meeting
may be resold by them only in transactions permitted by Rule 145 under the 1933
Act or as otherwise permitted under the 1933 Act. Persons who may be deemed to
be affiliates of ShowCase for such purposes generally include individuals or
entities that control, are controlled by or are under common control with
ShowCase, as the case may be, and include directors and certain executive
officers of ShowCase. The merger agreement requires that ShowCase use all
reasonable efforts to cause each of such affiliates to execute a written
agreement to the effect that such persons will not offer, sell or otherwise
dispose of any of the shares of SPSS common stock issued to them in the merger
in violation of the 1933 Act or the related SEC rules.
THE COMPANIES
SPSS
SPSS Inc. was incorporated in Illinois in 1975 under the name "SPSS,
Inc." and was reincorporated in Delaware in May 1993 under the name "SPSS Inc."
SPSS is a multinational company that provides software and professional services
for discovering what customers want and predicting what they will do. SPSS
software and services, individually and in combination, are primarily used by
commercial organizations to integrate and analyze data in the process of
formulating strategies and programs to create more profitable customer
relationships. This process is commonly called "data mining" or "data analysis
using advanced analytical techniques."
Especially when combined into comprehensive analytical solutions, SPSS
software and professional services enable commercial organizations to better
target their marketing and sales programs, including:
- attracting new customers more efficiently;
- increasing sales to existing customers by improving cross-selling,
up-selling, and retention;
- forecasting and monitoring results, such as sales performance;
- facilitating more effective electronic commerce; and
- better allocating scarce resources across marketing programs.
In the public sector, SPSS software and services are primarily used for
improving interactions with constituents, the detection of fraud and
non-compliance, academic research, and teaching data analysis techniques at
colleges and universities.
SPSS's technology offers:
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- a wide array of data access and data management capabilities;
- an extensive range of analytical techniques not found in
spreadsheets, query and reporting, or OLAP (On-Line Analytical
Processing) software; and
- various capabilities for the deployment of the results of analyses
to decision-makers or their integration into databases, operational
systems, and the worldwide web.
SPSS's major offerings include its branded analytical solutions,
CustomerCentric and eMine, the SPSS and Clementine product lines for general
data mining and analysis (particularly in customer relationship management
applications), and the Quantime, In2itive, Surveycraft, and VerbaStat product
lines for professional market research.
In its 25 years of operation, SPSS has become a widely recognized name
in analytical software. SPSS plans to leverage this leadership position to take
advantage of the increased demand for software and services that enable
organizations to systematically analyze and present data for use in
decision-making. This increased demand is particularly apparent in decisions
related to developing programs for attracting or retaining customers, as well as
forecasting and monitoring the results of these programs. SPSS's management
believes that growth in the availability of data about, and competition for,
customers has substantially expanded the market for its analytical solutions and
products. Further contributing to this increased demand are new developments in
SPSS technology that effectively process large volumes of data and distribute
analytical results in real-time to decision makers and decision-making systems.
SPSS also recently introduced new service offerings for the integration and
analysis of customer data, especially information collected at web sites.
In August 1993, SPSS completed an initial public offering of common
stock, $.01 par value. The common stock is listed on the Nasdaq National Market
under the symbol "SPSS." In early 1995, SPSS and some stockholders sold
1,865,203 shares of common stock in a public offering.
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INDUSTRY BACKGROUND
The analysis of data using advanced analytical techniques, whether
traditional statistical methods such as factor analysis and regression, or other
methods such as neural networks and decision trees, enables decision-makers to
draw reliable conclusions from numerical information about a given subject. Such
systematic analysis of numbers goes back to the seventeenth century, when
statistics were used in determining insurance and annuity rates, as well as by
political leaders in developing more effective economic policies. The
fundamental purpose and power of this kind of data analysis remains the same
today: to help decision makers understand and resolve problems by uncovering the
causes underlying current conditions and predicting future events. Such benefits
are particularly apparent in contemporary data mining applications, which often
involve the examination of extremely large amounts of data stored in specialized
databases known as "data warehouses" or "data marts," as well as in analyzing
data directly related to activities on the world wide web.
SPSS has historically developed and marketed its software and services
for a wide range of data analysis applications. Recently, SPSS began to focus
more specifically upon the analysis of data related to customer attitudes and
behavior. SPSS believes that demand for its analytical capabilities will
continue to grow as decision-making becomes more complex, as the consequences of
decisions (particularly those related to customer requirements) become more
significant, and as more data is available for analysis. To meet this demand,
colleges and universities are training increasing numbers of people in the use
of appropriate analytical methods. In addition, new technology has made more
usable and affordable the application of advanced analysis to large data sets as
well as the distribution of analytical results to wider audiences within an
organization.
Vendors providing spreadsheets, query and reporting tools, and OLAP
software serve the largest part of the general market for data analysis
software. The widespread use of these tools is due to their effectiveness in
providing basic summaries of historical data, such as what sales were by region,
how many customers purchased a particular product, or what the default rate was
on loans.
A smaller yet sizable and growing part of the market uses more advanced
analytical capabilities for dealing with issues of causality and prediction.
Such capabilities enable corporations to predict sales for the upcoming season,
determine the best targets for a new product, or distinguish good and bad credit
risks prior to extending credit terms. Spreadsheet, query and reporting, and
OLAP software usually lack the advanced analytical capabilities to build the
predictive models needed to address these types of questions.
SPSS believes the demand for its analytical solutions and products will
grow as:
- competition for customers accelerates dramatically due to the
combination of increasingly global markets, deregulation in many
industries, and the ubiquity of information on the web;
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- organizations require more useful information from the increasing
amount of data being collected, organized, and stored;
- the number of people with a working knowledge of analytical methods
continues to grow significantly; and
- easier-to-use software, increases in computing power, and additional
options for the deployment of results eliminate many historical
barriers to the use of advanced analytical capabilities.
MARKETS
SPSS customers come from various industries and use SPSS software in a
wide range of applications. SPSS focuses, however, on the following market
areas:
Customer Relationship Management. Firms in various industries use SPSS
software and services to improve customer interactions, including:
- targeting promotional campaigns;
- test-marketing new products;
- identifying changing customer characteristics;
- measuring customer satisfaction;
- forecasting sales; and
- streamlining and personalizing web sites and other applications.
Business Intelligence. Firms in various industries use SPSS software
and services to analyze information in corporate databases, particularly data
warehouses, for an extensive range of applications. SPSS's technology extends
the capabilities provided by other business intelligence tools such as OLAP
software, query and reporting programs, ETL (extraction-transformation-load)
products, and multidimensional data stores. Moreover, SPSS software for business
performance measurement gives executives the ability to monitor critical
day-to-day operations by viewing key performance indicators and drilling down
for more information as needed.
Market Research. Almost all of the top market research firms worldwide
use SPSS's software and services to conduct the process of survey research, from
designing questionnaires to collecting data through multiple sources (especially
telephone and the web) to producing customized tabulations to developing
advanced analytical models.
Government. SPSS software and services are used in almost every country
of the world, at all levels of government, in civilian as well as defense
agencies. SPSS software, for example, is used as part of the efforts of the
Internal Revenue Service of the United States to modernize its tracking systems,
provides critical information used by many municipal public safety agencies,
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has become the standard marketing tools in the recruitment programs of the
United States Armed Forces, and is employed by many national census programs.
Education. SPSS software is used at virtually every major college and
university. In addition to their use in teaching statistics at the undergraduate
and graduate levels, SPSS software is used in academic research of all types.
Academic administrators also use SPSS software to monitor such aspects of their
operations as attrition rates, changes in the demographic profile of student
populations, and the success of fund-raising activities.
Scientific Research. SPSS products are used in a wide variety of
research and development efforts across academic, government, and corporate
institutions. SPSS products provide data analysis and presentation tools in such
applications as pharmacology, clinical trials, environmental monitoring, and
experimental modeling.
SPSS'S ANALYTICAL SOLUTIONS AND SOFTWARE PRODUCTS
SPSS's software enables its customers to analyze data, including the
generation of reports, graphs, and models, on a wide variety of computing
platforms. This technology can be used as stand-alone products or as part of
integrated analytical solutions. SPSS also provides professional services along
with its products and solutions, such as developing plans to align analytical
efforts with organizational goals, collecting and storing data, building
predictive models, and deploying the results of analyses throughout an
organization.
In general, SPSS software is:
- comprehensive in function, spanning the process of analysis from
data access to advanced predictive techniques;
- modular, allowing customers to purchase only the functionality they
need;
- integrated, enabling the use of various parts of the SPSS technology
in combination to tackle particularly complex problems;
- embeddable, facilitating the integration of SPSS analytical
capabilities into other systems, including web sites;
- tailored to desktop operating environments for greater ease-of-use,
including browser-based environments for the delivery of results;
- available on most popular computing platforms, and
- for some products, localized for use in France, Germany, Italy,
Poland, Japan, Taiwan, Korea, China, and Spanish-speaking countries.
SPSS currently offers two branded analytical solutions:
- CustomerCentric, a comprehensive analytical CRM solution that
applies data mining techniques in delivering customer intelligence
to personnel throughout an
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organization. In addition, CustomerCentric uses automated scoring
engines to integrate customer intelligence into web sites and
various operational systems within an organization for
behind-the-scenes power that drives personalized customer
interactions. CustomerCentric empowers organizations with a
closed-loop customer intelligence system that drives more effective,
more profitable decisions at every customer interaction.
- eMine, a comprehensive analytical solution that applies data mining
techniques for improving the effectiveness of web sites. Focusing
exclusively upon web data, eMine not only measures web site
performance but also detects critical traffic patterns and
identifies different visitor types. eMine can be integrated into a
CustomerCentric implementation to address the wider range of
questions essential to customer relationship management.
For clients with more limited requirements, SPSS also provides a
variety of targeted analytical solutions, including those for:
- Business Performance Measurement, giving executives the ability to
monitor the effectiveness of their operations by viewing different
key performance indicators and then drilling down for more detailed
information.
- Clickstream analysis, the analysis of activity data from a web site,
typically to develop more personalized interactions or improve the
overall organization of the site.
- Scoring and deployment, offering application developers components
to be plugged into other software applications that enable real-time
or batch scoring of customers, such as applicants for loans prior to
extending credit or insurance claims before their evaluation by
investigators.
- Forecasting and scenarios, allowing managers as well as analysts to
use their business knowledge in making better forecasts.
- Automated web surveys, a powerful solution for conducting surveys on
the Web and reporting the results of these surveys in real-time.
There are three categories of SPSS analytical products:
(1) Data mining and analysis products, for examining data in
databases, data warehouses, and other file types. In customer
relationship management applications, these products are
primarily used to segment customers by various outcomes, such
as the purchase of a product or the renewal of a contract, as
well as to predict their future behavior and the actions of
prospects with similar profiles. SPSS offerings for data
mining and analysis are in either the SPSS or Clementine
product lines.
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- The SPSS product line provides a broad range
of statistical methods. Users create tables,
graphs, OLAP reports, and predictive models
in both desktop and distributed computing
environments. While there are some
variations according to the version and
computing platform, a typical configuration
in a customer relationship management
application is an SPSS Base and related
add-on and other optional products. The SPSS
Base includes the user interface, data
connectivity, data editing, reporting,
graphing, and general statistical
capabilities. Add-on products require the
SPSS Base to operate and become seamlessly
integrated with it upon installation; these
offerings provide additional functionality
specific to a particular type of analysis.
Other optional products do not require the
SPSS Base to operate and perform specific
applications, such as facilitating certain
types of data entry or performing certain
kinds of advanced analysis. Some of these
other optional products in the SPSS product
line are particularly notable because their
capabilities provide value to organizations
beyond what is typically realized with
general-purpose statistical products.
AnswerTree, for example, enables highly
visual decision-trees to be used for
developing customer profiles. DecisionTime
creates time-series forecasts, which can
then be distributed for review and scenario
analysis by managers and executives with its
companion product, WhatIf? SmartViewer Web
Server distributes the results of analysis
to decision-makers via the Web. SmartScore
deploys the results of analyses into
operational systems, including call centers
and web sites, as well as into databases or
data warehouses.
- The Clementine product line offers advanced
analytical capabilities for a variety of
data mining applications in desktop and
distributed computing environments. With its
unique user interface, Clementine enables
operating managers to easily incorporate
their business knowledge with data to
develop predictive models. Models built in
Clementine can then be deployed for use in
other software applications with the
Clementine Solution Publisher. While the
SPSS and Clementine product families are
already usable together, SPSS plans to more
tightly integrate their functionality in the
future.
(2) Market research products. The Quantime, In2itive, and
Surveycraft product lines provide comprehensive solutions for
professionals in the market research industry. These sets of
offerings have their particular strengths: the Quantime
products, for example, are distinguished by their extensive
functionality, while the In2itive products feature a more
modern user interface and the Surveycraft products are more
easily localized for use in Asian markets. SPSS plans to
combine the strengths of these product lines, as well as
improve their ability to communicate with other SPSS products,
in its next-generation solution for market research
professionals.
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(3) Scientific products. Scientists and engineers in various
technical applications use the SigmaPlot and SYSTAT product
lines for data presentation and analysis.
SOFTWARE PRICING
SPSS's licensing and pricing alternatives vary widely depending upon
the analytical solution or product required as well as the computing platform
involved and the number of users licensed.
Implementations of CustomerCentric and eMine usually cost between
$750,000 and $1.5 million, while those of more targeted analytical solutions
usually vary between $100,000 and $300,000. All such implementations carry
additional maintenance fees providing for updates to the technologies included.
For the SPSS product line, list prices in North America for perpetual
single-user licenses of desktop products are approximately $999 for the SPSS
Base and range from $299 to $2,499 for other products. Multi-user network and
site licenses can be significantly higher and require annual payments. List
prices of annual licenses for SPSS product line products on mainframes,
minicomputers, UNIX workstations, and Windows NT servers range from $4,500 to
$15,000, while perpetual licenses run from $10,000 to over $30,000.
Clementine is available under all license types listed above, with a
typical sale of between $50,000 and $75,000.
The market research products are licensed on an annual and perpetual
basis, where the amount of the annual or perpetual fee depends on the number of
modules involved in the customer's configuration and the number of users of each
module. Such fees range from approximately $1,000 to over $1 million. The rate
of renewal of these licenses has historically been very high (over 90%).
Science products are usually sold as perpetual licenses for between
$500 and $1,300, with discounts for volume purchases. Multi-user and site
licenses are also available and require annual payments.
PUBLICATIONS AND STUDENT SOFTWARE
SPSS authors and regularly updates a number of publications that
include user manuals and instructional texts. SPSS also develops student
versions of its SPSS Base and SYSTAT products, which are designed for classroom
use with SPSS textbooks or other instructional materials. Since February 1993,
the College Division of Prentice Hall, under the terms of a semi-exclusive,
worldwide agreement, has distributed SPSS publications and student software. See
"Business-Prentice Hall Agreement." SPSS also has arrangements with other
publishers to include the SPSS Student Version in textbooks with data sets
specific to the text.
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TRAINING AND CONSULTING
SPSS offers a comprehensive training program with courses covering
product operations, data analytical concepts, and particular analytical
applications. These courses are regularly scheduled in cities around the world.
Organizations may also contract for on-site SPSS training tailored to their
specific requirements.
SPSS offers consulting and customization services, where an engagement
may involve the development of plans to align analytical efforts with
organizational goals, the collection and organization of data, the building of
predictive models, and the deployment of the results of analyses throughout an
organization.
SALES AND MARKETING
The SPSS sales and marketing strategy emphasizes its ability to deliver
high value products and analytical solutions, particularly for customer
relationship management, business intelligence, and market research
applications. SPSS's management believes its data mining and other advanced
analysis capabilities are the keys to differentiating SPSS from its competitors.
SPSS markets and sells its solutions, products, and services primarily
through worldwide field sales and telesales organizations. Historically, product
sales have been made by the telesales organizations from leads driven by
advertising, direct mail, tradeshow attendance, and customer references.
Although varying widely, sales made by the telesales organization are typically
completed within 30 days and average about $1,400. SPSS's database of existing
customers provides an effective source for selling add-on products, upgrades,
and training or consulting services.
As SPSS increases its emphasis on the sale of higher-priced products
and analytical solutions, SPSS is increasing the size of its field sales force
along with its pre-sales support staff and consulting personnel. Most of this
field sales force is now organized by industry to better understand the business
issues facing executives in that industry and more effectively relate SPSS
products and analytical solutions to their needs. For large sales opportunities,
SPSS sales representatives and technical sales personnel visit prospects to make
presentations, give product demonstrations, and provide pre-sales consulting.
SPSS also has partner relationships with other leading companies, which
represent additional channels for sales and leads for SPSS's higher-priced
offerings.
In addition to its headquarters in Chicago, SPSS has sales offices
across the United States, including New York City, the Washington D.C. area,
Miami, Cincinnati, Denver, and San Francisco. The SPSS international sales
operation consists of thirteen sales offices in Europe and the Pacific Rim, as
well as over 60 licensed distributors. Overall, SPSS is represented in over 50
countries. Transactions are customarily made in local currencies.
Student versions of SPSS products are published by Prentice Hall and
sold by more than 300 Prentice Hall sales representatives working directly with
faculty on college campuses worldwide. The arrangement also permits Prentice
Hall to bundle its various textbooks on statistics, market research, and quality
improvement with student versions of SPSS products.
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Current users of SPSS products comprise a significant source of new
sales leads. Also important are the expert reviews of SPSS software in trade and
market-specific publications. SPSS's marketing communications program includes
advertising in trade and market-specific publications, advertising on the
worldwide web, direct mail, exhibiting at trade shows, participating in and
speaking at professional association meetings, sponsoring seminars for prospects
and customers, publishing SPSS's customer magazine and conducting user group
meetings.
CUSTOMER SERVICE AND TECHNICAL SUPPORT
SPSS provides extensive customer service and technical support either
on-site or by telephone, fax, mail and the worldwide web, promoting customer
satisfaction and obtaining feedback on new software. Technical support services
provided to all licensees include assistance in software installation and
operation, as well as limited consulting in the selection of different
analytical methods and the interpretation of results. Additional technical
support services are available on a fee basis.
RESEARCH AND DEVELOPMENT
SPSS plans to continue expanding its software offerings through the
development of new software technologies and products, the enhancement of
existing software technologies and products, the acquisition of complementary
technologies, and the formation of partnerships with value-added resellers or
other third parties serving selected markets. SPSS's research and development
strategy is primarily focused on:
- improving the scalability of its software to work with larger data
sets;
- expanding the ability of its software to integrate with other
applications and be tailored to customer-specific requirements;
- enhancing the ways results of analyses can be deployed throughout an
organization, making them readily accessible to decision-makers as
well as usable in various operational systems and web sites; and
- extending the analytical capacity already available in its software.
SPSS's specialists in user interface design, software engineering,
quality assurance, product documentation, and the development of analytical
algorithms are responsible for maintaining and enhancing the quality, usability,
and accuracy of all SPSS software. The research and development organization is
also responsible for authoring and updating all user documentation and other
publications. In addition, SPSS maintains ongoing relationships with third-party
software developers for the development of specialized software products and the
acquisition of technology that can be embedded in SPSS software.
Most statistical algorithms used by SPSS in its software are published
for the convenience of its customers. SPSS employs full-time statisticians who
regularly research and evaluate new algorithms and statistical techniques for
inclusion in SPSS's software. SPSS also
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employs statistically-trained professionals in its documentation, quality
assurance, software design and software engineering groups.
SPSS intends to continue to invest in research and development. In
particular, SPSS's 2000 development plan includes a recommendation engine for
integration into its CustomerCentric and eMine analytical solutions, additional
server versions of offerings in the SPSS product line, and updates to the SPSS
product line (including related server versions), Clementine, SmartViewer Web
Server, Quantime, In2itive, SYSTAT, SigmaPlot, and other products. SPSS also
intends to further develop analytical components designed for use by software
developers for integration into other applications.
In the past, SPSS has experienced delays in the introduction and
enhancement of products and technologies primarily due to difficulties with
particular operating environments and problems with technology provided by third
parties. These delays have varied depending upon the size and scope of the
project and the nature of the problems encountered. From time to time SPSS
discovers "bugs" in its products, which are resolved through maintenance
releases or periodic updates, depending on the seriousness of the defect. See
"Risk Factors- Risk Factors Relating to SPSS-SPSS Relies and Third Parties for
Certain Software."
The SPSS research and development staff currently includes
approximately 205 professionals organized into groups for software design,
algorithm development, software engineering, documentation, quality assurance,
and product localization. SPSS's expenditures for research and development,
including capitalized software, were approximately $19.6 million in 1997, $22.8
million in 1998, and $27.6 million in 1999.
SPSS also uses independent contractors in its research and development
efforts. Sometimes SPSS uses these contractors to obtain technical knowledge and
capability that it lacks internally. SPSS has also outsourced maintenance,
conversion, and new programming for some products to enable its internal
development staff to focus on products that are of greater strategic
significance. SPSS sometimes uses independent contractors to augment its
development capacity at a lower cost.
MANUFACTURING AND ORDER FULFILLMENT
To assure speed and efficiency in the manufacturing, order fulfillment,
and delivery of its products, SPSS entered into an agreement with IBM in
February 1993. From April 1993 to December 1996, IBM performed all diskette and
CD-ROM duplication, documentation printing, packaging, warehousing, fulfillment,
and shipping of SPSS products in the Western Hemisphere for SPSS. In January
1997, the IBM agreement was replaced with a similar agreement with Banta Global
Turnkey. These services were recently expanded worldwide. SPSS believes that,
because of the capacity of these third-party distribution centers and their
around-the-clock operation, SPSS can easily adapt to peak period demand, quickly
manufacture new products for distribution, and effectively respond to
anticipated sales volumes.
COMPETITION
SPSS's historical market for statistical software is both highly
competitive and fragmented. SPSS is among the largest companies in the
statistical software market, and, based
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upon sales and comparative assessments in trade publications, SPSS believes that
it competes effectively against its competitors, particularly on desktop
computing platforms. SPSS considers its primary worldwide competitor to be the
larger and better-financed SAS Institute, although SPSS believes that SAS's
revenues are derived principally from products for purposes other than
statistical analysis and operate on large systems platforms. StatSoft Inc. and
Minitab, Inc. are also competitors, although their annual revenues from these
statistical products are believed to be considerably less than the revenues of
SPSS. In addition to competition from other statistical software companies, SPSS
also faces competition from providers of software for specific statistical
applications.
In the data mining, customer relationship management and business
performance measurement markets, SPSS faces competition from many larger and
more well-funded companies, including SAS, IBM, Informix, NCR, Oracle, and
others, as well as recent entrants, such as Attune, Broadbase, E.piphany and
NetPerceptions, many of whom specialize in customer relationship management in
e-commerce settings. With the exception of SAS, these competitors do not
currently offer the range of analytical capability SPSS offers, and as a result
are both competitors and potential partners for SPSS technology.
SPSS holds a dominant position in the market for solutions to the
market research industry. SPSS believes that there are no competitors in this
market who are larger and better financed; the annual revenues of such vendors
as Sawtooth Software, Computers for Marketing Corporation, and Pulse Train
Technology are estimated to be considerably less than SPSS's revenues from its
market research products and services.
In all markets, SPSS competes primarily on the basis of the usability,
functionality, performance, reliability, and connectivity of its software. The
significance of each of these factors varies depending upon the anticipated use
of the software and the analytical training and expertise of the customer. To a
lesser extent, SPSS competes on the basis of price and thus maintains pricing
and licensing policies to meet market demand. SPSS believes it is able to
compete successfully because of its highly usable interfaces, comprehensive
analytical capabilities, efficient performance characteristics, local language
versions, consistent quality, and connectivity features of its software, as well
as its worldwide distribution capabilities and widely recognized name.
In the future, SPSS may face competition from other new entrants into
its markets. SPSS could also experience competition from companies in other
sectors of the broader market for business intelligence software, such as
providers of OLAP and analytical application software, as well as from companies
in other sectors of the broader market for customer relationship management
applications, such as providers of sales force automation and collaborative
software, who could add enhanced analytical functionality to their existing
products. Some of these potential competitors have significantly more capital
resources, marketing experience, and research and development capabilities than
SPSS. Competitive pressures from the introduction of new products by these
companies or other companies could have a material adverse effect on SPSS.
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INTELLECTUAL PROPERTY
SPSS attempts to protect its proprietary software with trade secret
laws and internal nondisclosure safeguards, as well as copyrights and
contractual restrictions on copying, disclosure and transferability that are
incorporated into its software license agreements. SPSS licenses its software
only in the form of executable code, with contractual restrictions on copying,
disclosures and transferability. Except for licenses of its products to users of
large system products and annual licenses of its desktop products, SPSS licenses
its products to end-users by use of a "shrink-wrap" license, as is customary in
the industry. It is uncertain whether these license agreements are legally
enforceable. The source code for all of SPSS's products is protected as a trade
secret and as unpublished copyrighted work. In addition, SPSS has entered into
confidentiality and nondisclosure agreements with its key employees. Despite
these restrictions, the possibility exists for competitors or users to copy
aspects of SPSS's products or to obtain information which SPSS regards as a
trade secret. SPSS has no patents, and judicial enforcement of copyright laws
and trade secrets may be uncertain, particularly outside of North America.
Preventing unauthorized use of computer software is difficult, and software
piracy is expected to be a persistent problem for the packaged software
industry. These problems may be particularly acute in international markets.
SPSS uses a variety of trademarks with its products. Management
believes the following are material to its business:
- SPSS is a registered trademark used in connection with virtually all
of SPSS's products;
- CustomerCentric is a trademark pending registration and used in
connection with SPSS's comprehensive analytical CRM solution;
- eMine is a registered trademark used in connection with SPSS's
comprehensive analytical solution for improving the effectiveness of
web sites;
- Clementine is a trademark pending registration and used in
connection with SPSS's acquired product line from Integral Solutions
Limited;
- WhatIf? and DecisionTime are the subject of pending applications for
registration;
- AnswerTree is a registered trademark and is an add-on product to the
SPSS product family;
- SmartViewer is a registered trademark and is an add-on product to
the SPSS product family;
- Vento and VentoMap are registered trademarks used in connection with
SPSS's acquired Vento products on all platforms;
- Quantime is an unregistered trademark used in connection with SPSS's
acquired Quantime products on all platforms;
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- In2itive Technologies is a registered trademark in Denmark and is
used in connection with SPSS's acquired In2itive products on all
platforms;
- Surveycraft is an unregistered trademark used in connection with
SPSS's acquired Surveycraft products;
- SYSTAT is a registered trademark used in connection with SPSS's
SYSTAT products on all platforms; and
- SigmaPlot is a registered trademark used in connection with SPSS's
acquired products on all platforms.
Some of these trademarks comprise portions of other SPSS trademarks.
SPSS has registered some of its trademarks in the United States and some of its
trademarks in a number of other countries, including the Benelux countries,
France, Germany, the United Kingdom, Japan, Singapore and Spain.
Due to the rapid pace of technological change in the software industry,
SPSS believes that patent, trade secret, and copyright protection are less
significant to its competitive position than factors such as the knowledge,
ability, and experience of SPSS's personnel, new research and development,
frequent technology and product enhancements, name recognition, and ongoing
reliable technology maintenance and support.
SPSS believes that its solutions, products, and trademarks and other
proprietary rights do not infringe the proprietary rights of third parties.
There can be no assurance, however, that third parties will not assert
infringement claims in the future.
RELIANCE ON THIRD PARTIES
HOOPS
SPSS entered into a perpetual nonexclusive license agreement, the HOOPS
agreement, with Autodesk Inc. that permits SPSS to incorporate a graphics
software program known as the HOOPS Graphics System into SPSS's products. Under
the terms of the HOOPS agreement, SPSS is required to pay royalties to Autodesk
based on the amount of revenues received by SPSS from products that incorporate
the HOOPS Graphics System. SPSS may terminate the HOOPS agreement at any time.
Autodesk may terminate the HOOPS agreement on the occurrence of a material,
uncured breach of the HOOPS agreement by SPSS.
SPSS also licenses certain other software programs from third-party
developers and incorporates them into its products. Many of these licenses are
exclusive worldwide agreements that terminate on various dates. SPSS believes
that it will be able to renew non-perpetual licenses or obtain substitute
products if needed.
BANTA GLOBAL TURNKEY SOFTWARE DISTRIBUTION AGREEMENT
In January 1997, SPSS entered into an agreement with Banta Global
Turnkey (Banta) under which Banta manufactures, packages, and distributes SPSS
software products to its
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customers worldwide. The Banta agreement had an initial three-year term, and
automatically renews thereafter for successive periods of one year. The Banta
agreement was renewed in January 2000. Either party may terminate this agreement
with 180 prior days written notice. If Banta terminates the agreement for
convenience or for any reason other than for cause, then during the 180-day
notice period Banta will assist SPSS in finding a new vendor. If either party
materially breaches its obligations, the other party may terminate the Banta
agreement for cause by written notice. This termination notice for cause must
specifically identify the breach or breaches, upon which the termination is
based and will be effective 180 days after the notice is received by the other
party, unless the breach(es) is (are) corrected during the 180 days.
PRENTICE HALL AGREEMENT
SPSS entered into an agreement with Prentice Hall in February 1993.
Under this agreement, SPSS granted to Prentice Hall the exclusive, worldwide
right to publish and distribute all SPSS publications, including student
versions of SPSS for DOS and Windows. The initial agreement had a five-year term
which ended in 1998.
SPSS entered into a new five-year contract with Prentice Hall in April
1998. Prentice Hall has an option to renew this contract for five additional
years if it pays SPSS $2,750,000 or more during the term of this agreement. If
Prentice Hall does not pay SPSS $1,100,000 by the end of the second year of the
contract, SPSS has the option to make Prentice Hall's right to distribute
Student Versions non-exclusive. The key differences in the new contract
vis-a-vis the old contract are: (1) Prentice Hall may publish and distribute
SPSS publications in certain geographic territories only, instead of worldwide;
(2) Prentice Hall has rights only to certain books and SPSS may sell any book
(rather than SPSS having to purchase the books from Prentice Hall); and (3) SPSS
can, within certain guidelines, license other publishers to bundle versions of
the SPSS Student Version with their textbooks.
COMPUTER SOFTWARE DEVELOPMENT COMPANY
In 1981, SPSS entered into a software development agreement with the
Computer Software Development Company to obtain funding of approximately
$2,000,000 for development of software including two large system products, SPSS
Graphics and SPSS Tables, and one desktop product, SPSS/PC+ Tables. SPSS entered
into two software purchase agreements with Computer Software Development under
which SPSS is required to pay Computer Software Development royalties through
the year 2001 based on a percentage of "net revenues" (as defined in the
agreements) from large system software products developed with Computer Software
Development funds. Under these agreements, SPSS incurred royalty payments of
approximately $249,000 in 1997, $234,000 in 1998 and $237,000 in 1999 to
Computer Software Development. Norman Nie, the Chairman of the Board of SPSS, is
a limited partner of Computer Software Development.
SEASONALITY
SPSS's quarterly operating results fluctuate due to several factors,
including:
- the number and timing of product updates and new product
introductions;
70
- delays in product development and introduction of new technologies;
- purchasing schedules of its customers;
- changes in foreign currency exchange rates;
- research and development as well as market development expenditures;
- the timing of product shipments and solution implementations;
- changes in mix of product and solutions revenues; and
- timing and cost of acquisitions and general economic conditions.
If forecasts of future revenues fall below expectations, operating
results may be adversely affected because SPSS's expense levels are to a large
extent based on these forecasts. Accordingly, SPSS believes that
quarter-to-quarter comparisons of its results of operations may not be
meaningful and should not be relied upon as an indication of future performance.
SPSS has historically operated with very little backlog because its products are
generally shipped as orders are received. As a result, revenues in any quarter
are dependent on orders shipped and licenses renewed in that quarter. SPSS has
experienced a seasonal pattern in its operating results, with the fourth quarter
typically having the highest operating income. For example, excluding special
general and administrative, merger-related, and acquired in-process technology
charges, the percentage of SPSS's operating income realized in the fourth
quarter was 36% in 1997, 35% in 1998 and 38% in 1999. In addition, the timing
and amount of SPSS's revenues are affected by a number of factors that make
estimation of operating results prior to the end of a quarter uncertain. A
significant portion of SPSS's operating expenses is relatively fixed, and
planned expenditures are based primarily on revenue forecasts. More
specifically, in the fourth quarter, the variable profit margins on modest
increases in sales volume at the end of the quarter are significant. If SPSS
fails to achieve these fourth quarter revenue increases, then a material
reduction in net income for the fourth quarter and the full year could result.
Generally, if revenues do not meet SPSS's expectations in any given quarter,
operating results will be adversely affected. SPSS cannot provide assurance of
profitability on a quarterly or annual basis in the future.
EMPLOYEES
As of September 30, 2000, SPSS had approximately 1004 employees,
approximately 564 domestically, and 440 internationally. Of the approximately
1004 employees, there are approximately 626 in sales and marketing, 193 in
product development and 185 in general and administrative. SPSS believes it has
generally good relationships with its employees. None of SPSS's employees are
members of labor unions.
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FINANCIAL INFORMATION ABOUT SPSS'S FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES
The following table sets forth financial information about SPSS's
foreign and domestic operations. This information may not necessarily be
indicative of trends for future periods.
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1997 1998 1999
---------------- ---------------- ---------------
(IN THOUSANDS)
Sales to unaffiliated customers:
United States $ 56,014 $ 64,870 $ 70,409
Europe and India 41,680 45,337 52,341
Pacific Rim 13,412 13,265 19,180
---------------- ---------------- ---------------
Total $ 111,106 $ 123,472 $ 141,930
================ ================ ===============
Sales or transfers between
geographic areas:
United States $ 18,261 $ 18,365 $ 22,707
Europe and India (12,613) (12,714) (14,296)
Pacific Rim (5,648) (5,651) (8,411)
---------------- ---------------- ---------------
Total $ -- $ -- $ --
================ ================ ===============
Operating income (loss)
United States $ 5,025 $ 4,581 $ 7,272
Europe and India (232) 10,799 12,747
Pacific Rim 1,268 1,397 4,476
---------------- ---------------- ---------------
Total $ 6,061 $ 16,777 $ 24,495
================ ================ ===============
[Download Table]
------------------------------------------------------
1997 1998 1999
---------------- ---------------- ----------------
Identifiable assets:
United States $ 44,054 $ 67,014 $ 70,792
Europe and India 16,227 21,694 28,250
Pacific Rim 4,908 5,595 7,673
---------------- ---------------- ----------------
Total 65,189 94,303 106,715
================ ================ ================
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SHOWCASE
ShowCase Corporation is the leading provider of fully integrated,
end-to-end, business intelligence solutions for IBM AS/400 customers. The
ShowCase STRATEGY product suite and related services are designed to enable
organizations to rapidly implement business intelligence solutions that create
increased value from their operational and customer data. The sophisticated data
warehousing and management capabilities of the ShowCase product suite provide
its clients with highly scalable and tightly integrated solutions. ShowCase's
products enable enterprise-wide distribution of information and allow end-user
access and analysis through familiar applications and Internet browsers.
ShowCase has nine years of experience delivering business intelligence solutions
to its clients. The ShowCase STRATEGY product suite, introduced in 1996,
supports ad hoc information access, enterprise reporting and analytics.
INDUSTRY BACKGROUND
The rapid growth of the Internet and the proliferation of e-business
are transforming the way organizations conduct business, communicate and share
information. This transformation is driving broad and immediate demand for
better intelligence and information dissemination. In recent years, the
deployment of enterprise resource planning applications, the integration of
supply chains and the emergence of e-business have increased the amount of data
available to companies. Nevertheless, many companies have failed to organize,
manage and disseminate this data in an accessible, intuitive manner. Companies
require business intelligence to interpret and create value from the vast
amounts of available data by better tailoring products and services, identifying
business opportunities and improving operational efficiencies. In addition, as
organizations have become more closely linked with suppliers and customers,
there is an increasing need to extend business intelligence beyond
organizational boundaries.
Business Intelligence. Employees, customers and suppliers require
business intelligence to make faster, smarter business decisions. Business
intelligence software enables organizations to transform data from disparate
sources into accessible, understandable and useful information. It is also the
foundation of an enterprise information portal, a centralized location where
users can access necessary corporate information. Business intelligence
solutions provide employees, customers and suppliers with useful information
through ad hoc information access, enterprise reporting and analytics. Ad hoc
information access enables users to customize the manner in which information is
viewed and analyzed. Enterprise reporting delivers timely analysis and
drill-down capabilities on a structured basis to broad user populations.
Finally, analytic applications provide management insight by enabling users to
analyze transactional data to identify operational trends and variances.
Examples of analytic applications include fraud detection, credit scoring and
budgeting applications. To support these functional uses, effective business
intelligence solutions require a strong infrastructure of data warehouse
generation and management.
Business intelligence is deployed in many ways to increase revenues and
operating efficiencies. For instance, in e-commerce, companies can use business
intelligence to better manage customer relationships by analyzing past
purchases, service history, product utilization and demographics. Consumer
product companies and retailers use business intelligence to deploy management
applications to determine which products to promote in specific markets and
73
channels. Companies engaged in supply chain management use business intelligence
to more efficiently manage product and material order flow among distribution
facilities, multiple plants and suppliers. Companies from all industries can use
business intelligence to benchmark performance against goals and best business
practices.
Business intelligence solutions are data intensive and draw on a broad
range of data sources. A critical foundation technology for business
intelligence solutions is a scalable and reliable server platform capable of
supporting a broad array of users and environments.
The IBM AS/400. The AS/400 is a leading server platform used by
mid-market companies to deploy enterprise resource planning, e-business and
business intelligence applications. The popularity of the AS/400 as an
application and e-business server is a function of its ease of use, reliability,
security, scalability and ability to deploy Java and Windows NT business
applications. Expanded interoperability with other systems facilitates the use
of the AS/400 as a server in heterogeneous computing environments. New models of
the AS/400 provide strong price performance and include an expanded
multiprocessor architecture and networking capabilities and software products
for Internet delivery of applications and e-business. The AS/400's integrated
hardware, operating system, database, middleware and software applications
provide organizations with the performance and tools to implement a robust
business intelligence solution.
Problems faced by traditional approaches to business intelligence.
Companies have spent extensive time and resources collecting, organizing and
delivering operational data through various applications. Nevertheless, many of
these companies have been unable to implement and realize the benefits of a
business intelligence solution because they lack the necessary technical
expertise. This problem is especially prevalent for AS/400 customers because
they typically have limited IT staff and resources. Traditionally, companies
have implemented business intelligence solutions through the purchase and
integration of many software products from multiple vendors. However, these
companies are often unable to realize the full potential of business
intelligence because of the following challenges:
Integrating components from multiple vendors. As a result of the
fragmented business intelligence market, implementing a business intelligence
solution has traditionally required the evaluation, selection, purchase and
integration of many different software products from multiple vendors.
Integrating these products requires extensive use of an organization's IT staff
and resources and often limits the overall capability of the implemented
solution. Furthermore, because these components are supplied by multiple
vendors, and use many different interfaces, the solution is often difficult to
use.
Adapting solutions to evolving end-user needs. The initial
implementation of a traditional business intelligence solution frequently
provides a limited set of functionality. As organizations realize the benefits
of business intelligence, they frequently wish to add more business
functionality to their solutions. Integrating this increased functionality may
not be possible with an organization's existing tools, or may be extremely
costly or laborious. Furthermore, the resulting solution is often of limited
overall effectiveness. As a result, end users frequently require sustained IT
staff involvement to perform the customized reporting and follow-on analysis
necessary to derive increased value from corporate data.
74
Scaling across the enterprise. When implementing traditional business
intelligence solutions, organizations frequently do not recognize the importance
of strong data warehouse generation and management capabilities. As a result,
the data warehouse generation and management infrastructure of a business
intelligence solution is often unable to meet the demands placed on it as the
diversity and size of the end-user population grows. Without this
infrastructure, companies frequently experience significant data integrity and
performance problems when they attempt to scale their business intelligence
solutions to serve broader user populations.
Extending business intelligence through the Internet. Extending
business intelligence through the Internet exacerbates the limitations of
traditional business intelligence solutions. As companies implement enterprise
information portals in an e-business environment, business intelligence
solutions must be easy to use and provide a high degree of scalability and
adaptability to deliver business intelligence to a growing population of
employees, customers and suppliers with diverse needs. To support this
large-scale deployment, business intelligence solutions must also have
sufficient management, security, intuitive user interfaces and Internet
browser-based capabilities.
ShowCase believes that the demand for business intelligence, the
limitations of traditional approaches and the large and growing AS/400 installed
base provide a significant opportunity for fully integrated, end-to-end business
solutions for AS/400 customers.
THE SHOWCASE SOLUTION
ShowCase is the leading provider of business intelligence solutions for
AS/400 customers. The ShowCase STRATEGY product suite and related services are
designed to enable organizations to rapidly implement and deploy business
intelligence solutions that create increased value from their operational and
customer data. ShowCase believes its solution provides the following key
benefits:
Full integration and end-to-end business intelligence functionality.
The ShowCase product suite and professional services are designed to provide
ShowCase's clients with a complete, fully integrated, end-to-end business
intelligence solution. ShowCase's products can be easily integrated with
industry leading enterprise software applications provided by vendors such as
Fiserv, Infinium Software, J.D. Edwards, Lawson Software, Lotus and SSA.
ShowCase's end-to-end solution provides each of the three functional business
intelligence uses--ad hoc information access, enterprise reporting and
analytics. Its business intelligence solutions incorporate a strong
infrastructure of data warehouse generation and management. This end-to-end
approach eliminates the need for AS/400 customers to evaluate, select, purchase
and integrate components from different vendors to realize the benefits of
business intelligence.
Easy deployment and expansion. ShowCase's comprehensive product suite
and accompanying professional services enable ShowCase's clients to quickly and
easily deploy a manageable business intelligence solution that minimizes the
burden on their IT departments. ShowCase's clients can deploy its modular
business intelligence solution in stages as their business intelligence needs
grow. Companies can start with any one of the above three functional business
intelligence uses and extend their solutions to include the other two as end
75
users realize the benefits of and discover other uses for business intelligence.
ShowCase also offers Deployment Accelerators, which provide adaptable
applications for targeted business functions and allow some of its clients to
realize benefits of business intelligence within days of deployment.
Robust scalability for enterprise-wide deployment. The ShowCase product
suite addresses the challenges faced by IT departments as business intelligence
solutions expand in functionality and in the number of applications and end
users supported. Its data warehouse generation and management capabilities and
its hub-and-spoke architecture enable modular expansion of data warehouses and
data marts, which are simpler implementations of data warehouses, to support
additional applications and end users. Further, ShowCase's product suite
supports enterprise performance capabilities and scalability through its tight
integration with and leverage of the AS/400 platform.
Ease of use and Internet accessibility. The ShowCase product suite
combines a consistent and intuitive user interface with powerful functionality
that allows end users to easily access, customize and analyze information and
reports with minimal IT assistance. Because users can realize the benefits of
ShowCase's solution through familiar applications, such as Microsoft Excel,
Lotus 1-2-3 and Microsoft Word, organizations are able to leverage existing
software applications and user skills. These capabilities are enhanced by
ShowCase's easy-to-use Internet browser-based capabilities, including query and
user-defined calculations, powerful graphics and drag-and-drop features.
SHOWCASE'S PRODUCTS
The ShowCase STRATEGY product suite includes all of the elements of a
complete business intelligence solution. Typical configurations of business
intelligence solutions include the following components of the ShowCase product
suite:
AD HOC INFORMATION ACCESS, ENTERPRISE REPORTING AND ANALYTICS
Query. Query provides end users high-performance access to relational
data on the AS/400 for ad hoc querying and results-oriented data analysis. Users
may access data warehouses and operational data through the product's interface
on their desktop computer, or through familiar applications, such as Microsoft
Excel, Lotus 1-2-3 and Microsoft Word. Query also provides scheduling and
sophisticated search functions for the advanced end user.
Report Writer. Report Writer enables end users to create fast,
specialized reports for data analysis. Report Writer also combines drag-and-drop
features, graphics and calculation capabilities that make report design easy and
intuitive.
Enterprise Reporting. Enterprise Reporting enables end users to publish
and schedule queries and reports in a variety of industry-standard formats to a
Web-server. By using Web technology as a repository and gateway, Enterprise
Reporting improves information delivery in a cost-effective, managed and secured
manner.
Analyzer. Analyzer enables end users to analyze relational data--data
with two variables and/or multidimensional data--data with more than two
variables through desktop computers.
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End users can display data as charts, spreadsheets or custom report forms. The
end user can drill down to the underlying data and sort, rank, filter, calculate
and graph this data for more in-depth analysis.
Analyzer for the Web. Analyzer for the Web is a "thin" version of
Analyzer that allows end users to conduct basic data analysis tasks over a
company's intranet or extranet. Analyzer for the Web is Java-based and
accessible through Internet browsers, such as Microsoft Explorer and Netscape
Navigator.
Essbase/400. Essbase/400 is a 64-bit implementation of Hyperion
Solutions' online analytical processing product, Essbase, on the AS/400.
Essbase/400 allows end users to perform multidimensional analysis on AS/400
data. It consists of a multidimensional database server, a desktop-based tool
for creating and maintaining the database and Microsoft Excel and Lotus 1-2-3
add- ins that provide end-user access. Essbase/400 can also be used with
ShowCase's Analyzer and Analyzer for the Web products, as well as the many
third-party applications developed for use with Hyperion's Essbase product.
Essbase/400 is easy to use and deploy rapidly, has robust calculation
capabilities, provides rapid responses to end-user requests and incorporates
user-generated scenario data.
DATA WAREHOUSE GENERATION AND MANAGEMENT
Warehouse Builder. For clients desiring enterprise-wide business
intelligence solutions, Warehouse Builder automates the process of building a
centralized data warehouse. Warehouse Builder transforms online transaction
processing data from any AS/400 data source into data marts or data warehouses.
Warehouse Builder enables clients to create multidimensional data marts or data
warehouses by moving data from IBM's DB/2 database for the AS/400 to
Essbase/400.
Warehouse Manager. Warehouse Manager provides the tools to manage data
warehouses and data marts on a day-to-day basis by integrating data
simplification, warehouse security, resource allocation and user access.
Warehouse Manager also enables administrators to allow users easier access to
data in complicated databases and to create a simplified view of any AS/400
database, whether it is used for transaction processing or analysis. In
addition, Warehouse Manager provides capabilities to interact with most AS/400
data types and with many third-party database extensions, such as the J.D.
Edwards interactive data dictionary and Infinium's security system.
DEPLOYMENT ACCELERATORS
Sales and Financial Analysis Deployment Accelerators. The ShowCase
STRATEGY Deployment Accelerators are pre-configured functional data models or
templates that may be used to quickly implement and adapt sales and/or financial
analysis applications. These adaptive applications are designed to serve as
architectural models for ShowCase's clients' business intelligence solutions.
Sales Analysis Deployment Accelerators provide order and performance/variance
analysis, sales, customer and shipping tracking, sales history and forecasting
and impact analysis. Financial Analysis Deployment Accelerators provide
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accounting and financial reporting, profit and loss analysis, budgeting,
forecasting and overhead calculation, variance and unit cost analysis and
business segmentation.
SHOWCASE SERVICES
Customer Support. ShowCase's support team provides comprehensive
support services to its clients, including the following services:
- unlimited technical support via telephone, facsimile, the Internet and
e-mail;
- program temporary fixes;
- technical documents on demand; and
- product upgrades.
ShowCase has over 2,200 clients on its annual maintenance plan. It
offers maintenance support through its regional support centers in North
America, Europe, Malaysia and a partnership in Japan. Currently, ShowCase's
regional support offices have access to an integrated customer database that
provides each office with real-time information regarding its clients and their
installed product base. A client that has a maintenance problem after hours and
is unable to contact its regional support office may contact any one of
ShowCase's other regional support offices and obtain maintenance support.
Professional Services. Because they often have limited IT staff and
resources, ShowCase's clients require a high level of service and support. To
address this need, ShowCase offers a full range of educational, consulting and
support services. It works with clients to design customized service plans that
will enable them to rapidly implement and realize the benefits of business
intelligence solutions that can evolve with end-user needs. As an example of
this approach, ShowCase recently introduced service offerings that allow clients
to leverage ShowCase's Deployment Accelerators to quickly implement pilot
applications. For existing clients, ShowCase offers services designed to assist
them in expanding their use of the ShowCase product suite and using it in more
sophisticated applications. To increase the ability of end users to realize the
functionality provided by the ShowCase product suite, ShowCase's educational
services provide comprehensive, hands-on training through both public and onsite
sessions. In addition to its own professional services personnel, ShowCase has
service partners in North America, Europe and Asia Pacific that provide training
and consulting for its clients.
SALES AND MARKETING
Sales. ShowCase currently sells its products and services through its
direct sales force and distribution partners including IBM, software application
vendors, distributors and resellers. ShowCase's direct sales force operates in
North America, Belgium, France, Germany, the Netherlands and the United Kingdom.
Its North American direct sales force is divided into three units. Each
salesperson in the new accounts unit focuses on specific potential accounts. The
existing accounts unit targets existing clients. Because many of ShowCase's
clients initially deploy its products on a departmental basis, ShowCase believes
that its existing clients represent a significant sales opportunity as they
discover the potential of business intelligence and look to
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leverage its benefits enterprise-wide to increase operational efficiency and
profitability. ShowCase's internal telesales unit focuses primarily on smaller
transactions, and generally sells individual components of its product suite to
new accounts, additional components of its product suite to existing clients and
maintenance services. ShowCase's overseas direct sales force consists of a
direct sales unit and a telesales unit that target both new clients and existing
accounts. Sales channels for ShowCase products and services may change following
the merger with SPSS.
ShowCase's software application vendor distribution partners include
vendors that integrate ShowCase's products within their own applications and
sell the integrated products to their customers, such as A3 Solutions, Fiserv,
IBM, Infinium Software, Lawson Software, Silverlake, TSG and Walker Interactive;
and vendors with which ShowCase has joint marketing and sales arrangements, such
as Data Systems International and J.D. Edwards. ShowCase also sells its products
through IBM's sales force and distributors located in countries not served by
ShowCase's direct sales force, including Eastern European, African and Asian
countries.
Marketing. ShowCase is focused on building market awareness and
acceptance of its product suite as the leading provider of business intelligence
solutions for the AS/400 customer. Its marketing organization provides a wide
range of programs, materials and events that support its sales force. These
include extensive public relations activities, user group meetings, conference
and trade show appearances, as well as programs to work closely with analysts
and other influential third parties. ShowCase uses its Internet site to augment
its market presence, promote its products and services and generate sales leads.
Furthermore, ShowCase has invested in building a partner and channel marketing
function to help recruit, train, support and conduct cooperative marketing with
strategic partners, resellers and certified service providers.
PRODUCT DEVELOPMENT
Since its inception, ShowCase has made substantial investments in
product development. During this time, it has focused on delivering rapid return
on investment and enterprise-wide deployment capabilities for its clients.
ShowCase's core technology competence lies in extracting and transforming raw
data from IBM's DB/2 database and other unique AS/400 data structures into
business intelligence. ShowCase extends the AS/400 operating system to support
business intelligence with features such as data simplification, enhanced
security and resource management. It also tightly integrates these database
management and infrastructure technologies with end user query and reporting
products and multidimensional analytical technology.
ShowCase's product development group is organized into small teams and
consists of product managers, software engineers, quality assurance engineers,
technical documentation specialists and integration specialists. Its product
development process is intended to be repeatable yet flexible thereby allowing
it to reuse both source code and the processes used to develop source code. To
better serve client needs and incorporate those needs into new releases,
ShowCase actively solicits product enhancement requests from employees, clients,
industry analysts, partners and IBM.
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STRATEGIC RELATIONSHIPS
IBM
ShowCase has maintained a strategic relationship with IBM in sales and
marketing and research and development. Its close relationship with IBM's
Rochester, Minnesota facility, which has developed the AS/400, has enabled
ShowCase to quickly leverage new AS/400 capabilities and influence the future
direction of the AS/400 for the benefit of its clients. This association with
IBM has resulted in ShowCase's products being recognized as a standard business
intelligence technology on the AS/400. For example, the ShowCase STRATEGY
product suite is used by IBM in new database release quality control efforts.
ShowCase also participates in several formal and informal programs with IBM
which it believes afford it valuable experience with AS/400 products and
insights into IBM's product development and marketing plans. ShowCase is one of
IBM's designated "Premier Business Partners" and has won several awards from
IBM, including, IBM's Powered by AS/400e Award. IBM has been a reseller of
several of ShowCase's products for several years. ShowCase entered into an
expanded agreement with IBM in December 1998, which was amended in February
2000, which provides that certain products will be marketed and sold as OEM
products by IBM. This agreement has a term of seven years, and expands the scope
of ShowCase's reseller relationship with IBM. Under this agreement, ShowCase has
agreed to perform several development enhancements to the Essbase/400 software.
Previously, ShowCase had not been a party to any other funded software
development arrangements.
HYPERION SOLUTIONS
ShowCase's relationship with Hyperion Solutions began in 1995 when
ShowCase searched the marketplace for a high-performance, multidimensional
database server and selected its online analytical processing product, Essbase.
ShowCase expended significant resources in 1995 and 1996 porting Essbase to and
optimizing its performance on the AS/400. ShowCase has the exclusive right to
distribute the resulting product, Essbase/400, subject to limited distribution
rights retained by Hyperion Solutions. The addition of Essbase/400 to its
product line provides ShowCase with the ability to access a broader customer
base, including users of multidimensional analyses. Furthermore, ShowCase's
Essbase/400 product provides it with additional partnering opportunities by
extending Essbase to the AS/400 platform. In addition, ShowCase's Analyzer and
Analyzer for the Web products are based on technology licensed from Hyperion
Solutions under a non-exclusive license agreement that expires in January 2001.
ShowCase's exclusive Essbase/400 distribution rights are conditioned
upon it paying minimum royalties and are subject to a buy-back right. Hyperion
Solutions must give ShowCase notice 12 months before exercising this buyback
right. If minimum royalty payments are not made, ShowCase has the option of
paying the remaining balance to retain its exclusive distribution rights. If
ShowCase does not retain its exclusive distribution rights, it must pay Hyperion
Solutions minimum royalty payments to retain non-exclusive distribution rights
to Essbase/400.
INTRANET SOLUTIONS
ShowCase's relationship with IntraNet Solutions began in late 1999 when
it signed a strategic agreement with IntraNet Solutions to resell their market
leading content management
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solution Xpedio to AS/400 customers. ShowCase has exclusive sales and marketing
rights to Xpedio for the AS/400 and non exclusive rights on other platforms. The
initial product integration development efforts with the Microsoft NT version
were completed in the March 31, 2000 quarter. This agreement enables ShowCase to
offer its clients the ability to more effectively manage web site content in one
integrated solution, including structured business intelligence data and non
structured content information. ShowCase's exclusive Xpedio distribution rights
for the AS/400 are conditioned upon it paying minimum royalties in future years.
COMPETITION
The markets for ShowCase's products are intensely competitive and
subject to rapidly changing technology. ShowCase competes primarily against
providers of decision support software and data warehousing and data mart
software. The bases of competition in these markets include breadth of solution,
functionality, performance, scalability, ease of use, operating platform and
cost. ShowCase's competitors providing business intelligence solutions for
AS/400 customers include Silvon and Infomanager. ShowCase also compete with
vendors that provide business intelligence products implemented on Unix or
Windows NT platforms and then connected to the AS/400. These vendors include
Brio Technology, Business Objects, Cognos, Computer Associates, Hyperion
Solutions, MicroStrategy, Microsoft, Oracle, Sagent Technology and SAS
Institute. In addition, enterprise resource planning software vendors including
Baan Company, PeopleSoft and SAP offer decision support and analytical modules
primarily to support the analysis of data from their own operational systems.
One or more of these companies may expand their technologies to support greater
business intelligence functionality. Finally, in the future, IBM may expand the
functionality of the operating system for the AS/400, or of its database
products, to provide some of the functions provided by ShowCase's products.
Many of ShowCase's competitors have longer operating histories,
significantly greater financial, technical, marketing or other resources and
greater name recognition than does ShowCase. As a result, they may be able to
respond more quickly to new or emerging technologies and changes in customer
requirements. The business intelligence software industry has recently
experienced consolidation and many industry analysts expect this trend to
continue. This consolidation may provide ShowCase's competitors with expanded
sales, distribution and marketing capabilities and broader product offerings.
INTELLECTUAL PROPERTY
ShowCase attempts to protect its software, documentation and other
written materials primarily through a combination of trade secret, trademark and
copyright laws, confidentiality procedures and contractual provisions. For
example, it licenses rather than sells its software and require licensees to
enter into license agreements which impose restrictions on their use of the
software. In addition, ShowCase has made efforts to avoid disclosure of its
trade secrets, including requiring those persons with access to its proprietary
information to enter into confidentiality agreements with it and restricting
access to ShowCase's source code.
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ShowCase has one patent issued and one patent application pending in
the United States with respect to aspects of its software. The pending patent
application may not be issued. In addition, ShowCase patents may not survive a
legal challenge to their validity or provide it significant protection.
ShowCase's means of protecting its intellectual property rights may not be
adequate or its competitors may independently develop similar technology.
Policing unauthorized use of its products is difficult, particularly in foreign
countries where the laws may not protect ShowCase's proprietary rights as fully
as in the United States.
ShowCase anticipates that software product developers increasingly will
be subject to infringement claims as the number of products and competitors in
its industry segment grows and the functionality of products in different
industry segments overlaps. As a result, ShowCase may become involved in these
claims. Any of these claims, with or without merit, could result in costly
litigation, divert ShowCase management's time, attention and resources, delay
product shipments or require ShowCase to enter into royalty or licensing
agreements. If a claim of product infringement against ShowCase is successful,
its business and operating results could be seriously harmed.
EMPLOYEES
As of March 31, 2000, ShowCase had a total of 300 employees, including
124 in sales and marketing, 63 in product development, 77 in professional
services and customer support and 36 in administration. None of ShowCase's
employees are represented by a labor union, and it believe that relations with
its employees are good.
FACILITIES
Our principal offices currently occupy approximately 27,000 square feet
in Rochester, Minnesota under a lease which expires June 30, 2004. In addition,
we also lease offices domestically and internationally in a variety of
locations, including domestic offices in the metropolitan areas of Atlanta,
Boston, Chicago, and Dallas and international offices in Belgium, France,
Germany, Japan, Malaysia, the Netherlands and the United Kingdom. We believe
that our facilities are adequate for the next 12 months and that, if required,
suitable additional or alternative space will be available on commercially
reasonable terms to accommodate expansion of our operations.
LEGAL PROCEEDINGS
From time to time, in the normal course of business, various claims are
made against ShowCase. At this time, in the opinion of ShowCase's management,
there are no pending claims the outcome of which is expected to result in a
material adverse effect on the financial position of ShowCase.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as follows:
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[Download Table]
Name Age Position
Kenneth H. Holec 45 President, Chief Executive Officer and Director
Craig W. Allen 45 Chief Financial Officer and Secretary
Jonathan P. Otterstatter 40 Executive Vice President, Technology
Patrick Dauga 40 Executive Vice President, Worldwide Field Operations
Kevin R. Potrzeba 39 Vice President, North America Sales
Paul A. Hesser 34 Vice President, Global Services
Theresa Z. O'Neil 37 Vice President, Marketing
Alfreda A. Masse 50 Vice President, Human Resources
Kenneth H. Holec has been ShowCase's President and Chief Executive
Officer and a member of its Board of Directors since November 1993. From 1985 to
1993, Mr. Holec was president and chief executive officer of Lawson Software, a
provider of high-end financial and human resource management software solutions.
Currently, Mr. Holec is a director of IntraNet Solutions, Inc., a maker of
Web-based document management products for corporate intranets. Mr. Holec holds
a B.S. degree in business administration from the University of Minnesota.
Craig W. Allen joined ShowCase as Controller in July 1993 and was
promoted to Chief Financial Officer in March 1997. From 1982 to 1993, Mr. Allen
was vice president of operations at Metafile Information Systems, Inc., a
software development and systems integration company. Prior to 1982, Mr. Allen
was audit manager at the accounting firm McGladrey Pullen & Co. in Rochester,
Minnesota. Mr. Allen holds a B.S. degree in business from the University of
Minnesota and is a certified public accountant.
Jonathan P. Otterstatter joined ShowCase as Vice President, Development
in May 1994 and was promoted to Executive Vice President, Technology in May
1999. From 1983 to May 1994, Mr. Otterstatter was employed by IBM where his last
position was senior development manager. Mr. Otterstatter holds a B.S. degree in
computer science from the University of Wisconsin at LaCrosse and an M.S. degree
in management of technology from the Massachusetts Institute of Technology.
Patrick Dauga joined ShowCase as Vice President, European Operations in
June 1997 and was promoted to Vice President, International in March 1998 and
recently was promoted to Executive Vice President, Worldwide Field Operations.
From 1986 to 1997, Mr. Dauga worked at Comshare, Inc., a software company
specializing in decision support systems, where his last position was vice
president for southern Europe. Mr. Dauga holds a degree from Sup de Co Bordeaux,
a business school in France.
Kevin R. Potrzeba has been ShowCase's Vice President, North America
Sales since September 1996. From 1987 to August 1996, Mr. Potrzeba was employed
by Software AG, a software products company, where his last position was vice
president of sales for eastern operations. Mr. Potrzeba holds a B.A. degree in
advertising and marketing from Northern Illinois University.
Paul A. Hesser has been ShowCase's Vice President, Global Services
since May 1999. From August 1989 to May 1999, Mr. Hesser was employed by IBM,
where his last position was services executive for the New York metropolitan
area. Mr. Hesser holds an MBA in finance from the University of Minnesota, and a
BS degree in marketing from Illinois State University.
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Theresa Z. O'Neil has been ShowCase's Vice President, Marketing since
November 1999. Ms. O'Neil was employed by Platinum Technology, Inc. from 1989 to
1999 where she held positions as vice president of corporate marketing and vice
president of marketing for data warehousing. Ms. O'Neil holds a M.A. degree in
English Literature from the University of Chicago and a B.A. degree in English
Literature, with Special Honors, from The George Washington University,
Washington, D.C.
Alfreda A. Masse has been ShowCase's Vice President, Human Resources
since November 1999. From 1989 to 1994 and again from 1997 until November 1999,
Ms. Masse was an organizational effectiveness consultant to companies including;
Sun Microsystems, Resource Information Management Systems, NEC Technology and
Tandem Corporation. From 1996 to 1997, Ms. Masse was employed by TriMark
Technologies, an application software development company, where her position
was vice president of organizational development. Ms. Masse holds a B.S. degree
in business administration from Northwood University in Michigan and is SPHR
certified.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
All statements, trend analysis and other information contained in the
following discussion relative to markets for ShowCase products and trends in
revenues, gross margins and anticipated expense levels, as well as other
statements including words such as "anticipate," "believe," "plan," "estimate,"
"expect," "intend" and other similar expressions constitute forward-looking
statements. Actual results of operations may differ materially from those
contained in the forward-looking statements. All forward-looking statements
included in this Management's Discussion and Analysis of Financial Condition and
Results of Operations are based on information available to ShowCase on this
prospectus, and ShowCase assumes no obligation to update these forward-looking
statements, or to update the reasons why actual results could differ from those
projected in these forward-looking statements.
RECENT DEVELOPMENT
On November 6, 2000, ShowCase Corporation and SPSS Inc. entered into a
Merger Agreement relating to the merger of ShowCase with a wholly owned
subsidiary of SPSS. The merger is subject to approval by the shareholders of
ShowCase and SPSS, the effectiveness of a Form S-4 registration statement to be
filed with the Securities and Exchange Commission and other customary closing
conditions. The merger is expected to close in the first calendar quarter of
2001.
OVERVIEW
ShowCase develops, markets and supports a fully integrated, end-to-end,
business intelligence solutions for IBM AS/400 customers. The ShowCase STRATEGY
product suite and related services are designed to enable organizations to
rapidly implement business intelligence solutions that create increased value
from their operational and customer data. The sophisticated data warehousing and
management capabilities of the ShowCase product suite provide its clients with
highly scalable and tightly integrated solutions. ShowCase's products enable
enterprise-wide distribution of information and allow end-user access and
analysis through familiar applications and Internet browsers.
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Six Months Ended September 30, 2000 and September 30, 1999
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data as
a percentage of total revenues for the periods indicated.
[Download Table]
Three Months Ended Six Months Ended
September 30, September 30,
------------------ -----------------
2000 1999 2000 1999
------- ------- ------ ------
AS A PERCENTAGE OF TOTAL REVENUES:
Revenues:
License fees 51.7% 47.3% 50.1% 53.1%
Maintenance and support 36.2 38.8 36.7 34.2
Professional service fees 12.1 13.8 13.2 12.7
----- ----- ----- -----
Total revenues 100.0 100.0 100.0 100.0
Cost of revenues:
License fees 8.8 9.0 8.1 9.7
Maintenance and support 7.8 8.9 8.1 8.3
Professional service fees 11.9 13.1 12.6 11.3
----- ----- ----- -----
Total cost of revenues 28.5 30.9 28.8 29.2
----- ----- ----- -----
Gross margin 71.5 69.1 71.2 70.8
Operating expenses:
Sales and marketing 48.0 61.5 50.8 55.3
Product development 12.5 14.7 13.2 12.7
General and administrative 9.7 13.4 10.3 10.9
----- ----- ----- -----
Total operating expenses 70.2 89.5 74.3 78.9
----- ----- ----- -----
Operating income (loss) 1.3 (20.5) (3.1) (8.1)
Other income (expense), net 3.4 4.3 3.6 2.4
----- ----- ----- -----
Net income (loss) before income taxes 4.7 (16.2) 0.5 (5.7)
Income taxes 1.6 2.2 1.3 1.6
----- ----- ----- -----
Net income (loss) 3.1% (18.4)% (0.8)% (7.3)%
===== ===== ===== =====
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Revenues
Total revenues. Total revenues increased to $12.5 million for the three
months ended September 30, 2000 from $8.5 million for the three months ended
September 30, 1999, representing an increase of 47.2%. For the six months ended
September 30, 2000, total revenues increased to $23.9 million from $19.0 million
for the six months ended September 30, 1999, an increase of 25.9%.
License fees. License fee revenues increased to $6.5 million for the
three months ended September 30, 2000 from $4.0 million for the three months
ended September 30, 1999, representing an increase of 60.7%. License fee
revenues increase to $12.0 million for the six months ended September 30, 2000
from $10.1 million for the six months ended September 30, 1999, representing an
increase of 18.7%. This increase in license fee revenue is largely attributable
to an increase in the number of licenses sold by ShowCase's expanded direct
sales force. License fee revenues as a percentage of total revenues were 51.7%
and 47.3% for the three months ended September 30, 2000 and 1999, respectively,
and 50.1% and 53.1% for the six months ended September 30, 2000 and 1999,
respectively.
License fee revenues from our Essbase/400 product represented 37.2% and
38.6% of ShowCase's total license fee revenues for the three months ended
September 30, 2000 and 1999, respectively, and 37.3% and 41.6% for the six
months ended September 30, 2000 and 1999, respectively.
License fee revenues derived from ShowCase's indirect distribution
channels were 19.0% and 22.2% of license fee revenues for the three months ended
September 30, 2000 and 1999, respectively and 17.0% and 19.6% for the six months
ended September 30, 2000 and 1999, respectively.
Maintenance and support. Maintenance and support revenues increased to
$4.5 million for the three months ended September 30, 2000 from $3.3 million for
the three months ended September 30, 1999, representing an increase of 37.3%.
For the six months ended September 30, 2000, maintenance and support revenues
increased to $8.8 million from $6.5 million for the six months ended September
30, 1999, an increase of 35.0%. Maintenance and support revenues as a percentage
of total revenues were 36.2% and 38.8% for the three months ended September 30,
2000 and 1999, respectively, and 36.7% and 34.2% for the six months ended
September 30, 2000 and 1999, respectively. These increases in maintenance and
support revenues were largely a result of the renewal of maintenance and support
contracts, as well as new maintenance and support contracts associated with new
product licenses.
Professional service fees. Professional service fee revenues increased
to $1.5 million for the three months ended September 30, 2000 from $1.2 million
for the three months ended September 30, 1999, representing an increase of
28.6%. For the six months ended September 30, 2000, professional service fee
revenues increased to $3.2 million from $2.4 million for the six months ended
September 30, 1999, an increase of 31.3%. Professional service fee revenues as a
percentage of total revenues were 12.1% and 13.8% for the three months ended
September 30,
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2000 and 1999, respectively, and 13.2% and 12.7% for the six months ended
September 30, 2000 and 1999, respectively. These increases in professional
service fee revenues were largely a result of revenues associated with the sale
of new product licenses.
Revenues from clients outside North America represented 33.6% and 45.9%
of ShowCase's total revenues for the three months ended September 30, 2000 and
1999, respectively, and 34.8% and 37.8% for the six months ended September 30,
2000 and 1999, respectively. A majority of this revenue was derived from
European sales.
Costs Of Revenues
Cost of license fees. Cost of license fees consists primarily of the
costs of product manuals, media, packaging, shipping and royalties paid to third
parties. Cost of license fees increased to $1.1 million for the three months
ended September 30, 2000 from $.8 million for the three months ended September
30, 1999, representing 17.0% and 19.0% of license fee revenues for these
periods, respectively. Cost of license fees increased to $1.9 million for the
six months ended September 30, 2000 from $1.8 million for the six months ended
September 30, 1999, representing 16.1% and 18.2% of license fee revenues for
these periods, respectively. These increases in cost of license fees in dollar
amount were primarily attributable to higher license fee revenues. ShowCase
anticipates that cost of license fees will increase in dollar amount in future
periods as license fee revenues increase. Cost of license fees as a percentage
of license fee revenues may increase if ShowCase enters into additional royalty
arrangements or if sales of Essbase/400 or other products which carry a royalty
obligation increase as a percentage of license fee revenues.
Cost of maintenance and support. Cost of maintenance and support
consists primarily of personnel costs associated with providing maintenance and
support services and payments to third parties to provide maintenance and
support, particularly with respect to Essbase/400. Cost of maintenance and
support increased to $1.0 million for the three months ended September 30, 2000
from $0.8 million for the three months ended September 30, 1999, representing
21.4% and 22.8% of maintenance and support revenues for these periods,
respectively. Cost of maintenance and support increased to $2.0 million for the
six months ended September 30, 2000 from $1.6 million for the six months ended
September 30, 1999, representing 22.2% and 24.2% of maintenance and support
revenues for these periods, respectively. These increases in cost of maintenance
and support in dollar amount were primarily due to the hiring of additional
personnel. ShowCase anticipates that cost of maintenance and support will
increase in dollar amount in future periods as maintenance and support revenues
increase.
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Cost of professional service fees. Cost of professional service fees
consists primarily of the costs of providing training and consulting services.
Cost of professional service fees increased to $1.5 million for the three months
ended September 30, 2000 from $1.1 million for the three months ended September
30, 1999, representing 98.4% and 94.4% of professional service fee revenues for
these periods, respectively. Cost of professional service fees increased to $3.0
million for the six months ended September 30, 2000 from $2.1 million for the
six months ended September 30, 1999, representing 95.4% and 88.9% of
professional service fee revenues for these periods, respectively. These
increases in cost of professional service fees were primarily due to the
expansion of ShowCase's professional services staff. ShowCase anticipates that
cost of professional service fees will increase in dollar amount in future
periods as professional service fee revenues increase.
Operating Expenses
Sales and marketing. Sales and marketing expenses consist primarily of
salaries, benefits, bonuses, commissions and travel and promotional expenses.
Sales and marketing expenses increased to $6.0 million for the three months
ended September 30, 2000 from $5.2 million for the three months ended September
30, 1999, representing 48.0% and 61.5% of total revenues for these periods,
respectively. Sales and marketing expenses increased to $12.2 million for the
six months ended September 30, 2000 from $10.5 million for the six months ended
September 30, 1999, representing 50.8% and 55.3% of total revenues for these
periods, respectively. These increases in sales and marketing expenses in dollar
amount reflect the hiring of additional sales and marketing personnel and
expanded promotional activities. Sales and marketing expenses decreased as a
percentage of total revenues primarily due to faster revenue growth during the
three and six months ended September 30, 2000. ShowCase anticipates that sales
and marketing expenses will increase in dollar amount in future periods.
Product development. Product development expenses consist primarily of
development personnel compensation and related costs associated with the
development of new products, the enhancement of existing products, quality
assurance and testing. Product development expenses increased to $1.6 million
for the three months ended September 30, 2000 from $1.2 million for the threes
months ended September 30, 1999, representing 12.5% and 14.7% of total revenues
for these periods, respectively. Product development expenses increased to $3.2
million for the six months ended September 30, 2000 from $2.4 million for the
six months ended September 30, 1999, representing 13.2% and 12.7% of total
revenues for these periods, respectively. These increases in dollar amount were
due to expenses associated with the development of new products and the hiring
of additional personnel. ShowCase anticipates that it will continue to devote
substantial resources to product development efforts and that product
development expenses will increase in dollar amount in future periods. To date,
all product development costs have been expensed as incurred.
General and administrative. General and administrative expenses consist
primarily of salaries of executive, financial, human resources and information
services personnel as well as outside professional fees. General and
administrative expenses increased to $1.2 million for the three months ended
September 30, 2000 from $1.1 million for the three months ended September 30,
1999, representing 9.7% and 13.4% of total revenues for these periods,
respectively. General
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and administrative expenses increased to $2.5 million for the six months ended
September 30, 2000 from $2.1 million for the six months ended September 30,
1999, representing 10.3% and 10.9% of total revenues for these periods,
respectively. These increases in dollar amount were primarily due to increased
staffing and related expenses necessary to manage and support the expansion of
operations. General and administrative expenses decreased as a percentage of
total revenues primarily due to faster revenue growth during the three and six
months ended September 30, 2000. ShowCase anticipates that general and
administrative expenses will increase in dollar amount in the future as a result
of increased personnel and infrastructure costs necessary to support the
expansion of operations.
Other Income
Other income consisted primarily of interest income and interest
expense. Other income increased to $424,000 for the three months ended September
30, 2000 from $362,000 for the three months ended September 30, 1999. Other
income increased to $852,000 for the six months ended September 30, 2000 from
$461,000 for the six months ended September 30, 1999. The increase in other
income is primarily due to earnings on the proceeds from ShowCase's initial
public offering in fiscal 2000.
Provision For Income Taxes
Income taxes increased to $200,000 for the three months ended September
30, 2000 from $185,000 for the three months ended September 30, 1999. Income
taxes remained at $300,000 for the six months ended September 30, 2000 and 1999.
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Years Ended March 31, 2000, March 31, 1999 and March 31, 1998
RESULTS OF OPERATIONS
The following table indicates the percentage of total revenues
represented by items reflected in ShowCase's consolidated statements of
operations.
[Download Table]
YEARS ENDED MARCH 31,
----------------------------
2000 1999 1998
------- ------- -------
AS A PERCENTAGE OF TOTAL REVENUES:
Revenues
License fees........................... 51.9% 59.2% 60.1%
Maintenance and support................ 34.9 29.3 28.0
Professional service fees.............. 13.2 11.6 11.9
----- ----- -----
Total revenues..................... 100.0 100.0 100.0
Cost of revenues:
License fees........................... 9.7 10.7 11.1
Maintenance and support................ 8.7 7.5 6.6
Professional service fees.............. 12.3 8.4 8.4
----- ----- -----
Total cost of revenues............. 30.7 26.6 26.2
----- ----- -----
Gross margin................................ 69.3 73.4 73.8
Operating expenses:
Sales and marketing.................... 56.3 53.6 65.2
Product development.................... 13.9 12.3 12.8
General and administrative............. 11.3 9.0 10.9
----- ----- -----
Total operating expenses........... 81.5 75.0 89.0
----- ----- -----
Operating loss.............................. (12.2) (1.6) (15.2)
Other income (expense), net................. 3.6 0.4 2.3
----- ----- -----
Net loss before income taxes................ (8.6) (1.2) (12.9)
Income taxes................................ 1.8 0.6 0.7
----- ----- -----
Net loss .................................. (10.4)% (1.7)% (13.6)%
===== ===== =====
REVENUES
Total revenues. Revenues increased to $39.5 million in fiscal 2000 from
$35.5 million in fiscal 1999 and from $23.8 million in fiscal 1998, representing
increases of 11.3% in fiscal 2000 and 49.5% in fiscal 1999.
License fees. License fee revenues decreased to $20.5 million in fiscal
2000 from $21.0 million in fiscal 1999, representing a decrease of 2.5%. The
license revenues declined in fiscal year 2000 primarily as a result of a
decrease in the number of licenses sold, due primarily to the impact of clients
and prospects delaying or canceling purchase decisions due to Year 2000.
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In fiscal year 1999, license fee revenues increased to $21.0 million
from $14.3 million in fiscal 1998, representing an increase of 47.2%. This
increase is largely attributable to increases in the number of licenses sold,
reflecting the results of an expanded direct field sales force and the
introduction of new products and product enhancements, as well as increases in
average transaction size. The average transaction size in North America for new
product licenses for additional components of ShowCase's product suite to
existing clients increased from approximately $18,000 in fiscal 1998 to $28,000
in fiscal 1999. ShowCase introduced Enterprise Reporting to the market in fiscal
year 2000, Analyzer for the Web and Deployment Accelerators to the market in
fiscal 1999 and Warehouse Builder to the market in fiscal 1998.
Revenues from Essbase/400 licenses comprise a significant percentage of
total license fee revenues. License fees for this product were 42.2% of our
total license revenue for fiscal 2000, 41.0% for fiscal 1999 and 39.5% for
fiscal 1998.
License fee revenues derived from ShowCase's indirect distribution
channels were 23.5% of license fee revenues for fiscal 2000, 21.2% for fiscal
1999 and 19.9% for fiscal 1998.
Maintenance and support. Maintenance and support revenues increased to
$13.8% million in fiscal 2000 from $10.4 million in fiscal 1999 and from $6.7
million in fiscal 1998, representing increases of 32.7% in fiscal 2000 and 56.2%
in fiscal 1999. These increases in maintenance and support revenues were largely
a result of the renewal of maintenance and support contracts as ShowCase's
installed base continued to grow, as well as new maintenance and support
contracts associated with new product licenses.
Professional service fees. Professional service fee revenues increased
to $5.2 million in fiscal 2000 from $4.1 million in fiscal 1999 and from $2.8
million in fiscal 1998, representing increases of 27.5% in fiscal 2000 and 45.4%
in fiscal 1999. These increases in professional service fee revenues were
largely a result of the service revenues associated with the sale of new product
licenses.
Revenues from clients outside North America represented 39.2% of
ShowCase's total revenues for fiscal 2000, 38.2% of ShowCase's total revenue for
fiscal 1999 and 34.4% of ShowCase's total revenue for fiscal 1998. A majority of
these sales were derived from European sales.
ShowCase's revenues come from three principal sources: license fees,
maintenance and support and professional service fees. ShowCase adopted the
provisions of Statement of Position ("SOP") No. 98-9, Modification of SOP 97-2,
Software Revenue Recognition, with respect to Certain Transactions, effective
April 1, 1999. Under SOP No. 97-2, as amended by SOP No. 98-9, ShowCase
recognizes license revenue when the software product has been delivered, if a
signed contract exists, the fee is fixed and determinable, collection of
resulting receivables is probable and product returns are reasonably estimable.
License fee revenues that are contingent upon sale to an end user by
distributors and other distribution partners are recognized upon receipt of a
report of delivery to the end user. Maintenance and support fees committed as
part of new product license sales and maintenance resulting from renewed
maintenance contracts are deferred and recognized ratably over the contract
period. Professional service revenue is recognized when services are performed.
Revenues related to multiple element arrangements are allocated to each element
of the arrangement based on the fair values of elements such as licenses fees,
maintenance and support and professional services. The determination of fair
value is based on vendor specific objective evidence. When fair value does not
exist for one or more of the delivered elements in the arrangement, the
"residual method" is used. Under the "residual method", the total fair value of
the undelivered elements is deferred and recognized ratably over the contract
period and the remaining residual amount is recognized with respect to the
delivered elements. The adoption of SOP No. 98-9 did not have a material effect
on ShowCase's operating results.
Costs Of Revenues
Cost of license fees. Cost of license fees consists primarily of the
costs of product manuals, media, packaging, shipping and royalties paid to third
parties. Cost of license fees was $3.8 million in fiscal 2000 and in fiscal 1999
and to $2.6 million in fiscal 1998. The cost of license fees increased to $3.8
million in fiscal year 1999 from $2.6 million in fiscal year 1998, representing
an increase of 44.0% in fiscal 1999. This increase in cost of license fees was
attributable to the increase in the number of licenses sold and to the increase
in the percentage of our revenues from ShowCase's Essbase/400 product, which
requires ShowCase to pay royalties.
Cost of maintenance and support. Cost of maintenance and support
consists primarily of personnel costs associated with providing maintenance and
support services and payments to third parties to provide maintenance and
support, primarily with respect to ShowCase's Essbase/400 product. Cost of
maintenance and support increased to $3.4 million in fiscal 2000 from $2.6
million in fiscal 1999 and from $1.6 million in fiscal 1998, representing
increases of 29.6% in fiscal 2000 and 68.3% in fiscal 1999. The increases in
cost of maintenance and support are primarily due to additional staffing and the
increase in the payment of third party maintenance and support fees with respect
to Essbase/400.
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Cost of professional service fees. Cost of professional service fees
consists primarily of the costs of providing training and consulting services.
Cost of professional service fees increased to $4.9 million in fiscal 2000 from
$3.0 million in fiscal 1999 and from $2.0 million in fiscal 1998, representing
increases of 63.0% in fiscal 2000 and 49.1% in fiscal 1999. The increases are
primarily due to the expansion of ShowCase's professional services staff.
Operating Expenses
Sales and marketing. Sales and marketing expenses consist primarily of
salaries, benefits, bonuses, commissions and travel and promotional expenses.
Sales and marketing expenses have increased to $22.2 million in fiscal 2000 from
$19.0 million in fiscal 1999 and from $15.5 million in fiscal 1998, representing
increases of 16.8 % in fiscal 2000 and 23.0% in fiscal 1999. The increases
reflect the expansion of a direct field sales force and the hiring of additional
sales and marketing personnel and, to a lesser extent, the increase of
promotional activities. ShowCase's sales and marketing staff grew from 91
people in fiscal 1998 to 107 in fiscal 1999 and to 124 in fiscal 2000. ShowCase
anticipates that sales and marketing expenses will increase in dollar amount in
future periods.
Product development. Product development expenses consist primarily of
development personnel compensation and related costs associated with the
development of new products, the enhancement of existing products, quality
assurance and testing. Product development expenses increased to $5.5 million in
fiscal 2000 from $4.4 million in fiscal 1999 and from $3.1 million in fiscal
1998, representing increases of 25.4% in fiscal 2000 and 43.3% in fiscal 1999.
The increases are due to expenses associated with the development of new
products and the hiring of additional personnel. ShowCase's product development
staff grew from 41 people in fiscal 1998 to 49 in fiscal 1999 and to 63 in
fiscal 2000. ShowCase anticipates that it will continue to devote significant
resources to its product development efforts and that product development
expenses will increase in dollar amount in future periods. Product development
costs are expensed as incurred.
General and administrative. General and administrative expenses consist
primarily of salaries of executive, financial, human resource and information
services personnel as well as outside professional fees. General and
administrative expenses increased to $4.5 million in fiscal 2000 from $3.2
million in fiscal 1999 and from $2.6 million in fiscal 1998, representing
increases of 39.0% in fiscal 2000 and 24.0% in fiscal 1999. The increases are
primarily due to increased staffing and related expenses necessary to manage and
support the expansion of our operations. ShowCase's general and administrative
staff grew from 23 people in fiscal 1998 to 28 in fiscal 1999 and to 36 in
fiscal 2000. ShowCase anticipates that its general and administrative expenses
will increase in dollar amount in the future as a result of increased personnel
and infrastructure costs necessary to support the expansion of ShowCase's
operations.
Other Income (Expense)
Other income consists primarily of earnings from investments and sales
of securities, equity in net income of unconsolidated affiliates and gains or
losses from disposal of fixed assets, net of any interest expense. Other income
increased to $1.4 million in fiscal 2000 from $143,000 in fiscal 1999 and from
$543,000 in fiscal 1998. The increase in other income in fiscal 2000 is
primarily due to earnings on the proceeds from ShowCase's initial public
offering. The decrease in fiscal 1999 was primarily due to the gain on the sale
of a security of a third party which occurred in fiscal 1998.
Provision (Benefit) For Income Taxes
Income taxes increased to $700,000 in fiscal 2000 from $200,000 in
fiscal 1999 and from $175,000 in fiscal year 1998. The taxes and the increase
are primarily due to foreign income taxes paid which could not be realized as
tax credits in the United States due to ShowCase's consolidated losses from
operations.
ShowCase has deferred tax assets for temporary differences of $4.0
million as of March 31, 2000 and $2.7 million as of March 31, 1999, primarily
related to deferred revenue on which taxes have been paid. ShowCase periodically
evaluates the need for a valuation allowance against these deferred tax assets.
Due to uncertainty regarding future taxable income and our operating losses in
each of the past three fiscal years, ShowCase has determined that it is more
likely than not that only a portion of the deferred tax assets will be realized
and accordingly, there is a corresponding valuation allowance of $4.0 million as
of March 31, 2000 and $2.2 million as of March 31, 1999. The amount recognized
as a deferred tax asset at March 31, 1999 approximates the amount of cash
refundable that could be generated if ShowCase were to continue its operating
loss position.
Liquidity And Capital Resources
To date, ShowCase has financed its business through cash provided by
operations, the sale of equity securities and bank borrowings. Operating
activities used cash of $1.2 million for the six months ended September 30, 2000
and used cash of $2.3 million for the six months ended September 30, 1999. The
decrease in cash from operating activities for the six months ending September
30, 2000 was due primarily to increased accounts receivable and a decrease in
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deferred revenue partially offset by an increase in income taxes payable and
increase in accounts payable and accrued liabilities. The decrease in cash from
operating activities for the six months ending September 30, 1999 was due
primarily to a net loss of $1.4 million and a decrease in deferred revenue.
ShowCase's operating activities used cash of $3.1 million in fiscal
2000, provided cash of $5.3 million in fiscal 1999 and used cash of $817,000 in
fiscal 1998. The decrease in cash from operations for fiscal 2000 was due
primarily to ShowCase's net loss in that year, offset in part by an increase in
deferred revenue. The increase in cash from operations, for fiscal 1999 was due
primarily to improved results of operations, an increase in deferred revenue,
offset in part by an increase in accounts receivable. The decrease in cash from
operations for fiscal 1998 was due primarily to ShowCase's net loss in that
year, offset in part by an increase in deferred revenue. In each period, the
increase in deferred revenue consisted primarily of prepayment of clients'
maintenance and support fees.
Investing activities provided cash of $2.5 million for the six months
ended September 30, 2000 and used cash of $25.8 million for the six months ended
September 30, 1999. The principal source of cash in investing activities for the
six months ended September 30, 2000 was maturity of marketable securities offset
by the purchase of software rights and capital expenditures related to the
acquisition of computer equipment and furniture required to support the
expansion of ShowCase's operations. The principal use of cash in investing
activities for the six months ended September 30, 1999 was the investment of the
proceeds from ShowCase's initial public offering and capital expenditures
related to the acquisition of computer equipment and furniture required to
support the expansion of ShowCase's operations.
ShowCase's investing activities used cash of $18.7 million in fiscal
2000, $487,000 in fiscal 1999 and $566,000 in fiscal 1998. In fiscal year 2000,
$17.9 million of the proceeds from the initial public offering were used to
invest in marketable securities and the balance of the cash used for investing
activities was for the purchase of equipment. In fiscal 1999 and 1998, the
principal use of cash in investing activities was for capital expenditures
related to the expansion of our operations.
Financing activities provided cash of $280,000 and $24.3 million in the
six months ended September 30, 2000 and 1999, respectively. For the six months
ended September 30, 2000, cash provided by financing activities consisted
primarily of the receipt of proceeds from the exercise of stock options. For the
six months ended September 30, 1999, cash provided by financing activities
consisted primarily of proceeds from ShowCase's initial public offering.
ShowCase's financing activities provided cash of $24.6 million in
fiscal 2000 used $1.4 million in 1999 and provided $3.8 million in fiscal 1999.
For fiscal 2000, financing activities provided cash primarily from issuance of
common stock in connection with our initial public offering, which resulted in
net proceeds to ShowCase of $24.4 million. For fiscal 1999, cash used by
financing activities consisted primarily of long-term debt repayment and
payments under capital lease obligations. For fiscal 1998, financing activities
provided cash primarily from proceeds received from the issuance of preferred
stock, offset in part by long-term debt repayment and payments under capital
lease obligations.
ShowCase's sources of liquidity at September 30, 2000 consisted
principally of cash and marketable securities of $28.0 million. ShowCase
believes that cash generated from operations, existing cash and marketable
securities will be sufficient to fund operations for at least the next twelve
months.
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SELECTED QUARTERLY OPERATING RESULTS
The following table shows unaudited consolidated financial information
for each of the four quarters in ShowCase's fiscal years ended March 31, 2000
and 1999. In management's opinion, this unaudited quarterly information has been
prepared on the same basis as the audited consolidated financial statements and
related notes and includes all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the information for the
quarters presented in accordance with generally accepted accounting principles.
[Enlarge/Download Table]
THREE MONTHS ENDED
---------------------------------------------------------------------------------------
MAR. 31, DEC. 31, SEPT 30, JUNE 30, MAR. 31, DEC. 31, SEPT 30, JUNE 30,
2000 1999 1999 1999 1999 1998 1998 1998
-------- -------- -------- -------- -------- -------- --------- --------
(in thousands)
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues:
License fees .......................... $ 5,416 $ 4,990 $ 4,027 $ 6,065 $ 5,944 $ 5,834 $ 5,019 $ 4,224
Maintenance and support ............... 3,826 3,456 3,301 3,206 3,088 2,776 2,365 2,161
Professional service fees ............. 1,623 1,201 1,178 1,234 1,225 933 1,037 913
-------- -------- -------- -------- -------- -------- -------- --------
Total revenues ...................... 10,865 9,647 8,506 10,505 10,257 9,543 8,421 7,298
Cost of revenues:
License fees .......................... 1,017 985 766 1,068 915 1,077 1,000 817
Maintenance and support ............... 997 855 753 824 818 658 605 565
Professional service fees ............. 1,531 1,199 1,112 1,032 995 805 577 613
-------- -------- -------- -------- -------- -------- -------- --------
Total cost of revenues .............. 3,545 3,039 2,631 2,924 2,728 2,540 2,182 1,995
-------- -------- -------- -------- -------- -------- -------- --------
Gross margin ............................. 7,320 6,608 5,875 7,581 7,529 7,003 6,239 5,303
Operating expenses:
Sales and marketing ................... 6,046 5,691 5,234 5,275 5,327 4,958 4,378 4,387
Product development ................... 1,616 1,457 1,247 1,163 1,135 1,038 1,219 979
General and administrative ............ 1,228 1,160 1,136 941 873 855 748 736
-------- -------- -------- -------- -------- -------- -------- --------
Total operating expenses ............ 8,890 8,308 7,617 7,379 7,335 6,851 6,345 6,102
-------- -------- -------- -------- -------- -------- -------- --------
Operating income (loss) .................. (1,570) (1,700) (1,742) 202 194 152 (106) (799)
Other income (expense), net .............. 560 395 362 98 89 23 25 6
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss) before income taxes .... (1,010) (1,305) (1,380) 300 283 175 (81) (793)
Income taxes ............................. 200 200 185 115 65 50 45 40
Net income (loss) ........................ $ (1,210) $ (1,505) $ (1,565) 185 $ 218 $ 125 $ (126) $ (833)
Basic income (loss) per share ............ $ (.12) $ (.15) $ (.15) $ .04 $ .05 $ .03 $ (.03) $ (.20)
Diluted income (loss) per share .......... $ (.12) $ (.15) $ (.15) $ .02 $ .03 $ .02 $ (.03) $ (.20)
Shares used in basic share calculation ... 10,485 10,368 10,139 4,542 4,495 4,348 4,409 4,190
Shares used in diluted share
calculation .............................. 10,485 10,368 10,139 8,371 8,063 6,906 4,409 4,190
ShowCase's operating results have varied and may in the future vary
significantly from quarter to quarter. These fluctuations may result in
volatility in the price of ShowCase's common stock. ShowCase believes that
quarter-to-quarter comparisons of its financial results are not necessarily
meaningful and should not be relied upon as an indication of future performance.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
ShowCase is exposed to market risk from changes in interest rates on
borrowings under its revolving line of credit that bear interest from time to
time at a variable rate based on a prime rate. In addition, its Belgian
subsidiary maintains a small line of credit with a variable interest rate and
maximum available borrowings which ShowCase does not believe are material. As of
September 30, 2000, ShowCase had no borrowings outstanding under either of these
lines of credit. Because ShowCase has no borrowings outstanding under its lines
of credit, ShowCase believes that the effect, if any, of reasonably possible
near-term changes in interest rates on its financial position would not be
material.
ShowCase is exposed to market risk from fluctuations in foreign
currency exchange rates. ShowCase manages exposure to variability in foreign
currency exchange rates primarily through the use of natural hedges, whereby
funding obligations and assets are both managed in the local currency. However,
different durations in ShowCase's funding obligations and assets may expose
ShowCase to the risk of foreign exchange rate fluctuations. ShowCase has not
entered into any derivative transactions to manage this risk. Based on our
overall foreign currency rate exposure at September 30, 2000, ShowCase does not
believe that a hypothetical 10% change in foreign currency rates would
materially adversely affect its financial position.
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FAIRNESS OPINIONS
OPINION OF ROBERT W. BAIRD & CO.
On September 15, 2000, SPSS retained Robert W. Baird & Co. to render an
opinion as to the fairness, from a financial point of view, of the Exchange
Ratio to SPSS. On November 6, 2000, Baird rendered its opinion to the board of
directors of SPSS to the effect that, as of such date, the Exchange Ratio was
fair, from a financial point of view, to SPSS.
THE FULL TEXT OF BAIRD'S OPINION DATED NOVEMBER 6, 2000, WHICH
DESCRIBES THE ASSUMPTIONS MADE, GENERAL PROCEDURES FOLLOWED, MATTERS CONSIDERED
AND LIMITATIONS ON THE SCOPE OF REVIEW UNDERTAKEN BY BAIRD IN RENDERING ITS
OPINION, IS ATTACHED AS ANNEX B TO THIS PROXY STATEMENT/PROSPECTUS AND IS
INCORPORATED IN THIS DOCUMENT BY REFERENCE. BAIRD'S OPINION IS DIRECTED ONLY TO
THE FAIRNESS, AS OF THE DATE OF THE OPINION AND FROM A FINANCIAL POINT OF VIEW,
OF THE EXCHANGE RATIO TO SPSS AND DOES NOT CONSTITUTE A RECOMMENDATION TO YOU AS
TO HOW YOU SHOULD VOTE WITH RESPECT TO THE MERGER AGREEMENT. THE SUMMARY OF
BAIRD'S OPINION SET FORTH BELOW IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF THE OPINION ATTACHED AS ANNEX B. SPSS STOCKHOLDERS ARE URGED TO
READ THE OPINION CAREFULLY AND IN ITS ENTIRETY.
In conducting its investigation and analysis and in arriving at its
opinion, Baird reviewed information and took into account financial and economic
factors it deemed relevant under the circumstances. In rendering its opinion,
Baird, among other things:
- reviewed certain internal information, primarily financial in nature,
including projections concerning the business and operations of
ShowCase furnished to Baird for purposes of its analysis;
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- reviewed publicly available information concerning ShowCase
including, but not limited to, ShowCase's recent filings with the SEC
and equity analyst research reports prepared by various investment
banking firms;
- received financial projections for ShowCase on a standalone basis for
calendar years 2000 and 2001;
- reviewed certain internal information, primarily financial in nature,
concerning the business and operations of SPSS furnished to Baird for
purposes of its analysis;
- reviewed publicly available information concerning SPSS including,
but not limited to, SPSS's recent filings with the SEC and equity
analyst research reports prepared by Baird analysts;
- reviewed the draft of the Agreement in the form presented to the
board of directors;
- compared the historical market prices and trading activity of SPSS's
and ShowCase's common stock with those of certain other publicly traded
companies Baird deemed relevant;
- compared the financial position and operating results of SPSS and
ShowCase with those of certain publicly traded companies Baird deemed
relevant;
- compared the proposed financial terms of the Merger with the
financial terms of certain other business combinations Baird deemed
relevant;
- reviewed certain potential pro forma effects of the Merger on SPSS;
- held discussions with members of SPSS's and ShowCase's respective
senior managements concerning SPSS's and ShowCase's historical and
current financial condition and operating results, as well as the
future prospects of SPSS and ShowCase, respectively; and
- considered other information, financial studies, analysis and
investigations, and financial, economic and market criteria which Baird
deemed relevant for the preparation of its opinion.
In arriving at its opinion, Baird assumed and relied upon the accuracy
and completeness of all of the financial and other information that was publicly
available or provided to Baird by or on behalf of SPSS and ShowCase. Baird was
not engaged, and did not assume any responsibility, to independently verify any
of this information. Baird assumed, with SPSS's consent, that:
- all material assets and liabilities, contingent or otherwise, known
or unknown, of SPSS and ShowCase were as set forth in their respective
financial statements;
- the Merger will be accounted for as a pooling of interests under
generally accepted accounting principals; and
96
- the Merger will be consummated in accordance with the terms of the
Agreement in the form presented to the board of directors, without any
amendment and without waiver by any party of any of the conditions to
their respective obligations under the Agreement.
At the direction of SPSS:
- Baird relied on published research analyst reports prepared by
various investment banking firms for estimates for ShowCase's calendar
years 2000 and 2001 performance and estimates from SPSS's senior
management for ShowCase's financial performance on a standalone basis
thereafter (collectively, the "ShowCase Projections");
- Baird relied on published research analyst reports prepared by Baird
analysts for estimates of SPSS's financial performance for calendar
years 2000 and 2001 and estimates from SPSS's senior management for
SPSS's financial performance on a standalone basis thereafter
(collectively, the "SPSS Projections");
- Baird has assumed that these estimates, together with the cost
savings and operating synergies resulting from the Merger as estimated
by SPSS's senior management, were reasonably prepared on bases
reflecting the best available estimates and good faith judgments as to
future performance of SPSS and ShowCase, respectively.
In conducting its review, Baird did not undertake nor obtain an
independent evaluation or appraisal of any of the assets or liabilities,
contingent or otherwise, of SPSS or ShowCase nor did Baird make a physical
inspection of the properties or facilities of SPSS or ShowCase. Baird's opinion
necessarily was based upon economic, monetary and market conditions as they
existed and could be evaluated on the date of its opinion, and did not predict
or take into account any changes which may occur, or information which may
become available, after the date of Baird's opinion. Furthermore, Baird
expressed no opinion as to the price or trading range at which any of SPSS's or
ShowCase's securities (including SPSS Common Stock and ShowCase Common Stock)
will trade following the date of the opinion.
The following is a summary of the material financial analyses performed
by Baird in connection with rendering its opinion.
Analysis of Implied ShowCase Transaction Multiples. Baird calculated
the "Implied Equity Price Per Share" reflected by the terms of the Merger to be
$7.53 for each share of ShowCase Common Stock, obtained by multiplying the
Exchange Ratio of 0.333 by the closing price per share of SPSS Common Stock of
$22.625 on November 3, 2000. Baird calculated the "Implied Total Equity Value"
(defined as the per share purchase price for ShowCase's Common Stock multiplied
by the total number of common shares outstanding, including net shares issuable
upon the exercise of stock options and warrants) and "Implied Enterprise Value"
(defined as the Implied Total Equity Value, plus the book value of total debt,
preferred stock and minority interests, less cash and cash equivalents as of
September 30, 2000) of ShowCase as a result of the Merger to be $87.1 million
and $59.1 million, respectively. In performing its analysis, Baird used, among
other items, operating statistics for ShowCase's latest twelve months, or LTM,
ended September 30, 2000 and projected calendar 2000 and 2001, per the ShowCase
Projections. Baird calculated multiples of the Implied Enterprise Value to
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ShowCase's LTM and projected calendar 2000 and calendar 2001 revenue, per the
ShowCase projections. Baird also calculated multiples of the Implied Total
Equity Value to ShowCase's LTM and projected calendar 2000 and calendar 2001 net
income and earnings per share, per the ShowCase projections. The table below
summarizes the results of this analysis and is qualified in its entirety by
reference to the other disclosures contained in this section and Baird's opinion
attached as Annex B to this proxy statement.
[Download Table]
IMPLIED SHOWCASE TRANSACTION MULTIPLES
--------------------------------------
Enterprise Value / LTM Revenue 1.3x
Enterprise Value / Calendar 2000 Revenue 1.2
Enterprise Value / Calendar 2001 Revenue 0.9
Equity Value / LTM Net Income (1) N/M
Equity Value / LTM EPS (1) N/M
Equity Value / Calendar 2000 Net Income (1) N/M
Equity Value / Calendar 2000 EPS (1) N/M
Equity Value / Calendar 2001 Net Income 22.2
Equity Value / Calendar 2001 EPS 21.7
(1) Multiples are Not Meaningful ("N/M") due to negative ShowCase
statistics.
Stock Trading History. To provide contextual data and comparative
market data, Baird reviewed the historical market prices of ShowCase and SPSS
for the twelve-month period ended November 3, 2000. Over the indicated period,
the high and low prices for shares of ShowCase and SPSS were $11.06 and $4.00,
and $33.75 and $16.88, respectively.
Comparative Stock Price Performance. Baird reviewed the recent stock
price performance of ShowCase and compared such performance with an index of ten
publicly traded companies listed below that Baird deemed relevant, with the
Nasdaq composite index, and with SPSS over the twelve-month period ended
November 3, 2000. The relative increase in market price per share for ShowCase,
the selected public company index, the Nasdaq composite index, and SPSS were
4.7%, 10.1%, 14.0%, and 16.0%, respectively.
Analysis of Selected Publicly Traded Companies to ShowCase. Baird
reviewed certain publicly available financial information as of the most
recently reported period and stock market information as of November 3, 2000,
for ten publicly traded companies that Baird deemed relevant. The group of
selected publicly traded companies is listed below:
- Actuate Corp.
- Applix Inc.
- Brio Technology, Inc.
- Hummingbird, Inc.
- Hyperion Solutions Corp.
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- Informix Corp.
- Microstrategy Inc.
- Sagent Technology Inc.
- SPSS Inc.
- Sybase, Inc.
Baird chose these companies based on its review of publicly traded
companies that possessed general business, operating and financial
characteristics representative of companies in the industry in which ShowCase
operates. Baird noted that none of the companies reviewed is identical to
ShowCase and that, accordingly, the analysis of these companies necessarily
involves complex considerations and judgments concerning differences in the
business, financial and operating characteristics of each company and other
factors that affect the market values of these companies.
For each selected company, Baird calculated the equity value by
multiplying the closing stock price of each company as of November 3, 2000, by
the total number of outstanding shares on a diluted basis. In addition, Baird
calculated enterprise value for each selected company by adding the book value
of outstanding total debt, preferred stock and minority interests to, and
subtracting cash and cash equivalents, from equity value. Baird then calculated
multiples of the enterprise value to each selected company's LTM revenue, latest
quarter annualized ("LQA") revenue as of the most recently reported period,
estimated 2000 revenue and projected 2001 revenue. Estimated and projected
revenue figures were based on published research analyst reports. Baird also
calculated multiples of each selected company's equity value to its net income
for calendar 2001 based on each company's stock price and earnings per share
data. Baird also calculated the ratios of each company's equity value to its net
income for calendar 2001 divided by estimated growth rates as provided by First
Call Corporation. Calendar 2001 net income for the selected companies was based
on median consensus earnings per share estimates provided by First Call
Corporation. Baird then compared the trading multiples for the selected
companies to the relevant ShowCase transaction multiples implied in the proposed
Merger based on its operating results for the LTM period ended September 30,
2000, the LQA period derived from the three-month period ended September 30,
2000, the estimated calendar year 2000, and the projected calendar year 2001,
per the ShowCase Projections. The table below summarizes the results of this
analysis and is qualified in its entirety by reference to the other disclosures
contained in this section and Baird's opinion attached as Annex B to this proxy
statement.
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IMPLIED SELECTED
IMPLIED PUBLIC COMPANY
SHOWCASE TRADING MULTIPLES
TRANSACTION --------------------------------------
MULTIPLES LOW MEDIAN MEAN HIGH
----------- ----- ------ ---- ----
Enterprise Value / LTM Revenue (1) 1.3x 0.6x 1.6x 4.5x 23.9x
Enterprise Value / LQA Revenue 1.2 0.6 1.7 3.8 18.0
Enterprise Value / 2000E Revenue 1.2 0.5 1.6 5.0 29.0
Enterprise Value / 2001P Revenue 0.9 0.5 1.2 2.0 6.7
Equity Value / 2001P EPS 21.7 10.7 13.5 13.9 18.8
Equity Value / 2001P EPS / Growth Rate 0.6 0.6 1.1 1.1 1.5
(1) Implied ShowCase LTM transaction multiples and selected public company LTM
trading multiples based on operating results for the most recently reported
LTM period.
Based on the implied public company trading multiples, Baird analyzed
the resulting implied exchange ratios derived from applying the selected
comparable company valuation multiples to ShowCase's LTM revenue and LQA revenue
for the most recent reported period, estimated 2000 revenue, projected 2001
revenue, and projected 2001 earnings per share, per the ShowCase Projections.
The table below summarizes the results of this analysis and is qualified in its
entirety by reference to the other disclosures contained in this section and
Baird's opinion attached as Annex B to this proxy statement.
[Download Table]
IMPLIED EXCHANGE RATIO (1)
----------------------------------------
LOW MEDIAN MEAN HIGH
----- ------ ----- -----
LTM Revenue 0.215 0.375 0.828 3.855
LQA Revenue 0.228 0.424 0.794 3.290
2000E Revenue 0.207 0.401 0.986 5.115
2001P Revenue 0.236 0.397 0.578 1.642
2001P Net Income 0.166 0.209 0.215 0.291
(1) Reflects the implied exchange ratio derived from applying public company
trading multiples to ShowCase statistics on a fully-diluted basis.
Analysis of Selected Comparable Acquisition Transactions. Baird
reviewed ten completed acquisition transactions which Baird deemed relevant. The
ten transactions reviewed were (acquiror/target company):
- Informix Corp./Ardent Software Inc.
- Oracle/Carleton Corp.
- Nortel Networks Corporation/Clarify Inc.
- Peoplesoft, Inc./Vantive Corp.
- Sun Microsystems/Forte Software, Inc.
- Sterling Software, Inc./Information Advantage Software
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- Sterling Software, Inc./Interlink Computer Sciences
- Ardent Software/Prism Solutions, Inc.
- Oracle/Concentra Corp.
- Informix Corp./Red Brick Systems Inc.
Baird chose these transactions based on its review of acquisition
transactions involving companies that possessed general business, operating and
financial characteristics representative of companies in the industry in which
ShowCase operates. Baird noted that none of the selected transactions or target
companies reviewed was identical to the Merger. Accordingly, Baird noted that
the analysis of selected transactions necessarily involves complex
considerations and judgments concerning differences in financial and operating
characteristics of ShowCase and each acquisition transaction and other factors
that would affect the acquisition value of selected transactions including,
among others, the general market conditions prevailing in the equity capital
markets at the time of that transaction.
For each of the selected transactions, Baird calculated the implied
equity value as well as the implied enterprise value, defined as the equity
value plus the book value of total debt, preferred stock and minority interests,
less cash and cash equivalents. Baird then calculated the multiples of implied
enterprise value to each target company's LTM revenue and forward four-quarter
("4Q Forward") revenue based on estimates for the four quarters following the
announcement date and calculated multiples of implied equity value to forward
four-quarter earnings per share based on publicly available investment banking
analyst research reports dated as near as possible to the respective transaction
announcement dates. Additionally, Baird calculated the premiums paid for the
equity in these transactions over the public market value of the equity at
various times prior to the announcement of such transactions. Baird then
compared those multiples and premiums to the relevant ShowCase transaction
multiples and premiums implied in the Merger based on ShowCase's operating
results for the LTM period ended September 30, 2000 and the results for
projected calendar year 2001, per the ShowCase Projections. The tables below
summarize the results of these analyses and are qualified in their entirety by
reference to the other disclosures contained in this section and Baird's opinion
attached as Annex B to this proxy statement.
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IMPLIED IMPLIED SELECTED
SHOWCASE ACQUISITION MULTIPLES
TRANSACTION ------------------------------------------
MULTIPLES LOW MEDIAN MEAN HIGH
----------- ----- ------ ----- ------
Enterprise Value / LTM Revenue 1.3x 0.3x 2.1x 3.2x 9.1x
Enterprise Value / 4Q Forward Revenue (1) 0.9 0.2 1.6 2.7 5.9
Equity Value / 4Q Forward EPS (1) 21.7 24.1 63.0 76.1 173.3
(1) 4Q Forward multiples are based on research analyst estimates, published
near the announcement date, for the forward four quarters following the
announcement dates.
[Download Table]
IMPLIED IMPLIED SELECTED
SHOWCASE ACQUISITION MULTIPLES
TRANSACTION --------------------------------------------
PREMIUMS LOW MEDIAN MEAN HIGH
----------- ------- ------ ----- ------
One Day 35.4% (32.7%) 26.9% 28.3% 75.0%
Seven Day 47.0% 6.7% 56.7% 50.7% 83.6%
Thirty Day 40.2% 3.8% 70.1% 73.8% 128.6%
Ninety Day 29.6% (54.8%) 48.6% 63.1% 385.2%
Based on the implied selected acquisition multiples, Baird analyzed the
resulting implied exchange ratio derived from applying the selected comparable
acquisition multiples to ShowCase's LTM and 4Q Forward revenue and 4Q Forward
earnings per share. The table below summarizes the results of this analysis and
is qualified in its entirety by reference to the other disclosures contained in
this section and Baird's opinion attached as Annex B to this proxy statement.
[Download Table]
IMPLIED EXCHANGE RATIO (1)
-----------------------------------------
LOW MEDIAN MEAN HIGH
----- ------ ----- -----
LTM Revenue 0.164 0.453 0.625 1.545
4Q Forward Revenue (2) 0.162 0.488 0.736 1.461
4Q Forward EPS (2) 0.373 0.975 1.177 2.681
(1) Reflects the implied exchange ratio derived from applying comparable
acquisition transaction multiples to ShowCase statistics on a fully-diluted
basis.
(2) 4Q Forward multiples are based on research analyst estimates, published
near the announcement date, for the forward four quarters following the
announcement dates.
Discounted Cash Flow Analysis. Baird performed a discounted cash flow
analysis using projections for calendar 2001 through 2005 as provided by the
ShowCase Projections. In that
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analysis, Baird assumed terminal value multiples ranging from 7.0x to 9.0x
Operating Profit, or EBIT, in calendar 2005 and discount rates ranging from
16.0% to 20.0%. That analysis produced implied exchange ratios ranging from
0.462 to 0.617.
Contribution Analysis. As a result of the Merger, ShowCase will
contribute approximately 20% of the post-Merger Enterprise Value, on a diluted
basis, based on market values as of November 3, 2000 and cash and debt balances
as of September 30, 2000. This compares to ShowCase's revenue contribution to
the combined company (per the ShowCase Projections and the SPSS Projections),
based on calendar 1998 and 1999, the LTM period ended September 30, 2000,
estimated calendar 2000 and projected calendar 2001, ranging from 20.7% to
24.4%. The table below summarizes the results of this analysis and is qualified
in its entirety by reference to the other disclosures contained in this section
and Baird's opinion attached as Annex B to this proxy statement.
[Download Table]
RELATIVE REVENUE CONTRIBUTION
------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER, DECEMBER,
----------------- -----------------
1998 1999 LTM 2000E 2001P
----- ----- ----- ----- -----
SPSS 79.3% 78.5% 77.7% 76.8% 75.6%
ShowCase 20.7% 21.5% 22.3% 23.2% 24.4%
Pro Forma Merger Analysis. Baird prepared a pro forma analysis of the
financial impact of the Merger. In conducting its analysis, Baird relied upon
certain assumptions and projected earnings estimates described above for
ShowCase and SPSS, the ShowCase Projections and the SPSS Projections. Baird
compared the earnings per share of SPSS Common Stock, on a standalone basis, to
the earnings per share of the common stock of the combined companies on a pro
forma basis for calendar years 2001 and 2002, per the ShowCase Projections and
the SPSS Projections. The results of the pro forma merger analysis suggested
that the Merger would be dilutive to SPSS on an earnings per share basis in
calendar 2001 and calendar 2002, excluding the effect of cost savings and
operating synergies estimated by SPSS management to result from the Merger.
Assuming in each year the cost savings and operating synergies anticipated by
SPSS management to result from the Merger would be achieved and excluding
non-recurring charges, the results of the pro forma merger analysis suggested
that the Merger would be non-dilutive in calendar 2001 and accretive in calendar
2002. The results of the pro forma Merger analysis are not necessarily
indicative of future operating results or financial position. The actual results
achieved by the combined company may vary from projected results and the
variations may be material.
Analysis of Selected Publicly Traded Companies to SPSS. To assess the
relative market valuation of SPSS Common Stock, Baird reviewed certain publicly
available financial information as of the most recently reported period and
stock market information as of November 3, 2000, for ten publicly traded
companies that Baird deemed relevant. The group of selected publicly traded
companies is listed below:
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- Actuate Corp.
- Applix Inc.
- Brio Technology, Inc.
- Hummingbird, Inc.
- Hyperion Solutions Corp.
- Informix Corp.
- Microstrategy Inc.
- Sagent Technology Inc.
- ShowCase Corporation
- Sybase, Inc.
Baird chose these companies based on its review of publicly traded
companies that possessed general business, operating and financial
characteristics representative of companies in the industry in which SPSS
operates. Baird noted that none of the companies reviewed is identical to SPSS
and that, accordingly, the analysis of these companies necessarily involves
complex considerations and judgments concerning differences in the business,
financial and operating characteristics of each company and other factors that
affect the market values of these companies.
For each selected company, Baird calculated the equity value by
multiplying the closing stock price of each company as of November 3, 2000, by
the total number of outstanding shares on a diluted basis. In addition, Baird
calculated enterprise value for each selected company by adding the book value
of outstanding total debt, preferred stock and minority interests to, and
subtracting cash and cash equivalents, from equity value. Baird then calculated
multiples of the implied enterprise value to each selected company's LTM
revenue, LQA revenue as of the most recently reported period, estimated 2000
revenue and projected 2001 revenue. Estimated and projected revenue figures were
based on published research analyst reports. Baird also calculated multiples of
each selected company's equity value to its net income for the LTM, estimated
calendar 2000 and projected calendar 2001 based on each company's stock price
and earnings per share data. Baird also calculated the ratios of each company's
equity value to its net income for calendar 2001 divided by estimated growth
rates as provided by First Call Corporation. Calendar 2000 and 2001 net income
for the selected companies was based on median consensus earnings per share
estimates provided by First Call Corporation. Baird then compared the trading
multiples for the selected companies to the relevant SPSS trading multiples
based on its operating results for the LTM period ended September 30, 2000, the
LQA period derived from the three-month period ended September 30, 2000, the
estimated calendar year 2000, and the projected calendar year 2001, per the SPSS
Projections. The table below summarizes the results of this analysis and is
qualified in its entirety by reference to the other disclosures contained in
this section and Baird's opinion attached as Annex B to this proxy statement.
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IMPLIED SELECTED
PUBLIC COMPANY
IMPLIED TRADING MULTIPLES
SPSS --------------------------------------
MULTIPLES LOW MEDIAN MEAN HIGH
--------- ----- ------ ----- -----
Enterprise Value / LTM Revenue (1) 1.5x 0.6x 1.5x 4.4x 23.9x
Enterprise Value / LQA Revenue 1.5 0.6 1.5 3.7 18.0
Enterprise Value / 2000E Revenue 1.5 0.5 1.4 4.9 29.0
Enterprise Value / 2001P Revenue 1.2 0.5 1.2 1.9 6.7
Equity Value / LTM EPS (1) 12.7 8.6 22.7 21.2 30.7
Equity Value / 2000E EPS 12.4 15.3 19.4 19.1 22.2
Equity Value / 2001P EPS 10.7 12.0 14.3 14.8 18.8
Equity Value / 2001P EPS / Growth Rate 0.6 0.5 1.1 1.0 1.5
(1) Implied LTM multiples based on operating results for the most recently
reported LTM period.
The foregoing is only a summary of the analyses performed by Baird and
does not purport to be a complete description of its presentation to SPSS's
board of directors. The preparation of financial analyses and a fairness opinion
is a complex process and is not necessarily susceptible to partial analyses or
summary description. Baird believes that its analyses and the summary set forth
above must be considered as a whole and that selecting portions of those
analyses and of the factors considered by Baird, without considering all
analyses and factors, would create an incomplete view of the processes
underlying those analyses conducted by Baird and its opinion. Baird did not
attempt to assign specific weights to particular analyses. Any estimates
contained in Baird's analyses are not necessarily indicative of actual values,
which may be significantly more or less favorable than as set forth in Baird's
analysis. Estimates of values of companies do not purport to be appraisals or
necessarily to reflect the prices at which companies may actually be sold.
Because these estimates are inherently subject to uncertainty, Baird does not
assume responsibility for their accuracy.
Baird, as part of its investment banking business, is regularly engaged
in the evaluation of businesses and their securities in connection with mergers
and acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements, and
valuations for estate, corporate and other purposes. SPSS retained Baird because
of its reputation and substantial experience and expertise in the valuation of
businesses and their securities in connection with mergers and acquisitions.
In the ordinary course of business, Baird may from time to time trade
in securities, including the securities of the SPSS or ShowCase, for its own
account or for accounts of its customers and, accordingly, may at any time hold
a long or short position in these securities.
Pursuant to an engagement letter dated September 15, 2000 between SPSS
and Baird, SPSS agreed to pay Baird a retainer fee and an additional fee payable
upon delivery of its opinion, regardless of the conclusions reached by Baird in
such opinion. SPSS has also agreed to indemnify Baird, its affiliates and their
respective directors, officers, employees and agents and
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controlling persons against certain liabilities related to or arising out of its
engagement, including liabilities under the federal securities laws.
OPINIONS OF SHOWCASE'S FINANCIAL ADVISORS
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED.
ShowCase retained Merrill Lynch, Pierce, Fenner & Smith Incorporated to
act as its financial advisor with respect to the merger. In connection with that
engagement, ShowCase requested that Merrill Lynch evaluate the fairness of the
exchange ratio in the merger from a financial point of view to the holders of
ShowCase common stock. At the meeting of the board of directors of Showcase on
November 6, 2000, Merrill Lynch delivered its oral opinion to the board of
directors, subsequently confirmed in writing, to the effect that, as of November
6, 2000, and based upon the assumptions made, matters considered and limits of
its review as set forth in its written opinion, the exchange ratio in the merger
was fair from a financial point of view to the holders of ShowCase common stock.
The full text of Merrill Lynch's opinion dated November 6, 2000, which
describes the assumptions made, general procedures followed, matters considered
and limitations on the scope of review undertaken by Merrill Lynch in rendering
its opinion, is attached as Annex C to this proxy statement/prospectus and is
incorporated in this document by reference. THE MERRILL LYNCH OPINION WAS
INTENDED FOR THE USE AND BENEFIT OF THE SHOWCASE BOARD OF DIRECTORS, WAS
DIRECTED ONLY TO THE FAIRNESS OF THE EXCHANGE RATIO IN THE MERGER FROM A
FINANCIAL POINT OF VIEW TO THE SHOWCASE STOCKHOLDERS, DID NOT ADDRESS THE MERITS
OF THE UNDERLYING DECISION BY SHOWCASE TO ENGAGE IN THE MERGER, AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY SHOWCASE STOCKHOLDER AS TO HOW THAT
STOCKHOLDER SHOULD VOTE ON THE PROPOSED MERGER OR ANY RELATED MATTER. THE
EXCHANGE RATIO WAS DETERMINED ON THE BASIS OF NEGOTIATIONS BETWEEN SHOWCASE AND
SPSS AND WAS APPROVED BY THE SHOWCASE BOARD OF DIRECTORS. The following summary
of Merrill Lynch's opinion is qualified in its entirety by reference to the full
text of the Merrill Lynch opinion attached as Annex C.
In arriving at its opinion, Merrill Lynch, among other things:
- reviewed certain publicly available business and financial
information relating to ShowCase and SPSS that Merrill Lynch deemed
to be relevant;
- reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets, liabilities and
prospects of ShowCase and SPSS, that was furnished to Merrill Lynch
by ShowCase and SPSS or was publicly available;
- conducted discussions with members of senior management of ShowCase
and SPSS concerning the matters described in clauses (1) and (2) as
well as their respective businesses and prospects before and after
giving effect to the merger;
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- reviewed the historical market prices and valuation multiples for
ShowCase common shares and SPSS common shares and compared them with
those of certain publicly traded companies that Merrill Lynch deemed
to be relevant;
- reviewed the results of operations of ShowCase and SPSS and compared
them with those of certain publicly traded companies that Merrill
Lynch deemed to be relevant;
- compared the proposed financial terms of the merger with the
financial terms of certain other transactions which Merrill Lynch
deemed to be relevant;
- participated in certain discussions and negotiations among
representatives of ShowCase and SPSS and their financial and legal
advisors;
- reviewed the definitive merger agreement;
- reviewed the potential pro forma impact of the merger; and
- reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as
Merrill Lynch deemed necessary, including our assessment of current
general economic, market and monetary conditions.
In preparing its opinion, Merrill Lynch assumed and relied, with
ShowCase's consent, on the accuracy and completeness of all financial and other
information that was publicly available or that was supplied or otherwise made
available to Merrill Lynch by ShowCase and SPSS, discussed with Merrill Lynch or
reviewed by or for Merrill Lynch. Merrill Lynch was not engaged, and did not
assume any responsibility, to independently verify any of this information.
Merrill Lynch also assumed, with ShowCase's consent:
- that the financial forecasts reviewed with senior management of
ShowCase and SPSS reflect the best currently available estimates and
judgment of ShowCase and SPSS's management as to the expected future
financial performance of ShowCase and SPSS, and that they provide a
reasonable basis upon which Merrill Lynch could form an opinion;
- that the merger will be accounted for as a pooling-of-interests under
Opinion 16 of the Accounting Principles Board and applicable SEC
rules and regulations;
- that the merger will qualify as a tax-free reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended;
- that the merger will be consummated substantially in accordance with
the terms set forth in the merger agreement, including in all
respects material to its analysis, that the representations and
warranties of each party in the merger agreement are true and
correct, that each party will perform all of the covenants and
agreements required to be performed by such party, that all
conditions to the consummation of the merger will be satisfied
without waiver thereof, and that the merger is in fact consummated
pursuant to the terms of the merger agreement; and
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- that, in the course of obtaining the necessary regulatory or other
consents or approvals (contractual or otherwise) for the merger, no
restrictions, including any divestiture requirements or amendments or
modifications, will be imposed that will have a material adverse
effect on the future results of operations or financial condition of
ShowCase, SPSS or the combined entity, or on the contemplated
benefits of the merger.
In accordance with ShowCase's instructions, Merrill Lynch did not
undertake an independent evaluation or appraisal of any of the assets or
liabilities of ShowCase or SPSS and was not furnished with any such evaluation
or appraisal. In addition Merrill Lynch did not assume any obligation to conduct
any physical inspection of the properties or facilities of ShowCase or SPSS.
Merrill Lynch's opinion was necessarily based upon market, economic and
other conditions as they existed on the date of its opinion and upon the
information in Merrill Lynch's possession on the date of its opinion. According
to the terms of its engagement with ShowCase, Merrill Lynch has no obligation to
update its opinion to take into account events occurring after the date its
opinion was delivered to the ShowCase board of directors. As a result,
circumstances could develop prior to consummation of the merger that, if known
at the time Merrill Lynch rendered its opinion, would have altered such opinion.
Merrill Lynch expressed no opinion as to the prices at which any of SPSS's or
ShowCase's securities will trade following the date of its opinion.
The following is a summary of the material financial analyses performed
by Merrill Lynch in connection with rendering its opinion.
Implied ShowCase Transaction Multiples Analysis. Merrill Lynch
calculated the implied offer price for ShowCase as a result of the merger to be
$7.53 for each share of ShowCase common stock by multiplying the exchange ratio
of 0.333 by SPSS's closing price per share of $22.625 on November 3, 2000.
Merrill Lynch calculated the implied equity value of ShowCase that will be paid
in the merger, using the treasury stock method, to be $87.1 million by
multiplying the implied offer price per share for ShowCase's common stock by the
total number of common shares outstanding, including net shares issuable upon
the exercise of stock options and warrants. Merrill Lynch then calculated the
implied enterprise value of ShowCase as a result of the merger to be $59.1
million by subtracting net cash and cash equivalents from the implied equity
value.
Using the implied enterprise value of $59.1 million for ShowCase which
was calculated as set forth above, Merrill Lynch calculated multiples of
revenues and earnings per share information for ShowCase's projected calendar
year 2000 and 2001 based on publicly available Wall Street research reports and
discussions with ShowCase management. The table below summarizes the results of
this analysis:
[Download Table]
Revenue Multiple EPS Multiple
------- -------- --- --------
CY 2000 $48.7 1.21x ($0.05) NM (1)
CY 2001 $70.0 0.84x $0.21 36.4x
-----------------
(1) Multiples are not meaningful ("NM") due to negative ShowCase statistics.
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Premium to Historical Stock Price and Exchange Ratio. Using publicly
available information, Merrill Lynch calculated the average premium to
historical stock price and exchange ratio for ShowCase common shares over
certain trading periods ending on November 3, 2000. The average premium to
historical stock price was calculated by comparing the actual daily stock price
of ShowCase over certain periods to the implied offer price of $7.53 in the
merger and averaging them over such period. The average exchange ratio for a
relevant period was calculated by dividing the daily stock price of ShowCase by
the daily stock price of SPSS for the relevant period and averaging them over
such period, and the premium to exchange ratio was determined by comparing the
average exchange ratio over certain periods to the exchange ratio in the merger
of 0.333 and averaging them over such period. The resulting average premium to
historical stock price and exchange ratio for the periods up to and including
November 3, 2000, were as follows:
[Download Table]
Implied Average Exchange
Historical Offer Exchange Ratio
Stock Price Premiums Ratios Premiums
Current $5.56 35.4% 0.246x 35.4%
10 Day Average $5.14 46.6% 0.230x 44.8%
1 Month Average $5.65 33.3% 0.238x 39.9%
3 Months Average $6.24 20.7% 0.240x 38.8%
6 Months Average $5.79 30.1% 0.214x 55.6%
Merrill Lynch observed that the proposed exchange ratio in the merger
of 0.333 exceeded the historical implied exchange ratios during all of the
above-mentioned periods.
Stock Trading Analysis. Merrill Lynch reviewed the per share daily
closing market prices of ShowCase and SPSS for the six-month period ended
November 3, 2000. The high and low prices for shares of ShowCase and SPSS during
this period were as follows:
SHOWCASE
[Download Table]
High Low
---- ---
6 Months 7.75 4.00
3 Months 7.75 5.00
1 Month 6.75 5.00
10 Trading Days 5.56 5.00
SPSS
[Download Table]
High Low
---- ---
6 Months 32.50 21.13
3 Months 30.56 21.13
1 Month 28.56 21.13
10 Trading Days 24.88 21.13
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Merrill Lynch observed that the implied offer price for ShowCase of
$7.53 was in the range of the six and three month trading ranges and was above
the one month and 10 day trading ranges of the ShowCase common stock.
Comparable Public Company Analysis. Using publicly available Wall
Street research analyst forecasts, Merrill Lynch compared certain financial,
operating and stock market information and ratios for ShowCase with the
corresponding data of 10 publicly traded companies engaged in businesses that
that Merrill Lynch judged to be reasonably comparable to ShowCase. The selected
publicly traded companies were:
- Actuate Corp.
- Brio Technology, Inc.
- Business Objects S.A.
- Cognos Inc.
- HNC Software Inc.
- Hyperion Solutions Corp.
- Informix Corp.
- JDA Software Group, Inc.
- Microstrategy Inc.
- Retek Inc.
Merrill Lynch determined the ratio of market capitalization to
estimated revenues for calendar years 2000 and 2001, the ratio of market
capitalization to estimated cash flow, or EBITDA, for calendar year 2001, and
the share price to projected earnings per share ratio for calendar year 2001 for
each of the above companies. Estimated revenue and EBITDA figures were based on
published research analyst reports and the price to earnings per share estimates
were provided by First Call. The range of multiples obtained by Merrill Lynch
for the above companies was then weighted and narrowed by Merrill Lynch to be
consistent with the multiples of the companies which it deemed to be the most
comparable to ShowCase. The following table presents the range of revenue
multiples, EBITDA multiples and the price to earnings per share, or P/E,
multiples that Merrill Lynch used:
[Download Table]
Low High
--- ----
2000E Revenue 0.6x 2.5x
2001E Revenue 0.4x 2.0x
2001E EBITDA 6.4x 8.3x
2001E P/E 10.6x 37.0x
Merrill Lynch then applied the range of revenue multiples to ShowCase's
estimated 2000 revenues of $48.7 million to determine ShowCase's resulting
implied equity value per share.
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The range of values produced from such calculations indicated an implied equity
value of ShowCase of between approximately $5.11 and $13.37 per share.
For the year 2001, Merrill Lynch applied the range of revenue multiples
to ShowCase's estimated 2001 revenues of $70.0 million to determine ShowCase's
resulting implied equity value per share. The range of values produced from such
calculations indicated an implied equity value of ShowCase of between
approximately $5.00 and $15.02 per share.
For the estimated cash flow multiples, Merrill Lynch applied the range
of EBITDA multiples to ShowCase's estimated 2001 EBITDA of $3.9 million to
determine ShowCase's resulting implied equity value per share. The range of
values produced from such calculations indicated an implied equity value of
ShowCase of between approximately $4.76 and $5.42 per share.
Lastly, Merrill Lynch applied the range of price to earning ratios to
ShowCase's estimated 2001 earnings per share of $0.21 to determine ShowCase's
resulting implied equity value per share. The range of values produced from such
calculations indicated an implied equity value of ShowCase of between
approximately $2.20 and $7.67 per share.
Merrill Lynch observed that the implied offer price in the merger of
$7.53 was either higher than or within the ranges of equity value per share
determined by Merrill Lynch pursuant to the foregoing analyses.
Comparable Acquisition Analysis. Merrill Lynch reviewed certain
publicly available information relating to a total of 17 selected prior
acquisition transactions occurring from October 1995 through August 2000 that
Merrill Lynch deemed to be reasonably similar to the merger. Eight of these
acquisition transaction were specifically in the software industry, and the
others showed other comparable characteristics. The transactions reviewed are as
follows (target/acquiror):
- 4Front Technologies / NCR Corp.
- Ardent Software / Informix
- BAAN / Invensys
- Illustra Information / Informix
- Interweave Software / Cognos
- LEX2000 / Cognos
- OLAP@Work / Business Objects
- OrCAD / Cadence Design Systems Inc.
- Quantime / SPSS
- Quickturn Design Systems / Mentor Graphics Corp.
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- Red Brick Systems / Informix
- Relational Matters / Cognos
- SQRIBE Technologies / Brio Technology
- Stanford Technology Group / Informix
- Vantive Corp. / PeopleSoft, Inc.
- Vento Software / SPSS
- Viasoft / CompuWare
For each of these transactions, Merrill Lynch compared the "transaction
value" as a multiple of the last twelve months' revenue of the target company,
where "transaction value" is generally defined as the sum of the per share offer
price for the target company multiplied by the number of company shares
outstanding and the number of target company options outstanding, net of option
proceeds, plus the preferred equity at liquidation, if any, the short-term debt,
the long-term debt and any minority interests, less cash, marketable securities
and exercisable option proceeds. This analysis showed a mean multiple of
transaction value to last twelve months' revenue of 1.3x for the transactions in
the software industry and of 2.6x for the remaining transactions. This analysis
also showed a median multiple of transaction value to last twelve months'
revenue of 1.4x for the transactions in the software industry and 1.7x for the
remaining transactions.
The range of multiples of transaction value obtained by Merrill Lynch
was then weighted and modified by Merrill Lynch to between 1.0x and 2.5x in
order to be consistent with the multiples of transactions which it deemed to be
the most comparable to the merger. Merrill Lynch applied the foregoing range of
multiples to ShowCase's last twelve months' revenues of $44.4 million to
determine ShowCase's resulting implied equity value per share. The range of
values produced from such calculations indicated an implied equity value of
ShowCase of between approximately $6.47 and $12.43 per share. Merrill Lynch
observed that the implied offer price in the merger of $7.53 was within, but in
the lower portion, of the ranges of equity value per share determined by Merrill
Lynch pursuant to the foregoing analysis.
It should be noted that no company utilized in the Comparable Public
Company Analysis above is identical to ShowCase, nor are any of the comparable
merger or acquisition transactions utilized in the Comparable Acquisition
Analysis above identical to the transactions contemplated by the merger
agreement. In evaluating companies identified by Merrill Lynch as comparable to
ShowCase or transaction identified by Merrill Lynch as comparable to the merger,
Merrill Lynch made judgments and assumptions with regard to industry
performance, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of ShowCase, such as the
impact of competition on the business of ShowCase and SPSS and the industry
generally, industry growth and the absence of any material change in the
financial condition and prospects of ShowCase, SPSS or the industry or in the
financial markets in general. Accordingly, a complete analysis cannot be limited
to a quantitative review of these results and involves complex considerations
and judgments concerning differences in financial and operating characteristics
of the comparable companies and transactions and other factors that
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could affect the public trading values of such comparable companies to which
they are being compared; mathematical analysis (such as determining the mean or
the median) is not in itself a meaningful method of using selected transaction
data. In addition, various analyses performed by Merrill Lynch incorporate
projections prepared by research analysts using only publicly available
information. These estimates may or may not prove to be accurate.
Premiums Paid Analysis. Merrill Lynch reviewed certain publicly
available information regarding the premiums paid since January 1, 1997, by
acquirors of publicly traded U.S. technology companies valued between $50
million and $150 million. Merrill Lynch's review focused on the premiums paid
over the price of the target's stock price one week prior to the announcement of
the acquisition. This review revealed a median premium of 40% and a mean premium
of 51%.
These premiums were then weighted and modified by Merrill Lynch to
between 30% and 50% to reflect Merrill Lynch's assessment of the appropriate
reasonable range for the implied equity value of ShowCase. When applied to
ShowCase's closing stock price of $5.56 per shares on November 3, 2000, this
test established a reference range for ShowCase common stock of between $7.23
and $8.34 per share, as compared to the implied offer price in the merger of
$7.53 per share.
Discounted Cash Flow Analysis. Merrill Lynch performed a discounted
cash flow analysis of ShowCase, without giving effect to the merger, based on
information provided by ShowCase's management. The discounted cash flow for
ShowCase was calculated assuming discount rates ranging from 17.0% to 21.0%
(based on Merrill Lynch's analysis of discount rates of comparable companies)
and was comprised of the sum of the present values of the projected cash flows
for the years 2001 through 2005 and a terminal value based upon a fiscal year
end March 31, 2005 EBITDA of $11.5 million and an EBITDA multiples range of
between 6.5x and 8.5x. This analysis produced equity value per share estimates
for ShowCase ranging from $7.16 to $8.68. Merrill Lynch observed that the
implied offer price in the merger for ShowCase was in the range of the implied
equity value per share of ShowCase common stock as determined by this discounted
cash flow analysis.
Merrill Lynch also calculated the implied exchange ratio by dividing
the discounted cash flow equity value per share of ShowCase by the discounted
cash flow equity value per share of SPSS. The discounted cash flow equity value
of SPSS for purposes of this analysis was calculated using the methodology
described above, assuming discount rates ranging from 17.0% to 21.0% (based on
Merrill Lynch's analysis of discount rates of comparable companies), assuming a
terminal value based upon a fiscal year end December 31, 2005 EBITDA of $94.7
million and an EBITDA multiples range of between 6.5x and 8.5x. Based upon this
analysis, and assuming no synergies as a result of the merger, Merrill Lynch
calculated an implied exchange ratio range of between 0.184 and 0.313. Merrill
Lynch observed that the proposed exchange ratio in the merger of 0.333 is higher
than the exchange ratio range implied by comparing ShowCase's discounted cash
flow value to SPSS's discounted cash flow value.
Relative Contribution Analysis -- Implied Ownership. Merrill Lynch
analyzed the relative contributions of ShowCase and SPSS to revenue, EBITDA and
net income of the combined entity for the years 2001 and 2002 using published
Wall Street analysts forecasts and
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information from Showcase. These analyses were performed without taking into
account any potential synergies resulting from the merger. Using the forecasted
revenue, EBITDA and net income projections and the treasury stock method of
calculating shares outstanding for each company, Merrill Lynch recorded a range
of implied exchange ratios from 0.063 to 0.383. Merrill Lynch observed that the
proposed exchange ratio in the merger of 0.333 was in the range of the implied
exchange ratios as calculated by the contribution analysis to the combined
entity.
Relative Contribution Analysis -- Contribution to Growth. Using
projections from Wall Street analysts research reports and information from
ShowCase, Merrill Lynch also calculated the relative contributions of ShowCase
and SPSS to the projected growth in revenue, EBITDA, EBIT and net income of the
combined entity for the years 2001 and 2005. Using the forecasted revenue,
EBITDA, EBIT and net income projections and the treasury stock method of
calculating shares outstanding for each company, Merrill Lynch observed a range
of implied exchange ratios from 0.169 to 0.882. Merrill Lynch observed that the
proposed exchange ratio in the merger of 0.333 was in the range of the implied
exchange ratios as calculated by the growth contribution of operating results to
the combined entity.
Pro Forma Merger Analysis. Merrill Lynch analyzed the estimated pro
forma effect of the merger on the forecasted earnings per share of ShowCase in
2001, 2002 and 2003. Using publicly available Wall Street research analyst
forecasts and information provided by ShowCase's management, and assuming no
synergies from the merger, Merrill Lynch estimated that the merger would dilute
ShowCase's earnings per share by $0.41 in 2001, $0.47 in 2002, and $0.54 in
2003.
The foregoing descriptions are intended to summarize the material
financial analyses performed by Merrill Lynch for the ShowCase board, but do not
purport to be a complete description of all the analyses underlying the Merrill
Lynch opinion. The preparation of a fairness opinion is a complex analytic
process involving various determinations as to the most appropriate and relevant
methods of financial analysis and the application of those methods to the
particular circumstances. Therefore, such an opinion is not readily susceptible
to partial analysis or summary description. In arriving at its opinion, Merrill
Lynch did not attribute any particular weight to any analysis or factor
considered by it, but rather made qualitative judgments as to the significance
and relevance of each analysis and factor. Accordingly, Merrill Lynch believes
that its analyses must be considered as a whole and that selecting portions of
its analyses, without considering all analyses, would create an incomplete view
of the process underlying its opinion.
In performing its analyses, numerous assumptions were made with respect
to industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Merrill
Lynch, ShowCase or SPSS and involve the application of complex methodologies and
educated judgment. Any estimates contained in the analyses performed by Merrill
Lynch are not necessarily indicative of actual values or future results, which
may be significantly more or less favorable than suggested by such analyses.
Additionally, estimates of the value of businesses or securities do not purport
to be appraisals or to reflect the prices at which such businesses or securities
might actually be sold. Accordingly, such analyses and estimates are inherently
subject to substantial uncertainty. In addition, the Merrill Lynch opinion and
the presentation to the ShowCase board of directors were among
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many factors taken into consideration by the ShowCase board in making its
determination to approve, and to recommend that its shareholders approve, the
merger agreement and the merger. The terms of the merger, including the exchange
ratio, were determined through negotiations between ShowCase and SPSS and were
not determined or recommended by Merrill Lynch. Consequently, the Merrill Lynch
analyses should not be viewed as determinative of the decision of the ShowCase
board or ShowCase management with respect to the fairness of the exchange ratio.
The ShowCase board of directors selected Merrill Lynch to act as its
financial advisor because of Merrill Lynch's reputation as an internationally
recognized investment banking firm with substantial experience in transactions
similar to this merger and because Merrill Lynch is familiar with ShowCase and
its business. As part of Merrill Lynch's investment banking businesses, Merrill
Lynch is continually engaged in the valuation of businesses and their securities
in connection with mergers and acquisitions, leveraged buyouts, negotiated
underwritings, secondary distributions of listed and unlisted securities and
private placements.
Under the terms of the engagement letter between Merrill Lynch and
ShowCase, Merrill Lynch provided financial advisory services and the financial
fairness opinion in connection with the merger, and ShowCase agreed to pay
Merrill Lynch a customary fee, all of which is contingent upon the consummation
of the merger. In addition, ShowCase has agreed to indemnify Merrill Lynch and
its affiliates, their respective directors, officers, agents and employees and
each person, if any, controlling Merrill Lynch or any of its affiliates, against
certain liabilities and expenses, including certain liabilities under the
federal securities laws, related to or arising out of Merrill Lynch's
engagement.
In the past, Merrill Lynch provided financial advisory and financing
services to ShowCase and may continue to do so and has received, and may
receive, fees for the rendering of such services. In the ordinary course of its
business, Merrill Lynch may actively trade in the securities of ShowCase and
SPSS, for its own account and for the accounts of its customers. Accordingly,
Merrill Lynch may at any time hold a long or short position in such securities.
CRAIG-HALLUM CAPITAL GROUP, INC.
Craig-Hallum Capital Group, Inc. ("Craig-Hallum"), financial advisor to
ShowCase, rendered a written opinion, dated November 6, 2000, to the ShowCase
board of directors as to the fairness, from a financial point of view, of the
exchange ratio in the merger to the holders of ShowCase common stock. At the
meeting of the board of directors of ShowCase on November 6, 2000, Craig-Hallum
delivered its oral opinion to the board of directors, subsequently confirmed in
writing, to the effect that, as of November 6, 2000, and based upon the
assumptions made, matters considered and limits of its review as set forth in
its written opinion, the exchange ratio in the merger was fair from a financial
point of view to the holders of ShowCase common stock. The full text of the
written opinion of Craig-Hallum is attached to this document as Annex D. We
encourage you to read the opinion carefully and in its entirety to understand
the procedures followed, assumptions made, matters considered and limitations on
the review undertaken by Craig-Hallum in providing its opinion. THE OPINION OF
CRAIG-HALLUM IS DIRECTED TO THE SHOWCASE BOARD OF DIRECTORS AND DOES NOT
CONSTITUTE RECOMMENDATIONS TO ANY SHAREHOLDER WITH RESPECT TO ANY MATTER
RELATING TO THE MERGER.
In arriving at its opinion, Craig-Hallum, amongst other things:
1. Reviewed and analyzed the financial terms of the Merger Agreement;
2. Reviewed and analyzed certain publicly available financial statements and
other information of ShowCase;
3. Reviewed and analyzed certain internal financial statements and other
historical financial and operating data concerning ShowCase prepared by
the management of ShowCase;
4. Reviewed and analyzed certain internal financial statements and other
historical financial and operating data concerning SPSS prepared by the
management of SPSS;
5. Reviewed and analyzed certain financial projections prepared by the
management of SPSS;
6. Reviewed and analyzed certain financial projections prepared by the
management of ShowCase;
7. Performed site visits and conducted discussions with members of the
senior management of SPSS with respect to the business and prospects of
SPSS;
8. Conducted discussions with members of the senior management of ShowCase
with respect to the business and prospects of ShowCase;
9. Analyzed the pro-forma impact of the Merger Agreement on SPSS's results of
operations;
10. Reviewed the reported prices and trading activity for SPSS's common stock
and the Company's common stock;
11. Compared the financial performance of SPSS and the price of the SPSS
common stock with that of what we believe to be certain other comparable
publicly-traded companies and their securities;
12. Compared the financial performance and pro-forma financial projections of
ShowCase with those of certain other comparable publicly-traded companies;
13. Reviewed the financial terms of certain business combinations involving
companies in lines of business we believe to be generally comparable to
those of ShowCase;
14. Participated in discussions among representatives of ShowCase and its
financial and legal advisors; and
15. Conducted such other analyses and examinations and considered such other
financial, economic and market criteria as we have deemed necessary in
arriving at our opinion.
In rendering its opinion, Craig-Hallum assumed and relied upon the
accuracy and completeness of the foregoing and of the financial, legal, tax,
operating and other information provided to us by SPSS and ShowCase and that
which was otherwise reviewed by them, and did not independently verify such
information. Craig-Hallum did not perform an independent evaluation or
appraisal of any of the respective assets or liabilities of ShowCase or SPSS
and was not furnished with any such valuations or appraisals. With respect to
the financial forecasts supplied to Craig-Hallum, they assumed that they had
been reasonably prepared on the bases reflecting the best currently available
estimates and judgments of the management of SPSS and ShowCase, as the case may
be, of the respective future financial performance of ShowCase and SPSS.
Craig-Hallum expressed no view as to such projections or the assumptions upon
which they were based. Craig-Hallum made no independent investigations of any
legal matters affecting SPSS or ShowCase and assumed the correctness of all
legal advice given to the Board of Directors of ShowCase by its counsel.
Craig-Hallum expresses no opinion herein as to the price at which the SPSS
common stock may actually trade at any time.
In connection with rendering its opinion, Craig-Hallum, amongst other
things, performed:
- Discounted cash flow analysis;
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- Equity value per share analysis;
- Selected comparable acquisition analysis: and,
- Contribution analysis.
Craig-Hallum did not attempt to assign any particular weights to
particular analyses. In addition, to assess the relative market valuation of
ShowCase common stock, Craig-Hallum reviewed certain publicly available
financial information as to the most recently reported stock market information
as of November 6, 2000 for five (5) publicly traded companies that Craig-Hallum
deemed relevant. Those companies were:
- Brio Tech, Inc.
- Business Objects S.A.
- Cognos Incorporated
- Hyperion Solutions Corporation
- Informix Corporation
Craig-Hallum chose these companies based on its review of publicly traded
companies that possessed general business, operating and financial
characteristics Craig-Hallum believed were representative of companies in the
industry in which Showcase operates. Craig-Hallum Capital Group noted that none
of the companies reviewed is identical to ShowCase and that accordingly, the
analysis of these companies necessarily involves complex considerations and
judgments concerning differences in the business, financial and operating
characteristics of each company and other factors that affect the market values
of these companies.
Craig-Hallum, as part of its securities and investment banking
business, is regularly engaged in the valuation of businesses and their
securities, in connection with mergers and acquisitions, secondary distributions
of securities, private placements and valuations for other purposes.
In the ordinary course of business, Craig-Hallum may from time to time
trade securities, including securities of SPSS or ShowCase, for its own account
or for accounts of its customers and, accordingly, may at any time hold a long
or short position of these securities.
Pursuant to an engagement agreement dated September 29, 2000 between
ShowCase and Craig-Hallum, ShowCase agreed to pay Craig-Hallum a fee upon
delivery of its opinion, regardless of the conclusions reached by Craig-Hallum
in such opinion. ShowCase has also agreed to indemnify Craig-Hallum, its
affiliates and their respective directors, officers, employees and agents and
controlling persons against certain liabilities related to or arising out of its
engagement, including liabilities under the federal securities laws.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendations of ShowCase's board of directors
with respect to the merger, stockholders should be aware that some officers of
ShowCase, including some officers who are also directors, have some interests in
the merger that may be different from, or in addition to, the interests of
stockholders of ShowCase. The board of directors of ShowCase was aware of these
interests and considered them, among other matters, in making their
recommendation.
Stock Options. In the merger, each outstanding option to purchase
shares of ShowCase common stock (including options held by officers and
non-employee directors of ShowCase) will be converted into an option to acquire,
on substantially the same economic terms and conditions as applied to the
ShowCase option, a number of shares of SPSS common stock to be determined by
multiplying the number of shares of ShowCase common stock subject to such option
by the exchange ratio rounded down to the nearest whole share, at a price per
share equal to the per share price at which the ShowCase option is exercisable
divided by the exchange ratio rounded to the nearest whole cent.
Some outstanding ShowCase option agreements (including some option
agreements between ShowCase and officers and non-employee directors of ShowCase)
provide that the option to purchase the underlying shares of common stock will
become fully vested upon a change in control of ShowCase. "Change in control" is
defined as the acquisition by an entity or person, not currently a shareholder
of ShowCase, of shares of ShowCase stock representing more than 50% of the
voting power of the outstanding shares of ShowCase stock.
Based upon the number of options held by all officers and non-employee
directors (12 individuals) as of November 6, 2000, options held by these
officers and non-employee directors to purchase 611,712 shares of Common Stock
will become fully vested at the effective time of the merger.
Severance Benefits. According to the terms of employment for ShowCase's
executive officers, if within one year following a change in control, as defined
above, an executive officer is terminated without cause or voluntarily
terminates employment with ShowCase because there has been a substantial change
in the scope of the executive officer's employment responsibilities or a forced
job relocation, the executive officer generally is entitled to receive severance
payments equal to between three and twelve months salary plus bonus, depending
on the executive officer's terms of employment. Some executive officers are
entitled to accelerated vesting of 50% of the stock options held by the
executive officer that were not already vested at the time of termination of
employment.
Based upon the number of unvested stock options held by ShowCase
officers (8 individuals) as of November 6, 2000 (not including options that
would vest upon a change in control), options to purchase an additional 96,875
shares of Common Stock would vest upon termination of employment of ShowCase's
executive officers under the circumstances described above.
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THE MERGER AGREEMENT
The following is a summary of the material terms of the merger
agreement. This summary does not purport to describe all the terms of the merger
agreement and is qualified by the complete merger agreement which is attached as
Annex A to this joint proxy statement/prospectus and incorporated by reference.
All stockholders of SPSS and ShowCase are urged to read the merger agreement
carefully and in its entirety.
GENERAL
Under the merger agreement, a wholly-owned subsidiary of SPSS will
merge with and into ShowCase, with ShowCase continuing as the surviving
corporation. The combined entity will be named "SPSS Inc."
Immediately following completion of the merger:
- SPSS's merger subsidiary will have been merged into ShowCase and will
no longer exist as a separate entity;
- ShowCase will be a wholly owned subsidiary of SPSS;
- former holders of ShowCase common stock will be entitled to receive
0.333 shares of SPSS common stock in exchange for each share of
ShowCase common stock held by them;
- the number of shares of SPSS common stock held by SPSS stockholders
before the merger will not be affected by the merger;
- former holders of options to purchase ShowCase common stock will be
entitled to receive economically equivalent options to purchase SPSS
common stock;
- approximately 3,725,000 shares SPSS common stock will be issuable
upon the exercise of SPSS options granted to former holders of
Showcase options; and
- on a fully diluted basis, former ShowCase stockholders will
collectively own approximately 25% of the outstanding shares of SPSS
common stock, and holders of SPSS common stock immediately prior to
the merger will collectively own the remainder.
Following the merger, SPSS will continue to be led by its current
management team.
CLOSING MATTERS
Closing. Unless the parties agree otherwise, the closing of the merger
will take place on the first business day after all closing conditions have been
satisfied or waived, unless the merger agreement has been terminated or another
time or date is agreed to in writing by the parties. See "The Merger Agreement
-- Conditions" below for a more complete description of the conditions that must
be satisfied prior to closing.
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Effective Time. As soon as practicable after the satisfaction or waiver
of the conditions to the merger, SPSS and ShowCase will file a certificate of
merger with the Delaware Secretary of State and articles of merger with the
Minnesota Secretary of State in accordance with the relevant provisions of the
Delaware General Corporation Law and the Minnesota Business Corporation Act and
make all other required filings or recordings. The merger will become effective
when the certificate of merger is filed with the Secretary of the State of
Delaware and the articles of merger are filed with the Secretary of the State of
Minnesota, whichever is later, or at such later time as SPSS and ShowCase agree
and specify in the certificate of merger and articles of merger.
CONSIDERATION TO BE RECEIVED IN THE MERGER; TREATMENT OF STOCK OPTIONS
The merger agreement provides that, at the effective time of the
merger:
- each share of ShowCase stock issued and outstanding immediately prior
to the effective time of the merger, will be converted into 0.333
shares of SPSS common stock; and
- each outstanding and unexercised option or right to purchase shares
of ShowCase common stock granted under the ShowCase stock plans will
be converted into a non-qualified option or a right to purchase
shares of SPSS common stock on economically equivalent terms and
conditions as were applicable to the options as granted under the
ShowCase stock plans, taking into account provisions providing for
full vesting under those stock plans. The number of shares of SPSS
common stock that the converted options will be exercisable for, and
the exercise price of the option, will be adjusted to reflect the
exchange ratio.
In addition, any shares of ShowCase common stock owned by SPSS or
SPSS's merger subsidiary will be automatically canceled, and will not be
exchanged for any shares of SPSS common stock or other consideration.
Each share of SPSS common stock will remain outstanding following the
merger and will continue to represent one share of common stock of the combined
company.
For a further discussion of the treatment of ShowCase stock options and
other employee benefit plans under the merger agreement, see "The Merger
Agreement -- Covenants -- Employee Matters" and "Interests of Certain Persons in
the Merger."
EXCHANGE OF CERTIFICATES IN THE MERGER
Before the closing of the merger, SPSS will appoint an exchange agent
to handle the exchange of ShowCase stock certificates for stock of SPSS and the
payment of cash for fractional shares. Soon after the closing of the merger, the
exchange agent will send a letter of transmittal, which is to be used to
exchange ShowCase stock certificates for stock of SPSS, to each former ShowCase
shareholder. The letter of transmittal will contain instructions explaining the
procedure for surrendering ShowCase stock certificates. You should not return
certificates with the enclosed proxy card.
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ShowCase shareholders who surrender their stock certificates, together
with a properly completed letter of transmittal, will receive shares of SPSS
common stock into which the shares of ShowCase common stock were converted in
the merger.
After the merger, each certificate that previously represented shares
of ShowCase stock will only represent the right to receive the shares of SPSS
common stock into which those shares of ShowCase common stock have been
converted.
SPSS will not pay dividends to holders of any ShowCase stock
certificates until the ShowCase stock certificates are surrendered to the
exchange agent. However, once those certificates are surrendered, SPSS will pay
to the holder, without interest, any dividends that have been declared after the
effective date of the merger on the shares into which those ShowCase shares have
been converted.
After the effective time of the merger, ShowCase will not register any
transfers of the shares of ShowCase common stock.
SPSS stockholders do not need to exchange their stock certificates.
FRACTIONAL SHARES
No fractional shares of SPSS common stock will be issued in the merger.
Instead, the exchange agent will pay each of those shareholders who would have
otherwise been entitled to a fractional share of SPSS common stock an amount in
cash determined by multiplying the fractional share interest by the closing
price for a share of SPSS stock on the Nasdaq National Market on the date of the
effective time of the merger or, if such date is not a business day, on the
business day immediately following the date on which the effective time of the
merger occurs.
LISTING OF SPSS STOCK
SPSS has agreed to use its reasonable best efforts to cause the shares
of SPSS common stock to be issued in the merger to be approved for listing on
Nasdaq National Market, subject to official notice of issuance, prior to the
effective time of the merger. SPSS's symbol "SPSS" will be used for such shares,
assuming the listing application is approved. Approval for listing on the Nasdaq
National Market of the shares of SPSS common stock issuable to the ShowCase
shareholders in the merger, subject only to official notice of issuance, is a
condition to the obligations of SPSS and ShowCase to complete the merger.
BOARD OF DIRECTORS; EXECUTIVE OFFICERS; COMPANY HEADQUARTERS
SPSS Board Of Directors. At the effective time of the merger, the board
of directors of SPSS will consist of eight members. The current Board of
Directors of SPSS will appoint William Binch, Promod Haque and Kenneth Holec to
the Board of Directors of SPSS.
Executive Officers. Jack Noonan, SPSS's current President and Chief
Executive Officer, will continue to be President and Chief Executive Officer of
SPSS after the merger. Edward Hamburg, SPSS's Executive Vice President,
Corporate Operations and Chief Financial Officer,
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will continue to be Executive Vice President, Corporate Operations and Chief
Financial Officer of SPSS after the merger.
SPSS Headquarters. After the completion of the merger, the headquarters
of the combined company will be located in Chicago, Illinois, SPSS's current
headquarters. In addition, SPSS shall maintain offices in Rochester, Minnesota,
the current location of ShowCase's headquarters, for so long as SPSS considers
it necessary or desirable.
COVENANTS
We have each undertaken certain covenants in the merger agreement
concerning the conduct of our respective businesses between the date the merger
agreement was signed and the completion of the merger. The following summarizes
the more significant of these covenants:
No Solicitation. We have each agreed that we, and any of our
subsidiaries, officers or directors, will not, and will use reasonable best
efforts to ensure that our respective employees, agents or representatives do
not:
- initiate, solicit, encourage or knowingly facilitate, including by
way of furnishing information, any inquiries or the making of any
proposal or offer with respect to a third party "acquisition
proposal" of the type described below;
- have any discussion with or provide any confidential information or
data to any person relating to an acquisition proposal;
- engage in negotiations concerning an acquisition proposal;
- knowingly facilitate any effort or attempt to make or implement an
acquisition proposal; or
- accept an acquisition proposal.
However, each of us is permitted, as is contemplated under the federal
securities laws, to take and disclose to our stockholders our position with
respect to any acquisition proposal.
In addition, each of SPSS and ShowCase is permitted to engage in
discussions and negotiations with, and provide information to, any person in
response to an unsolicited acquisition proposal, if:
- its meeting of stockholders to vote on the merger proposals shall not
have occurred;
- its board of directors concludes in good faith that there is a
reasonable likelihood that the acquisition proposal could result in a
"superior proposal" of the type described below;
- prior to providing any information or data to any person in
connection with an acquisition proposal, the proposing party first
signs a confidentiality agreement with
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terms, at least as stringent as the confidentiality provisions
contained in the merger agreement; and
- it keeps the other party informed of the status and terms of the
acquisition proposal and any discussions or negotiations relating to
the acquisition proposal.
An "acquisition proposal" for SPSS or ShowCase, as applicable, is any
proposal or offer with respect to:
- a merger, reorganization, share exchange, consolidation, business
combination, or recapitalization, liquidation, dissolution or similar
transaction involving the party;
- any purchase or sale of the consolidated assets of the party and its
subsidiaries, taken as a whole.
A "superior proposal" for ShowCase is a written proposal made by a
person other than SPSS which is for:
(1) a merger, reorganization, consolidation, share exchange, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving ShowCase;
(2) a sale, lease, exchange, transfer or other disposition of at least
40% of the assets of ShowCase and its Subsidiaries, taken as a
whole, in a single transaction or a series of related transactions;
or
(3) the acquisition, directly or indirectly, by a Person of beneficial
ownership of 40% or more of the common stock of ShowCase whether by
merger, consolidation, share exchange, business combination, tender
or exchange offer or otherwise
and which is on terms which the Board of Directors of ShowCase in good
faith concludes (after consultation with its financial advisors and
outside counsel), taking into account, among other things, all legal,
financial, regulatory and other aspects of the proposal and the Person
making the proposal:
(1) would, if consummated, result in a transaction that is more
favorable to its shareholders (in their capacities as
shareholders), from a financial point of view, than the
transactions contemplated by this Agreement, and
(2) is reasonably capable of being completed.
Board of Directors' Covenant to Recommend. We have agreed that our
respective boards of directors will recommend the approval of the merger to
their respective stockholders. However, each board is permitted not to make or
to withdraw or to modify or to qualify in a manner adverse to the other company
this recommendation, including by endorsing an alternative transaction to the
merger between SPSS and ShowCase, before its meeting if either:
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- it determines in good faith that a "material adverse effect" has
occurred with respect to the other party, and there would be a
substantial probability that the board would be breaching its
fiduciary duties to its stockholders if it did not change its
recommendation; or
- it has received an unsolicited acquisition proposal that its board
concludes in good faith is a superior proposal.
Even if the board of either company changes, withholds or modifies its
recommendation of the merger, that company is still required to present the
merger and related proposals to its stockholders for consideration at its
meeting, unless the merger agreement is otherwise terminated. See "The Merger
Agreement -- Termination of Merger Agreement" for a discussion of each party's
ability to terminate the merger agreement.
Operations of SPSS and ShowCase Pending Closing. We have each
undertaken a separate covenant that places restrictions on ourselves and our
respective subsidiaries until either the effective time of the merger or the
termination of the merger agreement. In general, we and our respective
subsidiaries are required to conduct our business in the usual, regular and
ordinary course in all material respects substantially in the same manner as
previously conducted and to use our reasonable efforts to preserve intact our
present lines of business and relationships with third parties. Each of us has
agreed to some specific restrictions that prohibit us and our respective
subsidiaries from:
- Disposing of any assets of ShowCase, except in the ordinary course of
business;
- Materially increasing the annual level of compensation of any
employee, and granting any unusual or extraordinary bonuses, benefits
or other forms of direct of indirect compensation to any employee,
officer, director or consultant, except in amounts in keeping with
past practices by formulas or otherwise;
- Increasing terminating, amending or otherwise modifying any plan for
the benefit of employees;
- Issuing any equity securities or options in excess of certain
amounts, warrants, rights or convertible securities;
- Paying any dividends, redeeming any securities, or otherwise causing
assets of ShowCase to be distributed to any of its Shareholders
except by way of compensation to employees who are also Shareholders
within the limitations set forth above; and
- Borrowing any funds, under existing credit lines or otherwise,
except as reasonably necessary for the ordinary operation of
ShowCase's business in a manner, and in amounts, in keeping with
historical practices.
Reasonable Best Efforts Covenant. We have agreed to cooperate with each
other and to use our reasonable best efforts to take all actions and do all
things advisable or necessary under the merger agreement and applicable laws to
complete the merger and the other transactions contemplated by the merger
agreement. This cooperation may include selling, holding separate
123
or disposing of assets in response to the requirements imposed by antitrust
authorities. Neither of us will be required for any reason to sell, hold
separate or otherwise dispose of assets, or to conduct our business in a
specified manner, if such action is not conditioned on our merger closing or
would reasonably be expected to have a material adverse effect on the combined
company.
Employee Matters. In the merger agreement, we have agreed that,
following the merger, SPSS will:
- comply with the terms of all ShowCase benefit plans and related
funding arrangements in accordance with their terms. Except as
provided in the previous sentence, for at least one year following
the completion of the merger, SPSS will provide compensation and
employee benefits under benefit plans to ShowCase employees that are
substantially comparable in the aggregate to the compensation and
benefits provided under the existing ShowCase plans; and
- with certain exceptions, grant to ShowCase employees in the U.S.
who continue employment with SPSS after the merger credit for any
co-payments and deductibles paid on or after January 1 of the
calendar year in which the merger occurs (to the same extent such
credit was given under the analogous ShowCase benefit plans during
the same period) and recognize all service of ShowCase employees with
ShowCase and its subsidiaries for purposes of eligibility to
participate and vesting credit.
OTHER COVENANTS AND AGREEMENTS
Meeting of Stockholders. The merger agreement contains a covenant that
we will each convene a meeting of our stockholders to consider and vote upon the
merger and related transactions as soon as reasonably practicable.
Insurance and Indemnification. SPSS is obligated, for six years after
the merger, to maintain in effect ShowCase's current directors' and officers'
liability insurance covering acts or omissions occurring prior to the effective
time of the merger.
SPSS is obligated, to the fullest extent permitted by law, to indemnify
and hold harmless, and provide advancement of expenses to, each person who is or
has been an officer or director of ShowCase or any of its subsidiaries with
respect to acts or omissions by them in their capacities as officers, directors
or employees of ShowCase or any of its subsidiaries or taken at the request of
ShowCase or any of its subsidiaries at any time on or prior to the effective
time of the merger, including for acts and omissions occurring in connection
with the approval of the merger and the merger agreement. SPSS will also cause
the surviving corporation in the merger to maintain in its certificate of
incorporation or by-laws for a period of six years the current provisions
regarding indemnification of officers, directors and employees.
Expenses. We have each agreed to pay our own costs and expenses
incurred in connection with the merger and the merger agreement. SPSS, however,
will pay the expenses incurred in connection with the filing with the SEC of
this joint proxy statement/prospectus and
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the related registration statement and the costs associated with the printing
and mailing of this joint proxy statement/prospectus.
Accountants' Letters. SPSS has agreed to use its reasonable best
efforts to deliver to ShowCase a copy of a letter from its independent public
accountants, dated the date of closing of the merger, stating that accounting
for the merger as a pooling of interests is appropriate if the merger is closed
and consummated as contemplated by the merger agreement.
ShowCase has agreed to use its reasonable best efforts to deliver to
SPSS and SPSS's independent public accountants a copy of a letter from its
independent public accountants, dated the closing date of the merger, stating
that they concur with ShowCase's conclusion that, as of the date of such
letter, no conditions exist which would preclude ShowCase's ability to be a
party to a business combination to be accounted for as a pooling of interests.
Other Covenants. The merger agreement contains covenants relating to
the cooperation between SPSS and ShowCase in the preparation of this joint proxy
statement/prospectus and other governmental filings. The merger agreement also
contains additional agreements relating to, among other things, public
announcements, mutual notice of certain matters and access to information.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains substantially reciprocal representations
and warranties made by each of us to the other. The representations and
warranties relate to:
- corporate existence, qualification to conduct business and
corporate standing and power;
- ownership of subsidiaries;
- capital structure;
- corporate authority to enter into, and carry out the obligations
under, the merger agreement and enforceability of the merger
agreement;
- absence of a breach of the certificate of incorporation, by-laws,
law or material agreements as a result of the merger;
- filings with the SEC;
- financial statements;
- information supplied for use in this joint proxy
statement/prospectus;
- board of directors approval;
- votes required for approval;
- litigation;
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- compliance with laws;
- absence of certain changes or events;
- intellectual property matters;
- payment of fees to finders or brokers in connection with the merger
agreement;
- opinions of financial advisors;
- accounting matters;
- tax matters;
- employee benefit and labor matters; and
- restrictive contracts.
The merger agreement also contains certain representations and
warranties of SPSS and its wholly-owned merger subsidiary, including
organization, corporate authorization, non-contravention and no prior business
activities.
The representations and warranties contained in the merger agreement do
not survive the effective time of the merger.
CONDITIONS
Our respective obligations to complete the merger are subject to the
satisfaction or, to the extent legally permissible, the waiver of various
conditions which include, in addition to other customary closing conditions:
- the adoption and approval of the Agreement and Plan of Merger by
the SPSS and ShowCase stockholders, and the approval of the share
issuance by the SPSS stockholders;
- the absence of any law, order or injunction prohibiting completion
of the merger or which would have a material adverse effect on the
combined company;
- the expiration or termination of the applicable waiting periods
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended;
- the approval for listing on the Nasdaq National Market of the SPSS
stock to be issued in the merger, subject to official notice of
issuance;
- the receipt of all other governmental and regulatory consents,
approvals and authorizations necessary for the merger -- other than
consents or approvals of antitrust authorities (which are
specifically discussed above) -- unless not obtaining those consents
or approvals would not reasonably be expected to have a material
adverse effect on the combined company, taken as a whole;
126
- the SEC having declared effective the SPSS registration statement,
of which this joint proxy statement/prospectus forms a part;
- ShowCase's receipt of a letter from its independent public
accountants, dated as of the closing date, confirming that, subject
to certain conditions, they concur with ShowCase's management that no
conditions exist that would preclude ShowCase's ability to be a party
in a business combination accounted for as a pooling of interests;
and
- SPSS's receipt of a letter from its independent public accountants,
dated as of the closing date, stating that, subject to certain
conditions, accounting for the merger as a pooling of interests is
appropriate, if the merger is closed and consummated as contemplated
by the merger agreement.
In addition, individually, our respective obligations to effect the
merger are subject to the satisfaction or, to the extent legally permissible,
the waiver of the following additional conditions:
- the representations and warranties of the other company contained
in the merger agreement being true and correct in all material
respects on the closing date of the merger as if they were made on
that date, unless they were by their express provisions made as of
another particular date, in which case the statement must be true and
correct in all material respects as of that date;
- the other party having performed or complied in all material
respects with its obligations and covenants contained in the merger
agreement;
- the receipt of an opinion of each company's counsel to the effect
that the merger will qualify as a reorganization under the Internal
Revenue Code;
- to the extent ShowCase is a party to any material agreement
pursuant to which transactions contemplated by the merger agreement
would or may result in the termination or modification of such
agreement, or any part thereof, ShowCase having received from the
other party or parties to such agreement, a waiver of the provisions
relating to such termination or modification or consent to the
transactions contemplated by the merger agreement.
TERMINATION OF MERGER AGREEMENT
Right to Terminate. The merger agreement may be terminated at any
time prior to the effective time in any of the following ways:
- by our mutual written consent;
- by either one of us;
- if the merger has not been completed by February 28, 2001, except
that a party may not terminate the merger agreement if the cause
of the merger not
127
being completed by that date is that party's failure to fulfill
its obligations under the merger agreement;
- if a governmental authority or a court order permanently
prohibits the completion of the merger or a governmental
authority fails to grant any necessary approval of the merger,
the absence of which would have a material adverse effect on the
combined company, except that a party may not terminate the
merger agreement if the cause of the prohibition or failure to
obtain approval is that party's fault; or
- if SPSS's stockholders fail to adopt the Agreement and Plan of
Merger, SPSS's stockholders fail to approve the issuance of
shares of stock pursuant to the Agreement and Plan of Merger, or
ShowCase's shareholders fail to adopt the Agreement and Plan of
Merger.
- by SPSS:
- if ShowCase's board of directors either fails to recommend the
merger to its shareholders, changes its recommendation, or fails
to call the ShowCase special meeting to vote on the merger;
- if ShowCase shall have breached any of its representations,
warranties, covenants or obligations under the merger agreement
and such breach:
- would result in the failure of closing conditions to the
merger being satisfied; and
- is incapable of being cured or remains uncured for 30
days after ShowCase receives notice of its breach.
- by ShowCase:
- if SPSS's board of directors either fails to recommend to its
stockholders the share issuance proposal, changes its
recommendation, or fails to call the SPSS special stockholder
meeting to vote on the share issuance proposal;
- if ShowCase's board of directors authorizes ShowCase to enter
into a written agreement concerning a transaction that ShowCase's
board of directors has determined is a superior proposal, except
that ShowCase cannot terminate the merger agreement for this
reason until the completion of five business days after ShowCase
provides SPSS with notice of the existence and terms of the
superior proposal, including the identity of the person making
the superior proposal and a statement as to whether ShowCase
intends to enter into a definitive agreement for a business
combination. After delivering such notice, ShowCase will provide
SPSS a reasonable opportunity to make adjustments to the terms
and conditions of the merger agreement to enable ShowCase to
proceed with the merger on the adjusted terms; or
128
- if SPSS shall have breached any of its representations,
warranties, covenants or obligations under the merger agreement
and such breach:
- would result in the failure of closing conditions to the
merger being satisfied; and
- is incapable of being cured or remains uncured for 30 days
after SPSS receives notice of its breach.
Termination Fees Payable by ShowCase. ShowCase has agreed to pay SPSS a
termination fee of $3.5 million if the merger agreement is terminated and at the
time of such termination a superior proposal is pending with respect to ShowCase
and ShowCase thereafter enters into an agreement relating to the superior
proposal.
AMENDMENTS, EXTENSIONS AND WAIVERS
The merger agreement may be amended by the parties at any time before
or after the stockholder meetings, except that any amendment after a
stockholders meeting, which requires approval by stockholders, shall not be made
without such approval. All amendments to the merger agreement must be in a
writing signed by each party.
At any time prior to the effective time of the merger, any party to the
merger agreement may, to the extent legally allowed:
- extend the time for the performance of any of the obligations or
other acts of the other parties to the merger agreement;
- waive any inaccuracies in the representations and warranties of the
other parties contained in the merger agreement; and
- waive compliance by the other parties with any of the agreements or
conditions contained in the merger agreement.
All extensions and waivers must be in writing and signed by the party
against whom the waiver is to be effective.
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BOARD OF DIRECTORS AND MANAGEMENT OF SPSS
FOLLOWING THE MERGER
OFFICERS AND DIRECTORS
The following table shows information as of November 9, 2000 with
respect to each person who is to be an executive officer or director of SPSS
following the merger.
[Download Table]
Name Age Position
---- --- --------
Norman Nie 57 Chairman of the Board of Directors
Jack Noonan 53 Director, President and Chief Executive Officer
Edward Hamburg 49 Executive Vice President, Corporate Operations,
Chief Financial Officer, and Secretary
Mark Battaglia 40 Executive Vice President, Corporate Marketing
Ian Durrell 58 Executive Vice President, SPSS Market Research
Susan Phelan 44 Executive Vice President, SPSS Business Intelligence
Bernard Goldstein (1)(2) 70 Director
Merritt Lutz (1) 58 Director
Michael Blair (1)(2) 56 Director
Promod Haque 52 Director
William Binch 60 Director
Kenneth Holec 45 Director
---------------------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Norman Nie, Chairman of the Board and co-founder of SPSS, designed
SPSS's original statistical software beginning in 1967 and has been a Director
and Chairman of the Board since SPSS's inception in 1975. He served as Chief
Executive Officer of SPSS from 1975 to 1991. In addition to his current
responsibilities as Chairman of the Board, Dr. Nie is a research professor at
Stanford University and a professor emeritus in the Political Science Department
at the University of Chicago. His research specialties include public opinion,
voting behavior and citizen participation. He has received three national awards
for his books in these areas. During 1998, he became a technology partner in Oak
Investment Partners and is a director of several privately-held companies. Dr.
Nie received his Ph.D. from Stanford University.
130
Jack Noonan has served as Director as well as President and Chief
Executive Officer since joining SPSS in January 1992. Mr. Noonan was President
and Chief Executive Officer of Microrim Corp., a developer of database software
products, from 1990 until December 1991. Mr. Noonan served as Vice President of
the Product Group of Candle Corporation, a developer of IBM mainframe system
software, from 1985 to 1990. Mr. Noonan is a Director of ShowCase Corporation,
Morningstar, Inc., and Repository Technologies, Inc. Mr. Noonan is a member of
the advisory committee to Napersoft, Inc.
Edward Hamburg, Executive Vice President, Corporate Operations, Chief
Financial Officer and Secretary, was elected Senior Vice President, Corporate
Operations in July 1992, Chief Financial Officer in June 1993 and Secretary in
June 1994. Dr. Hamburg previously served as Senior Vice President, Business
Development, and was responsible for product and technology acquisitions as well
as joint venture opportunities. Dr. Hamburg first joined SPSS in 1978 and served
in a variety of marketing and product management capacities. He joined the
faculty at the University of Illinois at Chicago in 1982, and returned to SPSS
in 1986. Dr. Hamburg received his Ph.D. from the University of Chicago.
Mark Battaglia, Executive Vice President, Corporate Marketing, joined
SPSS in October 1988. Mr. Battaglia served as Vice President of Marketing at
London House, a publisher in the Maxwell Communications family, from June 1987
until joining SPSS. Mr. Battaglia received his MBA in 1984 from the University
of Chicago.
Ian Durrell, Executive Vice President, SPSS Market Research, joined
SPSS in February 1991. Before that time, he served as head of European marketing
for Unify Corporation, a supplier of relational database management systems, and
was a partner of Partner Development International, a strategic partnering firm
from 1987 to 1989. Mr. Durrell graduated from the Royal Military Academy,
Sandhurst, in the United Kingdom.
Susan Phelan, Executive Vice President, SPSS Business Intelligence,
joined SPSS in 1980 as a sales representative. She assumed her current position
in 1987. Ms. Phelan received her MBA from the University of Illinois at Chicago.
Bernard Goldstein has been a Director of SPSS since 1987. He is a
Director of Broadview International, LLC, which he joined in 1979. He is a past
President of the Information Technology Association of America, the industry
trade association of the computer service industry, and past Chairman of the
Information Technology Foundation. Mr. Goldstein was a Director of Apple
Computer Inc. until August 1997, and is currently a Director of Sungard Data
Systems, Inc., Giga Information Group, Inc, and several privately held
companies. He is a graduate of both the Wharton School of the University of
Pennsylvania and the Columbia University Graduate School of Business.
Merritt Lutz has been a Director of SPSS since 1988. He is currently a
Managing Director of Morgan Stanley Dean Witter & Co. managing the its strategic
technology investments and partnerships. Previously, he was President of Candle
Corporation, a worldwide supplier of systems software from 1989 to November
1993. Mr. Lutz is a Director of Interlink Electronics, Inc. and three privately
held software companies: Algorithmics, Persistence Software, and MicroFrame
Technologies. Mr. Lutz serves on the Board of Managers at the
131
University of Rochester-Eastman School of Music and Michigan State University
College of Arts and Letters National Advisory Council. He is a former Director
of Information Technology Association of American and the NASD Industry Advisory
Committee. He holds a bachelors and masters degree from Michigan State
University.
Michael D. Blair has been a Director of SPSS since July 1997. Since
April 1974, he has been Chairman, Chief Executive, and founder of Cyborg
Systems, Inc., a human resource management software company. Mr. Blair is a
Director of Praxis International, Computer Corporation of America, and
Repository Technologies, Inc. He is a board member of Information Technology
Association of America, President of the Chicago Software Association, a board
member of the American Software Association, and a board member of Benefits &
Compensation Magazine. Mr. Blair holds a bachelor's degree in mathematics and
physics from the University of Missouri.
Promod Haque will be a director of SPSS following the merger. Dr. Haque
has been a director of ShowCase since March 1992. Dr. Haque joined Norwest
Venture Partners, a venture capital firm, in November 1990 and is currently
managing general partner of Norwest Venture Partners VIII & VII, general partner
of Norwest Venture Partners VI and general partner of Norwest Equity Partners V
& IV. Dr. Haque is a director of Extreme Networks, Inc., On Display, Primus
Knowledge Solutions, Redback Networks, Annuncio Software and several privately
held companies.
William Binch will be director of SPSS following the merger. Mr. Binch
has been a director of ShowCase since 1999. Mr. Binch was senior vice president
of worldwide operations for Hyperion Solutions from July 1997 to May 1999. Prior
to Hyperion, he was a senior executive for Business Objects and Prism, two
business intelligence and data-warehousing companies. In addition, Mr. Binch
served as vice president of strategic accounts at Oracle Corporation and has
held sales and management positions at IBM, Intel and Fortune. He also is a
director of five other technology companies: Market-Touch, On-Link Technology,
seeCommerce, Adflight, and Closedloop Solutions.
Kenneth Holec will be director of SPSS following the merger. Mr. Holec
has been president and chief executive officer and a member of the board of
directors of ShowCase since November 1993. From 1985 to 1993, Mr. Holec was
president and chief executive officer of Lawson Software, a provider of high-end
financial and human resource management software solutions. Currently, Mr. Holec
is a director of IntraNet Solutions, Inc., a maker of Web-based document
management products for corporate intranets.
SPSS's Board of Directors is divided into three classes serving
staggered three-year terms. Mr. Lutz is serving a three-year term expiring at
the 2001 annual meeting. Mr. Goldstein and Dr. Nie are each serving a three-year
term expiring at the 2002 annual meeting. Mr. Noonan and Mr. Blair are each
serving a three-year term expiring at the 2003 annual meeting. Messrs. Holec,
Binch and Haque will each be appointed to the SPSS Board of Directors on the
effective date of the Merger. In order to distribute newly-appointed directors
among the three classes, Mr. Holec will be appointed to a term expiring at the
2001 annual meeting, Mr. Binch will be appointed to serve a term expiring at the
2002 annual meeting and Dr. Haque will be appointed to serve a term expiring at
the 2003 annual meeting. For a discussion of the
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nomination rights granted to specific stockholders of SPSS, see "Related
Transactions-Stockholders Agreement." The executive officers named herein have
terms expiring at the next annual meeting or when their successors are duly
elected and qualified.
EXECUTIVE COMPENSATION
The executive compensation committee of the SPSS board of directors
will determine the form and amount of compensation of the ShowCase officers who
become SPSS's officers. The current officers of SPSS will continue to receive
such compensation based on considerations as discussed in the Report to the
Compensation Committee on pages 138 through 140.
The following tables show (a) the compensation paid or accrued by SPSS
to the Chief Executive Officer, and each of the four most highly compensated
officers of SPSS, other than the CEO, serving on December 31, 1999 (the "named
executive officers") for services rendered to SPSS in all capacities during
1997, 1998, and 1999, (b) information relating to option grants made to the
named executive officers in 1999 and (c) certain information relating to options
held by the named executive officers. SPSS made no grants of freestanding stock
appreciation rights ("SARs") in 1997, 1998, or 1999, nor did SPSS make any
awards in 1997, 1998 or 1999 under any long-term incentive plan.
SUMMARY COMPENSATION TABLE
[Enlarge/Download Table]
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------------------ ---------------------------------------------
AWARDS PAYOUTS
-------------------------- -------
OTHER RESTRICTED SECURITIES
SALARY ANNUAL STOCK UNDERLYING LTIP ALL
COMPENSATION BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($)(1) (#)(2) ($) ($)
--------------------------- ---- ------------ -------- ------------ ---------- ------------ ------- -----
Jack Noonan, 1999 $256,500 $ 96,125 None None 50,000 None None
President and Chief 1998 $242,500 $185,679 None None 50,000 None None
Executive Officer 1997 $235,000 $132,656 None None 50,000 None None
Ian Durrell, 1999 $197,000 $141,500 None None 25,000 None None
Executive Vice President, 1998 $197,000 $ 27,229 None None 25,000 None None
SPSS Market Research (3) 1997 $197,000 $ 30,933 None None 25,000 None None
Edward Hamburg, 1999 $156,000 $ 46,375 None None 25,000 None None
Executive Vice President, 1998 $156,000 $ 82,922 None None 25,000 None None
Corporate Operations and 1997 $156,000 $ 58,027 None None 25,000 None None
Chief Financial Officer
Mark Battaglia, 1999 $127,000 $ 41,375 None None 25,000 None None
Executive Vice President, 1998 $110,000 $ 70,262 None None 25,000 None None
Corporate Marketing 1997 $110,000 $ 54,342 None None 25,000 None None
Susan Phelan, 1999 $127,000 $ 84,080 None None 25,000 None None
Executive Vice President, 1998 $120,000 $ 83,419 None None 25,000 None None
SPSS Business Intelligence 1997 $110,300 $ 57,743 None None 25,000 None None
For the year ended December 31, 1999, non-employee directors of SPSS
were entitled to receive 5,000 options. Each director was also reimbursed by
SPSS for reasonable expenses incurred in connection with services provided as a
director. During 1999, Dr. Nie received compensation of $80,800 for consultant
work on a part-time basis.
---------------------------------
(1) On December 31, 1999, Dr. Hamburg held 8,800 shares and Ms. Phelan held
1,986 shares of restricted common stock having a market value, based on the
closing price of the common stock on that date, of $222,200 for Mr.
Hamburg's shares and $50,146 for Ms. Phelan's shares.
(2) Amounts reflected in this column are for grants of stock options for the
common stock of SPSS. No stock appreciation rights have been issued by
SPSS.
(3) Payments and options shown in the table for Mr. Durrell reflect payments
and option grants to Valletta Investments Limited, a consulting company
controlled by Mr. Durrell. Mr. Durrell does not receive any personal
benefits or perquisities, payments of salary and bonus, awards of options
or other compensation from SPSS in his individual capacity.
133
STOCK GRANTS TO EXECUTIVE OFFICERS
The following table shows the number of options to purchase common
stock granted to each of the named executive officers during 1999.
134
1999 OPTION/STOCK APPRECIATION RIGHTS GRANTS(1)
[Enlarge/Download Table]
Individual Grants
---------------------------------------------------------
Percent of Potential Realizable
Number of Total Value at Assumed
Securities Options/SARs Exercise Latest Annual
Underlying Granted to or Base Possible Rates of Stock Price
Options/SARs Employees in Price Expiration Appreciation For
Name Granted(#) 1999 ($/Sh) Date Option Term(2)
5% ($) 10% ($)
--------------------------- ------------ ------------ -------- ---------- -------- ----------
Jack Noonan................ 50,000 10.59% $20.500 01/03/09 $644,617 $1,633,586
Ian Durrell(3)............. 25,000 5.30% $20.500 01/03/09 $322,308 $ 816,793
Edward Hamburg............. 25,000 5.30% $20.500 01/03/09 $322,308 $ 816,793
Mark Battaglia............. 25,000 5.30% $20.500 01/03/09 $322,308 $ 816,793
Susan Phelan............... 25,000 5.30% $20.500 01/03/09 $322,308 $ 816,793
--------------------
(1) The Board of Directors of SPSS may, at its discretion, grant additional
options to the option holders in the event the option holders pay for the
exercise price of the options by tendering by attestation SPSS common
stock. In that case, the Board could grant these "reload" options in an
amount equal to the number of shares of SPSS common stock that the option
holder tendered by attestation.
(2) In satisfaction of applicable SEC regulations, the table shows the
potential realizable values of these options, upon their latest possible
expiration date, at arbitrarily assumed annualized rates of stock price
appreciation of five and ten percent over the term of the options. The
potential realizable value columns of the table illustrate values that
might be realized upon exercise of the options at the end of the ten-year
period starting with their vesting commencement dates, based on the
assumptions shown above. Because actual gains will depend upon the actual
dates of exercise of the options and the future performance of the common
stock in the market, the amounts shown in this table may not reflect the
values actually realized. No gain to the named executive officers is
possible without an increase in stock price which will benefit all
stockholders proportionately. Actual gains, if any, on option exercises and
common stock holdings are dependent on the future performance of the common
stock and general stock market conditions. There can be no assurance that
the potential realizable values shown in this table will be achieved, or
that the stock price will not be lower or higher than projected at five and
ten percent assumed annualized rates of appreciation.
(3) Options shown in the table for Mr. Durrell are options granted to Valletta.
135
AGGREGATED OPTION/STOCK APPRECIATION RIGHT EXERCISES IN 1999 AND
1999 YEAR-END OPTION/STOCK APPRECIATION RIGHT VALUES
[Enlarge/Download Table]
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
(#)(1) ($)(1) (2)
Shares ---------------- ---------------------
Acquired on Value
Exercise Realized Exercisable/ Exercisable/
Name (#) ($)(1) (4) Unexercisable Unexercisable
-------- ----------- ---------- ---------------- ---------------------
Jack Noonan................ None N/A 291,439/92,228 $7,358,835/$2,328,757
Ian Durrell(3)............. None N/A 79,281/45,719 $2,001,845/$1,154,405
Edward Hamburg............. 4,100 81,879 145,914/45,719 $3,684,329/$1,154,405
Mark Battaglia............. None N/A 133,614/45,719 $3,373,754/$1,154,405
Susan Phelan............... 6,500 152,425 115,448/45,719 $2,915,062/$1,154,405
(1) All information provided is with respect to stock options. No stock
appreciation rights have been issued by SPSS.
(2) These amounts have been determined by multiplying the aggregate number of
options by the difference between $25.25, the closing price of the common
stock on the Nasdaq National Market on December 31, 1999, and the exercise
price for that option
(3) Options shown in the table for Mr. Durrell are options granted to Valletta.
(4) These amounts have been determined by multiplying the aggregate number of
options exercised by the difference between the closing price of the common
stock on the Nasdaq National Market on the date of exercise and the
exercise price for that option.
EMPLOYMENT AGREEMENTS
SPSS entered into an employment agreement with Jack Noonan on January
14, 1992. This employment agreement provides for a one-year term with automatic
one-year extensions unless Mr. Noonan or SPSS gives a written termination notice
at least 90 days before the expiration of the initial term or any extension. It
also provides for a base salary of $225,000 during the initial term, together
with the same benefits provided to other employees of SPSS. The Board of
Directors annually reviews Mr. Noonan's base compensation and increased it to
$235,000 for 1993, 1994, 1995, 1996 and 1997, to $242,500 in 1998, and to
$256,500 in 1999. If SPSS terminates Mr. Noonan's employment without cause, SPSS
must pay Mr. Noonan an amount equal to 50% of Mr. Noonan's annual base salary in
effect at the time of termination. This amount is payable in 12 equal monthly
installments. However, if Mr. Noonan finds other employment at a comparable
salary, SPSS's obligation to make these payments ceases. The employment
agreement requires Mr. Noonan to refrain from disclosing confidential
information of SPSS and to abstain from competing with SPSS during his
employment and for a period of one year after employment ceases. Only Mr. Noonan
and Mr. Durrell, through a management services agreement with Valletta described
in "Management Services Agreement" below, are employed through an employment or
similar agreement. However, SPSS does have confidentiality and work-for-hire
agreements with many of its key management and technical personnel.
136
MANAGEMENT SERVICES AGREEMENT
SPSS has entered into a management services agreement with Valletta,
which requires that Ian Durrell's services are provided to SPSS. Either Valletta
or SPSS may terminate the agreement at any time upon 30 days' written notice. If
SPSS terminates the agreement under the 30-day notice provision without cause,
Valletta is entitled to termination payments equal to 50% of its annual
compensation under the agreement then in effect in six equal monthly
installments. The agreement further provides that if specified performance
standards are satisfied, Valletta is to receive annual compensation at a rate
established by the Board of Directors plus incentive compensation. For 1999,
Valletta's aggregate compensation, including bonus, was $338,500. The management
services agreement requires Valletta to refrain from disclosing confidential
information about SPSS and to abstain from competing with SPSS during the term
of the management services agreement and for a period of eighteen months
thereafter. Mr. Durrell has agreed to be bound by the terms and conditions of
the management services agreement and to act as SPSS's Vice-President,
International and to head the SPSS's non-western hemisphere operations.
CONSULTING AGREEMENT
SPSS has entered into a consulting agreement, dated as of January 1,
1997, with Norman H. Nie Consulting L.L.C., an Illinois Limited Liability
Company. Nie Consulting is to provide thirty (30) hours per month of consulting
services on various matters relating to the business of SPSS. This consulting
agreement provides for a one-year term with automatic one-year extensions unless
Nie Consulting or SPSS gives a written notice of termination at least 30 days
prior to the expiration of the initial term or any extension. SPSS may terminate
this consulting agreement for cause, in which event SPSS shall pay Nie
Consulting all accrued but unpaid compensation. The agreement also provides that
Nie Consulting is to receive annual compensation of $80,800 and reimbursement of
reasonable out of pocket expenses incurred in performing services under the
consulting agreement. The consulting agreement requires that the Nie Consulting
refrain from disclosing confidential information about SPSS during the term of
the consulting agreement and for a period of five years after its expiration. In
addition, the consulting agreement requires that Nie Consulting abstain from
competing with SPSS during his consultancy and for a period of one-year after
the consultancy ceases.
CHANGE OF CONTROL AGREEMENTS
On May 1, 1998, SPSS entered into change of control agreements
with its named executive officers to provide that, if the executive is
terminated without cause or constructively terminated within two years following
a change of control, then the executive may receive benefits including a
severance package equal to the greater of (a) the aggregate cash compensation
received in the immediately preceding fiscal year, or (b) two times the
executive's base salary received in the immediately preceding fiscal year; the
aggregate cost compensation scheduled to be received during the current fiscal
year; the accelerated vesting of all previously unvested options; and
participation in the same health and welfare benefits he or she received at any
time within 120 days of the change of control for eighteen months following that
date of such termination.
On November 30, 2000, SPSS revised its change of control agreements for
section (b) above to replace "two times the executive's base salary received in
the immediately preceding fiscal year" to "the aggregate cost compensation
schedule to be received during the current fiscal year."
137
COMPENSATION COMMITTEE
SPSS COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Goldstein, Blair and Lutz were directors and members of the
Compensation Committee during the last fiscal year. None of the members of the
Compensation Committee has ever been an officer or employee of SPSS or any of
its subsidiaries.
REPORT OF THE SPSS COMPENSATION COMMITTEE
To: The Board of Directors
The Compensation Committee of the Board of Directors is composed
entirely of directors who have never served as officers of SPSS. The
Compensation Committee develops and administers the compensation programs for
SPSS's executive officers. After consideration of the Compensation Committee's
recommendations, the entire Board of Directors reviews and approves the base
salaries, bonuses and the stock option and benefit programs for SPSS's executive
officers. In 1999, the Board approved the Compensation Committee's
recommendations in all material respects.
Compensation Philosophy. SPSS has three principal objectives in its
executive compensation programs:
1. It strives to relate its total compensation for senior
management to the achievement of financial benchmarks designed to build
shareholder value.
2. It rewards outstanding individual performance.
3. It strives to structure its entire compensation package in a
manner which is competitive with other executive compensation packages in
the software industry, so that it will attract and retain highly capable
key executives responsible for the success of SPSS and provide fair
compensation for the responsibilities undertaken by those executives.
These goals are met through a combination of salary, bonuses, stock options and
other benefits. SPSS is committed to increasing the proportion of the senior
executives' compensation which is performance-based, and therefore variable, and
to focus on building shareholder value as the primary measure of performance. To
the extent practicable, the Compensation Committee's objective is to align the
executive officers' financial interests with those of shareholders by focusing
on specific financial objectives that the Compensation Committee believes will
enhance shareholder value and through the grant of additional options pursuant
to SPSS's option plan, the opportunity for management to purchase additional
shares on advantageous terms under the SPSS's Stock Purchase Plan and through
present stock ownership and options.
The Compensation Committee focuses principally on SPSS's financial
performance--specifically operating and net income--in determining the amount of
bonuses for the executive officers. Therefore, bonuses for these officers are a
function of SPSS's overall financial
138
performance relative to budgeted goals. In keeping with SPSS's commitment to
increasing the proportion of the senior executives' compensation which is
performance-based, base salary levels are designed to increase in comparatively
small amounts and bonus compensation is designed so that it can increase or
decrease significantly depending on SPSS's overall financial performance.
The Compensation Committee works with the Chief Executive Officer (the
"CEO") to determine the base salary of the other executive officers, to
establish targets for the annual bonus program and to allocate the bonus pool
among the executive officers. Consistent with the Compensation Committee's
philosophy of shifting the proportion of compensation away from fixed to
variable types of compensation, the Compensation Committee has targeted growth
in total compensation to come from the bonus and other incentive forms of
compensation. At the beginning of each year, the Compensation Committee
establishes certain budgeted objectives for operating income. The total amount
allocated to the annual bonus pool is dependent upon the degree to which
budgeted goals are achieved.
Under SPSS's Third Amended and Restated 1995 Equity Incentive Plan, the
Compensation Committee is authorized to make grants of stock options to
executive officers. The Compensation Committee normally approves grants once a
year and occasionally in connection with significant corporate events. During
1999, the Compensation Committee awarded stock options to executive officers. In
determining the size of the option grants, the Compensation Committee considers
the impact of the grants on existing shareholders' stock ownership positions and
the prospective value of the options as a performance incentive. The number of
options previously awarded to and held by executive officers is reviewed and is
one factor in determining the size of current option grants.
The Compensation Committee has established a stock option program for
which only policy-making senior executives of SPSS are eligible. Acceleration of
the vesting of the options granted to the executive officers as of January 1999
was contingent upon SPSS achieving certain 1999 revenue and profit levels
established by the Board of Directors. Such options are customarily granted in
the first half of the calendar year after budgetary targets have been
established. The acceleration of these options is earned only if SPSS exceeds,
by a significant percentage established by the Compensation Committee, the
budgeted performance goals for SPSS operating and net income approved by the
Board. In the event of a major corporate event, the Compensation Committee may
change these goals.
In addition to SPSS performance, the Compensation Committee also takes
into account exceptional individual performance in determining bonus awards,
although it does not assign a specified percentage of senior executive bonus
compensation to this.
Chief Executive Officer Compensation. The Compensation Committee also
determines the CEO's base salary and bonus, employing largely the same
principles described above, except that the amount of the CEO's bonus is purely
a function of the financial performance of SPSS measured against the operating
and net income goals established by the Compensation Committee and approved by
the Board at the beginning of each year. The Compensation Committee believes
that it has established a total compensation package which compares favorably to
industry standards. The Compensation Committee considers the total salary and
incentive compensation provided to chief executives of similar companies,
although it does not
139
target a specific percentile range within this group of similar companies' chief
executive compensation in determining the CEO's compensation.
The Compensation Committee recommends stock option grants reflecting
the importance of Mr. Noonan's contribution to SPSS and the importance of
aligning Mr. Noonan's interest in SPSS with that of stockholders. In 1999, Mr.
Noonan received twice the number of stock options received by the other
policy-making senior executives. The Compensation Committee recommended grants
to Mr. Noonan of stock options to acquire 50,000 shares of common stock at
$20.50 per share effective January 4, 1999. These options vest in the same
manner as the stock options for the other senior executives.
Mr. Noonan's bonus is determined in the same manner as the other
policy-making senior executives, except that no portion of Mr. Noonan's bonus is
based on exceptional individual performance. It is the Compensation Committee's
view that the CEO's compensation should be based solely on the financial
performance of SPSS and that, for the CEO, exceptional individual performance is
so closely aligned with SPSS financial performance that the CEO's bonus should
be based solely on overall SPSS financial performance.
Tax Considerations. To the extent readily determinable and as one of
the factors in its consideration of compensation matters, the Compensation
Committee considers the anticipated tax treatment to SPSS and to the executive
officers of various payments and benefits. Some types of compensation payments
and their deductibility (e.g., the spread on exercise of non-qualified options)
depend upon the timing of an executive's vesting or exercise of previously
granted rights. Interpretations of and changes in the tax laws and other factors
beyond the Compensation Committee's control also affect the deductibility of
compensation. For these and other reasons, SPSS will not necessarily and in all
circumstances limit executive compensation to the amount which is permitted to
be deductible as an expense of SPSS under Section 162(m) of the Internal Revenue
Code. The Compensation Committee will consider various alternatives to
preserving the deductibility of compensation payments and benefits to the extent
reasonably practicable and to the extent consistent with its other compensation
objectives.
Compensation Committee of SPSS Inc.
Bernard Goldstein
Michael Blair
Merritt Lutz
140
PERFORMANCE GRAPH
The following graph shows the changes in $100 invested since December
31, 1994, in SPSS's common stock, the Nasdaq 100 Stocks Index and S&P Computer
Software and Services Index, a specialized industry focus group, assuming that
all dividends were reinvested.
[PERFORMANCE GRAPH}
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12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
-------- -------- -------- -------- -------- --------
SPSS (NASDAQ: SPSS) $100.00 $213.70 $305.48 $210.96 $206.85 $276.71
NASDAQ 100 Stock Index $100.00 $144.67 $270.48 $ 248.77 $460.98 $930.95
S&P Computer Software & Services Index $100.00 $165.44 $195.81 $ 357.88 $648.29 $981.98
141
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF SPSS
The following table shows, as of November 6, 2000, the number and
percentage of shares of SPSS common stock beneficially owned by:
- each person known by SPSS to own beneficially more than 5% of the
outstanding shares of the common stock;
- each director of SPSS;
- each named executive officer of SPSS;
- each person who will be appointed director upon completion of the
merger; and
- all directors and executive officers of SPSS as a group.
Unless otherwise indicated in a footnote, each person possesses sole voting and
investment power with respect to the shares indicated as beneficially owned.
[Download Table]
SHARES
BENEFICIALLY OWNED
------------------
Name NUMBER PERCENT
---- ------ -------
Norman H. Nie, individually, as Trustee of the
Nie Trust and as a Director and President
of the Norman and Carol Nie Foundation, Inc.(1)(18) 1,109,090 10.07%
Brown Capital Management, Inc.(2) 933,900 9.6%
T. Rowe Price Associates, Inc.(3) 906,400 8.8%
Fidelity Management & Research Company(4) 861,100 9.3%
Daruma Asset Management, Inc.(5) 549,400 5.6%
Jack Noonan (6)(18) 369,860 3.36%
Bernard Goldstein(7)(18) 52,957 *
Edward Hamburg(8)(18) 186,388 1.69%
Mark Battaglia(9)(18) 167,271 1.52%
Susan Phelan(10)(18) 150,541 1.37%
Ian Durrell(11)(18) 87,557 *
Merritt M. Lutz(12) 35,846 *
Michael D. Blair(13) 16,074 *
Promod Haque(14) 936,499 **
William Binch(15) 5,896 **
Kenneth Holec(16) 285,408 **
All directors and executive officers as
a group (10 persons)(17) 2,175,584 19.75%
----------------------------------
* The percentage of shares beneficially owned does not exceed 1% of the Common
Stock.
** These shares are not included in the percent owned column, as Messrs. Haque,
Binch and Holec are not yet directors of SPSS. See footnotes 14, 15 and 16.
(1) Includes 22,513 shares which are through options exercisable within 60
days; 90,433 shares held of record by the Norman and Carol Nie
Foundation, Inc.; and 996,144 shares held by the Nie Trust. Dr. Nie
shares voting and investment power over the 90,433 shares held by the
Nie Foundation with Carol Nie.
(2) Brown Capital Management, Inc., is the beneficial owner of 933,900
shares of SPSS common stock and an investment advisor in accordance
with Section 203 of the Investment Advisor Act. This information was
taken from Brown's Schedule 13G dated February 10, 2000.
(3) T. Rowe Price Associates, Inc. is the beneficial owner of 906,400
shares of SPSS common stock and an investment advisor registered under
Section 203 of the Investment Advisors Act of 1940. This information
was taken from T. Rowe Price's Schedule 13G dated February 8, 2000.
142
(4) Fidelity Management & Research Company, a wholly-owned subsidiary of
FMR Corp. and an investment adviser registered under Section 203 of the
Investment Advisers Act of 1940, is the beneficial owner of 861,100
shares of SPSS common stock as a result of acting as investment adviser
to several investment companies registered under Section 8 of the
Investment Company Act of 1940. The ownership of one investment
company, Fidelity Low-Priced Stock Fund, amounted to 861,100 shares of
SPSS common stock. FMR Corp. has the power to dispose of the shares of
SPSS common stock. The Board of Trustees directs the voting of the
shares of SPSS common stock. This information was taken from FMR
Corporation's Schedule 13G, filed on February 14, 2000.
(5) Daruma Asset Management, Inc. is the beneficial owner of 549,400 shares
of SPSS common stock and an investment advisor in accordance with
Section 203 of the Investment Advisor Act. This information was taken
from Daruma's Schedule 13G dated February 10, 2000.
(6) Includes 358,782 shares through options exercisable within 60 days.
(7) Includes 22,513 shares through options exercisable within 60 days.
(8) Includes 177,588 shares through options exercisable within 60 days.
(9) Includes 146,888 shares through options exercisable within 60 days.
(10) Includes 148,555 shares through options exercisable within 60 days.
(11) Mr. Durrell is the beneficial owner of these shares, which consist
solely of 87,557 shares through options exercisable within 60 days held
of record by Valletta.
(12) Includes 22,513 shares through options exercisable within 60 days.
(13) Includes 16,074 shares through options exercisable within 60 days.
(14) Mr. Haque is not yet a director of SPSS. These numbers assume
completion of the merger and exchange of shares, and are included with
this table on an as-converted basis.
(15) Mr. Binch is not yet a director of SPSS. These numbers assume
completion of the merger and exchange of shares, and are included with
this table on an as-converted basis.
(16) Mr. Holec is not yet a director of SPSS. These numbers assume
completion of the merger and exchange of shares, and are included with
this table on an as-converted basis.
(17) Includes 1,099,983 shares through options exercisable within 60 days.
This number does not include shares of SPSS common stock to be owned by
Messrs. Haque, Binch and Holec following consummation of the merger.
(18) The business address of each of Dr. Nie, Mr. Noonan, Dr. Hamburg, Mr.
Battaglia, Ms. Phelan and Mr. Durrell is the office of SPSS at 233
South Wacker Drive, Chicago, Illinois 60606. The business address for
Mr. Lutz is the office of Morgan Stanley Dean Witter & Co. at 750
Seventh Avenue, 16th floor, New York, New York 10019. The business
address of Mr. Goldstein is the office of Broadview Associates, L.P.,
One Bridge Plaza, Fort Lee, New Jersey 07024. The business address for
Michael Blair is the office of Cyborg Systems, Inc., Two North
Riverside Plaza, 12th floor, Chicago, Illinois 60606. The business
address of Fidelity Management & Research Company is 82 Devonshire
Street, Boston, Massachusetts 02109. The business address for the T.
Rowe Price Associates, Inc. is 100 East Pratt Street, Baltimore,
Maryland 21202. The business address for Daruma Asset Management, Inc.
is 60 East 42nd Street, Suite 1111, New York, New York 10165. The
business address for Brown Capital Management, Inc. is 1201 N. Calvest
Street, Baltimore, Maryland 21202. The business address of each other
person listed below is 233 South Wacker Drive, Chicago, Illinois 60606.
143
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF SHOWCASE
The following table shows, as of November 6, 2000, the number and
percentage of shares of ShowCase common stock beneficially owned by:
- each person known by ShowCase to own beneficially more than five
percent of the outstanding shares of ShowCase common stock;
- each director of ShowCase;
- each named executive officer of ShowCase; and
- all directors and executive officers of ShowCase as a group.
Unless otherwise noted, each person possesses sole voting and investment power
with respect to the shares indicated as beneficially owned.
[Download Table]
AMOUNT AND NATURE SHARES
OF BENEFICIAL PERCENT SUBJECT TO
NAME AND ADDRESS OF BENEFICIAL OWNER (1) OWNERSHIP (2) OF CLASS OPTIONS (2)
------------------------------------- ----------------- -------- -----------
Promod Haque and Norwest Equity Partners
245 Lytton Avenue, Suite 250
Palo Alto, California 94301 (3) 2,812,312 26.1 --
David G. Wenz
2924 Salem point Dr. S.W.
Rochester, Minnesota 55902 (4) 910,000 8.4 --
Dennis Semerad
1717 Northern Viola Lane, N.W.
Rochester, Minnesota 55906 (5) 856,960 7.9 --
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Wayne W. Mills
The Colonnade, Suite 290
550 Wayzata Boulevard
Golden Valley, Minnesota 55436 (6) 800,000 7.4 --
Kenneth H. Holec (7) 857,083 7.9 17,984
Jonathan P. Otterstatter (8) 177,039 1.6 20,417
Kevin R. Potrzeba 52,000 * 52,000
Patrick Dauga 51,000 * 23,000
Jack Noonan 37,187 * 37,187
C. McKenzie Lewis III 37,187 * 37,187
Theresa Z. O'Neil 23,333 * 23,333
William B. Binch 17,707 * 17,707
All directors and executive officers as a group (12
persons) 4,156,052 37.5 287,665
----------------------------------------------------------------------------------------------------------
* Less than 1% of the outstanding shares of Common Stock.
(1) The address of each executive officer of the Company is 4115 Highway 52
North, Suite 300, Rochester, Minnesota 55901-0144.
(2) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission, and includes general voting power
and/or investment power with respect to securities. Shares of Common
Stock subject to options or warrants currently exercisable or
exercisable within 60 days of November 6, 2000 are deemed to be
outstanding for the purpose of computing the percentage of the person
holding such options or warrants, but are not deemed outstanding for
computing the percentage of any other person.
(3) Dr. Haque's beneficial ownership includes 1,895,028 shares held by
Norwest Equity Partners IV, L.P. and 917,284 shares held by Norwest
Equity Partners V, L.P. Dr. Haque, one of the Company's directors, is a
general partner of Norwest Equity Partners IV and a general partner of
Norwest Equity Partners V. Dr. Haque shares voting and dispositive
power shares held by the Norwest funds with other general and managing
partners of the Norwest funds. Dr. Haque disclaims beneficial ownership
of shares held by Norwest Equity Partners, IV, L.P. and Norwest Equity
Partners V, L.P.
(4) Based solely on a Schedule 13G filed with the Securities and Exchange
Commission on February 14, 2000.
(5) Based solely on a Schedule 13G filed with the Securities and Exchange
Commission on February 14, 2000. Mr. Semerad's beneficial ownership
includes 20,000 shares registered in the name of Mr. Semerad's wife,
Rita M. Semerad.
(6) Based solely on a Schedule 13G filed with the Securities and Exchange
Commission on March 10, 2000.
(7) Mr. Holec's beneficial ownership includes 150,000 shares registered in
the name of Kenneth H. Holec 1999 Trust and 3,738 shares registered in
the name of each of Mr. Holec's three minor children.
(8) Mr. Otterstatter's beneficial ownership includes 17,000 shares
registered jointly with Pamela Otterstatter, Mr. Otterstatter's wife,
and 1,000 shares registered in the name of each of Mr. Otterstatter's
three minor children.
144
BENEFICIAL OWNERSHIP OF SPSS COMMON STOCK BY SHOWCASE OFFICERS AND DIRECTORS
The following table sets forth information, as of November 6, 2000,
regarding beneficial ownership of ShowCase common stock, as well as the
estimated beneficial ownership of SPSS common stock following completion of the
merger (based on beneficial ownership as of November 6, 2000), by each current
ShowCase director, certain executive officers of ShowCase and all directors and
executive officers of ShowCase as a group. This table assumes consummation of
the merger and the exchange of ShowCase shares for SPSS shares. However, it is
possible that some or all of the directors and executive officers of ShowCase
may, prior to completion of the merger, dispose of shares of ShowCase common
stock, and possibly a significant portion of such shares, beneficially owned by
them, subject to restrictions imposed on such individuals by applicable law and,
in the case of affiliates of ShowCase, restrictions imposed by pooling of
interests accounting requirements.
[Enlarge/Download Table]
SHARES OF
SHOWCASE SHARES OF SPSS
COMMON STOCK COMMON STOCK
NAME BEFORE MERGER AFTER MERGER
---- ------------- -------------
Promod Haque.................................................. 2,812,312 936,499
Kenneth H. Holec.............................................. 857,083 285,408
Jonathan P. Otterstatter...................................... 177,039 58,953
Kevin R. Potrzeba............................................. 52,000 17,316
Patrick Dauga................................................. 51,000 16,983
Jack Noonan................................................... 37,187 12,383
C. McKenzie Lewis III......................................... 37,187 12,383
Theresa Z. O'Neil............................................. 23,333 7,769
William B. Binch.............................................. 17,707 5,896
All directors and executive officers as a group (12 persons).. 4,156,052 1,383,965
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH NORMAN NIE
Dr. Nie received 5,000 options for his services as Chairman of the
Board of SPSS in 1999 and $80,800 for product development work on a part-time
basis. Dr. Nie is a limited partner in Computer Software Development Company, a
research and development limited partnership to which SPSS incurred royalty
expense of $249,000 in 1997, $234,000 in 1998 and $237,000 in 1999.
STOCKHOLDERS AGREEMENT
In connection with SPSS's initial public offering, SPSS and the
individuals and entities who were stockholders before the initial public
offering entered into an agreement containing registration rights with respect
to outstanding capital stock of SPSS and granting to each of the Nie Trust and
Morgan Stanley Venture Capital Fund, so long as they own beneficially more than
12.5% of the capital stock of SPSS, the right to designate one nominee (as part
of the management slate) in each election of directors at which directors of the
class specified for the holder are to be elected. Since the completion of the
February 1995 offering, Morgan Stanley Venture Capital Fund owned less than
12.5% and currently owns no capital stock of SPSS. Currently, the Nie Trust owns
less than 12.5% of the Capital Stock of SPSS.
145
As required by the stockholders agreement, the holders of restricted
securities constituting more than seven percent of the outstanding shares at any
time may require SPSS to register under the Securities Act all or any portion of
the restricted securities held by the requesting holder or holders for sale in
the manner specified in the notice. SPSS is not bound to honor the request
unless the proceeds from the registered sale can reasonably be expected to
exceed $5,000,000. SPSS estimates that the cost of complying with demand
registration rights would be approximately $50,000 for a single registration.
All of the stockholders who acquired their shares before the initial
public offering have piggyback registration rights, which entitle them to seek
inclusion of their common stock in any registration by SPSS, whether for its own
account or for the account of other security holders or both (except with
respect to registration on Forms S-4 or S-8 or another form not available for
registering restricted securities for sale to the public). In the event of a
request to have shares included in a registration statement filed by SPSS for
its own account, SPSS's underwriters may generally reduce, pro rata, the amount
of common stock to be sold by the stockholders if the inclusion of all such
securities would be materially detrimental to SPSS's offering.
146
INFORMATION ABOUT THE MEETINGS AND VOTING
SPSS's board of directors is using this joint proxy
statement/prospectus to solicit proxies from the holders of SPSS common stock
for use at the special meeting of SPSS's stockholders. The ShowCase board of
directors is also using this document to solicit proxies from the holders of
ShowCase common stock for use at the ShowCase special meeting. We are mailing
this joint proxy statement/prospectus and accompanying form of proxy to the
stockholders of each company on or about _______ __, 2001.
MATTERS RELATING TO THE MEETINGS
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-------------------------- ----------------------------------------------------- -------------------------------------------------
SPSS MEETING SHOWCASE MEETING
-------------------------- ----------------------------------------------------- -------------------------------------------------
Time and Place: [___________________ ___, 2001] [___________________ ___, 2001]
-------------------------- ----------------------------------------------------- -------------------------------------------------
Admission to In order to attend the special meeting, In order to attend the special meeting, you must
Meeting: you must have been a holder of SPSS have been a holder of ShowCase Corporation.
Inc. Common Stock on the record date, Common Stock on the record date,
_______ __, 2001. _______ __, 2001.
-------------------------- ----------------------------------------------------- -------------------------------------------------
Purpose of Meeting is 1. To approve and adopt the Agreement and Plan 1. To approve and adopt the merger agreement
to Vote on the of Merger, as described in "The Merger", and the merger as described in "The Merger," and
Following Items: 2. To approve the issuance of shares of SPSS 2. To transact such other business as may
common stock in connection with the merger, as properly come before the meeting, and any
described in "The Merger", adjournment or postponement.
3. To approve the 2000 Equity Incentive Plan, as
described in "Proposal 3",
4. To approve the 2000 Qualified and Nonqualified
Employee Stock Purchase Plans, as described in
"Proposal 4", and
5. To transact such other business as may properly
come before the meeting and any adjournment or
postponement.
-------------------------- ----------------------------------------------------- -------------------------------------------------
Record Date: The record date for shares entitled to The record date for shares entitled to vote is
vote is _______ __, 2001. _______ __, 2001.
-------------------------- ----------------------------------------------------- -------------------------------------------------
Outstanding Shares As of _______ __, 2001, the As of _______ __, 2001, the record date
Held: record date for the SPSS meeting, there for the ShowCase meeting, there were
were approximately [__________] shares of SPSS approximately [__________] shares of
common stock outstanding. ShowCase common stock outstanding.
-------------------------- ----------------------------------------------------- -------------------------------------------------
Shares Entitled to Shares entitled to vote are the shares of Shares entitled to vote are the shares of
Vote: SPSS common stock held at the close of ShowCase common stock held at the close of
business on the record date, _______ __, 2001. business on the record date, _______ __, 2001.
Each share of SPSS common stock that Each share of ShowCase common stock that you own
you own entitles you to one vote. entitles you to one vote.
Shares held by SPSS in its treasury are
not voted.
-------------------------- ----------------------------------------------------- -------------------------------------------------
Quorum Requirement: A quorum of stockholders is necessary to hold a A quorum of shareholders is necessary to hold
valid meeting. The presence in person or by proxy a valid meeting. The presence in person or by
at the meeting of holders of a majority of the outstanding shares of ShowCase common the
outstanding shares of SPSS common stock stock entitled to vote at the meeting is a
stock entitled to vote quorum.
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at the meeting is a quorum. Abstentions and Abstentions and broker "non-votes" count as
broker "non-votes" count as present for present for establishing a quorum. A broker
establishing a quorum. Shares held by SPSS non-vote occurs on an item when a broker is
in its treasury, if any, do not count toward not permitted to vote on that item without
a quorum. A broker non-vote occurs on an instruction from the beneficial owner of the
item when a broker is not permitted to vote shares and no instruction is given.
on that item without instruction from the
beneficial owner of the shares and no
instruction is given.
-------------------------- ----------------------------------------------------- -------------------------------------------------
Vote Necessary to Approval of the proposals to (i) approve Approval and adoption of the merger
Approve Proposals and adopt the Plan and Agreement of Merger, agreement and the merger requires the
(ii) approve the issuance of shares of SPSS common affirmative vote of at least a majority of the
stock in connection with the merger, (iii) approve outstanding shares of ShowCase common
the 2000 Equity Incentive Plan, and (iv) approve the the same effect as a vote against the proposal.
2000 Qualified and Nonqualified Employee Stock
Purchase Plans require the affirmative vote of a
majority of the outstanding shares of common stock
entitled to vote on such proposals. Abstentions and
broker non-votes will have the same effect as
negative votes or votes "Against" the proposals.
-------------------------- ----------------------------------------------------- -------------------------------------------------
Shares Beneficially As of __________ __, 2001, the record date for the As of [__________ __, 2001] the record date for
Owned by SPSS and SPSS meeting, directors and executive officers of the ShowCase meeting, directors and executive
ShowCase Directors and SPSS beneficially owned ________ shares of SPSS officers of ShowCase owned [_____________] shares
Executive Officers: common stock, including exercisable options. of ShowCase common stock, including exercisable
These shares represent in total options. These shares represent in total
approximately _______% of the outstanding approximately [__%] of the outstanding shares
shares of SPSS common stock. of ShowCase common stock.
-------------------------- ----------------------------------------------------- ------------------------------------------------
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PROXIES
Voting Your Proxy. You may vote in person at your meeting or by proxy.
We recommend you vote by proxy even if you plan to attend your meeting. You can
always change your vote at the meeting.
Voting instructions are included on your proxy card. If you properly
give your proxy and submit it to us in time to vote, one of the individuals
named as your proxy will vote your shares as you have directed. You may vote for
or against the proposals or abstain from voting. If no instructions are given on
the proxy card, the proxies will be voted "for" the proposals as listed on the
proxy and at the discretion of the person acting under the proxy on any other
matters that properly come before the meeting.
HOW TO VOTE BY PROXY
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SPSS SHOWCASE
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By Mail: If you choose to vote by mail, simply mark To vote by mail, simply mark your proxy,
your proxy, date and sign it, and return it date and sign it, and return it to
to Computershare in the postage-paid envelope Wells Fargo Shareowners Services in the
provided. If the envelope is missing, please postage-paid envelope provided. If the envelope
address your completed proxy card to SPSS c/o is missing, please address your completed proxy
Computershare, 2 North LaSalle Street, card to ShowCase c/o Wells Fargo Shareowners Services
Chicago, Illinois 60602. P.O. Box 64854
St. Paul, MN 55164-0854
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*If you hold shares through a broker or other custodian, please check
the voting form used by that firm to see if it offers telephone or Internet
voting.
PROXIES FOR PARTICIPANTS IN THE SPSS INC. EMPLOYEE STOCK PURCHASE PLAN
You will receive only one proxy card for all the shares you hold:
- In your own name; and
- In the SPSS Inc. Employee Stock Purchase Plan (the "Plan"), if you
are an SPSS employee.
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Please note that the merging of shares from different accounts is done
by matching Social Security numbers. You will receive a separate proxy card for
shares you own jointly only if the Social Security number on the joint account
differs from the Social Security number on your individual account.
If you do not vote your shares or specify voting instructions on your
proxy card, the Plan administrator will vote your shares in the same proportion
as the shares for which voting instructions have been received. TO ALLOW
SUFFICIENT TIME FOR VOTING BY THE ADMINISTRATOR OF THE PLAN, YOUR VOTING
INSTRUCTIONS MUST BE RECEIVED BY ______________ ___, 2001.
If you submit your proxy but do not make specific choices, your proxy
will follow the respective board of director recommendations and vote your
shares:
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SPSS SHOWCASE
-------------------------------------------------------- ---------------------------------------------------
- "FOR" the approval and adoption of the Plan and - "FOR" approval and adoption of the merger
Agreement of Merger agreement and the merger
-------------------------------------------------------- ---------------------------------------------------
- "FOR" the approval of the issuance of shares of SPSS - "FOR" any proposal by ShowCase's board of
Common Stock in connection with the Merger proposal directors to adjourn the ShowCase meeting
-------------------------------------------------------- ---------------------------------------------------
- "FOR" the approval of the 2000 Equity Incentive Plan - In its discretion as to any other business as
may properly come before the ShowCase meeting
-------------------------------------------------------- ---------------------------------------------------
- "FOR" the approval of the 2000 Qualified and
Nonqualified Employee Stock Purchase Plans
--------------------------------------------------------
- "FOR" any proposal by SPSS's board of directors to
adjourn the SPSS meeting
--------------------------------------------------------
- In its discretion as to any other business as may
properly come before the SPSS meeting
--------------------------------------------------------
Revoking Your Proxy. You may revoke your proxy at any time before it is
voted by:
- timely delivery of a valid, later-dated proxy;
- written notice to your company's Secretary before the meeting that
you have revoked your proxy; or
- voting by ballot at either the SPSS special meeting or ShowCase
special meeting.
Voting in Person. If you plan to attend a meeting and wish to vote in
person, we will give you a ballot at the meeting. However, if your shares are
held in the name of your broker, bank or other nominee, you must obtain a proxy,
executed in your favor, from the holder of record to be able to vote at the
meeting.
Proxy Solicitation. We will each pay our own costs of soliciting
proxies.
In addition to this mailing, proxies may be solicited by directors,
officers or employees of SPSS and ShowCase in person or by telephone or
electronic transmission. SPSS has hired Corporate Investor Communications, Inc.
("CIC") to assist in the distribution and solicitation of proxies. SPSS will pay
CIC a fee of approximately $6,500, plus reasonable expenses, for these services.
The extent to which these proxy soliciting efforts will be necessary
depends entirely upon how promptly proxies are submitted. You should send in
your proxy without delay by mail. We
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also reimburse brokers and other nominees for their expenses in sending these
materials to you and getting your voting instructions.
Do not send in any stock certificates with your proxy cards. The
exchange agent will mail transmittal forms with instructions for the surrender
of stock certificates for ShowCase common stock to former ShowCase shareholders
as soon as practicable after the completion of the merger.
OTHER BUSINESS; ADJOURNMENTS
We are not currently aware of any other business to be acted upon at
either meeting. If, however, other matters are properly brought before either
meeting, or any adjourned meeting, your proxies will have discretion to vote or
act on those matters according to their best judgment, including to adjourn the
meeting.
Adjournments may be made for the purpose of, among other things,
soliciting additional proxies. Any adjournment may be made from time to time by
approval of the holders of shares representing a majority of the votes present
in person or by proxy at the meeting, whether or not a quorum exists, without
further notice other than by an announcement made at the meeting. Neither of us
currently intends to seek an adjournment of our meeting.
ELECTRONIC ACCESS TO SPSS PROXY MATERIALS
The notice of SPSS's special meeting and proxy statement and the annual
report are available on SPSS's Internet site at www.spss.com.
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CERTAIN LEGAL INFORMATION
COMPARISON OF SPSS/SHOWCASE SHAREHOLDER RIGHTS
The rights of ShowCase shareholders under the Minnesota Business
Corporation Act, the ShowCase articles of incorporation and the ShowCase by-laws
prior to the completion of the merger are substantially the same as the rights
that they will have as SPSS stockholders following the completion of the merger
under the Delaware General Corporation Law, the SPSS certificate of
incorporation and the SPSS by-laws. The following is a summary of the material
differences between the current rights of ShowCase shareholders and the rights
those shareholders will have as SPSS stockholders following the merger.
Copies of the ShowCase articles of incorporation, the ShowCase by-laws,
the SPSS certificate of incorporation and the SPSS by-laws are incorporated by
reference and will be sent to holders of shares of ShowCase common stock upon
request. See "Where You Can Find More Information." The summary in the following
chart is not complete and it does not identify all differences that may, under
given situations, be material to stockholders and is subject in all respects,
and is qualified by reference to, the Minnesota Business Corporation Act,
Delaware General Corporation Law, the ShowCase articles of incorporation, the
ShowCase by-laws, the SPSS certificate of incorporation and the SPSS by-laws.
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SUMMARY OF MATERIAL DIFFERENCES BETWEEN CURRENT RIGHTS OF SHOWCASE
SHAREHOLDERS AND RIGHTS THOSE SHAREHOLDERS WILL
HAVE AS SPSS STOCKHOLDERS FOLLOWING THE MERGER
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SHOWCASE SHAREHOLDER RIGHTS SPSS STOCKHOLDER RIGHTS
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Corporate Governance: Upon completion of the merger, the Upon completion of the merger, the rights of
rights of ShowCase shareholders who SPSS stockholders will be governed by the
become SPSS shareholders in the merger Delaware General Corporation Law, SPSS's
will be governed by the Delaware General certificate of incorporation and SPSS's
Corporation Law, SPSS's certificate of by-laws. The certificate of incorporation and
incorporation and SPSS's by-laws. The by-laws of SPSS after the merger will be
certificate of incorporation and by-laws identical in all respects to those of SPSS
of SPSS after the merger will be prior to the merger.
identical in all respects to those of
SPSS prior to the merger.
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Authorized The authorized capital stock of ShowCase The authorized capital stock of SPSS consists
Capital Stock: consists of 50,000,000 shares of common of 50,000,000 shares of common stock, par
stock, par value $0.01 per share. value $0.01 per share.
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Number of ShowCase's board of directors currently SPSS's board of directors currently consists
Directors: consists of five directors. of five directors. Upon completion of the
merger, the SPSS board of directors will
consist of eight directors.
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Classification of ShowCase's board of directors is divided SPSS's board of directors is divided into
Board of Directors: into three classes, with each class three classes, with each class serving a
serving a staggered three-year term. staggered three-year term.
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Removal of Showcase's by-laws provide that any or SPSS directors may be removed from office at
Directors: all directors may be removed from office any time, but only for cause and only by the
at any time, but only for cause, by the affirmative vote of the holders of at least
affirmative vote of the shareholders 80% of all of the voting power of the then
holding a majority of the shares entitled outstanding shares of capital stock voting
to vote at an election of the directors. together as a single class.
A director named by the Board to fill a
vacancy may be removed with or without
cause, at any time, by affirmative vote of
the majority of the directors present.
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Stockholder Showcase shareholders may take any action SPSS stockholders may not act by written
Action by required or permitted to be taken in a consent in lieu of a meeting of stockholders.
Written Consent: meeting of the shareholders without a
meeting by written action signed by all
of the shareholders entitled to vote on
that action.
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Call of Special Showcase's by-laws provide that a SPSS's by-laws provide that a special meeting
Meetings of shareholder or shareholders holding of SPSS's stockholders may be called only by
Stockholders: 10% or more of the shares entitled to the Chairman of the Board or by the vote of a
vote on the matters to be presented, majority of the total number of directors
except for the purpose of considering which the corporation would have if there were
any action concerning a business no vacancies.
combination, is authorized to call a
special meeting.
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Amendment of Showcase's by-laws may be amended by SPSS's by-laws may be amended by the
By-laws: a vote of the majority of the whole affirmative vote of at least 80% of the
Board of Directors at any meeting outstanding shares of SPSS common stock, or by
provided that notice of the proposed a majority of the board of directors.
amendment shall have been given in the
notice given to the directors of such
meeting. Shareholders may change or
repeal the Bylaws by a majority vote
of the shareholders present at any
regular or special meeting of the
shareholders called for such purpose.
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Amendment of Articles Showcase's articles of incorporation SPSS's certificate of incorporation generally
or Certificate of generally may be amended by the may be amended by the affirmative vote of the
Incorporation. affirmative vote of a majority of the majority of the outstanding shares.
shareholders entitled to vote thereon.
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COMPARISON OF RIGHTS OF STOCKHOLDERS
Upon consummation of the Merger, the former shareholders of Showcase,
which is a corporation organized under Minnesota law, will become stockholders
of SPSS, a corporation governed by the laws of Delaware. There are many
similarities between Minnesota and Delaware law, as well as between the
corporate charters and bylaws of Showcase and SPSS; however, a number of
differences do exist. The following is a summary of those differences that might
significantly affect the rights of Showcase shareholders. This description and
analysis are brief summaries of relevant provisions of the charters and bylaws
of SPSS and of Showcase and certain provisions of Minnesota and Delaware law and
are qualified in their entirety by reference to such documents, to the parties'
respective bylaws, and to the laws of the parties' respective states of
incorporation.
VOTING RIGHTS
In general, the MBCA states, that unless a corporation's articles of
incorporation specify otherwise: (i) a shareholder has one vote for each share
held; (ii) shares owned by two or more shareholders may be voted by any one of
them unless the corporation receives notice from one denying authority to the
other to vote; (iii) a shareholder may cast vote by proxy so long as all
required rules are followed; and (iv) holders of a majority of the voting power
of the shares entitled to vote are a quorum.
The DGCL states that, unless a corporation's certificate of
incorporation or, with respect to clauses (ii) and (iii), the bylaws, specify
otherwise: (i) each share of its capital stock is entitled to one vote, (ii) a
majority of voting power of the shares entitled to vote, present in person or
represented by proxy, shall constitute a quorum at a stockholders' meeting, and
(iii) in all matters other than the election of directors, the affirmative vote
of the majority of the voting power of shares present in person or represented
by proxy at the meeting and entitled to vote on the subject matter shall be the
action of the stockholders.
Holders of both SPSS Common Stock and Showcase Common Stock are
entitled to one vote per share on all matters submitted to a vote of
stockholders.
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REMOVAL OF DIRECTORS
Under the MBCA, unless modified by the articles or bylaws of the
corporation or by shareholder agreement, the directors may be removed with or
without cause by the affirmative vote of that proportion or number of the voting
power of the shares of the classes or series the director represents which would
be sufficient to elect such director. Under Delaware law, a director on a
classified board of directors can be removed from office during his term by
stockholders only for cause unless the certificate of incorporation provides
otherwise. The term "cause" with respect to the removal of directors is not
defined in the Delaware General Corporation Law. Showcase's bylaws provide that
a director may be removed at any time only for cause by the affirmative vote of
the shareholders holding a majority of the shares entitled to vote at an
election of directors. Under the MCBA and the ShowCase bylaws, a director named
by the board may be removed with or without cause, at any time, if the director
was named by the board to fill a vacancy, rather than named by the shareholders,
and a majority of the remaining directors present affirmatively vote to remove
the director. SPSS's certificate of incorporation provides that a director may
be removed only for cause and only by the affirmative vote of the holders of at
least 80% of the voting stock.
CUMULATIVE VOTING FOR DIRECTORS
In general under the MBCA, cumulative voting in the election of
directors is permitted unless the articles of the company provide otherwise. In
order to exercise cumulative voting rights for a director, the shareholder is
required to give written notice of the intent to cumulate those votes as
provided in the MBCA. ShowCase's articles of incorporation provide that its
shareholders do not have cumulative voting rights. Cumulative voting is not
available under the DGCL unless so provided in the corporation's certificate of
incorporation. The elimination of cumulative voting limits the ability of
minority stockholders to obtain representation on the Board of Directors. SPSS's
certificate of incorporation does not provide for cumulative voting.
FILLING BOARD VACANCIES
Under the MBCA, unless different rules for filling vacancies are
provided for in the articles of incorporation or bylaws, vacancies resulting
from the death, resignation, removal or disqualification of a director may be
filled by the affirmative vote of a majority of the remaining directors, even
though less than a quorum, and vacancies resulting from a newly-created
directorship may be filled by the affirmative vote of a majority of the
directors serving at the time of the increase. The shareholders may also elect a
new director to fill a vacancy that is created by the removal of a director by
the shareholders. The ShowCase articles provide that vacancies on the board of
directors caused by death, resignation, removal or disqualification shall be
filled for the unexpired term by a majority of the remaining board although less
than a quorum; provided that newly created directorships resulting from an
increase in the authorized number of directors shall be filled by the
affirmative vote of 2/3 of the directors serving at the time of such increase.
The DGCL provides that if, at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the entire board of directors as constituted immediately prior to any increase,
the Delaware Court of Chancery may, upon application of any holder or holders of
at least 10% of the voting power of the then-outstanding shares of voting stock
of the corporation entitled to vote in the election of directors,
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summarily order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
STOCKHOLDER POWER TO CALL SPECIAL STOCKHOLDERS' MEETING
Under the MBCA, a special meeting of shareholders may be called by the
chairman of the board, the chief executive officer, the president, the chief
financial officer, the treasurer, any two or more directors, a person authorized
in the articles or bylaws to call special meetings, or a shareholder or
shareholders holding 10% or more of all shares entitled to vote, except that a
special meeting called by a shareholder for the purpose of considering any
action to facilitate, directly or indirectly, or effect a business combination,
including any action to change or otherwise affect the composition of the board
of directors for that purpose, must be called by 25% or more of the voting power
of all shares entitled to vote. Under the DGCL, a special meeting of
stockholders may be called by the board of directors or by any other person
authorized to do so in the certificate of incorporation or the bylaws.
Showcase's bylaws provide that a special stockholders' meeting may be called by
the president, treasurer, any two directors, or by a shareholder or shareholders
holding 10% or more of the shares entitled to vote on the matters to be
presented to the meeting; except that a special meeting for the purpose of
considering any action to directly or indirectly facilitate or effect a business
combination, including any action to change or otherwise affect the composition
of the board of directors for that purpose, must be called by 25% or more of the
voting power of all shares entitled to vote. SPSS's bylaws provide that either
the chairman of the board or a majority of the total number of directors
(including vacant seats) may call a special meeting of the stockholders.
ACTIONS BY WRITTEN CONSENT OF STOCKHOLDERS
Under the MBCA and the DGCL, stockholders may execute an action by
written consent in lieu of a stockholder meeting. The DGCL permits a corporation
to eliminate in its charter the ability of stockholders to act by written
consent. SPSS's certificate of incorporation prohibits stockholder actions by
written consent. Showcase's bylaws allow any action which may be taken at a
regular, annual or special shareholder meeting to be taken without a meeting and
without prior notice, provided all shareholders consent in writing.
ANTI-TAKEOVER STATUTE
Under the MBCA, certain "business combinations" (as defined in the Act)
between a Minnesota corporation with at least 100 shareholders, or a publicly
held corporation that has at least 50 shareholders, and an "interested
shareholder" are prohibited for a four (4) year period following the share
acquisition date by the interested shareholder, unless certain conditions are
satisfied or an exemption is found. An "interested shareholder" is generally
defined to include a person who beneficially owns at least 10% of the votes that
all shareholders would be entitled to cast in an election of directors of the
corporation. The MBCA also limits the ability of a shareholder who acquires
beneficial ownership of more than certain thresholds of the percentage voting
power of a Minnesota corporation from voting those shares in excess of the
threshold unless such acquisition has been approved in advance by a majority of
the voting power held by shareholders unaffiliated with such shareholder.
155
The ShowCase bylaws require that a special meeting called for the
purpose of considering any action to directly or indirectly facilitate or effect
a business combination, including any action to change or otherwise affect the
composition of the board of directors for that purpose, must be called by 25% or
more of the voting power of all shares entitled to vote. Under the MBCA, during
any tender offer, a publicly held corporation may not enter into or amend an
agreement (whether or not subject to contingencies) that increases the current
or future compensation of any officer or director. In addition, under Minnesota
law, a publicly held corporation is prohibited from purchasing any voting shares
owned for less than two years from a 5% shareholder for more than the market
value unless the transaction has been approved by the affirmative vote of the
holders of a majority of the voting power of all shares entitled to vote or
unless the corporation makes a comparable offer to all holders of shares of the
class or series of stock held by the 5% shareholder and to all holders of any
class or series into which such securities may be converted. ShowCase has not
adopted a shareholder rights plan.
The DGCL contains a provision intended to limit coercive takeovers of
companies incorporated in that state. Section 203 of the DGCL provides that a
corporation may not engage in any business combination with any interested
stockholder for a period of three years following the date that such stockholder
became an interested stockholder, unless (a) prior to the date the stockholder
became an interested stockholder, the board of directors approved the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder, (b) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the outstanding stock of the corporation, or
(c) the business combination is approved by the board of directors and
authorized by 66% of the outstanding stock which is not owned by the interested
stockholder. An interested stockholder means any person or group of persons that
is the owner of 15% or more of the outstanding stock; however, the statute
provides for certain exceptions to parties who otherwise would be designated
interested stockholders. Any corporation may decide to opt out of the statute in
its original certificate of incorporation or, at any time, by action of its
stockholders. SPSS has no present intention of opting out of the statute.
LOANS TO OFFICERS, DIRECTORS AND EMPLOYEES
The MBCA provides that a corporation may lend money to, guarantee an
obligation of, become a surety for, or otherwise financially assist an officer
or employee of the company if the transaction is approved by an affirmative vote
of a majority of the directors present and is for the benefit of such person and
may reasonably be expected, in the judgment of the board, to benefit the
company.
Under the DGCL, a corporation may make loans to, or guarantee the
obligations of, or otherwise assist the officers or employees of the corporation
or its subsidiaries (including directors who are also officers or employees)
without stockholder approval if such action, in the judgment of the directors,
may reasonably be expected to benefit the corporation. Both the MBCA and the
DGCL permit such loans or guaranties to be unsecured and without interest.
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CLASS VOTE FOR CERTAIN REORGANIZATIONS
Minnesota law provides that a resolution containing a plan of merger or
exchange must be approved by the affirmative vote of a majority of the directors
present at a meeting and submitted to the shareholders and approved by the
affirmative vote of the holders of a majority of the voting power of all shares
entitled to vote. Unlike Delaware law, Minnesota law requires that any class of
shares of a Minnesota corporation must be given the right to approve the plan if
it contains a provision which, if contained in a proposed amendment to the
corporation's articles of incorporation, would entitle such a class to vote as a
class. The DGCL generally does not require class voting for such transactions,
except in certain situations involving an amendment to the certificate of
incorporation which adversely affects a specific class of shares.
APPRAISAL RIGHTS
Under both the MBCA and the DGCL, a stockholder of a corporation
participating in certain mergers and reorganizations may be entitled to receive
cash in the amount of the "fair value" of its shares, as determined by a court,
in lieu of the consideration it would otherwise receive in the transaction. The
limitations on such "appraisal rights" are somewhat different in Minnesota and
Delaware.
Shareholders of a Minnesota corporation may exercise dissenter's rights
in connection with:
- an amendment of the articles of incorporation that materially and adversely
affects the rights and preferences of the shares of the dissenting
shareholder in certain respects;
- a sale or transfer of all or substantially all of the assets of the
corporation;
- a plan of merger to which the corporation is a party;
- a plan of exchange of shares to which the corporation is a party; and
- any other corporate action with respect to which the corporation's articles
of incorporation or bylaws give dissenting shareholders the right to obtain
payment for their shares.
Under the MBCA, unless the articles, the bylaws, or a resolution
approved by the board of directors otherwise provide, such dissenters' rights do
not apply to a shareholder of the surviving corporation in a merger, if the
shares of the shareholder are not entitled to be voted in the merger. The
ShowCase articles do not grant any other dissenters' rights. Shareholders who
desire to exercise their dissenters' rights must satisfy all of the conditions
and requirements as set forth in the MBCA in order to maintain such rights and
obtain such payment.
Under the DGCL, appraisal rights are not available to stockholders with
respect to a merger or consolidation by a corporation the shares of which are
either listed on a national securities exchange or are held of record by more
than 2,000 holders if the stockholders receive shares of the surviving
corporation or shares of any other corporation which are similarly listed or
widely-held and the stockholders do not receive any other property in exchange
for their shares except cash for fractional shares. Appraisal rights are also
unavailable under the DGCL to
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stockholders of a corporation surviving a merger if no vote of those
stockholders is required to approve the merger because, among other things, the
number of shares to be issued in the merger does not exceed 20% of the shares of
the surviving corporation outstanding immediately before the merger and certain
other conditions are met.
Generally, the DGCL does not provide stockholders with voting or
appraisal rights when a corporation acquires another business through the
issuance of its stock, whether in exchange for assets or stock or in a merger
with a subsidiary.
INSPECTION OF STOCKHOLDER LISTS
The MBCA provides for an absolute right of shareholder inspection of
certain corporate records including, but not limited to, the share register. The
DGCL provides no absolute right of shareholder inspection. However, the DGCL
permits any stockholder of record to inspect the stockholder list for any
purpose reasonably related to that person's interest as a stockholder. The MBCA
permits shareholders who demonstrate a proper purpose to examine other corporate
records.
DIVIDENDS
Under the MBCA, the board of directors may authorize and cause the
corporation to make a distribution only if the board determines that the
corporation will be able to pay its debts in the ordinary course of business
after making the distribution. The DGCL allows the payment of dividends and
redemption of stock out of paid-in and earned surplus or out of net profits for
the current and preceding fiscal years. Neither SPSS nor ShowCase has ever paid
a cash dividend on any class of capital stock.
DIFFERENCES REGARDING AMENDMENT OF CHARTERS OR BYLAWS
Under the MBCA and the ShowCase bylaws, the power to adopt, amend or
repeal the bylaws is vested in the board (subject to certain notice requirements
set forth in the ShowCase bylaws). The MBCA provides that the authority in the
board of directors is subject to the power of the shareholders to change or
repeal such bylaws by a majority vote of the shareholders at a meeting of the
shareholders called for such purpose, and the board of directors shall not make
or alter any bylaws fixing a quorum for meetings of shareholders, prescribing
procedures for removing directors or filling vacancies in the board of
directors, or fixing the number of directors or their classifications,
qualifications or terms of office. Under the MBCA, a shareholder or shareholders
holding 3% or more of the voting shares entitled to vote may propose a
resolution to amend or repeal bylaws adopted, amended or repealed by the board,
in which event such resolutions must be brought before the shareholders for
their consideration pursuant to the procedures for amending the articles of
incorporation.
The ShowCase bylaws provide that the board shall not make or alter any
bylaws fixing a quorum for meetings of shareholders, prescribing procedures for
removing directors or filling vacancies in the board, or fixing the number of
directors or their classifications, qualifications, or terms of office, except
that the board may adopt or amend by unanimous action any bylaw to increase the
number of directors.
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SPSS's bylaws may be altered, repealed or made by the affirmative vote
of 80% of the outstanding shares entitled to vote or by the affirmative vote of
a majority of the board of directors.
Under the MBCA, a proposal to amend the articles of incorporation may
be presented to the shareholders of a Minnesota corporation by a resolution (i)
approved by the affirmative vote of a majority of the directors present or (ii)
proposed by a shareholder or shareholders holding 3% or more of the voting
shares entitled to vote thereon. Under the MBCA, any such amendment must be
approved by the affirmative vote of a majority of the shareholders entitled to
vote thereon, except that the articles may provide for a specified proportion or
number larger than a majority. SPSS's articles of incorporation reserve to its
stockholders and directors the right to amend its articles in such methods
allowed by the DGCL.
NUMBER OF DIRECTORS
Under the MBCA and the ShowCase bylaws, the board of directors of a
Minnesota corporation shall consist of one or more directors as fixed by the
articles of incorporation or bylaws. The ShowCase board of directors currently
consists of five directors.
The DGCL permits a board of directors to change the authorized number
of directors by amendment to the bylaws unless the number of directors or the
manner of fixing the number of directors is set forth in the certificate of
incorporation, in which case the number of directors may be changed only by
amendment of the certificate of incorporation or consistent with the manner
specified in the certificate of incorporation, as the case may be. SPSS's
certificate of incorporation allows a range between five and nine directors.
SPSS currently has five directors.
CLASSIFIED BOARD OF DIRECTORS
The MBCA provides that directors may be divided into classes as
provided in the articles and bylaws. The ShowCase bylaws provide that the board
is divided into three classes with each class to expire in staggered three-year
terms. Each ShowCase director serves for a term of three years. The number of
directors may be increased or decreased from time to time as shall be determined
by the affirmative vote of a majority of the entire Board of Directors or by the
shareholders holding at least 2/3 of the outstanding shares of capital stock
entitled to vote, considered as one class.
The DGCL permits, but does not require, the adoption of a classified
board of directors with staggered terms. A maximum of three classes of directors
is permitted by the DGCL, with members of one class to be elected each year for
a maximum term of three years. Classification of the board of directors might
make it more difficult for a person acquiring shares to take immediate control
of the board of directors. SPSS's directors are elected in staggered three-year
terms, with one-third elected each year.
INDEMNIFICATION AND PERSONAL LIABILITY OF DIRECTORS AND OFFICERS
In general, the DGCL and the MBCA both provide that directors and
officers as well as other employees and individuals may be indemnified against
expenses (including attorneys'
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fees), judgments, fines and amounts paid in settlement in connection with
specified actions, suits or proceedings, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation as
a derivative action) if they acted in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interest of the corporation, and,
with respect to any criminal action or proceeding, if they had no reasonable
cause to believe their conduct was unlawful. There are, however, certain
differences between the DGCL and the MBCA.
The DGCL provides that a corporation may limit or eliminate a
director's personal liability, and SPSS's certificate of incorporation provides
that a director will not be personally liable, for monetary damages to the
corporation or its stockholders for breach of fiduciary duty as a director,
except for liability
- for any breach of the director's duty of loyalty to such
corporation or its stockholders,
- for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law,
- for paying or approving a stock repurchase in violation of
Section 174 of the DGCL, or
- for any transaction from which the director derived an
improper personal benefit.
SPSS's certificate of incorporation also provides that each current or
former director, officer, employee or agent of SPSS, or each such person who is
or was serving or who had agreed to serve at the request of SPSS as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, or other enterprise (including the heirs, executors, administrators or
estate of such person), will be indemnified by SPSS to the full extent permitted
by the DGCL as from time to time in effect. SPSS's certificate of incorporation
also provides that such indemnification provisions are not to be deemed
exclusive of any other rights to which those indemnified may be entitled.
Under the MBCA, a director may be liable to the corporation for
distributions made in violation of Minnesota law or a restriction contained in
the corporation's articles or bylaws. The ShowCase articles provide that a
director shall not be personally liable to ShowCase or its shareholders for
monetary liability relating to breach of fiduciary duty as a director, unless
the liability relates to:
- a breach of the director's duty of loyalty to the corporation or its
shareholders;
- acts or omissions involving a lack of good faith or which involve intentional
misconduct or a knowing violation of law;
- liability for illegal distributions and unlawful sales of ShowCase
securities;
- transactions where the director gained an improper personal benefit; or
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- any acts or omissions occurring prior to the date on which the liability
limitation provisions of the ShowCase articles became effective.
The ShowCase articles provide that any repeal or modification of the
foregoing provisions shall not adversely affect any right or protection of a
director of ShowCase existing at the time of such repeal or modification.
Indemnification is required by the MBCA provided the requisite
standards of conduct are met, as determined by a majority vote of a quorum of
the board if the directors who are parties to the action are not counted for
determining a quorum, a majority of a committee of the board who are not parties
to the proceeding, special legal counsel selected by a majority of the board or
the affirmative vote of shareholders.
Indemnification is permitted by the DGCL provided the requisite
standards of conduct are met, as determined by a majority vote of a
disinterested quorum of the directors, independent legal counsel (if a quorum of
independent directors is not obtainable), a majority vote of a quorum of the
stockholders (excluding shares owned by the indemnified party) or the court
handling the action.
The MBCA requires a corporation to indemnify any director, officer or
employee who is made or threatened to be made party to a proceeding by reason of
the former or present official capacity of the director, officer or employee,
against judgments, penalties, fines, settlements and reasonable expenses if the
person has not been indemnified by another source, acted in good faith, received
no improper personal benefit, had no reason to believe in a criminal proceeding
that the conduct was unlawful, and the person reasonably believed that the
conduct was in the best interests of the corporation or not opposed to the best
interests of the corporation.
The DGCL generally permits indemnification of expenses incurred in the
defense or settlement of a derivative or third-party action, provided there is a
determination by a disinterested quorum of the directors, by independent legal
counsel or by a majority vote of a quorum of the stockholders that the person
seeking indemnification acted in good faith and in a manner reasonably believed
to be in or not opposed to the best interests of the corporation. Without court
approval, however, no indemnification may be made in respect of any derivative
action in which such person is adjudged liable for negligence or misconduct in
the performance of his or her duty to the corporation. The DGCL requires
indemnification of expenses when the individual being indemnified has
successfully defended the action on the merits or otherwise.
Under the DGCL, rights to indemnification and expenses are
non-exclusive, in that they need not be limited to those expressly provided by
statute. The MBCA is similar in that there is no language in the statute
restricting the corporation from providing indemnification above that
specifically provided in the statute.
DESCRIPTION OF SPSS CAPITAL STOCK
The following summary of the terms of the capital stock of SPSS before
and after the merger is not meant to be complete and is qualified by reference
to SPSS's certificate of incorporation and SPSS's by-laws. Copies of SPSS's
certificate of incorporation and SPSS's by-laws are incorporated by reference
and will be sent to stockholders of SPSS and ShowCase upon request. See "Where
You Can Find More Information."
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AUTHORIZED CAPITAL STOCK
Under SPSS's certificate of incorporation, SPSS's authorized capital
stock consists of 50,000,000 shares of SPSS common stock, $0.01 par value.
SPSS COMMON STOCK
SPSS Common Stock Outstanding. The outstanding shares of SPSS common
stock are, and the shares of SPSS common stock issued under the merger will be,
duly authorized, validly issued, fully paid and non-assessable.
Voting Rights. Each holder of SPSS common stock is entitled to one vote
for each share of SPSS common stock held of record on the applicable record date
on all matters submitted to a vote of stockholders.
Dividend Rights; Rights Upon Liquidation. The holders of SPSS common
stock are entitled to receive, from funds legally available for the payment
thereof, dividends when and as declared by resolution of SPSS's board of
directors. In the event of liquidation, each share of SPSS common stock is
entitled to share pro rata in any distribution of SPSS's assets after payment or
providing for the payment of liabilities.
Preemptive Rights. Holders of SPSS common stock have no preemptive
rights to purchase, subscribe for or otherwise acquire any unissued or treasury
shares or other securities.
TRANSFER AGENT AND REGISTRAR
Computer Share is the transfer agent and registrar for the SPSS common
stock.
STOCK EXCHANGE LISTING; DELISTING AND DEREGISTRATION OF SHOWCASE COMMON STOCK
It is a condition to the merger that the shares of SPSS common stock
issuable in the merger be approved for listing on the Nasdaq National Market,
subject to official notice of issuance. If the merger is completed, ShowCase
common stock will cease to be listed on the Nasdaq National Market.
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ADDITIONAL MATTERS FOR CONSIDERATION BY ONLY SPSS STOCKHOLDERS
PROPOSAL 3--APPROVAL OF 2000 EQUITY INCENTIVE PLAN
On December 6, 2000, SPSS established its 2000 Equity Incentive Plan,
pursuant to which it can award stock options and a variety of other equity
incentives to directors, officers, other key executives, employees and
independent contractors of SPSS and any of its subsidiaries. The Board is
authorized to delegate to the Compensation Committee the administration of the
Plan. The purpose of the Plan is to further the success of SPSS by attracting
and retaining key management and other talent and providing to such persons
incentives and rewards tied to SPSS's business success.
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The Plan will be administered by the Board of Directors ("Board").
Under the terms of the Plan, the Board will be authorized to grant stock options
("Options"), stock appreciation rights ("SARs"), and restricted stock
("Restricted Shares") to directors, officers, other key executives, employees
and independent contractors of the Company and any of its subsidiaries
("Participants"). The Board is authorized to delegate to the Compensation
Committee the administration of the Plan.
Options granted under the 2000 Equity Incentive Plan may be either
Incentive Stock Options ("ISO's"), which are intended to meet the requirements
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or Nonqualified Stock Options ("NSO's"). ISO's may be granted only to
employees of the Company and its subsidiaries. The price per share of Common
Stock at which each Option is exercisable (the "Option Price") is determined by
the Board of Directors at the time of grant, but may not be less than 100% of
the fair market value of the Common Stock on the date the Option is granted.
Under the terms of the Plan, the fair market value of Common Stock is defined as
the closing price per share as reported by the Nasdaq National Market on that
day, or if Common Shares were not traded on that day, then the day immediately
preceding day on which the stock traded. Options are exercisable at such time
and under such conditions as are set forth in the Option grant, but in no event
may any ISO be exercisable subsequent to the day before the tenth anniversary of
the date on which the ISO is granted.
The Plan permits holders of Options issued under the Plan to pay the
exercise price for such Options in several ways, including: by surrendering
Option shares having a market value per share equal to the Option Price or by
the transfer to the Company of unrestricted shares having a value equal to the
total Option Price.
The Board of Directors may grant SARs to eligible parties in connection
with any Option granted under the Equity Incentive Plan, either at the time of
the grant of such Option or at anytime thereafter during the term of the Option.
Such SARs cover the same shares covered by the related Option and are subject to
the same terms and conditions as the related Options and such further terms and
conditions as are determined by the Board of Directors. A SAR entitles the
holder of the related Option to surrender to the Company the unexercised,
related Option, or any portion thereof, and to receive from the Company in
exchange therefore an amount equal to the excess of the Market Value per Share
(as defined in the Equity Incentive Plan) of a share of Common Stock on the date
of exercise over the option price times the number of shares covered by the
option, or portion thereof, which is surrendered.
Restricted Shares may be granted to Participants in such number and at
such times as the Board determines. Participants who receive Restricted Shares
have all the rights of stockholders with respect to such shares, including the
right to vote the shares and receive all dividends or other distributions made
or paid with respect to such shares. Restricted Shares will be subject, at
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the date of grant, to a substantial risk of forfeiture, for a period determined
by the Board of Directors.
The Plan has a term of ten years. In certain instances, the Plan may be
amended by the Board without shareholder approval, though shareholder approval
is required to increase the number of shares subject to the Plan. Currently, the
number of Common Shares that may be issued or transferred under the Plan may not
exceed 500,000.
Federal Income Tax Consequences Of the 2000 Equity Incentive Plan
The following discussion summarizes the material federal income tax
consequences of participation in the Plan. This discussion is general in nature
and does not address issues related to the tax circumstances of any particular
employee. The discussion is based on federal income tax laws in effect on the
date hereof and is, therefore, subject to possible future changes in the law.
This discussion does not address state, local or foreign tax consequences.
ISO's. An optionee will not recognize any income upon either grant or
exercise of an ISO, although the exercise may subject the optionee to
alternative minimum tax liability in the year of exercise because the excess of
the fair market value of the shares at the time of exercise over the Option
Price of the shares is included in income for purposes of the alternative
minimum tax. The treatment of any gain realized upon sale or other disposition
of the Company's Common Stock received upon exercise of an ISO will depend on
the holding period. If the optionee does not dispose of the stock received
within either one year after exercise of the ISO or two years after grant, any
gain realized upon disposition will be characterized as long-term capital gain.
If this holding period requirement is not satisfied, such disposition will be a
disqualifying disposition. In such a case, the portion of the gain realized on
disposition equal to the excess of the fair market value of the shares at the
time the ISO was exercised over the Option Price will be ordinary income taxable
as compensation in the year of disposition. The balance, if any, of the gain
will be capital gain.
The Company is entitled to a deduction with respect to an ISO only in
the taxable year of the Company in which a disqualifying disposition occurs. In
that event, the deduction would be equal to the ordinary income, if any,
recognized by the optionee upon disposition of the shares, provided that the
deduction is not otherwise disallowed under the Code.
Nonqualified Stock Options. An optionee will not recognize any income
upon either grant or vesting of a NSO. Upon exercise of any part of a NSO, the
optionee will recognize ordinary income in an amount equal to the difference
between the Option Price and the then fair market value of the shares acquired,
assuming the shares are freely transferable or are not subject to a substantial
risk of forfeiture. If the shares are not freely and are subject to a
substantial risk of forfeiture, the shares will be considered "Restricted
Shares." An optionee who receives Restricted Shares on exercise of a NSO will
not be subject to tax on exercise unless the recipient makes an election under
Section 83(b) of the Code. Instead, such recipient will be subject to tax at
ordinary income rates at the time of the expiration or earlier termination of
the Restriction Period in an amount equal to the excess of the fair market value
of the Restricted Stock at the
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time that the Restriction Period lapses or terminates over the Option Price. Any
further gain on sale of the stock would be capital gain. If a holder makes an
election under Section 83(b) of the Code, the holder will be subject to tax at
ordinary income rates in an amount equal to the excess of the fair market value
of the Restricted Stock at the date of option exercise over the Option Price.
Any further gain on sale of the stock would be capital gain.
In general, upon a subsequent disposition of the shares, the optionee's
basis for determining taxable gain or loss would be the amount paid for such
shares plus the amount that was includable in the optionee's income. Any gain
recognized on such disposition would generally be taxed as long-term or
short-term capital gain depending on the length of time the optionee is deemed
to have held these shares and the holding period in effect at the time.
The Company will be entitled to a deduction for federal income tax
purposes upon exercise of a NSO in an amount equal to the ordinary income
recognized by the optionee, provided that the deduction is not otherwise
disallowed under the Code. The Company must withhold taxes from the optionee's
compensation with respect to the ordinary income recognized by the optionee upon
exercise.
The treatment of SARs is essentially the same as the treatment of the
related options granted under the Equity Incentive Plan.
Restricted Shares. The recipient of Restricted Shares will not be
subject to tax upon its grant, unless the recipient makes an election under
Section 83(b) of the Code. Assuming no election under Section 83(b) is made, the
holder will be subject to tax at ordinary income rates at the time of the
expiration or earlier termination of the Restriction Period in an amount equal
to the excess of the fair market value of the Restricted Stock at the time that
the Restriction Period lapses or terminates over the amount paid for the stock.
Any further gain on sale of the stock would be capital gain. If a holder makes
an election under Section 83(b) of the Code, the holder will be subject to tax
at ordinary income rates based on the fair market value of the Restricted Stock
at the date of grant. Any further gain on sale of the stock would be capital
gain.
The Company must withhold taxes and will be entitled to a deduction
with respect to the amount of ordinary income recognized by the employee, unless
otherwise disallowed under the Code.
Cap on Company Deductions for Certain Compensation. Under the Omnibus
Reconciliation Act of 1993 (the "Act"), certain compensation payments in excess
of $1 million are subject to a cap on deductibility for the Company. The
limitation on deductibility applies with respect to that portion of a
compensation payment for a taxable year in excess of $1 million to either the
chief executive officer of the Company or any one of the other four highest paid
executives. Certain performance-based compensation is not subject to the cap on
deductibility. Stock options can qualify for this performance-based exception,
but only if they are granted at fair market value, the total number of shares
that can be granted to an executive for any period is stated, and shareholder
and Board approval is obtained. The Company intends to administer the ISO and
NSO portions of the Plan to comply with these performance-based criteria.
Restricted Shares do not satisfy the definition of performance-based
compensation unless the granting or vesting of the Restricted Shares are based
upon the attainment of specified performance goals.
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SPSS is seeking shareholder approval of the adoption of the 2000 Equity
Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ADOPTION OF
THE 2000 EQUITY INCENTIVE PLAN.
PROPOSAL 4--APPROVAL OF 2000 QUALIFIED AND NONQUALIFIED EMPLOYEE STOCK
PURCHASE PLANS
The Company is offering employees the right to participate in the 2000
Qualified Employee Stock Purchase Plan (the "Qualified Plan") and the 2000
Nonqualified Employee Stock Purchase Plan (the "Nonqualified Plan")
(collectively, the "Plans"). The Qualified Plan reserves 100,000 shares of the
Company's Common Stock for purchase by eligible employees of the Company and its
subsidiaries. The Nonqualified Plan contains no limit as to the shares issuable
thereunder. Shares of Common Stock issuable under the Plans are authorized but
previously unissued shares of Common Stock. The Plans are intended to advance
the interests of the Company and its stockholders by enabling the Company to
attract and retain persons of ability to perform services for the Company, by
providing an incentive to such persons through equity participation in the
Company, thereby offering significant potential rewards which are tied to the
Company's success. Any hourly or salaried employee of the Company or any
subsidiary of the Company employed prior to the end of the Enrollment Period (as
such term is used in the Plans) for that quarter is eligible to participate in
offers under the Plans, except that employees owning shares possessing 5% or
more of the total combined voting power or value of all classes of shares of the
Company or any subsidiary of the Company are not eligible to participate in the
Qualified Plan. Non-employee directors of the Company and its subsidiaries will
not be eligible to participate in the Plans.
The Board of Directors of the Company shall designate an Administrative
Committee (the "Administrative Committee") to administer the Plans. The
Administrative Committee, or a Plan Administrator appointed thereby, shall have
the sole and absolute power and authority to construe and interpret the Plans
from time to time and to adopt such rules as it deems necessary to carry out the
Plans. Although the Plans have no set duration, the Board shall have the right
to terminate, suspend or modify the Plans. The Administrative Committee and the
eligible employees have no other relationship.
Under the terms of the Plans, there shall be one or more enrollment
periods (each an "Enrollment Period" and collectively, the "Enrollment Periods")
during which eligible employees may elect to participate (a "Participant") in
the Plans by delivering to the Plan Administrator a written payroll deduction
authorization form. At the beginning of each calendar quarter, Participants will
be granted options to purchase shares of Common Stock through a payroll
deduction of a specified percentage of the Participant's annual salary. The
amount to be withheld must be specified in writing by the Participant and must
equal one, two, three, four, five, six, seven, eight, nine or ten percent of the
Participant's annual salary, bonus and commission.
Shares will be purchased at the end of each calendar quarter utilizing
amounts withheld during the calendar quarter. The purchase price per share is 85
percent of the lower of (i) the fair market value of a share of Common Stock on
the first trading day following the end of the previous calendar quarter or (ii)
the closing market price for the Common Stock on the last trading day of the
calendar quarter. Fair market value means the average of the high and low sale
prices as reported on the National Association of Securities dealers Automated
Quotation System or, if the stock is traded on one or more stock exchanges, the
closing price for the stock on the principal exchange on which the Common Stock
is traded. The Company will not purchase the shares of Common Stock to be issued
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pursuant to the Plans on the open market, but such shares shall rather be shares
newly issued by the Company.
Once enrolled in a Plan, a Participant shall participate in all
Enrollment Periods until he or she withdraws from further participation in the
Plan. A Participant may withdraw at any time prior to the end of a calendar
quarter by delivering a notice of withdrawal to the Company, in which event the
Company shall refund the Participant's entire Account, as defined in the Plan.
Unless a Participant withdraws from the Plan, funds contained in the
Participant's Account at the end of each calendar quarter will be used to
exercise the option and thereby purchase the shares of Common Stock. An employee
who has previously withdrawn from a Plan may re-enter by complying with the
requirements noted above, provided however, that the employee may not rejoin the
Plan until the beginning of the calendar quarter following the date of
withdrawal.
A Participant whose employment terminates for any reason other than
cause can elect to withdraw the amount in his Account, or leave the amount with
the Company to fund a purchase at the end of the calendar quarter. A Participant
whose employment is terminated for cause will receive a refund of the amount in
his account. If a Participant dies, his legal representative will receive a
refund of the amount in his Account. No Participant may sell, assign, transfer,
pledge, or otherwise dispose of or encumber such Participant's Account or any
rights to purchase or to receive shares of Common Stock under the Plan.
No Participant may be given options to purchase Common Shares under the
Qualified Plan which permit the Participant's rights to purchase shares under
all employee stock purchase plans of the Company (as defined in Internal Revenue
Code Section 423) to accrue at a rate which exceeds $25,000 of the fair market
value of such stock (determined when the option is granted) for each calendar
year for which the option was outstanding. In no event shall persons subject to
Section 16 of the Exchange Act of 1934, as amended, be eligible to purchase
Common Shares from the Plans with amounts deducted from their bonuses if such
purchases would increase the Common Shares so purchased by more than ten
percent.
The Plans are not subject to any provisions of the Employee Retirement
Income Security Act of 1974 ("ERISA"). The Common Stock issued pursuant to a
Plan shall be newly issued stock of the Company. Executive officers and persons
who hold 10% or more of the Company's outstanding Shares of Common Stock are
subject to the trading restrictions of Section 16(b) of the Exchange Act.
Federal Income Tax Effects on Participant
The federal income tax consequences of the grant and exercise of stock
options under the Plans, the subsequent disposition of shares acquired under
such options, are summarized below. The summary is not intended to be exhaustive
and may not cover all tax aspects of every situation. Participants should
consult with their tax advisors when specific questions arise.
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Qualified Plan
a. Time of Grant of Stock Option. A participant is not taxed at the
time of the grant of his/her stock option even though the Purchase Price is no
greater than eighty-five percent (85%) of the market price of the stock on the
date of the grant.
b. Time of Exercise of Stock Option. A participant is not taxed when
shares are purchased pursuant to the exercise of an option under the Plan, even
though the shares are purchased at the lower of eighty-five percent (85%) of the
Fair Market Value on the Enrollment Date or eighty-five percent (85%) of the
Fair Market Value on the Exercise Date.
c. Sale or other Disposition of Shares Acquired Under the Plan.
1. If a participant sells shares after the expiration of two
years from the date of an option grant and one year after the exercise date (the
"Statutory Holding Period"):
a. Any profit up to 15% of the Fair Market Value of
the shares on the last day of the calendar quarter ending immediately before the
option grant is taxable as ordinary income, any further profit is taxable as
capital gain; and
b. Any loss is treated as capital loss.
2. If a participant sells or otherwise disposes of shares
before the expiration of the Statutory Holding Periods:
a. The difference between the price paid by the
participant and the Fair Market Value of the shares at the date of purchase is
taxable as ordinary income; and
b. The difference between the amount received by the
participant on the disposition of the shares and the Fair Market Value of the
shares on the date of purchase is treated as a capital gain or loss.
d. Tax Deduction by Company. If shares are sold before the expiration
of the Statutory Holding Period, the Company is entitled to a tax deduction for
the difference between the price paid by the participant and the Fair Market
Value of the shares at the date of purchase. At any time, the Company may, but
will not be obligated to, withhold from the participant's Compensation the
amount necessary for the Company to meet applicable withholding obligations,
including any withholding required to make available to the Company any tax
deductions or benefits attributable to sale or early disposition of stock by the
participant.
NonQualified Plan
The Nonqualified Plan will be considered a nonqualified option plan for
tax purposes. The tax treatment is as outlined for nonqualified options granted
under the 2000 Equity Incentive Plans.
SPSS is seeking shareholder approval of the adoption of the 2000
Qualified and Nonqualified Employee Stock Purchase Plans.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ADOPTION
OF THE 2000 QUALIFIED AND NONQUALIFIED EMPLOYEE STOCK PURCHASE PLANS.
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LEGAL MATTERS
The validity of the SPSS common stock to be issued to ShowCase
shareholders in the merger will be passed upon by Ross & Hardies, counsel to
SPSS. It is a condition to the completion of the merger that each of SPSS and
ShowCase receive an opinion from their respective counsel with respect to the
tax treatment of the merger.
EXPERTS
The consolidated financial statements and financial statement schedule
of SPSS Inc. as of December 31, 1998 and December 31, 1999, and for each of the
years in the three-year period ended December 31, 1999 have been incorporated by
reference herein in reliance upon the reports of KPMG LLP, independent certified
public accountants, incorporated by reference herein, and upon the authority of
said firm as experts in accounting and auditing.
The consolidated financial statements and financial statement schedule
of ShowCase Corporation as of March 31, 1999 and 2000, and for each of the years
in the three-year period ended March 31, 2000 have been included in this joint
proxy statement/prospectus in reliance upon the reports of KPMG LLP, independent
certified public accountants, included herein, and upon the authority of said
firm as experts in accounting and auditing.
With respect to the unaudited interim financial information for the
periods ended March 31, 1999 and 2000, June 30, 1999 and 2000 and September
30, 1999 and 2000, incorporated by reference herein, the independent certified
public accountants have reported that they applied limited procedures in
accordance with professional standards for a review of such information.
However, their separate reports included in SPSS's quarterly reports on Form
10-Q for the quarters ended March 31, 2000, June 30, 2000 and September 30,
2000, and incorporated by reference herein, state that they did not
audit and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their reports on such information should
be restricted in light of the limited nature of the review procedures applied.
The accountants are not subject to the liability provisions of section 11 of the
Securities Act of 1933 for their report on the unaudited interim financial
information because the report is not a "report" or a "part" of the registration
statement prepared or certified by the accountants within the meaning of
sections 7 and 11 of the Securities Act.
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ADDITIONAL INFORMATION FOR STOCKHOLDERS
FUTURE STOCKHOLDER PROPOSALS
SPSS
If an SPSS stockholder intends to present a proposal at the SPSS 2001
annual meeting and seeks to have the proposal included in SPSS's proxy statement
relating to that meeting, pursuant to Rule 14a-8 of the Securities and Exchange
Act of 1934, as amended, the proposal must have been received by SPSS no later
than the close of business on January 17, 2001. However, if the date of the
annual meeting is not held within 30 days of June 14, 2001, then the deadline
for such notice becomes a reasonable time before SPSS begins to print and mail
its proxy material for the annual meeting. After that date, the proposal will be
considered untimely and SPSS's proxies will have discretionary voting authority
with respect to such matter. Any proposals, as well as any related questions,
should be directed to Edward Hamburg, Executive Vice President, Corporate
Operations, Chief Financial Officer and Secretary, 233 South Wacker Drive,
Chicago, Illinois 60606.
In addition, SEC rules set forth standards for the exclusion of some
stockholder proposals from a proxy statement for a stockholder meeting.
SHOWCASE
ShowCase will hold an annual meeting in 2001 only if the merger is not
completed. If such meeting is held, the deadline for receipt of a proposal to be
considered for inclusion in ShowCase's proxy statement for the 2001 annual
meeting is April 5, 2001.
WHERE YOU CAN FIND MORE INFORMATION
SPSS and ShowCase file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information we file at the SEC's public reference
rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call
the SEC at l-800-SEC-0330 for further information on the public reference rooms.
Our SEC filings are also available to the public from commercial document
retrieval services and at the web site maintained by the SEC at www.sec.gov.
SPSS has filed a registration statement on Form S-4 to register with
the SEC the SPSS common stock to be issued to ShowCase shareholders upon
completion of the merger. This joint proxy statement/prospectus is a part of
that registration statement and constitutes a prospectus of SPSS in addition to
being a proxy statement of SPSS and ShowCase for their respective special
meetings. As allowed by SEC rules, this joint proxy statement/prospectus does
not contain all the information you can find in the registration statement or
the exhibits to the registration statement.
The SEC allows SPSS to "incorporate by reference" information into this
joint proxy statement/prospectus, which means that SPSS can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated
171
by reference is deemed to be part of this joint proxy statement/prospectus,
except for any information superseded by information in, or incorporated by
reference in, this joint proxy statement/prospectus. This joint proxy
statement/prospectus incorporates by reference the documents set forth below
that SPSS has previously filed with the SEC. These documents contain important
information about SPSS and its finances.
[Enlarge/Download Table]
--------------------------------------------------------------------------------------------------------------
SPSS SEC FILINGS (FILE NO. 0-22194) PERIOD
--------------------------------------------------------------------------------------------------------------
Annual Report on Form 10-K Fiscal Year ended December 31, 1999
--------------------------------------------------------------------------------------------------------------
Quarters ended March 31, 2000, June 30, 2000 and
Quarterly Reports on Form 10-Q September 30, 2000
--------------------------------------------------------------------------------------------------------------
Current Reports on Form 8-K Filed on June 30, 2000 and November 15, 2000
--------------------------------------------------------------------------------------------------------------
The Registration Statement on Form 8-A12G Filed on June 18, 1998
--------------------------------------------------------------------------------------------------------------
SPSS is also incorporating by reference additional documents that SPSS
files with the SEC between the date of this joint proxy statement/prospectus and
the date of the SPSS and ShowCase special shareholder meetings.
SPSS has supplied all information contained or incorporated by
reference in this joint proxy statement/prospectus relating to SPSS, and all
information about ShowCase has been supplied by ShowCase.
If you are a stockholder of SPSS, we may have sent you some of the
documents incorporated by reference, but you can obtain any of them through us
or the SEC. DOCUMENTS INCORPORATED BY REFERENCE ARE AVAILABLE FROM SPSS WITHOUT
CHARGE, EXCLUDING ALL EXHIBITS UNLESS WE HAVE SPECIFICALLY INCORPORATED BY
REFERENCE AN EXHIBIT IN THIS JOINT PROXY STATEMENT/PROSPECTUS. STOCKHOLDERS MAY
OBTAIN SPSS DOCUMENTS INCORPORATED BY REFERENCE IN THIS JOINT PROXY
STATEMENT/PROSPECTUS BY REQUESTING THEM IN WRITING OR BY TELEPHONE FROM SPSS AT
THE FOLLOWING ADDRESS:
SPSS Inc.
233 South Wacker Drive
Chicago, Illinois 60606
Attention: Corporate Secretary
(312) 651-3000
172
If you are a SPSS stockholder and would like to request documents from
SPSS, please do so by _____________________, 2001 to receive them before the
SPSS special meeting.
You can also get more information by visiting SPSS's web site at
www.SPSS.com. Web site materials are not part of this joint proxy
statement/prospectus.
SPSS STOCKHOLDERS SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS TO VOTE ON
THE PROPOSALS TO SPSS'S STOCKHOLDERS IN CONNECTION WITH THE MERGER AND OTHER
PROPOSALS TO BE CONSIDERED AT SPSS'S SPECIAL MEETING. SHOWCASE SHAREHOLDERS
SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS JOINT PROXY/PROSPECTUS
TO VOTE ON THE PROPOSALS TO SHOWCASE SHAREHOLDERS IN CONNECTION WITH THE MERGER.
WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT
FROM WHAT IS CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS. THIS JOINT
PROXY STATEMENT/PROSPECTUS IS DATED _________________, 2001. YOU SHOULD NOT
ASSUME THAT THE INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS
IS ACCURATE AS OF ANY DATE OTHER THAN SUCH DATE, AND NEITHER THE MAILING OF
THIS JOINT PROXY STATEMENT/PROSPECTUS TO STOCKHOLDERS NOR THE ISSUANCE OF SPSS
COMMON STOCK IN THE MERGER SHALL CREATE ANY IMPLICATION TO THE CONTRARY.
173
INDEX TO SHOWCASE FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Independent Auditors' Report F-1
Consolidated Balance Sheets F-2
Consolidated Statements of Operations and Comprehensive Income (Loss) F-3
Consolidated Statements of Stockholders' Equity F-4
Consolidated Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-6
Independent Auditors' Report on Financial Statement Schedule F-22
Financial Statement Schedule F-23
F-i
FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Independent Auditors' Report
The Board of Directors and Stockholders
of ShowCase Corporation:
We have audited the accompanying consolidated balance sheets of ShowCase
Corporation and subsidiaries (the Company) as of March 31, 2000 and 1999, and
the related consolidated statements of operations and comprehensive income
(loss), stockholders' equity, and cash flows for each of the years in the
three-year period ended March 31, 2000. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the accompanying consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
ShowCase Corporation and subsidiaries as of March 31, 2000 and 1999, and the
results of their operations and their cash flows for each of the years in the
three-year period ended March 31, 2000 in conformity with accounting principles
generally accepted in the United States of America.
/s/ KPMG LLP
Minneapolis, Minnesota
May 2, 2000
F-1
SHOWCASE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
[Enlarge/Download Table]
MARCH 31,
--------------------
2000 1999
-------- --------
ASSETS
Current assets:
Cash and equivalents ................................................. $ 11,677 $ 8,900
Marketable securities ................................................ 18,387 139
Accounts receivable, net ............................................. 8,848 7,070
Prepaid expenses and other current assets ............................ 1,380 1,059
Income taxes receivable .............................................. 351 --
Deferred income taxes ................................................ -- 550
-------- --------
Total current assets ............................................... 40,643 17,718
-------- --------
Property and equipment, net .......................................... 2,088 2,092
Goodwill, net of accumulated amortization ............................ 56 116
-------- --------
Total assets ....................................................... $ 42,787 $ 19,926
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ..................................................... $ 1,323 $ 1,373
Accrued liabilities .................................................. 4,333 4,121
Current portion of long-term debt .................................... 2 5
Current portion of obligations under capital leases .................. 78 127
Income taxes payable ................................................. -- 295
Deferred revenue ..................................................... 12,778 10,800
-------- --------
Total current liabilities .......................................... 18,514 16,721
-------- --------
Deferred revenue, less current portion .................................. 914 846
Long-term debt, less current portion .................................... -- 2
Capital lease obligations, less current portion ......................... -- 85
-------- --------
Total liabilities .................................................. 19,428 17,654
-------- --------
Commitments (note 12)
Stockholders' equity:
Series A convertible preferred stock; $.01 par value;
473,757 shares authorized, issued, and outstanding; total
liquidation preference of $2,400.................................. -- 5
Series B convertible preferred stock; $.01 par value;
1,777,500 shares authorized, 875,000 shares issued and
outstanding; total liquidation preference of $3,500............... -- 9
Common stock, $.01 par value, 10,000,000 shares authorized,
10,522,113 and 4,502,867 shares issued and outstanding............ 105 45
Additional paid-in capital ........................................... 31,443 6,452
Accumulated other comprehensive income (loss):
Cumulative translation adjustment ................................ 123 47
Unrealized holding loss on securities ............................ (9) (181)
Deferred compensation ................................................ (426) (322)
Accumulated deficit .................................................. (7,877) (3,783)
-------- --------
Total stockholders' equity ..................................... 23,359 2,272
-------- --------
Total liabilities and stockholders' equity ..................... $ 42,787 $ 19,926
======== ========
See accompanying notes to consolidated financial statements.
F-2
SHOWCASE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
[Enlarge/Download Table]
YEARS ENDED MARCH 31,
--------------------------------
2000 1999 1998
-------- -------- --------
Revenues:
License fees ...................................... $ 20,498 $ 21,021 $ 14,279
Maintenance and support ........................... 13,789 10,390 6,651
Professional service fees ......................... 5,236 4,108 2,825
-------- -------- --------
Total revenues ................................ 39,523 35,519 23,755
-------- -------- --------
Cost of revenues:
License fees ...................................... 3,837 3,809 2,645
Maintenance and support ........................... 3,429 2,646 1,572
Professional service fees ......................... 4,873 2,990 2,005
-------- -------- --------
Total cost of revenues ........................ 12,139 9,445 6,222
-------- -------- --------
Gross margin ........................................... 27,384 26,074 17,533
-------- -------- --------
Operating expenses:
Sales and marketing ............................... 22,245 19,050 15,494
Product development ............................... 5,482 4,371 3,051
General and administrative ........................ 4,466 3,212 2,590
-------- -------- --------
Total operating expenses ...................... 32,193 26,633 21,135
-------- -------- --------
Operating loss ......................................... (4,809) (559) (3,602)
-------- -------- --------
Other income (expense), net:
Interest expense .................................. (21) (164) (123)
Interest and investment income .................... 1,289 277 74
Equity in income of unconsolidated affiliates...... -- 26 27
Gain on sales of securities ....................... 151 32 551
Other income (expense), net ....................... (4) (28) 14
-------- -------- --------
Total other income (expense), net ............. 1,415 143 543
-------- -------- --------
Net loss before income taxes ........................... (3,394) (416) (3,059)
Income taxes ........................................... 700 200 175
-------- -------- --------
Net loss ............................................... $ (4,094) $ (616) $ (3,234)
-------- -------- --------
Other comprehensive income (loss):
Foreign currency translation adjustment ........... 76 (60) 81
Unrealized holding gain (loss) on securities
arising during the year ....................... 291 (304) 123
Reclassification adjustment for gains
included in net loss .......................... (119) -- --
-------- -------- --------
Comprehensive loss ..................................... $ (3,846) $ (980) $ (3,030)
======== ======== ========
Net loss per share (note 10):
Basic ............................................. $ (0.46) $ (0.14) $ (0.82)
======== ======== ========
Diluted ........................................... $ (0.46) $ (0.14) $ (0.82)
======== ======== ========
Weighted average shares outstanding used in
computing basic net loss per share ................ 8,884 4,384 3,928
Weighted average shares outstanding used in
computing diluted net loss per share .............. 8,884 4,384 3,928
See accompanying notes to consolidated financial statements.
F-3
SHOWCASE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
[Enlarge/Download Table]
SERIES A SERIES B
CONVERTIBLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK COMMON STOCK
------------------ ------------------------ --------------------
NUMBER NUMBER NUMBER
OF SHARES AMOUNT OF SHARES AMOUNT OF SHARES AMOUNT
--------- ------- --------- ---------- --------- -------
Balances at March 31, 1997 ............. 473,757 $ 5 -- $ -- 3,852,731 $ 39
Net loss ............................... -- -- -- -- -- --
Change in foreign currency ............. -- -- -- -- -- --
translation adjustment
Unrealized holding gain on
marketable securities ............... -- -- -- -- -- --
Stock issued pursuant to
stock option plan ................... -- -- -- -- 135,829 1
Preferred Series B stock
issued............................... -- -- 875,000 9 -- --
------- ------- ------- ---------- ---------- -------
Balances at March 31, 1998 ............. 473,757 5 875,000 9 3,998,560 40
Net loss ............................... -- -- -- -- -- --
Change in foreign currency
translation adjustment .............. -- -- -- -- -- --
Unrealized holding gain
(loss) on marketable
securities .......................... -- -- -- -- -- --
Stock issued pursuant to stock
option plan ......................... -- -- -- -- 514,307 5
Deferred compensation .................. -- -- -- -- -- --
Amortization of deferred
compensation ........................ -- -- -- -- -- --
------- ------- ------- ---------- ---------- -------
Balances at March 31, 1999 ............. 473,757 5 875,000 9 4,502,867 45
Net loss ............................... -- -- -- -- -- --
Conversion of preferred to
common .............................. (473,757) (5) (875,000) (9) 2,759,226 28
Change in foreign currency
translation adjustment .............. -- -- -- -- -- --
Unrealized holding gain on
marketable securities, net
of reclassification adjustment ...... -- -- -- -- -- --
Stock issued pursuant to
initial public offering ............. -- -- -- -- 3,000,000 30
Stock issued pursuant to
exercise of warrant ................. -- -- -- -- 8,182 --
Stock issued pursuant to stock
option plan ......................... -- -- -- -- 251,838 2
Stock options issued to
consultant .......................... -- -- -- -- -- --
Deferred compensation .................. -- -- -- -- -- --
Amortization of deferred
compensation ........................ -- -- -- -- -- --
------- ------- ------ ---------- ---------- -------
BALANCES AT MARCH 31, 2000 ............. -- $ -- -- $ -- 10,522,113 $ 105
======= ======= ====== ========== ========== =======
ACCUMULATED
OTHER RETAINED
ADDITIONAL COMPREHENSIVE EARNINGS TOTAL
PAID-IN INCOME DEFERRED (ACCUMULATED STOCKHOLDERS'
CAPITAL (LOSS) COMPENSATION DEFICIT) EQUITY
---------- ------------- ------------ ------------- -------------
Balances at March 31, 1997 ................... $ 2,465 $ 26 $ -- $ 67 $ 2,602
Net loss ..................................... -- -- -- (3,234) (3,234)
Change in foreign currency ................... -- 81 -- -- 81
translation adjustment
Unrealized holding gain on
marketable securities ..................... -- 123 -- -- 123
Stock issued pursuant to
stock option plan ......................... 32 -- -- -- 33
Preferred Series B stock issued............... 3,491 -- -- -- 3,500
-------- -------- -------- -------- --------
Balances at March 31, 1998 ................... 5,988 230 -- (3,167) 3,105
Net loss ..................................... -- -- -- (616) (616)
Change in foreign currency
translation adjustment .................... -- (60) -- -- (60)
Unrealized holding gain
(loss) on marketable securities............ -- (304) -- -- (304)
Stock issued pursuant to stock
option plan ............................... 109 -- -- -- 114
Deferred compensation ........................ 355 -- (355) -- --
Amortization of deferred
compensation .............................. -- -- 33 -- 33
-------- -------- -------- -------- --------
Balances at March 31, 1999 ................... 6,452 (134) (322) (3,783) 2,272
Net loss ..................................... -- -- -- (4,094) (4,094)
Conversion of preferred to common............. (14) -- -- -- --
Change in foreign currency
translation adjustment .................... -- 76 -- -- 76
Unrealized holding gain on
marketable securities, net
of reclassification adjustment ............ -- 172 -- -- 172
Stock issued pursuant to
initial public offering ................... 24,320 -- -- -- 24,350
Stock issued pursuant to
exercise of warrant ....................... 78 -- -- -- 78
Stock issued pursuant to stock
option plan ............................... 395 -- -- -- 397
Stock options issued to consultant ........... 60 -- (60) -- --
Deferred compensation ........................ 152 -- (152) -- --
Amortization of deferred compensation ........ -- -- 108 -- 108
-------- -------- -------- -------- --------
BALANCES AT MARCH 31, 2000 ................... $ 31,443 $ 114 $ (426) $ (7,877) $ 23,359
======== ======== ======== ======== ========
See accompanying notes to consolidated financial statements.
F-4
SHOWCASE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
[Enlarge/Download Table]
YEARS ENDED MARCH 31,
------------------------------------
2000 1999 1998
---------- --------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .................................................................................... $ (4,094) $ (616) $ (3,234)
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
Depreciation and amortization ............................................................ 957 925 749
Provision for returns and doubtful accounts, net of
returns and write-offs ................................................................. (90) 305 200
Equity in income of unconsolidated affiliates ............................................ -- (26) (27)
Deferred income taxes .................................................................... 550 (210) 300
Gain on sale of securities ............................................................... (151) (32) (551)
Deferred compensation amortization and expense related
to cashless exercise of warrants ....................................................... 188 33 --
Loss on disposition of property and equipment ............................................ 12 35 14
Changes in operating assets and liabilities, net of effect of foreign
exchange rate changes:
Accounts receivable .................................................................... (1,688) (1,214) (1,455)
Prepaid expenses and other current assets .............................................. (321) (27) (376)
Income taxes receivable ................................................................ (351) 251 (251)
Accounts payable ....................................................................... (50) 279 27
Accrued liabilities .................................................................... 212 1,236 1,375
Deferred revenue ....................................................................... 2,046 4,104 2,707
Income taxes payable ................................................................... (295) 295 (295)
--------- --------- ---------
Net cash provided by (used in) operating activities .................................. (3,075) 5,338 (817)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ....................................................... (786) (925) (822)
Proceeds from dissolution of affiliate ................................................... -- 218 --
Purchase of marketable securities ........................................................ (133,496) -- --
Proceeds from maturities and sale of marketable securities ............................... 115,571 32 256
Proceeds from sale of property and equipment ............................................. 6 188 --
--------- --------- ---------
Net cash used in investing activities ................................................ (18,705) (487) (566)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock issued pursuant to stock option
and employee stock purchase plan ....................................................... 397 114 33
Proceeds from initial public offering, net of expenses ................................... 24,350 -- --
Proceeds from issuance of preferred stock ................................................ -- -- 3,500
Proceeds from issuance of long-term debt ................................................. -- -- 784
Payments on long-term debt ............................................................... (5) (1,334) (342)
Payments under capital lease obligations ................................................. (134) (136) (161)
--------- --------- ---------
Net cash provided by (used in) financing activities .................................. 24,608 (1,356) 3,814
--------- --------- ---------
Effect of foreign exchange rate changes on cash ............................................. (51) 1 (16)
--------- --------- ---------
Net increase in cash ........................................................................ 2,777 3,496 2,415
Cash and equivalents, beginning of year ..................................................... 8,900 5,404 2,989
--------- --------- ---------
Cash and equivalents, end of year ........................................................... $ 11,677 $ 8,900 $ 5,404
========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest ............................................................................... $ 21 $ 164 $ 123
========= ========= =========
Income taxes ........................................................................... $ 822 $ 259 $ 240
========= ========= =========
Cash received during the year from income tax refunds .................................... $ 26 $ 395 $ --
========= ========= =========
Supplemental disclosure of noncash investment and financing activities:
The Company acquired property and equipment totaling $317 under capital
lease during 1998. During 1998, the Company sold stock purchase warrants
in another company with a basis of $25 in exchange for marketable
securities with a fair market value of $320 and cash.
See accompanying notes to consolidated financial statements.
F-5
SHOWCASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) NATURE OF OPERATIONS
ShowCase Corporation (the "Company" or "ShowCase") was
incorporated in 1988, and in 1991, introduced a Windows-based query tool
for the IBM AS/400, ShowCase Vista. The Company has subsequently
introduced additional products and services to support an end-to-end
business intelligence solution for IBM AS/400 customers. The Company's
product suite is sold under the name ShowCase STRATEGY.
The Company has wholly owned subsidiaries in Germany, the United
Kingdom, Belgium, and France that distribute ShowCase products and
provide related services to clients in these countries.
During fiscal year 1999, the Company dissolved its 40% ownership
position in ShowCase Japan and received an amount equal to the carrying
value of the Company's ShowCase Japan investment. In addition, during
the fiscal year 1999, the Company also dissolved its 20% ownership
interest in ShowCase Italia SpA. The Company's carrying value of its
investment in ShowCase Italia SpA was zero prior to dissolution. The
Company received no proceeds nor was it required to assume any
obligations as a result of the ShowCase Italia SpA dissolution. Prior to
dissolution, the Company used the equity method to account for its
investment in these two affiliates.
(b) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
ShowCase Corporation and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in
consolidation.
(c) REVENUE RECOGNITION
The Company recognizes license revenue under the provisions of
Statement of Position ("SOP") No. 97-2, Software Revenue Recognition, as
amended by SOP No. 98-4, Deferral of the Effective Date of Certain
Provisions of SOP No. 97-2. SOP 97-2 generally requires revenue earned
on software arrangements involving multiple elements to be allocated to
each element based on its relative fair value. The fair value of the
element must be based on objective evidence that is specific to the
vendor. The Company adopted the provisions of SOP No. 98-9, Modification
of SOP 97-2, Software Revenue Recognition, with Respect to Certain
Transactions, effective April 1, 1999. The adoption of SOP No. 98-9 did
not have a material effect on the Company's operating results.
Under SOP No. 97-2, as amended by SOP Nos. 98-4 and 98-9, the
Company recognizes license revenue when the software has been delivered,
if a signed contract exists, the fee is fixed and determinable,
collection of resulting receivables is probable and product returns are
reasonably estimable. License fees that are contingent upon sale to an
end user by distributors and other channel partners are recognized upon
receipt of a report of delivery to the end user. Maintenance and support
fees including product upgrade rights, when and if available, committed
as part of new product licenses and maintenance resulting from renewed
maintenance contracts are deferred and recognized ratably over the
contract period. Professional service revenue is recognized when
services are performed.
Revenues related to multiple element arrangements are allocated to
each element of the arrangement based on the fair values of elements
such as license fees, maintenance and support and professional services.
The determination of fair value is based on vendor specific objective
evidence. When fair value does not exist for one or more of the
delivered elements in the arrangement, the "residual method" is used.
Under the "residual method," the total fair value of the undelivered
elements is deferred and recognized ratably over the contract period and
the remaining residual amount is recognized with respect to the
delivered elements. Such arrangements typically do not involve end user
cancellation rights, rights of return, or significant acceptance
periods. The Company accrues license revenue through the end of the
reporting period based upon reseller royalty reports or other forms of
customer-specific historical information.
The Company does not provide a contractual right of return.
However, in limited circumstances, and on a discretionary basis, the
Company may grant concessions to its clients. Such concessions are
granted to relatively few clients. The Company records an allowance for
sales returns to account for estimated concessions.
F-6
SHOWCASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(d) CAPITALIZED SOFTWARE COSTS
Costs associated with the planning and designing phase of software
development, including coding and testing activities necessary to
establish technological feasibility, are classified as research and
development and expensed as incurred. Once technological feasibility has
been determined, additional costs incurred in development, including
coding, testing, and product quality assurance are capitalized. With
regard to funded software development arrangements to which the Company
is a party for which technological feasibility has been established
before the arrangement was entered into, proceeds from the funding party
are (i) offset against capitalized costs, (ii) any excess is deferred
and credited against future capitalized costs, and (iii) any remaining
deferred amount is credited to income upon completion of the related
project. During 2000, 1999 and 1998, no software development costs were
capitalized.
Under a December 1998 agreement, which was amended in February
2000 with IBM, the Company has agreed to perform several development
enhancements to its Essbase/400 software. The Company has not completed
this project as of March 31, 2000 and therefore has not recognized any
income from this arrangement.
The Company adopted SOP No. 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use, and SOP No.
98-5, Reporting on the Costs of Start-up Activities, effective April 1,
1999. SOP No. 98-1 requires that entities capitalize certain costs
related to internal-use software once certain criteria have been met.
SOP No. 98-5 requires that all start-up costs related to new operations
must be expensed as incurred. In addition, all start-up costs that were
capitalized in the past must be written off when SOP No. 98-5 is
adopted. The adoption of SOP Nos. 98-1 and 98-5 did not have a material
impact on the Company's financial position, results of operations or
cash flows.
(e) GOODWILL
The excess of the cost over fair value of net assets acquired is
recorded as goodwill and amortized on a straight-line basis over five
years. Unamortized goodwill balances are reviewed periodically to
determine recoverability based upon forecasted undiscounted cash flows.
If it is determined that the asset is believed to be impaired, the
Company recognizes an impairment charge to reduce the unamortized
balance to its net realizable value. As of March 31, 2000, no impairment
charges have been recognized. Accumulated amortization was $244,000 and
$184,000 as of March 31, 2000 and 1999, respectively.
(f) INCOME TAXES
Deferred taxes are provided on an asset and liability method for
temporary differences and operating loss and tax credit carryforwards.
Temporary differences are the differences between the reported amounts
of assets and liabilities and their tax bases. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it
is more likely than not that some portion or all of the deferred tax
assets will not be realized. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date of
enactment.
(g) FOREIGN CURRENCY TRANSLATION
Exchange adjustments resulting from foreign currency transactions
are generally recognized in net income (loss), whereas adjustments
resulting from the translation of financial statements are reflected as
a separate component of accumulated other comprehensive income within
stockholders' equity. Revenues and expenses of foreign subsidiaries are
translated at the average exchange rates that prevail over the
applicable year. The functional currency of each foreign operation is
the local currency.
(h) USE OF ESTIMATES
Management of the Company has made certain estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the dates of the
financial statements and the reported amounts of revenue and expenses
during the periods. Actual results could differ from those estimates.
F-7
SHOWCASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(i) STOCK-BASED COMPENSATION
Compensation expense for stock option grants is recognized in
accordance with Accounting Principles Board ("APB") Opinion 25,
Accounting for Stock Issued to Employees. The pro forma effect on net
income (loss) is provided as if the fair value based method defined in
Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting
for Stock-based Compensation, had been applied.
(j) CASH AND EQUIVALENTS
The Company considers all short-term, highly liquid investments
that are readily convertible into known amounts of cash and have
original maturities of three months or less to be cash equivalents.
(k) MARKETABLE SECURITIES
All marketable securities are classified as available-for-sale and
available to support current operations or to take advantage of other
investment opportunities. These securities are stated at the estimated
fair value based upon market quotes with unrealized holding gains or
losses reported as a separate component of accumulated other
comprehensive income within stockholders' equity. Realized gains and
losses are included in other income (expense). The cost of securities
sold is based on the specific identification method. The cost of debt
securities is adjusted for amortization of premiums and accretion of
discounts to maturity. This amortization and accretion is included in
interest and investment income.
(l) COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) represents the change in stockholders'
equity resulting from other than stockholder investments and
distributions. For ShowCase, comprehensive income (loss) consists of net
earnings or loss plus changes in foreign currency translation adjustment
and unrealized holding gains (losses) on marketable securities available
for sale as displayed in the accompanying consolidated statements of
operations and comprehensive income (loss). Amounts recognized in net
income (loss), which previously were reported as other comprehensive
income (loss), are reclassified to avoid duplication. The effect of
deferred income taxes on other comprehensive income (loss) is not
material.
(m) RECLASSIFICATIONS
Certain amounts previously reported have been reclassified to
conform to the 2000 presentation.
(n) NEW ACCOUNTING PRONOUNCEMENTS
SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities (as amended by SFAS No. 137 with respect to the effective
date) established methods of accounting for derivative financial
instruments and hedging activities related to those instruments, as well
as other hedging activities. SFAS No. 133 will be effective for the
Company in April 2001. The Company is currently reviewing the potential
impact of this accounting standard.
In December 1999, the SEC staff issued Staff Accounting Bulletin
No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB
101, as amended by SAB 101A, summarizes certain views of the SEC staff
in applying generally accepted accounting principles to revenue
recognition in financial statements. Certain aspects of SAB 101 relate
to the timing of recognition of revenue and certain expenses with
respect to arrangements that involve the receipt of nonrefundable
up-front fees. SAB 101 requires that in particular situations the
nonrefundable fees and certain associated expenses be recognized over
the contractual terms or average life of the underlying arrangement. SAB
101 will be effective for the Company in the first quarter of fiscal
year 2001. The Company does not expect SAB 101 to have a material impact
on its financial condition or results of operations.
F-8
SHOWCASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(2) ACCOUNTS RECEIVABLE
Accounts receivable consist of the following (in thousands):
MARCH 31,
------------------
2000 1999
------- -------
Accounts receivable $ 9,578 $ 7,875
Less allowance for sales returns (400) (520)
Less allowance for doubtful accounts (330) (285)
------- -------
Accounts receivable, net $ 8,848 $ 7,070
======= =======
(3) PROFIT SHARING AND SAVINGS PLAN
The Company has adopted a profit sharing plan under Section 401(k)
of the Internal Revenue Code. This plan allows employees to defer a
portion of their income through contributions to this plan. At the
Company's board of directors' discretion, the Company may match a
percentage of employees' voluntary contributions or may make additional
contributions based on profits. In fiscal 1998, the Company initiated a
Company match determined annually by the Company's board of directors.
This Company match was approximately $193,000, $50,000 and $44,000 in
fiscal years 2000, 1999 and 1998, respectively.
(4) SIGNIFICANT CUSTOMERS
Revenues from transactions with one of the Company's distributors
comprised approximately 11% of total revenues for fiscal year 2000.
Accounts receivable from this distributor comprised approximately 18% of
total accounts receivable at March 31, 2000. Revenues from the Company's
former Japan affiliate comprised approximately 6% of total revenues for
fiscal year 1998.
(5) MARKETABLE SECURITIES
As of March 31, 2000, the Company's marketable securities were
comprised of corporate commercial paper with contractual maturities of
less than one year. The amortized cost basis, gross unrealized holding
loss, and estimated fair value of such securities were approximately
$18,396,000, $9,000, and $18,387,000, respectively, as of March 31,
2000.
As of March 31, 1999, the Company's marketable securities were
comprised of common stock of one of the Company's vendors. The cost
basis, gross unrealized holding loss, and estimated fair value of such
stock were approximately $320,000, $181,000, and $139,000, respectively,
as of March 31, 1999. The Company sold this stock in January 2000. The
gross realized gain related to the sale of this stock was approximately
$151,000.
(6) PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation and
amortization are computed using the straight-line method over the
estimated useful lives of the assets. Property and equipment are
summarized as follows (in thousands):
[Download Table]
MARCH 31,
---------------------
ESTIMATED USEFUL LIFE 2000 1999
-------- --------
Computers and software 3 to 5 years $ 3,828 $ 3,314
Office furniture and equipment 4 to 10 years 778 610
Leasehold improvements 5 to 9 years 315 172
-------- -------
4,921 4,096
Less accumulated depreciation and
amortization. (2,833) (2,004)
-------- -------
Net property and equipment $ 2,088 $ 2,092
======== =======
F-9
SHOWCASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(7) LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
[Download Table]
MARCH 31,
-------------
2000 1999
---- ----
Note payable to IBM, interest at 6.25%, principal and interest
payable quarterly through November 2000 $ 2 $ 7
Less current portion (2) (5)
---- -----
$ -- 2
==== =====
The Company has a $3,000,000 revolving line of credit agreement
with a bank through August 30, 2001, bearing interest at the bank's base
rate (9.0% at March 31, 2000) plus .25%. Borrowings are limited to 75%
of eligible accounts receivable and are payable on demand. The revolving
line of credit note is secured by substantially all of the Company's
assets and contains certain restrictive financial covenants, including
liquidity, profitability and the maintenance of prescribed tangible net
worth and debt to tangible net worth ratios. No borrowings were
outstanding under the line of credit at March 31, 2000.
(8) INCOME TAXES
Loss before income taxes was derived from the following sources
(in thousands):
YEAR ENDED MARCH 31,
------------------------------
2000 1999 1998
------- ------- --------
Domestic $(3,318) $ (421) $(2,597)
Foreign (76) 5 (462)
------- ------- -------
$(3,394) $ (416) $(3,059)
======= ======= =======
The provision for current income tax expense consists of the
following (in thousands):
YEAR ENDED MARCH 31,
------------------------
2000 1999 1998
------ ------ ------
Current:
Federal $ (70) $ 220 $(325)
State and local -- 35 --
Foreign 220 155 200
Deferred:
Federal 550 (210) 300
----- ----- -----
$ 700 $ 200 $ 175
===== ===== =====
F-10
SHOWCASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The provision for income taxes differs from the expected tax
expense, computed by applying the federal corporate tax rate of 34% to
earnings before income taxes, as follows (in thousands):
[Download Table]
YEAR ENDED MARCH 31,
-----------------------------
2000 1999 1998
------- ------- -------
Expected federal income tax benefit $(1,154) $ (142) $(1,040)
State taxes, net of federal benefit (40) 23 (52)
Change in valuation allowance 1,829 678 1,085
Research and experimentation credits (189) (203) --
Foreign sales corporation -- (61) --
Foreign operations and withholding taxes 246 (135) 152
Other 8 40 30
------- ------- -------
$ 700 $ 200 $ 175
======= ======= =======
The tax effects of temporary differences that give rise to
significant portions of deferred tax assets and deferred tax liabilities
at March 31, 2000 and 1999 are presented below (in thousands):
MARCH 31,
-------------------
2000 1999
------- --------
Deferred tax assets:
Accounts receivable allowances $ 211 $ 241
Vacation and other accruals 204 163
Deferred revenues 2,828 2,153
Foreign net operating loss carryforwards 204 204
Research and experimentation credit carryforwards 378 38
Foreign tax credit carryforwards 220 --
Other 39 42
------- -------
4,084 2,841
Valuation allowance (4,007) (2,178)
------- -------
77 663
Deferred tax liabilities:
Depreciation (77) (113)
------- -------
Net deferred tax asset $ -- $ 550
======= =======
In assessing the realization of deferred tax assets, management
considers whether it is more likely than not that some portion or all of
the deferred tax assets will not be realized. The ultimate realization
of the deferred tax asset is dependent upon the generation of future
taxable income during the periods in which those temporary differences
become deductible. Based on the level of historical taxable income and
projections of future taxable income over the periods in which the
deferred tax assets are deductible, management does not believe that it
is more likely than not the Company will realize the benefits of these
deductible differences. Accordingly, the Company has provided a
valuation allowance against the gross deferred tax assets as of March
31, 2000.
At March 31, 2000, there are foreign net operating loss
carryforwards of approximately $600,000, a portion of which will expire
in 2005.
F-11
SHOWCASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(9) STOCKHOLDERS' EQUITY
(a) INITIAL PUBLIC OFFERING
On June 29, 1999, the Company's registration statement for its
initial public offering of 3,000,000 shares of common stock at $9.00 per
share was declared effective by the Securities and Exchange Commission.
On July 6, 1999, the closing date of the sale of such securities, the
Company issued 3,000,000 shares of common stock and received proceeds,
net of underwriting discount, of $25,110,000. In connection with the
initial public offering, the Company amended and restated its articles
of incorporation and increased the number of authorized shares of
capital stock to 50,000,000 shares.
(b) SERIES A CONVERTIBLE PREFERRED STOCK
In 1991, the Company issued convertible preferred stock under the
terms of an investment agreement. Each preferred share was convertible
at the option of the holder at any time at a rate of four shares of
common stock for each preferred share, subject to certain adjustments.
The Series A convertible preferred stock was converted into 1,895,028
common shares on July 6, 1999.
(c) SERIES B CONVERTIBLE PREFERRED STOCK
In 1998, the Company issued convertible preferred stock under the
terms of an investment agreement. Each preferred share was convertible
at the option of the holder at any time at a rate of one share of common
stock for each preferred share, subject to certain adjustments. The
Series B convertible preferred stock was converted into 864,198 common
shares on July 6, 1999.
(d) STOCK PURCHASE WARRANTS
In May 1998, the Company issued a warrant to purchase 13,750
shares of Series B Convertible Preferred Stock at an exercise price of
$4.00 per share in consideration for the warrant-holder executing
certain equipment leases with the Company. The warrant was exercisable
through the earlier of May 13, 2008 or five years from the effective
date of the Company's initial public offering. The aggregate fair value
of the warrant, approximately $9,000, was determined by use of a
Black-Scholes pricing model, considering the following assumption:
expected dividend yield 0%, risk-fee interest rate of 6%, expected
warrant life of three years, and volatility of 20%. This amount is being
recognized by the Company as additional lease expense over the related
lease term. During fiscal year 2000, the warrant was exercised by the
warrant holder pursuant to a cashless exercise provision. The Company
recognized an expense of approximately $78,000 and issued an aggregate
of 8,182 shares of its common stock as a result of this exercise.
(e) EMPLOYEE STOCK PURCHASE PLAN
Under the Company's 1999 Employee Stock Purchase Plan, which
became effective upon consummation of the initial public offering,
substantially all employees may purchase shares of common stock at the
end of semiannual purchase periods at a price equal the lower of 85% of
the stock's fair market value on the first day or the last day of that
period. Plan funding occurs throughout the purchase period by
pre-elected payroll deductions of up to 15% of pay. No compensation
expense results from the plan. Shares issued under the plan were 35,647
at an average price of $4.91 per share in 2000. At March 31, 2000,
464,353 shares remain reserved for future issuance under the plan.
F-12
SHOWCASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(f) DEFERRED COMPENSATION
In connection with the grant to employees of options to purchase
81,000 shares of common stock in fiscal year 2000 and 527,900 shares of
common stock in fiscal year 1999, the Company recorded deferred
compensation of $152,000 in fiscal year 2000 and $355,000 in fiscal year
1999. This represents the difference between the deemed value of the
common stock for accounting purposes and the option exercise price of
such options on the date of grant based upon the intrinsic value method
in accordance with APB Opinion No. 25, Accounting for Stock Issued to
Employees. Additionally, the Company recorded approximately $60,000 of
deferred compensation in fiscal year 2000 related to stock options
issued to a consultant as described in Note 9(g). The Company recognized
an expense of approximately $108,000 and $33,000 for the fiscal years
ended March 31, 2000 and 1999, respectively, for these stock option
grants and will recognize the remainder of the deferred compensation
cost over the respective vesting periods (four to five years) of the
options granted.
(g) STOCK OPTIONS
The Company's 1991 Long-Term Incentive and Stock Option Plan and
1999 Stock Incentive Plan (collectively, the "Plan") provides for the
granting of incentive and nonqualified stock options, stock appreciation
rights, restricted stock, restricted stock units, performance awards and
other stock based awards to eligible participants. The terms and vesting
requirements of the awards are subject to the determination of the
compensation committee of the Company's board of directors.
Options granted under the Company's stock option plan may be
incentive stock options or non-qualified stock options. Incentive stock
options may be granted to certain employees and directors at a price not
less than the fair market value of the common stock on the day the
option is granted and must be exercisable no later than ten years after
the date of grant. Nonqualified stock options may be granted for terms
up to ten years after the date of grant, at prices determined by the
stock option committee.
During fiscal year 2000, the Company granted options to purchase
37,500 shares of the Company's common stock at $8.00 per share to a
consultant for services to be received over the four-year vesting period
of such options. The Company recorded approximately $60,000 of deferred
compensation in fiscal year 2000 related to the fair value of these
options as determined by use of a Black-Scholes valuation model,
considering the following assumptions: expected dividend yield 0%,
risk-free interest rate of 5.65%, expected option life of four years
and volatility of 20% (see Note 9(f)).
At March 31, 2000, the Company has 3,948,619 shares of its common
stock reserved for issuance upon the exercise of options granted under
the Company's stock option plans. The following table summarizes the
activity of the Company's stock option plan:
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
Outstanding--March 31, 1997 1,372,953 $ .53
Options granted 181,400 1.42
Options exercised (135,829) .25
Options canceled (53,740) 1.04
---------
Outstanding--March 31, 1998 1,364,784 .65
Options granted 820,900 3.61
Options exercised (514,307) .22
Options canceled (125,570) 1.10
---------
Outstanding--March 31, 1999 1,545,807 2.32
OPTIONS GRANTED 430,500 5.04
OPTIONS EXERCISED (216,191) 1.03
OPTIONS CANCELED (203,700) 2.40
---------
OUTSTANDING--MARCH 31, 2000 1,556,416 3.23
========= ======
F-13
SHOWCASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The following table summarizes the Company's stock options
outstanding at March 31, 2000:
[Enlarge/Download Table]
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------- ---------------------------
WEIGHTED WEIGHTED
NUMBER WEIGHTED AVERAGE AVERAGE NUMBER AVERAGE
OUTSTANDING AT REMAINING EXERCISE EXERCISABLE AT EXERCISE
RANGE OF EXERCISE PRICE MARCH 31, 2000 CONTRACTUAL LIFE PRICE MARCH 31, 2000 PRICE
----------------------- --------------- ------------------ -------- --------------- ---------
$ .07 - $1.08 411,032 5.3 years $ .76 264,721 $ .66
$1.42 - $1.50 360,084 7.9 years 1.47 95,468 1.46
$2.72 - $5.35 569,800 9.2 years 4.61 30,672 4.78
$5.38 - $7.12 164,000 9.1 years 7.01 15,300 7.12
$8.00 51,500 9.3 years 8.00 6,249 8.00
--------- -------
1,556,416 412,410
========= =======
The Company accounts for options issued to employees in connection
with its Plan under APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. The following pro forma amounts,
in accordance with the disclosure requirements of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-based Compensation
(SFAS 123), were determined as if the Company had accounted for its
stock options issued to employees and for the discount offered to its
employees under the employee stock purchase plan using the fair value
method as described in that statement:
YEAR ENDED MARCH 31,
----------------------------------
2000 1999 1998
-------- ------- ---------
Net loss (in thousands):
As reported $ (4,094) $ (616) $ (3,234)
Pro forma (4,608) (677) (3,266)
Diluted loss per share:
As reported $ (0.46) $ (0.14) $ (0.82)
Pro forma (0.52) (0.15) (0.83)
Because the method of accounting under SFAS 123 has not been
applied to stock options granted prior to April 1, 1995, the resulting
pro forma compensation cost may not be representative of compensation
cost to be disclosed in future years.
The weighted average grant date fair value of stock options
granted was $4.64, $1.19 and $.39 per option in 2000, 1999 and 1998,
respectively. The fair value of each option grant is estimated on the
date of grant using the Black-Scholes stock option pricing model with
the following average assumptions: risk-free interest rate ranging from
6.0% to 6.5%, expected dividend yields of 0%, and weighted average
expected lives of five years, for 2000, 1999, and 1998; and expected
volatility of 121% for 2000 and 0% for both 1999 and 1998.
F-14
SHOWCASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(10) NET LOSS PER SHARE
For ShowCase, basic income (loss) per share represents net income
(loss) divided by the weighted average number of common shares
outstanding during the period. Diluted income (loss) per share
represents net income (loss) divided by the sum of the weighted average
number of common shares outstanding plus shares derived from other
potentially dilutive securities. For ShowCase, potentially dilutive
securities include "in-the-money" fixed stock options and warrants and
the amount of weighted average common shares which would be added by the
conversion of outstanding convertible preferred stock. The number of
shares added for stock options and warrants is determined by the
treasury stock method, which assumes exercise of these options and the
use of any proceeds from such exercise to repurchase a portion of these
shares at the average market price for the period. When the results of
operations are a loss, other potentially dilutive securities are not
included in the calculation of loss per share.
The total number of weighted average option and warrant shares
excluded from the calculation of potentially dilutive securities either
because the exercise price exceeded the average market price or because
their inclusion in the calculation of net loss per share would have been
antidilutive were 1,052,523, 792,138 and 902,469 for fiscal years 2000,
1999 and 1998, respectively.
For the years ended March 31, 1999 and 1998, the effect of
conversion of the Company's Series A and Series B convertible preferred
stock was excluded from the calculation of net loss per diluted share
because the resulting impact would have been antidilutive. The Series A
and Series B convertible preferred stock were convertible into 1,895,028
and 864,198 common shares, respectively.
(11) GEOGRAPHIC SEGMENT DATA
The operations of the Company are primarily conducted in the
United States, the Company's domicile. Geographic data, determined by
references to the location of the Company's operations, as of March 31,
2000 and 1999 and for each of the years for the three-year period ended
March 31, 2000 is as follows (in thousands):
[Download Table]
YEAR ENDED MARCH 31,
-------------------------------------
2000 1999 1998
-------- -------- --------
Revenues:
U.S. operations $ 27,662 $ 24,894 $ 17,890
United Kingdom 3,058 3,695 2,751
France 3,528 3,166 360
Germany 2,882 1,777 1,102
Belgium 2,393 1,987 1,652
-------- -------- --------
$ 39,523 $ 35,519 $ 23,755
======== ======== ========
MARCH 31,
---------------
2000 1999
------ ------
Tangible long-lived assets:
U. S. operations $1,693 $1,736
Non-U.S. operations* 395 356
------ ------
$2,088 $2,092
====== ======
* Non U.S. operations include operations in the United Kingdom, France, Germany
and Belgium.
F-15
SHOWCASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(12) COMMITMENTS
(a) CAPITAL LEASES
The Company has entered into capital lease agreements for
computers and software and office furniture and equipment. The following
is a summary of the leased property (in thousands):
MARCH 31,
-----------------
2000 1999
------ -------
Computers and software $ 309 $ 645
Office furniture and equipment 7 52
------ ------
316 697
Less accumulated amortization (188) (419)
------ ------
Net property and equipment $ 128 $ 278
====== ======
The following is a schedule of future minimum lease payments under
capital leases with the present value of the minimum lease payments as
of March 31, 2000 (in thousands):
Total minimum lease payments for year
ending March 31, 2001 $ 83
Less amount representing interest at 5% to 16% (5)
-----
Present value of minimum lease payments 78
Less current portion (78)
-----
$ --
=====
(b) OPERATING LEASES
The Company leases certain office facilities and equipment under
operating leases. Total lease expense aggregated $2,160,000, $1,858,000
and $1,363,000 in 2000, 1999 and 1998, respectively. Minimum future
obligations as of March 31, 2000, including operating costs under
non-cancelable leases, are approximately as follows (in thousands):
YEARS ENDING MARCH 31:
2001 $ 1,345
2002 863
2003 422
2004 328
Thereafter 67
--------
$ 3,025
========
(c) ROYALTY AGREEMENT
The company is obligated to make royalty payments under certain
distribution and license agreements. Minimum royalties required by these
agreements in order for them to remain exclusive are $3,300,000 in 2001,
increased by 30% per year for each year from 2002 to 2004. One of these
agreements contains a buy-back clause under which the vendor would be
required to pay the Company an amount, as defined in the agreement, to
revoke the exclusive rights. This amount would be recognized as revenue
if such revocation should occur. Royalty expense under these agreements
was $2,841,000, $3,069,000 and $2,144,000 for years ending March 31,
2000, 1999 and 1998, respectively.
During fiscal 2000, ShowCase entered into a distribution and
license agreements with another software company, the board of directors
of which includes the CEO of ShowCase. The Company prepaid royalties of
$250,000 and there was no royalty expense under this agreement for the
year ending March 31, 2000.
F-16
SHOWCASE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
[Enlarge/Download Table]
Three Months Ended Six Months Ended
September 30, September 30,
-------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- --------
Revenues:
License fees $ 6,475 $ 4,027 $ 11,984 $ 10,092
Maintenance and support 4,532 3,301 8,783 6,507
Professional service fees 1,515 1,178 3,168 2,412
-------- -------- -------- --------
Total revenues 12,522 8,506 23,935 19,011
-------- -------- -------- --------
Cost of revenues:
License fees 1,101 766 1,930 1,835
Maintenance and support 972 753 1,949 1,577
Professional service fees 1,491 1,112 3,023 2,144
-------- -------- -------- --------
Total cost of revenues 3,564 2,631 6,902 5,556
-------- -------- -------- --------
Gross margin 8,958 5,875 17,033 13,455
-------- -------- -------- --------
Operating expenses:
Sales and marketing 6,009 5,234 12,170 10,508
Product development 1,565 1,247 3,150 2,410
General and administrative 1,217 1,136 2,465 2,077
-------- -------- -------- --------
Total operating expenses 8,791 7,617 17,785 14,995
-------- -------- -------- --------
Operating income (loss) 167 (1,742) (752) (1,540)
-------- -------- -------- --------
Other income (expense), net:
Interest expenses (2) (4) (5) (10)
Interest income 465 366 902 470
Other income (expense), net (39) -- (45) 1
-------- -------- -------- --------
Total other income (expense), net 424 362 852 461
-------- -------- -------- --------
Net income (loss) before income taxes 591 (1,380) 100 (1,079)
Income taxes 200 185 300 300
-------- -------- -------- --------
Net income (loss) $ 391 $ (1,565) $ (200) $ (1,379)
-------- -------- -------- --------
Other comprehensive income (loss):
Foreign currency translation
adjustment (60) (6) 9 28
Unrealized holding gain
on securities 4 40 3 72
-------- -------- -------- --------
Comprehensive income (loss) $ 335 $ (1,531) $ (188) $ (1,279)
======== ======== ======== ========
Net income (loss) per share:
Basic $ 0.04 $ (0.15) $ (0.02) $ (0.19)
======== ======== ======== ========
Diluted $ 0.03 $ (0.15) $ (0.02) $ (0.19)
======== ======== ======== ========
Weighted average shares outstanding
used in computing basic net income
(loss) per share 10,760 10,139 10,667 7,341
Weighted average shares outstanding
used in computing diluted net
income (loss) per share 11,352 10,139 10,667 7,341
See accompanying notes to unaudited consolidated financial statements
F-17
SHOWCASE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
[Enlarge/Download Table]
September 30, 2000 March 31, 2000
--------------------- ------------------
ASSETS
Current Assets:
Cash and equivalents $ 13,289 $ 11,677
Marketable securities 14,716 18,387
Accounts receivable, net 11,217 8,848
Prepaid expenses and other current assets 1,494 1,731
-------- --------
Total current assets 40,716 40,643
-------- --------
Property and equipment, net 1,792 2,088
Purchased software, net 1,000 --
Goodwill, net of accumulated amortization 26 56
-------- --------
Total assets $ 43,534 $ 42,787
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,714 $ 1,323
Accrued liabilities 5,352 4,333
Current portion of long-term debt -- 2
Current portion of obligations under capital leases 25 78
Deferred revenue 12,134 12,778
-------- --------
Total current liabilities 19,225 18,514
-------- --------
Deferred revenue, less current portion 744 914
-------- --------
Total liabilities 19,969 19,428
-------- --------
Stockholders' Equity:
Common stock, $.01 par value, 50,000,000 shares authorized,
10,764,129 and 10,522,113 shares issued and outstanding 108 105
Additional paid-in capital 31,777 31,443
Accumulated other comprehensive income:
Cumulative translation adjustment 132 123
Unrealized holding loss on securities (6) (9)
Deferred compensation (368) (426)
Accumulated deficit (8,078) (7,877)
-------- --------
Total stockholders' equity 23,565 23,359
-------- --------
Total liabilities and stockholders' equity $ 43,534 $ 42,787
======== ========
See accompanying notes to unaudited consolidated financial statements.
F-18
SHOWCASE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
[Enlarge/Download Table]
Six Months Ended
September 30,
----------------------
2000 1999
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (200) $ (1,379)
Adjustments to reconcile net loss
to cash used in operating activities:
Depreciation and amortization 459 375
Provision for returns and doubtful accounts, net of returns
and writeoffs -- (90)
Deferred income taxes -- 330
Deferred compensation amortization and expense related to
cashless exercise of warrants 58 129
Loss on the disposal of property and equipment 3 3
Changes in operating assets and liabilities, net of effect
of foreign exchange rate changes:
Accounts receivable (2,369) 250
Prepaid expenses (114) (118)
Income taxes receivable 351 (238)
Accounts payable 391 (349)
Accrued liabilities 915 271
Deferred revenue (813) (1,153)
Income taxes payable 104 (294)
--------- ---------
Net cash used in operating activities (1,215) (2,263)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (129) (370)
Purchase of marketable securities (98,388) (63,621)
Sale and maturity of marketable securities 102,062 38,192
Purchase of software license (1,000) --
Proceeds from sale of property and equipment 2 --
--------- ---------
Net cash provided by (used in) investing activities 2,547 (25,799)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 336 26
Proceeds from initial public offering, net of expenses -- 24,350
Payments under Capital lease obligations (56) (76)
--------- ---------
Net cash provided by financing activities 280 24,300
--------- ---------
Net increase (decrease) in cash 1,612 (3,762)
Cash, beginning of period 11,677 8,900
--------- ---------
Cash, end of period $ 13,289 $ 5,138
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the six months for interest $ 5 $ 10
========= =========
Cash paid during the six months for income taxes $ 75 $ 642
========= =========
Cash received during the six months from income tax refunds $ 234 $ --
========= =========
See accompanying notes to unaudited consolidated financial statements.
F-19
SHOWCASE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The unaudited interim consolidated financial statements include the
accounts of ShowCase Corporation and its wholly owned subsidiaries
(collectively, the "Company") and have been prepared by the Company in
accordance with generally accepted accounting principles, pursuant to
the rules and regulations of the Securities and Exchange Commission.
Accordingly, certain information and footnote disclosures normally
included in the financial statements have been omitted or condensed
pursuant to such rules and regulations. The information furnished
reflects, in the opinion of the management of the Company, all
adjustments, consisting primarily of recurring accruals, considered
necessary for a fair presentation of the financial position and the
results of operations.
In June 2000, the SEC staff issued Staff Accounting Bulletin No. 101B,
which deferred the required implementation date of Staff Accounting
Bulletin No. 101 ("SAB 101"), as amended by SAB 101A. SAB 101, as
amended, summarizes certain views of the SEC staff in applying generally
accepted accounting principles to revenue recognition in financial
statements. Implementation of SAB 101 by the Company was previously
required in the quarter beginning April 1, 2000. Subject to SAB 101B,
required implementation of SAB 101 has been deferred to the quarter
beginning January 1, 2001. The Company does not expect SAB 101 to have a
material impact on its financial condition or results of operation.
(2) NET INCOME (LOSS) PER SHARE
Basic income (loss) per share represents net income (loss) divided by
the weighted average number of shares of common stock outstanding during
the period. Diluted income (loss) per share represents net income (loss)
divided by the sum of the weighted average number of shares of common
stock outstanding plus shares derived from other potentially dilutive
securities. For the Company, potentially dilutive securities include
"in-the-money" fixed stock options and warrants. The number of shares
added for stock options and warrants is determined by the treasury stock
method, which assumes exercise of these options and warrants and the use
of any proceeds from such exercise to repurchase a portion of these
shares at the average market price for the period. When the results of
operations are a loss, other potentially dilutive securities are not
included in the calculation of loss per share.
For the three months ended September 30, 1999 and the six months ended
September 30, 2000 and 1999, basic loss per share is the same as diluted
loss per share because the effect of the inclusion of other potentially
dilutive securities in the calculation of diluted loss per share was
antidilutive.
The number of option shares excluded from the calculation of potentially
dilutive securities either because the exercise price exceeded the
average market price or because their inclusion in a calculation of net
loss per share would have been antidilutive was 189,996 and 1,148,689
for the three months ended September 30, 2000 and 1999, respectively,
and 781,690 and 1,125,701 for the six months ended September 30, 2000
and 1999, respectively.
F-20
(3) RELATED PARTY TRANSACTIONS
In late September 2000, the Company licensed certain software
from another software company, an executive of which is also a
member of the board of directors of the Company, for
$1,000,000. The Company will amortize this software over a
three-year period.
(4) SUBSEQUENT EVENT--MERGER WITH SPSS
On November 6, 2000, the Company and SPSS Inc. ("SPSS") entered into a
merger agreement relating to the acquisition of the Company by SPSS.
Under the terms of the agreement, SPSS will issue one share of its
common stock in return for every three outstanding shares of the
Company's stock. The merger is subject to approval by the
shareholders of the Company and SPSS, the effectiveness of a Form S-4
registration statement to be filed with the Securities and Exchange
Commission and other customary closing conditions. The merger is
expected to close in the first calendar quarter of 2001.
F-21
INDEPENDENT AUDITORS' REPORT
ON FINANCIAL STATEMENT SCHEDULE
The Board of Directors
of ShowCase Corporation:
Under date of May 2, 2000, we reported on the consolidated balance sheets
of ShowCase Corporation and subsidiaries as of March 31, 2000 and 1999, and the
related consolidated statements of operations and comprehensive income (loss),
stockholders' equity and cash flows for each of the years in the three-year
period ended March 31, 2000, as included in ShowCase Corporation's Annual
Report on Form 10-K for the fiscal year ended March 31, 2000. In connection
with our audits of the aforementioned consolidated financial statements, we
also audited the related consolidated financial statement schedule as listed in
the accompanying index (see Item 14(a)(2)). This financial statement schedule
is the responsibility of ShowCase Corporation's management. Our responsibility
is to express an opinion on this financial statement schedule based on our
audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
/s/ KPMG LLP
Minneapolis, Minnesota
May 2, 2000
F-22
SHOWCASE CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Year ended March 31,
-------------------------
2000 1999 1998
---- ---- ----
Allowance for Sales Returns:
Balance at beginning or year.................. $520 $320 $175
Additions charged to revenue.................. 472 319 445
Returns....................................... (592) (119) (300)
---- ---- ----
$400 $520 $320
==== ==== ====
Allowance for Doubtful Accounts:
Balance at beginning of year.................. $285 $180 $125
Additions charged to costs and expenses....... 45 163 55
Write-offs.................................... - (58) -
---- ---- ----
$330 $285 $180
==== ==== ====
F-23
ANNEX A
================================================================================
AGREEMENT AND PLAN OF MERGER
DATED AS OF NOVEMBER 6, 2000
AMONG
SPSS INC.,
SPSS ACQUISITION SUB CORP.
AND
SHOWCASE CORPORATION
================================================================================
TABLE OF CONTENTS
ARTICLE I
THE MERGER: CERTAIN RELATED MATTERS
[Download Table]
1.1 The Merger A-1
1.2 Closing A-2
1.3 Effective Time A-2
1.4 Effects of the Merger A-2
1.5 Articles of Incorporation A-2
1.6 Bylaws A-2
1.7 Appointment of Directors A-2
1.8 Effect on Capital Stock A-3
1.9 ShowCase Stock Options and Other Equity-Based Awards A-3
1.10 Dissenter's Rights A-4
1.11 Certain Adjustments A-4
ARTICLE II
EXCHANGE OF CERTIFICATES
2.1 Exchange Fund A-4
2.2 Exchange Procedures A-5
2.3 Distributions with Respect to Unexchanged Shares A-5
2.4 No Further Ownership Rights in ShowCase Common Stock A-5
2.5 No Fractional Shares of SPSS Common Stock A-6
2.6 Termination of Exchange Fund A-6
2.7 No Liability A-7
2.8 Investment of the Exchange Fund A-7
ii
[Download Table]
2.9 Lost Certificates A-7
2.10 Withholding Rights A-7
2.11 Further Assurances A-7
2.12 Stock Transfer Books A-7
2.13 Affiliates A-8
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of SPSS A-8
3.2 Representations and Warranties of ShowCase A-16
3.3 Representations and Warranties of SPSS and Merger Sub A-23
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Covenants of SPSS A-24
4.2 Covenants of ShowCase A-27
4.3 Governmental Filings A-29
4.4 Control of Other Party's Business A-30
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of Proxy Statement; Shareholders Meetings A-30
5.2 SPSS Board of Directors; Executive Officers; Headquarters A-33
5.3 Access to Information/Employees A-33
5.4 Reasonable Best Efforts A-34
5.5 Acquisition Proposals A-36
5.6 Employee Benefits Matters A-37
iii
[Download Table]
5.7 Fees and Expenses A-37
5.8 Directors' and Officers' Indemnification and Insurance A-37
5.9 Public Announcements A-38
5.10 Accountant's Letters A-38
5.11 Listing of Shares of SPSS Common Stock A-39
5.12 Dividends A-39
5.13 Affiliates A-39
5.14 Section 16 Matters A-40
5.15 Severance Packages A-40
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger A-40
6.2 Additional Conditions to Obligations of SPSS and Merger Sub A-41
6.3 Additional Conditions to Obligations of ShowCase A-42
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination A-43
7.2 Effect of Termination A-44
7.3 Amendment A-45
7.4 Extension; Waiver A-45
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations, Warranties and Agreements A-45
8.2 Notices A-45
iv
[Download Table]
8.3 Interpretation A-46
8.4 Counterparts A-46
8.5 Entire Agreement; No Third Party Beneficiaries A-46
8.6 Governing Law A-47
8.7 Severability A-47
8.8 Assignment A-47
8.9 Submission to Jurisdiction; Waivers A-47
8.10 Enforcement A-48
8.11 Definitions A-48
v
AGREEMENT AND PLAN OF MERGER, dated as of November 6, 2000 (this
"Agreement"), among SPSS INC., a Delaware corporation ("SPSS"), SPSS ACQUISITION
SUB CORP., a Delaware corporation and a direct wholly-owned subsidiary of SPSS
("Merger Sub"), and SHOWCASE CORPORATION, a Minnesota corporation ("ShowCase").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of ShowCase and SPSS deem it advisable
and in the best interests of each corporation and its respective stockholders
that ShowCase and SPSS engage in a business combination in order to advance the
long-term strategic business interests of ShowCase and SPSS;
WHEREAS, the combination of ShowCase and SPSS shall be effected by the
terms of this Agreement through a merger as outlined below (the "Merger");
WHEREAS, in furtherance thereof, the respective Boards of Directors of
ShowCase and SPSS have approved the Merger, upon the terms and subject to the
conditions set forth in this Agreement, pursuant to which each share of common
stock, par value $0.01 per share, of ShowCase ("ShowCase Common Stock") issued
and outstanding immediately prior to the Effective Time (as defined in Section
1.3), other than (i) shares owned or held directly by SPSS or Merger Sub and
(ii) Dissenting Shares (as defined below), will be converted into the right to
receive shares of common stock, par value $0.01 per share, of SPSS ("SPSS Common
Stock") as set forth in Section 1.8;
WHEREAS, for Federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
promulgated thereunder; and
WHEREAS, for accounting purposes, it is intended that the Merger shall
be accounted for as a pooling-of-interests transaction under United States
generally accepted accounting principles ("GAAP").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
THE MERGER; CERTAIN RELATED MATTERS
1.1 THE MERGER. Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the Delaware General Corporation Law (the
"DGCL") and the Minnesota Business Corporation Act (the "MBCA"), Merger Sub
shall be merged with and into ShowCase at the Effective Time. Following the
Merger, the separate corporate existence of Merger Sub shall cease and ShowCase
shall continue as the surviving corporation (the "Surviving Corporation").
A-1
1.2 CLOSING. Upon the terms and subject to the conditions set forth in
Article VI and the termination rights set forth in Article VII, the closing of
the Merger (the "Closing") will take place on the first Business Day after the
satisfaction or waiver (subject to applicable law) of the conditions (excluding
conditions that, by their nature, cannot be satisfied until the Closing Date)
set forth in Article VI, unless this Agreement has been theretofore terminated
pursuant to its terms or unless another time or date is agreed to in writing by
the parties hereto (the actual time and date of the Closing being referred to
herein as the "Closing Date"). The Closing shall be held at the offices of Ross
& Hardies, 150 North Michigan Avenue, Chicago, Illinois 60601, unless another
place is agreed to in writing by the parties hereto.
1.3 EFFECTIVE TIME. As soon as practicable following the satisfaction
or waiver (subject to applicable law) of the conditions set forth in Article VI,
at the Closing the parties shall (a) (i) file a certificate of merger (the
"Delaware Certificate of Merger") in such form as is required by and executed in
accordance with the relevant provisions of the DGCL and (ii) make all other
filings or recordings required under the DGCL, and (b) (i) file articles of
merger (the "Minnesota Articles of Merger") in such form as is required by and
executed in accordance with the relevant provisions of the MCBA and (ii) make
all other filings or recordings required under the MCBA. The Merger shall become
effective upon the later to occur of the date (i) the Delaware Certificate of
Merger is duly filed with the Delaware Secretary of State and (ii) the Minnesota
Articles of Merger are duly filed with the Minnesota Secretary of State or at
such subsequent time as SPSS and ShowCase shall agree and as shall be specified
in the Delaware Certificate of Merger and the Minnesota Articles of Merger (the
date and time the Merger becomes effective being the "Effective Time").
1.4 EFFECTS OF THE MERGER. At and after the Effective Time, the Merger
will have the effects set forth in the DGCL and MCBA. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all the
property, rights, privileges, powers and franchises of ShowCase and Merger Sub
shall be vested in the Surviving Corporation, and all debts, liabilities and
duties of ShowCase and Merger Sub shall become the debts, liabilities and duties
of the Surviving Corporation.
1.5 ARTICLES OF INCORPORATION. The articles of incorporation of
ShowCase, as in effect immediately prior to the Effective Time, shall be the
articles of incorporation of the Surviving Corporation, until thereafter changed
or amended as provided therein or by applicable law.
1.6 BYLAWS. The bylaws of ShowCase, as in effect immediately prior to
the Effective Time, shall be the bylaws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
1.7 APPOINTMENT OF DIRECTORS. The directors and officers of Merger Sub
shall be the initial directors and officers of the Surviving Corporation, each
to hold office in accordance with the articles of incorporation and bylaws of
the Surviving Corporation. Upon consummation of the Merger, SPSS shall cause the
appointment to the SPSS board of directors of three of the individuals currently
serving on the ShowCase board of directors, which individuals shall include,
without limitation, William Binch, Promod Haque and Kenneth Holec. On or before
the Effective Time, ShowCase shall deliver to SPSS resignations of the directors
and officers of ShowCase, effective as of the Effective Time.
A-2
1.8 EFFECT ON CAPITAL STOCK. (a) At the Effective Time, by virtue of
the Merger and without any action on the part of the holder thereof, each share
of ShowCase Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares of ShowCase Common Stock owned by SPSS or
Merger Sub, all of which shall be canceled as provided in Section 1.8(c), and
any Dissenting Shares), shall be converted into 0.333 validly issued, fully paid
and non-assessable shares of SPSS Common Stock (the "Exchange Ratio") (together
with any cash in lieu of fractional shares of SPSS Common Stock to be paid
pursuant to Section 2.5, the "Merger Consideration").
(b) As a result of the Merger and without any action on the part of the
holders thereof, at the Effective Time, all shares of ShowCase Common Stock
shall cease to be outstanding and shall be canceled and retired and shall cease
to exist, and each holder of a certificate which immediately prior to the
Effective Time represented any such shares of ShowCase Common Stock (a
"Certificate") shall thereafter cease to have any rights with respect to such
shares of ShowCase Common Stock, except as provided herein or by law.
(c) Each share of ShowCase Common Stock issued and owned by SPSS or
Merger Sub at the Effective Time shall, by virtue of the Merger, cease to be
outstanding and shall be, canceled and retired and no stock of SPSS or other
consideration shall be delivered in exchange therefor.
(d) At the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, each share of common stock, par value
$0.01 per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time, shall be converted into one validly issued, fully paid and
non-assessable share of common stock, par value $0.01 per share, of the
Surviving Corporation.
1.9 SHOWCASE STOCK OPTIONS AND OTHER EQUITY-BASED AWARDS. (a) Each
ShowCase Stock Option (as defined in Section 3.2(b)) that was granted pursuant
to the ShowCase Stock Option Plans (as defined in Section 3.2(b)) prior to the
Effective Time and which remains outstanding immediately prior to the Effective
Time shall cease to represent a right to acquire shares of ShowCase Common
Stock, and shall be converted, at the Effective Time, into a non-qualified
option to acquire, on economically equivalent terms and conditions as were
applicable under the ShowCase Stock Option (but taking into account any changes
thereto, including the acceleration thereof, provided for in the ShowCase Stock
Option Plans or in such option by reason of this Agreement or the transactions
contemplated hereby), that number of shares of SPSS Common Stock determined by
multiplying the number of shares of ShowCase Common Stock subject to such
ShowCase Stock Option by the Exchange Ratio, rounded, if necessary, to the
nearest whole share of SPSS Common Stock, at a price per share (rounded to the
nearest one-hundredth of a cent) equal to the per share exercise price specified
in such ShowCase Stock Option divided by the Exchange Ratio; provided, however,
that in the case of any ShowCase Stock Option to which Section 421 of the Code
applies by reason of its qualification under Section 422 of the Code, the option
price, the number of shares subject to such option and the terms and conditions
of exercise of such option shall be determined in a manner consistent with the
requirements of Section 424(a) of the Code. On or prior to the Effective Time,
ShowCase will take all actions necessary such that all ShowCase Stock Options
outstanding prior to the Effective Time under the ShowCase Stock Option Plans
are treated in accordance with the immediately preceding sentences, including,
A-3
but not limited to, precluding the holder of each ShowCase Stock Option from
receiving any cash payments in respect of such Option in connection with the
Merger.
(b) SPSS shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of SPSS Common Stock for delivery upon
exercise of SPSS Stock Options issued in accordance with this Section 1.9.
Promptly after the Effective Time, SPSS shall file a registration statement on
Form S-8 (or any successor or other appropriate forms), with respect to the
shares of SPSS Common Stock subject to such options and shall use commercially
reasonable efforts to maintain the effectiveness of such registration statement
or registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such options remain outstanding.
1.10 DISSENTERS' RIGHTS. (a) Notwithstanding any provision of Section
1.8 to the contrary, any shares of ShowCase Common Stock which are issued and
outstanding immediately prior to the Effective Time and which are held by a
shareholder who has not voted such shares of ShowCase Common Stock in favor of
the Merger and who has properly exercised, preserved and perfected dissenters'
rights with respect to such shares of ShowCase Common Stock in accordance with
the MBCA (including Sections 302A.471 and 302A.473 thereof) and, as of the
Effective Time, has neither effectively withdrawn nor otherwise lost for any
reason its right to exercise such dissenters' rights ("Dissenting Shares"), will
not be converted into or represent a right to receive the Merger Consideration
pursuant to Section 1.8(a). The holders of Dissenting Shares will be entitled to
only such rights as are granted by Section 302A.471 of the MBCA.
(b) Notwithstanding the provisions of Section 1.8(a), if any
holder of shares of ShowCase Common Stock who demands dissenters' rights with
respect to its shares of ShowCase Common Stock under the MBCA effectively
withdraws or otherwise loses for any reason (including failure to perfect) its
dissenters' rights, then as of the Effective Time or the occurrence of such
event, whichever later occurs, such shareholder's shares of ShowCase Common
Stock will automatically be cancelled and converted into and represent only the
right to receive the Merger Consideration as provided in Section 1.8(a), without
interest thereon, upon surrender of the certificate or certificates formerly
representing such shares of ShowCase Common Stock.
1.11 CERTAIN ADJUSTMENTS. If, between the date of this Agreement and
the Effective Time, the outstanding SPSS Common Stock or ShowCase Common Stock
shall have been changed into a different number of shares or different class by
reason of any reclassification, recapitalization, stock split, split-up,
combination or exchange of shares or a stock dividend or dividend payable in any
other securities shall be declared with a record date within such period, or any
similar event shall have occurred, the Exchange Ratio shall be appropriately
adjusted to provide to the holders of ShowCase Common Stock the same economic
effect as contemplated by this Agreement prior to such event.
ARTICLE II
EXCHANGE OF CERTIFICATES
2.1 EXCHANGE FUND. Prior to the Effective Time, SPSS shall appoint its
current transfer agent to act as exchange agent hereunder for the purpose of
exchanging Certificates for the Merger
A-4
Consideration (the "Exchange Agent"). At or prior to the Effective Time, SPSS
shall deposit with the Exchange Agent, in trust for the benefit of holders of
shares of ShowCase Common Stock, certificates representing the SPSS Common Stock
issuable pursuant to Section 1.8 in exchange for outstanding shares of ShowCase
Common Stock. SPSS agrees to make available to the Exchange Agent from time to
time as needed, cash sufficient to pay cash in lieu of fractional shares
pursuant to Section 2.5 and any dividends and other distributions pursuant to
Section 2.3. Any cash and certificates of SPSS Common Stock deposited with the
Exchange Agent shall hereinafter be referred to as the "Exchange Fund."
2.2 EXCHANGE PROCEDURES. Promptly after the Effective Time, the
Surviving Corporation shall cause the Exchange Agent to mail to each holder of a
Certificate (i) a letter of transmittal which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon proper delivery of the Certificates to the Exchange Agent, and which letter
shall be in customary form and have such other provisions as SPSS may reasonably
specify (such letter to be reasonably acceptable to ShowCase prior to the
Effective Time) and (ii) instructions for effecting the surrender of such
Certificates in exchange for the applicable Merger Consideration. Upon surrender
of a Certificate to the Exchange Agent together with such letter of transmittal,
duly executed and completed in accordance with the instructions thereto, and
such other documents as may reasonably be required by the Exchange Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor (A)
one or more shares of SPSS Common Stock (which shall be in uncertificated
book-entry form unless a physical certificate is requested) representing, in the
aggregate, the whole number of shares that such holder has the right to receive
pursuant to Section 1.8 (after taking into account all shares of ShowCase Common
Stock then held by such holder) and (B) a check in the amount equal to the cash
that such holder has the right to receive pursuant to the provisions of this
Article II, including cash in lieu of any fractional shares of SPSS Common Stock
pursuant to Section 2.5 and dividends and other distributions pursuant to
Section 2.3. No interest will be paid or will accrue on any cash payable
pursuant to Section 2.3 or Section 2.5. In the event of a transfer of ownership
of ShowCase Common Stock which is not registered in the transfer records of
ShowCase, one or more shares of SPSS Common Stock evidencing, in the aggregate,
the proper number of shares of SPSS Common Stock, a check in the proper amount
of cash in lieu of any fractional shares of SPSS Common Stock pursuant to
Section 2.5 and any dividends or other distributions to which such holder is
entitled pursuant to Section 2.3, may be issued with respect to such ShowCase
Common Stock to such a transferee if the Certificate representing such shares of
ShowCase Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid.
2.3 DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions declared or made with respect to shares of SPSS Common Stock
with a record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of SPSS Common Stock that
such holder would be entitled to receive upon surrender of such Certificate and
no cash payment in lieu of fractional shares of SPSS Common Stock shall be paid
to any such holder pursuant to Section 2.5 until such holder shall surrender
such Certificate in accordance with Section 2.2. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to such holder of shares of SPSS Common Stock issuable in exchange
therefor, without interest, (a) promptly after the time of such surrender, the
amount of any cash payable in lieu of fractional shares of SPSS Common Stock to
which such holder is entitled
A-5
Pursuant to Section 2.5 and the amount of dividends or other distributions with
a record date after the Effective Time theretofore paid with respect to such
whole shares of SPSS Common Stock, and (b) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time but prior to such surrender and a payment date subsequent to such
surrender payable with respect to such shares of SPSS Common Stock.
2.4 NO FURTHER OWNERSHIP RIGHTS IN SHOWCASE COMMON STOCK. All shares of
SPSS Common Stock issued and cash paid upon conversion of shares of ShowCase
Common Stock in accordance with the terms of Article I and this Article II
(including any cash paid pursuant to Section 2.3 or 2.5) shall be deemed to have
been issued or paid in full satisfaction of all rights pertaining to the shares
of ShowCase Common Stock.
2.5 NO FRACTIONAL SHARES OF SPSS COMMON STOCK. (a) No certificates or
scrip or shares of SPSS Common Stock representing fractional shares of SPSS
Common Stock or book-entry credit of the same shall be issued upon the surrender
for exchange of Certificates and such fractional share interests will not
entitle the owner thereof to vote or to have any rights of a stockholder of SPSS
or a holder of shares of SPSS Common Stock.
(b) Notwithstanding any other provision of this Agreement, each holder
of shares of ShowCase Common Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of SPSS Common
Stock (after taking into account all Certificates delivered by such holder)
shall receive, in lieu thereof, cash (without interest) in an amount equal to
the product of (i) such fractional part of a share of SPSS Common Stock
multiplied by (ii) the closing price for a share of SPSS Common Stock on the
NASDAQ National Market ("NASDAQ") on the date of the Effective Time or, if such
date is not a Business Day, the Business Day immediately following the date on
which the Effective Time occurs.
(c) As promptly as practicable after the determination of the amount of
cash, if any, to be paid to holders of fractional interests, the Exchange Agent
shall so notify SPSS, and SPSS shall cause the Surviving Corporation to deposit
such amount with the Exchange Agent and shall cause the Exchange Agent to
forward payments to such holders of fractional interests subject to and in
accordance with the terms hereof.
2.6 TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
which remains undistributed to the holders of Certificates for six months after
the Effective Time shall be delivered to SPSS or otherwise on the instruction of
SPSS, and any holders of the Certificates who have not theretofore complied with
this Article II shall thereafter look only to SPSS for the Merger Consideration
with respect to the shares of ShowCase Common Stock formerly represented thereby
to which such holders are entitled pursuant to Section 1.8 and Section 2.2, any
cash in lieu of fractional shares of SPSS Common Stock to which such holders are
entitled pursuant to Section 2.5 and any dividends or distributions with respect
to shares of SPSS Common Stock to which such holders are entitled pursuant to
Section 2.3. Any such portion of the Exchange Fund remaining unclaimed by
holders of shares of ShowCase Common Stock five years after the Effective Time
(or such earlier date immediately prior to such time as such amounts would
otherwise escheat to or become property of any Governmental Entity (as defined
in Section 3.1 (c) (iii) ) shall, to the extent permitted by law, become the
property of the Surviving Corporation free and clear of any claims or interest
of any Person previously entitled thereto.
A-6
2.7 NO LIABILITY. None of SPSS, Merger Sub, ShowCase, the Surviving
Corporation or the Exchange Agent shall be liable to any Person in respect of
any Merger Consideration from the Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
2.8 INVESTMENT OF THE EXCHANGE FUND. The Exchange Agent shall invest
any cash included in the Exchange Fund as directed by SPSS on a daily basis;
provided, that no such gain or loss thereon shall affect the amounts payable to
ShowCase shareholders pursuant to Article I and the other provisions of this
Article II. Any interest and other income resulting from such investments shall
promptly be paid to SPSS.
2.9 LOST CERTIFICATES. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such Person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will deliver in exchange for such lost, stolen or destroyed
Certificate the applicable Merger Consideration with respect to the shares of
ShowCase Common Stock formerly represented thereby, any cash in lieu of
fractional shares of SPSS Common Stock, and unpaid dividends and distributions
on shares of SPSS Common Stock deliverable in respect thereof, pursuant to this
Agreement.
2.10 WITHHOLDING RIGHTS. Each of the Surviving Corporation and SPSS
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of ShowCase Common
Stock such amounts as it is required to deduct and withhold with respect to the
making of such payment under the Code and the rules and regulations promulgated
thereunder, or any provision of state, local or foreign tax law. To the extent
that amounts are so withheld by the Surviving Corporation or SPSS, as the case
may be, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of ShowCase Common
Stock in respect of which such deduction and withholding was made by the
Surviving Corporation or SPSS, as the case may be.
2.11 FURTHER ASSURANCES. At and after the Effective Time, the officers
and directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of ShowCase or Merger Sub, any deeds, bills
of sale, assignments or assurances and to take and do, in the name and on behalf
of ShowCase or Merger Sub, any other actions and things to vest, perfect or
confirm of record or otherwise in the Surviving Corporation any and all right,
title and interest in, to and under any of the rights, properties or assets
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger.
2.12 STOCK TRANSFER BOOKS. The stock transfer books of ShowCase shall
be closed immediately upon the Effective Time and there shall be no further
registration of transfers of shares of ShowCase Common Stock thereafter on the
records of ShowCase. On or after the Effective Time, any Certificates presented
to the Exchange Agent or SPSS for any reason shall be converted into the Merger
Consideration with respect to the shares of ShowCase Common Stock formerly
represented thereby (including any cash in lieu of fractional shares of SPSS
Common Stock to which the holders thereof are entitled pursuant to Section 2.5)
and any dividends or other distributions to which the holders thereof are
entitled pursuant to Section 2.3.
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2.13 AFFILIATES. Notwithstanding anything to the contrary herein, to
the fullest extent permitted by law, no certificates representing shares of SPSS
Common Stock or cash shall be delivered to a Person who may be deemed an
"affiliate" of ShowCase in accordance with Section 5.13 hereof for purposes of
Rule 145 under the Securities Act of 1933, as amended (the "Securities Act"), or
for purposes of qualifying the Merger for pooling-of-interests accounting
treatment under Opinion 16 of the Accounting Principles Board and applicable
rules and regulations of the Securities and Exchange Commission (the "SEC")
until such Person has executed and delivered an Affiliate Agreement (as defined
in Section 5.13) to SPSS.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF SPSS. Except as set forth in the
SPSS disclosure schedule delivered by SPSS to ShowCase in connection with the
execution of this Agreement (the "SPSS Disclosure Schedule") (each section of
which qualifies the correspondingly numbered representation and warranty or
covenant), SPSS represents and warrants to ShowCase as follows:
(a) Organization, Standing and Power; Subsidiaries.
(i) Each of SPSS and each of its Subsidiaries (as defined in
Section 8.11) is duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or
organization, has the requisite power and authority to own, lease
and operate its properties and to carry on its business as now
being conducted, except where the failures to be so organized,
existing and in good standing or to have such power and authority,
in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on SPSS, and is duly qualified and in good
standing to do business in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes
such qualification necessary other than in such jurisdictions where
the failures so to qualify or to be in good standing, in the
aggregate, would not reasonably be expected to have a Material
Adverse Effect on SPSS. The copies of the certificate of
incorporation and bylaws of SPSS which were previously furnished or
made available to ShowCase are true, complete and correct copies of
such documents as in effect on the date of this Agreement.
(ii) Exhibit 21.1 to SPSS's Annual Report on Form 10K for the
year ended December 31, 1999 includes all the Subsidiaries of SPSS
which as of the date of this Agreement are Significant Subsidiaries
(as defined in Rule 1-02 of Regulation S-X of the SEC). All the
outstanding shares of capital stock of, or other equity interests
in, each such Significant Subsidiary have been validly issued and
are fully paid and non-assessable and are owned directly or
indirectly by SPSS, free and clear of all pledges, claims, liens,
charges, encumbrances and security interests of any kind or nature
whatsoever (collectively "Liens") and free of any other restriction
(including any restriction on the right to vote, sell or otherwise
dispose of such
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capital stock or other ownership interests), except for
restrictions imposed by applicable securities laws. Except as set
forth in the SPSS SEC Reports (as defined in Section 3.1 (d)) filed
prior to the date hereof, neither SPSS nor any of its Subsidiaries
directly or indirectly owns any equity or similar interest in, or
any interest convertible into or exchangeable or exercisable for,
any corporation, partnership, joint venture or other business
association or entity (other than Subsidiaries), that is or would
reasonably be expected to be material to SPSS and its Subsidiaries
taken as a whole.
(b) Capital Structure.
(i) As of October 27, 2000, the authorized capital stock of
SPSS consisted of 50,000,000 shares of SPSS Common Stock of which
10,014,024 shares were outstanding. Since October 27, 2000 to the
date of this Agreement, there have been no issuances of shares of
the capital stock of SPSS or any other securities of SPSS other
than issuances of shares pursuant to options or rights outstanding
as of December 31, 1999 under the Benefit Plans (as defined in
Section 8.11 (b)) of SPSS. All issued and outstanding shares of the
capital stock of SPSS are, and when shares of SPSS Common Stock are
issued in the Merger or upon exercise of stock options converted in
the Merger pursuant to Section 1.9, such shares will be, duly
authorized, validly issued, fully paid and non-assessable and free
of any preemptive rights. There were outstanding as of October 27,
2000 no options, warrants or other rights to acquire capital stock
from SPSS other than options and other rights to acquire capital
stock from SPSS representing in the aggregate the right to purchase
approximately 2,350,000 shares of SPSS Common Stock (collectively,
the "SPSS Stock Options") under SPSS's Third Amended and Restated
1995 Equity Incentive Plan, 1999 Employee Equity Incentive Plan,
and Amended 1991 Stock Option Plan (collectively, the "SPSS Stock
Option Plans"). Section 3.1 (b) of the SPSS Disclosure Schedule
sets forth a complete and correct list, as of October 27, 2000, of
the number of shares of SPSS Common Stock subject to SPSS Stock
Options or other rights to purchase or receive SPSS Common Stock
granted under the SPSS Benefit Plans or otherwise, the dates of
grant and the exercise prices thereof. No options or warrants or
other rights to acquire capital stock from SPSS have been issued or
granted since October 27, 2000 to the date of this Agreement.
(ii) No bonds, debentures, notes or other indebtedness of SPSS
having the right to vote on any matters on which holders of capital
stock of SPSS may vote ("SPSS Voting Debt") are issued or
outstanding.
(iii) Except as otherwise set forth in this Section 3.1 (b)
and as contemplated by Section 1.8 and Section 1.9, as of the date
of this Agreement, there are no securities, options, warrants,
calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which SPSS or any of its Subsidiaries
is a party or by which any of them is bound obligating SPSS or any
of its Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or
other voting securities of SPSS or any of its Subsidiaries or
obligating SPSS or any of its Subsidiaries to issue, grant, extend
or enter into any
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such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. As of the date of this Agreement, there
are no outstanding obligations of SPSS or any of its Subsidiaries
to repurchase, redeem or otherwise acquire any shares of capital
stock of SPSS or any of its Subsidiaries.
(c) Authority; No Conflicts.
(i) SPSS has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions
contemplated hereby, subject to obtaining the requisite stockholder
approval of this Agreement and the transactions contemplated hereby
and the issuance of the shares of SPSS Common Stock to be issued in
the Merger (the "Share Issuance") (the "SPSS Stockholder
Approval"). The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of SPSS,
subject to obtaining the SPSS Stockholder Approval. This Agreement
has been duly executed and delivered by SPSS and constitutes a
valid and binding agreement of SPSS, enforceable against it in
accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and
similar laws relating to or affecting creditors generally or by
general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(ii) The execution and delivery of this Agreement by SPSS does
not or will not, as the case may be, and the consummation by SPSS
of the Merger and the other transactions contemplated hereby will
not, conflict with, or result in any violation of, or constitute a
default (with or without notice or lapse of time, or both) under,
or give rise to a right of, or result by its terms in the,
termination, amendment, cancellation or acceleration of any
obligation or the loss of a material benefit under, or the creation
of a lien, pledge, security interest, charge or other encumbrance
on, or the loss of, any assets, including Intellectual Property
(any such conflict, violation, default, right of termination,
amendment, cancellation or acceleration, loss or creation, a
"Violation") pursuant to: (A) any provision of the certificate of
incorporation or bylaws of SPSS or any material Subsidiary of SPSS,
or (B) except as, in the aggregate, would not reasonably be
expected to have a Material Adverse Effect (as defined in Section
8.11 (g)) on SPSS, subject to obtaining or making the consents,
approvals, orders, authorizations, registrations, declarations and
filings referred to in paragraph (iii) below, any loan or credit
agreement, note, mortgage, bond, indenture, lease, benefit plan or
other agreement, obligation, instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to SPSS or any Subsidiary
of SPSS or their respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any national, state,
municipal or local government, any instrumentality, subdivision,
court, administrative agency or commission or other authority
thereof, or any quasi-governmental or private body exercising any
regulatory, taxing, importing or other governmental or
quasi-governmental authority
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(a "Governmental Entity"), is required by or with respect to SPSS
or any Subsidiary of SPSS in connection with the execution and
delivery of this Agreement by SPSS or the consummation of the
Merger and the other transactions contemplated hereby, except for
those required under or in relation to (A) the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (B)
state securities or "blue sky" laws (the "Blue Sky Laws"), (C) the
Securities Act, (D) the Exchange Act, (E) the DGCL with respect to
the filing of the Certificate of Merger, (F) rules and regulations
of NASDAQ, (G) antitrust or other competition laws of other
jurisdictions, and (H) such consents, approvals, orders,
authorizations, registrations, declarations and filings the
failures of which to make or obtain, in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on SPSS.
Consents, approvals, orders, authorizations, registrations,
declarations and filings required under or in relation to any, of
the foregoing clauses (A) through (G) are hereinafter referred to
as "Necessary Consents."
(d) Reports and Financial Statements.
(i) SPSS has filed all required registration statements,
prospectuses, reports, schedules, forms, statements and other
documents required to be filed by it with the SEC since January 1,
1998 (collectively, including all exhibits thereto, the "SPSS SEC
Reports"). No Subsidiary of SPSS is required to file any form,
report, registration statement, prospectus or other document with
the SEC. None of the SPSS SEC Reports, as of their respective dates
(and, if amended or superseded by a filing prior to the date of
this Agreement or the Closing Date, then on the date of such
filing), contained or will contain any untrue statement of a
material fact or omitted or will omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading. Each of the financial statements (including the
related notes) included in the SPSS SEC Reports presents fairly, in
all material respects, the consolidated financial position and
consolidated results of operations and cash flows of SPSS and its
consolidated Subsidiaries as of the respective dates or for the
respective periods set forth therein, all in conformity with GAAP
consistently applied during the periods involved except as
otherwise noted therein, and subject, in the case of unaudited
interim financial statements, to the absence of notes and normal
yearend adjustments that have not been and are not expected to be
material in amount. All of such SPSS SEC Reports, as of their
respective dates (and as of the date of any amendment to the
respective SPSS SEC Report), complied as to form in all material
respects with the applicable requirements of the Securities Act and
the Exchange Act and the rules and regulations promulgated
thereunder.
(ii) Except as disclosed in the SPSS SEC Reports filed prior
to the date hereof, since June 30, 2000, SPSS and its Subsidiaries
have not incurred any liabilities that are of a nature that would
be required to be disclosed on a balance sheet of SPSS and its
Subsidiaries or the footnotes thereto prepared in conformity with
GAAP, other than (A) liabilities incurred in the ordinary course of
business or (B) liabilities that, in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on SPSS.
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(e) Information Supplied.
(i) None of the information supplied or to be supplied by SPSS
for inclusion or incorporation by reference in (A) the Form S-4 (as
defined in Section 5.1) will, at the time the Form S-4 is filed
with the SEC, at any time it is amended or supplemented or at the
time it becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading and (B) the Joint Proxy
Statement/Prospectus (as defined in Section 5.1) will, on the date
it is first mailed to ShowCase shareholders or SPSS stockholders or
at the time of the ShowCase Shareholders Meeting or the SPSS
Stockholders Meeting (each as defined in Section 5.1), contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which
they were made, not misleading. The Form S-4 and the Joint Proxy
Statement/Prospectus will comply as to form in all material
respects with the requirements of the Exchange Act and the
Securities Act and the rules and regulations of the SEC thereunder.
(ii) Notwithstanding the foregoing provisions of this Section
3.1 (e), no representation or warranty is made by SPSS with respect
to statements made or incorporated by reference in the Form S-4 or
the Joint Proxy Statement/Prospectus based on information supplied
by ShowCase for inclusion or incorporation by reference therein.
(f) Board Approval. The Board of Directors of SPSS, by resolutions duly
adopted at a meeting duly called and held and not subsequently rescinded or
modified in any way (the "SPSS Board Approval"), has duly (i) determined that
this Agreement and the Merger are advisable and are fair to and in the best
interests of SPSS and its stockholders, (ii) approved this Agreement, the Merger
and the Share Issuance and (iii) recommended that the stockholders of SPSS
approve the Share Issuance and directed that the Share Issuance be submitted for
consideration by SPSS's stockholders at the SPSS Stockholders Meeting.
(g) Vote Required. The affirmative vote of at least a majority of the
votes cast by the holders of SPSS Common Stock, provided that the total votes
cast represents a majority of the outstanding shares of SPSS Common Stock, is
the only vote necessary to approve the Share Issuance.
(h) Litigation; Compliance with Laws.
(i) Except as disclosed in the SPSS SEC Reports filed prior to
the date of this Agreement, there are no suits, actions or
proceedings (collectively "Actions") pending or, to the knowledge
of SPSS, threatened, against or affecting SPSS or any Subsidiary of
SPSS which, in the aggregate, would reasonably be expected to have
a Material Adverse Effect on SPSS, nor are there any judgments,
decrees, injunctions, rules or orders of any Governmental Entity or
arbitrator outstanding against SPSS or
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any Subsidiary of SPSS which, in the aggregate, would reasonably be
expected to have a Material Adverse Effect on SPSS.
(ii) Except as disclosed in the SPSS SEC Reports filed prior
to the date of this Agreement and except as, in the aggregate,
would not reasonably be expected to have a Material Adverse Effect
on SPSS, SPSS and its Subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals of all Governmental
Entities which are necessary for the operation of the businesses of
SPSS and its Subsidiaries, taken as a whole (the "SPSS Permits").
SPSS and its Subsidiaries are in compliance with the terms of the
SPSS Permits, except where the failures to so comply, in the
aggregate, would not reasonably be expected to have a Material
Adverse Effect on SPSS. Except as disclosed in the SPSS SEC Reports
filed prior to the date of this Agreement, neither SPSS nor any of
its Subsidiaries is in violation of, and SPSS and its Subsidiaries
have not received any notices of violations with respect to, any
laws, ordinances or regulations of any Governmental Entity, except
for violations which, in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on SPSS.
(i) Absence of Certain Changes or Events. Except for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby, except as disclosed in the SPSS SEC Reports filed prior to the date of
this Agreement, and except as permitted by Section 4.1, since September, 2000,
(i) SPSS and its Subsidiaries have conducted their business only in the ordinary
course and (ii) there has not been any action taken by SPSS or any of its
Subsidiaries during the period from September 30, 2000 through the date of this
Agreement that, if taken during the period from the date of this Agreement
through the Effective Time, would constitute a breach of Section 4.1. Except as
disclosed in the SPSS SEC Reports filed prior to the date of this Agreement,
since September 30, 2000, there have not been any changes, circumstances or
events which, in the aggregate, have had, or would reasonably be expected to
have, a Material Adverse Effect on SPSS.
(j) Environmental Matters. Except as, in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on SPSS and except as
disclosed in the SPSS SEC Reports filed prior to the date of this Agreement the
operations of SPSS and its Subsidiaries have been and are in compliance with all
Environmental Laws (as hereafter defined). As used in this Agreement,
"Environmental Laws" means any and all federal, state, foreign, interstate,
local or municipal laws, rules, regulations, statutes, ordinances and codes of
any Governmental Entity regulating, relating to or imposing liability or
standards of conduct concerning pollution, Hazardous Materials or protection of
human health, safety or the environment, as currently in effect, and includes
the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C.ss.ss.9601, et seq., the Hazardous Materials Transportation Act, 49
U.S.C.ss.ss.1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
ss.ss.6901, et seq., the Clean Water Act; 33 U.S.C.ss.ss.1251, et seq., the
Clean Air Act, 33 U.S.C.ss.ss.2601, et seq., the Toxic Substances Control Act,
15 U.S.C.ss.ss.2601, et seq., the Federal Insecticide, Fungicide and Rodenticide
Act, 7 U.S.C.ss.ss.136, et seq., Occupational Safety and Health Act 29
U.S.C.ss.ss.651, et seq. and the Oil Pollution Act of 1990, 33 U.S.C.ss.ss.2701,
et seq., and the regulations promulgated pursuant thereto, and all analogous
state or local statutes. As used in this Agreement, "Hazardous Materials" means
any materials or wastes, defined or regulated as hazardous, toxic, a pollutant,
a contaminant or
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dangerous in or under any Environmental Laws which includes petroleum,
petroleum products, friable asbestos, urea formaldehyde, radioactive materials
and polychlorinated biphenyls.
(k) Intellectual Property. Except as, in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on SPSS and except as
disclosed in the SPSS SEC Reports filed prior to the date of the Agreement: (i)
SPSS and each of its Subsidiaries owns, or is licensed to use (in each case,
free and clear of any Liens), all Intellectual Property (as defined below) used
in or necessary for the conduct of its business as currently conducted; (ii) the
use of any Intellectual Property by SPSS and its Subsidiaries does not infringe
on or otherwise violate the rights of any Person and is in accordance with any
applicable license pursuant to which SPSS or any Subsidiary acquired the right
to use any Intellectual Property; (iii) to the knowledge of SPSS, no Person is
challenging, infringing on or otherwise violating any right of SPSS or any of
its Subsidiaries with respect to any Intellectual Property owned by and/or
licensed to SPSS or its Subsidiaries; and (iv) neither SPSS nor any of its
Subsidiaries has received any written notice or otherwise has knowledge of any
pending claim, order or proceeding with respect to any Intellectual Property
used by SPSS and its Subsidiaries and to its knowledge no Intellectual Property
owned and/or licensed by SPSS or its Subsidiaries is being used or enforced in a
manner that would reasonably be expected to result in the abandonment,
cancellation or unenforceability of such Intellectual Property. For purposes of
this Agreement, "Intellectual Property" shall mean software, trademarks, service
marks, brand names, certification marks, trade dress and other indications of
origin, the goodwill associated with the foregoing and registrations in any
jurisdiction of, and applications in any jurisdiction to register, the
foregoing, including any extension, modification or renewal of any such
registration or application; inventions, discoveries and ideas, whether
patentable or not, in any jurisdiction; patents, applications for patents
(including, without limitation, divisions, continuations, continuations in part
and renewal applications), and any renewals, extensions or reissues thereof, in
any jurisdiction; nonpublic information, trade secrets and confidential
information and rights in any jurisdiction to limit the use or disclosure
thereof by any person; writings and other works, whether copyrightable or not,
in any jurisdiction; and registrations or applications for registration of
copyrights in any jurisdiction, and any renewals or extensions thereof, any
similar intellectual property or proprietary rights.
(l) Brokers or Finders. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement, based upon arrangements made by
or on behalf of SPSS.
(m) Opinions of SPSS Financial Advisors. SPSS has requested the opinion
of Robert W. Baird & Co. Incorporated dated the date of such opinion, to the
effect that, as of such date, the Exchange Ratio is fair to SPSS, from a
financial point of view.
(n) Accounting Matters. To the knowledge of SPSS, neither SPSS nor any
of its affiliates has taken or agreed to take any action, and no fact or
circumstance is known to SPSS, that would prevent SPSS from accounting for the
Merger as a "pooling-of-interests" under Opinion 16 of the Accounting Principles
Board and applicable SEC rules and regulations.
(o) Taxes. Each of SPSS and its Subsidiaries has accurately filed all
Tax Returns required to have been filed (or extensions have been duly obtained)
and has paid all Taxes required to have
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been paid by it, except where failure to accurately file such Tax Returns or pay
such Taxes would not, in the aggregate, reasonably be expected to have a
Material Adverse Effect on SPSS. For purposes of this Agreement: (i) "Tax" (and,
with correlative meaning, "Taxes") means any federal, state, local or foreign
income, gross receipts, property, sales, use, license, excise, franchise,
employment, payroll, withholding, alternative or add on minimum, ad valorem,
transfer or excise tax, or any other tax, custom, duty, governmental fee or
other like assessment or charge of any kind whatsoever, together with any
interest or penalty, imposed by any governmental authority or any obligation to
pay Taxes imposed on any entity for which a party to this Agreement is liable as
a result of any indemnification provision or other contractual obligation, and
(ii) "Tax Return" means any return, report or similar statement required to be
filed with respect to any Tax (including any attached schedules), including,
without limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.
(p) Certain Contracts. As of the date hereof, except as set forth in
the SPSS SEC Reports filed prior to the date of this Agreement, neither SPSS nor
any of its Subsidiaries is a party to or bound by (i) any "material contracts"
(as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC) or
(ii) any non-competition agreements or any other agreements or arrangements that
limit or otherwise restrict SPSS or any of its Subsidiaries or any of their
respective affiliates or any successor thereto, or that would, after the
Effective Time, to the knowledge of SPSS, limit or restrict SPSS or any of its
affiliates (including the Surviving Corporation) or any successor thereto, from
engaging or competing in any line of business or in any geographic area, which
agreements or arrangements, in the aggregate, would reasonably be expected to
have a Material Adverse Effect on SPSS and its Subsidiaries (including the
Surviving Corporation and its Subsidiaries), taken together, after giving effect
to the Merger.
(q) Intentionally Omitted.
(r) Employee Benefit Plans. Except as disclosed in the SPSS SEC
Reports, there are no Benefit Plans maintained by SPSS covering only SPSS
executive officers. SPSS does not sponsor or contribute to, nor has it ever
sponsored or contributed to, any defined benefit pension plan subject to Title I
of ERISA. SPSS does not sponsor any Benefit Plan which is a "welfare plan"
described in Section 3(1) of ERISA providing benefits after termination of
employment (other than "COBRA" health care continuation benefits described in
Sections 601 et seq. of ERISA), except for such benefits which would not
reasonably be expected to have a Material Adverse Effect on SPSS. Each Benefit
Plan maintained by SPSS has been operated and administered in accordance with
its terms and, applicable law, except where failure to do so would not
reasonably be expected to have a Material Adverse Effect on SPSS. SPSS has
timely paid all required contributions to each of its Benefit Plans, except
where failure to do so would not reasonably be expected to have a Material
Adverse Effect on SPSS. As to the SPSS Benefit Plans, there is no litigation
pending or threatened, nor any pending investigation by a governmental body,
which, if resolved adversely to SPSS or to the applicable Benefit Plan, would
have a Material Adverse Effect on SPSS. The execution of this Agreement and the
consummation of the Merger will not constitute an event under any Benefit Plan
maintained by SPSS that will or may result in any payment, acceleration,
forgiveness of indebtedness, vesting, distribution, increase in compensation or
benefits or obligation to fund benefits with respect to any SPSS employee which,
in the aggregate, have had, or would reasonably be expected to have, a Material
Adverse Effect on SPSS.
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(s) Labor Matters. Except where failure to comply would not reasonably
be expected to have a Material Adverse Effect on SPSS, SPSS is and has been in
compliance with all applicable laws of the United States, or of any state or
local government or any subdivision thereof or of any foreign government
respecting employment and employment practices, terms and conditions of
employment and wages and hours, including, without limitation, ERISA, the Code,
the Immigration Reform and Control Act, the Worker Adjustment and Retraining
Notification Act (the "WARN Act"), any laws respecting employment
discrimination, sexual harassment, disability rights or benefits, equal
opportunity, plant closure issues, affirmative action, workers' compensation,
employee benefits, severance payments, continuation of health insurance
("COBRA"), labor relations, employee leave issues, wage and hour standards,
occupational safety and health requirements and unemployment insurance and
related matters, and is not engaged in any unfair labor practices.
3.2 REPRESENTATIONS AND WARRANTIES OF SHOWCASE. Except as set forth in
the ShowCase Disclosure Schedule delivered by ShowCase to SPSS in connection
with the execution of this Agreement (the "ShowCase Disclosure Schedule") (each
section of which qualifies the correspondingly numbered representation and
warranty or covenant), ShowCase represents and warrants to SPSS as follows:
(a) Organization, Standing and Power; Subsidiaries.
(i) Each of ShowCase and each of its Subsidiaries is duly
organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation or organization, has the
requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted,
except where the failures to be so organized, existing and in good
standing or to have such power and authority, in the aggregate,
would not reasonably be expected to have a Material Adverse Effect
on ShowCase, and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such
qualification necessary other than in such jurisdictions where the
failures so to qualify or to be in good standing in the aggregate
would not reasonably be expected to have a Material Adverse Effect
on ShowCase. The copies of the articles of incorporation and bylaws
of ShowCase which were previously furnished or made available to
SPSS are true, complete and correct copies of such documents as in
effect on the date of this Agreement.
(ii) Exhibit 21.1 to ShowCase's Annual Report on Form 10K for
the year ended March 31, 2000 includes all the Subsidiaries of
ShowCase which as of the date of this Agreement are Significant
Subsidiaries (as defined in Rule 1-02 of Regulation S-X of the
SEC). All the outstanding shares of capital stock of, or other
equity interests in, each such Significant Subsidiary have been
validly issued and are fully paid and nonassessable and are, except
as set forth in Exhibit 21.1, owned directly or indirectly by
ShowCase, free and clear of all Liens and free of any other
restriction (including any restriction on the right to vote, sell
or otherwise dispose of such capital stock or other ownership
interests), except for restrictions imposed by applicable
securities laws. Except as set forth in the ShowCase SEC Reports
(as defined in Section 3.2(d)) filed prior to the date hereof,
neither ShowCase nor any of
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its Subsidiaries directly or indirectly owns any equity or similar
interest in, or any interest convertible into or exchangeable or
exercisable for, any corporation, partnership, joint venture or
other business association or entity (other than Subsidiaries),
that is or would reasonably be expected to be material to ShowCase
and its Subsidiaries taken as a whole.
(b) Capital Structure.
(i) As of October 31, 2000, the authorized capital stock of
ShowCase consisted of 50,000,000 shares of ShowCase Common Stock,
of which 10,782,103 shares were outstanding. Since October 31, 2000
to the date of this Agreement, there have been no issuances of
shares of the capital stock of ShowCase or any other securities of
ShowCase other than issuances of shares pursuant to options
outstanding as of October 31, 2000 under the Benefit Plans of
ShowCase. All issued and outstanding shares of the capital stock of
ShowCase are duly authorized, validly issued, fully paid and
non-assessable, and no class of capital stock is entitled to
preemptive rights. There were outstanding as of October 31, 2000 no
options, warrants or other rights to acquire capital stock from
ShowCase other than options and other rights to acquire capital
stock of ShowCase representing in the aggregate the right to
purchase 1,824,232 shares of ShowCase Common Stock (collectively,
the "ShowCase Stock Options") under the Amended 1991 Long-Term
Incentive and Stock Option Plan, the 1999 Stock Incentive Plan and
the 1999 Employee Stock Purchase Plan (collectively, the "ShowCase
Stock Option Plans"). Section 3.2(b) of the ShowCase Disclosure
Schedule sets forth a complete and correct list, as of October 31,
2000 of the number of shares of ShowCase Common Stock subject to
ShowCase Stock Options or other rights to purchase or receive
ShowCase Common Stock granted under the ShowCase Benefit Plans or
otherwise, the dates of grant and the exercise prices thereof.
Except as set forth on Schedule 3.2 (b)(i) of the ShowCase
Disclosure Schedule, no options or warrants or other rights to
acquire capital stock from ShowCase have been issued or granted
since October 31, 2000 to the date of this Agreement.
(ii) No bonds, debentures, notes or other indebtedness of
ShowCase having the right to vote on any matters on which
shareholders may vote ("ShowCase Voting Debt") are issued or
outstanding.
(iii) Except as otherwise set forth in this Section 3.2 (b),
as of the date of this Agreement, there are no securities, options,
warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which ShowCase or any of its
Subsidiaries is a party or by which any of them is bound obligating
ShowCase or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital
stock or other voting securities of ShowCase or any of its
Subsidiaries or obligating ShowCase or any of its Subsidiaries to
issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or
undertaking. As of the date of this Agreement, there are no
outstanding obligations of ShowCase or any of
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its Subsidiaries to repurchase, redeem or otherwise acquire any
shares of capital stock of ShowCase or any of its Subsidiaries.
(c) Authority; No Conflicts.
(i) ShowCase has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions
contemplated hereby, subject in the case of the consummation of the
Merger to the adoption of this Agreement by the Required ShowCase
Vote (as defined in Section 3.2 (g)). The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of ShowCase, subject in the case of
the consummation of the Merger to the adoption of this Agreement by
the Required ShowCase Vote. This Agreement has been duly executed
and delivered by ShowCase and constitutes a valid and binding
agreement of ShowCase, enforceable against it in accordance with
its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws
relating to or affecting creditors generally or by general equity
principles (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
(ii) The execution and delivery of this Agreement by ShowCase
does not or will not, as the case may be, and the consummation by
ShowCase of the Merger and the other transactions contemplated
hereby will not, conflict with, or result in a Violation pursuant
to: (A) any provision of the certificate of incorporation or bylaws
of ShowCase or any material Subsidiary of ShowCase or (B) except
as, in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on ShowCase or, subject to obtaining or
making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in paragraph
(iii) below, any loan or credit agreement, note, mortgage, bond,
indenture, lease, benefit plan or other agreement, obligation,
instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation
applicable to ShowCase or any Subsidiary of ShowCase or their
respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity
is required by or with respect to ShowCase or any Subsidiary of
ShowCase in connection with the execution and delivery of this
Agreement by ShowCase or the consummation of the Merger and the
other transactions contemplated hereby, except the Necessary
Consents and such consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to
make or obtain, in the aggregate, would not reasonably be expected
to have a Material Adverse Effect on ShowCase.
(d) Reports and Financial Statements.
(i) ShowCase has filed all required registration statements,
prospectuses, reports, schedules, forms, statements and other
documents required to be filed by it
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with the SEC since June 30, 1999 (collectively, including all
exhibits thereto, the "ShowCase SEC Reports"). No Subsidiary of
ShowCase is required to file any form, report, registration
statement or prospectus or other document with the SEC. None of the
ShowCase SEC Reports, as of their respective dates (and, if amended
or superseded by a filing prior to the date of this Agreement or
the Closing Date, then on the date of such filing), contained or
will contain any untrue statement of a material fact or omitted or
will omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of
the financial statements (including the related notes) included in
the ShowCase SEC Reports presents fairly, in all material respects,
the consolidated financial position and consolidated results of
operations and cash flows of ShowCase and its consolidated
Subsidiaries as of the respective dates or for the respective
periods set forth therein, all in conformity with GAAP consistently
applied during the periods involved except as otherwise noted
therein, and subject, in the case of the unaudited interim
financial statements, to the absence of notes and normal and
recurring year-end adjustments that have not been and are not
expected to be material in amount. All of such ShowCase SEC
Reports, as of their respective dates (and as of the date of any
amendment to the respective ShowCase SEC Report), complied as to
form in all material respects with the applicable requirements of
the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder.
(ii) Except as disclosed in the ShowCase SEC Reports filed
prior to the date hereof, since June 30, 2000, ShowCase and its
Subsidiaries have not incurred any liabilities that are of a nature
that would be required to be disclosed on a balance sheet of
ShowCase and its Subsidiaries or the footnotes thereto prepared in
conformity with GAAP, other than (A) liabilities incurred in the
ordinary course of business, or (B) liabilities that, in the
aggregate, would not reasonably be expected to have a Material
Adverse Effect on ShowCase.
(e) Information Supplied.
(i) None of the information supplied or to be supplied by
ShowCase for inclusion or incorporation by reference in (A) the
Form S-4 will, at the time the Form S-4 is filed with the SEC, at
any time it is amended or supplemented or at the time it becomes
effective under the Securities Act, contain any untrue statement of
a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading, and (B) the Joint Proxy Statement/Prospectus will, on
the date it is first mailed to ShowCase shareholders or SPSS
stockholders or at the time of the ShowCase Shareholders Meeting or
the SPSS Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made,
not misleading. The Form S-4 and the Joint Proxy
Statement/Prospectus will comply as to form in all material
respects with the requirements of the Exchange Act and the
Securities Act and the rules and regulations of the SEC thereunder.
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(ii) Notwithstanding the foregoing provisions of this Section
3.2 (e), no representation or warranty is made by ShowCase with
respect to statements made or incorporated by reference in the Form
S-4 or the Joint Proxy Statement/Prospectus based on information
supplied by SPSS or Merger Sub for inclusion or incorporation by
reference therein.
(f) Board Approval. The Executive Committee of the Board of Directors
of ShowCase, which committee was created in accordance with applicable law and
pursuant to the articles of incorporation and bylaws of ShowCase, and is duly
authorized to so vote on behalf of the Board of Directors of ShowCase, by
resolutions duly adopted by unanimous vote of those voting at a meeting duly
called and held and not subsequently rescinded or modified in any way (the
"ShowCase Board Approval"), has duly (i) determined that this Agreement and the
Merger are advisable and are fair to and in the best interests of ShowCase and
its shareholders, (ii) approved this Agreement and the Merger and (iii)
recommended that the shareholders of ShowCase adopt this Agreement and approve
the Merger and directed that this Agreement and the transactions contemplated
hereby be submitted for consideration by ShowCase's shareholders at the ShowCase
Shareholders Meeting. The ShowCase Board Approval constitutes approval of this
Agreement and the Merger for purposes of Section 302A.613 of the MBCA. To the
knowledge of ShowCase, except for Section 302A.673 of the MBCA (which has been
rendered inapplicable), no state takeover statute is applicable to this
Agreement, the Merger or the other transactions contemplated hereby or thereby.
(g) Vote Required. The affirmative vote of the holders of a majority of
the outstanding shares of ShowCase Common Stock to adopt this Agreement and
approve the Merger (the "Required ShowCase Vote") is the only vote of the
holders of any class or series of ShowCase capital stock necessary to adopt this
Agreement and approve the Merger and the other transactions contemplated hereby.
(h) Litigation; Compliance with Laws.
(i) Except as disclosed in the ShowCase SEC Reports filed
prior to the date of this Agreement, there are no Actions pending
or, to the knowledge of ShowCase, threatened, against or affecting
ShowCase or any Subsidiary of ShowCase which, in the aggregate,
would reasonably be expected to have a Material Adverse Effect on
ShowCase, nor are there any judgments, decrees, injunctions, rules
or orders of any Governmental Entity or arbitrator outstanding
against ShowCase or any Subsidiary of ShowCase which, in the
aggregate, would reasonably be expected to have a Material Adverse
Effect on ShowCase.
(ii) Except as disclosed in the ShowCase SEC Reports filed
prior to the date of the Agreement and except as would, in the
aggregate, not reasonably be expected to have a Material Adverse
Effect on ShowCase, ShowCase and its Subsidiaries hold all permits,
licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for the operation of the businesses
of ShowCase and its Subsidiaries, taken as a whole (the "ShowCase
Permits"). ShowCase and its Subsidiaries are in compliance with the
terms of the ShowCase Permits, except where the failures to so
comply, in the aggregate, would not
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reasonably be expected to have a Material Adverse Effect on
ShowCase. Except as disclosed in the ShowCase SEC Reports filed
prior to the date of this Agreement, neither ShowCase nor its
Subsidiaries is in violation of, and ShowCase and its Subsidiaries
have not received any notices of violations with respect to, any
laws, ordinances or regulations of any Governmental Entity, except
for violations which, in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on ShowCase.
(i) Absence of Certain Changes or Events. Except for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby, except as disclosed in the ShowCase SEC Reports filed prior to the date
of this Agreement, except as permitted by Section 4.2, since September 30, 2000,
(i) ShowCase and its Subsidiaries have conducted their business only in the
ordinary course and (ii) there has not been any action taken by ShowCase or any
of its Subsidiaries during the period from September 30, 2000 through the date
of this Agreement that, if taken during the period from the date of this
Agreement through the Effective Time, would constitute a breach of Section 4.2.
Except as disclosed in the ShowCase SEC Reports filed prior to the date of this
Agreement, since September 30, 2000, there have not been any changes,
circumstances or events which, in the aggregate, have had, or would reasonably
be expected to have, a Material Adverse Effect on ShowCase.
(j) Environmental Matters. Except as, in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on ShowCase and except
as disclosed in the ShowCase SEC Reports filed prior to the date of this
Agreement, the operations of ShowCase and its Subsidiaries have been and are in
compliance with all Environmental Laws.
(k) Intellectual Property. Except as, in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on ShowCase and except
as disclosed in the ShowCase SEC Reports filed prior to the date of this
Agreement, (i) ShowCase and each of its Subsidiaries owns, or is licensed to use
(in each case, free and clear of any Liens), all Intellectual Property used in
or necessary for the conduct of its business as currently conducted; (ii) the
use of any Intellectual Property by ShowCase and its Subsidiaries does not
infringe on or otherwise violate the rights of any Person and is in accordance
with any applicable license pursuant to which ShowCase or any Subsidiary
acquired the right to use any Intellectual Property; (iii) to the knowledge of
ShowCase, no Person is challenging, infringing on or otherwise violating any
right of ShowCase or any of its Subsidiaries with respect to any Intellectual
Property owned by and/or licensed to ShowCase or its Subsidiaries; and (iv)
neither ShowCase nor any of its Subsidiaries has received any written notice or
otherwise has knowledge of any pending claim, order or proceeding with respect
to any Intellectual Property used by ShowCase and its Subsidiaries and to its
knowledge no Intellectual Property owned and/or licensed by ShowCase or its
Subsidiaries is being used or enforced in a manner that would reasonably be
expected to result in the abandonment, cancellation or unenforceability of such
Intellectual Property.
(l) Brokers or Finders. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement, based upon arrangements made by
or on behalf of ShowCase, except Merrill Lynch and Craig Hallum, whose
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fees and expenses will be paid by ShowCase in accordance with ShowCase's
agreements with such firms, copies of which have been provided to SPSS.
(m) Opinions of ShowCase Financial Advisor. ShowCase has requested the
opinions of Merrill Lynch and Craig Hallum, dated the date of such opinions, to
the effect that, as of such date, the Exchange Ratio is fair, from a financial
point of view, to the holders of ShowCase Common Stock.
(n) Accounting Matters. To the knowledge of ShowCase, neither ShowCase
nor any of its affiliates has taken or agreed to take any action, and no fact or
circumstance is known to ShowCase, that would prevent SPSS from accounting for
the Merger as a "pooling-of-interests" under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations.
(o) Taxes. Each of ShowCase and its Subsidiaries has accurately filed
all Tax Returns required to have been filed (or extensions have been duly
obtained) and has paid all Taxes required to have been paid by it, except where
failure to accurately file such Tax Returns or pay such Taxes would not, in the
aggregate, reasonably be expected to have a Material Adverse Effect on ShowCase.
ShowCase's financial statements reflect adequate reserves for Taxes.
(p) Certain Contracts. As of the date hereof, except as set forth in
the ShowCase SEC Reports filed prior to the date of this Agreement, neither
ShowCase nor any of its Subsidiaries is a party to or bound by (i) any "material
contracts" (as such term is defined in Item 601 (b) (10) of Regulation S-K of
the SEC) or (ii) any noncompetition agreements or any other agreements or
arrangements that limit or otherwise restrict ShowCase or any of its
Subsidiaries or any of their respective affiliates or any successor thereto or
that would, after the Effective Time, to the knowledge of ShowCase, limit or
restrict SPSS or any of its affiliates (including the Surviving Corporation) or
any successor thereto, from engaging or competing in any line of business or in
any geographic area, which agreements or arrangements, in the aggregate, would
reasonably be expected to have a Material Adverse Effect on SPSS and its
Subsidiaries (including the Surviving Corporation and its Subsidiaries), taken
together, after giving effect to the Merger.
(q) Employee Benefit Plans. Except as disclosed in the ShowCase SEC
Reports and in the ShowCase Disclosure Schedule, there are no Benefit Plans
maintained by ShowCase covering only ShowCase executive officers. ShowCase does
not sponsor or contribute to, nor has it ever sponsored or contributed to, any
defined benefit pension plan subject to Title I of ERISA. ShowCase does not
sponsor any Benefit Plan which is a "welfare plan" described in Section 3(1) of
ERISA providing benefits after termination of employment (other than "COBRA"
health care continuation benefits described in Sections 601 et seq. of ERISA),
except for such benefits which would not reasonably be expected to have a
Material Adverse Effect on ShowCase. Each Benefit Plan maintained by ShowCase
has been operated and administered in accordance with its terms and applicable
law, except where failure to do so would not reasonably be expected to have a
Material Adverse Effect on ShowCase. ShowCase has timely paid all required
contributions to each of its Benefit Plans, except where failure to do so would
not reasonably be expected to have a Material Adverse Effect on ShowCase. As to
the ShowCase Benefit Plans, there is no litigation pending or threatened, nor
any pending investigation by a governmental body, which, if resolved adversely
to ShowCase or to the applicable Benefit Plan, would have a Material Adverse
Effect on ShowCase. The execution of this Agreement and the consummation of the
Merger will not constitute an event
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under any Benefit Plan maintained by ShowCase that will or may result in any
payment, acceleration, forgiveness of indebtedness, vesting, distribution,
increase in compensation or benefits or obligation to fund benefits with respect
to any ShowCase Employee which, in the aggregate, have had, or would reasonably
be expected to have, a Material Adverse Effect on ShowCase.
(r) Labor Matters. Except where failure to comply would not reasonably
be expected to have a Material Adverse Effect on ShowCase, ShowCase is and has
been in compliance with all applicable laws of the United States, or of any
state or local government or any subdivision thereof or of any foreign
government respecting employment and employment practices, terms and conditions
of employment and wages and hours, including, without limitation, ERISA, the
Code, the Immigration Reform and Control Act, the WARN Act, any laws respecting
employment discrimination, sexual harassment, disability rights or benefits,
equal opportunity, plant closure issues, affirmative action, workers'
compensation, employee benefits, severance payments, COBRA, labor relations,
employee leave issues, wage and hour standards, occupational safety and health
requirements and unemployment insurance and related matters, and is not engaged
in any unfair labor practices.
3.3 REPRESENTATIONS AND WARRANTIES OF SPSS AND MERGER SUB. SPSS and
Merger Sub represent and warrant to ShowCase as follows:
(a) Organization. Merger Sub is a corporation duly incorporated,
validly existing and in good standing under the laws of Delaware. Merger Sub is
a direct wholly-owned subsidiary of SPSS.
(b) Corporate Authorization. Merger Sub has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
Merger Sub of this Agreement and the consummation by Merger Sub of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Merger Sub. This Agreement has been duly
executed and delivered by Merger Sub and constitutes a valid and binding
agreement of Merger Sub, enforceable against it in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors generally or by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(c) Non-Contravention. The execution, delivery and performance by
Merger Sub of this Agreement and the consummation by Merger Sub of the
transactions contemplated hereby do not and will not contravene or conflict with
the certificate of incorporation or bylaws of Merger Sub.
(d) No Business Activities. Merger Sub has not conducted any activities
other than in connection with the organization of Merger Sub, the negotiation
and execution of this Agreement and the consummation of the transactions
contemplated hereby. Merger Sub has no Subsidiaries.
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ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 COVENANTS OF SPSS. During the period from June 30, 2000 and
continuing until the Effective Time, SPSS agrees as to itself and its
Subsidiaries that (except as expressly contemplated or permitted by this
Agreement or the SPSS Disclosure Schedule or as required by a Governmental
Entity of competent jurisdiction or to the extent that ShowCase shall otherwise
consent in writing, which consent shall not be unreasonably withheld or
delayed):
(a) Ordinary Course.
(i) SPSS and its Subsidiaries shall carry on their respective
businesses in the usual, regular and ordinary course in all
material respects, in substantially the same manner as heretofore
conducted, and shall use all reasonable efforts to preserve intact
their present lines of business, maintain their rights and
franchises and preserve their relationships with customers,
suppliers and others having business dealings with them to the end
that their ongoing businesses shall not be impaired in any material
respect at the Effective Time; provided, however, that no action by
SPSS or its Subsidiaries with respect to matters specifically
addressed by any other provision of this Section 4.1 shall be
deemed a breach of this Section 4.1 (a) (1) unless such action
would constitute a breach of one or more of such other provisions.
(ii) Other than in connection with acquisitions permitted by
Section 4.1 (e), SPSS shall not, and shall not permit any of its
Subsidiaries to, (A) enter into any new material line of business
or (B) incur or commit to any capital expenditures or any
obligations or liabilities in connection therewith other than
capital expenditures and obligations or liabilities in connection
therewith incurred or committed to in the ordinary course of
business consistent with past practice and which, together with all
such expenditures incurred or committed since September 30, 2000,
are not in excess of the amounts set forth in Section 4.1 (a) of
the SPSS Disclosure Schedule.
(b) Dividends; Changes in Share Capital. SPSS shall not, and shall not
permit any of its Subsidiaries to, and shall not propose to, (i) declare or pay
any dividends on or make other distributions in respect of any of its capital
stock, (ii) split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in lieu
of or in substitution for, shares of its capital stock, except for any such
transaction by a wholly owned Subsidiary of SPSS which remains a wholly owned
Subsidiary after consummation of such transaction or (iii) repurchase, redeem or
otherwise acquire any shares of its capital stock or any securities convertible
into or exercisable for any shares of its capital stock except for the purchase
from time to time by SPSS of SPSS Common Stock in the ordinary course of
business consistent with past practice in connection with the SPSS Benefit Plans
and, subject to the restrictions contained in Section 4.1 (h) herein.
(c) Issuance of Securities. SPSS shall not, and shall not permit any of
its Subsidiaries to, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock of any class, any
SPSS Voting Debt or any securities convertible into or exercisable
A-24
for, or any rights, warrants, calls or options to acquire, any such shares or
SPSS Voting Debt, or enter into any commitment, arrangement, undertaking or
agreement with respect to any of the foregoing, other than (i) the issuance of
SPSS Common Stock upon the exercise of SPSS Stock Options or in connection with
other stock-based benefit plans outstanding on the date hereof, in each case in
accordance with their present terms or pursuant to SPSS Stock Options or other
stock based awards granted pursuant to clause (ii) below, (ii) the granting of
SPSS Stock Options or other stock-based awards to acquire shares of SPSS Common
Stock granted under stock-based benefit plans outstanding on the date hereof in
the ordinary course of business consistent with past practice not in excess of
SPSS Stock Options for 350,000 shares of SPSS Common Stock, (iii) issuances by a
wholly owned Subsidiary of SPSS of capital stock to such Subsidiary's parent or
another wholly owned Subsidiary of SPSS or (iv) pursuant to acquisitions set
forth on the SPSS Disclosure Schedule or the financings therefor.
(d) Governing Documents. Except to the extent required to comply with
their respective obligations hereunder or with applicable law, SPSS and Merger
Sub shall not amend or propose to so amend their respective certificates of
incorporation, bylaws or other governing documents.
(e) No Acquisitions. Other than (i) acquisitions disclosed on the SPSS
Disclosure Schedule and (ii) acquisitions for cash in existing or related lines
of business of SPSS the fair market value of the total consideration (including
the value of indebtedness acquired or assumed) for which does not exceed the
amount specified in the aggregate for all such acquisitions in Section 4.1 (e)
of the SPSS Disclosure Schedule and none of which acquisitions referred to in
this clause (ii) presents a material risk of making it more difficult to obtain
any approval or authorization required in connection with the Merger under
Regulatory Laws, SPSS shall not, and shall not permit any of its Subsidiaries
to, acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or otherwise
acquire or agree to acquire any assets (other than the acquisition of assets
used in the operations of the business of SPSS and its Subsidiaries in the
ordinary course, which assets do not constitute a business unit, division or all
or substantially all of the assets of the transferor); provided, however, that
the foregoing shall not prohibit (x) internal reorganizations or consolidations
involving existing Subsidiaries of SPSS or (y) the creation of new Subsidiaries
of SPSS organized to conduct or continue activities otherwise permitted by this
Agreement.
(f) No Dispositions. Other than (i) internal reorganizations or
consolidations involving existing Subsidiaries of SPSS, (ii) dispositions
referred to in SPSS SEC Reports filed prior to the date of this Agreement or
(iii) as may be required by or in conformance with law or regulation in order to
permit or facilitate the consummation of the transactions contemplated hereby or
the transactions disclosed in the SPSS Disclosure Schedule, SPSS shall not, and
shall not permit any of its Subsidiaries to, sell, lease or otherwise dispose
of, or agree to sell, lease or otherwise dispose of, any of its assets
(including capital stock of Subsidiaries of SPSS but excluding inventory in the
ordinary course of business).
(g) Investments; Indebtedness. SPSS shall not, and shall not permit any
of its Subsidiaries to, other than in connection with actions permitted by
Section 4.1 (e), (i) make any loans, advances or capital contributions to, or
investments in, any other Person, other than (x) by SPSS or a Subsidiary of SPSS
to or in SPSS or any Subsidiary of SPSS, (y) pursuant to any contract or other
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legal obligation of SPSS or any of its Subsidiaries existing at the date of this
Agreement or (z) in the ordinary course of business consistent with past
practice in an aggregate amount not in excess of $1,000,000 (provided that none
of such transactions referred to in this clause (z) presents a material risk of
making it more difficult to obtain any approval or authorization required in
connection with the Merger under Regulatory Laws) or (ii) create, incur, assume
or suffer to exist any indebtedness, issuances of debt securities, guarantees,
loans or advances not in existence as of the date of this Agreement except
pursuant to the credit facilities, indentures and other arrangements in
existence on the date of this Agreement or in the ordinary course of business
consistent with past practice, in each case as such credit facilities,
indentures and other arrangements may be amended, extended, modified, refunded,
renewed or refinanced after the date of this Agreement.
(h) Pooling; Tax-Free Qualification. SPSS shall use its reasonable best
efforts not to, and shall use its reasonable best efforts not to permit any of
its Subsidiaries to, take any action (including any action otherwise permitted
by this Section 4.1) that would prevent or impede the Merger from qualifying as
a "pooling of interests" for accounting purposes or as a "reorganization" under
Section 368 of the Code.
(i) Compensation. Other than as contemplated by Section 5.6 or by
Section 4.1 (c) or 4.1 (1) of the SPSS Disclosure Schedule, SPSS shall not
increase the amount of compensation of any director, executive officer or
employee, make any increase in or commitment to increase any employee benefits,
issue any additional SPSS Stock Options, terminate or modify any existing
employee benefit plan, adopt or make any commitment to adopt any additional
employee benefit plan or make any contribution, other than regularly scheduled
contributions, to any SPSS Benefit Plan and, in the case of any of the
foregoing, except in the ordinary course of business consistent with past
practice or as required by an existing agreement.
(j) Accounting Methods; Income Tax Elections. Except as disclosed in
SPSS SEC Reports filed prior to the date of this Agreement, or as required by a
Governmental Entity, SPSS shall not change its methods of accounting in effect
at June 30, 2000, except as required by changes in GAAP as concurred in by
SPSS's independent public accountants. SPSS shall not (i) change its fiscal year
or (ii) make any material tax election, other than in the ordinary course of
business consistent with past practice.
(k) Certain Agreements. SPSS shall not, and shall not permit any of its
Subsidiaries to, enter into any agreements or arrangements that limit or
otherwise restrict SPSS or any of its Subsidiaries or any of their respective
affiliates or any successor thereto or that could, after the Effective Time,
limit or restrict SPSS or any of its affiliates (including the Surviving
Corporation) or any successor thereto, from engaging or competing in any line of
business or in any geographic area which agreements or arrangements,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on SPSS and its Subsidiaries (including the Surviving
Corporation and its Subsidiaries), taken together, after giving effect to the
Merger.
(l) No Related Actions. SPSS will not, and will not permit any of its
Subsidiaries to, agree or commit to do any of the foregoing.
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4.2 COVENANTS OF SHOWCASE. During the period from June 30, 2000 and
continuing until the Effective Time, ShowCase agrees as to itself and its
Subsidiaries that (except as expressly contemplated or permitted by this
Agreement, the ShowCase Disclosure Schedule or as required by a Governmental
Entity of competent jurisdiction or to the extent that SPSS shall otherwise
consent in writing, which consent shall not be unreasonably withheld or
delayed):
(a) Ordinary Course.
(i) ShowCase and its Subsidiaries shall carry on their
respective businesses in the usual, regular and ordinary course in
all material respects, in substantially the same manner as
heretofore conducted, and shall use all reasonable efforts to
preserve intact their present lines of business, maintain their
rights and franchises and preserve their relationships with
customers, suppliers and others having business dealings with them
to the end that their ongoing businesses shall not be impaired in
any material respect at the Effective Time; provided, however, that
no action by ShowCase or its Subsidiaries with respect to matters
specifically addressed by any other provision of this Section 4.2
shall be deemed a breach of this Section 4.2 (a) (i) unless such
action would constitute a breach of one or more of such other
provisions.
(ii) Other than in connection with acquisitions permitted by
Section 4.2 (e), ShowCase shall not, and shall not permit any of
its Subsidiaries to, (A) enter into any licensing agreement; (B)
enter into any new material line of business; (C) incur or commit
to any capital expenditures or any obligations or liabilities in
connection therewith other than Permitted Capital Expenditures (as
defined below) and obligations or liabilities in connection
therewith, or (D) enter into any contract, agreement or other
arrangement for the sale of inventories or for the furnishing of
services by ShowCase or any of its Subsidiaries which contract,
agreement or other arrangement involves expenditures in excess of
$50,000.00 or which may give rise to commitments which may extend
beyond twelve months from the date of such contract, agreement or
arrangement, unless such contract, agreement or arrangement can be
terminated by ShowCase or its Subsidiary, as the case may be, by
giving less than 60 days notice and without incurring an obligation
to pay any material premium or penalty or suffering any other
material detriment. As used herein, a "Permitted Capital
Expenditure" is a capital expenditure which (i) is set forth on a
Capital Expenditure Schedule to be delivered by ShowCase to SPSS as
part of the ShowCase Disclosure Schedule, relating to periods from
and after September 30, 2000, to the extent it is approved by SPSS
(which approval will not be unreasonably withheld by SPSS) or (ii)
is (A) less than $100,000.00 in the case of any single expenditure
or related series of expenditures and (B) $250,000.00 in the
aggregate for all capital expenditures incurred pursuant to this
clause (ii) and not clause (i). ShowCase will deliver to SPSS on a
quarterly basis a schedule of actual capital expenditures made.
(b) Dividends; Changes in Share Capital. ShowCase shall not, and shall
not permit any of its Subsidiaries to, and shall not propose to, (i) declare or
pay any dividends on or make other distributions in respect of any of its
capital stock, (ii) split, combine or reclassify any of its capital
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stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for, shares of its capital stock, or
(iii) repurchase, redeem or otherwise acquire any shares of its capital stock or
any, securities convertible into or exercisable for any shares of its capital
stock except for the purchase from time to time by ShowCase of ShowCase Common
Stock in the ordinary course of business consistent with past practice in
connection with the ShowCase Benefit Plans.
(c) Issuance of Securities. ShowCase shall not, and shall not permit
any of its Subsidiaries to, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock of any class, any
ShowCase Voting Debt or any securities convertible into or exercisable for, or
any rights, warrants, calls or options to acquire, any such shares or ShowCase
Voting Debt, or enter into any commitment, arrangement, undertaking or agreement
with respect to any of the foregoing, other than (i) the issuance of ShowCase
Common Stock upon the exercise of ShowCase Stock Options or in connection with
other stock-based benefits plans outstanding on the date hereof, in each case in
accordance with their present terms or pursuant to ShowCase Stock Options or
other stock based awards granted pursuant to clause (iii) below, (ii) issuances
by a wholly owned Subsidiary of ShowCase of capital stock to such Subsidiary's
parent or another wholly owned subsidiary of ShowCase, (iii) the granting of
ShowCase Stock Options or other stock based awards to acquire shares of ShowCase
Common Stock granted under stock based benefit plans outstanding on the date
hereof in the ordinary course of business consistent with past practice not in
excess of ShowCase Stock Options for 100,000 shares of ShowCase Common Stock, or
(iv) pursuant to acquisitions set forth on the ShowCase Disclosure Schedule or
the financings therefor.
(d) Governing Documents. Except to the extent required to comply with
its obligations hereunder or with applicable law, ShowCase shall not amend or
propose to so amend its respective certificates of incorporation, bylaws or
other governing documents.
(e) No Acquisitions. ShowCase shall not, and shall not permit any of
its Subsidiaries to, acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any business (including by acquisition
of assets) or any corporation, partnership, association or other business
organization or division thereof.
(f) No Dispositions. ShowCase shall not, and shall not permit any of
its Subsidiaries to, sell, lease or otherwise dispose of, or agree to sell,
lease or otherwise dispose of, any of its assets (including capital stock of
Subsidiaries of ShowCase but excluding inventory in the ordinary course of
business).
(g) Investments; Indebtedness. ShowCase shall not, and shall not permit
any of its Subsidiaries to, other than in connection with actions permitted by
Section 4.2 (e), (i) make any loans, advances or capital contributions to, or
investments in, any other Person, other than (x) by ShowCase or a Subsidiary of
ShowCase to or in ShowCase or any Subsidiary of ShowCase, (y) pursuant to any
contract or other legal obligation of ShowCase or any of its Subsidiaries
existing at the date of this Agreement or (z) in the ordinary course of business
consistent with past practice in an aggregate amount not in excess of
$100,000.00 in the aggregate (provided that none of such transactions referred
to in this clause (z) presents a material risk of making it more difficult
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to obtain any approval or authorization required in connection with the Merger
under Regulatory Laws) or (ii) create, incur, assume or suffer to exist any
indebtedness, issuances of debt securities, guarantees, loans or advances not in
existence as of the date of this Agreement except pursuant to the credit
facilities, indentures and other arrangements in existence on the date of this
Agreement or in the ordinary course of business consistent with past practice,
in each case as such credit facilities, indentures and other arrangements and
other existing indebtedness may be amended, extended, modified, refunded,
renewed or refinanced after the date of this Agreement.
(h) Pooling; Tax-Free Qualification. ShowCase shall use its reasonable
best efforts not to, and shall use its reasonable best efforts not to permit any
of its Subsidiaries to, take any action (including any action otherwise
permitted by this Section 4.2) that would prevent or impede the Merger from
qualifying as a "pooling of interests" for accounting purposes or as a
"reorganization" under Section 368 of the Code.
(i) Compensation. Other than as contemplated by Section 5.6 or by
Sections 4.2 (c) or 4.2 (i) of the ShowCase Disclosure Schedule, ShowCase shall
not increase the amount of compensation of any director, executive officer or
employee, make any increase in or commitment to increase any employee benefits,
issue any additional ShowCase Stock Options, terminate or amend any existing
employee benefit plan, adopt or make any commitment to adopt any additional
employee benefit plan or make any contribution, other than regularly scheduled
contributions, to any ShowCase Benefit Plan and, in the case of any of the
foregoing, except in the ordinary course of business consistent with past
practice or as required by an existing agreement.
(j) Accounting Methods; Income Tax Elections. Except as disclosed in
ShowCase SEC Reports filed prior to the date of this Agreement, or as required
by a Governmental Entity, ShowCase shall not change its methods of accounting in
effect at June 30, 2000, except as required by changes in GAAP as concurred in
by ShowCase's independent public accountants. ShowCase shall not (1) change its
fiscal year or (ii) make any material tax election, other than in the ordinary
course of business consistent with past practice.
(k) Certain Agreements. ShowCase shall not, and shall not permit any of
its Subsidiaries to, enter into any agreements or arrangements that limit or
otherwise restrict ShowCase or any of its Subsidiaries or any of their
respective affiliates or any successor thereto, or that could, after the
Effective Time, limit or restrict SPSS or any of its affiliates (including the
Surviving Corporation) or any successor thereto, from engaging or competing in
any line of business or in any geographic area which agreements or arrangements,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on SPSS and its Subsidiaries (including the Surviving
Corporation and its Subsidiaries), taken together, after giving effect to the
Merger.
(l) No Related Actions. ShowCase will not, and will not permit any of
its Subsidiaries to, agree or commit to any of the foregoing.
4.3 GOVERNMENTAL FILINGS. Each party shall (a) confer on a regular and
frequent basis with the other and (b) report to the other (to the extent
permitted by law or regulation or any applicable confidentiality agreement) on
operational matters. ShowCase and SPSS shall file all reports required to be
filed by each of them with the SEC (and all other Governmental Entities) between
the date of this Agreement and the Effective Time and shall (to the extent
permitted by law or
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regulation or any applicable confidentiality agreement) deliver to the other
party copies of all such reports, announcements and publications promptly after
the same are filed.
4.4 CONTROL OF OTHER PARTY'S BUSINESS. Nothing contained in this
Agreement shall give ShowCase, directly or indirectly, the right to control or
direct SPSS's operations prior to the Effective Time. Nothing contained in this
Agreement shall give SPSS, directly or indirectly, the right to control or
direct ShowCase's operations prior to the Effective Time. Prior to the Effective
Time, each of ShowCase and SPSS shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision over its
respective operations.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 PREPARATION OF PROXY STATEMENT; SHAREHOLDERS MEETINGS. (a) As
promptly as reasonably practicable following the date hereof, SPSS and ShowCase
shall prepare and file with the SEC mutually acceptable proxy materials which
shall constitute the Joint Proxy Statement/Prospectus (such proxy
statement/prospectus, and any amendments or supplements thereto, the "Joint
Proxy Statement/Prospectus") and SPSS shall prepare and file a registration
statement on Form S-4 with respect to the issuance of SPSS Common Stock in the
Merger (the "Form S-4"). The Joint Proxy Statement/Prospectus will be included
in and will constitute a part of the Form S-4 as SPSS's prospectus. The Form S-4
and the Joint Proxy Statement/Prospectus shall comply as to form in all material
respects with the applicable provisions of the Securities Act, and the Exchange
Act and the rules and regulations thereunder. Each of SPSS and ShowCase shall
use reasonable best efforts to have the Form S-4 declared effective by the SEC
and to keep the Form S-4 effective as long as is necessary to consummate the
Merger and the transactions contemplated thereby. SPSS and ShowCase shall, as
promptly as practicable after receipt thereof, provide the other party copies of
any written comments and advise the other party of any oral comments, with
respect to the Joint Proxy Statement /Prospectus received from the SEC. SPSS
will provide ShowCase with a reasonable opportunity to review and comment on any
amendment or supplement to the Form S-4 prior to filing such with the SEC, and
will provide ShowCase with a copy of all such filings made with the SEC.
Notwithstanding any other provision herein to the contrary, no amendment or
supplement (including by incorporation by reference) to the Joint Proxy
Statement/Prospectus or the Form S-4 shall be made without the approval of both
parties, which approval shall not be unreasonably withheld or delayed; provided,
that with respect to documents filed by a party which are incorporated by
reference in the Form S-4 or Joint Proxy Statement/Prospectus, this right of
approval shall apply only with respect to information relating to the other
party or its business, financial condition or results of operations; and
provided, further, that SPSS, in connection with a Change in the SPSS
Recommendation, and ShowCase, in connection with a Change in the ShowCase
Recommendation, may amend or supplement the Joint Proxy Statement/Prospectus or
Form S-4 (including by incorporation by reference) pursuant to a Qualifying
Amendment (as defined below) to effect such a Change, and in such event, this
right of approval shall apply only with respect to information relating to the
other party or its business, financial condition or results of operations, and
shall be subject to the right of each party to have its Board of Directors'
deliberations and conclusions to be accurately described. A "Qualifying
Amendment" means an amendment or supplement to the Joint Proxy
Statement/Prospectus or Form
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S-4 (including by incorporation by reference) to the extent it contains (i) a
Change in the SPSS Recommendation or a Change in the ShowCase Recommendation (as
the case may be), (ii) a statement of the reasons of the Board of Directors of
SPSS or ShowCase (as the case may be) for making such Change in the SPSS
Recommendation or Change in the ShowCase Recommendation (as the case may be) and
(iii) additional information reasonably related to the foregoing. SPSS will use
reasonable best efforts to cause the Joint Proxy Statements/Prospectus to be
mailed to SPSS stockholders, and ShowCase will use reasonable best efforts to
cause the Joint Proxy Statement/Prospectus to be mailed to ShowCase's
shareholders, in each case after the Form S-4 is declared effective under the
Securities Act. SPSS shall also take any action (other than qualifying to do
business in any jurisdiction in which it is not now so qualified or to file a
general consent to service of process) required to be taken under any applicable
state securities laws in connection with the Share Issuance and ShowCase shall
furnish all information concerning ShowCase and the holders of ShowCase Common
Stock as may be reasonably requested in connection with any such action. Each
party will advise the other party, promptly after it receives notice thereof, of
the time when the Form S-4 has become effective, the issuance of any stop order,
the suspension of the qualification of the SPSS Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Joint Proxy Statement/Prospectus or the
Form S-4. If at any time prior to the Effective Time any information relating to
SPSS or ShowCase, or any of their respective affiliates, officers or directors,
should be discovered by SPSS or ShowCase which should be set forth in an
amendment or supplement to any of the Form S-4 or the Joint Proxy
Statement/Prospectus so that any of such documents would not include any
misstatement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, the party which discovers such information shall promptly
notify the other party hereto and, to the extent required by law, rules or
regulations, an appropriate amendment or supplement describing such information
shall be promptly filed with the SEC and disseminated to the stockholders of
SPSS and ShowCase.
(b) ShowCase shall duly take (subject to compliance with the provisions
of Section 3.1 (e) and Section 3.2(e) (provided that ShowCase shall have used
reasonable best efforts to ensure that such representations are true and
correct) ) all lawful action to call, give notice of, convene and hold a meeting
of its shareholders on a date as soon as reasonably practicable (the "ShowCase
Shareholders Meeting") for the purpose of obtaining the Required ShowCase Vote
with respect to the transactions contemplated by this Agreement and shall take
all lawful action to solicit the adoption of this Agreement by the Required
ShowCase Vote; and the Board of Directors of ShowCase shall recommend adoption
of this Agreement by the shareholders of ShowCase to the effect as set forth in
Section 3.2 (f) (the "ShowCase Recommendation"), and shall not withdraw, modify
or qualify (or propose to withdraw, modify or qualify) (a "Change") in any
manner adverse to SPSS such recommendation or take any action or make any
statement in connection with the ShowCase Shareholders Meeting inconsistent with
such recommendation (collectively, a "Change in the ShowCase Recommendation");
provided the foregoing shall not prohibit accurate disclosure (and such
disclosure shall not be deemed to be a Change in the ShowCase Recommendation) of
factual information regarding the business, financial condition or results of
operations of SPSS or ShowCase or the fact that an Acquisition Proposal has been
made, the identity of the party making such proposal or the material terms of
such proposal (provided, that the Board of Directors of ShowCase does not
withdraw, modify or qualify (or propose to withdraw, modify or qualify) in any
manner adverse to SPSS its recommendation) in the Form S-4 or the Joint Proxy
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Statement/Prospectus or otherwise, to the extent such information, facts,
identity or terms is required to be disclosed under applicable law; and,
provided further, that the Board of Directors of ShowCase may make a Change in
the ShowCase Recommendation (x) pursuant to Section 5.5 hereof or (y) prior to
the ShowCase Shareholders Meeting if (i) the Board of Directors of ShowCase
determines in good faith that a Material Adverse Effect has occurred with
respect to SPSS and (ii) the Board of Directors of ShowCase determines in good
faith that, by reason of its determination in clause (i) the failure to effect
such Change in the ShowCase Recommendation would be inconsistent with the
fiduciary duties of the ShowCase Board of Directors under applicable law.
Notwithstanding any Change in the ShowCase Recommendation, this Agreement shall
be submitted to the shareholders of ShowCase at the ShowCase Shareholders
Meeting for the purpose of adopting the Agreement and approving the Merger;
provided that this Agreement shall not be required to be submitted to the
shareholders of ShowCase at the ShowCase Shareholders Meeting if this Agreement
has been terminated pursuant to Section 7.1 hereof.
(c) SPSS shall duly take (subject to compliance with the provisions of
Section 3.2(e) and Section 3.1 (e) (provided that SPSS shall have used
reasonable best efforts to ensure that such representation is true and correct))
all lawful action to call, give notice of, convene and hold a meeting of its
stockholders on a date as soon as reasonably practicable (the "SPSS Stockholders
Meeting") for the purpose of obtaining the SPSS Stockholder Approval and shall
take all lawful action to solicit the approval of this Agreement and the
transactions contemplated hereby and the Share Issuance and the Board of
Directors of SPSS shall recommend approval of the Share Issuance by the
stockholders of SPSS to the effect as set forth in Section 3.1 (f) (the "SPSS
Recommendation"), and shall not Change in any manner adverse to ShowCase such
recommendation or take any action or make any statement in connection with the
SPSS Stockholders Meeting inconsistent with such recommendation (collectively, a
"Change in the SPSS Recommendation"); provided the foregoing shall not prohibit
accurate disclosure (and such disclosure shall not be deemed to be a Change in
the SPSS Recommendation) of factual information regarding the business,
financial condition or operations of SPSS or ShowCase or the fact that an
Acquisition Proposal has been made, the identity of the party making such
proposal or the material terms of such proposal (provided, that the Board of
Directors of SPSS does not withdraw, modify or qualify (or propose to withdraw,
modify or qualify) in any manner adverse to ShowCase its recommendation) in the
Form S-4 or the Joint Proxy Statement/Prospectus or otherwise, to the extent
such information, facts, identity or terms is required to be disclosed under
applicable law; and, provided, further, that the Board of Directors of SPSS may
make a Change in the SPSS Recommendation (x) pursuant to Section 5.5 hereof or
(y) prior to the SPSS Stockholders Meeting if (i) the Board of Directors of SPSS
determines in good faith that a Material Adverse Effect has occurred with
respect to ShowCase and (ii) the Board of Directors of SPSS determines in good
faith that, by reason of its determination in clause (i) the failure to effect
such Change in the SPSS Recommendation would be inconsistent with the fiduciary
duties of the SPSS Board of Directors under applicable law. Notwithstanding any
Change in the SPSS Recommendation, a proposal to approve the Share Issuance
shall be submitted to the stockholders of SPSS at the SPSS Stockholders Meeting
for the purpose of obtaining the SPSS Stockholder Approval; provided that this
Agreement shall not be required to be submitted to the stockholders of SPSS at
the SPSS Stockholders Meeting if this Agreement has been terminated pursuant to
Section 7.1 hereof.
(d) For purposes of this Agreement, a Change in the ShowCase
Recommendation shall be deemed to include, without limitation, a recommendation
by the ShowCase Board of Directors of a
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third party Acquisition Proposal with respect to ShowCase and a Change in the
SPSS Recommendation shall be deemed to include, without limitation, a
recommendation by the SPSS Board of Directors of a third party Acquisition
Proposal with respect to SPSS.
5.2 SPSS BOARD OF DIRECTORS; EXECUTIVE OFFICERS; HEADQUARTERS. (a) At
or prior to the Effective Time, SPSS will use its reasonable best efforts to (i)
reconstitute the board of directors of SPSS in accordance with Section 1.7. The
headquarters of SPSS will remain in Chicago, Illinois and SPSS will maintain
such other offices as deemed by SPSS to be necessary or desirable.
(b) Following the Effective Time and for so long thereafter as SPSS
shall deem necessary or desirable, SPSS shall preserve and perpetuate the name
"ShowCase" as a trade name.
5.3 ACCESS TO INFORMATION/EMPLOYEES. (a) Upon reasonable notice, each
party shall (and shall cause its Subsidiaries to) afford to the officers,
employees, accountants, counsel, financial advisors and other representatives of
the other party reasonable access during normal business hours, during the
period prior to the Effective Time, to all its properties, books, contracts,
commitments, records, officers and employees and, during such period, such party
shall (and shall cause its Subsidiaries to) furnish promptly to the other party
(a) a copy of each report, schedule, registration statement and other document
filed, published, announced or received by it during such period pursuant to the
requirements of Federal or state securities laws, as applicable (other than
documents which such party is not permitted to disclose under applicable law and
other than documents that can be obtained without cost or delay by the party
requesting same), and (b) all other information concerning it and its business,
properties and personnel as such other party may reasonably request (including
consultation on a regular basis with respect to litigation matters); provided,
however, that either party may restrict the foregoing access to the extent that
(i) any law, treaty, rule or regulation of any Governmental Entity applicable to
such party requires such party or its Subsidiaries to restrict or prohibit
access to any such properties or information or (ii) the information is subject
to confidentiality obligations to a third party. Any such information obtained
pursuant to this Section 5.3 ("Confidential Information") will be used solely
for the purpose of consideration or performance of the transactions contemplated
by this Agreement or any other agreement related hereto and will be kept
confidential by the party obtaining such information and all persons obtaining
such information on such party's behalf or who obtain such information from such
party. Confidential Information shall not include information that (A) is or
becomes generally available to the public other than as a result of disclosure
by a party or its Representatives, or (B) is or becomes available to a party
(other than the disclosing party) or its Representatives that is not known by
the non-disclosing party to have any obligation not to disclose such
information. Notwithstanding the foregoing, Confidential Information may be
disclosed by a party (x) to its directors, officers, employees, representatives
(including, without limitation, financial advisors, attorneys and accountants)
or agents (collectively "Representatives") who need to know such information if
the party informs such Representatives of the confidential nature of such
information and directs them to treat such information confidentially and to use
such information for no purpose other than as specifically permitted by the
Agreement and (y) if the party is legally required to make such disclosure as a
result of a court order, subpoena or similar legal duress, provided that prior
to such disclosure, the disclosing party gives to the other party prompt written
notice of its receipt of such order or subpoena or similar document so that the
other party has a reasonable opportunity prior to disclosure to obtain a
protective order (if disclosure of Confidential Information is so required, the
disclosing party shall disclose only that portion of such information
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that is so required and shall assist the other party in obtaining protective
orders or undertakings that confidential treatment will be accorded to any such
information furnished). In the event of termination of this Agreement, each
party will promptly return to the other party all Confidential Information in
its possession (including all written materials prepared or supplied by or on
its behalf containing or reflecting any Confidential Information) and will not
retain any copies, extracts or other reproductions in whole or in part of any
Confidential Information. Any work papers, memoranda or other writings prepared
by a party or its Representatives derived from or incorporating any Confidential
Information shall be destroyed promptly upon termination of this Agreement, with
such destruction confirmed to the other party in writing. Any oral Confidential
Information will continue to be subject to the terms of this Section 5.3. Each
party shall be responsible for the breach of the terms of this Section 5.3 by
its Representative. Any investigation by SPSS or ShowCase shall not affect the
representation and warranties of ShowCase and SPSS, as the case may be.
(b) After the date hereof SPSS and ShowCase shall establish a mechanism
reasonably acceptable to both parties by which SPSS will be permitted, prior to
the Effective Time and subject to applicable law, to communicate directly with
ShowCase employees regarding employee related matters after the Effective Time.
5.4 REASONABLE BEST EFFORTS.
(a) Subject to the terms and conditions of this Agreement, each party
will use its reasonable best efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things necessary, proper or advisable under
this Agreement and applicable laws and regulations to consummate the Merger and
the other transactions contemplated by this Agreement as soon as practicable
after the date hereof, including (i) preparing and filing as promptly as
practicable all documentation to effect all necessary applications, notices,
petitions, filings, tax ruling requests and other documents and to obtain as
promptly as practicable all consents, waivers, licenses, orders, registrations,
approvals, permits, tax rulings and authorizations necessary or advisable to be
obtained from any third party and/or any Governmental Entity in order to
consummate the Merger or any of the other transactions contemplated by this
Agreement and (ii) taking all reasonable steps as may be necessary to obtain all
such material consents, waivers, licenses, registrations, permits,
authorizations, tax rulings, orders and approvals. In furtherance and not in
limitation of the foregoing, each party hereto agrees to make an appropriate
filing of a Notification and Report Form pursuant to the HSR Act and any other
Regulatory Law (as defined below) with respect to the transactions contemplated
hereby as promptly as practicable after the date hereof and to supply as
promptly as practicable any additional information and documentary material that
may be requested pursuant to the HSR Act and any other Regulatory Law and to
take all other actions necessary to cause the expiration or termination of the
applicable waiting periods under the HSR Act as soon as practicable. Nothing in
this Agreement shall require any of SPSS and its Subsidiaries or ShowCase and
its Subsidiaries to sell, hold separate or otherwise dispose of or conduct their
business in a specified manner, or agree to sell, hold separate or otherwise
dispose of or conduct their business in a specified manner, or permit the sale,
holding separate or other disposition of, any assets of SPSS, ShowCase or their
respective Subsidiaries or the conduct of their business in a specified manner,
as a condition to obtaining any approval from a Governmental Entity or any other
Person, if such sale, holding separate or other disposition or the conduct of
their business in a specified manner is not conditioned on the Closing or, in
the aggregate, would reasonably be expected to have a Material
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Adverse Effect on SPSS and its Subsidiaries (including the Surviving Corporation
and its Subsidiaries), taken together, after giving effect to the Merger.
(b) Each of SPSS and ShowCase shall, in connection with the efforts
referenced in Section 5.4 (a) obtain all requisite material approvals and
authorizations for the transactions contemplated by this Agreement under the HSR
Act or any other Regulatory Law, use its reasonable best efforts to (i)
cooperate in all respects with each other in connection with any filing or
submission and in connection with any investigation or other inquiry, including
any proceeding initiated by a private party, (ii) promptly inform the other
party of any communication received by such party from, or given by such party
to, the Antitrust Division of the Department of Justice (the "DOJ"), the Federal
Trade Commission (the "FTC") or any other Governmental Entity and of any
material communication received or given in connection with any proceeding by a
private party, in each case regarding any of the transactions contemplated
hereby, and (iii) permit the other party to review any communication given by it
to, and consult with each other in advance of any meeting or conference with,
the DOJ, the FTC or any such other Governmental Entity or, in connection with
any proceeding by a private party, with any other Person, and to the extent
appropriate or permitted by the DOJ, the FTC or such other applicable
Governmental Entity or other Person, give the other party the opportunity to
attend and participate in such meetings and conferences. For purposes of this
Agreement, "Regulatory Law" means the Sherman Act, as amended, as amended, the
HSR Act, the Federal Trade Commission Act, as amended, and all other federal,
state and foreign, if any, statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines and other laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade or lessening of competition.
(c) Subject to the terms and conditions of this Agreement, in
furtherance and not in limitation of the covenants of the parties contained in
Sections 5.4(a) and 5.4(b), if any administrative or judicial action or
proceeding, including any proceeding by a private party, is instituted (or
threatened to be instituted) challenging any transaction contemplated by this
Agreement as violative of any Regulatory Law, each of SPSS and ShowCase shall
cooperate in all respects with each other and use its respective reasonable best
efforts, including without limitation, selling, holding separate or otherwise
disposing of or conducting their business in a specified manner, or agreeing to
sell, hold separate or otherwise dispose of or conduct their business in a
specified manner or permitting the sale, holding separate or other disposition
of, any assets of SPSS, ShowCase or their respective Subsidiaries or the
conducting of their business in a specified manner, in order to contest and
resist any such action or proceeding and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order, whether temporary,
preliminary or permanent, that is in effect and that prohibits, prevents or
restricts consummation of the transactions contemplated by this Agreement.
Notwithstanding the foregoing or any other provision of this Agreement, nothing
in this Section 5.4 shall limit a party's right to terminate this Agreement
pursuant to Article VII; provided that the foregoing is subject in all respects
to the last sentence of Section 5.4(a).
(d) If any objections are asserted with respect to the transactions
contemplated hereby under any Regulatory Law or if any suit is instituted by any
Governmental Entity or any private party challenging any of the transactions
contemplated hereby as violative of any Regulatory Law, each of SPSS and
ShowCase shall use its reasonable best efforts to resolve any such objections
or
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challenge as such Governmental Entity or private party may have to such
transactions under such Regulatory Law so as to permit consummation of the
transactions contemplated by this Agreement.
5.5 ACQUISITION PROPOSALS. Without limitation on any of such party's
other obligations under this Agreement (including under Article IV hereof), each
of SPSS and ShowCase agrees that neither it nor any of its Subsidiaries nor any
of the officers and directors of it or its Subsidiaries shall, and that it shall
use its reasonable best efforts to cause its and its Subsidiaries' employees,
agents and representatives (including any investment banker, attorney or
accountant retained by it or any of its Subsidiaries) not to, directly or
indirectly, initiate, solicit, encourage or knowingly facilitate (including by
way of furnishing information) any inquiries or the making of any proposal or
offer with respect to a merger, reorganization, share exchange, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving it, or any purchase or sale of the consolidated assets
(including without limitation stock of Subsidiaries) of such party and its
Subsidiaries, taken as a whole, (any such proposal or offer (other than a
proposal or offer made by the other party or an affiliate thereof) being
hereinafter referred to as an "Acquisition Proposal"). Each of SPSS and ShowCase
further agrees that neither it nor any of its Subsidiaries nor any of the
officers and directors of it or its Subsidiaries shall, and that it shall use
its reasonable best efforts to cause its and its Subsidiaries' employees, agents
and representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) not to, directly or indirectly, have
any discussion with or provide any confidential information or data to any
Person relating to an Acquisition Proposal, or engage in any negotiations
concerning an Acquisition Proposal, or knowingly facilitate any effort or
attempt to make or implement an Acquisition Proposal or accept an Acquisition
Proposal. Notwithstanding anything in this Agreement to the contrary, each of
SPSS and ShowCase or its respective Board of Directors shall be permitted to (A)
to the extent applicable, comply with Rule 14d-9 and Rule 14e-2 promulgated
under the Exchange Act with regard to an Acquisition Proposal, (B) effect a
Change in the SPSS or ShowCase Recommendation, as the case may be, or (C) engage
in any discussions or negotiations with, or provide any information to, any
Person in response to an unsolicited bona fide written Acquisition Proposal by
any such Person, if and only to the extent that, in any such case as is referred
to in clause (B) or (C), (i) its Shareholders Meeting shall not have occurred,
(ii) (x) in the case of clause (B) above such change is permitted by clause (y)
of the second proviso of the first sentence of Section 5.1 (b) or Section 5.1
(c), as the case may be, or it has received an unsolicited bona fide written
Acquisition Proposal from a third party and its Board of Directors concludes in
good faith that such Acquisition Proposal constitutes a Superior Proposal (as
defined in Section 8.11) and (y) in the case of clause (C) above, its Board of
Directors concludes in good faith that there is a reasonable likelihood that
such Acquisition Proposal could result in a Superior Proposal, (iii) prior to
providing any information or data to any Person in connection with an
Acquisition Proposal by any such Person, its Board of Directors receives from
such Person an executed confidentiality agreement containing terms at least as
stringent as those contained in Section 5.3 and (iv) prior to providing any
information or data to any Person or entering into discussions or negotiations
with any Person, such party notifies the other party promptly of such inquiries,
proposals or offers received by, any such information requested from, or any
such discussions or negotiations sought to be initiated or continued with, any
of its representatives indicating, in connection with such notice, the name of
such Person and the material terms and conditions of any inquiries, proposals or
offers. Each of SPSS and ShowCase agrees that it will promptly keep the other
party informed of the status and terms of any such proposals or offers and the
status and terms of any such discussions or negotiations. Each of SPSS and
ShowCase agrees that it will, and will
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cause its officers, directors and representatives to, immediately cease and
cause to be terminated any activities, discussions or negotiations existing as
of the date of this Agreement with any parties conducted heretofore with respect
to any Acquisition Proposal. Each of SPSS and ShowCase agrees that it will use
reasonable best efforts to promptly inform its directors, officers, key
employees, agents and representatives of the obligations undertaken in this
Section 5.5. Nothing in this Section 5.5 shall (x) permit SPSS or ShowCase to
terminate this Agreement (except as specifically provided in Article VII hereof)
or (y) affect any other obligation of SPSS or ShowCase under this Agreement.
5.6 EMPLOYEE BENEFITS MATTERS. Following the Effective Time, SPSS shall
comply with the terms of, or cause the Surviving Corporation to comply with the
terms of, all ShowCase Benefit Plans and related funding arrangements in
accordance with their respective terms. Nothing herein shall require SPSS to
continue any particular ShowCase Benefit Plan or prevent the amendment or
termination thereof, provided, however, that SPSS shall not take any action (by
way of amendment, termination or otherwise) which is in violation of the terms
of any ShowCase Benefit Plan or applicable law. Subject to the first two
sentences of this Section 5.6 (a), from and after the Effective Time until the
first anniversary of the Effective Time, SPSS shall provide employee benefits
under SPSS Benefit Plans to the employees and former employees of ShowCase and
its Subsidiaries that are substantially comparable in the aggregate to those
provided to such persons pursuant to the ShowCase Benefit Plans in effect
immediately prior to the date hereof. With respect to any SPSS Benefit Plans in
which any ShowCase employees first become eligible to participate, on or after
the Effective Time, SPSS shall: (A) provide each such employee with credit for
any co-payments and deductibles paid on or after January 1 of the calendar year
in which the Effective Time occurs (to the same extent such credit was given
under the analogous ShowCase Benefit Plan during the same period); and (B)
recognize all service of the ShowCase Employees with ShowCase and its
Subsidiaries for purposes of eligibility to participate and vesting credit.
5.7 FEES AND EXPENSES. Subject to Section 5.15 and Section 7.2, whether
or not the Merger is consummated, all Expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such Expenses, except (a) if the Merger is consummated, the Surviving
Corporation or its relevant Subsidiary shall pay, or cause to be paid, any and
all property or transfer taxes imposed on ShowCase or its Subsidiaries and (b)
Expenses incurred in connection with the filing, printing and mailing of the
Joint Proxy Statement/Prospectus, which shall be paid by SPSS; provided,
however, that the number of shares of SPSS Common Stock to be issued in
connection with this Agreement shall not be adjusted to reflect any of such
Expenses. As used in this Agreement, "Expenses" includes all out-of-pocket
expenses (including, without limitation, all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a party hereto and
its affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of this Agreement and the transactions contemplated hereby,
including the preparation, printing, filing and mailing of the Joint Proxy
Statement/Prospectus and the solicitation of stockholder approvals and all other
matters related to the transactions contemplated hereby.
5.8 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. The
Surviving Corporation shall, and SPSS shall cause the Surviving Corporation to,
(i) indemnify and hold harmless, and provide advancement of expenses to, all
past and present directors, officers and employees of ShowCase and its
Subsidiaries (in all of their capacities) (a) to the same extent such persons
are
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indemnified or have the right to advancement of expenses as of the date of this
Agreement by ShowCase pursuant to ShowCase's articles of incorporation, bylaws
and indemnification agreements, if any, in existence on the date hereof with any
directors, officers and employees of ShowCase and its Subsidiaries and (b)
without limitation to clause (a), to the fullest extent permitted by law, in
each case for acts or omissions occurring at or prior to the Effective Time
(including for acts or omissions occurring in connection with the approval of
this Agreement and the consummation of the transactions contemplated hereby),
(ii) include and cause to be maintained in effect in the Surviving Corporation's
(or any successor's) articles of incorporation and bylaws for a period of six
years after the Effective Time, the current provisions regarding elimination of
liability of directors, indemnification of officers, directors and employees and
advancement of expenses contained in the articles of incorporation and bylaws of
ShowCase and (iii) cause to be maintained for a period of six years after the
Effective Time the current policies of directors' and officers' liability
insurance and fiduciary liability insurance maintained by ShowCase (provided
that the Surviving Corporation (or any successor) may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are, in the aggregate, no less advantageous to the insured)
with respect to claims arising from facts or events that occurred on or before
the Effective Time. The obligations of the Surviving Corporation under this
Section 5.8 shall not be terminated or modified in such a manner as to adversely
affect any indemnitee to whom this Section 5.8 applies without the consent of
such affected indemnitee (it being expressly agreed that the indemnitees to whom
this Section 5.8 applies shall be third party beneficiaries of this Section
5.8).
5.9 PUBLIC ANNOUNCEMENTS. SPSS and ShowCase shall use reasonable best
efforts to develop a joint communications plan and each party shall use
reasonable best efforts (i) to ensure that all press releases and other public
statements with respect to the transactions contemplated hereby shall be
consistent with such joint communications plan, and (ii) unless otherwise
required by applicable law or by obligations pursuant to any listing agreement
with or rules of any securities exchange, neither party shall issue any press
release or otherwise making any public statement with respect to this Agreement
or the transactions contemplated hereby without the prior written consent of the
other party. In addition to the foregoing, except to the extent disclosed in or
consistent with the Joint Proxy Statement/Prospectus in accordance with the
provisions of Section 5.1, neither SPSS nor ShowCase shall issue any press
release or otherwise make any public statement or disclosure concerning the
other party or the other party's business, financial condition or results of
operations without the consent of the other party, which consent shall not be
unreasonably withheld or delayed.
5.10 ACCOUNTANT'S LETTERS. (a) SPSS shall use reasonable best efforts
to cause to be delivered to ShowCase a letter from SPSS's independent public
accountants dated the Closing Date, addressed to SPSS and ShowCase, in form
reasonably satisfactory to ShowCase and customary in scope for pooling letters
delivered by independent public accountants in connection with registration
statements similar to the Form S-4, stating that accounting for the Merger as a
pooling-of-interests under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations is appropriate if the Merger is closed and
consummated as contemplated by this Agreement.
(b) ShowCase shall use reasonable best efforts to cause to be delivered
to SPSS a letter from ShowCase's independent public accountants dated the
Closing Date, addressed to ShowCase
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and SPSS, in form reasonably satisfactory to SPSS and customary in scope for
pooling letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4, stating that they concur with
ShowCase's conclusion that, as of the date of their report, no conditions exist
that would preclude ShowCase's ability to be a party in a business combination
to be accounted for as a pooling-of-interests.
(c) Following execution of this Agreement, each of SPSS and ShowCase
shall use reasonable best efforts to cause the transactions contemplated by this
Agreement, including the Merger, to be accounted for as a pooling-of-interests
under Opinion 16 of the Accounting Principles Board and applicable SEC rules and
regulations, and such accounting treatment to be accepted by the SEC.
5.11 LISTING OF SHARES OF SPSS COMMON STOCK. SPSS shall use its
reasonable best efforts to cause the shares of SPSS Common Stock to be issued in
the Merger and the shares of SPSS Common Stock to be reserved for issuance upon
exercise of the ShowCase Stock Options to be approved for listing on NASDAQ,
subject to official notice of issuance, prior to the Closing Date.
5.12 DIVIDENDS. After the date of this Agreement, if applicable, each
of SPSS and ShowCase shall coordinate with the other the payment of dividends
with respect to the SPSS Common Stock and ShowCase Common Stock and the record
dates and payment dates relating thereto, it being the intention of the parties
hereto that holders of SPSS Common Stock and ShowCase Common Stock shall not
receive two dividends, or fail to receive one dividend, for any single calendar
quarter with respect to their shares of SPSS Common Stock and/or ShowCase Common
Stock or any shares of SPSS Common Stock that any such holder receives in
exchange for such shares of ShowCase Common Stock in the Merger.
5.13 AFFILIATES. (a) Not less than 45 days prior to the Effective Time,
ShowCase shall deliver to SPSS a letter identifying all persons who, in the
judgment of ShowCase, may be deemed at the time this Agreement is submitted for
adoption by the shareholders of ShowCase, "affiliates" of ShowCase for purposes
of Rule 145 under the Securities Act or for purposes of qualifying the Merger
for pooling-of-interests accounting treatment under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations, and such list shall
be updated as necessary to reflect changes from the date thereof. ShowCase shall
use reasonable best efforts to cause each person identified on such list to
deliver to SPSS not less than 30 days prior to the Effective Time, a written
agreement substantially in the form attached as Exhibit 5.13(a) hereto (the
"ShowCase Affiliate Agreement" ). Not less than 45 days prior to the Effective
Time, SPSS shall deliver to ShowCase a letter identifying all persons who, in
the judgment of SPSS, may be deemed "affiliates" of SPSS for purposes of
qualifying the Merger for pooling-of-interests accounting treatment under
Opinion 16 of the Accounting Principles Board and applicable SEC rules and
regulations, and such list shall be updated as necessary to reflect changes from
the date hereof. SPSS shall use reasonable best efforts to cause each person
identified on such list to deliver to ShowCase not less than 30 days prior to
the Effective Time, a written agreement substantially in the form attached
hereto as Exhibit 5.13(a) hereto (the "SPSS Affiliate Agreement"; each of the
ShowCase Affiliate Agreement and the SPSS Affiliate Agreement, are hereinafter
referred to as the "Affiliate Agreement").
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(b) SPSS shall use its reasonable best efforts to publish no later than
90 days after the end of the first month after the Effective Time in which there
are at least 30 days of post-Merger combined operations (which month may be the
month in which the Effective Time occurs), combined sales and net income figures
as contemplated by and in accordance with the terms of SEC Accounting Series
Release No. 135.
5.14 SECTION 16 MATTERS. Prior to the Effective Time, SPSS and ShowCase
shall take all such steps as may be required to cause any dispositions of
ShowCase Common Stock or acquisitions of SPSS Common Stock resulting from the
transactions contemplated by Article I or Article II of this Agreement by each
individual who is subject to the reporting requirements of Section 16 (a) of the
Exchange Act with respect to ShowCase, to be exempt under Rule 16b promulgated
under the Exchange Act.
5.15 SEVERANCE PACKAGES. Within a reasonable time after the Effective
Time, SPSS shall provide reasonable severance packages to certain ShowCase
employees, other than Kenneth Holec and Craig Allen, who are not retained for
employment by SPSS. Such packages will contain among other provisions,
compensation at such employee's then base compensation level for one week of
employment for every one year of service of such employee as a ShowCase
employee, with a one-month minimum.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of ShowCase, SPSS and Merger Sub to effect the Merger are
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) Shareholder Approval. (i) ShowCase shall have obtained the Required
ShowCase Vote in connection with the adoption of this Agreement by the
shareholders of ShowCase and (ii) SPSS shall have obtained the SPSS Stockholder
Approval in connection with the adoption of this Agreement and the Share
Issuance by the stockholders of SPSS.
(b) No Injunctions, Litigation or Restraints, Illegality. No Laws shall
have been adopted or promulgated, no Actions are pending or threatened, and no
temporary restraining order, preliminary or permanent injunction or other order
issued by a court or other Governmental Entity of competent jurisdiction shall
be in effect, (i) having the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger or (ii) which otherwise, individually or
in the aggregate, would reasonably be expected to have a Material Adverse Effect
on SPSS and its Subsidiaries (including the Surviving Corporation and its
Subsidiaries), taken together after giving effect to the Merger.
(c) HSR Act. The waiting period (and any extension thereof) applicable
to the Merger under the HSR Act shall have been terminated or shall have
expired.
(d) Governmental and Regulatory Approvals. Other than the filing
provided for under Section 1.3 and filings pursuant to the HSR Act (which are
addressed in Section 6.1 (c)), all
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consents, approvals and actions of, filings with and notices to any Governmental
Entity required of SPSS, ShowCase or any of their Subsidiaries to consummate the
Merger, the Share Issuance and the other transactions contemplated hereby, the
failure of which to be obtained or taken, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on SPSS and its
Subsidiaries (including the Surviving Corporation and its Subsidiaries), taken
together after giving effect to the Merger, shall have been obtained; provided,
however, that the provisions of this Section 6.1 (d) shall not be available to
any party whose failure to fulfill its obligations pursuant to Section 5.4 shall
have been the cause of, or shall have resulted in, the failure to obtain such
consent or approval. No consents, approvals, actions, filings or notices related
to any antitrust requirements of any jurisdiction, except as set forth in
Section 6.1 (c) hereof, shall be a condition of closing under this Section 6.1
(d).
(e) NASDAQ Listing. The shares of SPSS Common Stock to be issued in the
Merger and such other shares to be reserved for issuance in connection with the
Merger shall have been approved for listing on NASDAQ, subject to official
notice of issuance.
(f) Effectiveness of the Form S-4. The Form S-4 shall have been
declared effective by the SEC under the Securities Act. No stop order suspending
the effectiveness of the Form S-4 shall have been issued by the SEC and no
proceedings for that purpose shall have been initiated or threatened by the SEC.
(g) Pooling. ShowCase shall have received and delivered to SPSS and
SPSS's independent public accountants, a letter from its independent public
accountants, dated the Closing Date, stating that they concur with ShowCase's
conclusions that, as of the date of such letters, no conditions exist that would
preclude ShowCase's ability to be a party in a business combination to be
accounted for as a pooling-of-interests. SPSS shall have received and delivered
to ShowCase, a letter from its independent public accountants, dated the Closing
Date, stating that accounting for the Merger as a pooling-of-interests under
Opinion 16 of the Accounting Principles Board and applicable SEC rules and
regulations is appropriate if the Merger is closed and consummated as
contemplated by this Agreement.
(h) No Material Adverse Change. No event or circumstance shall have
occurred relating to the business, financial condition, prospects, assets or
operations of ShowCase or SPSS, respectively, since the date of the latest
financial statements of ShowCase and SPSS, respectively, which event or
circumstance has or is likely to result in a Material Adverse Effect on ShowCase
or SPSS, respectively, except to the extent any such event or circumstance
directly results from the announcement of the Merger, matters affecting the
general economic environment, and matters affecting the general software
industry.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF SPSS AND MERGER SUB. The
obligations of SPSS and Merger Sub to effect the Merger are subject to the
satisfaction of, or waiver by SPSS, on or prior to the Closing Date of the
following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of ShowCase set forth in this Agreement that is qualified as to
Material Adverse Effect shall be true and correct, and each of the
representations and warranties of ShowCase set forth in this Agreement that is
not so qualified shall be true and correct in all material respects, in each
case as of the date of
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this Agreement and as of the Closing Date as though made on and as of the
Closing Date (except to the extent in either case that such representations and
warranties speak as of another date), and SPSS shall have received a certificate
of the chief executive officer and the chief financial officer of ShowCase to
such effect.
(b) Performance of Obligations of ShowCase. ShowCase shall have
performed or complied with all agreements and covenants required to be performed
by it under this Agreement at or prior to the Closing Date that are qualified as
to Material Adverse Effect and shall have performed or complied in all material
respects with all other agreements and covenants required to be performed by it
under this Agreement at or prior to the Closing Date that are not so qualified,
and SPSS shall have received a certificate of the chief executive officer and
the chief financial officer of ShowCase to such effect.
(c) Opinion. SPSS shall have received from Ross & Hardies, counsel to
SPSS, on the Closing Date, a written opinion dated as of the Closing Date. In
rendering such opinion, counsel to SPSS shall be entitled to rely upon
information, representations and assumptions provided by SPSS and ShowCase
(allowing for such amendments to the representations as counsel to SPSS deems
reasonably necessary).
(d) Governmental Inquiry. No event or circumstance shall have occurred
relating to any governmental review or inquiry concerning any product or
business practice which is likely to result in a Material Adverse Effect on
ShowCase.
(e) Third-Party Consents. With respect to the agreements listed on
Exhibit 6.2(e), and to the extent ShowCase is a party to any other material
agreement pursuant to which the transactions contemplated hereby would or may
result in the termination or modification of such agreement, or any part
thereof, ShowCase shall have received from the other party or parties to such
contract a waiver of such provision or the consent to the transactions
contemplated hereby.
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF SHOWCASE. The obligations
of ShowCase to effect the Merger are subject to the satisfaction of, or waiver
by ShowCase, on or prior to the Closing Date of the following additional
conditions:
(a) Representations and Warranties. Each of the representations and
warranties of SPSS set forth in this Agreement that is qualified as to Material
Adverse Effect shall be true and correct, and each of the representations and
warranties of SPSS set forth in this Agreement that is not so qualified shall be
true and correct in all material respects, in each case as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date (except to the extent in either case that such representations and
warranties speak as of another date), and ShowCase shall have received a
certificate of the chief executive officer and the chief financial officer of
SPSS to such effect.
(b) Performance of Obligations of SPSS. SPSS shall have performed or
complied with all agreements and covenants required to be performed by it under
this Agreement at or prior to the Closing Date that are qualified as to Material
Adverse Effect and shall have performed or complied in all material respects
with all other agreements and covenants required to be performed by it under
this Agreement at or prior to the Closing Date that are not so qualified, and
ShowCase shall
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have received a certificate of the chief executive officer and the chief
financial officer of SPSS to such effect.
(c) Opinion. ShowCase shall have received from Dorsey & Whitney,
counsel to ShowCase, on the Closing Date, a written opinion dated as of the
Closing Date. In rendering such opinion, counsel to ShowCase shall be entitled
to rely upon information, representations and assumptions provided by SPSS and
ShowCase (allowing for such amendments to the representations as counsel to
ShowCase deems reasonably necessary).
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time, by action taken or authorized by the Board of Directors of
the terminating party or parties, and except as provided below, whether before
or after approval of the matters presented in connection with the Merger by the
stockholders of ShowCase or SPSS:
(a) By mutual written consent of SPSS and ShowCase;
(b) By either ShowCase or SPSS, if the Effective Time shall not have
occurred on or before February 28, 2001 (the "Termination Date"); provided,
however, that the right to terminate this Agreement under this Section 7.1 (b)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement (including without limitation such party's obligations set
forth in Section 5.4) has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before the Termination Date;
(c) By either ShowCase or SPSS, if any Governmental Entity (i) shall
have issued an order, decree or ruling or taken any other action (which the
parties shall have used their reasonable best efforts to resist, resolve or
lift, as applicable, in accordance with Section 5.4) permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement, and such order, decree, ruling or other action shall have become
final and nonappealable or (ii) shall have failed to issue an order, decree or
ruling or to take any other action (which order, decree, ruling or other action
the parties shall have used their reasonable best efforts to obtain, in
accordance with Section 5.4), in the case of each of (i) and (ii) which is
necessary to fulfill the conditions set forth in Sections 6.1 (c) and (d), as
applicable, and such denial of a request to issue such order, decree, ruling or
take such other action shall have become final and nonappealable; provided,
however, that the right to terminate this Agreement under this Section 7.1 (c)
shall not be available to any party whose failure to comply with Section 5.4 has
been the cause of such action or inaction;
(d) By either ShowCase or SPSS, if the approvals of the stockholders of
either SPSS or ShowCase contemplated by this Agreement shall not have been
obtained by reason of the failure to obtain the required vote at a duly held
meeting of stockholders or of any adjournment thereof at which the vote was
taken;
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(e) By SPSS, if ShowCase shall have failed to make the ShowCase
Recommendation or effected a Change in the ShowCase Recommendation (or resolved
to take any such action), whether or not permitted by the terms hereof, or shall
have materially breached its obligations under this Agreement by reason of a
failure to call the ShowCase Shareholders Meeting in accordance with Section 5.1
(b);
(f) By ShowCase, if SPSS shall have failed to make the SPSS
Recommendation or effected a Change in the SPSS Recommendation (or resolved to
take any such action), whether or not permitted by the terms hereof, or shall
have materially breached its obligations under this Agreement by reason of a
failure to call the SPSS Stockholders Meeting in accordance with Section 5.1
(c);
(g) By either SPSS or ShowCase, if there shall have been a breach by
the other of any of its representations, warranties, covenants or obligations
contained in this Agreement, which breach would result in the failure to satisfy
the conditions set forth in Section 6.2(a) or Section 6.2 (b) (in the case of a
breach by ShowCase) or Section 6.3 (a) or Section 6.3 (b) (in the case of a
breach by SPSS), and in any such case such breach shall be incapable of being
cured or, if capable of being cured, shall not have been cured within 30 days
after written notice thereof shall have been received by the party alleged to be
in breach; or
(h) By ShowCase, if the Board of Directors of ShowCase authorizes
ShowCase to enter into a written agreement concerning a transaction that the
Board of Directors of ShowCase has determined is a Superior Proposal; provided,
that ShowCase shall not terminate this Agreement pursuant to this Section 7.1
(h) and enter into a definitive agreement for a Business Combination until the
expiration of five (5) Business Days following SPSS's receipt of written notice
advising SPSS that ShowCase has received a Superior Proposal specifying the
material terms and conditions of such Superior Proposal (and including a copy
thereof with all accompanying documentation, if in writing), identifying the
person making such Superior Proposal and stating whether ShowCase intends to
enter into a definitive agreement for a Business Combination. After providing
such notice, ShowCase shall provide a reasonable opportunity to SPSS during such
period to make such adjustments in the terms and conditions of this Agreement as
would enable ShowCase to proceed with the Merger on such adjusted terms.
7.2 EFFECT OF TERMINATION. (a) In the event of termination of this
Agreement by either ShowCase or SPSS as provided in Section 7.1, this Agreement
shall forthwith become void and there shall be no liability or obligation on the
part of SPSS or ShowCase or their respective officers or directors except with
respect to Section 3.1 (l), Section 3.2(l), Section 5.3, Section 5.7, this
Section 7.2 and Article VIII, which provisions shall survive such termination,
and except that, notwithstanding anything to the contrary contained in this
Agreement, neither SPSS nor ShowCase shall be relieved or released from any
liabilities or damages arising out of its willful material breach of this
Agreement.
(b) In the event this Agreement is terminated pursuant to Section 7.1
herein and at the time of the event giving rise to the right of termination
there shall be pending a Superior Proposal with respect to ShowCase and within
twelve months thereafter ShowCase enters into an agreement relating to such
Superior Proposal, then ShowCase shall pay to SPSS not later than three Business
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Days after the date of consummation of such Superior Proposal an amount in cash
equal to $3.5 million (the "ShowCase Termination Fee").
(c) All payments under this Section 7.2 shall be made by wire transfer
of immediately available funds to an account designated by SPSS.
7.3 AMENDMENT. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the stockholders of ShowCase and SPSS, but, after any such approval, no
amendment shall be made which by law or in accordance with the rules of any
relevant stock exchange requires further approval by such stockholders without
such further approval. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
7.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party. The failure of
any party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
ARTICLE VIII
GENERAL PROVISIONS
8.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None of
the representations, warranties, covenants and other agreements in this
Agreement or in any instrument delivered pursuant to this Agreement, including
any rights arising out of any breach of such representations, warranties,
covenants and other agreements, shall survive the Effective Time, except for
those covenants and agreements contained herein and therein (including Section
5.8) that by their terms apply or are to be performed in whole or in part after
the Effective Time and this Article VIII.
8.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered
personally, or by telecopy or telefacsimile, upon confirmation of receipt, (b)
on the first Business Day following the date of dispatch if delivered by a
recognized next-day courier service, or (c) on the third Business Day following
the date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid. All notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice:
(a) if to SPSS or Merger Sub, to:
SPSS Inc.
233 South Wacker Drive
Chicago, Illinois 60606
Fax: (312) 651-3558
Attention: Jack Noonan, President and Chief Executive Officer
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with a copy to:
Ross & Hardies
150 North Michigan Avenue
Chicago, Illinois 60601
Fax: (312) 750-8600
Attention: Lawrence R. Samuels, Esq.
(b) if to ShowCase to:
ShowCase Corporation
4115 Highway 52 North, Suite 300
Rochester, Minnesota 55901-0144
Fax: (507) 287-2814
Attention: Kenneth H. Holec, President and Chief Executive Officer
with a copy to:
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, Minnesota 55402-1498
Fax: (612) 340-8738
Attention: Kenneth L. Cutler, Esq.
8.3 INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
8.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
8.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. (a) This Agreement,
the Confidentiality Agreement, and the other agreements of the parties referred
to herein constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
(b) This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or implied,
is intended to or shall confer upon any
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other Person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement, other than Section 5.8 (which is intended to be for
the benefit of the Persons covered thereby and may be enforced by such Persons).
For purposes of clarity, nothing in Section 5.6 is intended to confer upon any
ShowCase Employee, any benefits under any benefits plan, programs, policies or
other arrangements, including, but not limited to, the right to employment or
continued employment with SPSS for any period by reason of this Agreement.
8.6 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Illinois (without giving effect to
choice of law principles thereof).
8.7 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.
8.8 ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto, in
whole or in part (whether by operation of law or otherwise), without the prior
written consent of the other party, and any attempt to make any such assignment
without such consent shall be null and void, except that Merger Sub may assign,
in its sole discretion, any or all of its rights, interests and obligations
under this Agreement to any direct wholly owned Subsidiary of SPSS without the
consent of ShowCase, but no such assignment shall relieve Merger Sub of any of
its obligations under this Agreement. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
8.9 SUBMISSION TO JURISDICTION; WAIVERS. Each of SPSS and ShowCase
irrevocably agrees that any legal action or proceeding with respect to this
Agreement or for recognition and enforcement of any judgment in respect hereof
brought by the other party hereto or its successors or assigns may be brought
and determined in the Courts of the State of Illinois, and each of SPSS and
ShowCase hereby irrevocably submits with regard to any such action or proceeding
for itself and in respect to its property, generally and unconditionally, to the
nonexclusive jurisdiction of the aforesaid courts. Each of SPSS and ShowCase
hereby irrevocably waives, and agrees not to assert, by way of motion, as a
defense, counterclaim or otherwise, in any action or proceeding with respect to
this Agreement, (a) any claim that it is not personally subject to the
jurisdiction of the above-named courts for any reason other than the failure to
lawfully serve process (b) that it or its property is exempt or immune from
jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise),
and (c) to the fullest extent permitted by applicable law, that (i) the suit,
action or proceeding in any such court is brought in an inconvenient forum, (ii)
the venue of such suit, action or proceeding is improper and (iii) this
Agreement, or the subject matter hereof, may not be enforced in or by such
courts.
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8.10 ENFORCEMENT. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms. It is accordingly agreed that the parties
shall be entitled to specific performance of the terms hereof, this being in
addition to any other remedy to which they are entitled at law or in equity.
8.11 DEFINITIONS. As used in this Agreement:
(a) "beneficial ownership" or "beneficially own" shall have the meaning
under Section 13 (d) of the Exchange Act and the rules and regulations
thereunder.
(b) "Benefit Plans" means, with respect to any Person, each employee
benefit plan, program, arrangement and contract (including, without limitation,
any "employee benefit plan," as defined in Section 3 (3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and any bonus,
deferred compensation, stock bonus, stock purchase, restricted stock, stock
option, employment, termination, stay agreement or bonus, change in control and
severance plan, program, arrangement and contract) in effect on the date of this
Agreement or disclosed on the ShowCase Disclosure Schedule or the SPSS
Disclosure Schedule, as the case may be, to which such Person or its Subsidiary
is a party, which is maintained or contributed to by such Person, or with
respect to which such Person could incur material liability under Section 4069,
4201 or 4212 (c) of ERISA.
(c) "Board of Directors" means the Board of Directors of any specified
Person and any committees thereof.
(d) "Business Day" means any day on which banks are not required or
authorized to close in the City of Chicago, Illinois.
(e) "Confidentiality Agreement" means that certain Non-Disclosure
Agreement, dated July 25, 2000 between SPSS and ShowCase, as amended by that
certain Amendment #1 to Non-Disclosure Agreement dated as of August 31, 2000
between SPSS and ShowCase.
(f) "known" or "knowledge" means, with respect to any party, the
knowledge of such party's executive officers after reasonable inquiry.
(g) "Material Adverse Effect" means, with respect to any entity any
event, change, circumstance or effect that is or is reasonably likely to be
materially adverse to (i) the business, financial condition or results of
operations of such entity and its Subsidiaries taken as a whole, other than any
event, change, circumstance or effect relating (x) to the economy or financial
markets in general, (y) in general to the industries in which such entity
operates and not specifically relating to (or having the effect of specifically
relating to or having a materially disproportionate effect (relative to most
other industry participants) on) such entity or (z) to the announcement of the
transactions contemplated by this Agreement or (ii) the ability of such entity
to consummate the transactions contemplated by this Agreement. All references to
Material Adverse Effect on SPSS or its Subsidiaries contained in this Agreement
shall be deemed to refer solely to SPSS and its Subsidiaries without including
its ownership of ShowCase and its Subsidiaries after the Merger.
(h) "the other party" means, with respect to ShowCase, SPSS and means,
with respect to SPSS, ShowCase.
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(i) "Person" means an individual, corporation, limited liability
company, partnership, association, trust, unincorporated organization, other
entity or group (as defined in the Exchange Act).
(j) "Subsidiary" when used with respect to any party means any
corporation or other organization, whether incorporated or unincorporated, (i)
of which such party or any other Subsidiary of such party is a general partner
(excluding partnerships, the general partnership interests of which held by such
party or any Subsidiary of such party do not have a majority of the voting
interests in such partnership) or (ii) at least a majority of the securities or
other interests of which having by their terms ordinary voting power to elect a
majority of the Board of Directors or others performing similar functions with
respect to such corporation or other organization is directly or indirectly
owned or controlled by such party or by any one or more of its Subsidiaries, or
by such party and one or more of its Subsidiaries.
(k) "Superior Proposal" means with respect to ShowCase, a written
proposal made by a Person other than SPSS which is for (I) (i) a merger,
reorganization, consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
ShowCase, (ii) a sale, lease, exchange, transfer or other disposition of at
least 40% of the assets of ShowCase and its Subsidiaries, taken as a whole, in a
single transaction or a series of related transactions, or (iii) the
acquisition, directly or indirectly, by a Person of beneficial ownership of 40%
or more of the common stock of ShowCase whether by merger, consolidation, share
exchange, business combination, tender or exchange offer or otherwise and which
is (II) otherwise on terms which the Board of Directors of ShowCase in good
faith concludes (after consultation with its financial advisors and outside
counsel), taking into account, among other things, all legal, financial,
regulatory and other aspects of the proposal and the Person making the proposal,
(i) would, if consummated, result in a transaction that is more favorable to its
shareholders (in their capacities as shareholders), from a financial point of
view, than the transactions contemplated by this Agreement and (ii) is
reasonably capable of being completed.
A-49
IN WITNESS WHEREOF, SPSS, Merger Sub and ShowCase have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
SPSS INC.
By: /s/ Jack Noonan
----------------------------------
Name: Jack Noonan
Title: President and Chief
Executive Officer
SPSS ACQUISITION SUB CORP.
By: /s/ Jack Noonan
----------------------------------
Name: Jack Noonan
Title: President and Chief
Executive Officer
SHOWCASE CORPORATION
By: /s/ Kenneth H. Holec
----------------------------------
Name: Kenneth H. Holec
Title: President and Chief
Executive Officer
A-50
ANNEX B
November 6, 2000
Board of Directors
SPSS Inc.
233 South Wacker Drive
11th Floor
Chicago, IL 60606-6307
Members of the Board:
SPSS Inc. ("SPSS") proposes to enter into an Agreement and Plan of Merger (the
"Agreement") with ShowCase Corporation ("ShowCase") and SPSS Acquisition Sub
Corp., a direct wholly-owned subsidiary of SPSS ("Merger Sub"). Pursuant to the
Agreement, at the Effective Time (as defined in the Agreement), Merger Sub will
be merged with and into ShowCase (the "Merger") and each outstanding share of
common stock, par value $0.01 per share ("ShowCase Common Stock"), of ShowCase
(other than shares owned or held directly by SPSS or Merger Sub and other than
Dissenting Shares (as defined in the Agreement)) will be converted into the
right to receive the number of shares of common stock, par value $0.01 per share
("SPSS Common Stock"), of SPSS equal to 0.333 validly issued, fully paid and
non-assessable shares of SPSS Common Stock (the "Exchange Ratio").
You have requested our opinion as to the fairness, from a financial point of
view, of the Exchange Ratio to SPSS.
Robert W. Baird & Co. Incorporated ("Baird"), as part of its investment banking
business, is engaged in the evaluation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements, and valuations for estate, corporate and other purposes.
In conducting our investigation and analysis and in arriving at our opinion
herein, we have reviewed such information and taken into account such financial
and economic factors as we have deemed relevant under the circumstances. In that
connection, we have, among other things: (i) reviewed certain internal
information, primarily financial in nature, including projections, concerning
the business and operations of ShowCase furnished to us for purposes of our
analysis, as well as publicly available information including but not limited to
ShowCase's recent filings with the Securities and Exchange Commission and equity
analyst research reports prepared by various investment banking firms; (ii)
received financial projections for Showcase on a standalone basis for calendar
years 2000 and 2001; (iii) reviewed certain internal information, primarily
financial in nature, concerning the business and operations of SPSS furnished to
us for purposes of our analysis, as well as publicly available information
including
B-1
but not limited to SPSS's recent filings with the Securities and Exchange
Commission and equity research reports prepared by Baird analysts; (iv) reviewed
the draft Agreement in the form presented to SPSS's Board of Directors; (v)
compared the historical market prices and trading activity of ShowCase's and
SPSS's Common Stock with those of certain other publicly traded companies we
deemed relevant; (vi) compared the financial position and operating results of
ShowCase and SPSS with those of other publicly traded companies we deemed
relevant; (vii) compared the proposed financial terms of the Merger with the
financial terms of certain other business combinations we deemed relevant; and
(viii) reviewed certain potential pro forma financial effects of the Merger. We
have held discussions with certain members of ShowCase's and SPSS's respective
senior managements concerning ShowCase's and SPSS's historical and current
financial condition and operating results, as well as the future prospects of
ShowCase and SPSS, respectively. We have also considered such other information,
financial studies, analysis and investigations and financial, economic and
market criteria which we deemed relevant for the preparation of this opinion.
In arriving at our opinion, we have assumed and relied upon the accuracy and
completeness of all of the financial and other information that was publicly
available or provided us by or on behalf of ShowCase and SPSS and have not been
engaged to and we did not independently verify any such information. We have
assumed, with your consent, that: (i) all material assets and liabilities
(contingent or otherwise, known or unknown) of ShowCase and SPSS are as set
forth in their respective financial statements; (ii) the Merger will be
accounted for as a pooling-of-interests under generally accepted accounting
principles; and (iii) the Merger will be consummated in accordance with the
terms of the Agreement, without any amendment thereto and without waiver by any
party of any of the conditions to their respective obligations thereunder. At
the direction of SPSS: (i) we have relied on published research analyst reports
for estimates for ShowCase's calendar years 2000 and 2001 performance and
estimates of SPSS's senior management for ShowCase's financial performance on a
standalone basis thereafter; and (ii) we have relied on published research
reports prepared by Baird analysts for estimates of SPSS's financial performance
for calendar years 2000 and 2001 and upon estimates of SPSS's senior management
for SPSS's financial performance on a standalone basis thereafter (the foregoing
described in (i) and (ii) above being the "Estimates"). We have also assumed
that the Estimates, together with the cost savings and operating synergies
resulting from the Merger as estimated by SPSS senior management, were
reasonably prepared on bases reflecting the best available estimates and good
faith judgments as to future performance of ShowCase and SPSS, respectively. In
conducting our review, we have not undertaken nor obtained an independent
evaluation or appraisal of any of the assets or liabilities (contingent or
otherwise) of ShowCase or SPSS nor have we made a physical inspection of the
properties or facilities of ShowCase or SPSS. Our opinion necessarily is based
upon economic, monetary and market conditions as they exist and can be evaluated
on the date hereof, and does not predict or take into account any changes which
may occur, or information which may become available, after the date hereof.
Furthermore, we express no opinion as to the price or trading range at which any
of ShowCase's or SPSS's securities (including ShowCase Common Stock and SPSS
Common Stock) will trade following the date hereof.
B-2
Our opinion has been prepared at the request and for the information of the
Board of Directors of SPSS, and shall not be used for any other purpose or
disclosed to any other party without the prior written consent of Baird;
provided, however, that this letter may be reproduced in full in the
SPSS/ShowCase joint Proxy Statement to be provided to SPSS's shareholders in
connection with the Merger. This opinion does not address the relative merits of
the Merger and any other potential transactions or business strategies
considered by SPSS's Board of Directors, and does not constitute a
recommendation to any shareholder of SPSS as to how any such shareholder should
vote with respect to the Merger. Baird will receive a fee for rendering this
opinion.
In the ordinary course of our business, we may from time to time trade the
securities of SPSS or ShowCase for our own account or the accounts of our
customers and, accordingly, may at any time hold long or short positions in such
securities.
Based upon and subject to the foregoing, we are of the opinion that, as of the
date hereof, the Exchange Ratio is fair, from a financial point of view, to
SPSS.
Very truly yours,
/s/ Robert W. Baird & Co.
ROBERT W. BAIRD & CO. INCORPORATED
B-3
ANNEX C
November 6, 2000
Board of Directors
ShowCase Corporation
4115 Highway 52 North
Suite 300
Rochester, MN 55901-0144
Members of the Board:
ShowCase Corporation (the "Company"), SPSS Inc. (the "Acquiror") and SPSS
Acquisition Sub Corp., a wholly owned subsidiary of the Acquiror (the
"Acquisition Sub"), propose to enter into an Agreement and Plan of Merger, dated
as of November 6, 2000 (the "Agreement"), pursuant to which the Acquisition Sub
will be merged with and into the Company (the "Merger"). In the Merger, and as
set forth more fully in the Agreement, each share of the Company's common stock,
$0.01 par value (the "Company Shares"), issued and outstanding as of the date
and time the Merger becomes effective (the "Effective Time"), will be converted
into 0.333 shares (the "Exchange Ratio") of the Acquiror's common stock, $0.01
par value (the "Acquiror Shares").
You have asked us whether, in our opinion, the Exchange Ratio is fair from a
financial point of view to the holders of the Company Shares.
In arriving at the opinion set forth below, we have, among other things:
1. Reviewed certain publicly available business and financial information
relating to the Company and the Acquiror that we deemed to be relevant;
2. Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets, liabilities and prospects
of the Company and the Acquiror, that was furnished to us by the
Company and the Acquiror or was publicly available;
3. Conducted discussions with members of senior management of the Company
and the Acquiror concerning the matters described in clauses (1) and
(2) as well as their respective businesses and prospects before and
after giving effect to the Merger;
4. Reviewed the historical market prices and valuation multiples for the
Company Shares and the Acquiror Shares and compared them with those of
certain publicly traded companies that we deemed to be relevant;
5. Reviewed the results of operations of the Company and the Acquiror and
compared them with those of certain publicly traded companies that we
deemed to be relevant;
6. Compared the proposed financial terms of the Merger with the financial
terms of certain other transactions which we deemed to be relevant;
7. Participated in certain discussions and negotiations among
representatives of the Company and the Acquiror and their financial and
legal advisors;
C-1
8. Reviewed the Agreement;
9. Reviewed the potential pro forma impact of the Merger; and
10. Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed necessary, including our assessment of current general economic,
market and monetary conditions.
In preparing our opinion, we have assumed and relied, with your consent, on the
accuracy and completeness of all information supplied or otherwise made
available to us by the Company and the Acquiror, discussed with us or reviewed
by or for us, as well as all publicly available information, and we have not
assumed any responsibility for independently verifying such information. In
accordance with your instructions, we have not undertaken an independent
evaluation or appraisal of any of the assets or liabilities of the Company or
the Acquiror or been furnished with any such evaluation or appraisal. In
addition we have not assumed any obligation to conduct any physical inspection
of the properties or facilities of the Company or the Acquiror. With regard to
financial forecasts, we reviewed the forecast data with members of senior
management of the Company and the Acquiror and, with your consent, we have
assumed that these financial forecasts reviewed with senior management of the
Company and the Acquiror reflect the best currently available estimates and
judgment of the Company and Acquiror's management as to the expected future
financial performance of the Company and the Acquiror, and that they provide a
reasonable basis upon which we can form an opinion.
In accordance with your instructions, we have assumed that the Merger will be
accounted for as a pooling-of-interests under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations and that it will
qualify as a tax-free reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended. We have also assumed that the final
form of the Agreement will be substantially similar to the last draft reviewed
by us.
Our opinion is necessarily based upon market, economic and other conditions as
they exist and can be evaluated on, and on the information made available to us,
as of the date hereof. For the purposes of rendering this opinion, we have
assumed that the Merger will be consummated substantially in accordance with the
terms set forth in the Agreement, including in all respects material to our
analysis, that the representations and warranties of each party in the Agreement
and in all related documents and instruments (collectively, the "Documents")
that are referred to therein are true and correct, that each party to the
Documents will perform all of the covenants and agreements required to be
performed by such party under such Documents, that all conditions to the
consummation of the Merger will be satisfied without waiver thereof, and that
the Merger is in fact consummated pursuant to the terms of the Agreement. We
have also assumed that, in the course of obtaining the necessary regulatory or
other consents or approvals (contractual or otherwise) for the Merger, no
restrictions, including any divestiture requirements or amendments or
modifications, will be imposed that will have a material adverse effect on the
future results of operations or financial condition of the Company, the Acquiror
or the combined entity, or on the contemplated benefits of the Merger.
In connection with the preparation of this opinion, we have not been authorized
by the Company or the Board of Directors to solicit, nor have we solicited,
third-party indications of interest for
C-2
the acquisition of all or any part of the Company. Consequently, we express no
opinion as to whether any alternative transaction might produce consideration
for the holders of Company Shares in an amount in excess of that contemplated in
the Merger.
We are acting as financial advisor to the Company in connection with the Merger
and will receive a fee from the Company for our services, all of which is
contingent upon the consummation of the Merger. In addition, the Company has
agreed to indemnify us for certain liabilities arising out of our engagement. In
the past, we provided financial advisory and financing services to the Company
and may continue to do so and have received, and may receive, fees for the
rendering of such services.
In the ordinary course of our business, we may actively trade Company Shares or
Acquiror Shares for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company. It is further understood that this opinion will not be reproduced,
summarized, described or referred to or given to any person without our prior
written consent. Our opinion does not address the merits of the underlying
decision by the Company to engage in the Merger and does not constitute a
recommendation to any shareholder as to how such shareholder should vote on the
proposed Merger or any matter related thereto.
We have not considered, nor are we expressing any opinion herein with respect
to, the prices at which the Company Shares or the Acquiror Shares will trade
following the announcement of the Merger, or the price at which the Acquiror
Shares will trade following the consummation of the Merger.
On the basis of, and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Exchange Ratio is fair from a financial point of view to
the holders of the Company Shares.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:_______________________________________
Managing Director
Investment Banking Group
C-3
ANNEX D
November 6, 2000
The Board of Directors
ShowCase Corporation
4115 Highway 52 North, Suite 300
Rochester, Minnesota 55901-0144
Members of the Board:
We understand that Showcase Corporation, a Minnesota corporation (the
"Company"), and SPSS, Inc. a Delaware corporation (SPSS) entered into an
Agreement and Plan of Merger dated as of November 6, 2000 (the "Merger
Agreement"). Pursuant to the Merger Agreement, all of the issued and outstanding
shares of common stock of the Company, as of the Effective Date (as that term is
defined in the Merger Agreement) shall be converted into the right to receive,
in exchange for the Company Shares, .333 shares of SPSS common stock for each
share of the Company's common stock (the "Merger Consideration").
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of common stock of the Company, of the consideration to be
paid by such holders pursuant to the terms of the Merger Agreement. In
connection with our review of the Merger Agreement, and in arriving at our
opinion, we have, among other things:
1. Reviewed and analyzed the financial terms of the Merger Agreement;
2. Reviewed and analyzed certain publicly available financial statements
and other information of the Company;
3. Reviewed and analyzed certain internal financial statements and other
historical financial and operating data concerning the Company prepared
by the management of the Company;
4. Reviewed and analyzed certain internal financial statements and other
historical financial and operating data concerning SPSS prepared by the
management of SPSS;
5. Reviewed and analyzed certain financial projections prepared by the
management of SPSS;
6. Reviewed and analyzed certain financial projections prepared by the
management of the Company;
7. Performed site visits and conducted discussions with members of the
senior management of SPSS with respect to the business and prospects of
SPSS;
8. Conducted discussions with members of the senior management of the
Company with respect to the business and prospects of the Company;
9. Analyzed the pro-forma impact of the Merger Agreement on SPSS' results
of operations;
D-1
10. Reviewed the reported prices and trading activity for SPSS' common
stock and the Company 's common stock;
11. Compared the financial performance of SPSS and the price of the SPSS'
common stock with that of what we believe to be certain other
comparable publicly-traded companies and their securities;
12. Compared the financial performance and pro-forma financial projections
of the Company with those of certain other comparable publicly-traded
companies;
13. Reviewed the financial terms of certain business combinations involving
companies in lines of business we believe to be generally comparable to
those of the Company:
14. Participated in discussions among representatives of the Company and
its financial and legal advisors; and
15. Conducted such other analyses and examinations and considered such
other financial, economic and market criteria as we have deemed
necessary in arriving at our opinion.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of the foregoing and of the financial, legal, tax, operating and
other information provided to us by SPSS and the Company and that which was
otherwise reviewed by us, and have not independently verified such information.
We have not performed an independent evaluation or appraisal of any of the
respective assets or liabilities of the Company or SPSS and we have not been
furnished with any such valuations or appraisals. With respect to the financial
forecasts supplied to us, we have assumed that they have been reasonably
prepared on the bases reflecting the best currently available estimates and
judgments of the management of SPSS and the Company, as the case may be, of the
respective future financial performance of the Company and SPSS. We express no
view as to such projections or the assumptions upon which they were based. We
made no independent investigations of any legal matters affecting SPSS or the
Company and assumed the correctness of all legal advice given to the Board of
Directors of the Company by its counsel. We express no opinion herein as to the
price at which the SPSS' common stock may actually trade at any time.
It is understood that this letter is for the information and benefit of the
Board of Directors of the Company and our opinion is rendered to the Company's
Board of Directors in connection with its consideration of the merger. This
letter shall not be published or otherwise used and no public references to
Craig-Hallum Capital Group, Inc. shall be made without our prior written
consent, which consent shall not be unreasonably withheld; provided, however,
that this letter may be included in its entirety in the proxy statement
submitted to the stockholders of the Company for the purpose of approving the
Merger. Our opinion is, in any event, limited to the fairness, from a financial
point of view, to the holders of the Company's common stock, of the
consideration paid pursuant to the Merger Agreement. Events occurring after the
date hereof may materially affect the assumptions used in preparing this
opinion. Further, our opinion speaks only as of the date hereof and is based on
the economic, market, financial and other conditions as they exist and
information which we have been supplied as of the date hereof.
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It shall be understood that although subsequent developments may affect this
opinion, we do not have any obligation to update, revise or reaffirm this
opinion. Craig-Hallum Capital Group, Inc., as part of its securities and
investment banking business, is regularly engaged in the valuation of businesses
and their securities, in connection with mergers and acquisitions, secondary
distributions of securities, private placements and valuations for other
purposes. In rendering this fairness opinion, we have acted on behalf of the
Board of Directors of the Company and will receive a fee from the Company for
our services.
Based upon and subject to the foregoing, including the various assumptions and
limitations set forth herein, it is our opinion that as of the date hereof, the
Merger Consideration paid by SPSS' common stock pursuant to the Merger Agreement
is fair, from a financial point of view, to the holders of the Company's common
stock. Our opinion does not constitute a recommendation to any Board member or
stockholder of the Company as to how any such Board member or stockholder should
vote on the proposed Merger or otherwise address the Company's decision to
effect the Merger.
Very truly yours,
/s/ Craig-Hallum Capital Group, Inc.
CRAIG-HALLUM CAPITAL GROUP, INC.
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ANNEX E
SECTIONS 302A.471 AND 302A.473 OF THE
MINNESOTA BUSINESS CORPORATION ACT
Set forth below are Sections 302A.471 and 302A.473 of the Minnesota
Business Corporation Act which provide that shareholders may dissent from, and
obtain payment for the fair value of their shares in the event of, certain
corporate actions, and establish procedures for the exercise of such dissenters'
rights.
302A.471 RIGHTS OF DISSENTING SHAREHOLDERS.
Subdivision 1. ACTIONS CREATING RIGHTS. A shareholder of a corporation
may dissent from, and obtain payment for the fair value of the shareholder's
shares in the event of, any of the following corporate actions:
(a) An amendment of the articles that materially and adversely affects
the rights or preferences of the shares of the dissenting shareholder in that
it:
(1) alters or abolishes a preferential right of the shares;
(2) creates, alters, or abolishes a right in respect of the
redemption of the shares, including a provision respecting a sinking
fund for the redemption or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of
the shares to acquire shares, securities other than shares, or rights
to purchase shares or securities other than shares;
(4) excludes or limits the right of a shareholder to vote on a
matter, or to cumulate votes, except as the right may be excluded or
limited through the authorization or issuance of securities of an
existing or new class or series with similar or different voting
rights; except that an amendment to the articles of an issuing public
corporation that provides that section 302A.671 does not apply to a
control share acquisition does not give rise to the right to obtain
payment under this section;
(b) A sale, lease, transfer, or other disposition of all or
substantially all of the property and assets of the corporation, but not
including a transaction permitted without shareholder approval in section
302A.66l, subdivision 1, or a disposition in dissolution described in section
302A.725, subdivision 2, or a disposition pursuant to an order of a court, or a
disposition for cash on terms requiring that all or substantially all of the net
proceeds of disposition be distributed to the shareholders in accordance with
their respective interests within one year after the date of disposition;
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(c) A plan of merger, whether under this chapter or under chapter 322B,
to which the corporation is a constituent organization, except as provided in
subdivision 3;
(d) A plan of exchange, whether under this chapter or under chapter
322B, to which the corporation is a party as the corporation whose shares will
be acquired by the acquiring corporation, except as provided in subdivision 3;
or
(e) Any other corporate action taken pursuant to a shareholder vote
with respect to which the articles, the bylaws, or a resolution approved by the
board directs that dissenting shareholders may obtain payment for their shares.
Subd. 2. BENEFICIAL OWNERS.
(a) A shareholder shall not assert dissenters' rights as to less than
all of the shares registered in the name of the shareholder, unless the
shareholder dissents with respect to all the shares that are beneficially owned
by another person but registered in the name of the shareholder and discloses
the name and address of each beneficial owner on whose behalf the shareholder
dissents. In that event, the rights of the dissenter shall be determined as if
the shares as to which the shareholder has dissented and the other shares were
registered in the names of different shareholders.
(b) The beneficial owner of shares who is not the shareholder may
assert dissenters' rights with respect to shares held on behalf of the
beneficial owner, and shall be treated as a dissenting shareholder under the
terms of this section and section 302A.473, if the beneficial owner submits to
the corporation at the time of or before the assertion of the rights a written
consent of the shareholder.
Subd. 3. RIGHTS NOT TO APPLY.
(a) Unless the articles, the bylaws, or a resolution approved by the
board otherwise provide, the right to obtain payment under this section does not
apply to a shareholder (1) of the surviving corporation in a merger with respect
to shares of the shareholder that are not entitled to be voted on the merger and
are not canceled or exchanged in the merger or (2) the corporation whose shares
will be acquired by the acquiring corporation in a plan of exchange with respect
to shares of the shareholder that are not entitled to be voted on the plan of
exchange and are not exchanged in the plan of exchange.
(b) If a date is fixed according to section 302A.445, subdivision 1,
for the determination of shareholders entitled to receive notice of and to vote
on an action described in subdivision 1, only shareholders as of the date fixed,
and beneficial owners as of the date fixed who hold through shareholders, as
provided in subdivision 2, may exercise dissenters' rights.
Subd. 4. OTHER RIGHTS. The shareholders of a corporation who have a
right under this section to obtain payment for their shares do not have a
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right at law or in equity to have a corporate action described in subdivision 1
set aside or rescinded, except when the corporate action is fraudulent with
regard to the complaining shareholder or the corporation.
302A.473 PROCEDURES FOR ASSERTING DISSENTERS' RIGHTS.
Subdivision 1. DEFINITIONS.
(a) For purposes of this section, the terms defined in this subdivision
have the meanings given them.
(b) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action referred to in section 302A.471, subdivision 1 or
the successor by merger of that issuer.
(c) "Fair value of the shares" means the value of the shares of a
corporation immediately before the effective date of the corporate action
referred to in section 302A.47l, subdivision 1.
(d) "Interest" means interest commencing five days after the effective
date of the corporate action referred to in section 302A.471, subdivision 1, up
to and including the date of payment, calculated at the rate provided in section
549.09 for interest on verdicts and judgments.
Subd. 2. NOTICE OF ACTION. If a corporation calls a shareholder meeting
at which any action described in section 302A.471, subdivision 1 is to be voted
upon, the notice of the meeting shall inform each shareholder of the right to
dissent and shall include a copy of section 302A.471 and this section and a
brief description of the procedure to be followed under these sections.
Subd. 3. NOTICE OF DISSENT. If the proposed action must be approved by
the shareholders, a shareholder who is entitled to dissent under section
302A.471 and who wishes to exercise dissenters' rights must file with the
corporation before the vote on the proposed action a written notice of intent to
demand the fair value of the shares owned by the shareholder and must not vote
the shares in favor of the proposed action.
Subd. 4. NOTICE OF PROCEDURE; DEPOSIT OF SHARES. (a) After the proposed
action has been approved by the board and, if necessary, the shareholders, the
corporation shall send to all shareholders who have complied with subdivision 3
and to all shareholders entitled to dissent if no shareholder vote was required,
a notice that contains:
(1) The address to which a demand for payment and certificates
of certificated shares must be sent in order to obtain payment and the
date by which they must be received;
(2) Any restrictions on transfer of uncertificated shares that
will apply after the demand for payment is received;
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(3) A form to be used to certify the date on which the
shareholder, or the beneficial owner on whose behalf the shareholder
dissents, acquired the shares or an interest in them and to demand
payment; and
(4) A copy of section 302A.471 and this section and a brief
description of the procedures to be followed under these sections.
(b) In order to receive the fair value of the shares, a dissenting
shareholder must demand payment and deposit certificated shares or comply with
any restrictions on transfer of uncertificated shares within 30 days after the
notice required by paragraph (a) was given, but the dissenter retains all other
rights of a shareholder until the proposed action takes effect.
Subd. 5. PAYMENT; RETURN OF SHARES.
(a) After the corporate action takes effect, or after the corporation
receives a valid demand for payment, whichever is later, the corporation shall
remit to each dissenting share holder who has complied with subdivisions 3 and 4
the amount the corporation estimates to be the fair value of the shares, plus
interest, accompanied by:
(1) the corporation's closing balance sheet and statement of
income for a fiscal year ending not more than 16 months before the
effective date of the corporate action, together with the latest
available interim financial statements;
(2) an estimate by the corporation of the fair value of the
shares and a brief description of the method used to reach the
estimate; and
(3) a copy of section 302A.471 and this section, and a brief
description of the procedure to be followed in demanding supplemental
payment.
(b) The corporation may withhold the remittance described in paragraph
(a) from a person who was not a shareholder on the date the action dissented
from was first announced to the public or who is dissenting on behalf of a
person who was not a beneficial owner on that date. If the dissenter has
complied with subdivisions 3 and 4, the corporation shall forward to the
dissenter the materials described in paragraph (a), a statement of the reason
for withholding the remittance, and an offer to pay to the dissenter the amount
listed in the materials if the dissenter agrees to accept that amount in full
satisfaction. The dissenter may decline the offer and demand payment under
subdivision 6. Failure to do so entitles the dissenter only to the amount
offered. If the dissenter makes demand, subdivisions 7 and 8 apply.
(c) If the corporation fails to remit payment within 60 days of the
deposit of certificates or the imposition of transfer restrictions on
uncertificated shares, it shall return all deposited certificates and cancel all
transfer restrictions. However, the corporation may again give notice under
subdivision 4 and require deposit or restrict transfer at a later time.
Subd. 6. SUPPLEMENTAL PAYMENT; DEMAND. If a dissenter believes that the
amount remitted under subdivision 5 is less than the fair value of the shares
plus interest, the dissenter
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may give written notice to the corporation of the dissenter's own estimate of
the fair value of the shares, plus interest, within 30 days after the
corporation malls the remittance under subdivision 5, and demand payment of the
difference. Otherwise, a dissenter is entitled only to the amount remitted by
the corporation.
Subd. 7. PETITION; DETERMINATION. If the corporation receives a demand
under subdivision 6, it shall, within 60 days after receiving the demand, either
pay to the dissenter the amount demanded or agreed to by the dissenter after
discussion with the corporation or file in court a petition requesting that the
court determine the fair value of the shares, plus interest. The petition shall
be filed in the county in which the registered office of the corporation is
located, except that a surviving foreign corporation that receives a demand
relating to the shares of a constituent domestic corporation shall file the
petition in the county in this state in which the last registered office of the
constituent corporation was located. The petition shall name as parties all
dissenters who have demanded payment under subdivision 6 and who have not
reached agreement with the corporation. The corporation shall, after filing the
petition, serve all parties with a summons and copy of the petition under the
rules of civil procedure. Nonresidents of this state may be served by registered
or certified mail or by publication as provided by law. Except as otherwise
provided, the rules of civil procedure apply to this proceeding. The
jurisdiction of the court is plenary and exclusive. The court may appoint
appraisers, with powers and authorities the court deems proper, to receive
evidence on and recommend the amount of the fair value of the shares. The court
shall determine whether the shareholder or shareholders in question have fully
complied with the requirements of this section, and shall determine the fair
value of the shares, taking into account any and all factors the court finds
relevant, computed by any method or combination of methods that the court, in
its discretion, sees fit to use, whether or not used by the corporation or by a
dissenter. The fair value of the shares as determined by the court is binding on
all shareholders, wherever located. A dissenter is entitled to judgment in cash
for the amount by which the fair value of the shares as determined by the court,
plus interest, exceeds the amount, if any, remitted under subdivision 5, but
shall not be liable to the corporation for the amount, if any, by which the
amount, if any, remitted to the dissenter under subdivision 5 exceeds the fair
value of the shares as determined by the court, plus interest.
Subd. 8. COSTS; FEES; EXPENSES.
(a) The court shall determine the costs and expenses of a proceeding
under subdivision 7, including the reasonable expenses and compensation of any
appraisers appointed by the court, and shall assess those costs and expenses
against the corporation, except that the court may assess part or all of those
costs and expenses against a dissenter whose action in demanding payment under
subdivision 6 is found to be arbitrary, vexatious, or not in good faith.
(b) If the court finds that the corporation has failed to comply
substantially with this section, the court may assess all fees and expenses of
any experts or attorneys as the court deems equitable. These fees and expenses
may also be assessed against a person who has acted arbitrarily, vexatiously, or
not in good faith in bringing the proceeding, and may be awarded to a party
injured by those actions.
(c) The court may award, in its discretion, fees and expenses to an
attorney for the dissenters out of the amount awarded to the dissenters, if any.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
SPSS's Certificate of Incorporation provides for indemnification to the
full extent permitted by the laws of the State of Delaware against and with
respect to threatened, pending or completed actions, suits or proceedings
arising from or alleged to arise from, a party's actions or omissions as a
director, officer, employee or agent of SPSS or of any other corporation,
partnership, joint venture, trust or other enterprise which has served in such
capacity at the request of SPSS if the acts or omissions occurred, or were or
are alleged to have occurred, while said party was a director or officer of
SPSS; provided, however, SPSS shall not indemnify any director or officer in an
action against SPSS unless SPSS shall have consented to the action. Generally,
under Delaware law, indemnification will only be available where an officer or
director can establish that he/she acted in good faith and in a manner which was
reasonably believed to be in or not opposed to the best interests of SPSS.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify a director, officer, employee or agent made a party to
an action by reason of the fact that the person was a director, officer,
employee or agent of the corporation or was serving at the request of the
corporation, against expenses actually incurred by the person in connection with
the action if the person acted in good faith and in a manner such person
reasonably believed to be in, or not opposed to, the best interest of the
corporation with respect to any criminal action, and had no reasonable cause to
believe his conduct was unlawful. Delaware law does not permit a corporation to
eliminate a director's duty of due care, and the provisions of SPSS's
Certificate of Incorporation have no effect on the availability of equitable
remedies such as injunction or rescission, based upon a director's breach of the
duty of care.
SPSS maintains a director's and officer's liability insurance policy
which indemnifies directors and officers for specified losses arising from a
claim by reason of a wrongful act, as defined, under certain circumstances,
where SPSS does not provide indemnification.
Under the applicable provisions of the Delaware General Corporation
Law, any indemnification described above shall be made by the corporation only
as authorized in the specific case upon a determination that the indemnification
of the director, officer, employee or agent is proper in the circumstances
because he or she has met the applicable standard of conduct. Such determination
shall be made:
- By the Board of Directors by a majority vote of a quorum
consisting of directors who are not parties to such action,
suit or proceeding; or
- If such a quorum is not obtainable or, even if obtainable, a
quorum of disinterested directors so directs, by independent
legal counsel in a written opinion; or
- By the affirmative vote of a majority of the shares entitled
to vote thereon.
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MERGER AGREEMENT PROVISIONS RELATING TO SHOWCASE AND SPSS DIRECTORS AND
OFFICERS.
SPSS is obligated, for six years after the merger, to maintain in
effect ShowCase's current directors' and officers' liability insurance covering
acts or omissions occurring prior to the effective time of the merger.
SPSS is obligated, to the fullest extent permitted by law, to indemnify
and hold harmless, and provide advancement of expenses to, each person who is or
has been an officer or director of ShowCase or any of its subsidiaries with
respect to acts or omissions by them in their capacities as officers, directors
or employees of ShowCase or any of its subsidiaries or taken at the request of
ShowCase or any of its subsidiaries at any time on or prior to the effective
time of the merger, including for acts and omissions occurring in connection
with the approval of the merger and the merger agreement. SPSS will also cause
the surviving corporation in the merger to maintain in its certificate of
incorporation or by-laws for a period of six years the current provisions
regarding indemnification of officers, directors and employees.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) List of Exhibits (Note: Management Contracts and compensating plans
or arrangements are underlined in the following list.)
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Incorporation
Exhibit by Reference
Number Description of Document (if applicable)
2.1 Agreement and Plan of Merger among SPSS Inc., SPSS ACSUB, Inc., Clear (1), Ex. 2.1
Software, Inc. and the shareholders named therein, dated September 23,
1996.
2.2 Agreement and Plan of Merger among SPSS Inc., SPSS Acquisition Inc. and (2), Annex A
Jandel Corporation, dated October 30, 1996.
2.3 Asset Purchase Agreement by and between SPSS Inc. and DeltaPoint, Inc., (16), Ex. 2.3
dated as of May 1, 1997.
2.4 Stock Purchase Agreement among SPSS Inc. Edward Ross, Richard Kotter, (3), Ex. 2.1
Norman Grunbaum and Louis Davidson and certain U.K.-Connected
Shareholders or Warrant Holders of Quantime Limited named therein,
dated as of September 30, 1997.
2.5 Stock Purchase Agreement among SPSS Inc., Edward Ross, Richard Kottler, (3), Ex. 2.2
Norman Grunbaum and Louis Davidson and certain Non-U.K. Shareholders or
Warrant Holders of Quantime Limited named therein, dated as of
September 30, 1997.
2.6 Stock Purchase Agreement by and among SPSS Inc. and certain (4), Ex. 2.1
Shareholders of Quantime Limited named therein, dated as of November
21, 1997.
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2.7 Stock Purchase Agreement by and among SPSS Inc. and Jens Nielsen, (4), Ex. 2.2
Henrik Rosendahl, Ole Stangegaard, Lars Thinggaard, Edward O'Hara,
Bjorn Haugland, 2M Invest and the Shareholders listed on Exhibit A
thereto, dated November 21, 1997.
2.8 Stock Purchase Agreement by and among SPSS Inc. and the Shareholders of (18), Ex. 2.1
Integral Solutions Limited listed on the signature pages thereof, dated
as of December 31, 1998.
2.9 Share Purchase Agreement by and among SPSS Inc., Surveycraft Pty Ltd. (20), Ex. 2.9
and Jens Meinecke and Microtab Systems Pty Ltd., dated as of November
1, 1998.
2.10 Stock Acquisition Agreement by and among SPSS Inc. Vento Software, Inc. (21), Ex. 2.1
and David Blyer, John Gomez and John Pappajohn, dated as of November
29, 1999.
2.11 Asset Purchase Agreement by and between SPSS Inc. and DataStat, S.A., (24), Ex. 2.11
dated as of December 23, 1999.
2.12 Agreement and Plan of Merger, dated as of November 6, 2000, among SPSS, (30), Ex. 2.1
SPSS Acquisition Sub Corp., and ShowCase. (Attached hereto.)
3.1 Certificate of Incorporation of SPSS. (5), Ex. 3.2
3.2 Amended and Restated Articles of Incorporation of Showcase. (25), Ex. 3.2
3.3 By-Laws of SPSS. (5), Ex. 3.4
3.4 Amended and Restated Bylaws of Showcase. (25), Ex. 3.4
4.1 Specimen of Showcase Common Stock certificate. (26), Ex. 4.1
4.2 Registration Rights Provisions for former preferred shareholders of (25), Ex. 4.3
Showcase.
5 Opinion of Ross & Hardies regarding the validity of the securities
being registered. (Attached hereto.)
8.1 Opinion of Ross & Hardies regarding material federal income tax
consequences relating to the merger. (Attached hereto.)
8.2 Opinion of Dorsey & Whitney LLP regarding material federal income tax
consequences relating to the merger. (Attached hereto.)
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10.1 SPSS Employment Agreement with Jack Noonan. (8), Ex. 10.1
10.2 SPSS Agreement with Valletta. (6), Ex. 10.2
10.3 Agreement between SPSS and Prentice Hall. (6), Ex. 10.5
10.4 Software Distribution Agreement between SPSS and IBM. (6), Ex. 10.6
10.5 SPSS-HOOPS Agreement. (6), Ex. 10.7
10.6 SPSS Stockholders Agreement. (5), Ex. 10.8
10.7 SPSS Agreements with CSDC. (5), Ex. 10.9
10.8 SPSS Amended 1991 Stock Option Plan. (5), Ex. 10.10
10.9 SPSS Asset Purchase Agreement of SYSTAT. (9), Ex. 10.9
10.10 SPSS 1994 Bonus Compensation. (10), Ex. 10.11
10.11 SPSS Lease for Chicago, Illinois Office. (10), Ex. 10.12
10.12 SPSS Amendment to Lease for Chicago, Illinois Office. (10), Ex. 10.13
10.13 SPSS 1995 Equity Incentive Plan. (11), Ex. 10.14
10.14 SPSS 1995 Bonus Compensation. (12), Ex. 10.15
10.15 SPSS Amended and Restated 1995 Equity Incentive Plan. (13), Ex. 10.17
10.16 SPSS 1996 Bonus Compensation. (14), Ex. 10.18
10.17 Software Distribution Agreement between SPSS and Banta Global Turnkey. (14), Ex. 10.19
10.18 SPSS Lease for Chicago, Illinois in Sears Tower. (15), Ex. 10.20
10.19 SPSS 1997 Bonus Compensation. (17), Ex. 10.21
10.20 Norman H. Nie Consulting L.L.C. Agreement with SPSS. (17), Ex. 10.22
10.21 SPSS Second Amended and Restated 1995 Equity Incentive Plan. (19), Ex. A
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10.22 SPSS 1998 Bonus Compensation Plan. (21), Ex. 10.23
10.23 SPSS Third Amended and Restated 1995 Equity Incentive Plan. (22), Ex. 10.1
10.24 Loan Agreement dated June 1, 1999 between SPSS and American National (23), Ex. 10.1
Bank and Trust Company of Chicago.
10.25 First Amendment to Loan Agreement dated June 1, 1999, between SPSS and (23), Ex. 10.2
American National Bank and Trust Company of Chicago.
10.26 SPSS 1999 Bonus Compensation. (24), Ex. 10.27
10.27 Amended 1991 Long-Term Incentive and Stock Option Plan of Showcase. (25), Ex. 10.1
10.28 Showcase 1999 Stock Incentive Plan. (25), Ex. 10.2
10.29 Showcase 1999 Employee Stock Purchase Plan, as amended. (26), Ex. 10.3
10.30 Lease Agreement dated as of November 30, 1998 between Mortenson (25), Ex. 10.4
Properties, Inc. as Landlord and Showcase as Tenant.
10.31 Employment Agreement dated as of November 22, 1993, between the Company (25), Ex. 10.5
and Kenneth H. Holec.
10.32 Service Agreement dated as of March 17, 1998, between the Company and (25), Ex. 10.6
Patrick Dauga.
10.33 Employment offer letter to Kevin R. Potrzeba dated as of August 23, 1996. (25), Ex. 10.7
10.34 Showcase employment offer letter to Theresa Z. O'Neil dated as of (27), Ex. 10.8
October 28, 1999.
10.35 License Agreement, effective as of April 1, 1998, between Showcase (26), Ex. 10.9
Corporation and Arbor Software Corporation (the "Hyperion License
Agreement").
10.36 Amendment No. 1 to the Hyperion License Agreement, effective as of (26), Ex. 10.10
September 14, 1998, between Showcase and
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Hyperion Solutions Corporation.
10.37 Software License and Marketing Agreement, effective as of January 4, (25), Ex. 10.11
1996, between Showcase and AppSource.
10.38 Amendment to AppSource/Showcase License Agreement, effective as of (25), Ex. 10.12
March 7, 1997.
10.39 Amended and Restated License Agreement, dated as of February 16, 2000, (27), Ex. 10.13
between Showcase and International Business Machines Corporation
("IBM"). *
10.40 Outbound License Agreement, dated as of December 9, 1998, between (26), Ex. 10.14
Showcase and IBM.
10.41 Marketing Relationship Agreement, dated as of May 22, 1997, between (25), Ex. 10.15
Showcase and IBM.
10.42 Amendment No. 1, dated as of October 28, 1998, to Marketing (26), Ex. 10.16
Relationship Agreement between Showcase and IBM.
10.43 Amendment No. 2, dated as of March 15, 1999, to Marketing Relationship (26), Ex. 10.17
Agreement between Showcase and IBM.
10.44 License and Distribution Agreement, dated as of December 31, 1999, (28), Ex. 10.1
between Showcase and IntraNet Solutions, Inc. *
10.45 SPSS 2000 Equity Incentive Plan. (Attached hereto.)
10.46 SPSS Qualified Employee Stock Purchase Plan. (Attached hereto.)
10.47 SPSS Nonqualified Employee Stock Purchase Plan. (Attached hereto.)
15.1 Letter regarding Unaudited Interim Financial Information with respect
to SPSS. (Attached hereto.)
21.1 Subsidiaries of SPSS. (Attached hereto.)
22.2 Subsidiaries of Showcase. (29), Ex. 21.1
23.1 Consent of KPMG LLP with respect to SPSS. (Attached hereto.)
23.2 Consent of KPMG LLP with respect to ShowCase. (Attached hereto.)
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23.3 Consent of Ross & Hardies (included in the opinions filed as Exhibit 5
and Exhibit 8.1 to this Registration Statement).
23.4 Consent of Dorsey & Whitney LLP (included in the opinion filed as
Exhibit 8.2 to this Registration Statement).
23.5 Consent of Robert W. Baird & Co., Incorporated. (Attached hereto.)
23.6 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
(Attached hereto.)
23.7 Consent of Craig-Hallum Capital Group, Inc. (Attached hereto.)
24 Power of Attorney (Included in the signature pages hereto.).
99.1 Form of SPSS Proxy Card. (Attached hereto.)
99.2 Form of ShowCase Proxy Card. (Attached hereto.)
-------------------------------
(1) Previously filed with SPSS Inc.'s Report on Form 8-K, dated September
26, 1996, filed on October 11, 1996, as amended on Form 8-K/A-1, filed
November 1, 1996. (File No. 000-22194)
(2) Previously filed with Amendment No. 1 to Form S-4 Registration
Statement of SPSS Inc. filed on November 7, 1996. (File No. 333-15427)
(3) Previously filed with SPSS Inc.'s Report on Form 8-K, dated September
30, 1997, filed on October 15, 1997. (File No. 000-22194)
(4) Previously filed with Form S-3 Registration Statement of SPSS Inc.
filed on November 26, 1997. (File No. 333-41207)
(5) Previously filed with Amendment No. 2 to Form S-1 Registration
Statement of SPSS Inc. filed on August 4, 1993. (File No. 33-64732)
(6) Previously filed with Amendment No. 1 to Form S-1 Registration
Statement of SPSS Inc. filed on July 23, 1993. (File No. 33-64732)
(7) Previously filed with Form 10-Q Quarterly Report of SPSS Inc. for the
quarterly period ended September 30, 1993. (File No. 000-22194)
(8) Previously filed with Form S-1 Registration Statement of SPSS Inc.
filed on June 22, 1993. (File No. 33-64732)
II-7
(9) Previously filed with Form S-1 Registration Statement of SPSS Inc.
filed on December 5, 1994. (File No. 33-86858)
(10) Previously filed with Form 10-K Annual Report of SPSS Inc. for the year
ended December 31, 1994. (File No. 000-22194)
(11) Previously filed with SPSS Inc.'s 1995 Proxy Statement. (File No.
000-22194)
(12) Previously filed with Form 10-K Annual Report of SPSS Inc. for the year
ended December 31, 1995. (File No. 000-22194)
(13) Previously filed with SPSS Inc.'s 1996 Proxy Statement. (File No.
000-22194)
(14) Previously filed with Form 10-K Annual Report of SPSS Inc. for the year
ended December 31, 1996. (File No. 000-22194)
(15) Previously filed with Form 10-Q Quarterly Report of SPSS Inc. for the
quarterly period ended March 31, 1997. (File No. 000-22194)
(16) Previously filed with Form 10-Q Quarterly Report of SPSS Inc. for the
quarterly period ended June 30, 1997. (File No. 000-22194)
(17) Previously filed with Form 10-K Annual Report of SPSS Inc. for the year
ended December 31, 1997. (File No. 000-22194)
(18) Previously filed with SPSS Inc.'s Report on Form 8-K, dated December
31, 1998, filed on January 15, 1999, as amended on Form 8-K/A filed
March 12, 1999. (File No. 000-22194)
(19) Previously filed with SPSS Inc.'s 1998 Proxy Statement. (File No.
000-22194)
(20) Previously filed with Form 10-K Annual Report of SPSS Inc. for the year
ended December 31, 1998. (File No. 000-22194)
(21) Previously filed with SPSS Inc. Report on Form 8-K, dated November 29,
1999, filed December 10, 1999. (File No. 000-22194)
(22) Previously filed with Form 10-Q Quarterly Report of SPSS Inc. for the
quarterly period ended June 30, 1999. (File No. 000-22194)
(23) Previously filed with Form 10-Q Quarterly Report of SPSS Inc. for the
quarterly period ended September 30, 1999. (File No. 000-22194)
(24) Previously filed with Form 10-K Annual Report of SPSS Inc. for the year
ended December 31, 1999. (File No. 000-22194)
II-8
(25) Previously filed with Form S-1 Registration Statement of Showcase
Corporation filed on April 28, 1999. (File No. 333-77223)
(26) Previously filed with Amendment No. 2 to the Form S-1 Registration
Statement of Showcase Corporation filed on June 28, 1999. (File No.
333-77223)
(27) Previously filed with Form 10-K Annual Report of Showcase Corporation
for the year ended March 31, 2000. (File No. 000-26507)
(28) Previously filed with Form 10-Q Quarterly Report of Showcase
Corporation for the quarterly period ended December 31, 1999. (File No.
000-26507)
(29) Previously filed with Form S-1 of ShowCase Corporation filed with the
Securities and Exchange Commission on April 28, 1999, File No.
333-77223
(30) Previously filed with SPSS Inc's Form 8-K, filed November 15, 2000
(File No. 000-22194).
* Confidential information has been omitted from such Exhibit and filed
separately with the Commission pursuant to a confidential treatment
request under Rule 24b-2 of the Exchange Act.
(b) Financial Statement schedule for ShowCase and Independent Auditors
report thereon
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement.
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-9
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(4) That prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part of
this registration statement, by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c), such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be
deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(5) That every prospectus (i) that is filed pursuant to
paragraph (4) immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act of 1933 and is
used in connection with an offering of securities subject to Rule 415,
will be filed as a part of an amendment to the registration statement
and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(6) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(7) To respond to requests for information that is
incorporated by reference into the joint proxy statement/prospectus
pursuant to Item 4, 10(b), 11 or 13 of this form, within one business
day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to
the request.
(8) To supply by means of a post-effective amendment all
information concerning a transaction, and the company being acquired
involved therein, that was not the subject of and included in the
registration statement when it became effective.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is
II-10
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-11
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Chicago,
State of Illinois, on December 18, 2000.
SPSS INC.
By: /s/ Jack Noonan
----------------------------------
Jack Noonan
President and Chief Executive
Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints Jack Noonan and Edward Hamburg, and each of them, the true and lawful
attorneys-in-fact and agents of the undersigned, with full power of substitution
and resubstitution, for and in the name, place and stead of the undersigned, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, and hereby grants to such attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in furtherance of the
foregoing, as fully to all intents and purposes as the undersigned might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on December 18, 2000.
SIGNATURE TITLE(S)
--------- --------
/s/ Norman H. Nie Chairman of the Board of Directors
-----------------------------
Norman H. Nie
/s/ Jack Noonan President, Chief Executive Officer and Director
-----------------------------
Jack Noonan
II-12
/s/ Edward Hamburg Executive Vice President, Corporate
---------------------------------- Operations, Chief Financial Officer
Edward Hamburg and Secretary
/s/ Robert Brinkmann Controller and Assistant Secretary
---------------------------------- (Chief Accounting Officer)
Robert Brinkmann
/s/ Bernard Goldstein Director
----------------------------------
Bernard Goldstein
/s/ Merritt Lutz Director
----------------------------------
Merritt Lutz
/s/ Michael Blair Director
----------------------------------
Michael Blair
II-13
INDEX TO EXHIBITS
[Download Table]
Exhibit
Number Description
5 Opinion of Ross & Hardies regarding the validity of the securities
being registered
8.1 Opinion of Ross & Hardies regarding the material federal income tax
consequences relating to the merger.
8.2 Opinion of Dorsey & Whitney LLP regarding the material federal income
tax consequences relating to the merger.
10.45 SPSS 2000 Equity Incentive Plan
10.46 SPSS Qualified Employee Stock Purchase Plan
10.47 SPSS Nonqualified Employee Stock Purchase Plan
15.1 Letter regarding Unaudited Interim Financial Information with respect
to SPSS.
21.1 SPSS Subsidiaries
23.1 Consent of KPMG LLP with respect to SPSS.
23.2 Consent of KPMG LLP with respect to ShowCase.
23.5 Consent of Robert W. Baird & Co.
23.6 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated
23.7 Consent of Craig-Hallum Capital Group, Inc.
99.1 Form of SPSS Proxy Card
99.2 Form of ShowCase Proxy Card
II-14
Dates Referenced Herein and Documents Incorporated by Reference
| Referenced-On Page |
|---|
| This ‘S-4’ Filing | | Date | | First | | Last | | | Other Filings |
|---|
| |  |
| | 5/13/08 | | 198 |
| | 12/31/05 | | 125 | | | | | 10-K |
| | 3/31/05 | | 125 | | | | | 10-Q, 11-K |
| | 6/30/04 | | 94 | | | | | 10-Q |
| | 8/30/01 | | 196 |
| | 6/14/01 | | 183 |
| | 4/5/01 | | 183 |
| | 3/31/01 | | 202 | | | | | 10-Q |
| | 2/28/01 | | 14 | | 257 |
| | 1/17/01 | | 183 |
| | 1/1/01 | | 206 |
| Filed on: | | 12/19/00 | | 1 |
| | 12/18/00 | | 290 |
| | 12/12/00 | | 1 |
| | 12/6/00 | | 175 |
| | 12/1/00 | | 21 | | 67 |
| | 11/30/00 | | 149 |
| | 11/20/00 | | 38 |
| | 11/15/00 | | 184 | | 287 | | | 8-K |
| | 11/9/00 | | 48 | | 142 | | | 425 |
| | 11/7/00 | | 52 |
| | 11/6/00 | | 1 | | 281 | | | 8-K |
| | 11/3/00 | | 109 | | 125 |
| | 10/31/00 | | 231 |
| | 10/27/00 | | 223 |
| | 9/30/00 | | 23 | | 241 | | | 10-Q |
| | 9/29/00 | | 51 | | 128 |
| | 9/15/00 | | 51 | | 117 | | | S-8 |
| | 9/13/00 | | 51 |
| | 9/11/00 | | 51 |
| | 8/31/00 | | 262 |
| | 8/21/00 | | 51 |
| | 8/11/00 | | 51 |
| | 8/3/00 | | 51 |
| | 7/27/00 | | 51 |
| | 7/25/00 | | 51 | | 262 |
| | 6/30/00 | | 182 | | 243 | | | 10-Q, 8-K |
| | 6/28/00 | | 50 |
| | 6/14/00 | | 50 | | 58 | | | DEF 14A |
| | 6/6/00 | | 50 |
| | 5/2/00 | | 187 | | 208 |
| | 4/27/00 | | 50 |
| | 4/1/00 | | 206 |
| | 3/31/00 | | 18 | | 287 | | | 10-Q |
| | 3/10/00 | | 156 |
| | 2/16/00 | | 284 |
| | 2/14/00 | | 155 | | 156 | | | SC 13G/A |
| | 2/10/00 | | 154 | | 155 | | | SC 13G |
| | 2/8/00 | | 154 | | | | | SC 13G/A |
| | 12/31/99 | | 25 | | 287 | | | 10-K, 11-K |
| | 12/23/99 | | 281 |
| | 12/10/99 | | 286 | | | | | 8-K |
| | 11/29/99 | | 281 | | 286 | | | 8-K |
| | 10/28/99 | | 283 |
| | 9/30/99 | | 23 | | 286 | | | 10-Q |
| | 7/6/99 | | 198 |
| | 6/30/99 | | 35 | | 286 | | | 10-Q |
| | 6/29/99 | | 198 |
| | 6/28/99 | | 287 |
| | 6/1/99 | | 283 |
| | 4/28/99 | | 287 |
| | 4/1/99 | | 103 | | 193 |
| | 3/31/99 | | 25 | | 208 | | | 10-K405, 10-Q, 11-K |
| | 3/15/99 | | 284 |
| | 3/12/99 | | 286 | | | | | 8-K/A |
| | 1/15/99 | | 286 | | | | | 8-K |
| | 1/4/99 | | 152 |
| | 12/31/98 | | 25 | | 286 | | | 10-K405, 11-K, 8-K, 8-K/A |
| | 12/9/98 | | 284 |
| | 11/30/98 | | 283 |
| | 11/1/98 | | 281 |
| | 10/28/98 | | 284 |
| | 9/14/98 | | 283 |
| | 6/18/98 | | 184 | | | | | 8-A12G |
| | 5/1/98 | | 149 |
| | 4/1/98 | | 283 |
| | 3/31/98 | | 25 | | 202 | | | 10-K, 10-Q, 11-K |
| | 3/17/98 | | 283 |
| | 1/1/98 | | 225 |
| | 12/31/97 | | 25 | | 286 | | | 10-K, 11-K |
| | 11/26/97 | | 285 | | | | | S-3 |
| | 11/21/97 | | 280 | | 281 |
| | 10/15/97 | | 285 | | | | | 8-K |
| | 9/30/97 | | 280 | | 285 | | | 10-Q, 8-K |
| | 6/30/97 | | 43 | | 286 | | | 10-Q |
| | 5/22/97 | | 284 |
| | 5/1/97 | | 280 |
| | 3/31/97 | | 190 | | 286 | | | 10-K, 10-Q, 11-K |
| | 3/7/97 | | 284 |
| | 1/1/97 | | 125 | | 149 |
| | 12/31/96 | | 286 | | | | | 10-K, 11-K |
| | 11/7/96 | | 285 | | | | | S-4/A |
| | 11/1/96 | | 285 | | | | | 8-K/A, S-4 |
| | 10/30/96 | | 280 |
| | 10/11/96 | | 285 | | | | | 8-K |
| | 9/26/96 | | 285 | | | | | 8-K, 8-K/A |
| | 9/23/96 | | 280 |
| | 8/23/96 | | 283 |
| | 3/31/96 | | 23 | | | | | 10-Q |
| | 12/31/95 | | 23 | | 286 | | | 11-K, NT 11-K |
| | 4/1/95 | | 200 |
| | 12/31/94 | | 43 | | 286 |
| | 12/5/94 | | 286 |
| | 11/22/93 | | 283 |
| | 9/30/93 | | 285 |
| | 8/4/93 | | 285 |
| | 7/23/93 | | 285 |
| | 6/22/93 | | 285 |
| | 1/14/92 | | 148 |
| List all Filings |
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