<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-3
Rule 13e-3 Transaction Statement
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
WIZTEC SOLUTIONS LTD.
(Name of Issuer)
CONVERGYS ISRAEL INVESTMENTS LTD.
CONVERGYS CORPORATION
(Name of Persons Filing Statement)
Ordinary Shares, New Israeli Shekel 1 Par Value
(Title of Class of Securities)
M98105-105
(CUSIP Number of Class of Securities)
William D. Baskett III
General Counsel and Secretary
Convergys Corporation
201 East Fourth Street
Cincinnati, Ohio 45202
(513) 723-2444
(Name, Address and Telephone Number of Person Authorized to Receive Notice
and Communications on Behalf of Persons Filing Statement)
COPY TO:
Neil Ganulin
Frost & Jacobs LLP
2500 PNC Center
Cincinnati, Ohio 45202
(513) 651-6800
This statement is filed in connection with (check the appropriate box):
a. [ ] The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under the Securities
Exchange Act of 1934.
b. [ ] The filing of a registration statement under the Securities Act
of 1933.
c. [X] A tender offer.
d. [ ] None of the above.
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Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: [_]
CALCULATION OF FILING FEE
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Transaction Valuation* Amount of Filing Fee
$55,762,534 (1)............................................... $11,152.51 (2)
================================================================================
1. For purposes of calculating the filing fee only. Pursuant to, and as
provided by, Rule 0-11(d), this amount is calculated by multiplying
$18.30, the per share cash tender offer price, by 3,047,133 Ordinary
Shares, New Israeli Shekel 1 par value, which represents all Ordinary
Shares outstanding as of March 2, 1999 not owned directly or
indirectly by the persons filing this statement and assumes the
exercise of warrants and options to purchase Ordinary Shares which were
outstanding as of March 2, 1999.
2. The amount of the filing fee, calculated in accordance with Rule
0-11(d) of the Securities Exchange Act of 1934, as amended, equals
1/50th of one percent of the aggregate cash value for such number of
shares.
[X] Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
Amount Previously Paid: $11,152.51
Filing Parties: Convergys Corporation and Convergys Israel Investments Ltd.
Form or Registration No.: Schedule 14D-1
Date Filed: April 1, 1999
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INTRODUCTION
This Rule 13e-3 Transaction Statement (this "Statement") relates to a
tender offer by Convergys Israel Investments Ltd., a company limited by shares
duly registered under the laws of the State of Israel ("Sub") and a wholly owned
subsidiary of Convergys Corporation, an Ohio corporation ("Parent"), to purchase
all of the outstanding Ordinary Shares (including Shares which may be issued as
the result of the exercise of options and warrants during the course of the
Offer), New Israeli Shekel 1 par value (the "Shares"), of Wiztec Solutions Ltd.,
a company limited by shares duly registered under the laws of the State of
Israel (the "Company") not already owned by Sub and Parent, at $18.30 per Share,
net to the seller in cash, without interest, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated April 1, 1999 (the "Offer to
Purchase"), a copy of which is attached hereto as Exhibit (d)(1), and in the
related Letter of Transmittal, a copy of which is attached hereto as Exhibit
(d)(2) (which, as amended or supplemented from time to time, together constitute
the "Offer"). Capitalized terms used herein but not defined are used as defined
in the Offer to Purchase. This Schedule 13E-3 is being filed by Sub and Parent.
The following cross reference sheet is being supplied pursuant to
General Instruction F to the Schedule 13E-3 and shows the location in the Tender
Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") filed by Sub and Parent
with the Securities and Exchange Commission on the date hereof, of the
information required to be included in response to the items of this Statement.
The information set forth in the Schedule 14D-1, including all exhibits thereto,
is hereby expressly incorporated herein by reference and responses to each item
are qualified in their entirety by the provisions of Schedule 14D-1.
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CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Item in Where located
Schedule 13E-3 Schedule 14D-1
<S> <C>
Item 1(a)........................................................... Item 1(a)
Item 1(b)........................................................... Item 1(b)
Item 1(c)........................................................... Item 1(c)
Item 1(d)....................................................................*
Item 1(e)....................................................................*
Item 1(f)....................................................................*
Item 2..................................................................Item 2
Item 3(a)(1)......................................................Item 3(a)(1)
Item 3(a)(2)........................................................ Item 3(b)
Item 3(b)....................................................................*
Item 4.......................................................................*
Item 5..................................................................Item 5
Item 6(a)............................................................Item 4(a)
Item 6(b)....................................................................*
Item 6(c)............................................................Item 4(b)
Item 6(d)............................................................Item 4(c)
Item 7(a).............................................................. Item 5
Item 7(b)....................................................................*
Item 7(c)....................................................................*
Item 7(d)....................................................................*
Item 8.......................................................................*
Item 9.......................................................................*
Item 10.................................................................Item 6
Item 11.................................................................Item 7
Item 12......................................................................*
Item 13......................................................................*
Item 14......................................................................*
Item 15(a)...................................................................*
Item 15(b)..............................................................Item 8
Item 16.............................................................Item 10(f)
Item 17................................................................Item 11
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</TABLE>
* The item is not required by Schedule 14D-1, is inapplicable or is answered
in the negative.
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The name of the issuer of the class of equity security which is the
subject of the Rule 13e-3 transaction is Wiztec Solutions Ltd., a company
limited by shares duly registered
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under the laws of the State of Israel and the address of its principal executive
offices is 8 Maskit Street, Herzlia, 46776, Israel.
(b) The class of equity securities and the amount of such outstanding
securities being sought are 2,050,216 Ordinary Shares New Israeli Shekel 1 par
value, of the Company and 996,917 Ordinary Shares which may be issued during
the course of the Offer as a result of the exercise of any of the warrants and
options to purchase Ordinary Shares which were outstanding as of March 2, 1999.
There were 6,800,416 shares outstanding as of March 2, 1999. As of March 2,
1999 there were 49 holders of record of Ordinary Shares.
(c) The information set forth in "The Tender Offer - Section 6: Price
Range of the Shares; Dividends on the Shares" of the Offer to Purchaser is
incorporated herein by reference.
(d) The information set forth in "The Tender Offer - Section 6: Price
Range of the Shares; Dividends on the Shares" of the Offer to Purchase is
incorporated herein by reference.
(e) The information set forth in "Special Factors - Background of the
Offer" of the Offer to Purchase is incorporated herein by reference.
(f) The information set forth in "Special Factors - Background of the
Offer" and "The Tender Offer - Section 6: Price Range of the Shares; Dividends
on the Shares" of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a) - (d), (g) This Statement is being filed by the Sub and Parent. The
information set forth in the "Introduction" and "The Tender Offer - Section 9:
Certain Information Concerning Parent and Sub" of the Offer to Purchase is
incorporated herein by reference. The name, business address, present principal
occupation or employment, the material occupations, positions, offices or
employments for the past five years and citizenship of each director and
executive officer of Parent and Sub and the name, principal business and address
of any corporation or other organization in which such occupations, positions,
offices and employments are or were carried on are set forth in Schedule I to
the Offer to Purchase and incorporated herein by reference.
(e) and (f) During the last five years, neither the Sub nor Parent nor,
to the best knowledge of Sub or Parent, any of the persons listed on Schedule I
to the Offer to Purchase (i) have been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) was a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations or, or prohibiting activities subject
to, federal or state securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a) - (b) The information set forth in the "Introduction," "Special
Factors - Background of the Offer," "Special Factors - Related Party
Transactions," and "The Tender Offer -
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Section 9: Certain Information Concerning Parent and Sub" of the Offer to
Purchase is incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a) The information set forth in the "Introduction," "Special Factors -
Background of the Offer," "The Tender Offer - Section 1: Terms of the Offer" and
"The Tender Offer - Section 12: Certain Conditions of the Offer" of the Offer to
Purchase is incorporated herein by reference.
(b) Not applicable.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a) - (g): The information set forth in the "Introduction," "Special
Factors - Purpose of the Offer; Reasons of Parent and Sub for Offer," "Special
Factors - Plans for Company After the Offer; Certain Effects of the Offer" and
"The Tender Offer - Section 7: Effect of the Offer on the Market for the Shares;
Stock Price Quotation; Exchange Act Registration; Margin Regulations" of the
Offer to Purchase is incorporated herein by reference.
ITEM 6. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in "The Tender Offer - Section 10:
Sources and Amount of Funds" of the Offer to Purchase is incorporated herein by
reference.
(b) The information set forth in "The Tender Offer - Section 14: Fees
and Expenses" of the Offer to Purchase is incorporated herein by reference.
(c) The information set forth in "The Tender Offer - Section 10:
Sources and Amount of Funds" of the Offer to Purchase is incorporated herein by
reference.
(d) Not applicable.
ITEM 7. PURPOSE(S), ALTERNATIVE REASONS AND EFFECTS.
(a) - (d) The information set forth in the "Introduction," "Special
Factors - Background of the Offer," "Special Factors - Purpose of the Offer;
Reasons of Parent and Sub for Offer," "Special Factors - Plans for Company After
the Offer; Certain Effects of the Offer," "The Tender Offer - Section 7: Effect
of the Offer on the Market for the Shares; Stock Price Quotation; Exchange Act
Registration; Margin Regulations," and "The Tender Offer - Section 5: Certain
U.S. Federal Income Tax Consequences" of the Offer to Purchase is incorporated
herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a) - (b) The information set forth in "Special Factors - Position of
Sub Regarding Fairness of the Offer" of the Offer to Purchase is incorporated
herein by reference.
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(c) The information set forth in "Special Factors--Position of Sub
Regarding Fairness of the Offer" of the Offer to Purchase is incorporated herein
by reference.
(d) A majority of the directors who are not employees of the Company
has not retained an unaffiliated representative to act solely on behalf of
unaffiliated security holders for the purpose of negotiating the terms of the
Offer or preparing a report concerning the fairness of the transaction.
(e) The information set forth in the "Introduction" of the Offer to
Purchase is incorporate herein by reference.
(f) Not applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a) - (c) The information set forth in "Special Factors - Position of
Sub Regarding Fairness of the Offer," "Special Factors - Financial Analysis by
Parent's Financial Advisor" and "The Tender Offer - Section 14: Fees and
Expenses" of the Offer to Purchase is incorporated herein by reference.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) and (b): The information set forth in the "Introduction," "Special
Factors - Background of Offer," "Special Factors - Interests of Certain Persons
in Offer" and "Special Factors - Beneficial Ownership of Shares" of the Offer to
Purchase is incorporated herein by reference.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
Not applicable.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.
(a) The information set forth in the "Introduction" and "Special
Factors - Interests of Certain Persons in Offer" of the Offer to Purchase is
incorporated herein by reference.
(b) The information set forth in the "Introduction" of the Offer to
Purchase is incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth in the "Introduction," "Special Factors -
Rights of Shareholders in the Offer" and "The Tender Offer - Section 7: Effect
of the Offer on the Market for the Shares; Stock Price Quotation; Exchange Act
Registration; Margin Regulations" of the Offer to Purchase is incorporated
herein by reference.
(b) Not Applicable.
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<PAGE> 7
(c) Not Applicable.
ITEM 14. FINANCIAL INFORMATION.
(a) The information set forth in "The Tender Offer - Section 8: Certain
Information Concerning the Company" and in Schedule II to the Offer to Purchase
is incorporated herein by reference.
(b) Not applicable.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) Not applicable.
(b) The information set forth in the "Introduction" and "The Tender
Offer - Section 14: Fees and Expenses" of the Offer to Purchase is incorporated
herein by reference.
ITEM 16. ADDITIONAL INFORMATION.
The information set forth in the Offer to Purchase and the Letter of
Transmittal, copies of which are attached hereto as Exhibits (d)(1) and (d)(2),
respectively, to the extent not otherwise incorporated herein by reference, is
incorporated herein by reference.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(a) 364-Day Credit Agreement dated as of December 16, 1998 among Convergys
Corporation, the Lenders Party Hereto, PNC Bank, National Association,
Nationsbank, N.A. and Citibank, N.A., as Co-Syndication Agents, and The Chase
Manhattan Bank, as Administrative Agent
(b) Broadview Opinion, dated March 25, 1999.
(c) Not applicable.
(d)(1) Offer to Purchase dated April 1, 1999.
(d)(2) Letter of Transmittal.
(d)(3) Notice of Guaranteed Delivery.
(d)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.
(d)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(d)(6) Guidelines for Certification of Taxpayer Identification Number Substitute
Form W-9.
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(d)(7) W-8 Certificate of Foreign Status.
(d)(8) Press Release dated March 25, 1999.
(e) Not applicable.
(f) Not applicable.
(g)(1) Complaint filed in Carrazza, et. al., vs. Wiztec Solutions Ltd.,
et. al., Case No. A9901656.
(g)(2) Complaint filed in Tucker vs. Wiztec Solutions Ltd., et. al.,
Case No. A9901672.
SIGNATURES
After due inquiry and to the best of my knowledge and belief, each of
the undersigned certifies that the information set forth in this statement is
true, complete and correct.
Date: April 1, 1999 Convergys Israel Investments Ltd.
By /s/ William D. Baskett III
__________________________
William D. Baskett III
Vice President
Convergys Corporation
By /s/ William D. Baskett III
__________________________
William D. Baskett III
General Counsel and Secretary
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EXHIBIT INDEX
Exhibits
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(a) 364-Day Credit Agreement dated as of December 16, 1998 among Convergys
Corporation, the Lenders Party Hereto, PNC Bank, National Association,
Nationsbank, N.A. and Citibank, N.A., as Co-Syndication Agents, and The Chase
Manhattan Bank, as Administrative Agent
(b) Broadview Opinion, dated March 25, 1999
(c) Not applicable.
(d)(1) Offer to Purchase dated April 1, 1999.
(d)(2) Letter of Transmittal.
(d)(3) Notice of Guaranteed Delivery.
(d)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.
(d)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(d)(6) Guidelines for Certification of Taxpayer Identification Number Substitute
Form W-9.
(d)(7) W-8 Certificate of Foreign Status
(d)(8) Press Release dated March 25, 1999.
(e) Not applicable
(f) Not applicable.
(g)(1) Complaint filed in Carrazza, et. al., vs. Wiztec Solutions Ltd.,
et. al., Case No. A9901656.
(g)(2) Complaint filed in Tucker vs. Wiztec Solutions Ltd., et. al.,
Case No. A9901672.
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CONFORMED COPY
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364-DAY
CREDIT AGREEMENT
dated as of
December 16, 1998
among
CONVERGYS CORPORATION
The Lenders Party Hereto
PNC BANK, NATIONAL ASSOCIATION,
NATIONSBANK, N.A. and
CITIBANK, N.A.
as Co-Syndication Agents,
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
---------------------------
CHASE SECURITIES INC.,
================================================================================
as Lead Arranger and Book Manager
================================================================================
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TABLE OF CONTENTS
Page
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ARTICLE I
Definitions
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SECTION 1.01. Defined Terms........................................ 1
SECTION 1.02. Classification of Loans and Borrowings............... 18
SECTION 1.03. Terms Generally ..................................... 19
SECTION 1.04. Accounting Terms; GAAP............................... 19
ARTICLE II
The Credits
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SECTION 2.01. Commitments.......................................... 20
SECTION 2.02. Loans and Borrowings................................. 20
SECTION 2.03. Requests for Revolving Borrowings.................... 21
SECTION 2.04. Competitive Bid Procedure............................ 22
SECTION 2.05. Extension of Termination Date and/or 24
Maturity Date........................................
SECTION 2.06. Increase in Commitments.............................. 26
SECTION 2.07. Funding of Borrowings................................ 28
SECTION 2.08. Interest Elections................................... 29
SECTION 2.09. Termination and Reduction of
Commitments........................................ 30
SECTION 2.10. Repayment of Loans; Evidence of Debt................. 31
SECTION 2.11. Prepayment of Loans.................................. 32
SECTION 2.12. Fees................................................. 33
SECTION 2.13. Interest............................................. 34
SECTION 2.14. Alternate Rate of Interest........................... 35
SECTION 2.15. Increased Costs...................................... 36
SECTION 2.16. Break Funding Payments............................... 37
SECTION 2.17. Taxes................................................ 38
SECTION 2.18. Payments Generally; Pro Rata Treatment;
Sharing of Set-offs................................ 39
SECTION 2.19. Mitigation Obligations; Replacement of
Lenders............................................ 42
SECTION 2.20. Swingline Loans...................................... 43
<PAGE> 3
ARTICLE III
Representations and Warranties
------------------------------
SECTION 3.01. Organization; Powers................................. 44
SECTION 3.02. Authorization; Enforceability........................ 45
SECTION 3.03. Governmental Approvals; No Conflicts................. 45
SECTION 3.04. Financial Condition; No Material Adverse
Change.............................................. 45
SECTION 3.05. Properties........................................... 46
SECTION 3.06. Litigation and Environmental Matters................. 46
SECTION 3.07. Compliance with Laws and Agreements.................. 47
SECTION 3.08. Investment and Holding Company Status................ 47
SECTION 3.09. Taxes................................................ 47
SECTION 3.10. ERISA................................................ 47
SECTION 3.11. Disclosure........................................... 47
SECTION 3.12. Use of Proceeds...................................... 48
SECTION 3.13. Subsidiaries......................................... 48
SECTION 3.14. Year 2000............................................ 48
ARTICLE IV
Conditions
----------
SECTION 4.01. Effective Date....................................... 49
SECTION 4.02. Each Credit Event.................................... 50
ARTICLE V
Affirmative Covenants
---------------------
SECTION 5.01. Financial Statements and Other
Information........................................ 51
SECTION 5.02. Notices of Material Events........................... 52
SECTION 5.03. Existence; Conduct of Business....................... 53
SECTION 5.04 Payment of Obligations............................... 53
SECTION 5.05. Maintenance of Properties; Insurance................. 53
SECTION 5.06. Books and Records; Inspection Rights................. 54
SECTION 5.07. Compliance with Laws................................. 54
SECTION 5.08. Use of Proceeds...................................... 54
SECTION 5.09. Future Guarantors.................................... 54
ARTICLE VI
Negative Covenants
------------------
SECTION 6.01. Liens................................................ 55
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SECTION 6.02. Sale and Lease-Back Transactions..................... 56
SECTION 6.03. Fundamental Changes.................................. 56
SECTION 6.04. Transactions with Affiliates......................... 57
SECTION 6.05. Restrictive Agreements............................... 57
SECTION 6.06. Interest Coverage Ratio.............................. 57
SECTION 6.07. Consolidated Total Debt to
Consolidated Total Capitalization
Ratio.............................................. 58
ARTICLE VII
Events of Default.............................. 58
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ARTICLE VIII
The Administrative Agent........................... 61
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ARTICLE IX
Miscellaneous
-------------
SECTION 9.01. Notices.............................................. 64
SECTION 9.02. Waivers; Amendments.................................. 65
SECTION 9.03. Expenses; Indemnity;
Damage Waiver....................................... 66
SECTION 9.04. Successors and Assigns............................... 67
SECTION 9.05. Survival............................................. 70
SECTION 9.06. Counterparts; Integration;
Effectiveness...................................... 71
SECTION 9.07. Severability......................................... 71
SECTION 9.08. Right of Setoff...................................... 71
SECTION 9.09. Governing Law; Jurisdiction;
Consent to Service of Process...................... 72
SECTION 9.10. WAIVER OF JURY TRIAL................................. 73
SECTION 9.11. Headings............................................. 73
SECTION 9.12. Confidentiality...................................... 73
SECTION 9.13. Interest Rate Limitation............................. 74
<PAGE> 5
4
SCHEDULES:
- ----------
Schedule 2.01 -- Commitments
Schedule 3.06 -- Disclosed Matters
Schedule 3.13 -- Subsidiaries
Schedule 6.05 -- Existing Restrictions
EXHIBITS:
- ---------
Exhibit A -- Form of Assignment and Acceptance
Exhibit B -- Form of Opinion of Borrower's Counsel
Exhibit C -- Form of Guarantee Agreement
Exhibit D - Form of Indemnity, Subrogation and Contribution
Agreement
<PAGE> 6
1
364-DAY CREDIT AGREEMENT dated as of
December 16, 1998, among CONVERGYS CORPORATION, an
Ohio corporation, the LENDERS party hereto, PNC BANK,
NATIONAL ASSOCIATION, NATIONSBANK, N.A. and CITIBANK,
N.A., as Co-Syndication Agents, and THE CHASE
MANHATTAN BANK, as Administrative Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINED TERMS. As used in this
Agreement, the following terms have the meanings specified
below:
"ABR", when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Alternate Base Rate.
"ADJUSTED LIBO RATE" means, with respect to any Eurodollar
Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such
Interest Period multiplied by (b) the Statutory Reserve Rate.
"ADMINISTRATIVE AGENT" means The Chase Manhattan Bank, in its
capacity as administrative agent for the Lenders hereunder.
"ADMINISTRATIVE QUESTIONNAIRE" means an
Administrative Questionnaire in a form supplied by the
Administrative Agent.
"AFFILIATE" means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.
<PAGE> 7
2
"ALTERNATE BASE RATE" means, for any day, a rate per annum
equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base
CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate
in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due
to a change in the Prime Rate, the Base CD Rate or the Federal Funds Effective
Rate shall be effective from and including the effective date of such change in
the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate,
respectively.
"APPLICABLE PERCENTAGE" means, with respect to any Lender, the
percentage of the total Commitments represented by such Lender's Commitment. If
the Commitments have terminated or expired, the Applicable Percentages shall be
determined based upon the Commitments most recently in effect, giving effect to
any assignments.
"APPLICABLE RATE" means, for any day, with respect to any
Eurodollar Revolving Loan, or with respect to the facility fees payable
hereunder, as the case may be, the applicable rate per annum set forth below
under the caption "Eurodollar Spread" or "Facility Fee Rate", as the case may
be, based upon the ratings by Moody's and S&P, respectively, applicable on such
date to the Index Debt:
<TABLE>
<CAPTION>
==================================================================================================
Eurodollar Facility Fee
---------- ------------
Index Debt Ratings: Spread Rate
===================================================================================================
<S> <C> <C>
Category 1 .325% .075%
----------
A- or higher or A3 or higher
Category 2 .400% .100%
----------
BBB+ or Baa1
Category 3 .625% .125%
----------
BBB or Baa2
Category 4 .725% .150%
----------
BBB- and Baa3
Category 5 .800% .200%
----------
BB+ and Ba1
Category 6 1.000% .250%
----------
lower than BB+ or lower than
Ba1
===========================================================================================================
</TABLE>
For purposes of the foregoing, (i) if either Moody's or S&P
shall not have in effect a rating for the Index Debt (other than by reason of
the circumstances referred to in the last sentence of this definition), then
<PAGE> 8
3
such rating agency shall be deemed to have established a rating in Category 6;
(ii) if the ratings established or deemed to have been established by Moody's
and S&P for the Index Debt shall fall within different Categories, then (A) if
both such ratings are at or above Category 4, the Applicable Rate shall be based
on the higher of the two ratings unless one of the two ratings is two or more
Categories lower than the other, in which case the Applicable Rate shall be
determined by reference to the Category next above that of the lower of the two
ratings and (B) if one or both of such ratings is below Category 4, the
Applicable Rate shall be determined by reference to the lower of the two
ratings; and (iii) if the ratings established or deemed to have been established
by Moody's and S&P for the Index Debt shall be changed (other than as a result
of a change in the rating system of Moody's or S&P), such change shall be
effective as of the date on which it is first announced by the applicable rating
agency. Each change in the Applicable Rate shall apply during the period
commencing on the effective date of such change and ending on the date
immediately preceding the effective date of the next such change. If the rating
system of Moody's or S&P shall change, or if either such rating agency shall
cease to be in the business of rating corporate debt obligations, the Borrower
and the Lenders shall negotiate in good faith to amend this definition to
reflect such changed rating system or the unavailability of ratings from such
rating agency and, pending the effectiveness of any such amendment, the
Applicable Rate shall be determined by reference to the rating most recently in
effect prior to such change or cessation.
"ASSESSMENT RATE" means, for any day, the annual assessment
rate in effect on such day that is payable by a member of the Bank Insurance
Fund classified as "well-capitalized" and within supervisory subgroup "B" (or a
comparable successor risk classification) within the meaning of 12 C.F.R. Part
327 (or any successor provision) to the Federal Deposit Insurance Corporation
for insurance by such Corporation of time deposits made in dollars at the
offices of such member in the United States; PROVIDED that if, as a result of
any change in any law, rule or regulation, it is no longer possible to determine
the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual
rate as shall be determined by the Administrative Agent to be representative of
the cost of such insurance to the Lenders.
<PAGE> 9
4
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance
entered into by a Lender and an assignee (with the consent of any party whose
consent is required by Section 9.04), and accepted by the Administrative Agent,
in the form of Exhibit A or any other form approved by the Administrative Agent.
"AVAILABILITY PERIOD" means the period from and including the
Effective Date to but excluding the earlier of the Termination Date and the date
of termination of the Commitments.
"BASE CD RATE" means the sum of (a) the Three-Month Secondary
CD Rate multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.
"BOARD" means the Board of Governors of the
Federal Reserve System of the United States of America.
"BORROWER" means Convergys Corporation, an Ohio
corporation.
"BORROWING" means (a) Revolving Loans of the same Type, made,
converted or continued on the same date and, in the case of Eurodollar Loans, as
to which a single Interest Period is in effect, (b) a Competitive Loan or group
of Competitive Loans of the same Type made on the same date and as to which a
single Interest Period is in effect or (c) a Swingline Loan.
"BORROWING REQUEST" means a request by the Borrower for a
Revolving Borrowing in accordance with Section 2.03.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or required
by law to remain closed; PROVIDED that, when used in connection with a
Eurodollar Loan, the term "BUSINESS DAY" shall also exclude any day on which
banks are not open for dealings in dollar deposits in the London interbank
market.
"CAPITAL LEASE OBLIGATIONS" of any Person means the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such
<PAGE> 10
5
Person under GAAP, and the amount of such obligations shall be the capitalized
amount thereof determined in accordance with GAAP.
"CHANGE IN CONTROL" means (a) the acquisition of ownership,
directly or indirectly, beneficially or of record, by any Person or group
(within the meaning of the Securities Exchange Act of 1934 and the rules of the
Securities and Exchange Commission thereunder as in effect on the date hereof),
of shares representing more than 25% of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of the Borrower; (b)
occupation of a majority of the seats (other than vacant seats) on the board of
directors of the Borrower by Persons who were neither (i) nominated by the board
of directors of the Borrower nor (ii) appointed by directors so nominated; or
(c) the acquisition of direct or indirect Control of the Borrower by any Person
or group.
"CHANGE IN LAW" means (a) the adoption of any law, rule or
regulation after the date of this Agreement, (b) any change in any law, rule or
regulation or in the interpretation or application thereof by any Governmental
Authority after the date of this Agreement or (c) compliance by any Lender (or,
for purposes of Section 2.15(b), by any lending office of such Lender or by such
Lender's holding company, if any) with any request, guideline or directive
(whether or not having the force of law) of any Governmental Authority made or
issued after the date of this Agreement.
"CLASS", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are
Revolving Loans, Competitive
Loans or Swingline Loans.
"CODE" means the Internal Revenue Code of 1986, as amended
from time to time.
"COMMITMENT" means, with respect to each Lender, the
commitment of such Lender to make Revolving Loans and acquire participations in
Swingline Loans hereunder expressed as an amount representing the maximum
aggregate amount of such Lender's Revolving Credit Exposure hereunder, as such
commitment may be (a) reduced from time to time pursuant to Section 2.09 and (b)
reduced or increased from time to time pursuant to assignments by or to such
Lender pursuant to Section 9.04 and (c) increased pursuant to Section 2.06. The
initial amount of each Lender's
<PAGE> 11
6
Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance
pursuant to which such Lender shall have assumed its Commitment, as applicable.
The initial aggregate amount of the Lenders' Commitments is $600,000,000.
"COMPETITIVE BID" means an offer by a Lender to make a
Competitive Loan in accordance with Section 2.04.
"COMPETITIVE BID RATE" means, with respect to any Competitive
Bid, the Margin or the Fixed Rate, as applicable, offered by the Lender making
such Competitive Bid.
"COMPETITIVE BID REQUEST" means a request by the Borrower for
Competitive Bids in accordance with Section 2.04.
"COMPETITIVE LOAN" means a Loan made pursuant to
Section 2.04.
"CONSOLIDATED EBITDA" means, for any fiscal period, with
respect to the Borrower and the Consolidated Subsidiaries, Consolidated Net
Income for such period PLUS, to the extent deducted in computing such
Consolidated Net Income, without duplication, the sum of (a) income tax expense,
(b) interest expense, (c) depreciation and amortization expense, (d) any
extraordinary or non-recurring losses and (e) other noncash items (other than
accruals) reducing Consolidated Net Income, MINUS, to the extent added in
computing such Consolidated Net Income, without duplication, the sum of (i)
interest income, (ii) any extraordinary or non-recurring gains and (iii) other
noncash items increasing Consolidated Net Income, all as determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, for any fiscal period,
the aggregate of all payments by the Borrower and the Consolidated Subsidiaries
for such period that, in accordance with GAAP, are or should be included in
"interest paid, net of amounts capitalized" and "capital lease inter est paid"
reflected in the statement of cash flows for the Borrower and the Consolidated
Subsidiaries, less the amount of capital lease interest paid to the Borrower or
any Consolidated Subsidiary for such period that is not reflected in
Consolidated EBITDA for such period, all as determined on a consolidated basis
in accordance with GAAP.
<PAGE> 12
7
"CONSOLIDATED NET INCOME" means, for any fiscal period, net
income of the Borrower and the Consolidated Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED SUBSIDIARY" means any Subsidiary that should be
consolidated with the Borrower for financial reporting purposes in accordance
with GAAP.
"CONSOLIDATED TOTAL CAPITALIZATION" means, on any date, the
sum of (a) Consolidated Total Debt and (b) stockholders' equity of the Borrower
and the Consolidated Subsidiaries, at such date, determined on a consolidated
basis in accordance with GAAP.
"CONSOLIDATED TOTAL DEBT" means, at any date, all Indebtedness
of the Borrower and the Consolidated Subsidiaries at such date, determined on a
consolidated basis in accordance with GAAP.
"CONTRIBUTION AGREEMENT" means the indemnity, subrogation and
contribution agreement, substantially in the form of Exhibit D, to be entered
into by the Administrative Agent, the Borrower and the Guarantors.
"CONTROL" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise. "CONTROLLING" and "CONTROLLED" have meanings correlative thereto.
"DEFAULT" means any event or condition which constitutes an
Event of Default or which upon notice, lapse of time or both would, unless cured
or waived, become an Event of Default.
"DISCLOSED MATTERS" means the actions, suits and proceedings
and the environmental matters disclosed in Schedule 3.06.
"DOLLARS" or "$" refers to lawful money of the
United States of America.
"EFFECTIVE DATE" means the date on which the conditions
specified in Section 4.01 are satisfied (or waived in accordance with Section
9.02).
<PAGE> 13
8
"ENVIRONMENTAL LAWS" means all laws, rules, regulations,
codes, ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material or to health and safety matters.
"ENVIRONMENTAL LIABILITY" means any liability, contingent or
otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary
directly or indirectly resulting from or based upon (a) violation of any
Environmental Law, (b) the generation, use, handling, transportation, storage,
treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous
Materials, (d) the release or threatened release of any Hazardous Materials into
the environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA EVENT" means (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate
from the PBGC or a plan administrator of any notice relating to an intention to
terminate any Plan or
<PAGE> 14
9
Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the
Borrower or any of its ERISA Affiliates of any liability with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the
receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by
any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"EURODOLLAR", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate (or, in the
case of a Competitive Loan, the LIBO Rate).
"EVENT OF DEFAULT" has the meaning assigned to
such term in Article VII.
"EXCLUDED TAXES" means, with respect to the Administrative
Agent, any Lender or any other recipient of any payment to be made by or on
account of any obligation of the Borrower hereunder, (a) income or franchise
taxes imposed on (or measured by) its net income by the United States of
America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located, (b) any branch
profits taxes imposed by the United States of America or any similar tax imposed
by any other jurisdiction in which the Borrower is located and (c) in the case
of a Foreign Lender (other than an assignee pursuant to a request by the
Borrower under Section 2.19(b)), any withholding tax that is imposed on amounts
payable to such Foreign Lender at the time such Foreign Lender becomes a party
to this Agreement (or designates a new lending office) or is attributable to
such Foreign Lender's failure to comply with Section 2.17(e), except to the
extent that such Foreign Lender (or its assignor, if any) was entitled, at the
time of designation of a new lending office (or assignment), to receive
additional amounts from the Borrower with respect to such withholding tax
pursuant to Section 2.17(a).
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the
weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the
rates on overnight Federal funds
<PAGE> 15
10
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published on the next succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day that
is a Business Day, the average (rounded upwards, if necessary, to the next 1/100
of 1%) of the quotations for such day for such transactions received by the
Administrative Agent from three Federal funds brokers of recognized standing
selected by it.
"FINANCIAL OFFICER" means the chief financial officer,
principal accounting officer, treasurer or controller of the Borrower.
"FIXED RATE" means, with respect to any Competitive Loan
(other than a Eurodollar Competitive Loan), the fixed rate of interest per annum
specified by the Lender making such Competitive Loan in its related Competitive
Bid.
"FIXED RATE LOAN" means a Competitive Loan bearing
interest at a Fixed Rate.
"FOREIGN LENDER" means any Lender that is organized under the
laws of a jurisdiction other than that in which the Borrower is located. For
purposes of this definition, the United States of America, each State thereof
and the District of Columbia shall be deemed to constitute a single
jurisdiction.
"GAAP" means generally accepted accounting principles in the
United States of America.
"GOVERNMENTAL AUTHORITY" means the government of the United
States of America, any other nation or any political subdivision thereof,
whether state or local, and any agency, authority, instrumentality, regulatory
body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
"GUARANTEE" of or by any Person (the "GUARANTOR") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "PRIMARY OBLIGOR") in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such
<PAGE> 16
11
Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (b) to purchase or
lease property, securities or services for the purpose of assuring the owner of
such Indebtedness or other obligation of the payment thereof, (c) to maintain
working capital, equity capital or any other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation; PROVIDED, that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business.
"GUARANTEE AGREEMENT" means the guarantee agreement,
substantially in the form of Exhibit C, to be entered into by the Administrative
Agent and the Guarantors.
"GUARANTOR" means any of (a) Convergys Information Management
Group Inc., a wholly owned Subsidiary, (b) Convergys Customer Management Group
Inc., a wholly owned Subsidiary, (c) any indirect Subsidiary that on the date
hereof has outstanding any Indebtedness (other than Intercompany Indebtedness
and Indebtedness of the type described in clauses (d), (e) and (h) of the
definition of "Indebtedness"), and (d) each Subsidiary that shall become a party
to the Guarantee Agreement pursuant to Section 5.09.
"HAZARDOUS MATERIALS" means all explosive or radioactive
substances or wastes and all hazardous or toxic substances, wastes or other
pollutants, including petroleum or petroleum distillates, asbestos or asbestos
containing materials, polychlorinated biphenyls, radon gas, infectious or
medical wastes and all other substances or wastes of any nature regulated
pursuant to any Environmental Law.
"HEDGING AGREEMENT" means any interest rate protection
agreement, foreign currency exchange agreement, commodity price protection
agreement or other interest or currency exchange rate or commodity price hedging
arrangement.
"INDEBTEDNESS" of any Person means, without duplication, (a)
all obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such Person upon which interest charges are
<PAGE> 17
12
customarily paid, (d) all obligations of such Person under conditional sale or
other title retention agreements relating to property acquired by such Person,
(e) all obligations of such Person in respect of the deferred purchase price of
property or services (excluding current accounts payable incurred in the
ordinary course of business), (f) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the Indebtedness secured thereby has been assumed, (g)
all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease
Obligations of such Person, (i) all obligations, contingent or otherwise, of
such Person as an account party in respect of letters of credit and letters of
guaranty and (j) all obligations, contingent or otherwise, of such Person in
respect of bankers' acceptances. The Indebtedness of any Person shall include
the Indebtedness of any other entity (including any partnership in which such
Person is a general partner) to the extent such Person is liable therefor as a
result of such Person's ownership interest in or other relationship with such
entity, except to the extent the terms of such Indebtedness provide that such
Person is not liable therefor.
"INDEMNIFIED TAXES" means Taxes other than Excluded Taxes.
"INDEX DEBT" means senior, unsecured, long-term indebtedness
for borrowed money of the Borrower that is not guaranteed by any other Person or
subject to any other credit enhancement.
"INFORMATION MEMORANDUM" means the Confidential Information
Memorandum dated November 1998 relating to the Borrower and the Transactions.
"INTERCOMPANY INDEBTEDNESS" means any Indebtedness
of any Subsidiary which is owing to the Borrower or any
other Subsidiary.
"INTEREST ELECTION REQUEST" means a request by the Borrower to
convert or continue a Revolving Borrowing in accordance with Section 2.08.
"INTEREST PAYMENT DATE" means (a) with respect to any ABR Loan
(other than a Swingline Loan), the last day of each March, June, September and
December, (b) with respect to any Eurodollar Loan, the last day of the Interest
Period
<PAGE> 18
13
applicable to the Borrowing of which such Loan is a part and, in the case
of a Eurodollar Borrowing with an Interest Period of more than three months'
duration, each day prior to the last day of such Interest Period that occurs at
intervals of three months' duration after the first day of such Interest Period,
(c) with respect to any Fixed Rate Loan, the last day of the Interest Period
applicable to the Borrowing of which such Loan is a part and, in the case of a
Fixed Rate Borrowing with an Interest Period of more than 90 days' duration
(unless otherwise specified in the applicable Competitive Bid Request), each day
prior to the last day of such Interest Period that occurs at intervals of 90
days' duration after the first day of such Interest Period, and any other dates
that are specified in the applicable Competitive Bid Request as Interest Payment
Dates with respect to such Borrowing and (d) with respect to a Swingline Loan,
the day that such Loan is required to be repaid.
"INTEREST PERIOD" means (a) with respect to any Eurodollar
Borrowing, the period commencing on the date of such Borrowing and ending on the
numerically corresponding day in the calendar month that is one, two, three or
six months (or, with the consent of each Lender, nine or twelve months)
thereafter, as the Borrower may elect and (b) with respect to any Fixed Rate
Borrowing, the period (which shall not be less than 7 days or more than 360
days) commencing on the date of such Borrowing and ending on the date specified
in the applicable Competitive Bid Request; PROVIDED, that (i) if any Interest
Period would end on a day other than a Business Day, such Interest Period shall
be extended to the next succeeding Business Day unless, in the case of a
Eurodollar Borrowing only, such next succeeding Business Day would fall in the
next calendar month, in which case such Interest Period shall end on the next
preceding Business Day and (ii) any Interest Period pertaining to a Eurodollar
Borrowing that commences on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the last calendar
month of such Interest Period) shall end on the last Business Day of the last
calendar month of such Interest Period. For purposes hereof, the date of a
Borrowing initially shall be the date on which such Borrowing is made and, in
the case of a Revolving Borrowing, thereafter shall be the effective date of the
most recent conversion or continuation of such Borrowing.
<PAGE> 19
14
"LENDERS" means (a) the Persons listed on Schedule 2.01, (b)
any other Person that shall have become a party hereto pursuant to an Assignment
and Acceptance, other than any such Person that ceases to be a party hereto
pursuant to an Assignment and Acceptance and (c) any Person that shall have
become a party hereto pursuant to Section 2.06. Unless the context requires
otherwise, the term "Lenders" includes the Swingline Lenders.
"LIBO RATE" means, with respect to any Eurodollar Borrowing
for any Interest Period, the rate appearing on Page 3750 of the Telerate Service
(or on any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the "LIBO RATE" with respect to such
Eurodollar Borrowing for such Interest Period shall be the rate at which dollar
deposits of $5,000,000 and for a maturity comparable to such Interest Period are
offered by the principal London office of the Administrative Agent in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period.
"LIEN" means, with respect to any asset, (a) any mortgage,
deed of trust, lien, pledge, hypothecation, encumbrance, charge or security
interest in, on or of such asset, (b) the interest of a vendor or a lessor under
any conditional sale agreement, capital lease or title retention agreement (or
any financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"LOAN DOCUMENTS" means this Agreement and any promissory note
issued hereunder, the Guarantee Agreement and the Contribution Agreement.
<PAGE> 20
15
"LOANS" means the loans, including Swingline Loans, made by
the Lenders to the Borrower pursuant to this Agreement.
"MARGIN" means, with respect to any Competitive Loan bearing
interest at a rate based on the LIBO Rate, the marginal rate of interest, if
any, to be added to or subtracted from the LIBO Rate to determine the rate of
interest applicable to such Loan, as specified by the Lender making such Loan in
its related Competitive Bid.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(a) the business, assets, operations, prospects or condition, financial or
otherwise, of the Borrower and the Subsidiaries taken as a whole, (b) the
ability of the Borrower to perform any of its obligations under this Agreement
or (c) the rights of or benefits available to the Lenders under this Agreement.
"MATERIAL INDEBTEDNESS" means Indebtedness (other than the
Loans), or obligations in respect of one or more Hedging Agreements, of any one
or more of the Borrower and its Subsidiaries in an aggregate principal amount
exceeding $15,000,000. For purposes of determining Material Indebtedness, the
"principal amount" of the obligations of the Borrower or any Subsidiary in
respect of any Hedging Agreement at any time shall be the maximum aggregate
amount (giving effect to any netting agreements provided for in such Hedging
Agreements) that the Borrower or such Subsidiary would be required to pay if
such Hedging Agreement were terminated at such time.
"MATURITY DATE" means the Termination Date, unless
extended pursuant to Section 2.05.
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" means a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"OTHER TAXES" means any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made hereunder or from the execution, delivery
or enforcement of, or otherwise with respect to, this Agreement.
<PAGE> 21
16
"PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA and any successor entity performing similar functions.
"PERMITTED ENCUMBRANCES" means:
(a) Liens imposed by law for taxes that are not
yet due or are being contested in compliance with
Section 5.04;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens imposed by law, arising in the
ordinary course of business and securing obligations that are not
overdue by more than 30 days or are being contested in compliance with
Section 5.04;
(c) pledges and deposits made in the ordinary course of
business in compliance with workers' compensation, unemployment
insurance and other social security laws or regulations;
(d) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case
in the ordinary course of business;
(e) judgment liens in respect of judgments that do not
constitute an Event of Default under clause (k) of Article VII; and
(f) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do
not materially detract from the value of the affected property or
interfere with the ordinary conduct of business of the Borrower or any
Subsidiary;
PROVIDED that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness.
"PERSON" means any natural person, corporation, limited
liability company, trust, joint venture, association, company, partnership,
Governmental Authority or other entity.
<PAGE> 22
17
"PLAN" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"PRIME RATE" means the rate of interest per annum publicly
announced from time to time by The Chase Manhattan Bank as its prime rate in
effect at its principal office in New York City; each change in the Prime Rate
shall be effective from and including the date such change is publicly announced
as being effective.
"REGISTER" has the meaning set forth in Section 9.04.
"RELATED PARTIES" means, with respect to any specified Person,
such Person's Affiliates and the respective directors, officers, employees,
agents and advisors of such Person and such Person's Affiliates.
"REQUIRED LENDERS" means, at any time, Lenders having
Revolving Credit Exposures and unused Commitments representing more than 50% of
the total Revolving Credit Exposures and unused Commitments at such time;
PROVIDED that, for purposes of declaring the Loans to be due and payable
pursuant to Article VII, and for all purposes after the Loans become due and
payable pursuant to Article VII or the Commitments expire or terminate, the
outstanding Competitive Loans of the Lenders shall be included in their
respective Revolving Credit Exposures in determining the Required Lenders.
"REVOLVING CREDIT EXPOSURE" means, with respect to any Lender
at any time, the sum of the outstanding principal amount of such Lender's
Revolving Loans and its Swingline Exposure at such time.
"REVOLVING LOAN" means a Loan made pursuant to Section 2.03.
"S&P" means Standard & Poor's.
"SPIN-OFF" means the distribution by Cincinnati Bell, Inc., an
Ohio corporation, of 90.2% of the capital stock of the Borrower, all as
described in the Registration
<PAGE> 23
18
Statement on Form S-1, as amended prior to the date hereof, filed by the
Borrower with the Securities and Exchange Commission on May 26, 1998.
"STATUTORY RESERVE RATE" means a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the Board to which the Administrative Agent is
subject (a) with respect to the Base CD Rate, for new negotiable nonpersonal
time deposits in dollars of over $100,000 with maturities approximately equal to
three months and (b) with respect to the Adjusted LIBO Rate, for eurocurrency
funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of
the Board). Such reserve percentages shall include those imposed pursuant to
such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency
funding and to be subject to such reserve requirements without benefit of or
credit for proration, exemptions or offsets that may be available from time to
time to any Lender under such Regulation D or any comparable regulation. The
Statutory Reserve Rate shall be adjusted automatically on and as of the
effective date of any change in any reserve percentage.
"SUBSIDIARY" means, with respect to any Person (the "PARENT")
at any date, any corporation, limited liability company, partnership,
association or other entity the accounts of which would be consolidated with
those of the parent in the parent's consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership,
association or other entity (a) of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary voting
power or, in the case of a partnership, more than 50% of the general partnership
interests are, as of such date, owned, controlled or held, or (b) that is, as of
such date, otherwise Controlled, by the parent or one or more subsidiaries of
the parent or by the parent and one or more subsidiaries of the parent.
"SUBSIDIARY" means any subsidiary of the Borrower.
"SWINGLINE EXPOSURE" means, at any time, the aggregate
principal amount of all Swingline Loans outstanding at such time. The Swingline
Exposure of any
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19
Lender at any time shall be its Applicable Percentage of the total Swingline
Exposure at such time.
"SWINGLINE LENDERS" means The Chase Manhattan
Bank, Bank of America, National Trust & Savings Association and Citibank, N.A.,
in their capacity as lenders of Swingline Loans hereunder.
"SWINGLINE LOAN" means a Loan made pursuant to
Section 2.20.
"TAXES" means any and all present or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"TERMINATION DATE" means December 15, 1999, unless
extended pursuant to Section 2.05.
"THREE-MONTH SECONDARY CD RATE" means, for any day, the
secondary market rate for three-month certificates of deposit reported as being
in effect on such day (or, if such day is not a Business Day, the next preceding
Business Day) by the Board through the public information telephone line of the
Federal Reserve Bank of New York (which rate will, under the current practices
of the Board, be published in Federal Reserve Statistical Release H.15(519)
during the week following such day) or, if such rate is not so reported on such
day or such next preceding Business Day, the average of the secondary market
quotations for three-month certificates of deposit of major money center banks
in New York City received at approximately 10:00 a.m., New York City time, on
such day (or, if such day is not a Business Day, on the next preceding Business
Day) by the Administrative Agent from three negotiable certificate of deposit
dealers of recognized standing selected by it.
"TRANSACTIONS" means (a) the execution, delivery and
performance by the Borrower of this Agreement, the borrowing of Loans and the
use of the proceeds thereof and (b) the execution, delivery and performance by
the Guarantors of the Guarantee Agreement.
"TYPE", when used in reference to any Loan or Borrowing,
refers to whether the rate of interest on such Loan, or on the Loans comprising
such Borrowing, is determined by reference to the Adjusted LIBO Rate, the
Alternate Base Rate or, in the case of a Competitive Loan or Borrowing, the LIBO
Rate or a Fixed Rate.
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"WITHDRAWAL LIABILITY" means liability to a Multiemployer Plan
as a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. CLASSIFICATION OF LOANS AND BORROWINGS. For
purposes of this Agreement, Loans may be classified and referred to by Class
(E.G., a "Revolving Loan") or by Type (E.G., a "Eurodollar Loan") or by Class
and Type (E.G., a "Eurodollar Revolving Loan"). Borrowings also may be
classified and referred to by Class (E.G., a "Revolving Borrowing") or by Type
(E.G., a "Eurodollar Borrowing") or by Class and Type (E.G., a "Eurodollar
Revolving Borrowing").
SECTION 1.03. TERMS GENERALLY. The definitions of terms herein
shall apply equally to the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
The word "will" shall be construed to have the same meaning and effect as the
word "shall". Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any Person shall be construed to include such
Person's successors and assigns, (c) the words "herein", "hereof" and
"hereunder", and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (e) the words "asset" and "property" shall be construed to
have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.
SECTION 1.04. ACCOUNTING TERMS; GAAP. Except as otherwise
expressly provided herein, all terms of an accounting or financial nature shall
be construed in accordance with GAAP, as in effect from time to time; PROVIDED
that, if the Borrower notifies the Administrative
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Agent that the Borrower requests an amendment to any provision hereof to
eliminate the effect of any change occurring after the date hereof in GAAP or in
the application thereof on the operation of such provision (or if the
Administrative Agent notifies the Borrower that the Required Lenders request an
amendment to any provision hereof for such purpose), regardless of whether any
such notice is given before or after such change in GAAP or in the application
thereof, then such provision shall be interpreted on the basis of GAAP as in
effect and applied immediately before such change shall have become effective
until such notice shall have been withdrawn or such provision amended in
accordance herewith.
ARTICLE II
THE CREDITS
SECTION 2.01. COMMITMENTS. Subject to the terms and conditions
set forth herein, each Lender agrees to make Revolving Loans to the Borrower
from time to time during the Availability Period in an aggregate principal
amount that will not result in (a) such Lender's Revolving Credit Exposure
exceeding such Lender's Commitment or (b) the sum of the total Revolving Credit
Exposures plus the aggregate principal amount of outstanding Competitive Loans
exceeding the total Commitments. Within the foregoing limits and subject to the
terms and conditions set forth herein, the Borrower may borrow, prepay and
reborrow Revolving Loans.
SECTION 2.02. LOANS AND BORROWINGS. (a) Each Revolving Loan
shall be made as part of a Borrowing consisting of Revolving Loans made by the
Lenders ratably in accordance with their respective Commitments. Each
Competitive Loan shall be made in accordance with the procedures set forth in
Section 2.04. The failure of any Lender to make any Loan required to be made by
it shall not relieve any other Lender of its obligations hereunder; PROVIDED
that the Commitments and Competitive Bids of the Lenders are several and no
Lender shall be responsible for any other Lender's failure to make Loans as
required.
(b) Subject to Section 2.14, (i) each Revolving Borrowing
shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may
request in accordance herewith, and (ii) each Competitive Borrowing shall be
comprised entirely of Eurodollar Loans or Fixed Rate Loans as the Borrower may
request in accordance herewith. Each
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Swingline Loan shall be an ABR Loan. Each Lender at its option may make any
Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such
Lender to make such Loan; PROVIDED that any exercise of such option shall not
affect the obligation of the Borrower to repay such Loan in accordance with the
terms of this Agreement; PROVIDED FURTHER, that in exercising such option, each
Lender shall comply with its obligation under Section 2.19(a).
(c) At the commencement of each Interest Period for any
Eurodollar Revolving Borrowing, such Borrowing shall be in an aggregate amount
that is an integral multiple of $1,000,000 and not less than $5,000,000. At the
time that each ABR Revolving Borrowing is made, such Borrowing shall be in an
aggregate amount that is an integral multiple of $1,000,000 and not less than
$5,000,000. Each Competitive Borrowing shall be in an aggregate amount that is
an integral multiple of $1,000,000 and not less than $5,000,000. Each Swingline
Loan shall be in an aggregate amount that is an integral multiple of $1,000,000
and not less than $1,000,000. Borrowings of more than one Type and Class may be
outstanding at the same time; PROVIDED that there shall not at any time be more
than a total of ten Eurodollar Revolving Borrowings outstanding.
(d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request, or to elect to convert or continue,
any Borrowing if the Interest Period requested with respect thereto would end
after the Maturity Date.
SECTION 2.03. REQUESTS FOR REVOLVING BORROWINGS. To request a
Revolving Borrowing, the Borrower shall notify the Administrative Agent of such
request by telephone (a) in the case of a Eurodollar Borrowing, not later than
11:00 a.m., New York City time, three Business Days before the date of the
proposed Borrowing or (b) in the case of an ABR Borrowing that is not a
Swingline Loan, not later than 11:00 a.m., New York City time, one Business Day
before the date of the proposed Borrowing. Each such telephonic Borrowing
Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Borrowing Request in a form
approved by the Administrative Agent and signed by the Borrower. Each such
telephonic and written Borrowing Request shall specify the following information
in compliance with Section 2.02:
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(i) the aggregate amount of the requested
Borrowing;
(ii) the date of such Borrowing, which shall be a Business
Day;
(iii) whether such Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing;
(iv) in the case of a Eurodollar Borrowing, the initial
Interest Period to be applicable thereto, which shall be a period
contemplated by the definition of the term "Interest Period"; and
(v) the location and number of the Borrower's account to which
funds are to be disbursed, which shall comply with the requirements of
Section 2.07.
If no election as to the Type of Revolving Borrowing is specified, then the
requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period
is specified with respect to any requested Eurodollar Revolving Borrowing, then
the Borrower shall be deemed to have selected an Interest Period of one month's
duration. Promptly following receipt of a Borrowing Request in accordance with
this Section, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender's Loan to be made as part of the
requested Borrowing.
SECTION 2.04. COMPETITIVE BID PROCEDURE. (a) Subject to the
terms and conditions set forth herein, from time to time during the Availability
Period the Borrower may request Competitive Bids and may (but shall not have any
obligation to) accept Competitive Bids and borrow Competitive Loans; PROVIDED
that the sum of the total Revolving Credit Exposures plus the aggregate
principal amount of outstanding Competitive Loans shall not exceed the total
Commitments. To request Competitive Bids, the Borrower shall notify the
Administrative Agent of such request by telephone, in the case of a Eurodollar
Borrowing, not later than 11:00 a.m., New York City time, four Business Days
before the date of the proposed Borrowing and, in the case of a Fixed Rate
Borrowing, not later than 10:00 a.m., New York City time, one Business Day
before the date of the proposed Borrowing; PROVIDED that the Borrower may submit
no more than one Competitive Bid Request on the same day and a Competitive Bid
Request shall not be made within five Business Days after the date of any
previous Competitive Bid
<PAGE> 29
24
Request, unless any and all such previous Competitive Bid Requests shall have
been withdrawn or all Competitive Bids received in response thereto rejected.
Each such telephonic Competitive Bid Request shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Competitive Bid
Request in a form approved by the Administrative Agent and signed by the
Borrower. Each such telephonic and written Competitive Bid Request shall specify
the following information in compliance with Section 2.02:
(i) the aggregate amount of the requested
Borrowing;
(ii) the date of such Borrowing, which shall be a Business
Day;
(iii) whether such Borrowing is to be a Eurodollar Borrowing
or a Fixed Rate Borrowing;
(iv) the Interest Period to be applicable to such Borrowing,
which shall be a period contemplated by the definition of the term
"Interest Period"; and
(v) the location and number of the Borrower's account to which
funds are to be disbursed, which shall comply with the requirements of
Section 2.07.
Promptly following receipt of a Competitive Bid Request in accordance with this
Section, the Administrative Agent shall notify the Lenders of the details
thereof by telecopy, inviting the Lenders to submit Competitive Bids.
(b) Each Lender may (but shall not have any obligation to) make
one or more Competitive Bids to the Borrower in response to a Competitive Bid
Request. Each Competitive Bid by a Lender must be in a form approved by the
Administrative Agent and must be received by the Administrative Agent by
telecopy, in the case of a Eurodollar Competitive Borrowing, not later than 9:30
a.m., New York City time, three Business Days before the proposed date of such
Competitive Borrowing, and in the case of a Fixed Rate Borrowing, not later than
9:30 a.m., New York City time, on the proposed date of such Competitive
Borrowing. Competitive Bids that do not conform substantially to the form
approved by the Administrative Agent may be rejected by the Administrative
Agent, and the Administrative Agent shall notify the applicable Lender as
promptly as practicable. Each Competitive Bid shall specify (i) the
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principal amount (which shall be a minimum of $5,000,000 and an integral
multiple of $1,000,000 and which may equal the entire principal amount of the
Competitive Borrowing re quested by the Borrower) of the Competitive Loan or
Loans that the Lender is willing to make, (ii) the Competitive Bid Rate or Rates
at which the Lender is prepared to make such Loan or Loans (expressed as a
percentage rate per annum in the form of a decimal to no more than four decimal
places) and (iii) the Interest Period applicable to each such Loan and the last
day thereof.
(c) The Administrative Agent shall promptly notify the
Borrower by telecopy of the Competitive Bid Rate and the principal amount
specified in each Competitive Bid and the identity of the Lender that shall have
made such Competitive Bid.
(d) Subject only to the provisions of this paragraph, the
Borrower may accept or reject any Competitive Bid. The Borrower shall notify the
Administrative Agent by telephone, confirmed by telecopy in a form approved by
the Administrative Agent, whether and to what extent it has decided to accept or
reject each Competitive Bid, in the case of a Eurodollar Competitive Borrowing,
not later than 10:30 a.m., New York City time, three Business Days before the
date of the proposed Competitive Borrowing, and in the case of a Fixed Rate
Borrowing, not later than 10:30 a.m., New York City time, on the proposed date
of the Competitive Borrowing; PROVIDED that (i) the failure of the Borrower to
give such notice shall be deemed to be a rejection of each Competitive Bid, (ii)
the Borrower shall not accept a Competitive Bid made at a particular Competitive
Bid Rate if the Borrower rejects a Competitive Bid made at a lower Competitive
Bid Rate, (iii) the aggregate amount of the Competitive Bids accepted by the
Borrower shall not exceed the aggregate amount of the requested Competitive
Borrowing specified in the related Competitive Bid Request, (iv) to the extent
necessary to comply with clause (iii) above, the Borrower may accept Competitive
Bids at the same Competitive Bid Rate in part, which acceptance, in the case of
multiple Competitive Bids at such Competitive Bid Rate, shall be made pro rata
in accordance with the amount of each such Competitive Bid, and (v) except
pursuant to clause (iv) above, no Competitive Bid shall be accepted for a
Competitive Loan unless such Competitive Loan is in a minimum principal amount
of $5,000,000 and an integral multiple of $1,000,000; PROVIDED FURTHER that if a
Competitive Loan must be in an amount less than $5,000,000 because of the
<PAGE> 31
26
provisions of clause (iv) above, such Competitive Loan may be for a minimum of
$1,000,000 or any integral multiple thereof, and in calculating the pro rata
allocation of acceptances of portions of multiple Competitive Bids at a
particular Competitive Bid Rate pursuant to clause (iv) the amounts shall be
rounded to integral multiples of $1,000,000 in a manner determined by the
Borrower. A notice given by the Borrower pursuant to this paragraph shall be
irrevocable.
(e) The Administrative Agent shall promptly notify each
bidding Lender by telecopy whether or not its Competitive Bid has been accepted
(and, if so, the amount and Competitive Bid Rate so accepted), and each
successful bidder will thereupon become bound, subject to the terms and
conditions hereof, to make the Competitive Loan in respect of which its
Competitive Bid has been accepted.
(f) If the Administrative Agent shall elect to submit a
Competitive Bid in its capacity as a Lender, it shall submit such Competitive
Bid directly to the Borrower at least one quarter of an hour earlier than the
time by which the other Lenders are required to submit their Competitive Bids to
the Administrative Agent pursuant to paragraph (b) of this Section.
SECTION 2.05. EXTENSION OF TERMINATION DATE AND/OR MATURITY
DATE. (a) The Borrower may, by notice to the Administrative Agent (which shall
promptly deliver a copy to each of the Lenders) given not less than 45 days and
not more than 60 days prior to the Termination Date then in effect, request that
the Lenders extend the Termination Date for an additional period of not more
than 364 days as specified in such notice. Any such notice shall specify any
fees that the Borrower agrees to pay as consideration for such extension, any
changes to the Applicable Rates that will apply during the term of such
extension and the amendments, if any, to the covenants contained herein or other
provisions hereof proposed by the Borrower to be applicable during the term of
such extension. Each Lender shall, by notice to the Borrower and the
Administrative Agent given not earlier than the 30th day and not later than the
25th day prior to the Termination Date then in effect, advise the Borrower
whether or not it agrees to such extension on the terms set forth in such
notice. Any Lender that has not so advised the Administrative Agent by such day
shall be deemed to have declined to agree to such extension.
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(b) If the Borrower shall have requested and the Lenders shall
have agreed to an extension of the Termination Date, then the Termination Date
shall be extended for the additional period and on the terms specified in the
Borrower's notice provided for under subsection (a) and, if such terms vary from
those contained in this Agreement, the Borrower and the extending Lenders shall
enter into an amendment to this Agreement to be effective as of the Termination
Date in effect prior to such extension pursuant to which such terms shall be
given effect.
(c) The decision to agree or withhold agreement to any
extension of the Termination Date hereunder shall be at the sole discretion of
each Lender. The Commitment of any Lender that has declined to agree to any
requested extension of the Termination Date (a "Non-Extending Lender") shall
terminate on the Termination Date in effect prior to giving effect to any such
extension (the "Existing Termination Date"), and the principal amount of any
outstanding Loans made by such Lender, together with any accrued interest
thereon, and any accrued fees and other amounts payable hereunder shall be due
and payable on the Existing Termination Date. Notwithstanding the foregoing,
pursuant to Section 2.19(b), the Borrower shall have the right to replace a
Non-Extending Lender with a Lender or other financial institution that will
agree to an extension of the Termination Date.
(d) The Borrower may, at its sole option, by notice to the
Administrative Agent (which shall promptly deliver a copy to each of the
Lenders) given not less than 10 days and not more than 60 days prior to the
Termination Date at any time in effect, extend the Maturity Date to a date not
later than the first anniversary of such Termination Date. Loans repaid or
prepaid after the Termination Date may not be reborrowed (except in the case of
a refinancing of a Eurodollar Revolving Loan with another Revolving Loan at the
time of such repayment or prepayment).
SECTION 2.06. INCREASE IN COMMITMENTS. (a) The Borrower may on
one occasion at any time not later than three months prior to the Termination
Date, by written notice to the Administrative Agent (which shall promptly
deliver a copy to each of the Lenders), request that the total Commitments be
increased by an amount not in excess of $100,000,000. Such notice shall set
forth the amount of the requested increase in the total Commitments and the date
on
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which such increase is requested to become effective (which shall be not less
than 30 days or more than 60 days after the date of such notice), and shall
offer each Lender the opportunity to increase its Commitment by its Applicable
Percentage of the proposed increased amount. Each Lender shall, by notice to the
Borrower and the Administrative Agent given not more than 30 days after the date
of the Borrower's notice, either agree to increase its Commitment by all or a
portion of the offered amount (each Lender so agreeing being an "INCREASING
LENDER") or decline to increase its Commitment (and any Lender that does not
deliver such a notice within such period of 30 days shall be deemed to have
declined to increase its Commitment) (each Lender so declining or deemed to have
declined being a "NON-INCREASING LENDER"). In the event that, on the 30th day
after the Borrower shall have delivered a notice pursuant to the first sentence
of this paragraph, the Lenders shall have agreed pursuant to the preceding
sentence to increase their Commitments by an aggregate amount less than the
increase in the total Commitments requested by the Borrower, the Administrative
Agent may arrange for one or more banks or other financial institutions (any
such bank or other financial institution referred to in this clause (a) being
called an "AUGMENTING LENDER"), which may include any Lender, to extend
Commitments or increase their existing Commitments in an aggregate amount equal
to the unsubscribed amount, PROVIDED that each Augmenting Lender, if not already
a Lender hereunder, shall be subject to the approval of the Borrower and the
Administrative Agent (which approvals shall not be unreasonably withheld) and
each Augmenting Lender shall execute all such documentation as the
Administrative Agent shall specify to evidence its Commitment and its status as
a Lender hereunder. Increases and new Commitments created pursuant to this
clause (a) shall become effective on the date specified in the notice delivered
by the Borrower pursuant to the first sentence of this paragraph.
Notwithstanding the foregoing, no increase in the total Commitments (or in the
Commitment of any Lender) shall become effective under this paragraph unless,
(i) on the date of such increase, the conditions set forth in paragraphs (a) and
(b) of Section 4.02 shall be satisfied (with all references in such paragraphs
to a Borrowing being deemed to be references to such increase) and the
Administrative Agent shall have received a certificate to that effect dated such
date and executed by a Financial Officer of the Borrower, (ii) the
Administrative Agent shall have received (with sufficient copies for each of the
Lenders) documents consistent with those delivered on the
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Effective Date under clauses (b) and (c) of Section 4.01 as to the corporate
power and authority of the Borrower to borrow hereunder after giving effect to
such increase and (iii) following any such increase pursuant to this Section, no
Lender shall have a Commitment representing more than 30% of the total
Commitments.
(b) On the effective date (the "INCREASE EFFECTIVE DATE") of
any increase in the total Commitments pursuant to Section 2.06(a) (the
"COMMITMENT INCREASE"), (i) the aggregate principal amount of the Loans
outstanding (the "INITIAL LOANS") immediately prior to giving effect to the
Commitment Increase on the Increase Effective Date shall be deemed to be paid,
(ii) each Increasing Lender and each Augmenting Lender that shall have been a
Lender prior to the Commitment Increase shall pay to the Administrative Agent in
same day funds an amount equal to the difference between (A) the product of (1)
such Lender's Applicable Percentage (calculated after giving effect to the
Commitment Increase) multiplied by (2) the amount of the Subsequent Borrowings
(as hereinafter defined) and (B) the product of (1) such Lender's Applicable
Percentage (calculated without giving effect to the Commitment Increase)
multiplied by (2) the amount of the Initial Loans, (iii) each Augmenting Lender
that shall not have been a Lender prior to the Commitment Increase shall pay to
Administrative Agent in same day funds an amount equal to the product of (1)
such Augmenting Lender's Applicable Percentage (calculated after giving effect
to the Commitment Increase) multiplied by (2) the amount of the Subsequent
Borrowings, and (iv) after the Administrative Agent receives the funds specified
in clauses (ii) and (iii) above, the Administrative Agent shall pay to each
Non-Increasing Lender the portion of such funds that is equal to the difference
between (A) the product of (1) such Non-Increasing Lender's Applicable
Percentage (calculated without giving effect to the Commitment Increase)
multiplied by (2) the amount of the Initial Loans, and (B) the product of (1)
such Non-Increasing Lender's Applicable Percentage (calculated after giving
effect to the Commitment Increase) multiplied by (2) the amount of the
Subsequent Borrowings, (v) after the effectiveness of the Commitment Increase,
the Borrower shall be deemed to have made new Borrowings (the "SUBSEQUENT
BORROWINGS") in an aggregate principal amount equal to the aggregate principal
amount of the Initial Loans and of the types and for the Interest Periods
specified in a Borrowing Request delivered to the Administrative Agent in
accordance with Section 2.03, (vi) each Non-Increasing Lender, each Increasing
Lender and
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each Augmenting Lender shall be deemed to hold its Applicable Percentage of each
Subsequent Borrowing (calculated after giving effect to the Commitment Increase)
and (vii) the Borrower shall pay each Increasing Lender and each Non-Increasing
Lender any and all accrued but unpaid interest on the Initial Loans. The deemed
payments made pursuant to clause (i) above in respect of each Eurodollar Loan
shall be subject to indemnification by the Borrower pursuant to the provisions
of Section 2.16 if the Increase Effective Date occurs other than on the last day
of the Interest Period relating thereto.
SECTION 2.07. FUNDING OF BORROWINGS. (a) Each Lender shall
make each Loan to be made by it hereunder on the proposed date thereof by wire
transfer of immediately available funds by 12:00 noon, New York City time, to
the account of the Administrative Agent most recently designated by it for such
purpose by notice to the Lenders; provided that Swingline Loans shall be made as
provided in Section 2.20. The Administrative Agent will make such Loans
available to the Borrower by promptly crediting the amounts so received, in like
funds, to an account of the Borrower maintained with the Administrative Agent in
New York City and designated by the Borrower in the applicable Borrowing Request
or Competitive Bid Request.
(b) Unless the Administrative Agent shall have received notice
from a Lender prior to the proposed date of any Borrowing that such Lender will
not make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender and the Borrower severally agree to pay to the Administrative
Agent forthwith on demand such corresponding amount with interest thereon, for
each day from and including the date such amount is made available to the
Borrower to but excluding the date of payment to the Administrative Agent, at
(i) in the case of such Lender, the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation or (ii) in the case of the Borrower,
the interest rate applicable to ABR Loans. If such Lender pays such amount to
the
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Administrative Agent, then such amount shall constitute such Lender's Loan
included in such Borrowing.
SECTION 2.08. INTEREST ELECTIONS. (a) Each Revolving Borrowing
initially shall be of the Type specified in the applicable Borrowing Request
and, in the case of a Eurodollar Revolving Borrowing, shall have an initial
Interest Period as specified in such Borrowing Request. Thereafter, the Borrower
may elect to convert such Borrowing to a different Type or to continue such
Borrowing and, in the case of a Eurodollar Revolving Borrowing, may elect
Interest Periods therefor, all as provided in this Section. The Borrower may
elect different options with respect to different portions of the affected
Borrowing, in which case each such portion shall be allocated ratably among the
Lenders holding the Loans comprising such Borrowing, and the Loans comprising
each such portion shall be considered a separate Borrowing. This Section shall
not apply to Competitive Borrowings or Swingline Borrowings, which may not be
converted or continued.
(b) To make an election pursuant to this Section, the Borrower
shall notify the Administrative Agent of such election by telephone by the time
that a Borrowing Request would be required under Section 2.03 if the Borrower
were requesting a Revolving Borrowing of the Type resulting from such election
to be made on the effective date of such election. Each such telephonic Interest
Election Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Interest Election
Request in a form approved by the Administrative Agent and signed by the
Borrower.
(c) Each telephonic and written Interest Election Request
shall specify the following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request
applies and, if different options are being elected with respect to
different portions thereof, the portions thereof to be allocated to
each resulting Borrowing (in which case the information to be specified
pursuant to clauses (iii) and (iv) below shall be specified for each
resulting Borrowing);
(ii) the effective date of the election made pursuant to such
Interest Election Request, which shall be a Business Day;
<PAGE> 37
32
(iii) whether the resulting Borrowing is to be an ABR
Borrowing or a Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the
Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the
term "Interest Period".
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election
Request, the Administrative Agent shall advise each Lender of the details
thereof and of such Lender's portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest
Election Request with respect to a Eurodollar Revolving Borrowing prior to the
end of the Interest Period applicable thereto, then, unless such Borrowing is
repaid as provided herein, at the end of such Interest Period such Borrowing
shall be converted to an ABR Borrowing. Notwithstanding any contrary provision
hereof, if an Event of Default has occurred and is continuing and the
Administrative Agent, at the request of the Required Lenders, so notifies the
Borrower, then, so long as an Event of Default is continuing (i) no outstanding
Revolving Borrowing may be converted to or continued as a Eurodollar Borrowing
and (ii) unless repaid, each Eurodollar Revolving Borrowing shall be converted
to an ABR Borrowing at the end of the Interest Period applicable thereto.
SECTION 2.09. TERMINATION AND REDUCTION OF COMMITMENTS. (a)
Unless previously terminated, the Commitments shall terminate on the Termination
Date.
(b) The Borrower may at any time terminate, or from time to
time reduce, the Commitments; PROVIDED that (i) each reduction of the
Commitments shall be in an amount that is an integral multiple of $1,000,000 and
not less than $10,000,000 and (ii) the Borrower shall not terminate or reduce
the Commitments if, after giving effect to any concurrent prepayment of the
Loans in accordance with Section 2.11, the sum of the Revolving Credit Exposure
plus
<PAGE> 38
33
the aggregate principal amount of outstanding Competitive Loans would exceed the
total Commitments.
(c) The Borrower shall notify the Administrative Agent of any
election to terminate or reduce the Commitments under paragraph (b) of this
Section at least three Business Days prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, the Administrative Agent
shall advise the Lenders of the contents thereof. Each notice delivered by the
Borrower pursuant to this Section shall be irrevocable; PROVIDED that a notice
of termination of the Commitments delivered by the Borrower may state that such
notice is conditioned upon the effectiveness of other credit facilities, in
which case such notice may be revoked by the Borrower (by notice to the
Administrative Agent on or prior to the specified effective date) if such
condition is not satisfied. Any termination or reduction of the Commitments
shall be permanent. Each reduction of the Commitments shall be made ratably
among the Lenders in accordance with their respective Commitments.
SECTION 2.10. REPAYMENT OF LOANS; EVIDENCE OF DEBT. (a) The
Borrower hereby unconditionally promises to pay (i) to the Administrative Agent
for the account of each Lender the then unpaid principal amount of each
Revolving Loan on the Maturity Date, (ii) to the Administrative Agent for the
account of the applicable Lenders the then unpaid principal amount of each
Competitive Loan on the last day of the Interest Period applicable to such Loan
and (iii) to the applicable Swingline Lender the then unpaid principal amount of
each Swingline Loan on the earlier of the Maturity Date and the first date after
such Swingline Loan is made that is the 15th or last day of a calendar month and
is at least two Business Days after such Swingline Loan is made; PROVIDED that
on each date that a Revolving Borrowing or Competitive Borrowing is funded, the
Borrower shall repay all Swingline Loans that were outstanding on the date the
relevant notice of Borrowing for such Revolving Borrowing or Competitive
Borrowing was delivered.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of the Borrower to
such Lender resulting from each Loan made by such Lender, including the amounts
of principal and interest payable and paid to such Lender from time to time
hereunder.
<PAGE> 39
34
(c) The Administrative Agent shall maintain accounts in which
it shall record (i) the amount of each Loan made hereunder, the Class and Type
thereof and the Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) the amount of any sum received by
the Administrative Agent hereunder for the account of the Lenders and each
Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to
paragraph (b) or (c) of this Section shall be PRIMA FACIE evidence of the
existence and amounts of the obligations recorded therein; PROVIDED that the
failure of any Lender or the Administrative Agent to maintain such accounts or
any error therein shall not in any manner affect the obligation of the Borrower
to repay the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans made by it be evidenced
by a promissory note. In such event, the Borrower shall prepare, execute and
deliver to such Lender a promissory note payable to the order of such Lender
(or, if requested by such Lender, to such Lender and its registered assigns) and
in a form approved by the Administrative Agent. Thereafter, the Loans evidenced
by such promissory note and interest thereon shall at all times (including after
assignment pursuant to Section 9.04) be represented by one or more promissory
notes in such form payable to the order of the payee named therein (or, if such
promissory note is a registered note, to such payee and its registered assigns).
SECTION 2.11. PREPAYMENT OF LOANS. (a) The Borrower shall have
the right at any time and from time to time to prepay any Borrowing in whole or
in part, subject to prior notice in accordance with paragraph (b) of this
Section; PROVIDED that the Borrower shall not have the right to prepay any
Competitive Loan without the prior consent of the Lender thereof.
(b) The Borrower shall notify the Administrative Agent (and, in the
case of a prepayment of a Swingline Loan, the applicable Swingline Lender) by
telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar Revolving Borrowing, not later than 11:00 a.m., New
York City time, three Business Days before the date of prepayment, (ii) in the
case of prepayment of an ABR Revolving Borrowing, not later
<PAGE> 40
35
than 11:00 a.m., New York City time, one Business Day before the date of
prepayment or (iii) in the case of a prepayment of a Swingline Loan, not later
than 12:00 noon, New York City time, on the date of prepayment. Each such notice
shall be irrevocable and shall specify the prepayment date and the principal
amount of each Borrowing or portion thereof to be prepaid; PROVIDED that, if a
notice of prepayment is given in connection with a conditional notice of
termination of the Commitments as contemplated by Section 2.09, then such notice
of prepayment may be revoked if such notice of termination is revoked in
accordance with Section 2.09. Promptly following receipt of any such notice
relating to a Revolving Borrowing, the Administrative Agent shall advise the
Lenders of the contents thereof. Each partial prepayment of any Revolving
Borrowing shall be in an amount that would be permitted in the case of an
advance of a Revolving Borrowing of the same Type as provided in Section 2.02.
Each prepayment of a Revolving Borrowing shall be applied ratably to the Loans
included in the prepaid Borrowing. Prepayments shall be accompanied by accrued
interest to the extent required by Section 2.13.
SECTION 2.12. FEES. (a) The Borrower agrees to pay to the
Administrative Agent for the account of each Lender a facility fee, which shall
accrue at the Applicable Rate on the daily amount of the Commitment of such
Lender (whether used or unused) during the period from and including the date
hereof to but excluding the date on which such Commitment terminates; PROVIDED
that, if such Lender continues to have any Revolving Loans outstanding after its
Commitment terminates, then such facility fee shall continue to accrue on the
daily principal amount of such Lender's outstanding Revolving Loans from and
including the date on which its Commitment terminates to but excluding the date
on which such Lender ceases to have any Revolving Loans outstanding. Accrued
facility fees shall be payable in arrears on the last day of March, June,
September and December of each year and on the date on which the Commitments
terminate, commencing on the first such date to occur after the date hereof;
PROVIDED that any facility fees accruing after the date on which the Commitments
terminate shall be payable on demand. All facility fees shall be computed on the
basis of a year of 360 days and shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).
(b) For any day on which the outstanding principal amount of
Loans shall be greater than 50% of the
<PAGE> 41
36
total Commitments (or, following the date on which the Commitments terminate,
50% of the total Commitments on such date), the Borrower shall pay to the
Administrative Agent for the account of each Lender a utilization fee equal to
0.125% per annum on the aggregate amount of each Lender's outstanding Loans on
such day. The utilization fees, if any, in respect of any fiscal quarter shall
be payable in arrears on the last day of each March, June, September and
December and on the date on which the Commitments terminate and, if Loans remain
outstanding after such date and if the outstanding principal amount of Loans on
the date the Commitments terminate was greater than 50% of the total Commitments
in effect on such date, on the last day of each March, June, September and
December and on the Maturity Date. All utilization fees shall be computed on the
basis of a year of 360 days and shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).
(c) The Borrower agrees to pay to the Administrative Agent,
for its own account, fees payable in the amounts and at the times separately
agreed upon between the Borrower and the Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates due,
in immediately available funds, to the Administrative Agent for distribution, in
the case of facility fees to the Lenders. Fees paid shall not be refundable
under any circumstances.
SECTION 2.13. INTEREST. (a) The Loans
comprising each ABR Borrowing (including each Swingline
Loan) shall bear interest at the Alternate Base Rate.
(b) The Loans comprising each Eurodollar Borrowing shall bear
interest (i) in the case of a Eurodollar Revolving Loan, at the Adjusted LIBO
Rate for the Interest Period in effect for such Borrowing plus the Applicable
Rate, or (ii) in the case of a Eurodollar Competitive Loan, at the LIBO Rate for
the Interest Period in effect for such Borrowing plus (or minus, as applicable)
the Margin applicable to such Loan.
(c) Each Fixed Rate Loan shall bear interest at the Fixed Rate
applicable to such Loan.
(d) Notwithstanding the foregoing, if any principal of or
interest on any Loan or any fee or other
<PAGE> 42
37
amount payable by the Borrower hereunder is not paid when due, whether at stated
maturity, upon acceleration or otherwise, such overdue amount shall bear
interest, after as well as before judgment, at a rate per annum equal to (i) in
the case of overdue principal of any Loan, 2% plus the rate otherwise applicable
to such Loan as provided in the preceding paragraphs of this Section or (ii) in
the case of any other amount, 2% plus the rate applicable to ABR Loans as
provided in paragraph (a) of this Section.
(e) Accrued interest on each Loan shall be payable in arrears
on each Interest Payment Date for such Loan and, in the case of Revolving Loans,
upon termination of the Commitments; PROVIDED that (i) interest accrued pursuant
to paragraph (d) of this Section shall be payable on demand, (ii) in the event
of any repayment or prepayment of any Loan (other than a prepayment of an ABR
Revolving Loan prior to the end of the Availability Period), accrued interest on
the principal amount repaid or prepaid shall be payable on the date of such
repayment or prepayment and (iii) in the event of any conversion of any
Eurodollar Revolving Loan prior to the end of the current Interest Period
therefor, accrued interest on such Loan shall be payable on the effective date
of such conversion.
(f) All interest hereunder shall be computed on the basis of a
year of 360 days, except that interest computed by reference to the Alternate
Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall
be computed on the basis of a year of 365 days (or 366 days in a leap year), and
in each case shall be payable for the actual number of days elapsed (including
the first day but excluding the last day). The applicable Alternate Base Rate,
Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent,
and such determination shall be conclusive absent manifest error.
SECTION 2.14. ALTERNATE RATE OF INTEREST. If
prior to the commencement of any Interest Period for a
Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination
shall be conclusive absent manifest error) that adequate and reasonable
means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO
Rate, as applicable, for such Interest Period; or
<PAGE> 43
38
(b) the Administrative Agent is advised by the Required
Lenders (or, in the case of a Eurodollar Competitive Loan, the Lender
that is required to make such Loan) that the Adjusted LIBO Rate or the
LIBO Rate, as applicable, for such Interest Period will not adequately
and fairly reflect the cost to such Lenders (or Lender) of making or
maintaining their Loans (or its Loan) included in such Borrowing for
such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Revolving Borrowing to, or
continuation of any Revolving Borrowing as, a Eurodollar Borrowing shall be
ineffective, (ii) if any Borrowing Request requests a Eurodollar Revolving
Borrowing, such Borrowing shall be made as an ABR Borrowing and (iii) any
request by the Borrower for a Eurodollar Competitive Borrowing shall be
ineffective; PROVIDED that (A) if the circumstances giving rise to such notice
do not affect all the Lenders, then requests by the Borrower for Eurodollar
Competitive Borrowings may be made to Lenders that are not affected thereby and
(B) if the circumstances giving rise to such notice affect only one Type of
Borrowings, then the other Type of Borrowings shall be permitted.
SECTION 2.15. INCREASED COSTS. (a) If any
Change in Law shall:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Lender (except any such
reserve requirement reflected in the Adjusted LIBO Rate); or
(ii) impose on any Lender or the London interbank market any
other condition affecting this Agreement or Eurodollar Loans or Fixed
Rate Loans made by such Lender;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan or Fixed Rate Loan (or of
maintaining its obligation to make any such Loan) or to reduce the amount of
<PAGE> 44
39
any sum received or receivable by such Lender hereunder (whether of principal,
interest or otherwise), then the Borrower will pay to such Lender such
additional amount or amounts as will compensate such Lender for such additional
costs incurred or reduction suffered.
(b) If any Lender determines that any Change in Law regarding
capital requirements has or would have the effect of reducing the rate of return
on such Lender's capital or on the capital of such Lender's holding company, if
any, as a consequence of this Agreement or the Loans made by, such Lender to a
level below that which such Lender or such Lender's holding company could have
achieved but for such Change in Law (taking into consideration such Lender's
policies and the policies of such Lender's holding company with respect to
capital adequacy), then from time to time the Borrower will pay to such Lender
such additional amount or amounts as will compensate such Lender or such
Lender's holding company for any such reduction suffered. It is acknowledged
that this Agreement is being entered into by the Lenders on the understanding
that the Lenders will not be required to maintain capital against their
Commitments under currently applicable laws, regulations and regulatory
guidelines. In the event the Lenders shall otherwise determine that such
understanding is incorrect, it is agreed that the Lenders will be entitled to
make claims under this paragraph (b) based upon market requirements prevailing
on the date hereof for commitments under comparable credit facilities against
which capital is required to be maintained.
(c) A certificate of a Lender setting forth in reasonable
detail the amount or amounts necessary to compensate such Lender or its holding
company, as the case may be, as specified in paragraph (a) or (b) of this
Section shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay such Lender the amount shown as due on
any such certificate within 10 days after receipt thereof.
(d) Failure or delay on the part of any Lender to demand
compensation pursuant to this Section shall not constitute a waiver of such
Lender's right to demand such compensation; PROVIDED that the Borrower shall not
be required to compensate a Lender pursuant to this Section for any increased
costs or reductions incurred more than 270 days prior to the date that such
Lender notifies the Borrower of the Change in Law giving rise to such increased
<PAGE> 45
40
costs or reductions and of such Lender's intention to claim compensation
therefor; PROVIDED FURTHER that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the 270-day period referred
to above shall be extended to include the period of retroactive effect thereof.
(e) Notwithstanding the foregoing provisions of this Section,
a Lender shall not be entitled to compensation pursuant to this Section in
respect of any Competitive Loan if the Change in Law that would otherwise
entitle it to such compensation shall have been publicly announced prior to
submission of the Competitive Bid pursuant to which such Loan was made.
SECTION 2.16. BREAK FUNDING PAYMENTS. In the event of (a) the
payment of any principal of any Eurodollar Loan or Fixed Rate Loan other than on
the last day of an Interest Period applicable thereto (including as a result of
an Event of Default), (b) the conversion of any Eurodollar Loan other than on
the last day of the Interest Period applicable thereto, (c) the failure to
borrow, convert, continue or prepay any Revolving Loan on the date specified in
any notice delivered pursuant hereto (regardless of whether such notice may be
revoked under Section 2.11(b) and is revoked in accordance therewith), (d) the
failure to borrow any Competitive Loan after accepting the Competitive Bid to
make such Loan, or (e) the assignment of any Eurodollar Loan or Fixed Rate Loan
other than on the last day of the Interest Period applicable thereto as a result
of a request by the Borrower pursuant to Section 2.19, then, in any such event,
the Borrower shall compensate each Lender for the loss, cost and expense
attributable to such event. In the case of a Eurodollar Loan, such loss, cost or
expense to any Lender shall be deemed to include an amount determined by such
Lender to be the excess, if any, of (i) the amount of interest which would have
accrued on the principal amount of such Loan had such event not occurred, at the
Adjusted LIBO Rate that would have been applicable to such Loan, for the period
from the date of such event to the last day of the then current Interest Period
therefor (or, in the case of a failure to borrow, convert or continue, for the
period that would have been the Interest Period for such Loan), over (ii) the
amount of interest which would accrue on such principal amount for such period
at the interest rate which such Lender would bid were it to bid, at the
commencement of such period, for dollar deposits of a comparable amount and
period from other banks in the
<PAGE> 46
41
eurodollar market. A certificate of any Lender setting forth in reasonable
detail any amount or amounts that such Lender is entitled to receive pursuant to
this Section shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay such Lender the amount shown as due on
any such certificate within 10 days after receipt thereof.
SECTION 2.17. TAXES. (a) Any and all payments by or on account
of any obligation of the Borrower hereunder shall be made free and clear of and
without deduction for any Indemnified Taxes or Other Taxes; PROVIDED that if the
Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from
such payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent or Lender
(as the case may be) receives an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrower shall make such deductions
and (iii) the Borrower shall pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent and
each Lender within 10 days after written demand therefor, for the full amount of
any Indemnified Taxes or Other Taxes paid by the Administrative Agent or such
Lender, as the case may be, on or with respect to any payment by or on account
of any obligation of the Borrower hereunder (including Indemnified Taxes or
Other Taxes imposed or asserted on or attributable to amounts payable under this
Section) and any penalties, interest and reasonable expenses arising therefrom
or with respect thereto, whether or not such Indemnified Taxes or Other Taxes
were correctly or legally imposed or asserted by the relevant Governmental
Authority. A certificate in reasonable detail as to the amount of such payment
or liability delivered to the Borrower by a Lender, or by the Administrative
Agent on its own behalf or on behalf of a Lender, shall be conclusive absent
manifest error.
(d) As soon as practicable after any payment of Indemnified
Taxes or Other Taxes by the Borrower to a
<PAGE> 47
42
Governmental Authority, the Borrower shall deliver to the Administrative Agent
the original or a certified copy of a receipt issued by such Governmental
Authority evidencing such payment, a copy of the return reporting such payment
or other evidence of such payment reasonably satisfactory to the Administrative
Agent.
(e) Any Foreign Lender that is entitled to an exemption from
or reduction of withholding tax under the law of the jurisdiction in which the
Borrower is located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement shall deliver to the Borrower (with a
copy to the Administrative Agent), at the time or times prescribed by applicable
law, such properly completed and executed documentation prescribed by applicable
law or reasonably requested by the Borrower as will permit such payments to be
made without withholding or at a reduced rate.
SECTION 2.18. PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING
OF SET-OFFS. (a) The Borrower shall make each payment required to be made by it
hereunder (whether of principal, interest, fees or of amounts payable under
Section 2.15, 2.16 or 2.17, or otherwise) prior to 12:00 noon, New York City
time, on the date when due, in immediately available funds, without set-off or
counterclaim. Any amounts received after such time on any date may, in the
discretion of the Administrative Agent, be deemed to have been received on the
next succeeding Business Day for purposes of calculating interest thereon. All
such payments shall be made to the Administrative Agent at its offices at 270
Park Avenue, New York, New York, except payments to be made directly to the
Swingline Lender as expressly provided herein and except that payments pursuant
to Sections 2.15, 2.16, 2.17 and 9.03 shall be made directly to the Persons
entitled thereto. The Administrative Agent shall distribute any such payments
received by it for the account of any other Person to the appropriate recipient
promptly following receipt thereof. If any payment hereunder shall be due on a
day that is not a Business Day, the date for payment shall be extended to the
next succeeding Business Day, and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension. All payments
hereunder shall be made in dollars.
(b) (i) If at any time insufficient funds are received by and
available to the Administrative Agent to pay
<PAGE> 48
43
fully all amounts of principal, interest and fees then due hereunder, such funds
shall be applied (x) first, towards payment of interest and fees then due
hereunder, ratably among the parties entitled thereto in accordance with the
amounts of interest and fees then due to such parties, and (y) second, towards
payment of principal then due hereunder, ratably among the parties entitled
thereto in accordance with the amounts of principal then due to such parties.
(ii) For purposes of determining the available Commitments of
the Lenders at any time, each outstanding Competitive Borrowing shall be deemed
to have utilized the Commitments of the Lenders (including those Lenders which
shall not have made Loans as part of such Competitive Borrowing) pro rata in
accordance with such respective Commitments.
(c) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Revolving Loans or participations in Swingline Loans
resulting in such Lender receiving payment of a greater proportion of the
aggregate amount of its Revolving Loans and participations in Swingline Loans
and accrued interest thereon than the proportion received by any other Lender,
then the Lender receiving such greater proportion shall purchase (for cash at
face value) participations in the Revolving Loans and participations in
Swingline Loans of other Lenders to the extent necessary so that the benefit of
all such payments shall be shared by the Lenders ratably in accordance with the
aggregate amount of principal of and accrued interest on their respective
Revolving Loans and participations in Swingline Loans; PROVIDED that (i) if any
such participations are purchased and all or any portion of the payment giving
rise thereto is recovered, such participations shall be rescinded and the
purchase price restored to the extent of such recovery, without interest, and
(ii) the provisions of this paragraph shall not be construed to apply to any
payment made by the Borrower pursuant to and in accordance with the express
terms of this Agreement or any payment obtained by a Lender as consideration for
the assignment of or sale of a participation in any of its Loans to any assignee
or participant, other than to the Borrower or any Subsidiary or Affiliate
thereof (as to which the provisions of this paragraph shall apply). The Borrower
consents to the foregoing and agrees, to the extent it may effectively do so
under applicable law, that any Lender acquiring a
<PAGE> 49
44
participation pursuant to the foregoing arrangements may exercise against the
Borrower rights of set-off and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of the Borrower in the amount
of such participation.
(d) Unless the Administrative Agent shall have received notice
from the Borrower prior to the date on which any payment is due to the
Administrative Agent for the account of the Lenders hereunder that the Borrower
will not make such payment, the Administrative Agent may assume that the
Borrower has made such payment on such date in accordance herewith and may, in
reliance upon such assumption, distribute to the Lenders the amount due. In such
event, if the Borrower has not in fact made such payment, then each of the
Lenders severally agrees to repay to the Administrative Agent forthwith on
demand the amount so distributed to such Lender with interest thereon, for each
day from and including the date such amount is distributed to it to but
excluding the date of payment to the Administrative Agent, at the greater of the
Federal Funds Effective Rate and a rate determined by the Administrative Agent
in accordance with banking industry rules on interbank compensation.
(e) If any Lender shall fail to make any payment required to
be made by it pursuant to Section 2.07(b) or 2.18(d), then the Administrative
Agent may, in its discretion (notwithstanding any contrary provision hereof),
apply any amounts thereafter received by the Administrative Agent for the
account of such Lender to satisfy such Lender's obligations under such Sections
until all such unsatisfied obligations are fully paid.
SECTION 2.19. MITIGATION OBLIGATIONS; REPLACEMENT OF LENDERS.
(a) If any Lender requests compensation under Section 2.15, or if the Borrower
is required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.17, then such
Lender shall use reasonable efforts to designate a different lending office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the judgment
of such Lender, such designation or assignment (i) would eliminate or reduce
amounts payable pursuant to Section 2.15 or 2.17, as the case may be, in the
future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Borrower
<PAGE> 50
45
hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 2.15, or
if the Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.17,
or if any Lender shall not agree to a requested extension of the Maturity Date
pursuant to Section 2.05, or if any Lender defaults in its obligation to fund
Loans hereunder, then the Borrower may, at its sole expense and effort, upon
notice to such Lender and the Administrative Agent, require such Lender to
assign and delegate, without recourse (in accordance with and subject to the
restrictions contained in Section 9.04), all its interests, rights and
obligations under this Agreement (other than any outstanding Competitive Loans
held by it) to an assignee that shall assume such obligations (which assignee
may be another Lender, if a Lender accepts such assignment); PROVIDED that (i)
the Borrower shall have received the prior written consent of the Administrative
Agent (and if a Commitment is being assigned, the Swingline Lenders), which
consent shall not unreasonably be withheld, (ii) such Lender shall have received
payment of an amount equal to the outstanding principal of its Loans (other than
Competitive Loans) and participations in Swingline Loans, accrued interest
thereon, accrued fees and all other amounts payable to it hereunder, from the
assignee (to the extent of such outstanding principal and accrued interest and
fees) or the Borrower (in the case of all other amounts) and (iii) in the case
of any such assignment resulting from a claim for compensation under Section
2.15 or payments required to be made pursuant to Section 2.17, such assignment
will result in a reduction in such compensation or payments. A Lender shall not
be required to make any such assignment and delegation if, prior thereto, as a
result of a waiver by such Lender or otherwise, the circumstances entitling the
Borrower to require such assignment and delegation cease to apply.
SECTION 2.20. SWINGLINE LOANS. (a) Subject to the terms and
conditions set forth herein, each Swingline Lender agrees to make Swingline
Loans to the Borrower from time to time during the Availability Period, in an
aggregate principal amount at any time outstanding that will not result in (i)
the aggregate principal amount of outstanding Swingline Loans exceeding
$15,000,000 or (ii) the sum of the
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46
total Revolving Credit Exposures plus the aggregate principal amount of
outstanding Competitive Loans exceeding the total Commitments; PROVIDED that no
Swingline Lender shall be required to make a Swingline Loan to refinance an
outstanding Swingline Loan. Within the foregoing limits and subject to the terms
and conditions set forth herein, the Borrower may borrow, prepay and reborrow
Swingline Loans.
(b) To request a Swingline Loan, the Borrower shall notify the
Administrative Agent of such request by telephone (confirmed by telecopy), not
later than 12:00 noon, New York City time, on the day of a proposed Swingline
Loan. Each such notice shall be irrevocable and shall specify the requested date
(which shall be a Business Day) and amount of the requested Swingline Loan. The
Administrative Agent will promptly advise the applicable Swingline Lender of any
such notice received from the Borrower. The applicable Swingline Lender shall
make each Swingline Loan available to the Borrower by means of a credit to the
general deposit account of the Borrower with such Swingline Lender by 3:00 p.m.,
New York City time, on the requested date of such Swingline Loan.
(c) Any Swingline Lender may by written notice given to the
Administrative Agent not later than 10:00 a.m., New York City time, on any
Business Day require the Lenders to acquire participations on such Business Day
in all or a portion of the Swingline Loans outstanding from such Swingline
Lender. Such notice shall specify the aggregate amount of Swingline Loans in
which Lenders will participate. Promptly upon receipt of such notice, the
Administrative Agent will give notice thereof to each Lender, specifying in such
notice such Lender's Applicable Percentage of such Swingline Loan or Loans. Each
Lender hereby absolutely and unconditionally agrees, upon receipt of notice as
provided above, to pay to the Administrative Agent, for the account of the
applicable Swingline Lender, such Lender's Applicable Percentage of such
Swingline Loan or Loans. Each Lender acknowledges and agrees that its obligation
to acquire participations in Swingline Loans pursuant to this paragraph is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including the occurrence and continuance of a Default or reduction
or termination of the Commitments, and that each such payment shall be made
without any offset, abatement, withholding or reduction whatsoever. Each Lender
shall comply with its obligation under this paragraph by wire transfer of
immediately available funds, in the same manner as provided in
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47
Section 2.07 with respect to Loans made by such Lender (and Section 2.07 shall
apply, MUTATIS MUTANDIS, to the payment obligations of the Lenders), and the
Administrative Agent shall promptly pay to the applicable Swingline Lender the
amounts so received by it from the Lenders. The Administrative Agent shall
notify the Borrower of any participations in any Swingline Loan acquired
pursuant to this paragraph, and thereafter payments in respect of such Swingline
Loan shall be made to the Administrative Agent and not to the applicable
Swingline Lender. Any amounts received by any Swingline Lender from the Borrower
(or other party on behalf of the Borrower) in respect of a Swingline Loan after
receipt by such Swingline Lender of the proceeds of a sale of participations
therein shall be promptly remitted to the Administrative Agent; any such amounts
received by the Administrative Agent shall be promptly remitted by the
Administrative Agent to the Lenders that shall have made their payments pursuant
to this paragraph and to such Swingline Lender, as their interests may appear.
The purchase of participations in a Swingline Loan pursuant to this paragraph
shall not relieve the Borrower of any default in the payment thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders that:
SECTION 3.01. ORGANIZATION; POWERS. Each of the Borrower and
its Subsidiaries is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, has all requisite power and
authority to carry on its business as now conducted and, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, is qualified to do business in,
and is in good standing in, every jurisdiction where such qualification is
required.
SECTION 3.02. AUTHORIZATION; ENFORCEABILITY. The Transactions
are within the Borrower's or Guarantor's, as the case may be, corporate powers
and have been duly authorized by all necessary corporate and, if required,
stockholder action. Each of the Loan Documents has been duly executed and
delivered by the Borrower or the Guarantors, as applicable, and constitutes a
legal, valid
<PAGE> 53
48
and binding obligation of the Borrower or the Guarantors, as applicable,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors' rights
generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at law.
SECTION 3.03. GOVERNMENTAL APPROVALS; NO CONFLICTS. The
Transactions (a) do not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority, except such as
have been obtained or made and are in full force and effect, (b) will not
violate any applicable law or regulation or the charter, by-laws or other
organizational documents of the Borrower or any of its Subsidiaries or any order
of any Governmental Authority, (c) will not violate or result in a default under
any indenture, agreement or other instrument binding upon the Borrower or any of
its Subsidiaries or its assets, or give rise to a right thereunder to require
any payment to be made by the Borrower or any of its Subsidiaries, and (d) will
not result in the creation or imposition of any Lien on any asset of the
Borrower or any of its Subsidiaries.
SECTION 3.04. FINANCIAL CONDITION; NO MATERIAL ADVERSE CHANGE.
(a) The Borrower has heretofore furnished to the Lenders its consolidated
balance sheet and statements of income, stockholders equity and cash flows (i)
as of and for the fiscal year ended December 31, 1997, reported on by Coopers &
Lybrand L.L.P., independent public accountants, and (ii) as of and for the
fiscal quarter and the portion of the fiscal year ended September 30, 1998,
certified by its chief financial officer. Such financial statements present
fairly, in all material respects, the financial position and results of
operations and cash flows of the Borrower and its consolidated Subsidiaries as
of such dates and for such periods in accordance with GAAP, subject to year-end
audit adjustments and the absence of footnotes in the case of the statements
referred to in clause (ii) above.
(b) Since December 31, 1997, there has been no material
adverse change in the business, assets, operations, prospects or condition,
financial or otherwise, of the Borrower and its Subsidiaries, taken as a whole.
SECTION 3.05. PROPERTIES. (a) Each of the Borrower and its
Subsidiaries has good title to, or valid
<PAGE> 54
49
leasehold interests in, all its real and personal property material to its
business, except for minor defects in title that do not interfere with its
ability to conduct its business as currently conducted or to utilize such
properties for their intended purposes.
(b) Each of the Borrower and its Subsidiaries owns, or is
licensed to use, all trademarks, tradenames, copyrights, patents and other
intellectual property material to its business, and the use thereof by the
Borrower and its Subsidiaries does not infringe upon the rights of any other
Person, except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
SECTION 3.06. LITIGATION AND ENVIRONMENTAL MATTERS. (a) Except
for Disclosed Matters, there are no actions, suits or proceedings by or before
any arbitrator or Governmental Authority pending against or, to the knowledge of
the Borrower, threatened against or affecting the Borrower or any of its
Subsidiaries (i) as to which there is a reasonable possibility of an adverse
determination and that, if adversely determined, could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect (other
than the Disclosed Matters) or (ii) that involve this Agreement or the
Transactions.
(b) Except for the Disclosed Matters and except with respect
to any other matters that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, neither the
Borrower nor any of its Subsidiaries (i) has failed to comply with any
Environmental Law or to obtain, maintain or comply with any permit, license or
other approval required under any Environmental Law, (ii) has become subject to
any Environmental Liability, (iii) has received notice of any claim with respect
to any Environmental Liability or (iv) knows of any basis for any Environmental
Liability.
(c) Since the date of this Agreement, there has been no change
in the status of the Disclosed Matters that, individually or in the aggregate,
has resulted in, or materially increased the likelihood of, a Material Adverse
Effect.
SECTION 3.07. COMPLIANCE WITH LAWS AND AGREEMENTS. Each of the
Borrower and its Subsidiaries is in compliance with all laws, regulations and
orders of any
<PAGE> 55
50
Governmental Authority applicable to it or its property and all indentures,
agreements and other instruments binding upon it or its property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect. No Default has occurred and is
continuing.
SECTION 3.08. INVESTMENT AND HOLDING COMPANY STATUS. Neither
the Borrower nor any of its Subsidiaries is (a) an "investment company" as
defined in, or subject to regulation under, the Investment Company Act of 1940
or (b) a "holding company" as defined in, or subject to regulation under, the
Public Utility Holding Company Act of 1935.
SECTION 3.09. TAXES. Each of the Borrower and its Subsidiaries
has timely filed or caused to be filed all Tax returns and reports required to
have been filed and has paid or caused to be paid all Taxes required to have
been paid by it, except (a) Taxes that are being contested in good faith by
appropriate proceedings and for which the Borrower or such Subsidiary, as
applicable, has set aside on its books adequate reserves in accordance with GAAP
and (b) to the extent that the failure to do so could not reasonably be expected
to result in a Material Adverse Effect.
SECTION 3.10. ERISA. No ERISA Event has occurred or is
reasonably expected to occur that, when taken together with all other such ERISA
Events for which liability is reasonably expected to occur, could reasonably be
expected to result in a Material Adverse Effect. The present value of all
accumulated benefit obligations under each Plan (based on the assumptions used
for purposes of Statement of Financial Accounting Standards No. 87) did not, as
of the date of the most recent financial statements reflecting such amounts,
exceed by more than $1,000,000 the fair market value of the assets of such Plan,
and the present value of all accumulated benefit obligations of all underfunded
Plans (based on the assumptions used for purposes of Statement of Financial
Accounting Standards No. 87) did not, as of the date of the most recent
financial statements reflecting such amounts, exceed by more than $5,000,000 the
fair market value of the assets of all such underfunded Plans.
SECTION 3.11. DISCLOSURE. Neither the Information Memorandum
nor any of the other reports, financial statements, certificates or other
information furnished by or on behalf of the Borrower to the
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51
Administrative Agent or any Lender in connection with the negotiation of this
Agreement or delivered hereunder (as modified or supplemented by other
information so furnished) contains any material misstatement of fact or omits to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, when taken as a whole, not
misleading; PROVIDED that, with respect to projected financial information, the
Borrower represents only that such information was prepared in good faith based
upon assumptions believed to be reasonable at the time.
SECTION 3.12. USE OF PROCEEDS. Neither the Borrower nor any
Subsidiary is engaged principally, or as one of its important activities, in the
business of extending credit for the purpose, whether immediate, incidental or
ultimate, of buying or carrying margin stock (within the meaning of Regulation
T, U or X of the Board) and no part of the proceeds of any Loan will be used to
buy or carry any margin stock.
SECTION 3.13. SUBSIDIARIES. Schedule 3.13 contains an accurate
list of all of the material Subsidiaries of the Borrower on the date hereof,
setting forth their respective jurisdictions of organization and the percentage
of their respective ownership interest held by the Borrower or other
Subsidiaries. All of the issued and outstanding shares of capital stock of such
material Subsidiaries have been duly authorized and issued and are fully paid
and non-assessable.
SECTION 3.14. YEAR 2000. Any reprogramming required to permit
the proper functioning, in and following the year 2000, of (i) the Borrower's
and each Subsidiary's computer systems and equipment containing embedded
microchips (including, to the best of the Borrower's knowledge after reasonable
inquiry, systems and equipment supplied by others or with which the Borrower's
or such Subsidiary's systems interface) and the testing of all such systems and
equipment, as so reprogrammed, will be completed by September 30, 1999. The cost
to the Borrower or any Subsidiary of such reprogramming and testing and of the
reasonably foreseeable consequences of year 2000 to the Borrower or any such
Subsidiary (including, without limitation, to the best of the Borrower's
knowledge after reasonable inquiry, reprogramming errors and the failure of
others' systems or equipment) will not result in a Default or a Material Adverse
Effect. Except for such of the
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52
reprogramming referred to in the preceding sentence as may be necessary, the
computer and management information systems of the Borrower and its Subsidiaries
are and, with ordinary course upgrading and maintenance, will continue for the
term of this Agreement to be, sufficient to permit the Borrower and its
Subsidiaries to conduct its business without a Material Adverse Effect.
ARTICLE IV
CONDITIONS
SECTION 4.01. EFFECTIVE DATE. The obligations of the Lenders
to make Loans hereunder shall not become effective until the date on which each
of the following conditions is satisfied (or waived in accordance with Section
9.02):
(a) The Administrative Agent (or its counsel) shall have
received from each party hereto either (i) a counterpart of this
Agreement signed on behalf of such party or (ii) written evidence
satisfactory to the Administrative Agent (which may include telecopy
transmission of a signed signature page of this Agreement) that such
party has signed a counterpart of this Agreement.
(b) The Administrative Agent (or its counsel) shall have
received from each Guarantor either (i) a counterpart of each of the
Guarantee Agreement and the Contribution Agreement signed on behalf of
such party or (ii) written evidence satisfactory to the Administrative
Agent (which may include telecopy transmission of a signed signature
page of each of the Guarantee Agreement and the Contribution Agreement)
that such party has signed a counterpart of the Guarantee Agreement and
the Contribution Agreement.
(c) The Administrative Agent shall have received favorable
written opinions (addressed to the Administrative Agent and the Lenders
and dated the Effective Date) of (i) Frost & Jacobs LLP and (ii)
Simpson Thacher & Bartlett, counsel for the Borrower, substantially in
the form of Exhibit B, and covering such other matters relating to the
Borrower, this Agreement or the Transactions as the Required
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53
Lenders shall reasonably request. The Borrower hereby requests
such counsel to deliver such opinions.
(d) The Administrative Agent shall have received such
documents and certificates as the Administrative Agent or its counsel
may reasonably request relating to the organization, existence and good
standing of the Borrower and the Guarantors, the authorization of the
Transactions and any other legal matters relating to the Borrower and
the Guarantors, the Loan Documents or the Transactions, all in form and
substance reasonably satisfactory to the Administrative Agent and its
counsel.
(e) The Administrative Agent shall have received a
certificate, dated the Effective Date and signed by the President, a
Vice President or a Financial Officer of the Borrower, confirming
compliance with the conditions set forth in paragraphs (a) and (b) of
Section 4.02.
(f) The Administrative Agent shall have received all fees and
other amounts due and payable on or prior to the Effective Date,
including, to the extent invoiced, reimbursement or payment of all
out-of-pocket expenses required to be reimbursed or paid by the
Borrower hereunder.
(g) There shall be no litigation or administrative proceeding
that would reasonably be expected to have a Material Adverse Effect.
(h) The Lenders shall have received (i) pro forma financial
information giving effect to the Spin-Off and (ii) three-year
projections for the Borrower.
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans hereunder shall not
become effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 9.02) at or prior to 3:00 p.m., New York City time, on
December 23, 1998 (and, in the event such conditions are not so satisfied or
waived, the Commitments shall terminate at such time).
SECTION 4.02. EACH CREDIT EVENT. The obligation of each Lender
to make a Loan on the occasion of any
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54
Borrowing is subject to the satisfaction of the following conditions:
(a) The representations and warranties of the Borrower set
forth in this Agreement shall be true and correct on and as of the date
of such Borrowing.
(b) At the time of and immediately after giving effect to such
Borrowing, no Default shall have occurred and be continuing.
(c) After giving effect to such Borrowing, the aggregate
amount of such Borrowing, together with all other short term and medium
term borrowings by the Borrower, will not exceed the aggregate amount
of short term and medium term borrowings authorized by the resolutions
of the Board of Directors of the Borrower.
Each Borrowing shall be deemed to constitute a representation and warranty by
the Borrower on the date thereof as to the matters specified in paragraphs (a),
(b) and (c) of this Section.
ARTICLE V
AFFIRMATIVE COVENANTS
Until the Commitments have expired or been terminated in whole
and the principal of and interest on each Loan and all fees payable hereunder
shall have been paid in full, the Borrower covenants and agrees with the Lenders
that:
SECTION 5.01. FINANCIAL STATEMENTS AND OTHER INFORMATION. The
Borrower will furnish to the Administrative Agent and each Lender:
(a) within 90 days after the end of each fiscal year of the
Borrower, its audited consolidated balance sheet and related statements
of operations, stockholders' equity and cash flows as of the end of and
for such year, setting forth in each case in comparative form the
figures for the previous fiscal year, all reported on by Coopers &
Lybrand L.L.P. or other independent public accountants of recognized
national standing (without a "going concern" or like qualification or
exception and without any qualification or exception as to the scope of
such audit) to the effect that such consolidated financial
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55
statements present fairly in all material respects the financial
condition and results of operations of the Borrower and its
consolidated Subsidiaries on a consolidated basis in accordance with
GAAP consistently applied;
(b) within 45 days after the end of each of the first three
fiscal quarters of each fiscal year of the Borrower, its consolidated
balance sheet and related statements of operations, stockholders'
equity and cash flows as of the end of and for such fiscal quarter and
the then elapsed portion of the fiscal year, setting forth in each case
in comparative form the figures for the corresponding period or periods
of (or, in the case of the balance sheet, as of the end of) the
previous fiscal year, all certified by one of its Financial Officers as
presenting fairly in all material respects the financial condition and
results of operations of the Borrower and its consolidated Subsidiaries
on a consolidated basis in accordance with GAAP consistently applied,
subject to normal year-end audit adjustments and the absence of
footnotes;
(c) concurrently with any delivery of financial statements
under clause (a) or (b) above, a certificate of a Financial Officer of
the Borrower (i) certifying as to whether a Default has occurred and,
if a Default has occurred, specifying the details thereof and any
action taken or proposed to be taken with respect thereto, (ii) setting
forth reasonably detailed calculations demonstrating compliance with
Section 6.06 and (iii) stating whether any change in GAAP or in the
application thereof has occurred since the date of the audited
financial statements referred to in Section 3.04 and, if any such
change has occurred, specifying the effect of such change on the
financial statements accompanying such certificate;
(d) promptly after the same become publicly available, copies
of all periodic and other reports, proxy statements and other materials
filed by the Borrower or any Subsidiary with the Securities and
Exchange Commission, or any Governmental Authority succeeding to any or
all of the functions of said Commission, or with any national
securities exchange, or distributed by the Borrower to its shareholders
generally, as the case may be; and
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56
(e) promptly following any request therefor, such other
information regarding the operations, business affairs and financial
condition of the Borrower or any Subsidiary, or compliance with the
terms of this Agreement, as the Administrative Agent or any Lender may
reasonably request.
SECTION 5.02. NOTICES OF MATERIAL EVENTS. The
Borrower will furnish to the Administrative Agent and each
Lender prompt written notice of the following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or
proceeding by or before any arbitrator or Governmental Authority
against or affecting the Borrower or any Affiliate thereof that, if
adversely determined, could reasonably be expected to result in a
Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together
with any other ERISA Events that have occurred, could reasonably be
expected to result in liability of the Borrower and its Subsidiaries in
an aggregate amount exceeding $1,000,000;
(d) any change in the date of its fiscal year end;
and
(e) any other development that results in, or could reasonably
be expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.
SECTION 5.03. EXISTENCE; CONDUCT OF BUSINESS. The Borrower
will, and will cause each of its Subsidiaries to, do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges and franchises material
to the conduct of its business; PROVIDED that the foregoing shall not prohibit
any merger, consolidation, liquidation or dissolution permitted under Section
6.03.
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57
SECTION 5.04. PAYMENT OF OBLIGATIONS. The Borrower will, and
will cause each of its Subsidiaries to, pay its obligations, including Tax
liabilities, that, if not paid, could result in a Material Adverse Effect before
the same shall become delinquent or in default, except where (a) the validity or
amount thereof is being contested in good faith by appropriate proceedings, (b)
the Borrower or such Subsidiary has set aside on its books adequate reserves
with respect thereto in accordance with GAAP and (c) the failure to make payment
pending such contest could not reasonably be expected to result in a Material
Adverse Effect.
SECTION 5.05. MAINTENANCE OF PROPERTIES; INSURANCE. The
Borrower will, and will cause each of its Subsidiaries to, (a) keep and maintain
all property material to the conduct of its business in good working order and
condition, ordinary wear and tear excepted, and (b) maintain, with financially
sound and reputable insurance companies, insurance in such amounts and against
such risks as are customarily maintained by companies engaged in the same or
similar businesses operating in the same or similar locations.
SECTION 5.06. BOOKS AND RECORDS; INSPECTION RIGHTS. The
Borrower will, and will cause each of its Subsidiaries to, keep proper books of
record and account in which full, true and correct entries are made of all
dealings and transactions in relation to its business and activities. The
Borrower will, and will cause each of its Subsidiaries to, permit any
representatives designated by the Administrative Agent or any Lender, upon
reasonable prior notice, to visit and inspect its properties, to examine and
make extracts from its books and records, and to discuss its affairs, finances
and condition with its officers and independent accountants, all at such
reasonable times and as often as reasonably requested.
SECTION 5.07. COMPLIANCE WITH LAWS. The Borrower will, and
will cause each of its Subsidiaries to, comply with all laws, rules, regulations
and orders of any Governmental Authority applicable to it or its property,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 5.08. USE OF PROCEEDS. The proceeds of the Loans will
be used only for general corporate purposes
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58
(including working capital needs, refinancing Indebtedness, providing commercial
paper back-up and financing acquisitions that are approved by the board of
directors, or other governing body, of the target entity before the acquiror
commences a tender offer, proxy solicitation or similar action with respect to
the target's voting capital stock). No part of the proceeds of any Loan will be
used, whether directly or indirectly, for any purpose that entails a violation
of any of the Regulations of the Board, including Regulations U and X.
SECTION 5.09. FUTURE GUARANTORS. The Borrower will promptly
cause each (a) direct Subsidiary not in existence (or not a direct Subsidiary)
on the date hereof and (b) indirect Subsidiary not in existence (or not an
indirect Subsidiary or not an indirect Subsidiary that has incurred the type of
Indebtedness described below) on the date hereof that has created, incurred or
permitted to exist any Indebtedness (other than Intercompany Indebtedness and
Indebtedness of the type described in clauses (d), (e) and (h) of the definition
of "Indebtedness"), in each case to become a party to the Guarantee Agreement
and the Contribution Agreement and to assume all of the obligations of a
Guarantor under each such agreement.
ARTICLE VI
NEGATIVE COVENANTS
Until the Commitments have expired or terminated in whole and
the principal of and interest on each Loan and all fees payable hereunder have
been paid in full, the Borrower covenants and agrees with the Lenders that:
SECTION 6.01. LIENS. The Borrower will not, and will not
permit any Subsidiary to, create, incur, assume or permit to exist any Lien on
any property or asset now owned or hereafter acquired by it, or assign or sell
any income or revenues (including accounts receivable) or rights in respect of
any thereof, except:
(a) Permitted Encumbrances;
(b) any Lien on any property or asset of the Borrower or any
Subsidiary existing on the date hereof; PROVIDED that (i) such Lien
shall not apply to any other property or asset of the Borrower or any
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59
Subsidiary, (ii) such Lien shall secure only those obligations which it
secures on the date hereof and extensions, renewals and replacements
thereof that do not increase the outstanding principal amount thereof
and (iii) all such Liens secure obligations having an aggregate
principal amount not exceeding at any time $5,000,000;
(c) any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any Subsidiary or existing on
any property or asset of any Person that becomes a Subsidiary after the
date hereof prior to the time such Person becomes a Subsidiary;
PROVIDED that (i) such Lien is not created in contemplation of or in
connection with such acquisition or such Person becoming a Subsidiary,
as the case may be, (ii) such Lien shall not apply to any other
property or assets of the Borrower or any Subsidiary and (iii) such
Lien shall secure only those obligations which it secures on the date
of such acquisition or the date such Person becomes a Subsidiary, as
the case may be and extensions, renewals and replacements thereof that
do not increase the outstanding principal amount thereof; and
(d) Liens on fixed or capital assets acquired, constructed or
improved by the Borrower or any Subsidiary; PROVIDED that (i) such
security interests and the Indebtedness secured thereby are incurred
prior to or within 90 days after such acquisition or the completion of
such construction or improvement, (ii) the Indebtedness secured thereby
does not exceed 90% of the cost of acquiring, constructing or improving
such fixed or capital assets and (iii) such security interests shall
not apply to any other property or assets of the Borrower or any
Subsidiary.
SECTION 6.02. SALE AND LEASE-BACK TRANSACTIONS. The Borrower
will not, and will not permit any of its Subsidiaries to, enter into any
arrangement, directly or indirectly, with any Person whereby it shall sell or
transfer any property used or useful in its business, whether now owned or
hereafter acquired, and thereafter rent or lease such property or other property
which it intends to use for substantially the same purpose or purposes as the
property being sold or transferred, except to the extent the aggregate sales
price for the assets transferred in all such arrangements in effect at any time
does not exceed
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$15,000,000; PROVIDED that on or prior to December 31, 1999, the Borrower may,
and may permit its Subsidiaries to, enter into such an arrangement in an amount
not to exceed $100,000,000 for the sole purpose of enabling the Borrower to take
advantage of a capital loss carryforward.
SECTION 6.03. FUNDAMENTAL CHANGES. (a) The Borrower will not,
and will not permit any Subsidiary to, merge into or consolidate with any other
Person, or permit any other Person to merge into or consolidate with it, or
sell, transfer, lease or otherwise dispose of (in one transaction or in a series
of transactions) all or substantially all of its assets, or all or substantially
all of the stock of any of its Subsidiaries (in each case, whether now owned or
hereafter acquired), or liquidate or dissolve, except that, if at the time
thereof and immediately after giving effect thereto no Default shall have
occurred and be continuing (i) any Subsidiary may merge into the Borrower in a
transaction in which the Borrower is the surviving corporation, (ii) any
Subsidiary may merge into any Subsidiary in a transaction in which the surviving
entity is a Subsidiary, (iii) any Subsidiary may sell, transfer, lease or
otherwise dispose of its assets to the Borrower or to another Subsidiary and
(iv) any Subsidiary may liquidate or dissolve if the Borrower determines in good
faith that such liquidation or dissolution is in the best interests of the
Borrower and is not materially disadvantageous to the Lenders.
(b) The Borrower will not, and will not permit any of its
Subsidiaries to, engage to any material extent in any business other than
businesses of the type conducted by the Borrower and its Subsidiaries on the
date of execution of this Agreement and businesses reasonably related thereto.
SECTION 6.04. TRANSACTIONS WITH AFFILIATES. The Borrower will
not, and will not permit any of its Subsidiaries to, sell, lease or otherwise
transfer any property or assets to, or purchase, lease or otherwise acquire any
property or assets from, or otherwise engage in any other transactions with, any
of its Affiliates, except (a) in the ordinary course of business at prices and
on terms and conditions not less favorable to the Borrower or such Subsidiary
than could be obtained on an arm's-length basis from unrelated third parties,
(b) transactions between or among the Borrower and its Subsidiaries not
involving any other Affiliate and (c) dividends or other distributions (whether
in cash, securities or other property) with respect to any shares of any class
of capital stock of the Borrower
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or any Subsidiary, or any payment (whether in
cash, securities or other property), including any sinking fund or similar
deposit, on account of the purchase, redemption, retirement, acquisition,
cancelation or termination of any such shares of capital stock of the Borrower
or any option, warrant or other right to acquire any such shares of capital
stock of the Borrower.
SECTION 6.05. RESTRICTIVE AGREEMENTS. The Borrower will not,
and will not permit any of its Subsidiaries to, directly or indirectly, enter
into, incur or permit to exist any agreement or other arrangement that
prohibits, restricts or imposes any condition upon the ability of any Subsidiary
to pay dividends or other distributions with respect to any shares of its
capital stock or to make or repay loans or advances to the Borrower or any other
Subsidiary or to Guarantee Indebtedness of the Borrower or any other Subsidiary;
PROVIDED that (i) the foregoing shall not apply to restrictions and conditions
imposed by law or by this Agreement and (ii) the foregoing shall not apply to
restrictions and conditions existing on the date hereof identified on Schedule
6.05 (but shall apply to any extension or renewal of, or any amendment or
modification expanding the scope of, any such restriction or condition).
SECTION 6.06. INTEREST COVERAGE RATIO. The Borrower will not
permit the ratio of (a) Consolidated EBITDA to (b) Consolidated Interest
Expense, in each case for any period of four consecutive fiscal quarters, to be
less than 4.0 to 1.00.
SECTION 6.07. CONSOLIDATED TOTAL DEBT TO CONSOLIDATED TOTAL
CAPITALIZATION RATIO. The Borrower will not permit the ratio of (a) Consolidated
Total Debt to (b) Consolidated Total Capitalization, in each case at any time,
to be greater than 0.6 to 1.0.
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ARTICLE VII
EVENTS OF DEFAULT
If any of the following events ("EVENTS OF DEFAULT") shall
occur:
(a) the Borrower shall fail to pay any principal of any Loan
when and as the same shall become due and payable, whether at the due
date thereof or at a date fixed for prepayment thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan or
any fee or any other amount (other than an amount referred to in clause
(a) of this Article) payable under this Agreement, when and as the same
shall become due and payable, and such failure shall continue
unremedied for a period of three Business Days;
(c) any representation or warranty made or deemed made by or
on behalf of the Borrower or any Subsidiary in or in connection with
any Loan Document or any amendment or modification thereof or waiver
thereunder, or in any report, certificate, financial statement or other
document furnished pursuant to or in connection with any Loan Document
or any amendment or modification thereof or waiver thereunder, shall
prove to have been incorrect in any material respect when made or
deemed made;
(d) the Borrower shall fail to observe or perform any
covenant, condition or agreement contained in Section 5.02, 5.03 (with
respect to the Borrower's existence) or 5.08 or in Article VI;
(e) the Borrower shall fail to observe or perform any
covenant, condition or agreement contained in this Agreement (other
than those specified in clause (a), (b) or (d) of this Article), and
such failure shall continue unremedied for a period of 30 days after
notice thereof from the Administrative Agent to the Borrower (which
notice will be given at the request of any Lender);
(f) the Borrower or any Subsidiary shall fail to make any
payment (whether of principal or interest and regardless of amount) in
respect of any Material
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Indebtedness, when and as the same shall become due and payable;
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that
enables or permits (with or without the giving of notice, the lapse of
time or both) the holder or holders of any Material Indebtedness or any
trustee or agent on its or their behalf to cause any Material
Indebtedness to become due, or to require the prepayment, repurchase,
redemption or defeasance thereof, prior to its scheduled maturity;
PROVIDED that this clause (g) shall not apply to secured Indebtedness
that becomes due as a result of the voluntary sale or transfer of the
property or assets securing such Indebtedness;
(h) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed seeking (i) liquidation,
reorganization or other relief in respect of the Borrower or any
Subsidiary or its debts, or of a substantial part of its assets, under
any Federal, state or foreign bankruptcy, insolvency, receivership or
similar law now or hereafter in effect or (ii) the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar
official for the Borrower or any Subsidiary or for a substantial part
of its assets, and, in any such case, such proceeding or petition shall
continue undismissed for 60 days or an order or decree approving or
ordering any of the foregoing shall be entered;
(i) the Borrower or any Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation,
reorganization or other relief under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in
effect, (ii) consent to the institution of, or fail to contest in a
timely and appropriate manner, any proceeding or petition described in
clause (h) of this Article, (iii) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower or any Subsidiary or
for a substantial part of its assets, (iv) file an answer admitting the
material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the
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benefit of creditors or (vi) take any action for the purpose of
effecting any of the foregoing;
(j) the Borrower or any Subsidiary shall become unable, admit
in writing its inability or fail generally to pay its debts as they
become due;
(k) one or more judgments for the payment of money in an
aggregate amount in excess of $15,000,000 shall be rendered against the
Borrower, any Subsidiary or any combination thereof and the same shall
remain undischarged for a period of 30 consecutive days during which
execution shall not be effectively stayed, or any action shall be
legally taken by a judgment creditor to attach or levy upon any assets
of the Borrower or any Subsidiary to enforce any such judgment;
(l) an ERISA Event shall have occurred that, in the opinion of
the Required Lenders, when taken together with all other ERISA Events
that have occurred, could reasonably be expected to result in a
Material Adverse Effect;
(m) the Guarantee Agreement or any provision thereof shall be
declared to be unenforceable or null and void or any Guarantor or any
person acting by or on behalf of such Guarantor shall deny or disaffirm
any of such Guarantor's obligations under the Guarantee Agreement or
any Guarantor shall fail to perform or observe any term, covenant or
agreement on its part to be performed or observed pursuant to the
Guarantee Agreement;
(n) a Change in Control shall occur; or
(o) the Spin-Off shall not have been consummated on or prior
to January 31, 1999 on terms consistent in all material respects with
the pro forma financial information and projections described in
paragraph (h) of Section 4.01.
then, and in every such event (other than an event with respect to the Borrower
described in clause (h) or (i) of this Article), and at any time thereafter
during the continuance of such event, the Administrative Agent may, and at the
request of the Required Lenders shall, by notice to the Borrower, take either or
both of the following actions, at the same or different times: (i) terminate the
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Commitments, and thereupon the Commitments shall terminate immediately, and (ii)
declare the Loans then outstanding to be due and payable in whole (or in part,
in which case any principal not so declared to be due and payable may thereafter
be declared to be due and payable), and thereupon the principal of the Loans so
declared to be due and payable, together with accrued interest thereon and all
fees and other obligations of the Borrower accrued hereunder, shall become due
and payable immediately, without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Borrower; and in case of any
event with respect to the Borrower described in clause (h) or (i) of this
Article, the Commitments shall automatically terminate and the principal of the
Loans then outstanding, together with accrued interest thereon and all fees and
other obligations of the Borrower accrued hereunder, shall automatically become
due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrower.
ARTICLE VIII
THE ADMINISTRATIVE AGENT
Each of the Lenders hereby irrevocably appoints the
Administrative Agent as its agent and authorizes the Administrative Agent to
take such actions on its behalf and to exercise such powers as are delegated to
the Administrative Agent by the terms hereof, together with such actions and
powers as are reasonably incidental thereto.
Each bank serving as the Administrative Agent hereunder shall
have the same rights and powers in its capacity as a Lender as any other Lender
and may exercise the same as though it were not the Administrative Agent and
such bank and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower or any Subsidiary or
other Affiliate thereof as if it were not the Administrative Agent hereunder.
It is understood that the Co-Syndication Agents do not have
any duties or responsibilities under this Agreement (other than in their
capacity as a Lender). The Administrative Agent shall not have any duties or
obligations except those expressly set forth herein. Without limiting the
generality of the foregoing, (a) neither the Administrative Agent nor the
Documentation
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Agent shall be subject to any fiduciary or other implied duties, regardless of
whether a Default has occurred and is continuing, (b) the Administrative Agent
shall not have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby that the Administrative Agent is required to exercise in
writing by the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in Section
9.02), and (c) except as expressly set forth herein, the Administrative Agent
shall not have any duty to disclose, and shall not be liable for the failure to
disclose, any information relating to the Borrower or any of its Subsidiaries
that is communicated to or obtained by the bank serving as Administrative Agent
or any of its Affiliates in any capacity. The Administrative Agent shall not be
liable for any action taken or not taken by it with the consent or at the
request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in Section
9.02) or in the absence of its own gross negligence or wilful misconduct. The
Administrative Agent shall be deemed not to have knowledge of any Default unless
and until written notice thereof is given to the Administrative Agent by the
Borrower or a Lender, and the Administrative Agent shall not be responsible for
or have any duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with this Agreement, (ii) the contents
of any certificate, report or other document delivered hereunder or in
connection herewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth herein, (iv) the
validity, enforceability, effectiveness or genuineness of this Agreement or any
other agreement, instrument or document, or (v) the satisfaction of any
condition set forth in Article IV or elsewhere herein, other than to confirm
receipt of items expressly required to be delivered to the Administrative Agent.
The Administrative Agent shall be entitled to rely upon, and
shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other writing believed
by it to be genuine and to have been signed or sent by the proper Person. The
Administrative Agent also may rely upon any statement made to it orally or by
telephone and believed by it to be made by the proper Person, and shall not
incur any liability for relying thereon. The Administrative Agent may
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consult with legal counsel (who may be counsel for the Borrower), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts.
The Administrative Agent may perform any and all its duties
and exercise its rights and powers by or through any one or more sub-agents
appointed by the Administrative Agent. The Administrative Agent and any such
sub-agent may perform any and all its duties and exercise its rights and powers
through their respective Related Parties. The exculpatory provisions of the
preceding paragraphs shall apply to any such sub-agent and to the Related
Parties of the Administrative Agent and any such sub-agent, and shall apply to
their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Administrative Agent.
Subject to the appointment and acceptance of a successor
Administrative Agent as provided in this paragraph, the Administrative Agent may
resign at any time by notifying the Lenders and the Borrower. Upon any such
resignation, the Required Lenders shall have the right, in consultation with the
Borrower, to appoint a successor. If no successor shall have been so appointed
by the Required Lenders and shall have accepted such appointment within 30 days
after the retiring Administrative Agent gives notice of its resignation, then
the retiring Administrative Agent may, on behalf of the Lenders, appoint a
successor Administrative Agent which shall be a bank with an office in New York,
New York, or an Affiliate of any such bank. Upon the acceptance of its
appointment as Administrative Agent hereunder by a successor, such successor
shall succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations hereunder. The fees
payable by the Borrower to a successor Administrative Agent shall be the same as
those payable to its predecessor unless otherwise agreed between the Borrower
and such successor. After the Administrative Agent's resignation hereunder, the
provisions of this Article and Section 9.03 shall continue in effect for the
benefit of such retiring Administrative Agent, its sub-agents and their
respective Related Parties in respect of any actions taken or omitted to be
taken by any of them while it was acting as Administrative Agent.
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Each Lender acknowledges that it has, independently and
without reliance upon the Administrative Agent or any other Lender and based on
such documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any related agreement or any document furnished hereunder or thereunder.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. NOTICES. Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein or in any other Loan Document shall be
in writing and shall be delivered by hand or overnight courier service, mailed
by certified or registered mail or sent by telecopy, as follows:
(a) if to the Borrower, to it at 201 E. Fourth
Street, Cincinnati, Ohio 45202, Attention of Robert P.
Komin (Telecopy No. (513) 241-1543);
(b) if to the Administrative Agent, to The Chase Manhattan
Bank, Loan and Agency Services Group, One Chase Manhattan Plaza, 8th
Floor, New York, New York 10081, Attention of Janet Belden (Telecopy
No. (212) 552-5658), with a copy to The Chase Manhattan Bank, 270 Park
Avenue, New York 10017, Attention of Constance Coleman (Telecopy No.
(212) 270-1263);
(c) if to the Swingline Lenders, to (i) The Chase Manhattan
Bank, Loan and Agency Services Group, One Chase Manhattan Plaza, 8th
Floor, New York, New York 10081, Attention of Janet Belden (Telecopy
No. (212) 552-5658), with a copy to The Chase Manhattan Bank, 270 Park
Avenue, New York 10017, Attention of Constance Coleman (Telecopy No.
(212) 270-1263); (ii) NationsBank, N.A., 100 N. Tryon Street,
Charlotte, N.C. 28255, Attention of Jack Williams (Telecopy No. (704)
388-0960 or (iii) Citibank, N.A., 399 Park Avenue, New
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York, NY 10043, Attention of Elizabeth Minnella (Telecopy No. (212)
793-6873; and
(d) if to any other Lender, to it at its address (or telecopy
number) set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
SECTION 9.02. WAIVERS; AMENDMENTS. (a) No failure or delay by
the Administrative Agent or any Lender in exercising any right or power
hereunder or under any other Loan Document shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Administrative Agent and the
Lenders hereunder and under any other Loan Document are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provision of this Agreement or any other Loan Document or consent to any
departure by the Borrower therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) of this Section, and then such waiver
or consent shall be effective only in the specific instance and for the purpose
for which given. Without limiting the generality of the foregoing, the making of
a Loan shall not be construed as a waiver of any Default, regardless of whether
the Administrative Agent or any Lender may have had notice or knowledge of such
Default at the time.
(b) Neither this Agreement nor any other Loan Document nor any
provision hereof or thereof may be waived, amended or modified except pursuant
to an agreement or agreements in writing entered into by the Borrower and the
Required Lenders or by the Borrower and the Administrative Agent with the
consent of the Required Lenders; PROVIDED that no such agreement shall (i)
increase the Commitment of any Lender, including pursuant to Section 2.06,
without the written consent of such Lender, (ii) reduce the principal amount of
any Loan or reduce the rate of interest thereon, or reduce any fees payable
hereunder, without the written
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consent of each Lender affected thereby, (iii) postpone the scheduled date of
payment of the principal amount of any Loan, or any interest thereon, or any
fees payable hereunder, or reduce the amount of, waive or excuse any such
payment, or postpone the Maturity Date or the scheduled date of expiration of
any Commitment, including pursuant to Section 2.05 (PROVIDED that nothing herein
shall limit the right of the Borrower to extend the Maturity Date pursuant to
Section 2.05(d) without the consent of any Lender), without the written consent
of each Lender affected thereby, (iv) change Section 2.18(b) or (c) in a manner
that would alter the pro rata sharing of payments required thereby, without the
written consent of each Lender, (v) change any of the provisions of this Section
or the definition of "Required Lenders" or any other provision hereof specifying
the number or percentage of Lenders required to waive, amend or modify any
rights hereunder or make any determination or grant any consent hereunder or
(vi) release any Guarantor from its Guarantee obligations under the Guarantee
Agreement, or limit its liability in respect of such Guarantee obligations,
without the written consent of each Lender; PROVIDED FURTHER that no such
agreement shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent or the Swingline Lenders hereunder without the prior
written consent of the Administrative Agent or the Swingline Lenders, as the
case may be.
SECTION 9.03. EXPENSES; INDEMNITY; DAMAGE WAIVER. (a) The
Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the
Administrative Agent and its Affiliates, including the reasonable fees, charges
and disbursements of counsel for the Administrative Agent, in connection with
the syndication of the credit facilities provided for herein, the preparation
and administration of the Loan Documents or any amendments, modifications or
waivers of the provisions thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated) and (ii) all out-of-pocket expenses
incurred by the Administrative Agent or any Lender, including the fees, charges
and disbursements of any counsel for the Administrative Agent or any Lender, in
connection with the enforcement or protection of its rights in connection with
the Loan Documents, including its rights under this Section, or in connection
with the Loans made hereunder, including all such out-of-pocket expenses
incurred during any workout, restructuring or negotiations in respect of such
Loans.
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(b) The Borrower shall indemnify the Administrative Agent and
each Lender, and each Related Party of any of the foregoing Persons (each such
Person being called an "INDEMNITEE") against, and hold each Indemnitee harmless
from, any and all losses, claims, damages, liabilities and related expenses,
including the fees, charges and disbursements of any counsel for any Indemnitee,
incurred by or asserted against any Indemnitee arising out of, in connection
with, or as a result of (i) the execution or delivery of any Loan Document or
any agreement or instrument contemplated thereby, the performance by the parties
thereto of their respective obligations thereunder or the consummation of the
Transactions or any other transactions contemplated thereby, (ii) any Loan or
the use of the proceeds therefrom, (iii) any actual or alleged presence or
release of Hazardous Materials on or from any property owned or operated by the
Borrower or any of its Subsidiaries, or any Environmental Liability related in
any way to the Borrower or any of its Subsidiaries, or (iv) any actual or
prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory and
regardless of whether any Indemnitee is a party thereto; PROVIDED that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses are determined by a
court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or wilful misconduct of such Indemnitee.
(c) To the extent that the Borrower fails to pay any amount
required to be paid by it to the Administrative Agent or the Swingline Lenders
under paragraph (a) or (b) of this Section, each Lender severally agrees to pay
to the Administrative Agent or the Swingline Lenders, as the case may be, such
Lender's Applicable Percentage (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid amount;
PROVIDED that the unreimbursed expense or indemnified loss, claim, damage,
liability or related expense, as the case may be, was incurred by or asserted
against the Administrative Agent or the Swingline Lenders in their capacity as
such.
(d) To the extent permitted by applicable law, the Borrower
shall not assert, and hereby waives, any claim against any Indemnitee, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in
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connection with, or as a result of, this Agreement or any agreement or
instrument contemplated hereby, the Transactions, any Loan or the use of the
proceeds thereof.
(e) All amounts due under this Section shall be payable
promptly after written demand therefor.
SECTION 9.04. SUCCESSORS AND ASSIGNS. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns permitted hereby, except that
the Borrower may not assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of each Lender (and any
attempted assignment or transfer by the Borrower without such consent shall be
null and void). Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby and, to the extent expressly
contemplated hereby, the Related Parties of each of the Administrative Agent and
the Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement.
(b) Any Lender may assign to one or more assignees all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it); PROVIDED that
(i) except in the case of an assignment to a Lender or an Affiliate of a Lender,
each of the Borrower and the Administrative Agent (and, in the case of an
assignment of all or a portion of a Commitment or any Lender's obligations in
respect of its Swingline Exposure, the Swingline Lenders) must give their prior
written consent to such assignment (which consent shall not be unreasonably
withheld), (ii) except in the case of an assignment to a Lender or an Affiliate
of a Lender or an assignment of the entire remaining amount of the assigning
Lender's Commitment, the amount of the Commitment of the assigning Lender
subject to each such assignment (determined as of the date the Assignment and
Acceptance with respect to such assignment is delivered to the Administrative
Agent) shall not be less than $10,000,000 unless each of the Borrower and the
Administrative Agent otherwise consent, (iii) each partial assignment shall be
made as an assignment of a proportionate part of all the assigning Lender's
rights and obligations under this Agreement, except that this clause (iii) shall
not apply to rights in respect of outstanding Competitive
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Loans, (iv) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Acceptance, together with a processing
and recordation fee of $3,500, and (v) the assignee, if it shall not be a
Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire; and PROVIDED FURTHER that any consent of the Borrower otherwise
required under this paragraph shall not be required if an Event of Default has
occurred and is continuing. Subject to acceptance and recording thereof pursuant
to paragraph (d) of this Section, from and after the effective date specified in
each Assignment and Acceptance the assignee thereunder shall be a party hereto
and, to the extent of the interest assigned by such Assignment and Acceptance,
have the rights and obligations of a Lender under this Agreement, and the
assigning Lender thereunder shall, to the extent of the interest assigned by
such Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all of the
assigning Lender's rights and obligations under this Agreement, such Lender
shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 2.15, 2.16, 2.17 and 9.03). Any assignment or transfer by a
Lender of rights or obligations under this Agreement that does not comply with
this paragraph shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
paragraph (e) of this Section.
(c) The Administrative Agent, acting for this purpose as an
agent of the Borrower, shall maintain at one of its offices in The City of New
York a copy of each Assignment and Acceptance delivered to it and a register for
the recordation of the names and addresses of the Lenders, and the Commitment
of, and principal amount of the Loans owing to, each Lender pursuant to the
terms hereof from time to time (the "REGISTER"). The entries in the Register
shall be conclusive, and the Borrower, the Administrative Agent and the Lenders
may treat each Person whose name is recorded in the Register pursuant to the
terms hereof as a Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary. The Register shall be available for
inspection by the Borrower and any Lender, at any reasonable time and from time
to time upon reasonable prior notice.
(d) Upon its receipt of a duly completed Assignment and
Acceptance executed by an assigning Lender
<PAGE> 79
74
and an assignee, the assignee's completed Administrative Questionnaire (unless
the assignee shall already be a Lender hereunder), the processing and
recordation fee referred to in paragraph (b) of this Section and any written
consent to such assignment required by paragraph (b) of this Section, the
Administrative Agent shall accept such Assignment and Acceptance and record the
information contained therein in the Register. No assignment shall be effective
for purposes of this Agreement unless it has been recorded in the Register as
provided in this paragraph.
(e) Any Lender may, without the consent of the Borrower or the
Administrative Agent or the Swingline Lenders, sell participations to one or
more banks or other entities (a "PARTICIPANT") in all or a portion of such
Lender's rights and obligations under this Agreement (including all or a portion
of its Commitment and the Loans owing to it); PROVIDED that (i) such Lender's
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (iii) the Borrower, the Administrative Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement. Any
agreement or instrument pursuant to which a Lender sells such a participation
shall provide that such Lender shall retain the sole right to enforce this
Agreement and to approve any amendment, modification or waiver of any provision
of this Agreement; PROVIDED that such agreement or instrument may provide that
such Lender will not, without the consent of the Participant, agree to any
amendment, modification or waiver described in the first proviso to Section
9.02(b) that affects such Participant. Subject to paragraph (f) of this Section,
the Borrower agrees that each Participant shall be entitled to the benefits of
Sections 2.15, 2.16 and 2.17 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to paragraph (b) of this Section.
To the extent permitted by law, each Participant also shall be entitled to the
benefits of Section 9.08 as though it were a Lender, provided such Participant
agrees to be subject to Section 2.18(c) as though it were a Lender.
(f) A Participant shall not be entitled to receive any greater
payment under Section 2.15 or 2.17 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is
<PAGE> 80
75
made with the Borrower's prior written consent. A Participant that would be a
Foreign Lender if it were a Lender shall not be entitled to the benefits of
Section 2.17 unless the Borrower is notified of the participation sold to such
Participant and such Participant agrees, for the benefit of the Borrower, to
comply with Section 2.17(e) as though it were a Lender.
(g) Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement to secure
obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section shall not apply to any
such pledge or assignment of a security interest; PROVIDED that no such pledge
or assignment of a security interest shall release a Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.
SECTION 9.05. SURVIVAL. All covenants, agreements,
representations and warranties made by the Borrower or the Guarantors in the
Loan Documents and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of the Loan Documents and the making of any
Loans, regardless of any investigation made by any such other party or on its
behalf and notwithstanding that the Administrative Agent or any Lender may have
had notice or knowledge of any Default or incorrect representation or warranty
at the time any credit is extended hereunder, and shall continue in full force
and effect as long as the principal of or any accrued interest on any Loan or
any fee or any other amount payable under any Loan Document is outstanding and
unpaid and so long as the Commitments have not expired or terminated. The
provisions of Sections 2.15, 2.16, 2.17 and 9.03 and Article VIII shall survive
and remain in full force and effect regardless of the consummation of the
transactions contemplated hereby, the repayment of the Loans or the termination
of the Commitments or of this Agreement or any provision hereof.
SECTION 9.06. COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This
Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a
<PAGE> 81
76
single contract. This Agreement and any separate letter agreements with respect
to fees payable to the Administrative Agent constitute the entire contract among
the parties relating to the subject matter hereof and supersede any and all
previous agreements and understandings, oral or written, relating to the subject
matter hereof. Except as provided in Section 4.01, this Agreement shall become
effective when it shall have been executed by the Administrative Agent and when
the Administrative Agent shall have received counterparts hereof which, when
taken together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Delivery of an executed counterpart
of a signature page of this Agreement by telecopy shall be effective as delivery
of a manually executed counterpart of this Agreement.
SECTION 9.07. SEVERABILITY. Any provision of this Agreement
held to be invalid, illegal or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such invalidity, illegality
or unenforceability without affecting the validity, legality and enforceability
of the remaining provisions hereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 9.08. RIGHT OF SETOFF. If an Event of Default shall
have occurred and be continuing, each Lender and each of its Affiliates is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other obligations at
any time owing by such Lender or Affiliate to or for the credit or the account
of the Borrower against any of and all the obligations of the Borrower now or
hereafter existing under this Agreement held by such Lender, irrespective of
whether or not such Lender shall have made any demand under this Agreement and
although such obligations may be unmatured. The rights of each Lender under this
Section are in addition to other rights and remedies (including other rights of
setoff) which such Lender may have.
SECTION 9.09. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE
OF PROCESS. (a) This Agreement shall be
<PAGE> 82
77
construed in accordance with and governed by the law of the State of New York.
(b) The Borrower hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of the
Supreme Court of the State of New York sitting in New York County and of the
United States District Court of the Southern District of New York, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement, or any other Loan Document or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement or any other Loan Document shall
affect any right that the Administrative Agent or any Lender may otherwise have
to bring any action or proceeding relating to this Agreement against the
Borrower or its properties in the courts of any jurisdiction.
(c) The Borrower hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or any other
Loan Document in any court referred to in paragraph (b) of this Section. Each of
the parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(d) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 9.01. Nothing
in this Agreement or any other Loan Document will affect the right of any party
to this Agreement to serve process in any other manner permitted by law.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
<PAGE> 83
78
OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
SECTION 9.11. HEADINGS. Article and Section headings and the
Table of Contents used herein are for convenience of reference only, are not
part of this Agreement and shall not affect the construction of, or be taken
into consideration in interpreting, this Agreement.
SECTION 9.12. CONFIDENTIALITY. Each of the Lenders agrees to
maintain the confidentiality of the Information (as defined below), except that
Information may be disclosed (a) to its and its Affiliates' directors, officers,
employees and agents, including accountants, legal counsel and other advisors
(it being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep
such Information confidential), (b) to the extent requested by any regulatory
authority, (c) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process, (d) to any other party to this Agreement,
(e) in connection with the exercise of any remedies hereunder or any suit,
action or proceeding relating to this Agreement or any other Loan Document or
the enforcement of rights hereunder, (f) subject to an agreement containing
provisions substantially the same as those of this Section, to any assignee of
or Participant in, or any prospective assignee of or Participant in, any of its
rights or obligations under this Agreement, (g) with the consent of the Borrower
or (h) to the extent such Information (i) becomes publicly available other than
as a result of a breach of this Section or (ii) becomes available to the
Administrative Agent or any Lender on a nonconfidential basis from a source
other than the Borrower. For the purposes of this Section, "INFORMATION" means
all information received from the Borrower relating to the Borrower or its
business, other than any such information that is available to the
Administrative Agent or any Lender on a nonconfidential basis prior to
disclosure by the Borrower; PROVIDED that, in the case of information received
<PAGE> 84
79
from the Borrower after the date hereof, such information is clearly identified
at the time of delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section shall be considered
to have complied with its obligation to do so if such Person has exercised the
same degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.
SECTION 9.13. INTEREST RATE LIMITATION. Notwithstanding
anything herein to the contrary, if at any time the interest rate applicable to
any Loan, together with all fees, charges and other amounts which are treated as
interest on such Loan under applicable law (collectively the "CHARGES"), shall
exceed the maximum lawful rate (the "MAXIMUM RATE") which may be contracted for,
charged, taken, received or reserved by the Lender holding such Loan in
accordance with applicable law, the rate of interest payable in respect of such
Loan hereunder, together with all Charges payable in respect thereof, shall be
limited to the Maximum Rate and, to the extent lawful, the interest and Charges
that would have been payable in respect of such Loan but were not payable as a
result of the operation of this Section shall be cumulated and the interest and
Charges payable to such Lender in respect of other Loans or periods shall be
increased (but not above the Maximum Rate therefor) until such cumulated amount,
together with interest thereon at the Federal Funds Effective Rate to the date
of repayment, shall have been received by such Lender.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
CONVERGYS CORPORATION,
by
/s/ Robert P. Komin, Jr.
-----------------------------
Name: Robert P. Komin, Jr.
Title: VP Finance & Treasurer
<PAGE> 85
THE CHASE MANHATTAN BANK,
individually and as Administrative
Agent,
by
/s/ John F. Mix
------------------------------
Name: John F. Mix
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION,
individually and as Co-Syndication
Agent,
by
/s/ C. J. Richardson
------------------------------
Name: C. Joseph Richardson
Title: Senior Vice President
NATIONSBANK, N.A., individually and
as Co-Syndication Agent,
by
/s/ John E. Williams
------------------------------
Name: John E. Williams
Title: Senior Vice President
CITIBANK, N.A., individually and as
Co-Syndication Agent,
by
/s/ E. Ogimachi
------------------------------
Name: Eileen G. Ogimachi
Title: Managing Director
BANKERS TRUST COMPANY,
by
/s/ Gregory P. Shefrin
------------------------------
Name: Gregory P. Shefrin
Title: Vice President
<PAGE> 86
THE BANK OF NEW YORK,
by
/s/ Debra Mcgarry
----------------------------------
Name: Debra McGarry
Title: Assistant Vice President
BANQUE NATIONALE DE PARIS, CHICAGO
BRANCH,
by
/s/ Arnaud Collin Du Bocage
--------------------------------
Name: Arnaud Collin du Bocage
Title: Executive Vice President
& General Mgr.
by
/s/ William J. Krummen
-----------------------------------
Name: William J. Krummen
Title: Vice President & Manager
COMMERZBANK AKTIENGESELLSCHAFT,
by
/s/ William J. Binder
-----------------------------------
Name: William J. Binder
Title: Vice President
by
/s/ Rie Ando
-----------------------------------
Name: Rie Ando
Title: Assistant Treasurer
FIFTH THIRD BANK,
by
/s/ Andrew K. Hauck
-----------------------------------
Name: Andrew K. Hauck
Title: Vice President
FLEET NATIONAL BANK,
by
/s/ Barbara Agostini Keegan
-----------------------------------
Name: Barbara Agostini Keegan
Title: Vice President
<PAGE> 87
NBD BANK,
by
/s/ Randy S. With
-----------------------------------
Name: Randal S. With
Title: First Vice President
STAR BANK, NATIONAL ASSOCIATION,
by
/s/ Derek S. Roudebush
-----------------------------------
Name: Derek S. Roudebush
Title: Vice President
SUNTRUST BANK CENTRAL FLORIDA, N.A.,
by
/s/ Harold Bitler
-----------------------------------
Name: Harold Bitler
Title: First Vice President
TORONTO DOMINION (TEXAS), INC.,
by
/s/ Sonja R. Jordan
-----------------------------------
Name: Sonja R. Jordan
Title: Vice President
<PAGE> 88
BANKBOSTON, N.A.,
by
/s/ Patrick Bonebrake
-----------------------------------
Name: Patrick Bonebrake
Title: Vice President
<PAGE> 89
EXHIBIT A
[FORM OF]
ASSIGNMENT AND ACCEPTANCE
Reference is made to the 364-Day Credit Agreement dated as of
December 16, 1998 (as amended and in effect on the date hereof, the "Credit
Agreement"), among Convergys Corporation, the Lenders named therein, PNC Bank,
National Association, NationsBank, N.A. and Citibank, N.A., as Co-Syndication
Agents, and The Chase Manhattan Bank, as Administrative Agent for the Lenders.
Terms defined in the Credit Agreement are used herein with the same meanings.
The Assignor named on the reverse hereof hereby sells and
assigns, without recourse, to the Assignee named on the reverse hereof, and the
Assignee hereby purchases and assumes, without recourse, from the Assignor,
effective as of the Assignment Date set forth on the reverse hereof, the
interests set forth on the reverse hereof (the "Assigned Interest") in the
Assignor's rights and obligations under the Credit Agreement, including, without
limitation, the interests set forth on the reverse hereof in the Commitment of
the Assignor on the Assignment Date and Revolving Loans owing to the Assignor
which are outstanding on the Assignment Date but excluding accrued interest and
fees to and excluding the Assignment Date. The Assignee hereby acknowledges
receipt of a copy of the Credit Agreement. From and after the Assignment Date
(i) the Assignee shall be a party to and be bound by the provisions of the
Credit Agreement and, to the extent of the Assigned Interest, have the rights
and obligations of a Lender thereunder and (ii) the Assignor shall, to the
extent of the Assigned Interest, relinquish its rights and be released from its
obligations under the Credit Agreement.
This Assignment and Acceptance is being delivered to the
Administrative Agent together with (i) if the Assignee is a Foreign Lender, any
documentation required to be delivered by the Assignee pursuant to Section
2.17(e) of the Credit Agreement, duly completed and executed by the Assignee,
and (ii) if the Assignee is not already a Lender under the Credit Agreement, an
Administrative Questionnaire in the form supplied by the Administrative Agent,
duly completed by the Assignee. The parties hereto shall pay the fee payable to
the Administrative Agent pursuant to Section 9.04(b) of the Credit Agreement.
<PAGE> 90
This Assignment and Acceptance shall be governed by and
construed in accordance with the laws of the State of New York.
Date of Assignment:
Legal Name of Assignor:
Legal Name of Assignee:
Assignee's Address for Notices:
Effective Date of Assignment
("Assignment Date"):
Percentage Assigned
of
Facility/Commitment
Principal Amount (set forth, to at
Assigned (and least 8 decimals,
identifying as a percentage of
information as the Facility and
to individual the aggregate
Competitive Commitments of all
Facility Loans) Lenders Thereunder)
- ----------------- ---------------- -------------------
Commitment $ %
Assigned:
Revolving Loans:
The terms set forth above and on the reverse side hereof are hereby agreed to:
[Name of Assignor] , as
---------------------
Assignor
By: __________________________
Name:
Title:
<PAGE> 91
[Name of Assignee] , as
---------------------
Assignee
By: __________________________
Name:
Title:
The undersigned hereby consent to the within assignment:
Convergys Corporation The Chase Manhattan Bank,
as Administrative Agent,
By: _____________________ By: _____________________
Name: Name:
Title: Title:
<PAGE> 92
EXHIBIT B
(513) 651-6800
December 16, 1998
The Chase Manhattan Bank, as
Administrative Agent
270 Park Avenue
New York, New York 10017
Chase Securities Inc., as Lead Arranger
270 Park Avenue
New York, New York 10017
The Lenders party to the Credit
Agreement referred to below
Ladies and Gentlemen:
We have acted as counsel for Convergys Corporation, a corporation organized
under the laws of the State of Ohio (the "Borrower"), in connection with (a)
extensions of credit to the Borrower pursuant a 364-Day Credit Agreement of even
date herewith (the "Credit Agreement") between the Borrower, the lenders party
thereto (the "Lenders"), PNC Bank, National Association, NationsBank, N.A., and
Citibank, N.A., as Co-Syndication Agents, and The Chase Manhattan Bank, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent") and (b) the Contribution Agreement of even date herewith among the
Borrower, the Guarantors (as defined below) and the Administrative Agent. We
also have represented Convergys Customer Management Group Inc., a corporation
organized under the laws of the State of Ohio ("CMG"), and Convergys Information
Management Group Inc., a corporation organized under the laws of the State of
Ohio ("IMG"), in connection with the Guarantee Agreement and the Contribution
Agreement (the "Guarantee Documents"). CMG and IMG are sometimes hereinafter
referred to as the "Guarantors". The Credit Agreement, the Contribution
Agreement and all other documents executed by the Borrower in connection with
the Transaction (as defined below) are sometimes hereinafter referred to as the
"Credit Documents". The execution, delivery and performance by the Borrower of
the Credit Documents and the execution, delivery and performance by the
Guarantors of the Guarantee Documents is sometimes hereinafter referred to as
the "Transaction".
<PAGE> 93
The Chase Manhattan Bank
December 16, 1998
Page 2
This opinion is given to you pursuant to Section 4.01 of the Credit
Agreement. Capitalized terms defined in the Credit Agreement and not otherwise
defined herein shall have the meanings given those terms in the Credit
Agreement.
In connection with this opinion, we have examined certificates of officers
of the Borrower and the Guarantors (the "Officer's Certificates"). We also have
examined the Credit Documents, the Guarantee Documents and such certificates of
public officials, corporate documents and records and other certificates,
opinions and instruments and have made such other investigations as we have
deemed necessary in connection with the opinions hereinafter set forth.
In rendering the opinions set forth herein, we have assumed, other than as
to the Borrower and the Guarantors, (i) the due authorization, execution and
delivery of the Credit Documents and the Guarantee Documents and (ii) that the
Credit Documents and Guarantee Documents constitute the valid and binding
obligations of all parties to the Credit Documents and Guarantee Documents under
applicable law. Further, we have assumed the authenticity of all documents
submitted to us as originals, the legal capacity of all parties signing such
documents, the genuineness of the signatures on such documents, and the
conformity to original documents of all photostatic copies of such documents
submitted to us. Finally, we have assumed that the records of the proceedings of
the directors of the Borrower and the Guarantors contained in the minute books
furnished to us by the Borrower and the Guarantors are complete and accurate,
and include all such records and reflect actions duly and validly taken by the
directors of the Borrower and the Guarantors.
The opinions hereinafter expressed are subject to the following additional
qualifications:
(i) The enforceability of the Credit Documents and the Guarantee Documents
is subject to and may be affected by applicable state and/or federal bankruptcy,
insolvency, reorganization, equity of redemption, moratorium laws, or similar
laws affecting the rights of creditors or debtors generally, and the application
of general principles of equity (regardless of whether such enforceability is
considered in a proceeding at law or in equity) and matters of public policy,
including without limitation, concepts of materiality, reasonableness, good
faith and fair dealing.
(ii) No opinion is expressed as to the validity, binding effect or
enforceability of (a) self-help provisions, (b) waivers of constitutional
rights, (c) provisions waiving the right to trial by jury, waiving rights to
automatic stay, relating to venue, purporting to establish evidentiary standards
or specifying that provisions may be waived only in writing, (d) warrants of
attorney to confess judgment, (e) provisions related to waiver of remedies (or
the delay or omission of enforcement thereof), disclaimers, liability
limitations with respect to third parties, powers of attorney, liquidated
damages or the creation of remedies not available under Ohio law, (f) provisions
pursuant to which the Lender attempts to exempt itself from liability for its
own
<PAGE> 94
The Chase Manhattan Bank
December 16, 1998
Page 3
negligence, fault or actions, or providing for indemnification against criminal
liability, civil penalties or punitive damages or against actions to the extent
that the indemnitee has been grossly negligent or engaged in willful misconduct,
(g) provisions requiring the payment of attorney's fees or litigation expenses,
or (h) provisions which purport (1) to require the payment of interest on
interest or (2) compensate any party for loss or expense in excess of actual
loss or reasonable expenses or which constitute a penalty.
As used herein, the phrases "to our knowledge", "known to us" or similar
phrases mean we have relied solely upon: (i) the Officer's Certificates, (ii)
the representations contained in the Credit Documents and the Guarantee
Documents and (iii) the actual knowledge of the limited number of attorneys in
this firm who regularly perform legal services for the Borrower and the
Guarantors obtained in the scope of such representation and without (unless
expressly described herein) any independent investigation or inquiry, and no
inference as to our knowledge concerning factual matters should or may be drawn.
The phrases "corporate power" and "validly existing" refer to and are
limited by Chapter 1701 of the Ohio Revised Code and the Articles of
Incorporation and Regulations of the Borrower.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Borrower and each of the Guarantors are corporations validly
existing and in good standing under the laws of the State of Ohio.
2. The Borrower and each of the Guarantors are qualified to do business and
are in good standing as foreign corporations in all jurisdictions where the
failure to be so qualified would have a material adverse effect upon the
Borrower, the Guarantors or the transactions contemplated by the Credit
Documents and the Guarantee Documents.
3. The Borrower has the corporate power to execute and deliver each of the
Credit Documents and to perform its obligations thereunder. Each Guarantor has
the corporate power to execute and deliver each of the Guarantee Documents and
to perform its obligations thereunder.
4. Each of the Credit Documents has been duly authorized by all necessary
corporate action, including, if required, stockholder action, and has been duly
executed and delivered on behalf of the Borrower. Each of the Guarantee
Documents has been duly authorized by all necessary corporate action, including,
if required, stockholder action, and has been duly executed and delivered on
behalf of the Guarantors.
5. Each of the Credit Documents constitutes the legal, valid and binding
obligations of the Borrower, enforceable against the Borrower in accordance with
their terms. Each of the
<PAGE> 95
The Chase Manhattan Bank
December 16, 1998
Page 4
Guarantee Documents constitutes the legal, valid and binding obligations of the
Guarantors, enforceable against the Guarantors in accordance with their terms.
6. The execution and delivery of the Credit Documents by the Borrower, and
the performance of the terms thereof by the Borrower, do not violate or
constitute on the part of the Borrower a breach or default under (a) its
Articles of Incorporation or Regulations, or (b) to our knowledge, any of the
following: (i) any agreements to which the Borrower is a party or by which it
may be bound (provided, however, that no analysis has been made with respect to
compliance with or effects upon financial ratios, tests or covenants or the
like), (ii) any applicable provisions of statutory law or regulation to which
the Borrower is subject (iii) any order, judgment or decree of any court or
governmental agency or authority of Ohio to which the Borrower is subject. The
execution and delivery of the Guarantee Documents by the Guarantors, and the
performance of the terms thereof by the Guarantors, do not violate or constitute
on the part of either of the Guarantors a breach or default under (a) its
Articles of Incorporation or Regulations, or (b) to our knowledge, any of the
following: (i) any agreements to which either of the Guarantors is a party or by
which it may be bound (provided, however, that no analysis has been made with
respect to compliance with or effects upon financial ratios, tests or covenants
or the like), (ii) any applicable provisions of statutory law or regulation to
which either of the Guarantors is subject (iii) any order, judgment or decree of
any court or governmental agency or authority of Ohio to which either of the
Guarantors is subject.
7. To our knowledge and except to the extent disclosed in Borrower's
reports and filings made pursuant to the Securities Exchange Act of 1934, as
amended, there are no actions, suits, proceedings or governmental investigations
pending before any arbitrator, court or governmental agency or authority or
overtly threatened in writing, against the Borrower or any of its Subsidiaries
(a) which would reasonably be expected to result in a Material Adverse Effect in
the financial condition of the Borrower or any of its Subsidiaries or (b) that
involve the Credit Documents, the Guarantee Documents or the Transaction.
8. No approval, authorization or other action by, or filing with, any
governmental body or governmental agency or authority (which has not been
obtained) is required in connection with the execution and delivery by the
Borrower any of the Credit Documents and the performance of the terms thereof by
the Borrower; and the transaction will not result in the creation or imposition
of any lien on any asset of the Borrower or any of its Subsidiaries. No
approval, authorization or other action by, or filing with, any governmental
body or governmental agency or authority (which has not been obtained) is
required in connection with the execution and delivery by the Guarantors of
either of the Guarantee Documents and the performance of the terms thereof by
the Guarantors.
9. Neither the Borrower nor any of its Subsidiaries is: (a) an "investment
company" as defined in, or subject to regulation under, the Investment Company
Act of 1940 or (b) a "holding
<PAGE> 96
The Chase Manhattan Bank
December 16, 1998
Page 5
company" as defined in, or subject to regulation under, the Public Utility
Holding Company Act of 1935.
10. The execution, delivery and performance of the Credit Documents, the
borrowings under the Credit Agreement and the use of the proceeds thereof in
accordance with the terms of the Credit Agreement will not violate or be
inconsistent with any of the provisions of Regulation U or Regulation G of the
Board of Governors of the Federal Reserve System of the United States and all
official rulings and interpretations thereunder or thereof.
The opinions expressed herein are limited to the laws (excluding principles
of conflicts of law) of the State of Ohio and the Federal laws of the United
States. To the extent that the Credit Documents and the Guarantee Documents are
not governed by Ohio law, we assume that the governing law is in all material
respects identical to the law of the State of Ohio.
This opinion is given solely for the use and benefit of the Lenders and the
Administrative Agent and each of their successors and assigns under the Credit
Documents and Guarantee Documents in connection with the loans contemplated by
the Credit Agreement and may not be relied upon for any other purpose or by any
other party or entity. This opinion speaks as of its date only and is based upon
facts and law in existence on the date hereof and we disclaim any undertaking to
advise you of changes occurring therein after the date hereof.
Very truly yours,
/s/ Frost & Jacobs LLP
<PAGE> 97
OFFICER'S CERTIFICATE
The undersigned, William D. Baskett, III, Secretary of Convergys
Corporation (the "Borrower"), for the purpose of enabling and inducing Frost &
Jacobs to issue its legal opinion, a copy of which is attached hereto ("Legal
Opinion") on behalf of the Borrower pursuant to a 364-Day Credit Agreement
between the Borrower, the Lenders named therein PNC Bank, National Association,
Bank of America NT&SA and Citibank, N.A., as Co-Syndication Agents, and The
Chase Manhattan Bank, as Administrative Agent ("Credit Agreement"), certifies as
follows:
1. There are no presently existing or contemplated plans to dissolve
the Borrower or to terminate its existence as an Ohio corporation.
2. There are no actions, suits, proceedings or governmental
investigations pending or threatened, or any judgments entered, against or
affecting the Borrower, its Subsidiaries or their properties except to the
extent disclosed in Borrower's reports and filings made pursuant to the
Securities Exchange Act of 1934, as amended, which would reasonably be
expected to result in a material adverse change in the financial condition
of the Borrower, its Subsidiaries or their properties or that involve the
Credit Agreement or the Transaction.
3. The Borrower is not subject to any material court or governmental
agency or authority orders, judgments or decrees except to the extent
disclosed in Borrower's reports and filings made pursuant to the Securities
Exchange Act of 1934, as amended.
4. Neither the execution, delivery nor performance by the Borrower of
the Credit Agreement is subject to any authorization, consent, approval or
review by any governmental body or regulatory authority.
5. The execution, delivery and performance by the Borrower of the
Credit Agreement do not violate or constitute (or become with notice or
lapse of a cure or grace period) a breach or default under (a) the
Borrower's Articles of Incorporation or Regulations, (b) any agreements to
which the Borrower is a party, or (c) any court or governmental agency or
authority orders, judgments or decrees.
6. The undersigned is not aware of any facts or circumstances which
would render Frost & Jacobs' legal opinion untrue.
7. The undersigned is authorized to issue this Certificate on behalf
of the Borrower.
Capitalized Terms used herein and not otherwise defined herein will have
the meanings given such terms in the Credit Agreement and/or the Legal Opinion.
Signed on December 16, 1998.
----------------------------------------
William D. Baskett, III, Secretary
<PAGE> 98
OFFICER'S CERTIFICATE
The undersigned, Thomas P. Mehnert, Assistant Secretary of Convergys
Customer Management Group, Inc. (the "Guarantor"), for the purpose of enabling
and inducing Frost & Jacobs to issue its legal opinion, a copy of which is
attached hereto ("Legal Opinion") on behalf of the Borrower pursuant to a
364-Day Credit Agreement between Convergys Corporation (the "Borrower"), the
Lenders named therein PNC Bank, National Association, Bank of America NT&SA and
Citibank, N.A., as Co-Syndication Agents, and The Chase Manhattan Bank, as
Administrative Agent ("Credit Agreement"), certifies as follows:
1. There are no presently existing or contemplated plans to dissolve
the Guarantor or to terminate its existence as an Ohio corporation.
2. There are no actions, suits, proceedings or governmental
investigations pending or threatened, or any judgments entered, against or
affecting the Guarantor, its Subsidiaries or their properties except to the
extent disclosed in Borrower's reports and filings made pursuant to the
Securities Exchange Act of 1934, as amended, which would reasonably be
expected to result in a material adverse change in the financial condition
of the Guarantor, its Subsidiaries or their properties or that involve the
Credit Agreement or the Transaction.
3. The Guarantor is not subject to any material court or governmental
agency or authority orders, judgments or decrees except to the extent
disclosed in Guarantor's reports and filings made pursuant to the
Securities Exchange Act of 1934, as amended.
4. Neither the execution, delivery nor performance by the Guarantor of
the Guarantee Documents is subject to any authorization, consent, approval
or review by any governmental body or regulatory authority.
5. The execution, delivery and performance by the Guarantor of the
Guarantee Documents do not violate or constitute (or become with notice or
lapse of a cure or grace period) a breach or default under (a) the
Guarantor's Articles of Incorporation or Regulations, (b) any agreements to
which the Guarantor is a party, or (c) any court or governmental agency or
authority orders, judgments or decrees.
6. The undersigned is not aware of any facts or circumstances which
would render Frost & Jacobs' legal opinion untrue.
7. The undersigned is authorized to issue this Certificate on behalf
of the Guarantor.
Capitalized Terms used herein and not otherwise defined herein will have
the meanings given such terms in the Credit Agreement and/or the Legal Opinion.
Signed on December 16, 1998.
----------------------------------------
Assistant Secretary
<PAGE> 99
OFFICER'S CERTIFICATE
The undersigned, Roy T. Heggland, Assistant Secretary of Convergys
Information Management Group, Inc. (the "Guarantor"), for the purpose of
enabling and inducing Frost & Jacobs to issue its legal opinion, a copy of which
is attached hereto ("Legal Opinion") on behalf of the Borrower pursuant to a
364-Day Credit Agreement between Convergys Corporation (the "Borrower"), the
Lenders named therein PNC Bank, National Association, Bank of America NT&SA and
Citibank, N.A., as Co-Syndication Agents, and The Chase Manhattan Bank, as
Administrative Agent ("Credit Agreement"), certifies as follows:
1. There are no presently existing or contemplated plans to dissolve
the Guarantor or to terminate its existence as an Ohio corporation.
2. There are no actions, suits, proceedings or governmental
investigations pending or threatened, or any judgments entered, against or
affecting the Guarantor, its Subsidiaries or their properties except to the
extent disclosed in Borrower's reports and filings made pursuant to the
Securities Exchange Act of 1934, as amended, which would reasonably be
expected to result in a material adverse change in the financial condition
of the Guarantor, its Subsidiaries or their properties or that involve the
Credit Agreement or the Transaction.
3. The Guarantor is not subject to any material court or governmental
agency or authority orders, judgments or decrees except to the extent
disclosed in Guarantor's reports and filings made pursuant to the
Securities Exchange Act of 1934, as amended.
4. Neither the execution, delivery nor performance by the Guarantor of
the Guarantee Documents is subject to any authorization, consent, approval
or review by any governmental body or regulatory authority.
5. The execution, delivery and performance by the Guarantor of the
Guarantee Documents do not violate or constitute (or become with notice or
lapse of a cure or grace period) a breach or default under (a) the
Guarantor's Articles of Incorporation or Regulations, (b) any agreements to
which the Guarantor is a party, or (c) any court or governmental agency or
authority orders, judgments or decrees.
6. The undersigned is not aware of any facts or circumstances which
would render Frost & Jacobs' legal opinion untrue.
7. The undersigned is authorized to issue this Certificate on behalf
of the Guarantor.
Capitalized Terms used herein and not otherwise defined herein will have
the meanings given such terms in the Credit Agreement and/or the Legal Opinion.
Signed on December 16, 1998.
----------------------------------------
Secretary
<PAGE> 100
December 16, 1998
The Chase Manhattan Bank, as Administrative
Agent (the "Agent") under the Credit Agreement,
as hereinafter defined
and
The Lenders listed on Schedule I hereto which are parties to the Credit
Agreement on the date hereof
Re: The 364-Day Credit Agreement dated as of December 16, 1998 (the "Credit
Agreement"), among Convergys Corporation, an Ohio corporation (the
"Company"), the lending institutions identified in the Credit Agreement
(the "Lenders"), PNC Bank, National Association, NationsBank, N.A. and
Citibank N.A., as Co-Syndication Agents and the Agent
------------------------------------------------------------------------
Ladies and Gentlemen:
We have acted as special New York counsel to the Company in connection
with the preparation, execution and delivery of (i) the Credit Agreement (the
"Credit Agreement"), (ii) the Guarantee Agreement, dated as of December 16,
1998, among each of the Subsidiaries of the Company listed on Schedule 1 thereto
(the "Guarantors') and the Agent (the "Guarantee Agreement") and (iii) the
Indemnity, Subrogation and Contribution Agreement, dated as of December 16, 1998
(the "Contribution Agreement"), among the Borrower, the Guarantors and the Agent
(collectively, the "Credit Documents"). Unless otherwise indicated, capitalized
terms used but not defined herein shall have the respective meanings set forth
in the Credit Agreement. This opinion is furnished to you pursuant to Section
4.01(c) of the Credit Agreement.
In connection with this opinion, we have examined the execution
copy of Credit Agreement, the execution copy of the Guarantee Agreement and the
execution copy of the Contribution Agreement, each delivered to us on December
15. We also have examined the originals, or duplicates or certified or conformed
copies, of such records, agreements, instruments and other documents and have
made such other investigations as we have deemed relevant and necessary in
connection with the opinions expressed herein. As to questions of fact material
to this opinion, we have relied upon certificates of public officials and of
officers and representatives of the Company and the Guarantors. In addition, we
have examined, and have relied as to matters of fact upon, the representations
made in the Credit Documents.
In rendering the opinions set forth below, we have assumed the
genuineness of all signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us
<PAGE> 101
as originals, the conformity to original documents of all documents submitted to
us as duplicates or certified or conformed copies, and the authenticity of the
originals of such latter documents.
Based upon and subject to the foregoing, and subject to the
qualifications and limitations set forth herein, and assuming that the execution
copy of each Credit Document reviewed by us is the form executed and delivered
by the parties thereto, we are of the opinion that:
1. The execution and delivery by the Company of the Credit Agreement
and the Contribution Agreement, its borrowings in accordance with the terms of
the Credit Agreement, and performance of its payment obligations thereunder,
assuming that proceeds of borrowings will be used in accordance with the terms
of the Credit Agreement, will not result in any violation of any New York
statute or any rule or regulation issued pursuant to any New York statute.
2. The execution and delivery by each Guarantor of the Guarantee
Agreement and the Contribution Agreement and the performance of its payment
obligations thereunder will not result in any violation of any New York statute
or any rule or reputation issued pursuant to any New York statute.
3. No consent, approval. authorization, order, filing, registration or
qualification of or with any New York governmental agency or body is required
for the execution and delivery by the Company or by any Guarantor of the Credit
Documents to which it is a party, the borrowings by the Company in accordance
with the terms of the Credit Amement or the performance by the Company or the
Guarantors of their respective payment obligations under the Credit Documents.
4. Assuming that the Credit Agreement is a valid and legally binding
obligation of each of the Lenders parties thereto and that the Contribution
Agreement is a valid and legally binding obligation of the Administrative Agent,
and assuming that (a) the Company is validly existing and in good standing under
the laws of the jurisdiction in which it is organized and has duly authorized
the Credit Agreement and the Contribution Agreement in accordance with its
Certificate of Incorporation and By-Laws, (b) execution, delivery and
performance by the Company of the Credit Agreement and the Contribution
Agreement do not violate the laws of the jurisdiction in which it is organized
or any other applicable laws (excepting the laws of the State of New York), (c)
execution, delivery and performance by the Company of the Credit Agreement and
the Contribution Agreement do not constitute a breach or violation of any
agreement or instrument which is binding upon the Company and (d) the Company is
not an "investment company" within the meaning of and subject to regulation
under the Investment Company Act of 1940 or a "holding company" as defined in,
or subject to regulation under, the Public Utility Holding Company Act of 1935,
each of the Credit Agreement and the Contribution Agreement constitutes the
valid and legally binding obligation of the Company enforceable against the
Company.
5. Assuming, that each of the Guarantee Agreement and the Contribution
Agreement is a valid and legally binding obligation of the Administrative Agent
and assuming that (a) each Guarantor is validly existing and in good standing
under the laws of the jurisdiction in which it is organized and has duly
authorized the Guarantee Agreement and the Contribution Agreement in
<PAGE> 102
accordance with its Certificate of Incorporation and By-Laws, (b) execution,
delivery and performance by each Guarantor of the Guarantee Agreement and the
Contribution Agreement do not violate the laws of the jurisdiction in which it
is organized or any other applicable laws (excepting the laws of the State of
New York), (c) execution, delivery and performance by each Guarantor of the
Guarantee Agreement and the Contribution Agreement do not constitute a breach or
violation of any agreement or instrument which is binding upon each Guarantor
and (d) no Guarantor is an "investment company" within the meaning of and
subject to regulation under the Investment Company Act of 1940 or a "holding
company" as defined in, or subject to regulation under, the Public Utility
Holding Company Act of 1935, each of the Guarantee Agreement and the
Contribution Agreement constitutes the valid and legally binding obligation of
each Guarantor enforceable against each Guarantor.
Our opinions in paragraphs 4 and 5 above are subject to (i) the effects
of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, (ii)
general equitable principles (whether considered in a proceeding in equity or at
law) and (iii) an implied covenant of good faith and fair dealing.
We express no opinion with respect to:
(A) the effect of any provision of the Credit Documents which
is intended to permit modification thereof only by means of an agreement signed
in writing by the parties thereto;
(B) the effect of any provision of the Credit Agreement
insofar as it provides that any Person purchasing a participation from a Lender
or other Person may exercise set-off or similar rights with respect to such
participation or that any Lender or other Person may exercise set-off or similar
rights other than in accordance with applicable law;
(C) the effect of any provision of the Credit Documents
imposing penalties or forfeitures;
(D) the enforceability of any provision of any of the Credit
Documents to the extent that such provision constitutes a waiver of illegality
as a defense to performance of contract obligations;
(E) the effect of any provision of the Credit Documents
relating to indemnification or exculpation in connection with violations of any
securities laws or relating to indemnification, contribution or exculpation in
connection with willful, reckless or criminal acts or gross negligence of the
indemnified or exculpated Person or the Person receiving contribution.
In connection with the provisions of the Credit Documents whereby the
Company and the Guarantors submit to the jurisdiction of the United States
District Court for the Southern District of New York, we note the limitations of
28 U.S.C. sections 1331 and 1332 on Federal court jurisdiction, and we also note
that such submissions cannot supersede such court's discretion in determining
whether to transfer an action from one Federal court to another under 28 U.S.C.
section 1404(a).
<PAGE> 103
We are members of the Bar of the State of New York, and we do not
express any opinion herein concerning any law other than the law of the State of
New York.
This opinion letter is rendered to you in connection with the above
described transactions. This opinion letter may not be relied upon by you for
any other purpose, or relied upon by, or furnished to, any other person, firm or
corporation without our prior written consent.
Very truly yours,
SIMPSON THACHER & BARTLETT
<PAGE> 104
EXHIBIT C
CONFORMED COPY
GUARANTEE AGREEMENT dated as of December 16,
1998, among each of the subsidiaries listed on
Schedule I hereto (each such subsidiary,
individually, a "Guarantor" and, collectively, the
"Guarantors") of CONVERGYS CORPORATION, an Ohio
corporation (the "Borrower"), and THE CHASE MANHATTAN
BANK, as administrative agent (the "Administrative
Agent") for the Lenders (as defined in the Credit
Agreement referred to below).
Reference is made to the 364-Day Credit Agreement dated as of December
16, 1998 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among the Borrower, the lenders from time to time party
thereto (the "Lenders"), PNC BANK, NATIONAL ASSOCIATION, NATIONSBANK, N.A. AND
CITIBANK, N.A., as Co-Syndication Agents, and the Administrative Agent.
Capitalized terms used herein and not defined herein shall have the meanings
assigned to such terms in the Credit Agreement.
The Lenders have agreed to make Loans (including Swingline Loans) to
the Borrower pursuant to, and upon the terms and subject to the conditions
specified in, the Credit Agreement. Each of the Guarantors is a wholly owned
Subsidiary of the Borrower and acknowledges that it will derive substantial
benefit from the making of the Loans by the Lenders. The obligations of the
Lenders to make Loans are conditioned on, among other things, the execution and
delivery by the Guarantors of a Guarantee Agreement in the form hereof. As
consideration therefor and in order to induce the Lenders to make Loans, the
Guarantors are willing to execute this Agreement.
Accordingly, the parties hereto agree as follows:
<PAGE> 105
SECTION 1. GUARANTEE. Each Guarantor unconditionally guarantees (the
"Guarantee"), jointly with the other Guarantors and severally, as a primary
obligor and not merely as a surety, (a) the due and punctual payment by the
Borrower of (i) the principal of and premium, if any, and interest (including
interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether such interest is
allowed or allowable as a claim in such proceeding) on the Loans (including
Swingline Loans), when and as due, whether at maturity, by acceleration, upon
one or more dates set for prepayment or otherwise and (ii) all other monetary
obligations, including fees, costs, expenses and indemnities, whether primary,
secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether such monetary
obligations are allowed or allowable as a claim in such proceeding), of the
Borrower to the Lenders under the Credit Agreement and the other Loan Documents,
(b) the due and punctual performance of all covenants, agreements, obligations
and liabilities of the Borrower under or pursuant to the Credit Agreement and
the other Loan Documents (c) the due and punctual payment and performance of all
the covenants, agreements, obligations and liabilities of each other Guarantor
under or pursuant to this Agreement and the other Loan Documents and (d) the due
and punctual payment and performance of all obligations of the Borrower under
each Hedging Agreement entered into with any counterparty that was a Lender (or
an Affiliate thereof) at the time such Hedging Agreement was entered into (all
the monetary and other obligations described in the preceding clauses (a)
through (d) being collectively called the "Obligations"). Each Guarantor further
agrees that the Obligations may be extended or renewed, in whole or in part,
without notice to or further assent from it, and that it will remain bound upon
the Guarantee notwithstanding any extension or renewal of any Obligation.
Anything contained in this Agreement to the contrary notwithstanding,
the obligations of each Guarantor hereunder shall be limited to a maximum
aggregate amount equal to the greatest amount that would not render such
Guarantor's obligations hereunder subject to avoidance as a fraudulent transfer
or conveyance under Section 548 of Title 11 of the United States Code or any
provisions of applicable state law (collectively, the "Fraudulent Transfer
Laws"), in each case after giving effect to all other liabilities of such
Guarantor, contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of such
Guarantor (a) in respect of Intercompany Indebtedness to the Borrower or
Affiliates of the Borrower to the extent that such indebtedness would be
<PAGE> 106
discharged in an amount equal to the amount paid by such Guarantor hereunder and
(b) under any guarantee of senior unsecured indebtedness or Indebtedness
subordinated in right of payment to the Obligations, which guarantee contains a
limitation as to maximum amount similar to that set forth in this paragraph,
pursuant to which the liability of such Guarantor hereunder is included in the
liabilities taken into account in determining such maximum amount) and after
giving effect as assets to the value (as determined under the applicable
provisions of the Fraudulent Transfer Laws) of any rights to subrogation,
contribution, reimbursement, indemnity or similar rights of such Guarantor
pursuant to (i) applicable law or (ii) any agreement providing for an equitable
allocation among such Guarantor and other Affiliates of the Borrower of
obligations arising under Guarantees by such parties (including the Contribution
Agreement).
SECTION 2. OBLIGATIONS NOT WAIVED. To the fullest extent permitted by
applicable law, each Guarantor waives presentment to, demand of payment from and
protest to the Borrower of any of the Obligations, and also waives notice of
acceptance of the Guarantee and notice of protest for nonpayment. To the fullest
extent permitted by applicable law, the obligations of each Guarantor hereunder
shall not be affected by (a) the failure of the Administrative Agent or any
other Lender to assert any claim or demand or to enforce or exercise any right
or remedy against the Borrower or any other Guarantor under the provisions of
the Credit Agreement, any other Loan Document or otherwise or (b) any
rescission, waiver, amendment or modification of, or any release from any of the
terms or provisions of this Agreement, any other Loan Document, any Guarantee or
any other agreement, including with respect to any other Guarantor under this
Agreement.
SECTION 3. GUARANTEE OF PAYMENT. Each Guarantor further agrees that the
Guarantee constitutes a guarantee of payment when due and not of collection, and
waives any right to require that any resort be had by the Administrative Agent
or any other Lender to any of the security held for payment of the Obligations
or to any balance of any deposit account or credit on the books of the
Administrative Agent or any other Lender in favor of the Borrower or any other
person.
SECTION 4. NO DISCHARGE OR DIMINISHMENT OF GUARANTEE. The obligations
of each Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason (other than the indefeasible payment in
full in cash of the Obligations), including any claim of waiver, release,
surrender, alteration or compromise of any of the Obligations, and shall not be
<PAGE> 107
4
subject to any defense or set-off, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality or unenforceability of the
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of each Guarantor hereunder shall not be discharged or impaired or
otherwise affected by the failure of the Administrative Agent or any other
Lender to assert any claim or demand or to enforce any remedy under the Credit
Agreement, any other Loan Document or any other agreement, by any waiver or
modification of any provision of any thereof, by any default, failure or delay,
wilful or otherwise, in the performance of the Obligations, or by any other act
or omission that may or might in any manner or to any extent vary the risk of
any Guarantor or that would otherwise operate as a discharge of each Guarantor
as a matter of law or equity (other than the indefeasible payment in full in
cash of all the Obligations) or which would impair or eliminate any right of
such Guarantor to subrogation.
SECTION 5. DEFENSES OF BORROWER WAIVED. To the fullest extent permitted
by applicable law, each of the Guarantors waives any defense based on or arising
out of any defense of the Borrower or the unenforceability of the Obligations or
any part thereof from any cause, or the cessation from any cause of the
liability of the Borrower, other than the indefeasible payment in full in cash
of all the Obligations. The Administrative Agent and the Lenders may, at their
election, compromise or adjust any part of the Obligations, make any other
accommodation with the Borrower or any other Guarantor or exercise any other
right or remedy available to them against the Borrower or any other Guarantor,
without affecting or impairing in any way the liability of any Guarantor
hereunder except to the extent that all the Obligations have been indefeasibly
paid in full in cash. Pursuant to applicable law, each of the Guarantors waives
any defense arising out of any such election even though such election operates,
pursuant to applicable law, to impair or to extinguish any right of
reimbursement or subrogation or other right or remedy of such Guarantor against
the Borrower or any other Guarantor.
SECTION 6. AGREEMENT TO PAY; SUBORDINATION. In furtherance of the
foregoing and not in limitation of any other right that the Administrative Agent
or any other Lender has at law or in equity against any Guarantor by virtue
hereof, upon the failure of the Borrower or any other Guarantor to pay any
Obligation when and as the same shall become due, whether at maturity, by
acceleration, after notice of prepayment or otherwise, each Guarantor hereby
promises to and will forthwith pay, or cause to be paid, to the Administrative
Agent or such other Lender as designated thereby in cash the amount of such
unpaid Obligations. Upon
<PAGE> 108
5
payment by any Guarantor of any sums to the Administrative Agent or any Lender
as provided above, all rights of such Guarantor against the Borrower arising as
a result thereof by way of right of subrogation, contribution, reimbursement,
indemnity or otherwise shall in all respects be subordinate and junior in right
of payment to the prior indefeasible payment in full in cash of all the
Obligations. In addition, any indebtedness of the Borrower now or hereafter held
by any Guarantor is hereby subordinated in right of payment to the prior payment
in full in cash of the Obligations. If any amount shall erroneously be paid to
any Guarantor on account of (a) such subrogation, contribution, reimbursement,
indemnity or similar right or (b) any such indebtedness of the Borrower, such
amount shall be held in trust for the benefit of the Lenders and shall forthwith
be paid to the Administrative Agent to be credited against the payment of the
Obligations, whether matured or unmatured, in accordance with the terms of the
Loan Documents.
SECTION 7. INFORMATION. Each of the Guarantors assumes all
responsibility for being and keeping itself informed of the Borrower's financial
condition and assets, and of all other circumstances bearing upon the risk of
nonpayment of the Obligations and the nature, scope and extent of the risks that
such Guarantor assumes and incurs hereunder, and agrees that none of the
Administrative Agent or the Lenders will have any duty to advise any of the
Guarantors of information known to it or any of them regarding such
circumstances or risks.
SECTION 8. REPRESENTATIONS AND WARRANTIES. Each of the Guarantors
represents and warrants as to itself that all representations and warranties
relating to it contained in the Credit Agreement are true and correct.
SECTION 9. TERMINATION. The Guarantees (a) shall terminate when all the
Obligations have been indefeasibly paid in full in cash and the Lenders have no
further commitment to lend under the Credit Agreement and (b) shall continue to
be effective or be reinstated, as the case may be, if at any time payment, or
any part thereof, of any Obligation is rescinded or must otherwise be restored
by any Lender or any Guarantor upon the bankruptcy or reorganization of the
Borrower, any Guarantor or otherwise.
SECTION 10. BINDING EFFECT; SEVERAL AGREEMENT; ASSIGNMENTS. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party, and all covenants,
promises and agreements by or on behalf of the Guarantors that are contained in
this Agreement shall bind and inure to the benefit of each party hereto and
their respective successors and assigns. This Agreement shall
<PAGE> 109
6
become effective as to any Guarantor when a counterpart hereof (or a Supplement
referred to in Section 19) executed on behalf of such Guarantor shall have been
delivered to the Administrative Agent, and a counterpart hereof (or a Supplement
referred to in Section 19) shall have been executed on behalf of the
Administrative Agent, and thereafter shall be binding upon such Guarantor and
the Administrative Agent and their respective successors and assigns, and shall
inure to the benefit of such Guarantor, the Administrative Agent and the other
Lenders, and their respective successors and assigns, except that no Guarantor
shall have the right to assign its rights or obligations hereunder or any
interest herein (and any such attempted assignment shall be void). This
Agreement shall be construed as a separate agreement with respect to each
Guarantor and may be amended, modified, supplemented, waived or released with
respect to any Guarantor without the approval of any other Guarantor and without
affecting the obligations of any other Guarantor hereunder.
SECTION 11. WAIVERS; AMENDMENT. (a) No failure or delay of the
Administrative Agent in exercising any power or right hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Administrative Agent
hereunder and of the other Lenders under the other Loan Documents are cumulative
and are not exclusive of any rights or remedies that they would otherwise have.
No waiver of any provision of this Agreement or consent to any departure by any
Guarantor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on any Guarantor in any case shall entitle such Guarantor to
any other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to a written agreement entered into between
the Guarantors with respect to which such waiver, amendment or modification
relates and the Administrative Agent, with the prior written consent of the
Required Lenders (except as otherwise provided in the Credit Agreement).
SECTION 12. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 110
7
SECTION 13. NOTICES. All communications and notices hereunder shall be
in writing and given as provided in Section 9.01 of the Credit Agreement. All
communications and notices hereunder to each Guarantor shall be given to it in
care of the Borrower.
SECTION 14. SURVIVAL OF AGREEMENT; SEVERABILITY. (a) All covenants,
agreements, representations and warranties made by the Guarantors herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Administrative Agent and the other Lenders and
shall survive the making by the Lenders of the Loans regardless of any
investigation made by the Lenders or on their behalf, and shall continue in full
force and effect as long as the principal of or any accrued interest on any Loan
or any other fee or amount payable under this Agreement or any other Loan
Document is outstanding and unpaid and as long as the Commitments have not been
terminated.
(b) In the event any one or more of the provisions contained in this
Agreement or in any other Loan Document should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby (it being understood that the invalidity of a
particular provision in a particular jurisdiction shall not in and of itself
affect the validity of such provision in any other jurisdiction). The parties
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 15. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute a single contract, and shall become effective as
provided in Section 10. Delivery of an executed signature page to this Agreement
by facsimile transmission shall be as effective as delivery of a manually
executed counterpart of this Agreement.
SECTION 16. RULES OF INTERPRETATION. The rules of interpretation
specified in Section 1.03 of the Credit Agreement shall be applicable to this
Agreement.
SECTION 17. JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) Each
Guarantor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of the Supreme Court of the State
<PAGE> 111
8
of New York sitting in New York County and of the United States District Court
of the Southern District of New York, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Agreement or any
other Loan Document, or for recognition or enforcement of any judgment, and each
of the parties hereto hereby irrevocably and unconditionally agrees that all
claims in respect of any such action or proceeding may be heard and determined
in such New York State or, to the extent permitted by law, in such Federal
court. Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement or any other Loan Document shall affect any right that
the Administrative Agent or any other Lender may otherwise have to bring any
action or proceeding relating to this Agreement or any other Loan Document
against any Guarantor or its properties in the courts of any jurisdiction.
(b) Each Guarantor irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or any other Loan Document in any
court referred to in paragraph (a) of this Section. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 13. Nothing in this
Agreement or any other Loan Document will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
SECTION 18. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 18.
<PAGE> 112
9
SECTION 19. ADDITIONAL GUARANTORS. Pursuant to Section 5.09 of the
Credit Agreement, each (a) direct Subsidiary that was not in existence (or not a
direct Subsidiary) on the date of the Credit Agreement and (b) indirect
Subsidiary not in existence (or not an indirect Subsidiary or not an indirect
Subsidiary that has incurred the type of Indebtedness described below) on the
date hereof that has created, incurred or permitted to exist any Indebtedness
(other than Intercompany Indebtedness and Indebtedness of the type described in
clauses (d), (e) and (h) of the definition of "Indebtedness"), is required
promptly to enter into this Agreement as a Guarantor upon becoming a Subsidiary.
Upon execution and delivery after the date hereof by the Administrative Agent
and such a Subsidiary of an instrument in the form of Annex 1, such Subsidiary
shall become a Guarantor hereunder with the same force and effect as if
originally named as a Guarantor herein. The execution and delivery of any
instrument adding an additional Guarantor as a party to this Agreement shall not
require the consent of any other Guarantor hereunder. The rights and obligations
of each Guarantor hereunder shall remain in full force and effect
notwithstanding the addition of any new Guarantor as a party to this Agreement.
SECTION 20. RIGHT OF SET-OFF. If an Event of Default shall have
occurred and be continuing, each Lender is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other Indebtedness at any time owing by such Lender to or
for the credit or the account of any Guarantor against any or all the
obligations of such Guarantor now or hereafter existing under this Agreement and
the other Loan Documents held by such Lender, irrespective of whether or not
such Lender shall have made any demand under this Agreement or any other Loan
Document and although such obligations may be unmatured. The rights of each
Lender under this Section 20 are in addition to other rights and remedies
(including other rights of set-off) that such Lender may have.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
<PAGE> 113
10
CONVERGYS INFORMATION
MANAGEMENT GROUP INC.,
by
/s/ ROBERT J. MARINO
--------------------------------
Name: Robert J. Marino
Title: President & CEO
CONVERGYS CUSTOMER
MANAGEMENT GROUP INC.,
by
/s/ DAVID F. DOUGHERTY
----------------------------------
Name: David F. Dougherty
Title: President & CEO
THE CHASE MANHATTAN BANK, as
Administrative Agent,
by
/s/ JOHN F. MIX
---------------------------------
Name: John F. Mix
Title: Vice President
<PAGE> 114
Schedule I to the
Guarantee Agreement
GUARANTOR ADDRESS
--------- -------
Convergys Information 201 E. Fourth Street
Management Group Inc. Cincinnati, Ohio 45202
Attn: Robert P. Komin
Telecopy: (513) 241-1543
Convergys Customer 201 E. Fourth Street
Management Group Inc. Cincinnati, Ohio 45202
Attn: Robert P. Komin
Telecopy: (513) 241-1543
<PAGE> 115
Annex 1 to the
Guarantee Agreement
SUPPLEMENT NO. dated as of
, to the Guarantee Agreement dated as of
December 16, 1998, among each of the subsidiaries
thereto (each such subsidiary, individually, a
"Guarantor" and, collectively, the "Guarantors") of
CONVERGYS CORPORATION, an Ohio corporation (the
"Borrower"), and THE CHASE MANHATTAN BANK, as
administrative agent (the "Administrative Agent") for
the Lenders (as defined in the Credit Agreement
referred to below).
A. Reference is made to the 364-Day Credit Agreement dated as of
December 16, 1998 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among Borrower, the lenders from time to time
party thereto (the "Lenders"), PNC BANK, NATIONAL ASSOCIATION, NATIONSBANK, N.A.
AND CITIBANK, N.A., as Co-Syndication Agents, and the Administrative Agent.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Guarantee Agreement and the
Credit Agreement.
C. The Guarantors have entered into the Guarantee Agreement in order to
induce the Lenders to make Loans. Pursuant to Section 5.09 of the Credit
Agreement, each (a) direct Subsidiary that was not in existence (or not a direct
Subsidiary) on the date of the Credit Agreement and (b) indirect Subsidiary not
in existence (or not an indirect Subsidiary or not an indirect Subsidiary that
has incurred the type of Indebtedness described below) on the date hereof that
has created, incurred or permitted to exist any Indebtedness (other than
Intercompany Indebtedness and Indebtedness of the type described in clauses (d),
(e) and (h) of the definition of "Indebtedness"), is required to enter into the
Guarantee Agreement as a Guarantor upon becoming such a Subsidiary. Section 19
of the Guarantee Agreement provides that additional Subsidiaries of the Borrower
may become Guarantors under the Guarantee Agreement by execution and delivery of
an instrument in the form of this Supplement. The undersigned Subsidiary of the
Borrower (the "New Guarantor") is executing this Supplement in accordance with
the requirements of the Credit Agreement to become a Guarantor under the
Guarantee Agreement in order to induce the Lenders to make additional Loans and
as consideration for Loans previously made.
<PAGE> 116
Accordingly, the Administrative Agent and the New Guarantor agree as
follows:
SECTION 1. In accordance with Section 19 of the Guarantee Agreement,
the New Guarantor by its signature below becomes a Guarantor under the Guarantee
Agreement with the same force and effect as if originally named therein as a
Guarantor and the New Guarantor hereby (a) agrees to all the terms and
provisions of the Guarantee Agreement applicable to it as a Guarantor thereunder
and (b) represents and warrants that the representations and warranties made by
it as a Guarantor thereunder are true and correct on and as of the date hereof.
Each reference to a "Guarantor" in the Guarantee Agreement shall be deemed to
include the New Guarantor. The Guarantee Agreement is hereby incorporated herein
by reference.
SECTION 2. The New Guarantor represents and warrants to the
Administrative Agent and the other Lenders that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts, each of
which shall constitute an original, but all of which when taken together shall
constitute a single contract. This Supplement shall become effective when the
Administrative Agent shall have received counterparts of this Supplement that,
when taken together, bear the signatures of the New Guarantor and the
Administrative Agent. Delivery of an executed signature page to this Supplement
by facsimile transmission shall be as effective as delivery of a manually
executed counterpart of this Supplement.
SECTION 4. Except as expressly supplemented hereby, the Guarantee
Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Guarantee Agreement shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision hereof in a particular
<PAGE> 117
jurisdiction shall not in and of itself affect the validity of such provision in
any other jurisdiction). The parties hereto shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be in writing
and given as provided in Section 13 of the Guarantee Agreement. All
communications and notices hereunder to the New Guarantor shall be given to it
care of the Borrower.
SECTION 8. The New Guarantor agrees to reimburse the Administrative
Agent for its out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, disbursements and other charges of counsel for
the Administrative Agent.
IN WITNESS WHEREOF, the New Guarantor and the Administrative Agent have
duly executed this Supplement to the Guarantee Agreement as of the day and year
first above written.
[Name Of New Guarantor],
by
----------------------
Name:
Title:
Address:
--------------
------------------------
------------------------
THE CHASE MANHATTAN BANK,
as Administrative Agent,
by
-----------------------
Name:
Title:
<PAGE> 118
EXHIBIT D
CONFORMED COPY
INDEMNITY, SUBROGATION and CONTRIBUTION
AGREEMENT (together with instruments executed and
delivered pursuant to Section 12, the "Contribution
Agreement") dated as of December 16, 1998, among
CONVERGYS CORPORATION, an Ohio corporation (the
"Borrower"), each subsidiary of the Borrower listed
on Schedule I hereto (the "Guarantors") and THE CHASE
MANHATTAN BANK, as administrative agent (in such
capacity, the "Administrative Agent") for the Lenders
(as defined in the Credit Agreement referred to
below).
Reference is made to (a) the 364-Day Credit Agreement dated as of
December 16, 1998 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement") among the Borrower, the lenders from time to time
party thereto (the "Lenders"), PNC BANK, NATIONAL ASSOCIATION, NATIONSBANK, N.A.
AND CITIBANK, N.A., as Co-Syndication Agents, and the Administrative Agent and
(b) the Guarantee Agreement dated as of December 16, 1998, among the Guarantors
and the Administrative Agent (the "Guarantee Agreement"). Capitalized terms used
herein and not defined herein are used with the meanings assigned to such terms
in the Credit Agreement.
The Lenders have agreed to make Loans (including Swingline Loans) to
the Borrower pursuant to, and upon the terms and subject to the conditions
specified in, the Credit Agreement. The Guarantors have guaranteed such Loans
and the other Obligations (as defined in the Guarantee Agreement) of the
Borrower and the Guarantors under the Credit Agreement and the other Loan
Documents pursuant to the Guarantee Agreement. The obligations of the Lenders to
make Loans are conditioned on, among other things, the execution and delivery by
the Borrower and the Guarantors of an agreement in the form hereof.
Accordingly, the Borrower, each Guarantor and the Administrative Agent
agree as follows:
<PAGE> 119
SECTION 1. INDEMNITY AND SUBROGATION. In addition to all such rights of
indemnity and subrogation as the Guarantors may have under applicable law (but
subject to Section 3), the Borrower agrees that in the event a payment shall be
made by any Guarantor under the Guarantee Agreement, the Borrower shall
indemnify such Guarantor for the full amount of such payment and, until such
indemnification obligation shall have been satisfied, such Guarantor shall be
subrogated to the rights of the person to whom such payment shall have been made
to the extent of such payment.
SECTION 2. CONTRIBUTION AND SUBROGATION. Each Guarantor (a
"Contributing Guarantor") agrees (subject to Section 3) that, in the event a
payment shall be made by any other Guarantor under the Guarantee Agreement, and
such other Guarantor (the Claiming Guarantor) shall not have been fully
indemnified by the Borrower as provided in Section 1, the Contributing Guarantor
shall, to the extent the Claiming Guarantor shall not have been so indemnified
by the Borrower, indemnify the Claiming Guarantor in an amount equal to the
amount of such payment, multiplied by a fraction of which the numerator shall be
the net worth of the Contributing Guarantor on the date hereof (or, in the case
of any Guarantor becoming a party hereto pursuant to Section 12, the date of the
Supplement hereto executed and delivered by such Guarantor) and the denominator
shall be the aggregate net worth of all the Guarantors on the date hereof (or,
in the case of any Guarantor becoming a party hereto pursuant to Section 12, the
date of the Supplement hereto executed and delivered by such Guarantor). Any
Contributing Guarantor making any payment to a Claiming Guarantor pursuant to
this Section 2 shall be subrogated to the rights of such Claiming Guarantor
under Section 1 to the extent of such payment.
SECTION 3. SUBORDINATION. Notwithstanding any provision of this
Agreement to the contrary, all rights of the Guarantors under Sections 1 and 2
and all other rights of indemnity, contribution or subrogation under applicable
law or otherwise shall be fully subordinated to the indefeasible payment in full
in cash of the Obligations. No failure on the part of the Borrower or any
Guarantor to make the payments required by Sections 1 and 2 (or any other
payments required under applicable law or otherwise) shall in any respect limit
the obligations and liabilities of any Guarantor with respect to its obligations
hereunder, and each Guarantor shall remain liable for the full amount of the
obligations of such Guarantor hereunder.
SECTION 4. TERMINATION. This Agreement shall survive and be in full
force and effect so long as any Obligation is outstanding and has not been
indefeasibly paid in full in cash or any of the Commitments under the Credit
Agreement have not been terminated, and shall continue to be effective or be
<PAGE> 120
reinstated, as the case may be, if at any time payment, or any part thereof, of
any Obligation is rescinded or must otherwise be restored by any Lender or any
Guarantor upon the bankruptcy or reorganization of the Borrower, any Guarantor
or otherwise.
SECTION 5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. NO WAIVER; AMENDMENT. (a) No failure on the part of the
Administrative Agent or any Guarantor to exercise, and no delay in exercising,
any right, power or remedy here under shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right, power or remedy by the
Administrative Agent or any Guarantor preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other remedies provided by
law. None of the Administrative Agent and the Guarantors shall be deemed to have
waived any rights hereunder unless such waiver shall be in writing and signed by
such parties.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to a written agreement entered into between
the Borrower, the Guarantors and the Administrative Agent, with the prior
written consent of the Required Lenders (except as otherwise provided in the
Credit Agreement).
SECTION 7. NOTICES. All communications and notices hereunder shall be
in writing and given as provided in the Credit Agreement or the Guarantee
Agreement, as applicable, and addressed as specified therein.
SECTION 8. BINDING AGREEMENT; ASSIGNMENTS. Whenever in this Agreement
any of the parties hereto is referred to, such reference shall be deemed to
include the successors and assigns of such party; and all covenants, promises
and agreements by or on behalf of the parties that are contained in this
Agreement shall bind and inure to the benefit of their respective successors and
assigns. Neither the Borrower nor any Guarantor may assign or transfer any of
its rights or obligations hereunder (and any such attempted assignment or
transfer shall be void) without the prior written consent of the Required
Lenders. Notwithstanding the foregoing, at the time any Guarantor is released
from its obligations under the Guarantee Agreement in accordance with such
Guarantee Agreement and the Credit Agreement, such Guarantor will cease to have
any rights or obligations under this Agreement with respect to any payments made
or assets sold after the date of such release.
<PAGE> 121
5
SECTION 9. SURVIVAL OF AGREEMENT; SEVERABILITY. (a) All covenants and
agreements made by the Borrower and each Guarantor herein and in the
certificates or other instruments prepared or delivered in connection with this
Agreement or the other Loan Documents shall be considered to have been relied
upon by the Administrative Agent, the other Lenders and each Guarantor, shall
survive the making by the Lenders of the Loans and shall continue in full force
and effect as long as the principal of or any accrued interest on any Loans or
any other fee or amount payable under the Credit Agreement, this Agreement or
any of the other Loan Documents is outstanding and unpaid or the Commitments
have not been terminated.
(b) In case any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, no
party hereto shall be required to comply with such provision for so long as such
provision is held to be invalid, illegal or unenforceable, but the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby. The parties shall endeavor in
good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.
SECTION 10. COUNTERPARTS. This Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract. This Agreement shall be effective with
respect to any Guarantor when a counterpart bearing the signature of such
Guarantor shall have been delivered to the Administrative Agent. Delivery of an
executed signature page to this Agreement by facsimile transmission shall be as
effective as delivery of a manually signed counterpart of this Agreement.
SECTION 11. RULES OF INTERPRETATION. The rules of interpretation
specified in Section 1.03 of the Credit Agreement shall be applicable to this
Agreement.
SECTION 12. ADDITIONAL GUARANTORS. Pursuant to Section 5.09 of the
Credit Agreement, each (a) direct Subsidiary that was not in existence (or not a
direct Subsidiary) on the date of the Credit Agreement and (b) indirect
Subsidiary not in existence (or not an indirect Subsidiary or not an indirect
Subsidiary that has incurred the type of Indebtedness described below) on the
date hereof that has created, incurred or permitted to exist any Indebtedness
(other than Intercompany Indebtedness and Indebtedness of the type described in
clauses (d), (e) and (h) of the definition of "Indebtedness"), is required
promptly to enter into this
<PAGE> 122
6
Agreement as a Guarantor upon becoming such a Subsidiary. Upon execution and
delivery, after the date hereof, by the Administrative Agent and such a
Subsidiary of an instrument in the form of Annex 1 hereto, such Subsidiary shall
become a Guarantor hereunder with the same force and effect as if originally
named as a Guarantor hereunder. The execution and delivery of any instrument
adding an additional Guarantor as a party to this Agreement shall not require
the consent of any Guarantor hereunder. The rights and obligations of each
Guarantor hereunder shall remain in full force and effect notwithstanding the
addition of any new Guarantor as a party to this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first appearing above.
CONVERGYS CORPORATION,
by
/S/ ROBERT P. KOMIN, JR.
-------------------------------------------
Name: Robert P. Komin, Jr.
Title: VP Finance &
Treasurer
CONVERGYS INFORMATION
MANAGEMENT GROUP INC.,
by
/s/ ROBERT J. MARINO
-----------------------------------------
Name: Robert J. Marino
Title: President & CEO
CONVERGYS CUSTOMER
MANAGEMENT GROUP INC.,
by
/s/ DAVID F. DOUGHERTY
-----------------------------------------
Name: David F. Dougherty
Title: President & CEO
THE CHASE MANHATTAN BANK, as
Administrative Agent,
by
/s/ JOHN F. MIX
-------------------------------------------
Name: John F. Mix
Title: Vice President
<PAGE> 123
7
<PAGE> 124
8
SCHEDULE I
to the Indemnity, Subrogation
and Contribution Agreement
GUARANTORS
NAME ADDRESS
Convergys Information 201 E. Fourth Street
Management Group Inc. Cincinnati, Ohio 45202
Attn: Robert P. Komin
Telecopy: (513) 241-1543
Convergys Customer 201 E. Fourth Street
Management Group Inc. Cincinnati, Ohio 45202
Attn: Robert P. Komin
Telecopy: (513) 241-1543
<PAGE> 125
Annex 1 to
the Indemnity, Subrogation and
Contribution Agreement
SUPPLEMENT NO. (this "Supplement") dated as
of [ ], to the Indemnity, Subrogation and
Contribution Agreement dated as of December 16, 1998
(as the same may be amended, supplemented or
otherwise modified from time to time, the
"Contribution Agreement"), among CONVERGYS
CORPORATION, an Ohio corporation (the "Borrower"),
each subsidiary of the Borrower listed on Schedule I
thereto (the "Guarantors") and THE CHASE MANHATTAN
BANK, as administrative agent (in such capacity, the
"Administrative Agent") for the Lenders (as defined
in the Credit Agreement referred to below).
A. Reference is made to (a) the 364-Day Credit Agreement dated as of
December 16, 1998 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement") among the Borrower, the lenders from time to time
party thereto (the "Lenders"), PNC BANK, NATIONAL ASSOCIATION, NATIONSBANK, N.A.
AND CITIBANK, N.A., as Co-Syndication Agents, and the Administrative Agent and
(b) the Guarantee Agreement dated as of December 16, 1998, among the Guarantors
and the Administrative Agent (the "Guarantee Agreement").
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Contribution Agreement and the
Credit Agreement.
C. The Borrower and the Guarantors have entered into the Contribution
Agreement in order to induce the Lenders to make Loans. Pursuant to Section 5.09
of the Credit Agreement, each (a) direct Subsidiary that was not in existence
(or not a direct Subsidiary) on the date of the Credit Agreement and (b)
indirect Subsidiary not in existence (or not an indirect Subsidiary or not an
indirect Subsidiary that has incurred the type of Indebtedness described below)
on the date hereof that has created, incurred or permitted to exist any
Indebtedness (other than Intercompany Indebtedness and Indebtedness of the type
described in clauses (d), (e) and (h) of the definition of "Indebtedness"), is
required promptly to enter into the Contribution Agreement as a Guarantor upon
becoming such a Subsidiary. Section 12 of the Contribution Agreement
<PAGE> 126
2
provides that additional Subsidiaries may become Guarantors under the
Contribution Agreement by execution and delivery of an instrument in the form of
this Supplement. The undersigned Subsidiary (the "New Guarantor") is executing
this Supplement in accordance with the requirements of the Credit Agreement to
become a Guarantor under the Agreement in order to induce the Lenders to make
additional Loans and as consideration for Loans previously made.
Accordingly, the Administrative Agent and the New Guarantor agree as
follows:
SECTION 1. In accordance with Section 12 of the Contribution Agreement,
the New Guarantor by its signature below becomes a Guarantor under the
Contribution Agreement with the same force and effect as if originally named
therein as a Guarantor and the New Guarantor hereby agrees to all the terms and
provisions of the Contribution Agreement applicable to it as a Guarantor
thereunder. Each reference to a "Guarantor" in the Contribution Agreement shall
be deemed to include the New Guarantor. The Contribution Agreement is hereby
incorporated herein by reference.
SECTION 2. The New Guarantor represents and warrants to the
Administrative Agent and the other Secured Parties that this Supplement has been
duly authorized, executed and delivered by it and constitutes its legal, valid
and binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the Administrative
Agent shall have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Guarantor and the Administrative Agent.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
SECTION 4. Except as expressly supplemented hereby, the Contribution
Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 127
3
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Contribution Agreement shall not in any way be affected or
impaired. The parties hereto shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be in writing
and given as provided in Section 7 of the Contribution Agreement. All
communications and notices hereunder to the New Guarantor shall be given to it
at the address set forth under its signature.
SECTION 8. The New Guarantor agrees to reimburse the Administrative
Agent for its reasonable out-of-pocket expenses in connection with this
Supplement, including the reasonable fees, other charges and disbursements of
counsel for the Administrative Agent.
IN WITNESS WHEREOF, the New Guarantor and the Administrative Agent have
duly executed this Supplement to the Contribution Agreement as of the day and
year first above written.
[Name Of New Guarantor]
by
-------------------------------
Name:
Title:
Address:
THE CHASE MANHATTAN BANK
as Administrative Agent
by
-----------------------------
Name:
Title:
<PAGE> 128
SCHEDULE I
to Supplement No.___ to the Indemnity,
Subrogation and Contribution Agreement
GUARANTORS
NAME ADDRESS
- ---- -------
<PAGE> 129
<TABLE>
<CAPTION>
SCHEDULE 2.01
COMMITMENTS
<S> <C>
LENDER COMMITMENTS
- ------ -----------
The Chase Manhattan Bank $ 57,500,000.00
NationsBank, N.A. $ 57,500,000.00
Citibank, N.A. $ 57,500,000.00
PNC Bank, National Association $ 57,500,000.00
NBD Bank $ 45,000,000.00
Commerzbank Aktiengesellschaft $ 45,000,000.00
Fleet National Bank $ 45,000,000.00
Toronto Dominion (Texas), Inc. $ 45,000,000.00
BankBoston, N.A. $ 32,500,000.00
The Bank of New York $ 32,500,000.00
Bankers Trust Company $ 25,000,000.00
Banque Nationale de Paris, Chicago $ 25,000,000.00
Branch
Fifth Third Bank $ 25,000,000.00
Star Bank, National Association $ 25,000,000.00
Suntrust Bank Central Florida, N.A. $ 25,000,000.00
---------------
Total $ 600,000,000.00
================
</TABLE>
<PAGE> 130
SCHEDULE 3.06
DISCLOSED MATTERS
None except as set forth in Borrower's reports and filings made pursuant to the
Securities and Exchange Act of 1934, as amended, prior to the date of this
Agreement.
<PAGE> 131
SCHEDULE 3.13
Convergys Information Management Group Inc.
Convergys IMG Europe Inc.
Convergys IMG International Inc.
Convergys IMG International Service Inc.
Convergys IMG International Sales Corporation
Convergys Customer Management Group Inc.
MATRIXX Marketing International Inc.
MATRIXX Marketing Europe S.A.
MATRIXX Marketing Customer Care Canada
MATRIXX Marketing Services S.A.
MATRIXX Marketing S.A.
All subsidiaries are 100% owned.
<PAGE> 132
SCHEDULE 6.05
EXISTING RESTRICTIONS
None
<PAGE> 1
March 25, 1999
CONFIDENTIAL
Board of Directors
Convergys Corporation
201 East Fourth Street
Cincinnati, OH 45202
Dear Members of the Board:
We understand that Convergys Israel Investments Ltd. ("Sub"), a wholly owned
subsidiary of Convergys Corporation ("Convergys" or the "Parent"), proposes to
make a tender offer (the "Offer") to purchase all the Ordinary Shares (the
"Shares") of Wiztec Solutions Ltd. ("Wiztec" or the "Company") for $18.00 per
share (the "Offer Price"). The terms and conditions of the Offer are more fully
detailed in the Offer to Purchase as defined below. We also understand that an
affiliate of Parent currently owns approximately 70% of the issued and
outstanding Shares, which it intends to tender in the Offer.
You have requested our opinion as to whether the Offer Price is fair, from a
financial point of view, to Wiztec shareholders (other than affiliates of
Parent).
Broadview International LLC ("Broadview") focuses on providing merger and
acquisition advisory services to information technology ("IT"), communications
and media companies. In this capacity, we are continually engaged in valuing
such businesses, and we maintain an extensive database of IT, communications and
media mergers and acquisitions for comparative purposes. We are currently acting
as financial advisor to Convergys' Board of Directors and will receive a fee
from Convergys upon the successful conclusion of the Offer, in addition to the
fee we earned in the prior transaction in which Convergys assumed a controlling
interest in Wiztec.
<PAGE> 2
In rendering our opinion, we have, among other things:
1.) reviewed the terms of the Offer to Purchase (the "Offer to Purchase") and
the associated exhibits thereto in the form of the draft dated March 24,
1999 furnished to us by legal counsel to Convergys on March 24, 1999
(which, for the purposes of this opinion, we have assumed, with your
permission, to be identical in all material respects to the Offer to
Purchase pursuant to which the Offer will be made);
2.) reviewed Wiztec's Form 20-F for its fiscal year ended December 31, 1997,
including the audited financial statements included therein and unaudited
financial statements for the twelve months ended December 31, 1998 included
in Wiztec's February 3, 1999 press release;
3.) reviewed certain internal financial and operating information, including
certain projections through 2003, relating to Wiztec prepared and provided
to us by Convergys management;
4.) participated in discussions with Wiztec management concerning the
operations, business strategy, financial performance and prospects for
Wiztec;
5.) compared certain aspects of the financial performance of Wiztec with public
companies we deemed comparable;
6.) analyzed available information, both public and private, concerning other
transactions we believe to be comparable in whole or in part to the Offer;
7.) reviewed Convergys' Form S-1, as amended, relating to its initial public
offering, including the audited financial statements included therein, and
Convergys' Form 10-Q for the quarterly period ended September 30, 1998,
including the unaudited financial statements included therein;
<PAGE> 3
8.) participated in discussions with Convergys management concerning the
operations, business strategy, financial performance and prospects for
Convergys;
9.) discussed with Convergys management its view of the strategic rationale for
the Offer;
10.) reviewed equity analyst reports covering Convergys;
11.) assisted in negotiations and discussions related to the Offer among
Convergys, Wiztec and their financial and legal advisors; and
12.) conducted other financial studies, analyses and investigations as we deemed
appropriate for purposes of this opinion.
In rendering our opinion, we have relied, without independent verification, on
the accuracy and completeness of all the financial and other information that
was publicly available or furnished to us by Convergys, Wiztec or Wiztec's
financial and legal advisors. With respect to the financial projections examined
by us, we have assumed that they were reasonably prepared and reflected the best
available estimates and good faith judgments of the managements of Convergys and
Wiztec as to the future performance of Convergys and Wiztec. We have neither
made nor obtained an independent appraisal or valuation of any of Wiztec's
assets.
Based upon and subject to the foregoing, we are of the opinion that the Offer
Price is fair, from a financial point of view, to Wiztec shareholders (other an
affiliates of Parent).
<PAGE> 4
For purposes of this opinion, we have assumed that neither Convergys nor Wiztec
is currently involved in any material transaction other than the Offer and those
activities undertaken in the ordinary course of conducting their respective
businesses. Our opinion is necessarily based upon market, economic, financial
and other conditions as they exist and can be evaluated as of the date of this
opinion, and any change in such conditions would require a reevaluation of this
opinion. We express no opinion as to the price at which Wiztec Shares will trade
at any time.
This opinion speaks only as of the date hereof and may be relied upon only by
the Board of Directors of Convergys in connection with its consideration of the
Offer and does not constitute a recommendation to any shareholder as to whether
such shareholder should tender his shares pursuant to the Offer. This opinion
may not be published or referred to, in whole or part, without our prior written
permission, which shall not be unreasonably withheld. Broadview hereby consents
to references to, and the inclusion of this opinion in its entirety in the Offer
to Purchase.
Sincerely,
Broadview International LLC
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING ORDINARY SHARES
OF
WIZTEC SOLUTIONS LTD.
AT
$18.30 NET PER SHARE
BY
CONVERGYS ISRAEL INVESTMENTS LTD.
A WHOLLY OWNED SUBSIDIARY
OF
CONVERGYS CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON APRIL 28, 1999, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS SUBJECT TO THE CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE.
SEE SECTION 12.
THE OFFER IS NOT CONDITIONED ON ANY SPECIFIED NUMBER OF SHARES BEING
TENDERED, THE AVAILABILITY OF FINANCING OR ON THE APPROVAL OF THE BOARD OF
DIRECTORS OF WIZTEC SOLUTIONS LTD. OR ANY COMMITTEE THEREOF. CONVERGYS
INFORMATION MANAGEMENT GROUP INC., A WHOLLY OWNED SUBSIDIARY OF CONVERGYS
CORPORATION, CURRENTLY OWNS BENEFICIALLY 4,750,200 SHARES, REPRESENTING
APPROXIMATELY 70% OF THE ISSUED AND OUTSTANDING SHARES AT MARCH 2, 1999.
------------------------
IMPORTANT
Any shareholder (including any person who may become a shareholder during
the course of this Offer to Purchase as the result of the exercise of options or
warrants) desiring to tender all or any portion of such shareholder's Ordinary
Shares, each with New Israeli Shekel ("NIS") 1 Par Value (the "Shares"), should
either (i) complete and sign the enclosed Letter of Transmittal (or a facsimile
thereof) in accordance with the Instructions in the Letter of Transmittal, have
such shareholder's signature thereon guaranteed (if required by Instruction 1 to
the Letter of Transmittal), mail or deliver the Letter of Transmittal (or a
facsimile thereof) and any other required documents to the Depositary (as
defined herein) and either deliver the certificates for such Shares to the
Depositary along with the Letter of Transmittal (or such facsimile) or, in the
case of a book-entry transfer effected pursuant to the procedures described in
Section 3 of this Offer to Purchase, deliver an Agent's Message (as defined
herein) and any other required documents to the Depositary and deliver such
Shares pursuant to the procedure for book-entry transfer set forth in Section 3
of this Offer to Purchase or (ii) request such shareholder's broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
such shareholder. Any shareholder whose Shares are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee must contact
such broker, dealer, commercial bank, trust company or other nominee to tender
such Shares.
Any shareholder who desires to tender Shares and whose certificates
evidencing such Shares are not immediately available, or who cannot comply with
the procedures for book-entry transfer on a timely basis, or who cannot deliver
all required documents to the Depositary prior to the expiration of the Offer,
may tender such Shares by following the procedures for guaranteed delivery set
forth in Section 3 of this Offer to Purchase.
Questions and requests for assistance may be directed to the Information
Agent (as defined herein) at its address and telephone number set forth on the
back cover of this Offer to Purchase. Requests for additional copies of this
Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery
and other tender offer materials may be directed to the Information Agent or to
brokers, dealers, commercial banks or trust companies.
------------------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
------------------------
The Information Agent for the Offer is:
(GEORGESON LOGO)
April 1, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION................................................ 3
SPECIAL FACTORS............................................. 6
Background to the Offer................................... 6
Fairness of the Offer..................................... 8
Financial Analysis by Parent's Financial Advisor.......... 8
Purpose of the Offer; Reasons of Parent and Sub for the
Offer.................................................. 14
Plans for the Company After the Offer; Certain Effects of
the Offer.............................................. 15
Rights of Shareholders in the Offer....................... 16
Interest of Certain Persons in Offer...................... 16
Related Party Transactions................................ 16
Beneficial Ownership of Shares............................ 17
Certain Litigation........................................ 17
THE TENDER OFFER............................................ 18
1. Terms of the Offer.................................... 18
2. Acceptance for Payment and Payment.................... 19
3. Procedures for Tendering Shares....................... 20
4. Withdrawal Rights..................................... 23
5. Certain U.S. Federal Income Tax and Israeli Income Tax
Consequences........................................... 23
6. Price Range of the Shares; Dividends on the Shares.... 25
7. Effect of the Offer on the Market for the Shares,
Stock Price Quotation; Exchange Act Registration,
Margin Regulations.................................... 25
8. Certain Information Concerning the Company............ 27
9. Certain Information Concerning Parent and Sub......... 29
10. Sources and Amount of Funds........................... 30
11. Dividends and Distributions........................... 31
12. Certain Conditions of the Offer....................... 31
13. Certain Legal Matters and Regulatory Approvals........ 33
14. Fees and Expenses..................................... 34
15. Miscellaneous......................................... 34
SCHEDULE I -- Directors and Executive Officers of Parent and Sub
SCHEDULE II -- Audited Financial Statements for the Company for
the Fiscal Years Ended December 31, 1998 and 1997.
</TABLE>
2
<PAGE> 3
To the Holders of Ordinary Shares of Wiztec Solutions Ltd. (including persons
who may become Holders during the course of the Offer as a result of the
exercise of options and warrants):
INTRODUCTION
Convergys Israel Investments Ltd., a company limited by shares duly
registered under the laws of the State of Israel ("Sub") and a wholly owned
subsidiary of Convergys Corporation, a company incorporated under the laws of
the State of Ohio, U.S.A. ("Parent"), hereby offers to purchase all outstanding
Ordinary Shares (including Shares which may be issued during the course of the
Offer as a result of the exercise of options and warrants), each with New
Israeli Shekel ("NIS") 1 Par Value (the "Shares"), of Wiztec Solutions Ltd., a
company limited by shares duly registered under the laws of the State of Israel
(the "Company"), at a price of $18.30 per Share, net to the seller in cash,
without interest (the "Offer Price"), upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which, as amended or supplemented from time to time, collectively
constitute the "Offer").
Tendering shareholders of record who tender Shares directly will not be
obligated to pay brokerage fees or commissions or, except as set forth in
Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase
of Shares by Sub pursuant to the Offer. However, any tendering shareholder or
other payee who fails to complete and sign the Substitute Form W-9 included in
the Letter of Transmittal or Form W-8, Certificate of Foreign Status, may be
subject to backup federal income tax withholding of 31% of the gross proceeds
payable to such shareholder or other payee pursuant to the Offer. See Section 3.
Shareholders who hold their Shares through a bank or broker should check with
such institution as to whether they charge any service fees. Sub will pay all
fees and expenses of Georgeson & Company Inc., which is acting as the
Information Agent (in such capacity, the "Information Agent"), incurred in
connection with the Offer and in accordance with the terms of the agreements
entered into between Sub and/or Parent and each such person. See Section 14.
Convergys Information Management Group Inc. ("Convergys IMG"), a sister
company of Sub, currently owns directly 4,750,200 Shares, constituting
approximately 70.0% of the issued and outstanding Shares (excluding options and
warrants), which it intends to tender in the Offer. The purpose of the Offer is
to facilitate the acquisition by Sub of all of the Shares for cash.
THE COMPANY'S BOARD OF DIRECTORS HAS NOT APPROVED THE OFFER AND HAS
EXPRESSED NO OPINION AND HAS NOT MADE ANY RECOMMENDATION, AND WILL NOT MAKE ANY
RECOMMENDATION, AS TO WHETHER SHAREHOLDERS SHOULD TENDER THEIR SHARES IN THE
OFFER, BECAUSE OF CERTAIN ACTUAL AND POTENTIAL CONFLICTS OF INTEREST. EACH
SHAREHOLDER SHOULD MAKE ITS OWN DETERMINATION AS TO WHETHER TO ACCEPT OR REJECT
THE OFFER.
If shareholders of the Company holding at least 90% of the Shares
(excluding Shares presently held by Sub, by a subsidiary of Sub or for them)
accept the Offer within four months of the date hereof (the "Initial Period"),
Sub shall be entitled, pursuant to Section 236 of the Companies Ordinance [New
Version], 5743-1983, of the State of Israel (the "Companies Ordinance"), to
declare by notice to the remaining shareholders (the "Notice of Acquisition"),
to be given within two months following the Initial Period, that it desires to
purchase their Shares. Following such notice, Sub will be entitled and obligated
to purchase those Shares on the same terms as the Offer (the "Compulsory
Acquisition"). For purposes of Section 236 of the Companies Ordinance, Sub
believes that the Shares owned by Convergys IMG are not held by Sub, any of
Sub's subsidiaries or for them, although such position is not free from doubt
under Israeli law. If Sub's belief is correct and if holders of at least
1,370,175 Shares (representing approximately 66.83% of the outstanding Shares
not held by Convergys IMG) or at least 2,195,322 Shares (representing
approximately 73.99% of the outstanding Shares not held by Convergys IMG
assuming the exercise of all outstanding Options (as defined herein)) accept the
Offer, Sub will have acquired at least 90% of the outstanding Shares and will be
entitled to purchase the remaining Shares in the Compulsory Acquisition. If
Sub's belief is incorrect, holders of at least 1,845,195 Shares (representing
90% of the outstanding Shares not held by Convergys IMG) or at least 2,670,342
Shares (assuming the exercise of all outstanding Options) must accept the Offer
in order for Sub to be entitled to purchase the remaining Shares in the
Compulsory Acquisition. Should holders of at least 90% of the Shares accept the
Offer, Sub intends to give the Notice of Acquisition within the required time
period and in the required form and to complete the Compulsory Acquisition.
3
<PAGE> 4
Shareholders of the Company who object to the Compulsory Acquisition will
be entitled to file an objection with the Tel Aviv District Court within one
month of the Notice of Acquisition. In the event that any such objection is
filed, the Court may issue such relief as it sees fit. One month after the
Notice of Acquisition, or, if an objection was filed, one month after the
Court's resolution of such objection, Sub shall deliver to the Company a copy of
the Notice of Acquisition and the consideration for the Shares it is entitled to
purchase in accordance with Section 236, and the Company shall register Sub as
the record owner of such Shares. The Company shall receive the consideration as
trustee for the shareholders whose Shares are purchased pursuant to the
Compulsory Acquisition.
The Offer also serves as a "Plan" under Section 236 of the Companies
Ordinance and, by accepting the Offer, Company shareholders are approving the
"Plan".
Following the consummation of the Offer and the Compulsory Acquisition, the
current shareholders of the Company will no longer retain any interest in the
Company and, therefore, will not share in its future earnings and potential
growth.
Sub is not offering to purchase outstanding options and warrants to
purchase Shares. Holders of options and warrants who wish to participate in the
Offer need to exercise their options and warrants and tender the Shares received
upon exercise in the Offer. Those holders who elect not to exercise their
options and warrants and participate in the Offer will continue to own those
securities, subject to the possible effects of the Offer on the underlying
Shares as set forth below.
In the event that holders of at least 90% of the Shares do not accept the
Offer, Sub nonetheless will purchase those Shares which are offered in
accordance herewith and subject to the conditions hereof. Thereafter, Sub may
elect to do one or more of the following: (i) initiate a plan or an arrangement
between itself, the Company and the Company's shareholders, in accordance with
Section 233 of the Companies Ordinance, pursuant to which Sub would acquire the
remaining Shares of the Company; (ii) if the number of shareholders is below 300
record holders of Shares, terminate registration of the Shares under the
Securities Exchange Act of 1934 (the "Exchange Act"), or (iii) engage in certain
open market or privately negotiated purchases, at prices which may be greater or
less than the Offer Price, in order to increase Sub's ownership of the
outstanding Shares. As a consequence, no assurance can be given as to when, or
if, Sub will be able to cause the Compulsory Acquisition to be consummated and,
similarly, no assurance can be given as to when, or if, the consideration would
be paid to shareholders who do not tender their Shares in the Offer.
THE OFFER IS CONDITIONED UPON THE APPROVAL OF THE ISRAEL INVESTMENT CENTER
OR ACKNOWLEDGEMENT THAT SUCH APPROVAL IS NOT REQUIRED AND UPON THE APPROVAL OF
THE OFFICE OF THE CHIEF SCIENTIST OF THE MINISTRY OF INDUSTRY AND TRADE. THE
OFFER IS ALSO SUBJECT TO THE OTHER CONDITIONS SET FORTH IN THIS OFFER TO
PURCHASE. SEE "THE TENDER OFFER -- SECTION 1. TERMS OF THE OFFER" AND "SECTION
12. CERTAIN CONDITIONS OF THE OFFER."
THE OFFER IS NOT CONDITIONED ON ANY SPECIFIED NUMBER OF SHARES BEING
TENDERED, THE AVAILABILITY OF FINANCING OR ON THE APPROVAL OF THE BOARD OF
DIRECTORS OF THE COMPANY OR ANY COMMITTEE THEREOF. CONVERGYS IMG, A WHOLLY OWNED
SUBSIDIARY OF PARENT, CURRENTLY OWNS BENEFICIALLY 4,750,200 SHARES, REPRESENTING
APPROXIMATELY 70% OF THE ISSUED AND OUTSTANDING SHARES AT MARCH 2, 1999.
According to information received by Parent and Sub from the Company, as of
March 2, 1999, the authorized capital of the Company consisted of: 10,000,000
Ordinary Shares, each with NIS 1 Par Value, 6,800,416 shares of which were
issued and outstanding. In addition, the Company had outstanding: underwriters
warrants to purchase 140,000 Shares, all of which warrants were issued and
outstanding; options to purchase 400,000 Shares authorized pursuant to the
Company's Incentive Plan, of which options to purchase 193,667 Shares were
issued and outstanding; options to purchase 500,000 Shares authorized pursuant
to the Company's Subsidiary Incentive Plan, of which options to purchase 11,375
Shares were issued and outstanding; Series A Warrants to purchase 331,200
Shares, of which warrants to purchase 319,575 Shares were issued and
outstanding; and options to purchase 690,000 Shares authorized pursuant to the
Company's 1997 Option Plan, of which options to purchase 332,300 Shares were
issued and outstanding (the foregoing outstanding options and
4
<PAGE> 5
warrants are collectively referred to as "Options"). Of the total Options,
options to purchase 80,087 Shares are not vested and may remain unvested
throughout the Offer.
DISSENTERS' RIGHTS ARE NOT AVAILABLE IN CONNECTION WITH THE OFFER. SEE
"SPECIAL FACTORS -- RIGHTS OF SHAREHOLDERS IN THE OFFER." HOWEVER, SHAREHOLDERS
OF THE COMPANY WHO OBJECT TO THE COMPULSORY ACQUISITION WILL BE ENTITLED TO FILE
AN OBJECTION WITH AN ISRAELI COURT AND THE COURT MAY ISSUE RELIEF AS IT SEES
FIT.
5
<PAGE> 6
SPECIAL FACTORS
BACKGROUND TO THE OFFER
On April 17, 1996, the Company completed an initial public offering of
1,610,000 Shares at $6.00 per share. The Company received total aggregate
proceeds from the offering of $9,660,000 before payment of fees and expenses.
In mid-December 1996, Thomas Smaldone, President of the Cable and Broadband
Solutions Group of Convergys Information Management Group Inc. (formerly known
as Cincinnati Bell Information Systems Inc., "Convergys IMG"), a wholly owned
subsidiary of Parent, contacted Yaron Polak, President and Chief Executive
Officer of the Company, to determine whether the Company would be interested in
entering into a marketing agreement in which Convergys IMG would sell and
support the Company's products in North America. As a result of that inquiry,
during the first quarter of 1997, a series of meetings were held between Mr.
Polak and Mr. Smaldone and other Convergys IMG executives and advisors regarding
the possible framework of a Company-Convergys IMG relationship. The elements of
the relationship discussed included an investment by Convergys IMG in the
Company, a joint marketing arrangement and a joint product development
arrangement.
On April 28, 1997, Mr. Polak, accompanied by Dan Goldstein, Chairman and
Chief Executive Officer of Formula Systems (1985) Ltd. ("Formula"), the majority
shareholder of the Company, and Shai Beilis, Vice Chairman of the Company, met
with Mr. Smaldone, members of the Convergys IMG executive management team and a
member of Convergys IMG's financial advisor, Broadview International LLC
("Broadview"), in Cincinnati, Ohio. At that meeting, the parties discussed basic
terms of Convergys IMG's possible purchase of nearly 20% of the Company's
outstanding stock from Formula and certain other Company shareholders, the basic
parameters of the Option and the Put Option (as defined below), the
establishment of a joint marketing arrangement and the establishment of a joint
product development arrangement.
During the first week of June 1997, Mr. Smaldone and other members of the
Convergys IMG team traveled to Herzlia, Israel to conduct due diligence. The
Convergys IMG team held a series of meetings with Company personnel to evaluate
the Company's development plans, products, current client contracts, financial
condition and other items.
During July and August 1997, definitive agreements reflecting the
transaction were negotiated. After the appropriate Board of Directors'
authorizations were obtained, on August 19, 1997, a Stock Purchase Agreement
among Convergys IMG, the Company and certain shareholders of the Company (the
"First Purchase Agreement") was signed, and that transaction was consummated on
October 6, 1997. Pursuant to the First Purchase Agreement, Convergys IMG
purchased 1,300,000 Shares of the Company (530,000 allocated by the Company and
770,000 from existing shareholders) for the aggregate purchase price of
$11,000,000 and was granted an option (the "First Agreement Option"),
exercisable until October 1999, to purchase that number of Shares from an
affiliate of Formula, which would result in Convergys IMG owning 51% of the
Company's Shares. Under the terms of the First Purchase Agreement, if Convergys
IMG exercised the First Agreement Option, certain shareholders of the Company
would then be subject to a call option (the "Call Option") exercisable by
Convergys IMG, pursuant to which such shareholders would be required to sell all
of their remaining Shares to Convergys IMG. In addition, upon exercise of the
First Agreement Option, such shareholders had a put option (the "Put Option"),
enabling such shareholders to sell all of their remaining Shares to Convergys
IMG. In addition, pursuant to the First Purchase Agreement, Mr. Smaldone became
a member of the Board of Directors of the Company.
In connection with the First Purchase Agreement, Convergys IMG and the
Company entered a Marketing and Licensing Agreement, dated as of October 6, 1997
(the "Marketing Agreement"), pursuant to which the Company granted Convergys IMG
a right to use, license and market the Company's proprietary software, which
provides subscriber management systems to multi-channel subscription television
system operators. Subject to certain exclusions, and subject to Convergys IMG's
meeting certain performance goals, Convergys IMG's right is exclusive with
regard to North America and with regard to certain Japanese companies and
non-exclusive with regard to the rest of the world. Pursuant to the Marketing
Agreement, Convergys IMG has paid to the Company approximately $5,496,000.
Convergys IMG and the Company also entered into a Joint Development Agreement,
6
<PAGE> 7
dated as of October 6, 1997 (the "Development Agreement"), under which Convergys
IMG and the Company committed to cooperate and use their funds, knowledge and
personnel to jointly develop a "next generation" customer care and billing
system for North American and international markets. Pursuant to the Development
Agreement, Convergys IMG has paid to the Company approximately $1,562,000.
Throughout 1998, Convergys IMG and the Company implemented the Marketing
Agreement and the Development Agreement. As a result of Convergys IMG's success
in establishing new clients in North America using the Company's products and
services, Convergys IMG decided that it wanted to investigate the possibility of
acquiring 100% of the Shares of the Company. Parent's philosophy and policy is
to own the entire equity interests of its subsidiaries. Therefore, Mr. Smaldone
contacted Mr. Goldstein on December 1, 1998 to inform him of Convergys IMG's
interest in exercising the First Agreement Option. On December 11, 1998, Mr.
Goldstein and Mr. Smaldone, accompanied by their respective counsel, met in
Gatwick, England, to discuss the terms under which Convergys IMG would purchase
the remaining shares of the Company held by Formula and certain other
shareholders of the Company. At that meeting Mr. Smaldone was accompanied by
James Dahmus, Senior Vice President-Finance of Convergys IMG, and Roy Heggland,
Senior Vice President and General Counsel of Convergys IMG. Richard Gilden, of
Fulbright & Jaworski L.L.P., Formula's U.S. counsel, accompanied Mr. Goldstein.
The First Agreement Option exercise price agreed to in the First Purchase
Agreement was based on a formula linked to the market price of the Shares. Both
Convergys IMG and Formula deemed it in their best interests to obtain certainty
with respect to the exercise price of the First Agreement Option and to minimize
market risk. Accordingly, the parties decided to try to fix the exercise price
at a set amount for a designated time period. Subject to the satisfaction of
various conditions, Mr. Smaldone and Mr. Goldstein discussed an exercise price
of $15.25 for all remaining Company shares held or controlled by Formula. In
addition, they discussed (i) Convergys IMG entering into a services agreement
with Formula or an affiliate for a period of two years during which time
Convergys IMG would spend $6 million in exchange for contract services to be
provided by companies owned by Formula and (ii) Formula continuing to provide
certain services to the Company during a transition period.
Subsequently, there were numerous discussions between Mr. Smaldone, Mr.
Goldstein and Mr. Robert Marino, President of Convergys IMG, regarding the terms
and conditions of Convergys IMG's acquisition of Formula's remaining shares in
the Company. In addition, Convergys IMG continued to consider acquiring the
entire equity interest of the Company, and the method and timing of such a
purchase, if pursued. One method considered was to have Formula and the other
shareholders tender into a tender offer for all Shares of the Company. However,
at the end of January, the market price of the Shares advanced to, and remained
at greater than, the $15.25 per Share that had been previously discussed with
Formula. Convergys IMG determined that it would be in its best interest to
purchase Formula's Shares in an expedited transaction to avoid further market
risk. In addition, Formula desired to complete the transaction in an expedited
manner. As a result, Convergys IMG decided not to make a tender offer for all
Shares at that time, but instead to proceed with negotiating and executing
definitive agreements to acquire the Shares owned by Formula and certain other
Company shareholders.
On February 16, 1999, Convergys IMG, certain shareholders of the Company
and Formula entered into an Agreement (the "Second Purchase Agreement") which
replaced the First Agreement Option, the Call Option and the Put Option. On
March 2, 1999, the transaction closed, and Convergys IMG purchased from certain
shareholders of the Company and Formula an aggregate of 3,450,200 Shares of the
Company, at $15.25 per share, for an aggregate purchase price of $52,615,550
(the "March Transaction"). Pursuant to the March Transaction, Yaron Polak,
President and Chief Executive Officer of the Company, sold an aggregate of
58,000 Shares for an aggregate price of $884,500. At the closing, three members
of the Board of Directors of the Company (Dan Goldstein, Gad Goldstein and Shai
Beilis) resigned and were replaced by Mr. Heggland, Brian C. Henry, Chief
Operating Officer of Convergys IMG, and Steven G. Rolls, Chief Financial Officer
of Parent. With the appointment of these three directors and Mr. Smaldone
continuing as a director, Convergys IMG appointees constitute a majority of the
directors of the Company.
Parent continued to monitor the market price of the Shares and, on March
25, 1999, the Parent Board of Directors met and determined that Sub should
proceed with the Offer. On March 26, 1999, Parent issued a press
7
<PAGE> 8
release announcing the Offer. In addition, on March 30, 1999, the Sub Board of
Directors determined to proceed with Offer.
FAIRNESS OF THE OFFER
Since a "sister" company of Sub owns a majority of the outstanding shares
of the Company, Parent, Convergys IMG and Sub are deemed to be "affiliates" of
the Company under Rule 12b-2 of the Exchange Act. Accordingly, in compliance
with Rule 13e-3 under the Exchange Act, Parent and Sub have considered the
fairness of the Offer to the shareholders of the Company other than Parent, Sub
and Convergys IMG, and, in connection with the Offer, Parent, Convergys IMG and
Sub have filed with the Commission a Rule 13e-3 Transaction Statement on
Schedule 13E-3 (the "Schedule 13E-3").
Parent and Sub believe that the Offer is fair to the Company's
shareholders. The Offer Price was determined by Parent after considering the
factors set forth below and without negotiations with or input by the Company.
The factors considered by the Parent included the following:
(i) The current and historical trading prices of the Shares and the
fact that the $18.30 per Share price to be paid in the Offer represents a
premium of approximately 10% over the closing price for the Shares on March
25, 1998, the last trading day before the public announcement of the Offer
(as reported on the Nasdaq National Market), a premium of approximately 20%
over the $15.25 per Share price paid to Formula and certain other
shareholders on March 2, 1999, and a premium of 5.655% and 9.89% over the
average closing prices of the Shares for the 30 and 60 day periods,
respectively, immediately prior to such public announcement.
(ii) The information and analyses presented by Broadview, Parent's
financial advisor, that the Offer Price was fair, from a financial point of
view, to the Company's shareholders other than Convergys IMG.
(iii) The terms of the Offer provide for a prompt cash payment to
shareholders for their Shares.
(iv) The Offer structure permits each shareholder to decide whether or
not to tender its Shares pursuant to the Offer but does not require any
minimum number of Shares to be tendered in order for the Sub to consummate
the Offer.
(v) That Parent and its affiliates have no present intention of
selling their Shares to a third party and no third party has made a bid for
the Shares.
In reaching its conclusion that the Offer is fair, Parent and Sub also
considered certain countervailing factors, including (i) the fact that the
Shares have traded at a price in excess of the Offer Price and that the Offer
Price is below the 52 week high for the Shares and (ii) that the Offer will
deprive current shareholders of the Company of the opportunity to participate in
future growth prospects of the Company that can only be realized following
consummation of the Offer through an investment in Parent. Parent and Sub
believe, however, that these factors were outweighed by the other factors
described above.
In assessing the fairness of the Offer, Parent and Sub considered the
foregoing factors collectively and did not find it practicable to assign, nor
did they assign, relative weights to the individual factors considered in
reaching its conclusion as to fairness. In light of the nature of the Company's
business, Parent and Sub did not deem net book value or liquidation value to be
relevant indicators of the value of the Shares.
FINANCIAL ANALYSIS BY PARENT'S FINANCIAL ADVISOR
Parent requested Broadview, its financial advisor for the transactions
regarding the Company (and not the advisor or agent of any other person
including the Company), to render an opinion regarding the fairness, from a
financial point of view, to the Company shareholders, of the Offer Price. On
Thursday, March 25, 1999, Broadview delivered to Parent its written opinion (the
"Broadview Opinion") that, as of March 25, 1999, based upon and subject to the
various factors and assumptions set forth in the Broadview Opinion, the Offer
Price was fair, from a financial point of view, to the Company's shareholders
other than Convergys IMG. The Offer Price was determined by Parent after
considering the factors set forth above as well as Broadview's opinion.
8
<PAGE> 9
The text of the Broadview Opinion, which sets forth assumptions made,
matters considered, and limitations on the review undertaken, is attached as
Exhibit (b) to the Schedule 13E-3. The Company shareholders are urged to read
the Broadview Opinion carefully in its entirety. The Broadview Opinion addresses
only the fairness of the Offer Price from a financial point of view and does not
constitute a recommendation to any shareholder as to whether such shareholder
should tender his or her Shares pursuant to the Offer. Broadview employed a
number of methodologies and sources of information, both qualitative and
quantitative, to determine the fairness of the Offer Price from a financial
point of view. These included, but were not limited to, analyses of other
comparable public companies and comparable transactions. Broadview will receive
a fee from Parent contingent upon successful conclusion of the Offer, in
addition to the fee earned by Broadview in the prior transaction in which Parent
acquired a controlling interest in the Company. See "THE TENDER OFFER -- Item
14. Fees and Expenses." The summary of the Broadview Opinion set forth herein is
qualified in its entirety by reference to the full text of such opinion.
In rendering its opinion, Broadview, among other actions: (i) reviewed the
terms of the Offer to Purchase and the associated exhibits thereto in the form
of the draft dated March 24, 1999 furnished to it by legal counsel to Parent on
March 24, 1999 (which, for the purposes of this opinion, it assumed, with
Parent's permission, to be identical in all material respects to the Offer to
Purchase pursuant to which the Offer was made); (ii) reviewed the Company's Form
20-F for its fiscal year ended December 31, 1997, including the audited
financial statements included therein and unaudited financial statements for the
twelve months ended December 31, 1998 included in the Company's February 3, 1999
press release; (iii) reviewed certain internal financial and operating
information, including certain projections through 2003, relating to the Company
prepared and provided to it by Parent management; (iv) participated in
discussions with the Company management concerning the operations, business
strategy, financial performance and prospects for the Company; (v) compared
certain aspects of the financial performance of the Company with public
companies it deemed comparable; (vi) analyzed available information, both public
and private, concerning other transactions it believes to be comparable in whole
or in part to the Offer; (vii) reviewed Parent's Form S-1, as amended, relating
to its initial public offering, including the audited financial statements
included therein, and Parent's Form 10-Q for the quarterly period ended
September 30, 1998, including the unaudited financial statements included
therein; (viii) participated in discussions with Parent management concerning
the operations, business strategy, financial performance and prospects for
Parent; (ix) discussed with Parent management its view of the strategic
rationale for the Offer; (x) reviewed equity analyst reports covering Parent;
(xi) participated in discussions regarding the offer with management of Parent;
and (xii) conducted other financial studies, analyses and investigations as it
deemed appropriate for purposes of its opinion.
In rendering the Broadview Opinion, Broadview relied, without independent
verification, on the accuracy and completeness of all the financial and other
information that was publicly available or furnished by Parent, the Company or
the Parent's financial and legal advisors. Broadview assumed that those
projections prepared and provided by the management of Parent were reasonably
prepared and reflected the best available estimates and good faith judgments as
to the future performance of the Company, respectively. Broadview did not make
nor obtain an independent appraisal or valuation of any of the Company's assets.
With regard to any analyses relating to valuations of comparable public
companies, the share prices used were for the close of trading on March 24,
1999, the last trading day before the Parent Board met to give final
consideration to the proposed Offer.
The following is a summary explanation prepared by Broadview of the various
sources of information and valuation methodologies employed by Broadview in
conjunction with rendering the Broadview Opinion regarding the proposed Offer.
Company Stock Performance Analysis. Broadview examined the following:
(i) the Company Ordinary Shares weekly historical volume and trading prices
from March 24, 1998 to March 24, 1999; and (ii) daily relative closing
prices for an index of public company comparables compared to the Company
and the S&P 500 from March 24, 1998 to March 24, 1999.
Public Company Comparables Analysis. Ratios of a company's common
stock share price and equity market capitalization, adjusted for cash and
debt when appropriate, to selected historical and projected operating
metrics indicate the value public equity markets place on companies in a
particular market
9
<PAGE> 10
segment. A number of companies are comparable to the Company based on
market focus, business model and financial performance. Broadview reviewed,
from a financial point of view, six public company comparables in the
software segment of the Information Technology ("IT") market providing
billing and customer care software and services. The public company
comparables were selected from the Broadview Barometer, a proprietary
database of publicly-traded IT ("IT"), Communications and Media companies
maintained by Broadview and broken down by industry segment.
Total Market Capitalization/Revenue ("TMC/R"), Total Market
Capitalization/Earnings Before Interest and Taxes ("TMC/EBIT"), and
Price/Earnings ("P/E") multiples indicate the value public markets place on
companies in a particular market segment. Broadview employed a TMC
valuation in this analysis because it enables two critical balance sheet
items, cash and debt, to be factored directly into the valuation. The
formula for the Total Market Capitalization ("TMC") is as follows:
[(market value of equity) + (short term debt + long term debt) - (cash and
equivalents)].
To determine value using this approach, the first step is to calculate
the appropriate TMC/R or TMC/ EBIT ratio. Next, the revenue or EBIT of the
company is multiplied by the appropriate TMC/R or TMC/ EBIT ratio
determined in step 1. This provides a total "entity" value which represents
the company's value based on its operating performance, i.e., excluding the
effects of capitalization. The final step is to subtract all short term and
long term debt from the total entity value and then add back cash and
equivalents. The result is one measure of the fair market value of a
company's equity.
Broadview reviewed each company's: Trailing Twelve Month ("TTM")
Revenue; TTM Revenue Growth; TTM EBIT Margin; TTM Net Margin, Equity Market
Capitalization; TTM TMC/R ratio; TTM TMC/EBIT ratio; TTM P/E ratio;
TMC/Projected Calendar 1999 Revenue ratio ("Projected 1999 TMC/R"); and
Price/Projected Calendar 1999 Earnings ratio ("Projected 1999 P/E").
In order of descending TTM TMC/R, the public company comparables
consist of: (i) LHS Group, Inc.; (ii) CSG Systems International, Inc.;
(iii) Saville Systems plc; (iv) Billing Concepts Corp.; (v) International
Telecommunications Data Systems, Inc.; and (vi) SCC Communications Corp.
These comparables exhibit the following medians and ranges for the
applicable multiples:
<TABLE>
<CAPTION>
MEDIAN MULTIPLE RANGE OF MULTIPLES
--------------- ------------------
<S> <C> <C>
TTM TMC/R........................................ 1.85 0.59-10.61
TTM TMC/EBIT..................................... 7.79 5.35-45.53
TTM P/E.......................................... 14.66 12.31-73.67
Projected 1999 TMC/R............................. 1.48 0.52- 7.69
Projected 1999 P/E............................... 11.32 9.79-48.36
</TABLE>
10
<PAGE> 11
These comparables imply the following medians and ranges for per Share
value of the Company:
<TABLE>
<CAPTION>
MEDIAN RANGE OF
IMPLIED VALUE IMPLIED VALUES
------------- --------------
<S> <C> <C>
TTM TMC/R........................................... $ 7.40 $ 3.90-$31.81
TTM TMC/EBIT........................................ $ 8.50 $ 6.54-$38.74
TTM P/E............................................. $11.31 $ 9.50-$56.86
Projected 1999 TMC/R
(Company management estimate*).................... $ 7.96 $ 4.26-$31.84
Projected 1999 TMC/R
(analyst estimate)................................ $ 8.20 $ 4.34-$33.10
Projected 1999 P/E Company
(Company management estimate*).................... $10.65 $ 9.21-$45.48
Projected 1999 P/E
(analyst estimate)................................ $12.14 $10.49-$51.84
</TABLE>
- ---------------
*Such estimates were not prepared specifically for use in the Offer.
Transaction Comparables Analysis. Ratios of equity purchase price,
adjusted for the seller's cash and debt when appropriate, to selected
historical operating metrics indicate the value strategic and financial
acquirers have been willing to pay for companies in a particular market
segment. A number of companies involved in recent transactions are
comparable to the Company based on market focus, business model, and
financial performance. Broadview reviewed ten comparable public and private
company merger and acquisition ("M&A") transactions from January 1, 1997
through the present involving sellers sharing many characteristics with the
Company, from a financial point of view including each transaction's:
Adjusted Price (Equity Price plus debt minus cash); Seller TTM Revenue; and
Adjusted Price/TTM Revenue ("P/R") ratio. Transactions were selected from
Broadview's proprietary database of published and confidential M&A
transactions in the IT, Communications and Media industries. These
transactions represent ten sellers in the software segment of the IT market
providing billing and customer care services, with TTM revenue less than
$100 million.
In order of descending P/R multiple, the ten public and private
company transactions used are the acquisition of: (i) Architel Systems
Corp. by Amdocs Ltd.; (ii) Transaction Billing Resources Inc. by Card Clear
plc; (iii) Computer Resources Management, Inc. by Billing Concepts Corp.;
(iv) Communications Software Consultants, Inc. by Billing Concepts Corp.;
(v) European Technology Partner AS by LCC International Inc.; (vi) Coral
Systems Inc. by Lightbridge Inc.; (vii) Aldiscon Ltd. by Logica plc; and
(viii) three other transactions that have not been publicly disclosed.
These comparables exhibit the following median and range for the
applicable multiple:
<TABLE>
<CAPTION>
MEDIAN MULTIPLE RANGE OF MULTIPLES
--------------- ------------------
<S> <C> <C>
P/R.............................................. 2.60 1.36-8.93
</TABLE>
These comparables imply the following median and range for per share value:
<TABLE>
<CAPTION>
MEDIAN RANGE OF
IMPLIED VALUE IMPLIED VALUES
------------- --------------
<S> <C> <C>
P/R................................................. $ 9.49 $ 6.04-$27.12
</TABLE>
Transaction Premiums Paid Analysis. Premiums paid above the seller's
equity market capitalization indicate the additional value, when compared
to public shareholders, strategic and financial acquirers are willing to
pay for companies in a particular market segment. In this analysis, the
value of consideration paid in transactions involving stock is computed
using the buyer's last reported closing price (on the appropriate exchange)
prior to announcement. The seller's equity market capitalization ("EMC")
one trading day prior
11
<PAGE> 12
to announcement is calculated using the seller's last reported closing
price (on the appropriate exchange) prior to announcement. The seller's EMC
twenty trading days prior to announcement is calculated using the seller's
closing price (on the appropriate exchange) on the first day of that period
which: (1) consists of twenty consecutive days during which the appropriate
exchange conducts trading activity, and (2) ends on the day of the last
reported closing price prior to announcement. Broadview reviewed 42
comparable M&A transactions involving selected software companies from
January 1, 1997 to the present with equity consideration between $50
million and $250 million. Transactions were selected from Broadview's
proprietary database of published and confidential M&A transactions in the
IT, Communications and Media industries.
In order of descending premium paid based on the seller's stock price
20 trading days prior to announcement, the selected software transactions
used were the acquisition of: (i) FullTime Software, Inc. by Legato
Systems, Inc. (pending); (ii) Sulcus Hospitality Technologies Corp. by
Eltrax Systems, Inc. (pending); (iii) US Servis, Inc. by HBO & Company;
(iv) Consilium, Inc. by Applied Materials, Inc.; (v) Cybermedia, Inc. by
Network Associates, Inc.; (vi) Interlink Computer Sciences by Sterling
Software, Inc. (pending); (vii) Oshap Technologies Ltd. by SunGard Data
Systems Inc.; (viii) TeleBackup Systems, Inc. by VERITAS Software Corp.
(pending); (ix) National Health Enhancement Systems, Inc. by HBO & Company;
(x) Visigenic Software, Inc. by Borland International, Inc.; (xi) C*ATS
Software, Inc. by Misys plc; (xii) Technology Modeling Associates, Inc. by
Avant! Corp.; (xiii) Interactive Group by DataWorks Corp.; (xiv) FDP Corp.
by SunGard Data Systems Inc. (pending); (xv) Logic Works, Inc. by PLATINUM
technology, inc.; (xvi) Award Software International, Inc. by Phoenix
Technologies Ltd.; (xvii) Kurzweil Applied Intelligence, Inc. by Lernout &
Hauspie Speech Products NV; (xviii) Software Artistry, Inc. by IBM Corp.;
(xix) Walsh International, Inc. by Cognizant Corp.; (xx) The ForeFront
Group by CBT Group plc.; (xxi) Amisys Managed Care Systems, Inc. by HBO &
Company; (xxii) Globalink, Inc. by Lernout and Hauspie Speech Products NV;
(xxiii) Maxis, Inc. by Electronic Arts, Inc.; (xxiv) Learmonth & Burchett
Management Systems, Inc. by PLATINUM Technology, Inc.; (xxv) Oacis
Healthcare Holdings Corp. by Science Applications International Corp.
(pending); (xxvi) Equitrac Corporation by Investor Group (pending); (xxvii)
PC DOCS Group International Inc. by Hummingbird Communications Ltd.
(pending); (xxviii) PHAMIS, Inc. by IDX Systems Corp.; (xxix) IQ Software
Corp. by Information Advantage Software, Inc.; (xxx) State Of The Art, Inc.
by Sage Group plc; (xxxi) Innovative Technologies Systems, Inc. by
Peregrine Systems, Inc.; (xxxii) Interlinq Software Corp. by W.R. Hambrecht
& Co. (pending); (xxxiii) Andyne Computing Ltd. by Hummingbird
Communications Ltd.; (xxxiv) Unison Software, Inc. by IBM Corp.; (xxxv)
Premenos Corp. by Harbinger Corp; (xxxvi) DataWorks Corp. by Platinum
Software Corp.; (xxxvii) Simulations Sciences, Inc. by Siebe plc; (xxxviii)
Enterprise Systems, Inc. by HBO & Company; (xxxix) XcelleNet, Inc. by
Sterling Commerce, Inc.; (xl) Fractal Design Corp. by MetaTools, Inc.;
(xli) Orcad, Inc. by Summit Design; and (xlii) FTP Software, Inc. by
NetManage, Inc.
These comparables exhibit the following medians and ranges for the
applicable premiums (discounts):
<TABLE>
<CAPTION>
MEDIAN PREMIUM RANGE OF PREMIUMS
-------------- -----------------
<S> <C> <C>
Premium Paid to Seller's EMC 20 Trading Days Prior
to Announcement................................. 41.6% (26.5%)-326.7%
Premium Paid to Seller's EMC One Trading Day Prior
to Announcement................................. 24.7% (2.0%)-186.7%
</TABLE>
These comparables imply the following medians and ranges for per Share
value of the Company:
<TABLE>
<CAPTION>
MEDIAN RANGE OF
IMPLIED VALUE IMPLIED VALUES
------------- --------------
<S> <C> <C>
Premium Paid to Seller's EMC 20 Trading Days Prior to
Announcement........................................ $22.74 $11.81-$68.54
Premium Paid to Seller's EMC One Trading Day Prior to
Announcement........................................ $20.82 $16.35-$47.84
</TABLE>
In addition, Broadview reviewed 19 comparable M&A transactions from
January 1, 1998 to the present in which the buyer had a controlling
interest of greater than 50% in the seller and subsequently acquired the
12
<PAGE> 13
remainder. Transactions were selected from Securities Data Company's
proprietary database of published M&A transactions across all industries.
In order of descending premium paid based on the seller's stock price
20 trading days prior to announcement, the selected transactions used were
the acquisition of: (i) Group 1 Software Inc. by COMNET; (ii) BT Office
Products Intl. by Buhmann NV; (iii) Newmont Gold Corp. by Newmont Mining
Corp.; (iv) Intelligent Electronics (XL Connect Solutions) by Xerox Corp.;
(v) Knoll Inc. by Investor Group; (vi) BRC Holdings Inc. by Affiliated
Computer Services; (vii) BET Holdings by Investor Group; (viii) J&L
Specialty Steel Inc. by Usinor SA; (ix) Mycogen Corp. by Dow Chemical
Corp.; (x) TCI Ventures Group by Liberty Media Group; (xi) Rayonier
Timberlands by Rayonier Inc.; (xii) International Franchise Systems by
Investor Group; (xiii) Citizens Corp. by Allmerica Financial Corp.; (xiv)
Forum Retirement Partners L.P. by Host Marriott Corp.; (xv) Capital Factors
Holding, Inc. by Union Planters Bank, National Association; (xvi) IP
Timberlands Ltd. by IP Forest Resources Company; (xvii) Hondo Oil & Gas
Company by Lonrho plc; (xviii) Pan African Resources Corp. by Golden Star
Resources Ltd.; and (xix) Ryerson Tull, Inc. by Inland Steel Industries,
Inc.
These comparables exhibit the following medians and ranges for the
applicable premiums (discounts):
<TABLE>
<CAPTION>
MEDIAN PREMIUM RANGE OF PREMIUMS
-------------- -----------------
<S> <C> <C>
Premium Paid to Seller's EMC 20 Trading Days Prior
to Announcement................................. 9.9% (44.1%)-83.0%
Premium Paid to Seller's EMC One Trading Day Prior
to Announcement................................. 11.2% (28.8%)-80.4%
</TABLE>
These comparables imply the following medians and ranges for per Share
value of the Company:
<TABLE>
<CAPTION>
MEDIAN RANGE OF
IMPLIED VALUE IMPLIED VALUES
------------- --------------
<S> <C> <C>
Premium Paid to Seller's EMC 20 Trading Days Prior to
Announcement........................................ $17.65 $ 8.98-$29.40
Premium Paid to Seller's EMC One Trading Day Prior to
Announcement........................................ $18.56 $11.89-$30.10
</TABLE>
Consideration of Pro Forma Combination Analyses. A pro forma merger
analysis calculates the EPS accretion or dilution of the pro forma combined
entity taking into consideration various financial effects which will
result from a consummation of the merger. While pro forma combination
analyses are commonly performed, Broadview did not employ such an analysis
for the purposes of this opinion. As Parent already owns a controlling
stake in the Company, Broadview considered a pro forma analysis
inappropriate for this opinion.
Present Value of Projected Share Price Analysis. Broadview calculated
the present value of the potential future price of shares of the Company
Ordinary Shares on a stand-alone basis using projections from the Company
and Parent management (which projections were not prepared specifically for
use in the Offer) and Broadview estimates for the twelve months ending
December 31, 2000 discounted to March 24, 1999 at discount rates ranging
from 7.86% to 25.00% and including the discount rate calculated using the
equity cost of capital of 12.65% of the Company calculated using the
Capital Asset Pricing Model ("CAPM") and the median capital-structure
adjusted beta. The capital-structure adjusted beta eliminates the effects
of different capitalization structures of a company from the beta of a
company's equity. The potential future share price is calculated based on
earnings estimates for the 12 months ending December 31, 2000 and assumes a
TTM P/E multiple of 14.66, the median TTM P/E multiple for the Company's
public company comparable set.
Based on this analysis and the median TTM P/E multiple of the
Company's public company comparable set of 14.66, the per share valuation
range implied by the present value of the future share prices is $11.92 to
$15.68 using the range of discount rates specified above and is $14.47 as
calculated using the cost of equity implied by the Company set of public
company comparables.
13
<PAGE> 14
Discounted Cash Flows Valuation Methodology. Broadview valued the
Company based upon free cash flow estimates over a period from the date of
valuation through December 31, 2003. The Company's terminal value was
calculated based on terminal growth rates of 4.0%, 5.0% and 6.0% as well as
terminal multiples of earnings of 14.0, 16.0 and 18.0. A discount rate of
12.65% was applied after careful weighting of all factors both positively
and negatively affecting the riskiness of the Company's cash flows. Using
the 12.65% discount rate and the assumed terminal growth rates, the per
share equity values for the Company are $25.43, $27.81 and $30.92,
respectively. Using the 12.65% discount rate and the assumed terminal
multiples of earnings, the per share equity values for the Company were
$27.04, $29.67 and $32.31, respectively.
Summary of Valuation Analyses. Taken together, the information and analyses
employed by Broadview lead to Broadview's overall opinion that the Offer Price
to be paid in the Offer is fair, from a financial point of view, to the Company
shareholders (other than affiliates of Parent).
The preparation of the Broadview Opinion was a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying the Broadview Opinion. No company or transaction used in the above
analyses as a comparison is directly comparable to the Company or the
contemplated transaction. The analyses were prepared solely for purposes of
Broadview providing the Broadview Opinion to Parent and do not purport to be
appraisals or necessarily reflect the prices at which businesses or securities
actually may be sold. Analyses based upon forecasts of future results are not
necessarily indicative of actual future results, which may be significantly more
or less favorable than suggested by such analyses. Because such analyses are
inherently subject to uncertainty, being based upon numerous factors or events
beyond the control of the parties or their respective advisors, none of Parent,
the Company, Broadview or any other person assumes responsibility if future
results are materially different from those forecast. As described above, the
Broadview Opinion was one of many factors taken into consideration by the Parent
Board in making its determination to proceed with the Offer.
Broadview, as part of its investment banking business, is continually
engaged in the valuation 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. Parent selected
Broadview as its financial advisor because it is a nationally recognized
investment banking firm that has substantial experience in transactions similar
to the Offer.
A copy of the Broadview Opinion has been filed as Exhibit (b) to the
Schedule 13E-3 filed by Parent and Sub and is incorporated herein by reference.
The foregoing summary does not purport to be a complete description of the
analyses performed by Broadview and is qualified by reference to the Broadview
Opinion filed as Exhibit (b) to the Schedule 13E-3. Copies of the Broadview
Opinion are available for inspection and copying at the principal executive
offices of Parent or the Company during regular business hours by any
shareholder of the Company, or a shareholder's representative who has been so
designated in writing. A copy of the Broadview Opinion shall be provided by
Parent to any shareholder or any representative of a shareholder who has been so
designated in writing upon written request and at the expense of the requesting
shareholder or representative and is available via the SEC's EDGAR system
http://www.sec.gov. See "THE TENDER OFFER -- Item 9. Certain Information
Concerning Parent and Sub".
PURPOSE OF THE OFFER; REASONS OF PARENT AND SUB FOR THE OFFER
The purpose of the Offer is for Parent indirectly to increase its ownership
of Shares from approximately 70.0% to 100%. Parent's philosophy and policy is to
own the entire equity interests of its subsidiaries in order to simplify the
management of its subsidiaries and to eliminate the possibility of any potential
conflicts of interest between itself and any shareholders of its subsidiaries.
See also "SPECIAL FACTORS -- Background of the Offer." Upon consummation of the
Offer and the Compulsory Acquisition, the Company will become a wholly owned
subsidiary of Parent. As a result, Parent will be able to integrate completely
the Company's business with its own businesses and eliminate any potential
conflicts of interest between the Company's shareholders and itself. The
acquisition of the Shares has been structured as a cash tender offer in order to
(i) effect a prompt and
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orderly transfer of ownership of the Company to Sub and (ii) provide
shareholders with cash for all of their Shares at a price in excess of the
market price of the Shares on the date the Offer to Purchase was announced.
PLANS FOR THE COMPANY AFTER THE OFFER; CERTAIN EFFECTS OF THE OFFER
Except as otherwise described in this Offer to Purchase, Parent, Sub and
the persons set forth on Schedule I have no current plans or proposals which
relate to or would result in the following: (a) other than the Offer, the
Compulsory Acquisition, and an arrangement pursuant to Section 233 of the
Companies Ordinance, if applicable, an extraordinary corporate transaction, such
as a merger, reorganization or liquidation involving the Company; (b) a sale or
transfer of a material amount of the assets of the Company; (c) any change in
the present board of directors and management of the Company including, but not
limited to, any plan or proposal to change the number or term of directors, to
fill any existing vacancy on the board or to change any material term of the
employment contract of any executive officer; (d) any material change in the
present dividend rate or policy or indebtedness or capitalization of the
Company; or (e) any other material change in the Company's corporate structure
or business. Notwithstanding the above, Parent and Sub reserve the right to
replace all or some of the current directors of the Company.
Parent intends to initiate, however, a review of the Company in order to
best integrate the activities of the Company and Parent and its affiliates, and
Parent expressly reserves the right to make any changes that it deems necessary
or appropriate in light of its review or in light of future developments.
According to information provided by the Company, under various benefits plans
and warrants, there were outstanding vested and unvested Options to purchase
996,917 Shares. Of the total Options, options to purchase 80,087 Shares are not
vested and may remain unvested throughout the Offer (the "Unvested Options").
The benefit plans and terms of the warrants do not provide any special treatment
of the Options in the event of a tender offer. However, Parent and the Company
intend to encourage the holders of the Options to exercise the Options and
tender the Shares received upon exercise in this Offer. Company employees who
choose to exercise Options which were issued less than two years before the
conclusion of the Offer may be subject to unfavorable tax treatment unless
certain conditions are met. SEE "THE TENDER OFFER -- Section 5. "Certain U.S.
Federal Income Tax and Israeli Income Tax Consequences." Two years will not have
elapsed from the grant of Unvested Options to purchase 76,387 Shares and, in
addition, from the grant of vested Options to purchase 58,516 Shares. Those
holders who elect not to exercise their options and warrants and participate in
the Offer will continue to own those securities, subject to the possible effects
of the Offer on the underlying Shares as set forth below.
As a result of the Offer and the Compulsory Acquisition, the direct and
indirect interest of Parent in the Company's net book value and net earnings
will increase from 70% to 100%. On a pro forma basis as if the Offer and the
Compulsory Acquisition had been completed as of December 31, 1998, Parent's
interest in the Company's net book value would have increased from $17,034,000
(70%) to $24,335,000 (100%) and in the Company's net earnings from $3,936,000
(70%) to $5,623,000 (100%). In addition, Parent and its subsidiaries will be
entitled to all benefits resulting from that interest, including all income
generated by the Company's operations, any future increase in the Company's
value and the right to elect all members of the Company board of directors.
Similarly, Parent will also bear the risk of losses generated by the Company's
operations and any decrease in the value of the Company after the consummation
of the Offer. Also, shareholders will not have the opportunity to participate
directly in the earnings and growth of the Company after the consummation of the
Offer and the Compulsory Acquisition and will not have any right to vote on
corporate matters. Similarly, shareholders will not face the risk of losses
generated by the Company's operations or decline in the value of the Company
after the consummation of the Offer and the Compulsory Acquisition.
Following the consummation of the Offer, Parent expects that the number of
Shares that trade publicly and the number of shareholders would be reduced, and
such reduction would be likely to adversely affect the liquidity and market
value of any remaining Shares held by the public after the Offer. If, after the
consummation of the Offer, the number of record holders is below 300, Parent
could terminate the registration of the Shares under the Exchange Act and, if
the number of beneficial holders is below 400, the Shares would be no longer
eligible for listing on the Nasdaq National Market. See "THE TENDER
OFFER -- Section 7. Effect of the Offer on the Market for Shares; Stock Price
Quotation; Exchange Act Registration; Margin Regulations." It is expected,
whether or not Shares are accepted for payment by the Sub pursuant to the Offer
and the Offer is consummated,
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that the Company's current management, under the general direction of the board
of directors of the Company, will continue to manage the Company as an on-going
business.
RIGHTS OF SHAREHOLDERS IN THE OFFER
Under Israeli law no dissenter's rights are available with this Offer. If
Sub acquires at least 90% of the outstanding Shares, shareholders of the Company
who object to the Compulsory Acquisition will be entitled to file an objection
with the Tel Aviv District Court within one month of receiving the Notice of
Acquisition. In the event that any such objection is filed, the Court may issue
such relief as it sees fit. See "THE TENDER OFFER -- Section 7. Effect of the
Offer on the Market for Shares; Stock Price Quotation; Exchange Act
Registration; Margin Regulations."
INTEREST OF CERTAIN PERSONS IN OFFER
Shareholders should be aware that certain affiliates of Parent and Sub and
certain officers and directors of Parent and Sub may have interests in the Offer
or have roles in Parent, Sub or in Convergys IMG which are described below and
which may present them with certain potential conflicts of interest. Currently,
of the seven directors of the Company, one is the Chief Financial Officer of
Parent and three are the Senior Vice President and General Counsel, Chief
Operating Officer, and President of the Cable and Broadband Solutions Group of
Convergys IMG, the subsidiary of Parent, which owns the approximately 70.0% of
the issued and outstanding Shares in the Company.
Shareholders should also be aware that Parent and its affiliates have
certain interests that present actual or potential conflicts of interest in
connection with the Offer. See "SPECIAL FACTORS -- Related Party
Transactions -- Potential Conflicts of Interest with Affiliates." As a result of
Parent's current direct ownership of Convergys IMG which, in turn, owns
approximately 70.0% of the issued and outstanding Shares and its ability to
elect all of the Company's directors, Parent may be deemed to control the
Company.
At the present time, none of the executive officers, directors or
affiliates of the Company unrelated to Parent, Convergys IMG and Sub have
indicated whether they will tender any Shares owned by them in the Offer.
RELATED PARTY TRANSACTIONS
Potential Conflicts of Interest with Affiliates
Since Parent owns directly 100% of the common shares of Convergys IMG, as
long as Parent continues to beneficially own more than 50% of the common shares
of Convergys IMG, Parent will have the power to elect all of the directors of
Convergys IMG and thereby control Convergys IMG. As long as Convergys IMG owns
more than 50% of the outstanding Shares, Convergys IMG (and Parent indirectly)
will have the power to elect all of the directors of the Company and thereby to
control the Company. In addition, one of the executive officers of Parent is a
director of the Company and three of the executive officers of Convergys IMG are
also directors of the Company. As a result, the possibility exists that
conflicts of interest between the Company and Parent and its affiliates may
arise from time to time. Israeli companies are subject to the Companies
Ordinance and Parent and its subsidiaries are subject to the Ohio General
Corporation Law, both of which codify the duty of care and fiduciary duties of
directors and other specified persons and establish certain procedures that are
designed to provide disclosure of conflicts of interest and set certain required
approvals for transactions with interested parties. However, there can be no
assurances that such duties and procedures will eliminate the effects of any
potential conflicts of interest.
At the present time the following relationships exist between the Company
and Convergys IMG. Convergys IMG and the Company are parties to a Marketing and
Licensing Agreement, dated as of October 6, 1997 (the "Marketing Agreement"),
pursuant to which the Company granted Convergys IMG a right to use, license and
market the Company's proprietary software, which provides comprehensive
subscriber management systems to multi-channel subscription television system
operators. Subject to certain exclusions, and subject to Convergys IMG's meeting
certain performance goals, Convergys IMG's right is exclusive with regard to
North America and with regard to certain Japanese companies and non-exclusive
with regard to the rest of the world. Pursuant to the
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Marketing Agreement, Convergys IMG has paid to the Company approximately
$5,496,000. Convergys IMG and the Company also are parties to a Joint
Development Agreement, dated as of October 6, 1997 (the "Development
Agreement"), under which Convergys IMG and the Company committed to cooperate
and use their funds, knowledge and personnel to jointly develop a "next
generation" customer care and billing system for North American and
international markets. Pursuant to the Development Agreement, Convergys IMG has
paid to the Company approximately $1,562,000.
According to the Company's Articles of Association, for as long as
Convergys IMG beneficially owns more than 50% of the outstanding Shares,
Convergys IMG has the power to elect all of the directors of the Company and
thereby to control the Company.
BENEFICIAL OWNERSHIP OF SHARES
Parent's subsidiary, Convergys IMG currently owns 4,750,200 Shares, which
represents approximately 70.0% of the issued and outstanding Shares (excluding
Options). Except as set forth in this Offer to Purchase, to the best knowledge
of Parent and Sub, none of its subsidiaries or the persons listed in Schedule I
to this Offer to Purchase (i) beneficially owns any Shares or (ii) has purchased
any shares in the past 60 days.
Except in connection with the March Transaction and as set forth below, the
Company has not filed any public document indicating that (i) the Company or any
of its officers, directors or affiliates have effected any transactions in
Shares during the past 60 days or (ii) the Company has purchased any Shares
since January 1, 1997. Yaron Polak, President and Chief Executive Officer of the
Company, and Riki Allon, Chief Operating Officer of the Company, have sold
Shares in transactions in the past 60 days. On February 4, 1999, Mr. Polak sold
37,500 Shares at $17.25 per Share and 2,500 Shares at $17.3125 per Share. On
February 4, 1999, Riki Allon sold 2,500 Shares at $17.75 per Share, 5,000 Shares
at $17.25 per Share, 5000 Shares at $17.375 per Share and 9,500 Shares at $17.50
per Share. On February 8, 1999, Riki Allon sold 1,000 Shares at $18.625 per
Share, 2,500 Shares at $18.375 per Share and 3,000 Shares at $18.00 per Share.
Other than the purchases of Convergys IMG in the March Transaction and pursuant
to the First Purchase Agreement, no affiliate of Parent (including Sub) has
purchased any Shares.
It is Parent's and Sub's belief that, as a result of pending litigation
described in "Special Factors -- Certain Litigation," no executive officer or
affiliate of the Company unrelated to Parent, Convergys IMG or Sub will make any
recommendation concerning the Offer.
CERTAIN LITIGATION
Since the announcement by Parent and Sub of the intention to commence the
Offer, two lawsuits have been commenced by shareholders who are unaffiliated
with the defendants (the "unaffiliated shareholders") in the Court of Common
Pleas, Hamilton County, Ohio: Carrazza, et al., vs. Wiztec Solutions, Ltd., et
al., Case No. A9901656; and Tucker vs. Wiztec Solutions, Ltd., et al., Case No.
A9901672. Each of the actions purports to be a class action brought on behalf of
unaffiliated shareholders and asserts claims against the Company, Parent and
members of the Company Board of Directors. The actions each allege that, through
the conduct of the defendants, Parent has proposed to acquire the Shares at an
unfair and inadequate price, in violation of fiduciary duties allegedly owed by
the defendants to the unaffiliated shareholders. The complaints purport by their
terms to seek injunctive relief preventing consummation of the Offer, or
rescission if it is successfully consummated, compensatory damages, and
attorneys' fees and expenses. No motion for injunctive relief has been filed.
The complaints have not yet been formally served upon the defendants and the
time within which the defendants have to respond to the complaints accordingly
has not expired. The defendants anticipate that the complaints will be
consolidated into a single action. Parent believes the actions to be without
merit and intends to contest the actions vigorously. The description of the
lawsuits set forth above is qualified by reference to the complaints filed in
such lawsuits which have been filed as exhibits to the Schedule 13E-3.
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THE TENDER OFFER
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the Offer
(including, if the Offer is extended or amended, the terms and conditions of
such extension or amendment), Sub will accept for payment and pay for all Shares
validly tendered prior to the Expiration Date, and not properly withdrawn in
accordance with Section 4. The term "Expiration Date" shall mean 12:00 Midnight,
New York City time, on April 28, 1999, unless and until Sub shall have extended
the period of time during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by Sub, shall expire.
The Offer is conditioned upon the conditions set forth in Section 12. If
such conditions are not satisfied at or prior to the Expiration Date, Sub
reserves the right subject to complying with applicable rules and regulations of
the SEC, to (i) decline to purchase any Shares tendered in the Offer and
terminate the Offer and return all tendered Shares to the tendering
shareholders, (ii) waive any or all conditions to the Offer and, subject to
complying with applicable rules and regulations of the SEC, purchase all Shares
validly tendered, or (iii) extend the Offer and, subject to the right of
shareholders to withdraw Shares until the Expiration Date, retain all Shares
which have been tendered during the period or periods for which the Offer is
extended.
Subject to applicable rules and regulations of the SEC, Sub may, under
certain circumstances, (a) extend the period of time during which the Offer is
open and thereby delay acceptance for payment of and the payment for any Shares,
by giving oral or written notice of such extension to the Depositary and (b)
amend the Offer in any other respect by giving oral or written notice of such
amendment to the Depositary. Under no circumstances will interest be paid on the
purchase price for tendered Shares, whether or not Sub exercises its right to
extend the Offer.
Sub may (i) extend the Offer on one or more occasions for such period as
may be determined by Sub in its sole discretion (each such extension period not
to exceed 10 business days at a time), if at the then scheduled Expiration Date
any of the conditions to Sub's obligations to accept for payment and pay for
Shares shall not be satisfied or waived and (ii) extend the Offer for any period
required by any rule, regulation, interpretation or position of the SEC or the
staff thereof applicable to the Offer.
Any extension, delay, waiver, amendment or termination of the Offer will be
followed as promptly as practicable by public announcement thereof, the
announcement in the case of an extension to be issued no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date in accordance with Rules 14d-4(c), 14d-6(d) and 14e-1(d) under
the Securities Exchange Act of 1934 (the "Exchange Act"), which require that
material changes be promptly disseminated to holders of Shares. Subject to
applicable law and without limiting the obligation of Sub under such Rules or
the manner in which Sub may choose to make any public announcement, Sub will not
have any obligation to publish, advertise or otherwise communicate any such
public announcement other than by making a press release to the Dow Jones News
Service. As used in this Offer to Purchase, "business day" has the meaning set
forth in Rule 14d-1 under the Exchange Act.
If Sub extends the Offer, or if Sub (whether before or after its acceptance
for payment of Shares) is delayed in its purchase of, or payment for, Shares or
is unable to pay for Shares pursuant to the Offer for any reason, then, without
prejudice to Sub's rights under the Offer, the Depositary may retain tendered
Shares on behalf of Sub, and such Shares may not be withdrawn except to the
extent tendering shareholders are entitled to the withdrawal rights described in
Section 4. However, the ability of Sub to delay the payment for Shares which Sub
has accepted for payment is limited by Rule 14e-1(c) under the Exchange Act,
which requires that a bidder pay the consideration offered or return the
securities deposited by, or on behalf of, holders of securities promptly after
the termination or withdrawal of the Offer.
If Sub makes a material change in the terms of the Offer or the information
concerning the Offer or waives a material condition of the Offer, Sub will
disseminate additional tender offer materials and extend the Offer to the extent
required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The
minimum period during
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which the Offer must remain open following material changes in the terms of the
Offer or information concerning the Offer, other than a change in price or a
change in percentage of securities sought, will depend upon the facts and
circumstances then existing, including the relative materiality of the changed
terms or information. In a public release, the SEC has stated its view that an
offer must remain open for a minimum period of time following a material change
in the terms of such offer and that waiver of a material condition is a material
change in the terms of such offer. The release states that an offer should
remain open for a minimum of five business days from the date a material change
is first published, or sent or given to security holders and that, if material
changes are made with respect to information not materially less significant
than the offer price and the number of shares being sought, a minimum of 10
business days may be required to allow adequate dissemination and investor
response. The requirement to extend the Offer will not apply to the extent that
the number of business days remaining between the occurrence of the change and
the then scheduled Expiration Date equals or exceeds the minimum extension
period that would be required because of such amendment. If, prior to the
Expiration Date, Sub increases the consideration offered to holders of Shares
pursuant to the Offer, such increased consideration will be paid to all holders
whose Shares are purchased in the Offer whether or not such Shares were tendered
prior to such increase.
The Company has provided Sub with the Company's shareholder lists and
security position listings for the purpose of disseminating the Offer to holders
of Shares. This Offer to Purchase and the related Letter of Transmittal will be
mailed to record holders of Shares and will be furnished to brokers, dealers,
commercial banks, trust companies and similar persons whose names, or the names
of whose nominees, appear on the shareholder lists or, if applicable, who are
listed as participants in a clearing agency's security position listing, for
subsequent transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT. Upon the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of any such extension or amendment), Sub will accept for
payment and will pay for all Shares validly tendered prior to the Expiration
Date and not properly withdrawn in accordance with Section 4 promptly after the
later to occur of (i) the Expiration Date and (ii) the satisfaction or waiver of
the conditions of the Offer set forth in Section 12 related to regulatory
matters. Any determination concerning the satisfaction of such terms and
conditions shall be within the sole discretion of Sub. See Section 4.
Sub expressly reserves the right, in its sole discretion, to delay
acceptance for payment of, or payment for, Shares in order to comply in whole or
in part with any applicable law. See Section 12. If Sub is delayed in its
acceptance for payment of, or payment for (whether before or after its
acceptance for payment of Shares), Shares or is unable to accept for payment or
pay for Shares pursuant to the Offer for any reason, then, without prejudice to
Sub's rights under the Offer (including such rights as are set forth in Sections
1 and 12) (but subject to compliance with Rule 14e-1(c) under the Exchange Act,
which requires that a tender offeror pay the consideration offered or return the
tendered securities promptly after termination or withdrawal of a tender offer),
the Depositary may, nevertheless, on behalf of Sub, retain tendered Shares, and
such Shares may not be withdrawn except to the extent tendering shareholders are
entitled to exercise, and duly exercise, withdrawal rights as described in
Section 4.
For purposes of the Offer, Sub will be deemed to have accepted for payment,
and thereby purchased, Shares properly tendered to Sub and not withdrawn, if, as
and when Sub gives oral or written notice to the Depositary of its acceptance
for payment of such Shares. Upon the terms and subject to the conditions of the
Offer, payment for Shares accepted for payment pursuant to the Offer will be
made by deposit of the purchase price therefor with the Depositary, which will
act as agent for tendering shareholders for the purpose of receiving payment
from Sub and transmitting payment to tendering shareholders. In all cases,
payment for Shares accepted for payment pursuant to the Offer will be made only
after timely receipt by the Depositary of (i) certificates for such Shares (or a
timely Book Entry Confirmation (as defined below) with respect thereto), (ii) a
Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or, in the case of a book-
entry transfer, an Agent's Message (as defined below) and (iii) any other
documents required by the Letter of Transmittal. Accordingly, payment may be
made to tendering shareholders at different times if delivery of the Shares and
other required documents occur at different times. The per Share consideration
paid to any holder of
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Shares pursuant to the Offer will be the highest per Share consideration paid to
any other holder of such Shares pursuant to the Offer.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE TO BE
PAID BY SUB FOR THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY
DELAY IN MAKING SUCH PAYMENT.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if certificates are submitted representing more Shares than are
tendered, certificates evidencing Shares not tendered or not accepted for
purchase will be returned to the tendering shareholder, or such other person as
the tendering shareholder shall specify in the Letter of Transmittal, as
promptly as practicable following the expiration, termination or withdrawal of
the Offer. In the case of Shares delivered by book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility pursuant to the
procedures set forth in Section 3, such Shares will be credited to such account
maintained at the Book-Entry Transfer Facility as the tendering shareholder
shall specify in the Letter of Transmittal, as promptly as practicable following
the expiration, termination or withdrawal of the Offer. If no such instructions
are given with respect to Shares delivered by book-entry transfer, any such
Shares not tendered or not purchased will be returned by crediting the account
at the Book-Entry Transfer Facility designated in the Letter of Transmittal as
the account from which such Shares were delivered.
If, prior to the Expiration Date, Sub shall increase the consideration
offered to any holders of Shares pursuant to the Offer, such increased
consideration shall be paid to all holders of Shares that are purchased pursuant
to the Offer, whether or not such Shares were tendered prior to such increase in
consideration.
Sub reserves the right to transfer or assign, in whole or, from time to
time, in part, to one or more of its affiliates, the right to purchase Shares
tendered pursuant to the Offer, but any such transfer or assignment will not
relieve Sub of its obligations under the Offer and will in no way prejudice the
rights of tendering shareholders to receive payment for Shares validly tendered
and accepted for payment pursuant to the Offer.
3. PROCEDURES FOR TENDERING SHARES.
Valid Tender. For Shares to be validly tendered pursuant to the Offer,
either (i) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), together with any required signature guarantees, or in the
case of a book-entry transfer, an Agent's Message, and any other required
documents, must be received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase prior to the Expiration Date and
either certificates evidencing tendered Shares must be received by the
Depositary at one of such addresses or such Shares must be delivered to the
Depositary pursuant to the procedures for book-entry transfer set forth below
and a Book-Entry Confirmation must be received by the Depositary, in each case
prior to the Expiration Date, or (ii) the tendering shareholder must comply with
the guaranteed delivery procedures described below.
If certificates evidencing tendered Shares are forwarded to the Depositary
in multiple deliveries, a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof) must accompany each delivery. No
alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at The Depository Trust Company (the "Book-Entry Transfer
Facility") for purposes of the Offer within two business days after the date of
this Offer to Purchase. Any financial institution that is a participant in the
Book-Entry Transfer Facility's system may make book-entry delivery of Shares by
causing the Book-Entry Transfer Facility to transfer such Shares into the
Depositary's account in accordance with such Book-Entry Transfer Facility's
procedures for such transfer. However, although delivery of Shares may be
effected through book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees, or
an Agent's Message, and any other required documents must, in any case, be
transmitted to, and received by, the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase prior to the Expiration Date,
or the tendering shareholder must comply with the guaranteed delivery procedures
described below. The confirmation of a book-entry transfer of Shares into the
Depositary's account at the Book-Entry Transfer Facility as described above is
referred to herein as a "Book-Entry Confirmation."
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THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENT MUST BE
TRANSMITTED TO AND RECEIVED BY THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH
ON THE BACK COVER PAGE OF THIS OFFER TO PURCHASE. DELIVERY OF THE LETTER OF
TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY
WILL NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that Sub may
enforce such agreement against such participant.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal (i) if the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section, includes any participant in
the Book Entry Transfer Facility's systems whose name appears on a security
position listing as the owner of the Shares) of Shares tendered therewith and
such registered holder has not completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on the
Letter of Transmittal or (ii) if such Shares are tendered for the account of a
financial institution (including most commercial banks, savings and loan
associations and brokerage houses) that is a participant in the Security
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program or by any
other "eligible guarantor institution," as such term is defined in Rule 17Ad-15
under the Exchange Act (each, an "Eligible Institution" and, collectively,
"Eligible Institutions"). In all other cases, all signatures on Letters of
Transmittal must be guaranteed by an Eligible Institution. See Instructions 1
and 5 to the Letter of Transmittal. If the certificates for Shares are
registered in the name of a person other than the signer of the Letter of
Transmittal, or if payment is to be made, or certificates for Shares not
tendered or not accepted for payment are to be returned, to a person other than
the registered holder of the certificates surrendered, then the tendered
certificates for such Shares must be endorsed or accompanied by appropriate
stock powers, in either case, signed exactly as the name or names of the
registered holders or owners appear on the certificates, with the signatures on
the certificates or stock powers guaranteed as described above. See Instructions
1 and 5 to the Letter of Transmittal.
Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's certificates for Shares are not immediately
available or the procedures for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such shareholder's tender may be
effected if all the following conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Sub, is received by the
Depositary, as provided below, prior to the Expiration Date; and
(iii) the certificates, in proper form for transfer, for (or a
Book-Entry Confirmation with respect to) such tendered Shares, together
with a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantees, or, in the case
of a book-entry transfer, an Agent's Message, and any other required
documents, are received by the Depositary within three trading days after
the date of execution of such Notice of Guaranteed Delivery. A "trading
day" is any day on which the New York Stock Exchange is open for business.
21
<PAGE> 22
The Notice of Guaranteed Delivery may be delivered by hand to the
Depositary or transmitted by telegram, facsimile transmission or mailed to the
Depositary and must include a guarantee by an Eligible Institution in the form
set forth in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (a) certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares, (b) a Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message, and (c) any other documents required by the Letter of Transmittal.
Accordingly, tendering shareholders may be paid at different times depending
upon when certificates for Shares or Book-Entry Confirmations with respect to
such Shares are actually received by the Depositary.
The valid tender of Shares pursuant to one of the procedures described
above will constitute a binding agreement between the tendering shareholder and
Sub upon the terms and subject to the conditions of the Offer.
Appointment. By executing the Letter of Transmittal as set forth above
(including delivery through an Agent's Message), the tendering shareholder will
irrevocably appoint designees of Sub as such shareholder's attorneys-in-fact and
proxies in the manner set forth in the Letter of Transmittal, each with full
power of substitution, to the full extent of such shareholder's rights with
respect to the Shares tendered by such shareholder and accepted for payment by
Sub and with respect to any and all non-cash dividends, distributions, rights,
other Shares or other securities issued or issuable in respect of such Shares on
or after March 25, 1999 (collectively, "Distributions"). All such proxies will
be considered coupled with an interest in the tendered Shares. Such appointment
will be effective if, as and when, and only to the extent that, Sub accepts for
payment Shares tendered by such shareholder as provided herein. All such powers
of attorney and proxies will be irrevocable and will be deemed granted in
consideration of the acceptance for payment by Sub of Shares tendered in
accordance with the terms of the Offer. Upon such appointment, all prior powers
of attorney, proxies and consents given by such shareholder with respect to such
Shares (and any and all Distributions) will, without further action, be revoked
and no subsequent powers of attorney, proxies, consents or revocations may be
given by such shareholder (and, if given, will not be deemed effective). The
designees of Sub will thereby be empowered to exercise all voting and other
rights with respect to such Shares (and any and all Distributions), including,
without limitation, in respect of any annual or special meeting of the Company's
shareholders (and any adjournment or postponement thereof), actions by written
consent in lieu of any such meeting or otherwise, as each such attorney-in-fact
and proxy or his substitute shall in his sole discretion deem proper. Sub
reserves the right to require that, in order for Shares to be deemed validly
tendered, immediately upon Sub's acceptance for payment of such Shares, Sub must
be able to exercise full voting, consent and other rights with respect to such
Shares (and any and all Distributions), including voting at any meeting of
shareholders.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by Sub, in its sole discretion, which determination
will be final and binding. Sub reserves the absolute right to reject any or all
tenders of any Shares determined by it not to be in proper form or the
acceptance for payment of which, or payment for which, may, in the opinion of
Sub's counsel, be unlawful. Sub also reserves the absolute right, in its sole
discretion, to waive any defect or irregularity in any tender of Shares of any
particular shareholder, whether or not similar defects or irregularities are
waived in the case of other shareholders. No tender of Shares will be deemed to
have been validly made until all defects or irregularities relating thereto have
been cured or waived. None of Sub, Parent, the Depositary, the Information Agent
or any other person will be under any duty to give notification of any defects
or irregularities in tenders or incur any liability for failure to give any such
notification. Sub's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding.
Backup Withholding. In order to avoid "backup withholding" of Federal
income tax on payments of cash pursuant to the Offer, a shareholder surrendering
Shares in the Offer, or its assignee (in either case, the "Payee") must, unless
an exemption applies, provide the Depositary with such Payee's correct taxpayer
identification number ("TIN") on a Substitute Form W-9 and certify under
penalties of perjury that such TIN is correct and
22
<PAGE> 23
that such Payee is not subject to backup withholding. If a Payee does not
provide such Payee's correct TIN or fails to provide the certifications
described above, the Internal Revenue Service (the "IRS") may impose a penalty
on such Payee and payment of cash to such Payee pursuant to the Offer may be
subject to backup withholding of 31%. All shareholders surrendering Shares
pursuant to the Offer and other Payees should complete and sign the Substitute
Form W-9 included as part of the Letter of Transmittal to provide the
information and certification necessary to avoid backup withholding (unless an
applicable exemption exists and is proved in a manner satisfactory to Sub and
the Depositary). Certain Payees (including, among others, all corporations and
certain foreign individuals and entities) are not subject to backup withholding.
Noncorporate foreign shareholders should complete and sign a Form W-8,
Certificate of Foreign Status, a copy of which has been enclosed with the Offer
to Purchase, in order to avoid backup withholding. See Instruction 10 to the
Letter of Transmittal.
4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4 or as
provided by applicable law, tenders of Shares are irrevocable. Shares tendered
pursuant to the Offer may be withdrawn pursuant to the procedures set forth
below at any time prior to the Expiration Date and, unless theretofore accepted
for payment by Sub pursuant to the Offer, may also be withdrawn at any time
after May 30, 1999.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase. Any such notice
of withdrawal must specify the name of the person who tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the name of the registered
holder of the Shares to be withdrawn, if different from the name of the person
who tendered the Shares. If certificates evidencing Shares to be withdrawn have
been delivered or otherwise identified to the Depositary, then, prior to the
physical release of such certificates, the serial numbers shown on such
certificates must be submitted to the Depositary and, unless such Shares have
been tendered by an Eligible Institution, the signatures on the notice of
withdrawal must be guaranteed by an Eligible Institution. If Shares have been
delivered pursuant to the procedures for book-entry transfer as set forth in
Section 3, any notice of withdrawal must also specify the name and number of the
account at the Book-Entry Transfer Facility to be credited with the withdrawn
Shares and otherwise comply with such Book-Entry Transfer Facility's procedures.
Withdrawals of tendered Shares may not be rescinded, and any Shares
properly withdrawn will thereafter be deemed not validly tendered for purposes
of the Offer. However, withdrawn Shares may be retendered by again following one
of the procedures described in Section 3 at any time prior to the Expiration
Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Sub, in its sole discretion, which
determination will be final and binding. None of Sub, Parent, the Depositary,
the Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
5. CERTAIN U.S. FEDERAL INCOME TAX AND ISRAELI INCOME TAX CONSEQUENCES. Certain
U.S. Tax Considerations The following is a general summary of certain U.S.
Federal income tax consequences of the Offer that are relevant to a beneficial
holder of Shares whose Shares are tendered and accepted for payment pursuant to
the Offer (a "Holder"). The discussion is based on the Internal Revenue Code of
1986, as amended (the "Code"), regulations issued thereunder, judicial decisions
and administrative rulings, all of which are subject to change, possibly with
retroactive effect. The following discussion does not address the U.S. Federal
income tax consequences to all categories of Holders that may be subject to
special rules (e.g., holders who acquired their Shares pursuant to the exercise
of employee stock options or other compensation arrangements with the Company,
foreign holders, insurance companies, tax-exempt organizations, dealers in
securities and persons who have acquired the Shares as part of a straddle,
hedge, conversion transaction or other integrated investment), nor does it
address the Federal income tax consequences to persons who do not hold the
Shares as "capital assets" within the meaning of Section 1221 of the Code
(generally, property held for investment). Holders should consult their own tax
advisors regarding the U.S. Federal, state, local and foreign income and other
tax consequences of the Offer.
The receipt of cash for Shares pursuant to the Offer will be a taxable
transaction for U.S. Federal income tax purposes and may also be a taxable
transaction under applicable state, local and foreign income and other tax
23
<PAGE> 24
laws. In general, a Holder who sells Shares pursuant to the Offer will recognize
gain or loss for Federal income tax purposes equal to the difference, if any,
between the amount of cash received and the Holder's adjusted tax basis in the
Shares sold pursuant to the Offer. Gain or loss will be determined separately
for each block of Shares (i.e., Shares acquired at the same cost in a single
transaction) tendered pursuant to the Offer. Such gain or loss will be long-term
capital gain or loss if the Holder has held the Shares for more than one year at
the time of the consummation of the Offer. Capital gains recognized by an
individual investor (or an estate or certain trusts) upon a disposition of a
Share that has been held for more than one year generally will be subject to a
maximum tax rate of 20% or, in the case of a Share that has been held for one
year or less, will be subject to tax at ordinary income rates. Certain
limitations apply to the use of capital losses.
Certain Israeli Tax Considerations. The following is a summary of certain
Israeli tax considerations applicable to the Company's shareholders in
connection with the receipt of cash in exchange for Shares pursuant to the
Offer. The following summary is not intended and should not be construed as
legal or professional tax advice and does not cover all possible tax
considerations. The following summary is addressed only to shareholders that
hold the Shares as capital assets (generally, assets held for investment) and
may not apply to all shareholders.
Israeli law generally imposes a capital gains tax on the sale of shares in
an Israeli company like the Company by both residents and non-residents of
Israeli, unless a specific exemption is available or unless a treaty between
Israel and the country of the non-resident provides otherwise. The law
distinguishes between the "Real Gain" and the "Inflationary Surplus". The Real
Gain is the excess of the total capital gain over the Inflationary Surplus. The
Inflationary Surplus is computed on the basis of the increase in the Israeli
Consumer Price Index between the date of purchase and the date of sale. The Real
Gain is added to ordinary income which is taxed at an individual's marginal rate
(up to 50%) and 36% for companies. The Inflationary Surplus accumulated through
December 31, 1993 is generally taxed at a rate of 10%, while the Inflationary
Surplus accumulated from December 31, 1993 is exempt from capital gains tax.
Pursuant to the Income Tax Order (Exemption from Tax on Capital Gains From
the Sale of Shares) (the "Exemption Order"), capital gains from the sale, by
both residents and non-residents of Israel, of shares of an Industrial Company
which are traded on a recognized foreign stock exchange (including the Nasdaq
National Market) are exempt from taxation. There are various exceptions to the
exemption which, generally speaking, deny the exemption with regard to capital
gains realized when a share in a company has been sold for the first time after
the registration of the shares of that company on a recognized foreign stock
exchange. Sub believes that the Company currently qualifies as an Industrial
Company within the meaning of the Exemption Order and that -- absent any change
in its current business activities -- it will continue to qualify as such;
however, such qualification has never been established definitively. The
exemption under the Exemption Order is not applicable to companies that report
in accordance with the Income Tax Law (Inflationary Adjustment) - 1985.
In addition to the exemption provided by the Exemption Order, pursuant to
the Convention Between the Government of the United States of America and the
Government of Israel with respect to Taxes on Income (the "Treaty"), the sale,
exchange or disposition of Shares by a person who qualifies as a resident of the
United States within the meaning of the Treaty (a "Treaty Resident") will not be
subject to Israeli capital gains tax unless such Treaty Resident holds directly
or indirectly Shares representing 10% or more of the voting power of the Company
during any part of the 12-month period preceding the sale, exchange or
disposition. A sale, exchange or disposition of Shares by a Treaty Resident who
holds, directly or indirectly, Shares representing 10% or more of the voting
power of the Company during such 12-month period will be subject to such Israeli
capital gains tax; however, under the Treaty, such Treaty Resident would be
permitted to claim a credit for such taxes against the U.S. income tax imposed
with respect to such sale, exchange or disposition, subject to the limitations
applicable to the foreign tax credits.
Income from sale of shares which an employee was issued as the result of
the exercise of options awarded under an employee option plan in the framework
of Section 102 of the Income Tax Ordinance (a "Section 102 Plan") generally is
computed at the difference between the sale price and the exercise price and is
taxed at the employee's marginal tax rate. In a Section 102 Plan, an employee
who sells shares issued as the result of the exercise of options before two
years have elapsed from the award of the options, is subject to taxation
according
24
<PAGE> 25
to the highest tax of three possibilities: the tax which would have been owing
upon award of the options, the tax owing at the time of the sale and the tax
which would have been owing two years after the award of the options (the
"Highest Tax Provision"). At Convergys IMG's request, the Income Tax authorities
have issued a pre-ruling according to which if an employee of the Company sells
Shares to Convergys IMG in the context of a tender offer and if these Shares
have been received as a result of the exercise of options awarded the employee
in the context of the Company's Section 102 Plan less than two years prior to
the sale, then such sale will not be regarded as a violation of Section 102 and
its related regulations and, therefore, will not be subject to the Highest Tax
Provision. Rather, such employees will pay taxation at their regular marginal
rates and such taxation will be withheld at source by the trustee of the
Company's Section 102 Plan. The exemption of employees from the Highest Tax
Provision in accordance with the pre-ruling is contingent upon all of the
Company's shares being sold. Sub intends to apply for an amendment of the
pre-ruling to include sale of Shares to itself in the context of the Offer and,
though no assurance can be given, Sub believes that such amended pre-ruling will
issue prior to the conclusion of the Offer. When and if such amended pre-ruling
issues, Sub will inform the Company's employees to whom such amended pre-ruling
may be relevant.
THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL
TAX CONSEQUENCES RELATING TO THE DISPOSITION OF SHARES. HOLDERS OF SHARES ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE TAX CONSEQUENCES OF THEIR
PARTICULAR SITUATIONS.
6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES. The Shares are listed and
traded on the Nasdaq National Market under the symbol "WIZTF". The following
table sets forth, for each of the fiscal quarters indicated, the high and low
closing sales price per Share on the Nasdaq National Market as reported in
published financial sources. The Company has not paid any dividends on the
Shares since becoming a publicly traded company.
<TABLE>
<CAPTION>
SHARE PRICE
------------------
HIGH LOW
------- -------
<S> <C> <C>
1997
First Quarter............................................. $ 6.438 $ 4.500
Second Quarter............................................ $ 7.750 $ 4.875
Third Quarter............................................. $12.500 $ 6.8125
Fourth Quarter............................................ $15.250 $ 9.875
1998
First Quarter............................................. $11.500 $ 9.000
Second Quarter............................................ $12.625 $ 9.375
Third Quarter............................................. $14.750 $ 9.000
Fourth Quarter............................................ $14.500 $ 8.000
1999
First Quarter (through March 26, 1999).................... $19.375 $12.375
</TABLE>
On March 25, 1999, the last full trading day prior to the public
announcement of the Offer by Parent and Sub, the last reported closing sales
price of the Shares on the Nasdaq National Market was $16.625 per Share.
SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, STOCK PRICE QUOTATION;
EXCHANGE ACT REGISTRATION, MARGIN REGULATIONS.
Market for the Shares. The purchase of Shares by Sub pursuant to the Offer
will reduce the number of holders of Shares and the number of Shares that might
otherwise trade publicly and, depending upon the number of Shares so purchased,
could adversely affect the liquidity and market value of the remaining Shares
held by the public.
Stock Price Quotation. Depending upon the number of Shares purchased
pursuant to the Offer, the Shares may no longer be eligible for listing on the
Nasdaq National Market. In the event the Shares were no longer
25
<PAGE> 26
eligible for listing on the Nasdaq National Market, quotations might still be
available from other sources. The extent of the public market for the Shares and
the availability of such quotations would, however, depend upon the number of
holders of such Shares remaining at such time, the interest in maintaining a
market in such Shares on the part of securities firms, the possible termination
of registration of such Shares under the Exchange Act as described below and
other factors.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the SEC if the Shares are not
listed on a national securities exchange, quoted on an automated inter-dealer
quotation system or held by 300 or more holders of record. Termination of
registration of the Shares under the Exchange Act would substantially reduce the
information required to be furnished by the Company to its shareholders and to
the SEC and would make certain provisions of the Exchange Act no longer
applicable to the Company. Furthermore, the ability of "affiliates" of the
Company and persons holding "restricted securities" of the Company to dispose of
such securities pursuant to Rule 144 or Rule 144A promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), may be impaired or
eliminated.
PARENT AND SUB CURRENTLY INTEND TO SEEK TO CAUSE THE COMPANY TO TERMINATE
THE REGISTRATION OF THE SHARES UNDER THE EXCHANGE ACT AS SOON AS PRACTICABLE
AFTER CONSUMMATION OF THE OFFER IF THE REQUIREMENTS FOR TERMINATION OF
REGISTRATION ARE MET.
Margin Regulations. The Shares are presently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which status has the effect, among other things, of
allowing brokers to extend credit on the collateral of the Shares. Depending
upon factors similar to those described above regarding market quotations, it is
possible that, following the Offer, the Shares would no longer constitute
"margin securities" for the purposes of the margin regulations of the Federal
Reserve Board and therefore could no longer be used as collateral for loans made
by brokers. In addition, if registration of the Shares under the Exchange Act
were terminated, the Shares would no longer constitute "margin securities."
Companies Ordinance Section 236. If shareholders of the Company holding at
least 90% of the Shares (excluding Shares presently held by Sub, by a subsidiary
of Sub or for them) accept the Offer within the Initial Period, Sub shall be
entitled, pursuant to Section 236 of the Companies Ordinance to declare by the
Notice of Acquisition, to be given within two months following the Initial
Period, that it desires to purchase the Shares of the remaining shareholders.
Following such notice, Sub will be entitled and obligated to purchase those
Shares on the same terms as the Offer. For purposes of Section 236 of the
Companies Ordinance, Sub believes that the Shares owned by Convergys IMG are not
held by Sub, any of its subsidiaries or for them although such position is not
free from doubt under Israeli law. If Sub's belief is correct and if holders of
at least 1,370,175 Shares (representing approximately 66.83% of the outstanding
Shares not held by Convergys IMG) or at least 2,195,322 Shares (representing
approximately 73.99% of the outstanding Shares not held by Convergys IMG
assuming the exercise of all outstanding Options (as defined herein)) accept the
Offer, Sub will have acquired at least 90% of the outstanding Shares and will be
entitled to purchase the remaining Shares in the Compulsory Acquisition. If
Sub's belief is incorrect, holders of at least 1,845,195 Shares (representing
90% of the outstanding Shares not held by Convergys IMG) or at least 2,670,342
Shares assuming the exercise of all outstanding Options) must accept the Offer
in order for Sub to be entitled to purchase the remaining Shares in the
Compulsory Acquisition. Sub intends to give Notice of Acquisition within the
required time period and in the required form and to complete the Compulsory
Acquisition.
Shareholders of the Company who object to the Compulsory Acquisition shall
be entitled to file an objection with the Tel Aviv District Court within one
month of the Notice of Acquisition. In the event that any such objection is
filed, the Court may issue such relief as it sees fit. One month after the
Notice of Acquisition, or, if an objection was filed, one month after the
Court's resolution of such objection, Sub shall deliver to the Company a copy of
the Notice of Acquisition and the consideration for the Shares it is entitled to
purchase in accordance with Section 236, and the Company shall register Sub as
the record owner of such Shares. The Company shall receive the consideration as
trustee for the shareholders whose Shares are purchased pursuant to the
Compulsory Acquisition.
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<PAGE> 27
This Offer to Purchase also serves as a "Plan" under Section 236 of the
Companies Ordinance and, by accepting the Offer, Company shareholders are
approving the "Plan.".
8. CERTAIN INFORMATION CONCERNING THE COMPANY. The information concerning the
Company contained in this Offer to Purchase, including that set forth below
under "-- Selected Financial Data," has been furnished by the Company or has
been taken from or based upon publicly available documents and records on file
with the SEC and other public sources. The summary information set forth below
is qualified in its entirety by reference to such reports (which may be obtained
and inspected as described below) and should be considered in conjunction with
the more comprehensive financial and other information in such reports and other
publicly available reports and documents filed by the Company with the SEC and
other publicly available information. Although Sub and Parent do not have any
knowledge that would indicate that any statements contained herein based upon
such reports are untrue, neither Parent nor Sub assumes responsibility for the
accuracy or completeness of the information concerning the Company contained in
such documents and records or for any failure by the Company to disclose events
which may have occurred or may affect the significance or accuracy of any such
information but which are unknown to Parent or Sub.
General. The business of the Company consists of the development,
production and sale of computer software which provides multi-channel
subscription television systems operators with a comprehensive and advanced
subscriber management system. The Company is limited by shares, duly registered
under the laws of the State of Israel and its principal executive offices are
located at 8 Maskit Street, Herzlia, 46776 Israel. The telephone number of the
Company at such offices is 972-9-952-6555.
Selected Financial Information. Set forth below is a summary of certain
consolidated financial information with respect to the Company, excerpted or
derived from the Company's Form 8-K, date of report March 31, 1999, as filed
with the SEC pursuant to the Exchange Act.
More comprehensive financial information is included in such reports
(including management's discussion and analysis of financial condition and
results of operations) and in other documents filed by the Company with the SEC.
The following summary is qualified in its entirety by reference to such reports
and other documents and all of the financial information (including any related
notes) contained therein. Such reports, documents and financial information may
be inspected and copies may be obtained from the SEC in the manner set forth
below under "-- Available Information." In addition, Schedule II hereto sets
forth the audited financial statements for the fiscal years ended December 31,
1998 and 1997.
WIZTEC SOLUTIONS LTD.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------
1998 1997
--------- ---------
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Statement of Operations Data:
Revenues.................................................. $20,297 $11,975
Net Income................................................ 5,623 2,130
Earnings Per Share:
Basic..................................................... $ .85 $ .34
Diluted................................................... $ .80 $ .34
Weighted Average Common Shares Outstanding:
Basic..................................................... 6,619 6,194
Diluted................................................... 7,007 6,295
Other Data:
Ratio of Earnings to Fixed Charges (1).................... 47.05x 22.60x
Book Value per Diluted Share.............................. $ 3.47 $ 2.90
</TABLE>
27
<PAGE> 28
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------
1998 1997
------- -------
<S> <C> <C>
Balance Sheet Data:
Total Current Assets...................................... $22,479 $14,379
Total Assets.............................................. 28,442 20,671
Total Current Liabilities................................. 3,853 2,055
Total Liabilities......................................... 4,107 2,385
Shareholders' Equity...................................... 24,335 18,286
</TABLE>
- ---------------
(1) For purposes of determining the historical ratios of earnings to fixed
charges, earnings consist of earnings before taxes plus fixed charges. Fixed
charges consist of the portion of operating lease payments representative of
the interest factor.
Certain Projections for the Company. THE FOLLOWING SETS FORTH CERTAIN
FINANCIAL INFORMATION AND PROJECTIONS (THE "PROJECTIONS") FOR THE COMPANY FOR
THE FISCAL YEAR ENDING DECEMBER 31, 1999 AND THE FIRST QUARTER OF 1999. THE
COMPANY DOES NOT IN THE ORDINARY COURSE PUBLICLY DISCLOSE PROJECTIONS AS TO
FUTURE REVENUES OR EARNINGS, AND THE PROJECTIONS WERE NOT PREPARED WITH A VIEW
TO PUBLIC DISCLOSURE OR FOR USE IN CONNECTION WITH THIS OFFER. THESE PROJECTIONS
WERE NOT PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
AND THE COMPANY'S INDEPENDENT ACCOUNTANTS HAVE NOT EXAMINED OR COMPILED ANY OF
THE FOLLOWING PROJECTIONS OR EXPRESSED ANY CONCLUSION OR PROVIDED ANY OTHER FORM
OF ASSURANCE WITH RESPECT TO SUCH PROJECTIONS AND ACCORDINGLY ASSUME NO
RESPONSIBILITY FOR SUCH PROJECTIONS. PARENT OBTAINED THESE PROJECTIONS AS PART
OF ITS DUE DILIGENCE FOR THE MARCH TRANSACTION AND IN ORDER FOR PARENT TO
INTERNALLY ACCOUNT FOR AND BUDGET FOR ITS OWNERSHIP OF THE COMPANY. THE
PROJECTIONS WERE PREPARED WITH A LIMITED DEGREE OF PRECISION, AND WERE NOT
PREPARED WITH A VIEW TO COMPLIANCE WITH THE GUIDELINES ESTABLISHED BY THE
AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS, WHICH
WOULD REQUIRE A MORE COMPLETE PRESENTATION OF DATA THAN IS SHOWN BELOW. THE
COMPANY HAS ALSO INFORMED PARENT AND SUB THAT ITS INTERNAL FINANCIAL FORECASTS
(UPON WHICH THE PROJECTIONS PROVIDED TO PARENT AND SUB WERE BASED IN PART) ARE,
IN GENERAL, PREPARED SOLELY FOR INTERNAL USE AND CAPITAL BUDGETING AND OTHER
MANAGEMENT DECISION-MAKING PURPOSES AND ARE SUBJECTIVE IN MANY RESPECTS AND THUS
SUSCEPTIBLE TO VARIOUS INTERPRETATIONS AND PERIODIC REVISION BASED ON ACTUAL
EXPERIENCE AND BUSINESS DEVELOPMENTS. PROJECTED INFORMATION OF THIS TYPE IS
BASED ON ESTIMATES AND ASSUMPTIONS WHICH THEMSELVES ARE BASED ON EVENTS AND
CIRCUMSTANCES THAT HAVE NOT TAKEN PLACE AND ARE INHERENTLY SUBJECT TO
SIGNIFICANT FINANCIAL, MARKET, ECONOMIC AND COMPETITIVE UNCERTAINTIES AND
CONTINGENCIES, ALL OF WHICH ARE DIFFICULT TO PREDICT AND MANY OF WHICH ARE
BEYOND THE CONTROL OF THE COMPANY, SUB OR PARENT OR THEIR RESPECTIVE FINANCIAL
ADVISORS. MANY OF THE ASSUMPTIONS UPON WHICH THE FOREGOING PROJECTIONS WERE
BASED, NONE OF WHICH WERE APPROVED BY PARENT OR SUB, ARE DEPENDENT UPON ECONOMIC
FORECASTING (BOTH GENERAL AND SPECIFIC TO THE COMPANY'S BUSINESSES), WHICH IS
INHERENTLY UNCERTAIN AND SUBJECTIVE. THEREFORE, IT IS EXPECTED THAT THERE WILL
BE DIFFERENCES BETWEEN THE ACTUAL AND PROJECTED RESULTS AND THAT THE ACTUAL
RESULTS MAY BE MATERIALLY HIGHER OR LOWER THAN THOSE PROJECTED. THE INCLUSION OF
THE PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS A REPRESENTATION BY THE
COMPANY, PARENT, SUB, BROADVIEW OR ANY OTHER PERSON THAT THE PROJECTED RESULTS
WILL BE ACHIEVED. THESE PROJECTIONS SHOULD BE READ IN CONJUNCTION WITH THE
HISTORICAL FINANCIAL INFORMATION OF THE COMPANY INCLUDED ELSEWHERE IN THIS
OFFER. SEE "CERTAIN INFORMATION CONCERNING THE COMPANY."
28
<PAGE> 29
CONSOLIDATED COMPANY FORECAST*
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
Q1 1999 Q2 1999 Q3 1999 Q4 1999 TOTAL
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues(**)................................ $7,351 $7,132 $7,129 $7,134 $28,746
Cost of Revenues............................ 3,089 3,062 3,282 3,369 12,802
Gross Profit................................ 4,262 4,070 3,847 3,765 15,944
Software Development Costs.................. 275 273 274 273 1,094
Selling, General and Administrative
Expenses.................................. 1,367 1,522 1,532 1,600 6,021
Operating Income............................ 2,620 2,275 2,041 1,893 8,829
Other Income................................ 110 105 105 105 425
Income Before Taxes on Income............... 2,730 2,380 2,146 1,998 9,254
Taxes on Income............................. 444 432 364 349 1,590
Net Income.................................. 2,286 1,949 1,781 1,649 7,665
</TABLE>
- ---------------
(*) Including consolidation adjustments for inter-company transactions.
(**) Assuming the Company's receipt of approximately $5,000,000 in revenues
from Convergys IMG, mainly from professional and consulting work performed
for clients of Convergys IMG.
In addition, on March 25, 1999, the Company provided Parent with its
estimate of March results and first quarter results so that Parent could satisfy
itself that the split of March revenues and expenses from total first quarter
results was reasonable. Parent is required to make this determination because,
as a result of the March Transaction, beginning as of March 1, 1999, Parent, as
an indirect 70% shareholder of the Company, will include 100% of the Company's
revenues and expenses in its financial results. The Company indicated to Parent
that, as of March 25, 1999, it estimated that its first quarter results would be
$7.3 million in revenues and $2.9 million in net income.
The foregoing Projections constitute "forward looking statements" and
readers should be aware that the following important factors, among others, in
some cases have affected, and in the future could affect, the Company's actual
results and could cause the Company's actual results for 1999 to differ
materially from those in the Projections. These factors include, among others,
the following possibilities: (i) the development of new technology that could
render the Company's products or services noncompetitive or obsolete; (ii) the
failure of the Company to be Year 2000 compliant; (iii) continued significant
and increased competition in its markets and for its products and services; and
(iv) the failure of the Company to continue to attract and retain highly
qualified key technical and business personnel, including software
professionals.
Available Information. The Company is subject to the informational filing
requirements of the Exchange Act applicable to "foreign private issuers" and, in
accordance therewith, is obligated to file reports, including annual reports on
Form 20-F, and other information with the SEC relating to its business,
financial condition and other matters. Such reports and other information should
be available for inspection at the public reference facilities of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the
SEC located at Seven World Trade Center, Suite 1300, New York, NY 10048, and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies
of such information should be obtainable by mail, upon payment of the SEC's
customary charges, by writing to the SEC's principal office at 450 Fifth Street,
N.W., Washington, D.C. 20549.
9. CERTAIN INFORMATION CONCERNING PARENT AND SUB.
Parent and Sub. Parent provides outsourced information services (operated
by Convergys Information Management Group Inc.) and customer management
solutions (operated by Convergys Customer Management Group Inc.). Shares of the
Parent are traded on the New York Stock Exchange under the symbol "CVG." Parent
is an Ohio corporation with its principal executive offices located at 201 East
Fourth Street Cincinnati, Ohio 45202. The telephone number of Parent at such
location is (513) 723-7000.
29
<PAGE> 30
Sub is a company limited by shares duly registered under the laws of the
State of Israel, organized in connection with the Offer and has not carried on
any significant activities other than in connection with the Offer. The
principal executive offices of Sub are located 29B Keren Hayesod Street,
Jerusalem 94188 Israel. The telephone number of Sub at such location is
972-2-625-7751. All of the outstanding capital stock of Sub is owned directly or
beneficially by Parent. Until immediately prior to the time Sub purchases Shares
pursuant to the Offer, it is not anticipated that Sub will have any significant
assets or liabilities or engage in any significant activities other than those
incident to its formation and capitalization and the transactions contemplated
by the Offer.
The name, citizenship, business address, present principal occupation and
material positions held during the past five years of each of the executive
officers and directors of Parent and Sub are set forth in Schedule I to this
Offer to Purchase. Except as set forth in this Offer to Purchase none of Sub,
Parent, or, to the best knowledge of Sub and Parent, any of the persons listed
on Schedule I hereto or any associate or majority owned subsidiary of Sub,
Parent or any of the persons so listed, beneficially owns or has a right to
acquire, directly or indirectly, any Shares, and none of Sub or Parent, or, to
the best knowledge of Sub and Parent, any of the persons or entities referred to
above, nor any of the respective executive officers, directors or subsidiaries
of any of the foregoing, has effected any transaction in the Shares during the
past 60 days.
Except as set forth in this Offer to Purchase, none of Sub, Parent or, to
the best knowledge of Sub and Parent, any of the persons listed on Schedule I
hereto, has any contract, arrangement, understanding or relationship with any
other person with respect to any securities of the Company, including, but not
limited to, any contract, arrangement, understanding or relationship concerning
the transfer or the voting of any securities of the Company, joint ventures,
loan or option arrangements, puts or calls, guarantees of loans, guarantees
against loss or the giving or withholding of proxies.
Except as set forth in this Offer to Purchase, none of Sub, Parent, any of
their respective affiliates, nor, to the best knowledge of Sub or Parent, any of
the persons listed on Schedule I, has had, since January 1, 1996, any business
relationships or transactions with the Company or any of its executive officers,
directors or affiliates that would be required to be reported under the rules of
the SEC applicable to the Offer. Except as set forth in this Offer to Purchase,
since January 1, 1996 there have been no contacts, negotiations or transactions
between Sub, Parent, any of their respective affiliates or, to the best
knowledge of Sub or Parent, any of the persons listed on Schedule I, and the
Company or its affiliates concerning a merger, consolidation or acquisition,
tender offer or other acquisition of securities, election of directors or a sale
or other transfer of a material amount of assets.
Available Information. Parent is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is obligated to
file reports, proxy statements and other information with the SEC relating to
its business, financial condition and other matters. Information as of
particular dates concerning Parent's directors and officers, their remuneration,
options granted to them, the principal holders of Parent's securities and any
material interests of such persons in transactions with Parent is required to be
disclosed in proxy statements distributed to Parent's shareholders and filed
with the SEC. Such reports, proxy statements and other information should be
available for inspection at the public reference facilities of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the
SEC located at Seven World Trade Center, Suite 1300, New York, NY 10048, and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies
of such information should be obtainable by mail, upon payment of the SEC's
customary charges, by writing to the SEC's principal office at 450 Fifth Street,
N.W., Washington, D.C. 20549. The SEC also maintains a website on the Internet
at http://www.sec.gov that contains reports, proxy statements and other
information relating to Parent which have been filed via the SEC's EDGAR System.
10. SOURCES AND AMOUNT OF FUNDS.
The Offer is not conditioned upon any financing arrangements. Sub estimates
that the total amount of funds required by Sub to consummate the Offer,
including the fees and expenses of the Offer, is approximately $56.5 million.
Sub will obtain all such funds from Parent in the form of capital contributions,
loans or advances. Parent anticipates funding the capital contributions or
advances through one or more of a combination of cash on hand and other
internally generated funds, commercial paper, privately placed notes and
arranged bank credit facilities.
30
<PAGE> 31
Parent has an established credit facility with a syndicate of fifteen banks
of which Chase Manhattan Bank is the lead lender and administrative agent. The
facility limit is $600,000,000 and interest paid under the facility is based on
capital Libor rates adjusted according to Parent's credit rating. As of March
23, 1999, Parent had borrowed approximately $355,000,000 under the facility. The
facility expires on December 15, 1999; however, Parent can request an extension
for an additional 364 days beyond December 15, 1999.
It is anticipated that any indebtedness incurred by Parent in connection
with the Offer will be repaid from funds generated internally by Parent and its
subsidiaries, through other sources which may include the proceeds of future
bank refinancings, dispositions or the public or private sale of debt equity
securities, or through a combination of two or more such sources. No final
decisions have been made, however, concerning the method Parent will employ to
repay any such indebtedness. Such decisions, when made, will be based on
Parent's review from time to time of the advisability of particular actions, as
well as on prevailing interest rates and financial and other economic
conditions.
11. DIVIDENDS AND DISTRIBUTIONS.
If, on or after March 25, 1999, the Company should (a) split, combine or
otherwise change the Shares or its capitalization, (b) acquire or otherwise
cause a reduction in the number of outstanding Shares or other securities or (c)
issue or sell additional securities, then, subject to the provisions of Section
12, Sub, in its sole discretion, may make such adjustments as it deems
appropriate in the Offer Price and other terms of the Offer, including, without
limitation, the number or type of securities offered to be purchased.
If, on or after March 25, 1999, the Company should declare or pay any cash
dividend on the Shares or other distribution on the Shares or issue with respect
to the Shares or any additional Shares, shares of any other class of capital
stock, other voting securities or any securities convertible into, or rights,
warrants or, conditional or otherwise, to acquire, any of the foregoing, payable
or distributable to shareholders of record on a date prior to the transfer of
Shares purchased pursuant to the Offer to Sub or its nominee or transferee on
the Company's stock transfer records, then, subject to the provisions of Section
12, (a) the Offer Price may, in the sole discretion of Sub, be reduced by the
amount of any such cash dividend or cash distribution and (b) the whole of any
such noncash dividend, distribution or issuance to be received by the tendering
shareholders will (i) be received and held by the tendering shareholders for the
account of Sub and will be required to be promptly remitted and transferred by
each tendering shareholder to the Depositary for the account of Sub, accompanied
by appropriate documentation of transfer, or (ii) at the direction of Sub, be
exercised for the benefit of Sub, in which case the proceeds of such exercise
will promptly be remitted to Sub. Pending such remittance and subject to
applicable law, Sub will be entitled to all rights and privileges as owner of
any such noncash dividend, distribution, issuance or proceeds and may withhold
the entire Offer Price or deduct from the Offer Price the amount or value
thereof, as determined by Sub in its sole discretion.
12. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, Sub shall not be required
to accept for payment and pay for any Shares tendered, and may terminate or
amend the Offer, and may postpone the acceptance for payment of and payment for
Shares tendered, if (i) it has not received the approval of the Israeli
Investment Center or acknowledgment that such approval is not required and the
approval of the Office of the Chief Scientist of the Ministry of Industry and
Trade to purchase the Shares as described below, or (ii) at any time on or after
March 25, 1999 and prior the time of acceptance for payment of any such Shares
(whether or not any other Shares have therefore been accepted for payment or
paid for pursuant to the Offer) any of the following events shall occur:
(a) there shall be instituted or pending any action or proceeding
before any court, regulatory or administrative agency or commission,
domestic or foreign, initiated by a governmental, regulatory or
administrative body or authority, or any other person (i) challenging the
acquisition by Parent or Sub of the Shares, seeking to restrain or prohibit
the consummation of the transactions contemplated by the Offer, seeking to
obtain any material damages or otherwise directly or indirectly relating to
the consummation of the transactions contemplated by the Offer, (ii)
seeking to prohibit or impose any material limitation on the
31
<PAGE> 32
ownership or operation by Parent, Sub or any of their subsidiaries of all
or any portion of the business or assets or properties of Parent or any of
its subsidiaries or the Company or any of its subsidiaries or to compel
Parent, Sub or any of their subsidiaries to dispose of or hold separate all
or any portion of the business or assets of Parent or any of its
subsidiaries or the Company or any of its subsidiaries, (iii) imposing any
material limitation upon the ability of Parent, Sub or any of their
subsidiaries effectively to acquire or hold or to exercise full rights of
ownership of Shares, including without limitation the right to vote Shares
purchased by it on all matters properly presented to the shareholders of
the Company, (iv) making the acceptance for payment, or payment for, some
or all of the Shares illegal or resulting in a material delay in the
ability of Parent or Sub to accept for payment or pay for some or all of
the Shares or (v) which otherwise, in the reasonable judgment of Parent, is
reasonably likely to have a materially adverse effect on the financial
condition, results of the operations, business, operations, properties,
assets or prospects of the Company and its subsidiaries taken as a whole or
on the value of the Shares to Parent and Sub; or
(b) there shall be in force an injunction or other order issued by any
court, regulatory or administrative agency or commission, domestic or
foreign, (i) restraining or prohibiting the consummation of the
transactions contemplated by the Offer or awarding any material damages
relating to the consummation of the transactions contemplated by the Offer,
(ii) prohibiting or imposing any material limitation on the ownership or
operation by Parent, Sub or any of their subsidiaries of all or any portion
of the business or assets or properties of Parent or any of its
subsidiaries or the Company or any of its subsidiaries or compelling
Parent, Sub or any of their subsidiaries to dispose of or hold separate all
or any portion of the business or assets of Parent or any of its
subsidiaries or the Company or any of its subsidiaries, (iii) imposing any
material limitation upon the ability of Parent, Sub or any of their
subsidiaries effectively to acquire or hold or to exercise full rights of
ownership of Shares including without limitation the right to vote Shares
purchased by it on all matters properly presented to the shareholders of
the Company, (iv) making the acceptance for payment, or payment for, some
or all of the Shares illegal or resulting in a material delay in the
ability of Parent or Sub to accept for payment of pay for some or all of
the Shares or (v) which is otherwise, in the reasonable judgment of Parent,
is reasonably likely to have a materially adverse effect on the financial
condition, results of operations, business, operations, properties, assets
or prospects of the Company and its subsidiaries taken as a whole or on the
value of the Shares to Parent and Sub; or
(c) any statute, rule, regulation or order shall be enacted,
promulgated, entered, enforced or deemed applicable to the Offer or any
other action shall have been taken by any government, governmental
authority or court, domestic or foreign, that, in the reasonable judgment
of Sub is reasonably likely to result, directly or indirectly, in any of
the consequences referred to in clauses (iii) through (v) of paragraph (a)
above; or
(d) any material adverse change shall have occurred in the financial
condition, results of operations or business of the Company, or Parent or
Sub shall have become aware of liabilities, contingent or otherwise, or any
facts or circumstances that reasonably could be expected to result in a
claim for damages which have not been disclosed to Parent or Sub and which
could materially and adversely affect the business, assets, conditions
(financial or otherwise) or operations of the Company and its subsidiary
taken as a whole; or
(e) there shall have occurred (i) any general suspension of, or
limitation on price for or trading in securities in the over-the-counter
market, (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or Israel, (iii) a
commencement of a war, armed hostilities or other national or international
calamity involving the United States or Israel, (iv) any limitation by any
governmental authority on the extension of credit by banks or other lending
institutions, (v) civil riots, acts of insurgence and related actions that
threaten the normal conduct of business and commerce in Israel, or (vi) in
the case of any of the foregoing existing at the time of the commencement
of the Offer, in the reasonable judgment of Sub, a material acceleration or
worsening thereof; or
(f) a tender or exchange offer for Shares shall have been made or
publicly proposed to be made by another person offering a higher price for
Shares than Sub;
which, in the reasonable judgment of Sub, in any such case, and regardless of
the circumstances giving rise to any such condition, makes it inadvisable to
proceed with the Offer or acceptance for payment and payment.
32
<PAGE> 33
The foregoing conditions are for the sole benefit of Sub and may be
asserted by Sub regardless of the circumstances giving rise to any such
condition or may be waived by Sub in whole or in part at any time and from time
to time in its sole discretion. The failure by Sub at any time to exercise any
of the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed an ongoing right which may be asserted at any time
and from time to time.
Office of Israeli Chief Scientist. Sub's acquisition of Shares in the
Company requires the approval of the Office of the Chief Scientist of the
Ministry of Industry and Trade of the State of Israel (the "OCS"). Under the Law
for the Encouragement of Industrial Research and Development, 1984, and the
regulations promulgated thereunder, research and development programs approved
by the OCS are eligible to receive grants, if they meet certain criteria, in
exchange for payment of royalties from the sale of the products developed in the
course of the OCS-funded research and development programs. Certain of the
Company's research and development activities were funded through OCS grants.
The terms of the OCS grants awarded to the Company include the obligation to
obtain the approval of the OCS prior to certain kinds of transactions with
regard to the shares and other means of control of the Company and to obtain the
approval of the OCS to move the manufacturing of products based on technologies
developed through OCS funded activities outside of Israel. The purchase of
Shares in accordance with this Offer will require such approval.
Israel Investment Center. Sub believes that the purchase of Shares in
accordance with this Offer does not require approval by the Israel Investment
Center (the "Investment Center") because it falls within a general exemption and
within a specific approval already granted by the Investment Center. However,
some ambiguity exists in that regard and therefore Sub has asked the Investment
Center to state explicitly that its approval is not required. This Offer is
contingent upon such statement being made or, alternatively, on the approval of
the Investment Center being granted. The Investment Center was established under
the Law for the Encouragement of Capital Investments, 1959. That law provides
that a capital investment in eligible facilities, upon application to the
Investment Center, may be designated as an Approved Enterprise. Part of the
facilities of the Company have been so designated and, therefore,
qualify -- subject to observance of the conditions of the law and the specific
certificates of approval issued upon designation of the Company's Approved
Enterprise -- for various tax and other benefits. Among the conditions of the
Company's certificate of approval is a restriction -- subject to various
exemptions -- on the transfer of the Company's Shares without approval of the
Investment Center.
13. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS.
General. Except as described in this Section 13, based on a review of
publicly available filings made by the Company with the SEC and other publicly
available information concerning the Company, neither Sub nor Parent is aware of
any license or regulatory permit that appears to be material to the business of
the Company and its subsidiaries, taken as a whole, that might be adversely
affected by the acquisition of Shares by Parent or Sub pursuant to the Offer or
otherwise, or of any approval or other action by any governmental,
administrative or regulatory agency or authority, domestic or foreign, that
would be required prior to the acquisition of Shares by Sub pursuant to the
Offer or otherwise. Should any such approval or other action be required, Sub
and Parent presently contemplate that such approval or other action will be
sought. While, except as otherwise described in this Offer to Purchase, Sub does
not presently intend to delay the acceptance for payment of, or payment for,
Shares tendered pursuant to the Offer pending the outcome of any such matter,
there can be no assurance that any such approval or other action, if needed,
would be obtained or would be obtained without substantial conditions or that
failure to obtain any such approval or other action might not result in
consequences adverse to the Company's business or that certain parts of the
Company's business might not have to be disposed of, or other substantial
conditions complied with, in the event that such approvals were not obtained or
such other actions were not taken or in order to obtain any such approval or
other action. If certain types of adverse action are taken with respect to the
matters discussed below, Sub could decline to accept for payment, or pay for,
any Shares tendered. See Section 12 for certain conditions to the Offer,
including conditions with respect to governmental actions.
Legal Matters. The Offer is conditioned upon the approval of the Israel
Investment Center and the OCS.
33
<PAGE> 34
14. FEES AND EXPENSES.
Broadview provides merger and acquisition advisory services to information
technology, communications and media companies. Parent and Broadview entered
into an agreement dated June 14, 1996 whereunder Parent retained Broadview to
assist it in connection with its corporate development program. In that
capacity, Broadview analyzes Parent's corporate strategy and goals, helps
establish transaction criteria consistent with those goals, develops and screens
potential target candidates against the established criteria and helps to
negotiate and structure transactions. The agreement continues in effect until
terminated by either party giving to the other not less than 30 days' written
notice. Generally under the agreement, Broadview is paid a monthly retainer of
$6,500, which amounts are credited against success fees payable to Broadview
upon the completion of transactions. Under the terms of the agreement, in
connection with its work on the Wiztec transaction, Parent has previously paid
Broadview approximately $293,000 for the acquisition pursuant to the First
Purchase Agreement, approximately $450,000 in connection with the March
Transaction, and will pay it additional consideration in connection with the
Offer of up to $530,000 if all of the Shares are tendered. The issuance of the
fairness opinion with respect to the Offer is included as part of the fees being
paid to Broadview in connection with its work on the Wiztec transaction. Parent
has agreed to reimburse Broadview for its reasonable out-of-pocket expenses and
to indemnify it against certain liabilities, including certain liabilities under
the federal securities laws.
Sub and Parent have retained Georgeson & Company Inc. to serve as the
Information Agent and IBJ Whitehall Bank & Trust Company to serve as the
Depositary in connection with the Offer. The Information Agent may contact
holders of Shares by personal interview, mail, telephone, telex, telegraph and
other methods of electronic communication and may request brokers, dealers,
banks, trust companies and other nominees to forward the Offer materials to
beneficial holders. The Information Agent and the Depositary will each receive
reasonable and customary compensation for their services, be reimbursed for
certain reasonable out-of-pocket expenses and be indemnified against certain
liabilities and expenses in connection with their services, including certain
liabilities under the Federal securities laws.
It is estimated that the expenses incurred in connection with the Offer
will be approximately as set forth below:
<TABLE>
<S> <C>
Advisor Fees and Expenses................................... $530,000
Information Agent Fees...................................... 12,000
Depositary Fees............................................. 15,000
Filing Fees................................................. 11,150
Legal Fees,................................................. 125,000
Printing and Mailing Costs, Miscellaneous................... 50,000
--------
Total............................................. $743,150
========
</TABLE>
Except as set forth above, neither Parent nor Sub will pay any fees or
commissions to any broker or dealer or other person or entity in connection with
the solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers,
commercial banks and trust companies will, upon request, be reimbursed by Sub
for customary mailing and handling expenses incurred by them in forwarding the
Offer materials to their customers.
Certain employees of the Company have assisted Sub with respect to the
Offer, primarily by providing information concerning the Company for preparation
of the Offer. Principally, this information has included financial information
of the Company and stock ownership and stock transaction data with respect to
the Company. Certain employees of Parent and Convergys IMG have also assisted
Sub with respect to the Offer by assisting in the preparation of the Offer. No
employee of the Company, Parent or Convergys IMG has, or will, receive any
additional or separate compensation for such services.
15. MISCELLANEOUS.
The Offer is being made solely by this Offer to Purchase and the related
Letter of Transmittal and is being made to all holders (and all persons who may
become shareholders during the course of the Offer as the result of the exercise
of the Options) of Shares. Sub is not aware of any state where the making of the
Offer is prohibited
34
<PAGE> 35
by administrative or judicial action pursuant to any valid state statute. If Sub
becomes aware of any valid state statute prohibiting the making of the Offer or
the acceptance of the Shares pursuant thereto, Sub shall make a good faith
effort to comply with such statute or seek to have such statute declared
inapplicable to the Offer. If, after such good faith effort, Sub cannot comply
with such state statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) holders of Shares in such state. In those
jurisdictions where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer is being made on behalf of Sub
by one or more registered brokers or dealers licensed under the laws of such
jurisdictions.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF PARENT OR SUB NOT CONTAINED HEREIN OR IN THE LETTER
OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Sub and Parent have filed with the SEC the Schedule 13E-3 pursuant to Rule
13e-3 and the Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act,
together with exhibits, furnishing certain additional information with respect
to the Offer. Such Schedules and any amendments thereto, including exhibits,
should be available for inspection and copies should be obtainable in the same
manner set forth in Section 8 of this Offer to Purchase (except that such
material will not be available at the regional offices of the SEC).
Convergys Israel Investments Ltd.
April 1, 1999
35
<PAGE> 36
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
OF PARENT AND SUB
1. Directors and Executive Officers of Parent. The following table sets
forth the name and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years, of each
director and executive officer of Parent. Unless otherwise indicated, each such
person is a citizen of the United States of America and the business address of
each such person is c/o Convergys Corporation, 201 East Fourth Street,
Cincinnati, Ohio 45202. Unless otherwise indicated, each occupation set forth
opposite an individual's name refers to employment with Parent. Unless otherwise
indicated, each such person has held his or her present occupation as set forth
below, or has been an executive officer at Parent for the past five years.
Charles S. Mechem, Jr., Chairman of the Board since May 1998; Chairman of
Cincinnati Bell Inc. ("CBI"), 1996-1998; Commissioner Emeritus, Ladies
Professional Golf Association ("LPGA"); Commissioner of the LPGA, 1991-1995.
James F. Orr, President and Chief Executive Officer since May 1998; Chief
Operating Officer of CBI, 1996-1998; Executive Vice President of CBI and
President and Chief Executive Officer of Convergys IMG, 1995-1996; Chief
Operating Officer of Convergys IMG, 1994 - 1995.
William D. Baskett III, General Counsel and Secretary since May 1998;
General Counsel and Chief Legal Officer of CBI, 1993 -1998; Partner of Frost &
Jacobs LLP, 1970-1997.
Steven G. Rolls, Chief Financial Officer since June 1998; Vice President
and Controller of The B.F. Goodrich Company, 1993 - 1998.
Robert P. Komin, Vice President Finance and Treasurer, since May 1998; Vice
President Finance and Planning of CBI, 1996-1998; Director of Finance and
Planning of CBI, 1995-1996; Product Marketing Manager of Rogue Wave Software,
1994-1995.
Cheryl N. Campbell, Vice President Public Relations, since September 1998;
Vice President of Public Relations of CBI, 1997-1998; Vice President of
Corporate Communications and Public Affairs of Cincinnati Bell Telephone Company
("CBT"), 1996-1997; Vice President of Regulatory Affairs of CBT, 1995-1996;
Director of Docket Management and Regulatory Affairs of CBT, 1993-1995.
Thomas A. Cruz, Vice President Human Resources and Administration, since
May 1998, Corporate Vice President of Human Resources and Administration of CBI,
1997-1998; Senior Vice President of Human Resources and Administration of
Convergys IMG, 1993-1997.
Andre S. Valentine, Vice President and Controller, since September 1998;
Controller and Chief Accounting Officer of CBI during 1998; Director of
Corporate Accounting of CBI, 1997-1998; Business Assurance Manager at
PricewaterhouseCoopers LLP, 1990-1997.
John F. Barrett, Director; President and Chief Executive Officer of The
Western and Southern Life Insurance Company, since 1994.
Judith G. Boynton, Director; Executive Vice President and Chief Financial
Officer of Polaroid Corporation since 1998; Vice President and Controller of
Amoco Corporation 1996-1998; General Manager - Auditing, 1994-1996.
Gary C. Butler, Director; President and Chief Operating Officer of
Automatic Data Processing, Inc. since 1998; Group President of the Employer
Services Group, 1995-1998; Group President of the Dealer Services Group,
1990-1995.
Roger L. Howe, Director; Retired Chairman of the Board of U.S. Precision
Lens, Inc. since 1998; Chairman of the Board 1988-1998.
Steven C. Mason, Director; Retired Chairman of the Board and Chief
Executive Officer of Mead Corporation since 1997; Chairman of the Board and
Chief Executive Officer, 1992-1997.
<PAGE> 37
2. Directors and Executive Officers of Sub. The following table sets forth
the name and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years, of each
director and executive officer of Sub. Each such person is a citizen of the
United States of America, and the business address of each such person is c/o
Convergys Corporation, 201 East Fourth Street, Cincinnati, Ohio 45202.
William D. Baskett III, Vice President of Sub; General Counsel and
Secretary of Parent.
Roy T. Heggland, Director of Sub; Senior Vice President and General Counsel
of Convergys IMG.
Thomas E. Smaldone, Director of Sub; President of the Cable and Broadband
Solutions Group of Convergys IMG, since 1996; President, Core Products and
Marketing of Convergys IMG, 1994-1996.
<PAGE> 38
SCHEDULE II
WIZTEC SOLUTIONS LTD.
(AN ISRAELI CORPORATION)
1998 CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 39
WIZTEC SOLUTIONS LTD.
(AN ISRAELI CORPORATION)
1998 CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
REPORT OF INDEPENDENT AUDITORS.............................. F-2
CONSOLIDATED FINANCIAL STATEMENTS:
Balance sheets............................................ F-3 - F-4
Statements of income...................................... F-5
Statements of changes in shareholders' equity............. F-6
Statements of cash flows.................................. F-7
Notes to financial statements............................. F-8 - F-27
</TABLE>
F-1
<PAGE> 40
pricewaterhousecoopers logo
- --------------------------------------------------------------------------------
KESSELMAN & KESSELMAN
Certified Public
Accountants (Isr.)
Trade Tower, 25 Hamered
Street
Tel Aviv 68125 Israel
P.O. Box 452 Tel Aviv
61003 Israel
Telephone +972-3-7954555
Facsimile +972-3-7954556
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of
WIZTEC SOLUTIONS LTD.
We have audited the consolidated balance sheets of Wiztec Solutions Ltd.
(the "Company") and its subsidiaries as of December 31, 1998 and 1997 and the
related consolidated statements of income, changes in shareholders' equity and
cash flows for each of the three years in the period ended December 31, 1998.
These financial statements are the responsibility of the Company's Board of
Directors and management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We did not audit the financial statements of the consolidated subsidiaries,
whose assets at December 31, 1998 and 1997 constitute approximately 14% and 18%,
respectively, of total consolidated assets, and whose revenues for the years
ended December 31, 1998, 1997 and 1996 constitute approximately 17%, 39% and
25%, respectively, of total consolidated revenues. Those financial statements
were audited by other independent auditors, whose reports have been furnished to
us, and our opinion, insofar as it relates to amounts included for those
subsidiaries, is based solely on the reports of the other independent auditors.
We conducted our audits in accordance with generally accepted auditing
standards, including those prescribed by the Israeli Auditors (Mode of
Performance) Regulations, 1973. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement, either due to error or to intentional
misrepresentation. 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 the Company's Board of Directors and management, as well as evaluating
the overall financial statement presentation. We believe that our audits and the
reports of the other independent auditors provide a fair basis for our opinion.
In our opinion, based on our audits and the reports of the other
independent auditors referred to above, the aforementioned financial statements
present fairly, in all material respects, the consolidated financial position of
the Company and its subsidiaries as of December 31, 1998 and 1997 and the
results of their operations, the changes in shareholders' equity and their cash
flows for each of the three years in the period ended December 31, 1998, in
conformity with accounting principles generally accepted in Israel and in the
United States (as applicable to these financial statements, such accounting
principles are practically identical).
/s/ KESSELMAN & KESSELMAN
--------------------------------------
Kesselman & Kesselman
Certified Public Accountants (Israel)
Tel-Aviv, Israel
February 2, 1999
F-2
<PAGE> 41
WIZTEC SOLUTIONS LTD.
(AN ISRAELI CORPORATION)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1998 1997
------- -------
<S> <C> <C>
ASSETS
CURRENT ASSETS (note 9):
Cash and cash equivalents (note 10a)...................... $10,704 $10,015
Short-term investments (note 10b)......................... 5,729
Accounts receivable:
Trade.................................................. 5,107 3,919
Other.................................................. 910 415
Inventories............................................... 29 30
------- -------
Total current assets.............................. 22,479 14,379
------- -------
NON-CURRENT RECEIVABLES (note 9):
Trade, net of current maturities (note 3)................. 118 809
Loan to a related party (note 2b)......................... 450
Other..................................................... 41
------- -------
609 809
------- -------
FIXED ASSETS (note 4):
Cost...................................................... 3,003 2,713
Less -- accumulated depreciation and amortization......... 1,244 924
------- -------
1,759 1,789
------- -------
SOFTWARE DEVELOPMENT COSTS (note 10c):
Original amount........................................... 3,982 3,377
Less -- accumulated amortization.......................... 1,435 870
------- -------
2,547 2,507
------- -------
GOODWILL:
Original amount........................................... 1,394 1,394
Less -- accumulated amortization.......................... 346 207
------- -------
1,048 1,187
------- -------
$28,442 $20,671
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES (note 9):
Accounts payable and accruals:
Trade.................................................. $ 349 $ 657
Other (note 10d)....................................... 2,435 1,143
Advances from customers................................... 1,069 255
------- -------
Total current liabilities......................... 3,853 2,055
------- -------
LONG-TERM LIABILITIES:
Advances from customers................................... 163 263
Accrued severance pay, net of amounts funded (note 8)..... 91 67
------- -------
Total long-term liabilities....................... 254 330
------- -------
COMMITMENTS (note 5)
Total liabilities................................. 4,107 2,385
------- -------
</TABLE>
F-3
<PAGE> 42
WIZTEC SOLUTIONS LTD.
(AN ISRAELI CORPORATION)
CONSOLIDATED BALANCE SHEETS -- (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1998 1997
------- -------
<S> <C> <C>
SHAREHOLDERS' EQUITY (note 6):
Share capital -- ordinary shares of NIS 1 par value
(authorized: December 31, 1998 -- 10,000,000 shares;
December 31, 1997 -- 8,000,000 shares; Issued and
outstanding: December 31, 1998 -- 6,672,000 shares;
December 31, 1997 -- 6,600,000 shares)................. 2,106 2,088
Stock options............................................. 325 325
Share premium and other capital surplus................... 13,764 13,356
Retained earnings......................................... 8,140 2,517
------- -------
Total shareholders' equity........................ 24,335 18,286
------- -------
$28,442 $20,671
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<TABLE>
<S> <C>
/s/ DAN GOLDSTEIN Chairman of the Board of Directors
- -----------------------------------------------------
Dan Goldstein
/s/ YARON POLAK President, Chief Executive Officer and Director
- -----------------------------------------------------
Yaron Polak
</TABLE>
F-4
<PAGE> 43
WIZTEC SOLUTIONS LTD.
(AN ISRAELI CORPORATION)
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------
1998 1997 1996
------- ------- ------
<S> <C> <C> <C>
REVENUES (note 10f)......................................... $20,297 $11,975 $8,332
COST OF REVENUES (note 10g)................................. 9,316 5,992 4,258
------- ------- ------
GROSS PROFIT................................................ 10,981 5,983 4,074
------- ------- ------
SOFTWARE DEVELOPMENT COSTS:
Expenses incurred......................................... 1,363 1,599 1,678
Less -- amounts capitalized............................... 1,176 1,365 1,091
------- ------- ------
NET SOFTWARE DEVELOPMENT COSTS.............................. 187 234 587
------- ------- ------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................ 4,956 3,652 2,138
------- ------- ------
OPERATING INCOME............................................ 5,838 2,097 1,349
FINANCIAL INCOME, NET (note 10h)............................ 536 328 279
CAPITAL LOSS, NET........................................... (111) (6)
------- ------- ------
INCOME BEFORE TAXES ON INCOME............................... 6,263 2,419 1,628
TAXES ON INCOME (note 7).................................... 640 289 15
------- ------- ------
NET INCOME ................................................. $ 5,623 $ 2,130 $1,613
======= ======= ======
EARNINGS PER SHARE (note 10i):
Basic..................................................... $ 0.850 $ 0.344 $0.291
======= ======= ======
Diluted................................................... $ 0.803 $ 0.338 $0.288
======= ======= ======
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING -- IN
THOUSANDS (note 10j):
Basic..................................................... 6,619 6,194 5,542
======= ======= ======
Diluted................................................... 7,007 6,295 5,609
======= ======= ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 44
WIZTEC SOLUTIONS LTD.
(AN ISRAELI CORPORATION)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
SHARE CAPITAL SHARE RETAINED
------------------ PREMIUM EARNINGS
NUMBER OF STOCK AND OTHER (ACCUMULATED
SHARES AMOUNT OPTIONS CAPITAL SURPLUS DEFICIT) TOTAL
--------- ------ ------- --------------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1996....... 4,400 $1,411 $ -- $ 2,132 $(1,226) $ 2,317
CHANGES DURING 1996:............. 1,613
Net Income..................... 1,613
Issue of share capital in an
initial public offering, see
note 6a(1).................. 1,610 506 7,053* 7,559
Issue of options to the
underwriter in an initial
public offering, see note
6b(2)....................... *** ***
Issue of share capital and
stock options...............
In connection with
acquisition of a business,
see note 6a(2)............ 60 19 325 220 564
----- ------ ---- ------- ------- -------
BALANCE AT DECEMBER 31, 1996..... 6,070 1,936 325 9,405 387 12,053
CHANGES DURING 1997:
Net Income..................... 2,130 2,130
Issue of share capital, see
note 8a(3).................. 530 152 3,951** 4,103
----- ------ ---- ------- ------- -------
BALANCE AT DECEMBER 31, 1997..... 6,600 2,088 325 13,356 2,517 18,286
CHANGES DURING 1998:
Net income..................... 5,623 5,623
Exercise of options granted to
employees, see note 6a(4)... 72 18 408 426
----- ------ ---- ------- ------- -------
BALANCE AT DECEMBER 31, 1998..... 6,672 $2,106 $325 $13,764 $ 8,140 $24,335
===== ====== ==== ======= ======= =======
</TABLE>
- ---------------
* Net of $2,100,000 -- share issue expenses.
** Net of $402,000 -- share issue expenses.
*** Represents an amount less than $1,000.
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 45
WIZTEC SOLUTIONS LTD.
(AN ISRAELI CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 5,623 $ 2,130 $ 1,613
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization:
Fixed assets......................................... 405 429 220
Software development costs........................... 565 129 127
Goodwill............................................. 139 139 67
Decrease in value of short-term investments............ 72
Capital loss, net...................................... 111 6
Severance pay, net..................................... 24 36 31
Changes in operating assets and liabilities:
Increase in trade receivables (including non-current
portion).......................................... (497) (2,295) (362)
Decrease (increase) in other accounts receivable
(including non-current portion)................... (125) (228) 65
Decrease in inventories.............................. 1 25 27
Increase (decrease) in accounts payable and
accruals.......................................... 1,146 958 (422)
Increase (decrease) in advances from customers
(including non-current portion)................... 714 (250) 59
------- ------- -------
Net cash provided by operating activities................. 8,178 1,079 1,425
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of short-term investment...................... (6,776)
Amounts capitalized to software development costs......... (1,155) (1,354) (1,092)
Purchase of fixed assets.................................. (730) (947) (636)
Loan granted to a related party........................... (250)
Decrease in cash as a result of disposal of investment in
a proportionately consolidated company, see
supplementary information below........................ (51)
Acquisition of business by newly formed subsidiary........ (459)
Proceeds from disposal of short-term investments*......... 975
Proceeds from sale of fixed assets........................ 72 55
------- ------- -------
Net cash used in investing activities..................... (7,915) (2,246) (2,187)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issue of share capital, net............................... 426 4,103 7,559
Repayment of long-term loans.............................. (226)
Short-term bank credit, net............................... (65) (92)
------- ------- -------
Net cash provided by financing activities................. 426 4,038 7,241
------- ------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 689 2,871 6,479
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.............. 10,015 7,144 665
------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................... $10,704 $10,015 $ 7,144
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -- cash
paid during the year for:
Interest.................................................. $ -- $ 3 $ 24
======= ======= =======
Income taxes.............................................. $ 629 $ 135 $ 42
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE> 46
WIZTEC SOLUTIONS LTD.
(AN ISRAELI CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
ACQUISITION OF BUSINESS BY NEWLY FORMED SUBSIDIARY:
Assets and liabilities of the business acquired at date of
acquisition:
Working capital deficiency (excluding cash and cash
equivalents).......................................... $ (404)
Fixed assets........................................... 260
Long-term loans........................................ (227)
Company's ordinary shares and stock options issued as part
of the acquisition..................................... (564)
Goodwill arising on acquisition........................... 1,394
------
$ 459
======
</TABLE>
SUPPLEMENTARY INFORMATION ON INVESTING ACTIVITY NOT INVOLVING CASH FLOWS
During 1998, the Company disposed of its investment in a proportionately
consolidated company (see note 2), based on its book value.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1998
------------
<S> <C>
Decrease in cash resulting form this disposal is as follows:
Assets and liabilities of that company previously
consolidated, at date of disposal:
Working capital deficiency (excluding cash and cash
equivalents).......................................... $ (123)
Fixed assets, net...................................... 226
Software development costs, net........................ 571
Loans from shareholders................................ (650)
Capital loss on the disposal.............................. (75)
------
$ (51)
======
</TABLE>
For summarized cash flow information for the years ended December 31, 1998
and 1997, relating to the Company's pro-rata interest in the proportionately
consolidated company -- see note 2.
The accompanying notes are an integral part of the financial statements.
F-8
<PAGE> 47
WIZTEC SOLUTIONS LTD.
(AN ISRAELI CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies, applied on a consistent basis, are as
follows:
A. GENERAL:
1) Nature of operations
Wiztec Solutions Ltd. (the "Company" or "Wiztec") is an Israeli corporation
whose main operation is the development and marketing of WIZARD -- a
comprehensive operations support and management information system for use by
cable, satellite and other multichannel subscription television system
operators.
On October 6, 1997, the Company and a U.S. corporation signed a worldwide
marketing agreement for the Company's WIZARD product, and a joint development
agreement to develop a next-generation product -- see note 6a(3).
The revenues of the Company and its subsidiaries are derived mainly from a
limited number of installations of WIZARD systems. As to the Company's principal
markets and customers -- see note 10f(2) and (3).
The Company's U.S. subsidiary also operates a processing center with
printing and mailing facilities. The Company, its wholly-owned subsidiaries and
formerly the proportionately consolidated company (see note 2) are referred to
as "the Group".
2) Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting years. Actual results could differ from those estimates.
3) Functional currency
The currency of the primary economic environment in which the operations of
the Group are conducted is the U.S. dollar ("dollar"). Virtually all revenues
are obtained outside Israel, mainly in dollars. Thus, the functional currency of
the Company and its investee companies is the dollar.
Transactions and balances originally denominated in dollars are presented
at their original amounts. Balances in non-dollar currencies are translated into
dollars using historical and current exchange rates for non-monetary and
monetary balances, respectively. For non-dollar transactions reflected in the
income statements, the exchange rates at transaction dates are used.
Depreciation, amortization and changes in inventories deriving from non-monetary
items are based on historical exchange rates. The resulting transaction gains or
losses are carried to financial income or expenses, as appropriate.
4) Accounting principles
The financial statements are prepared in accordance with accounting
principles generally accepted (GAAP) in Israel and in the United States (as
applicable to these financial statements, such accounting principles are
practically identical).
5) Uncertainty due to the Year 2000 ("Y2K") issue
The Y2K issue arises because many computerized systems use two digits,
rather than four, to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when
F-9
<PAGE> 48
WIZTEC SOLUTIONS LTD.
(AN ISRAELI CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
information using year 2000 dates is processed. In addition, similar problems
may arise in some systems which use certain dates in 1999 to represent something
other than a date. The effects of the Y2K issue may be experienced before, on,
or after January 1, 2000, and, if not addressed, the impact on operations and
financial reporting may range from minor errors to significant systems failure,
which could affect an entity's ability to conduct normal business operations.
The Company and its subsidiary are in the process of adapting their
software to Y2K, and accordingly are taking measures to solve problems in
connection therewith. It is not possible to be certain that all aspects of the
Y2K issue affecting the entity, including those related to the efforts of
customers, suppliers or other third parties, will be fully resolved.
B. PRINCIPLES OF CONSOLIDATION:
1) The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries.
2) In addition to the fully consolidated companies as described above, the
consolidated financial data for 1997 and for the period from January 1, 1998
through June 30, 1998 include, by the proportionate consolidation method, the
accounts of a proportionately consolidated company, which was a jointly and
equally controlled company, see note 2.
3) Intercompany balances and transactions have been eliminated.
C. SHORT-TERM INVESTMENTS
Short-term investments -- marketable Israeli Government bonds and
investment in mutual fund -- are stated at market or redemption value.
The changes in value of the above securities are carried to financial
income or expense.
D. INVENTORIES
Inventories, which include computer, equipment, forms and supplies, are
stated at the lower of cost or market. Cost is determined on average basis.
E. FIXED ASSETS
These assets are stated at cost.
The assets are depreciated by the straight-line method, on the basis of
their estimated useful lives.
Annual rates of depreciation are:
<TABLE>
<CAPTION>
%
----
<S> <C>
Computers and equipment............................... 7-33
Motor vehicles........................................ 15
</TABLE>
Leasehold improvements are amortized by the straight-line method over the
term of the lease, which is shorter than the estimated useful life of the
improvements.
F-10
<PAGE> 49
WIZTEC SOLUTIONS LTD.
(AN ISRAELI CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
F. SOFTWARE DEVELOPMENT COSTS:
1) Software development costs are charged to income as incurred, until
technological feasibility is established. This is determined when detailed
design is completed and verified, or, in case detailed design is not applicable,
a working model has been completed and tested.
2) Upon the establishment of technological feasibility of the relevant
product, software development costs are capitalized in accordance with the
provisions of Statement of Financial Accounting Standards (FAS) No. 86 of the
Financial Accounting Standards Board ("FASB"). Amortization of capitalized
software development costs begins when the product is available for sale to
customers.
Annual amortization is computed by the straight-line method, over the
remaining useful life of the product or based on the ratio of current gross
revenue to current and anticipated future gross revenues, whichever is higher.
Currently, amortization is computed over a period of 3 years.
In the event that the unamortized software development costs exceed the net
realizable value of the product, it is written down to net realizable value.
G. GOODWILL
Goodwill, representing the excess of cost of investment in a business
acquired over fair value of the underlying net liabilities at acquisition, is
amortized in equal annual installments over 10 years.
H. REVENUE RECOGNITION:
1) Customer agreements generally specify the scope of product customization
desired prior to initial installation ("basic customization"), such as
adaptation to desire report and screen lay-outs, language, etc.
The Company recognizes revenue from licensing and basic customization upon
meeting the conditions specified in the relevant agreements (such as completion
of basic customization and installation or customer acceptance). In the case of
sales which involve long-term receivables, the revenues are recognized at their
present value according to the requirements of APB-21 (see note 3).
Revenue from ongoing customization and commissioned work is recognized for
each contract on a percentage-of-completion method, based on the ratio of hours
incurred to date to the total estimated hours of the contract. Contract losses
are recorded in the period in which such losses first become evident.
Maintenance contract revenue is recognized on the straight-line basis,
during the period in which maintenance is provided.
Revenue from printing and mailing is recognized as the services are
performed.
Revenue from sale of computer equipment is recognized based upon the degree
of completion of installation.
Past experience indicates that there are no significant expenditures
related to warranty costs. Therefore, the Company does not make any provisions
for such expenditures.
2) On October 27, 1997, the American Institute of Certified Public
Accountants issued Statement of Position 97-2 (SOP 97-2) "Software Revenue
Recognition". SOP 97-2 supersedes Statement of Position 91-1 and provides
guidance on when and in what amounts revenue should be recognized for the
licensing, selling, leasing or otherwise marketing of computer software.
SOP 97-2 is effective for transactions entered into in fiscal years
beginning after December 15, 1997.
F-11
<PAGE> 50
WIZTEC SOLUTIONS LTD.
(AN ISRAELI CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company adopted SOP 97-2 effective January 1, 1998. In light of the
nature of the transactions the Company entered into in 1998, the implementation
of SOP 97-2 had no material effect on these financial statements.
I. DEFERRED INCOME TAXES
Deferred taxes are computed in respect of differences between the amounts
in the financial statements and for tax purposes.
Deferred tax balances are computed at the tax rate expected to apply to
income of the Group at time of release to income from the deferred tax accounts
(see also note 7e).
J. CASH EQUIVALENTS
The Group considers all highly liquid investments, which include short-term
bank deposits (up to three months from date of deposit), that are not restricted
as to withdrawal or use, to be cash equivalents.
K. COMPREHENSIVE INCOME
In 1998, the Company adopted FAS 130 "Reporting Comprehensive Income",
which was issued in June 1997 by the FASB.
The Company has no comprehensive income components, other than net income.
L. IMPAIRMENT IN VALUE OF FIXED ASSETS
The Group adopted FAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of" of the FASB. The provisions
of FAS 121 require a company to review its long-lived assets for impairment on
an exception basis whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable through future cash flows.
If it is determined that an impairment loss has occurred based on expected
future cash flows, then the loss is recognized in the statements of income.
There were no impairment losses recorded in these financial statements.
M. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT
In June 1998, the FASB issued FAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("FAS 133"). FAS 133 established a new model
for accounting for derivatives and hedging activities. FAS 133 requires
companies to record derivatives on the balance sheet as assets or liabilities,
measured at fair value. Gains or losses resulting from changes in the values of
those derivatives would be accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting. FAS 133 is effective for
calendar-year companies as from January 1, 2000.
The Company is currently evaluating the impact FAS 133 will have on its
financial statements; however, since the use of derivatives by the Company is
limited (see also note 10e(3)), it expects that the adoption of FAS 133 will
have no material impact on its consolidated results of operations, financial
position or cash flows.
NOTE 2 -- PROPORTIONATELY CONSOLIDATED COMPANY -- T.C.S. -- TELECOM SOLUTIONS
LTD. ("T.C.S."):
a. In 1997, following a joint venture agreement, the Company and another
Israeli Corporation founded T.C.S., an Israeli Company.
F-12
<PAGE> 51
WIZTEC SOLUTIONS LTD.
(AN ISRAELI CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
T.C.S. was a jointly and equally-controlled company from incorporation to
the beginning of the third quarter of 1998, when the Company disposed of its
investment in T.C.S. Therefore, as of July 1, 1998, the Company's consolidated
financial data no longer include the activities of T.C.S.
The Company sold its investment in T.C.S. to a related party (a company
under common control), based on T.C.S.'s book value. Due to immaterial
adjustments to T.C.S.'s capital deficiency at date of disposal, a loss of
$75,000 was reported in the Company's accounts as a result of the disposal.
b. At the date of disposal of the investment in T.C.S., loans in an amount
of $900,000 were due from T.C.S. to the Company. As part of the transaction,
these loans were transferred from T.C.S. to its new shareholder. An amount of
$450,000 out of these loans is to be repaid in October 1999 and is presented in
the balance sheet among "accounts receivable -- other". Repayment of the
remaining amount, which is presented in the balance sheet under "loan to a
related party", is conditional upon T.C.S.'s achieving revenues from sale of
licenses (not including sales to a former shareholder). The Company is entitled
to 10% of the license revenues collected by December 31, 2003. Payments made to
the Company after December 31, 1999 will carry interest at a starting rate of 4%
(increasing every year thereafter).
Through July 1, 1998, T.C.S. was engaged in development of software. The
software development costs incurred by T.C.S. were capitalized once
technological feasibility was established. As of July 1, 1998, software
development costs in an amount of $571,000, which were incurred by T.C.S., were
capitalized in the Company's financial statements. The Company believes that,
since no allowance for impairment in value of those costs was needed, there is
no need to provide an allowance in respect of the abovementioned conditional
debt. Moreover, according to T.C.S.'s business forecasts, license revenues are
expected as of the second half of 1999.
c. Following are data relating to T.C.S. included in the 1998 and 1997
consolidated financial statements:
1) Balance sheet data:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
--------------
(IN
THOUSANDS)
<S> <C>
ASSETS:
Current assets............................................ $108
Fixed assets, net of accumulated depreciation and
amortization........................................... 176
Software development costs, net of accumulated
amortization........................................... 198
----
$482
====
LIABILITIES:
Current liabilities....................................... $130
Long-term liability to shareholders*...................... 486
----
$616
====
</TABLE>
- ---------------
* This amount was eliminated in consolidation.
F-13
<PAGE> 52
WIZTEC SOLUTIONS LTD.
(AN ISRAELI CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2) Operating results data:
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
JANUARY 1, 1998 INCORPORATION TO
TO JUNE 30, DECEMBER 31,
1998 1997
--------------- ----------------
(IN THOUSANDS)
<S> <C> <C>
Software development expenses incurred................... $380 $198
Less -- amounts capitalized.............................. 373 198
---- ----
Net software development costs........................... 7 --
Selling, general and administrative expenses............. 288 157
---- ----
Operating loss........................................... 295 157
Financial income -- net.................................. 24 3
---- ----
Loss for the period...................................... $271 $154
==== ====
</TABLE>
3) Cash flow data relating to the Company's pro-rata interest in T.C.S.:
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
JANUARY 1, 1998 INCORPORATION TO
TO JUNE 30, DECEMBER 31,
1998 1997
--------------- ----------------
(IN THOUSANDS)
<S> <C> <C>
Net cash used in operating activities.................. $292 $ 35
==== ====
Net cash used in investing activities.................. $435 $378
==== ====
Net cash provided by financing activities*............. $689 $506
==== ====
</TABLE>
- ---------------
* This amount was eliminated in consolidation.
NOTE 3 -- NON-CURRENT TRADE RECEIVABLES:
a. At balance sheet dates, non-current trade receivables, including their
current maturities, are composed as follows:
<TABLE>
<CAPTION>
DECEMBER 31
--------------
1998 1997
---- ------
(IN THOUSANDS)
<S> <C> <C>
Interest bearing note receivable*........................... $340 $ 703
Amounts receivable, bearing no interest..................... 260 948
Less -- unamortized discount based on imputed interest
rate**.................................................... (11) (71)
---- ------
$589 $1,580
==== ======
</TABLE>
- ---------------
* The note bears interest at an annual rate of 5.2%, and the balance at
December 31, 1998, is payable in 1999.
** The imputed interest rate is based on the LIBOR (London Inter-Bank Offered
Rate) on 12 month dollar accounts prevailing at each transaction date. The
rate used is 5.2%.
F-14
<PAGE> 53
WIZTEC SOLUTIONS LTD.
(AN ISRAELI CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
b. The balance of non-current receivables matures in the following years
subsequent to the balance sheet dates:
<TABLE>
<CAPTION>
DECEMBER 31
--------------
1998 1997
---- ------
(IN THOUSANDS)
<S> <C> <C>
First year -- included among current trade receivables...... $471 $ 771
---- ------
Second year................................................. 118 705
Third year.................................................. 104
---- ------
118 809
---- ------
$589 $1,580
==== ======
</TABLE>
NOTE 4 -- FIXED ASSETS
Composition of assets, grouped by major classifications, is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998
--------------------------------------
ACCUMULATED
DEPRECIATION
AND DEPRECIATION
COST AMORTIZATION BALANCE
------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Computers and equipment........................... $2,200 $1,058 $1,142
Motor vehicles.................................... 641 140 501
Leasehold improvements............................ 162 46 116
------ ------ ------
$3,003 $1,244 $1,759
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
--------------------------------------
ACCUMULATED
DEPRECIATION
AND DEPRECIATION
COST AMORTIZATION BALANCE
------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Computers and equipment........................... $1,978 $779 $1,199
Motor vehicles.................................... 590 123 467
Leasehold improvements............................ 145 22 123
------ ---- ------
$2,713 $924 $1,789
====== ==== ======
</TABLE>
NOTE 5 -- COMMITMENTS:
a. The Company is obligated to pay Argotec Ltd. (the controlling
shareholder of the Company; hereafter -- Argotec) an annual management services
fee equal to 2% of the revenues, excluding revenues derived from investee
companies, but not more than the Israeli currency equivalent of $180,000.
b. The Company is committed to pay its Chief Executive Officer and a
number of other employees an annual bonus based on achieving certain targets, as
determined annually by management and the board of directors.
c. In February 1997, the Company entered into an agreement to lease
premises in Herzlia for a period of 7 years with an option to renew the lease
for an additional 35 months. The lease commitments are linked to the
F-15
<PAGE> 54
WIZTEC SOLUTIONS LTD.
(AN ISRAELI CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Israeli consumer price index ("the Israeli CPI"). The annual lease commitment,
at rates in effect at December 31, 1998, is approximately $307,000.
Until February 1997, the Company was committed to pay Argotec for the use
of premises and to reimburse it for various services, according to actual and
accountable expenses, as stipulated by an agreement between the parties.
d. The U.S. subsidiary is obligated under a number of noncancellable
operating leases for office space and property and equipment that have initial
or remaining terms in excess of one year.
The projected minimum lease payments under operating leases that have
initial or remaining noncancellable terms in excess of one year as of December
31, 1998, are approximately $94,000 in 1999, and $24,000 in 2000.
e. Rental expense totaled $409,000, $337,000, and $181,000 in 1998, 1997
and 1996, respectively.
f. According to the joint development agreement mentioned in note 6a(3),
Convergys and the Company are each to contribute up to $2 million. In 1997,
Convergys and the Company deposited $500,000 each in a common bank account. In
1998, each party deposited an additional $762,000.
NOTE 6 -- SHAREHOLDERS' EQUITY:
a. Share capital:
1) On April 17, 1996, 1,610,000 ordinary shares (including 210,000 ordinary
shares resulting from exercise of over-allotment options by underwriters) were
offered in an initial public offering ("IPO") at $6 per share. Total
consideration (net of share issue expenses of $2,100,00) received by the Company
was $7,559,000.
The Company's shares have been trading in the United States on the Nasdaq
National Market since April 18, 1996, under the symbol "WIZTF." On December 31,
1998 the per share closing price of the Company's ordinary shares was $14.76.
2) On July 1, 1996, the Company issued 60,000 ordinary shares and 331,200
stock options (see b(3) hereafter) to Business Systems, Inc. ("BSI") and its
employees in addition to cash paid, in exchange for the transfer of
substantially all BSI's assets and liabilities to Wiztec Solutions Inc. (a
wholly owned subsidiary).
3) Concurrently with signing of the worldwide marketing and joint
development agreements mentioned in note 1a(1), the Company issued 530,000
ordinary shares to a U.S. corporation -- Convergys Information Management Group
Inc. (formerly -- Cincinnati Bell Information Systems Inc. -- "Convergys"), for
$8.5 per share. The total consideration (net of share issue expenses of
$402,000) received by the Company was $4,103,000. An additional 770,000 shares
were purchased by Convergys from existing shareholders. Altogether, Convergys
acquired approximately 19.7% of the Company's shares. In addition, the Company's
principal shareholders granted Convergys a two-year option to buy a controlling
interest in the Company.
4) Under the employee stock option plans (see b. below), 71,733 options
were exercised to purchase ordinary shares of the Company in 1998.
b. Stock options and warrants:
1) Employee stock option plans:
(a) In October 1995, the board of directors of the Company adopted a share
option plan (the "share option plan") pursuant to which 400,000 ordinary shares
were reserved for issue upon the exercise of options to be granted to employees
of the Company. The exercise price of the options shall not be below the fair
market value of the ordinary shares at the time of grant. Unless otherwise
decided by the board of directors, the options will vest over a two-year period
with respect to employees who commenced their employment prior to October 1,
F-16
<PAGE> 55
WIZTEC SOLUTIONS LTD.
(AN ISRAELI CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1995, and over a three-year period with respect to employees who commenced their
employment prior to October 1, 1995, and over a three-year period with respect
to all other employees. Options which are not exercised within 10 years from
date of issue will expire. Each option can be exercised to purchase one ordinary
share having the same rights as the other ordinary shares.
Under the share option plan, options to purchase an aggregate of 366,000
ordinary shares were granted on April 17, 1996 -- the date of the initial public
offering. The exercise price of these options is $6.00. Each option under the
plan has a term of 10 years. Options shall vest so that (i) with respect to
grantees who commenced their employment with the Company on or prior to October
1, 1995, one-third of such options shall vest on the first anniversary, and
two-thirds of such options shall vest on the second anniversary, of the date of
grant, and (ii) with respect to grantees who commenced their employment with the
Company after October 1, 1995, one-third of such options shall vest on each of
the first, second and third anniversaries of the date of grant, respectively.
Options granted under this plan are to be subject to the terms stipulated
by Section 102 of the Israeli Income Tax Ordinance. Inter alia, this Section
provides that the Company will be allowed to claim as an expense for tax
purposes the amounts credited to the employees as a benefit, when the related
tax is payable by the employee.
(b) On March 6, 1997, the Company's Board of Directors adopted a share
option plan (the "1997 share option plan") pursuant to which 440,000 ordinary
shares were reserved for issuance upon the exercise of options to be granted to
employees of the Company and others. The exercise price of the options and the
schedule pursuant to which such options will vest shall be determined by a
committee of the board of directors in its sole and absolute discretion. Options
which are not exercised within 10 years from date of issue will expire. Each
option can be exercised to purchase one ordinary share having the same rights as
the other ordinary shares. Options granted under the 1997 share option plan to
employees are to be subject to the terms stipulated by Section 102 of the
Israeli Income Tax Ordinance (see also (a) above). On May 11, 1998, the
Company's Board of Directors approved reservation of an additional 250,000
ordinary shares for issue under the 1997 share option plan. The additional
options are to be subject to the terms of the original plan approved in 1997.
Under the 1997 share option plan, options to purchase an aggregate of
134,900 and 203,000 ordinary shares were granted in 1998 and 1997, respectively.
The exercise price of options granted is: 1998 -- $9 or $11; 1997 -- $5.875
(reflecting the Company's ordinary share price on date of grant). The vesting
period of the options is between 1/2 and 3 years from the date of grant,
according to the committee's determination.
(c) On September 25, 1996, the board of directors of the Company adopted an
employee incentive plan designed to provide incentives to the employees of the
Company's U.S. subsidiary.
The number of options to be issued under this plan depend upon the
achievement of certain target profits, sales and customers during the period
from July 1, 1996 to June 30, 1998. Each option can be exercised to purchase one
of the Company's ordinary shares, having the same rights as the other ordinary
shares. Options granted under the incentive plan in accordance with the terms
thereof, may qualify as "Incentive Stock Options" under Section 422 of the U.S.
Internal Revenue Code of 1986, as amended. Each option under the incentive plan
shall be for a term of ten years.
On September 25, 1996, the date of the adoption of the incentive plan, the
Company issued 75,000 options which are not subject to achievement of targets.
The exercise price of these options is $8.625. These options are presently
exercisable.
On January 16, 1998, the Company issued 11,500 options, all immediately
exercisable, following the achievement of certain targets. The exercise price of
these options is $9.00 -- the quoted share price on the date of grant.
No more options are available for future allotment under this plan.
F-17
<PAGE> 56
WIZTEC SOLUTIONS LTD.
(AN ISRAELI CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(d) A summary of the status of the Company's plans as of December 31, 1998,
1997 and 1996, and changes during the years ended on those dates is presented
below:
<TABLE>
<CAPTION>
1998 1997 1996
------------------ ------------------ ------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
NUMBER PRICE NUMBER PRICE NUMBER PRICE
------- -------- ------- -------- ------- --------
$ $ $
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of year......... 587,067 423,200 6.465
Changes during the year:
Granted................... 146,400 9.723 203,000 5.875 441,000 6.446
Exercised................. (71,733) 6.000
Forfeited................. (7,334) 6.641 (39,133) 5.996 (17,800) 6.000
------- ------- -------
Options outstanding at end
of year................... 654,400 7.085 587,067 6.292 423,200 6.465
======= ======= =======
Options exercisable at
year-end.................. 509,600 6.592 198,830 5.948
======= =======
Weighted average fair value
of options granted during
the year*................. 3.02 1.74 2.87
</TABLE>
- ---------------
* The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions: dividend yield of 0% for all years; expected volatility of: 1998
and 1997 -- 62%, 1996 -- 91%; risk-free interest rate of: 1998 -- 5.5%
1997 -- 6.1%, 1996 -- 6.3% and expected life of: 1998 -- 1.6 years 1997 -- 1.3
years, 1996 -- 1.7 years.
(e) The following table summarizes information regarding options
outstanding at December 31, 1998 for all three plans:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- -------------------------------------------------------------- -------------------------
NUMBER WEIGHTED WEIGHTED NUMBER WEIGHTED
OUTSTANDING AT AVERAGE AVERAGE EXERCISABLE AT AVERAGE
DECEMBER 31, REMAINING EXERCISE DECEMBER 31, EXERCISE
EXERCISE PRICE 1998 CONTRACTUAL LIFE PRICE 1998 PRICE
- ---------------- -------------- ---------------- -------- -------------- --------
YEARS $
$ ---------------- $
<S> <C> <C> <C> <C> <C>
5.875 197,400 8.30 5.875 163,233 5.875
6.000 237,600 7.30 6.000 299,867 6.000
8.625 73,000 7.75 8.625 73,000 8.625
9.000 93,500 9.00 9.000 43,500 9.000
11.000 52,900 9.30 11.000 11.000
------- -------
5.875 to 11.000 654,400 8.06 7.088 509,600 6.592
======= =======
</TABLE>
(f) Accounting treatment of the employee stock option plans
The Company accounts for its employee stock option plans using the
treatment prescribed by Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" ("APB 25"). Under APB 25, compensation cost for
employee stock option plans is measured using the intrinsic value based method
of accounting.
F-18
<PAGE> 57
WIZTEC SOLUTIONS LTD.
(AN ISRAELI CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123"). This Statement established a fair value based method
of accounting for an employee stock option or similar equity instrument, and
encourages adoption of such method for stock compensation plans. However, it
also allows companies to continue to account for those plans using the
accounting treatment prescribed by APB 25.
The Company has elected to continue applying the provisions of APB 25, and
has accordingly compiled with the disclosure requirements set forth in FAS 123
for companies electing to apply APB 25.
No compensation cost has been charged against income in respect of these
plans, since the options granted had no intrinsic value at date of grant. Had
compensation cost for the Company's plans been determined based on the fair
value at the grant date, consistent with the method of FAS 123, the Company's
net income and earnings per share would have been reduced to the pro-forma
amounts indicated below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------------------------
1998 1997 1996
----------------- ----------------- -----------------
AS PRO- AS PRO- AS PRO-
REPORTED FORMA REPORTED FORMA REPORTED FORMA
-------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
Net income, in thousands..................... $5,623 $5,522 $2,130 $1,373 $1,613 $1,129
====== ====== ====== ====== ====== ======
Earnings per share:
Basic...................................... $0.850 $0.834 $0.344 $0.222 $0.291 $0.204
====== ====== ====== ====== ====== ======
Diluted.................................... $0.803 $0.790 $0.338 $0.219 $0.288 $0.201
====== ====== ====== ====== ====== ======
</TABLE>
2) Stock options issued to the Company IPO's underwriter
In connection with its IPO, the Company sold the underwriter options to
purchase 140,000 of the Company's ordinary shares for $0.01 per option. The
underwriter's options (also known as the "Underwriter's Warrants") are
exercisable for four years commencing April 17, 1997, at a price per ordinary
share of $7.50 (125% of the IPO Price).
The Company's management estimates that the above options reduced the IPO
share issue expenses by $200,000.
3) Stock options issued as part of acquisition of business
As mentioned in a(2) above, the Company issued options to purchase 331,200
ordinary shares as part of the purchase price of the business acquired. 225,000
options were issued to BSI and the rest to BSI's employees (who have become
employees of the U.S. subsidiary). All options, defined as series "A" options,
are exercisable commencing September 27, 1996, for a period of five years. The
exercise price of the options is $8.525. As of December 31, 1998, none of the
331,200 outstanding options had been exercised.
In addition, after 4.5 years of the above 5 have elapsed, and provided that
the Company's share price does not exceed $18 per share on any trading day
during the entire 4.5 years, grantees are entitled to exchange their options for
series "B" options. In such case, the exercise price will equal the share price
on the day the options were exchanged for series "B" options.
If the right to exchange the options to series "B" options is not
exercised, the grantee is entitled to exercise the options during an additional
period of 3 years (instead of 6 months).
F-19
<PAGE> 58
WIZTEC SOLUTIONS LTD.
(AN ISRAELI CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
c. Dividends:
1) The Company has not paid any cash dividends on its ordinary shares in
the past and does not expect to pay cash dividends on its ordinary shares in the
foreseeable future.
2) The distribution of cash dividends in the amount of $7,418,000 out of
retained earnings of $8,140,000 as of December 31, 1998 would subject the
Company to tax at a rate of 25% on the amount distributed, effectively reducing
the dividend distribution by the amount of the tax (see note 7a and e).
3) In the event that cash dividends are declared by the Company, such
dividends will be paid in Israeli currency. Under current Israeli regulations,
any cash dividend in Israeli currency paid in respect of ordinary shares
purchased by non-residents of Israel with non-Israeli currency may be freely
repatriated in such non-Israeli currency, at the rate of exchange prevailing at
the time of conversion.
NOTE 7 -- TAXES ON INCOME:
a. Tax benefits under the Law for the Encouragement of Capital Investments,
1959 (the "law")
Under the law, by virtue of the "approved enterprise" status granted to its
enterprises, the Company is entitled to various tax benefits, including the
following:
1) Reduced tax rates
The period of tax benefits is 7 years, commencing in the first year in
which the Company earns taxable income from the "approved enterprises". Income
derived from the approved enterprises is tax exempt for a period of 2 or 4
years, after which the Income from these enterprises is taxable at the rate of
25% for the remainder of the period of tax benefits (5 or 3 years).
The period of benefits in respect of the main enterprise of the Company
commenced in 1995. The period of the expansion project commenced in 1998.
In the event of distribution of cash dividends from income which is tax
exempt due to the above, the Company would have to pay company tax at the rate
of 25% on an amount equal to the amount distributed and the corporate tax
thereon, see also d. below.
2) Accelerated depreciation
The Company is entitled to claim accelerated depreciation in respect of
machinery and equipment used by the approved enterprise. The Company has not
utilized this benefit.
3) Conditions for entitlement to the benefits
The entitlement to the above benefits is conditional upon the Company's
fulfilling the conditions stipulated by the law, regulations published
thereunder and the instruments of approval for the specific investments in
approved enterprises. In the event of failure to comply with these conditions,
the benefits may be cancelled and the Company may be required to refund the
amount of the benefits, in whole or in part, with the addition of linkage
differences to the Israeli CPI and interest.
Through December 31, 1998, the Company utilized tax benefits amounting to
approximately $2.7 million.
F-20
<PAGE> 59
WIZTEC SOLUTIONS LTD.
(AN ISRAELI CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
b. Measurement of results for tax purposes under the Israeli Income Tax
(Inflationary Adjustments) Law, 1985 (hereafter -- the inflationary
adjustments law)
Under the inflationary adjustments law, results for tax purposes are
measured in real terms, in accordance with the changes in the Israeli CPI or in
the exchange rate of the dollar, for a "foreign investment company".
As of tax year 1996, the Company elected to measure its results on the
basis of the changes in the exchange rate of the dollar, or alternatively to be
taxed based upon dollar books of account, according to applicable income tax
regulations. The Company may not reelect the alternative method of
measurement -- according to the Israeli CPI, before tax year 2000.
c. Tax benefits under Israeli Law for the Encouragement of Industry
(Taxation), 1969
The Company currently qualifies as an "industrial company" as defined by
this law, and as such is entitled to claim, and has in fact claimed, certain tax
benefits, including, Inter-alia, depreciation at increased rates as stipulated
by regulations published under the inflationary adjustments law and the right to
claim expenses relating to public issue of shares, as a deduction for tax
purposes during a period of three years.
d. Tax rates applicable to income from other sources
Income not eligible for "approved enterprise" benefits mentioned in a.
above is taxed at the regular rate of 36%.
e. Deferred income taxes:
1) As stated in a. above, most of the Company's income from operations is
tax exempt due to the approved enterprise status granted to the Company. The
Company has decided to permanently reinvest the amount of its tax exempt income
and not to distribute such income as dividends. Accordingly, no deferred taxes
have been included in these financial statements in respect of the said tax
exempt income.
2) Deferred taxes have been created in respect of provisions for employee
rights. The deferred taxes -- presented in the balance sheet amount "accounts
receivable -- other" -- are computed at the tax rate of 36%.
Realization of this deferred tax balance is conditional upon earning, in
the coming years, taxable income in an appropriate amount. The amount of the
deferred tax asset, however, could be reduced in the near term if estimates of
future taxable income are reduced.
f. Non-Israeli subsidiaries
The subsidiaries are taxed based upon tax laws in their countries of
residence.
g. Income before taxes on income is composed as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------
1998 1997 1996
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
The Company (1997 and 1998 -- and proportionately
consolidated company) -- in Israel..................... $5,563 $2,242 $1,577
Subsidiaries -- outside of Israel........................ 700 176 51
------ ------ ------
$6,263 $2,419 $1,628
====== ====== ======
</TABLE>
F-21
<PAGE> 60
WIZTEC SOLUTIONS LTD.
(AN ISRAELI CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
h. Taxes on income included in the income statements:
1) As follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------
1998 1997 1996
----- ----- -----
(IN THOUSANDS)
<S> <C> <C> <C>
For the reported year:
Current:
In Israel.............................................. $424 $224
Out of Israel.......................................... 266 65 $15
---- ---- ---
690 289 15
----
Deferred:
In Israel.............................................. (32)
Out of Israel.......................................... (18)
----
(50)
---- ---- ---
$640 $289 $15
==== ==== ===
</TABLE>
2) A reconciliation of the theoretical tax expense, assuming all income is
taxed at the regular rates applicable to income of companies in Israel (see d,
above) and the actual tax expense is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------
1998 1997 1996
------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Income before taxes on income, per consolidated
statements of income................................... $ 6,263 $2,419 $1,628
======= ====== ======
Theoretical tax expense.................................. $ 2,255 $ 871 $ 586
Tax benefit arising from exempt tax rate as an "approved
enterprise"............................................ (2,101) (734) (455)
------- ------ ------
154 137 131
Increase (decrease) in tax arising from different tax
rates applicable to non-Israeli subsidiaries........... 15 2 (4)
Increase in tax resulting from losses of proportionately
consolidated company for which deferred taxes were not
provided............................................... 56
Increase (decrease) in taxes resulting from permanent
differences:
Tax exempt income...................................... (4) (6)
Disallowable deductions................................ 4 3
Deductible expenses -- IPO expenses.................... (38) 50
Tax withheld at source that is not creditable against
future years' income................................... 360 38
Sundry -- net............................................ 111 94 (60)
------- ------ ------
Taxes on income in the consolidated statements of
income -- for the reported year........................ $ 640 289 $ 114
======= ====== ======
Effective tax rates...................................... 10.2% 11.9% 0.9%
======= ====== ======
</TABLE>
F-22
<PAGE> 61
WIZTEC SOLUTIONS LTD.
(AN ISRAELI CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. Tax assessments
The Company received final tax assessments through the year ended December
31, 1995.
The subsidiaries have not been assessed for tax purposes since
incorporation.
NOTE 5 -- SEVERANCE PAY
The liability of the Company (December 31, 1997 -- and the proportionately
consolidated company) for severance pay to their employees pursuant to Israeli
law and employment agreements is covered by managerial insurance policies for
which monthly payments are made. The amounts accrued and the amounts funded with
managerial insurance policies are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
--------------
1998 1997
----- -----
(IN THOUSANDS)
<S> <C> <C>
Accrued severance pay....................................... $488 $324
Less -- amounts funded...................................... 397 257
---- ----
$ 91 $ 67
==== ====
</TABLE>
The above companies may only make withdrawals from the insurance policies
for the purpose of paying severance pay.
Under Israeli GAAP, amounts funded by purchase of insurance policies, as
above, are deducted from the related severance pay liability. Under U.S. GAAP,
those policies should be presented as a long-term investment, among the
companies' assets.
The non-Israeli subsidiaries have no legal liability for severance pay to
their employees.
Severance pay expense totalled $248,000, $221,000 and $130,000 in 1998,
1997 and 1996, respectively.
NOTE 9 -- MONETARY BALANCES IN NON-DOLLAR CURRENCIES:
a. As follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------ ------------------
ISRAELI ISRAELI
CURRENCY OTHER* CURRENCY OTHER*
-------- ------ -------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Assets:
Current assets:
Cash and cash equivalents................. $ 158 $1,217 $209 $ 670
Accounts receivable....................... 802 331 161 890
Non-current receivables...................... 116 110
------ ------ ---- ------
$ 960 $1,666 $370 $1,670
====== ====== ==== ======
Liabilities:
Current liabilities -- accounts payable and
accruals.................................. $2,064 $ 124 $983 $ 12
====== ====== ==== ======
</TABLE>
- ---------------
* Mainly Australian dollars and German marks.
F-23
<PAGE> 62
WIZTEC SOLUTIONS LTD.
(AN ISRAELI CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
b. Data regarding the rate of exchange and the Israeli CPI:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Rate of devaluation of the Israeli currency
against the dollar....................... 17.6% 8.8% 3.7%
Rate of increase in the Israeli CPI........ 8.6% 7.0% 10.6%
Exchange rate (at end of year) -- $1 =..... NIS 4.160 NIS 3.536 NIS 3.251
</TABLE>
NOTE 10 -- SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION:
BALANCE SHEETS:
a. cash and cash equivalents
As of December 31, 1998 and 1997, $7,574,369 and $8,168,000, respectively,
were deposited in dollar linked deposits, bearing interest at an average annual
rate of 4.65%-5.8%.
b. Short-term investments:
<TABLE>
<CAPTION>
DECEMBER 31
1998
--------------
(IN THOUSANDS)
<S> <C>
Marketable Israeli government bonds linked to the U.S.
dollar.................................................... $ 779
Merrill Lynch Prime Rate Portfolio mutual fund*............. 4,950
------
$5,729
======
</TABLE>
- ---------------
* Represents shares in the fund. The policy of the fund is to invest in senior
collateralized corporate loans bearing interest at a floating rate. The shares
can be sold at any time to Merrill Lynch at their redemption value. Default on
the corporate loans could cause a decline in the redemption value of the
shares.
c. Software development costs
Software development costs at December 31, 1998 and 1997 include the fully
amortized, basic WIZARD development costs, in the amount of $738,000.
d. Accounts payable and accruals -- other:
<TABLE>
<CAPTION>
DECEMBER 31
----------------
1998 1997
------ ------
(IN THOUSANDS)
<S> <C> <C>
Employees and employee institutions......................... $1,527 $ 577
Related parties............................................. 298 471
Government departments and agencies......................... 257 62
Accrued expenses and other.................................. 353 33
------ ------
$2,435 $1,143
====== ======
</TABLE>
e. Financial Instruments:
1) Fair value
The financial instruments of the Group consist of non-derivative assets and
liabilities (mainly items included in working capital).
F-24
<PAGE> 63
WIZTEC SOLUTIONS LTD.
(AN ISRAELI CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In view of their nature, the fair value of financial instruments included
in working capital of the Group is usually identical or close to their carrying
value.
As to non-current trade receivables -- since the Company applies the
provisions of APB 21, and since the imputed interest rates are close to the
prevailing market rates, the fair value of these receivables approximates their
carrying value.
As to a non-current loan to a related party (note 2) -- the fair value of
this loan -- based on the present value of cash flows and on common interest
rates for similar debt -- is $426,000.
2) Concentrations of credit risks
At December 31, 1998 and 1997, the Group's cash and cash equivalents and
part of its short-term investments are deposited with major Israeli banks.
The main part of the Company's short-term investments is held by Merill
Lynch, a company that manages investment portfolios, see note 10b.
The Company is of the opinion that the credit risk in respect of these
balances is remote.
A significant portion of the Group's trade receivables is due from a
limited number of customers in the cable television industry (see also f.
hereafter). The group performs ongoing credit evaluations of its customers and
generally does not require collateral from them. Consequently, the Company is of
the opinion that the exposure to credit risk relating to trade receivables is
limited.
3) Derivative financial instruments
The Company has only limited investment in derivative financial
instruments.
In 1998, the Company entered into one forward exchange contract in a
notional amount of DM 1 million for exchange of German marks into new Israeli
shekels. The loss from this derivative was recognized in the income statement.
At December 31, 1998, the Company had no forward exchange contracts outstanding.
In 1997 and 1996, the Company had no investment in derivatives.
STATEMENTS OF INCOME:
f. Segment information and revenues from principal customers
In 1998, the Company adopted FAS 131, "Disclosures about Segments of an
Enterprise and Related Information", which was issued in June 1997 by the FASB.
Disaggregated financial data is provided below as follows: (1) revenue by
type; (2) revenue by geographic area; and (3) revenues from principal customers:
1) Revenue -- classified by type:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------
1998 1997 1996
------- ------- ------
<S> <C> <C> <C>
License and basic customization........................ $10,008 $ 5,070 $2,322
Ongoing customization, commissioned work, maintenance,
printing and mailing................................. 7,818 6,477 4,995
Sale of computer equipment............................. 2,471 428 1,015
------- ------- ------
$20,297 $11,975 $8,332
======= ======= ======
</TABLE>
F-25
<PAGE> 64
WIZTEC SOLUTIONS LTD.
(AN ISRAELI CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2) Geographic information
Following is a summary of revenues by geographic area. Revenue is
attributed to geographic area based on the location of the customers:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------
1998 1997 1996
------- ------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Israel................................................. $ 702 $ 274 $ 793
U.S.A.................................................. 7,226 3,328 2,047
Germany................................................ 3,009 1,471
Taiwan................................................. 1,579
Australia.............................................. 1,363 1,961 1,555
United Kingdom......................................... 1,776
Poland................................................. 1,227 150
Other.................................................. 3,415 4,791 3,939
------- ------- ------
$20,297 $11,975 $8,332
======= ======= ======
</TABLE>
Most of the Group's long-lived assets are located in Israel. Fixed assets,
net, in an amount of $456,000, are located in the United States.
3) Revenues from principal customers
Revenues from single customers each of which exceeds 10% of total revenues
in the relevant year:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------
1998 1997 1996
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Customer A............................................... $1,363 $1,961 $1,480
====== ====== ======
Customer B............................................... $3,009 $1,471
====== ======
Customer C............................................... $1,366
======
Customer D............................................... $1,773
======
Customer E -- Convergys.................................. $4,848
======
</TABLE>
g. Cost of revenues -- composition:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------
1998 1997 1996
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
License and basic customization.......................... $3,735 $1,756 $ 606
Ongoing customization, commissioned work, maintenance,
printing and mailing................................... 3,742 3,938 2,794
Sale of computer equipment............................... 1,839 298 858
------ ------ ------
$9,316 $5,992 $4,258
====== ====== ======
</TABLE>
h. Financial income, net:
<TABLE>
<S> <C> <C> <C>
Income................................................... $ 742 $ 630 $ 330
Expenses................................................. 206 302 51
------ ------ ------
$ 536 $ 328 $ 279
====== ====== ======
</TABLE>
F-26
<PAGE> 65
WIZTEC SOLUTIONS LTD.
(AN ISRAELI CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
i. Earnings per share
Basic earnings per share are computed based on the weighted average number
of shares outstanding during each year. In computing the diluted earnings per
share, account was taken of the dilutive effect of the outstanding stock options
(see note 6b), using the treasury stock method.
Following is a reconciliation of the numerators and the denominators of the
basic and diluted per-share data:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 YEAR ENDED DECEMBER 31, 1997
--------------------------------------- ---------------------------------------
INCOME SHARES PER-SHARE INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- --------- ----------- ------------- ---------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Basic EPS............ $5,623 6,619 $0.850 2,130 6,194 $0.344
====== ======
Plus -- incremental
shares from assumed
exercise of stock
options............ 388 101
------ ----- ------ ------ -----
Diluted EPS.......... $5,623 7,007 $0.803 2,130 6,295 $0.338
====== ===== ====== ====== ===== ======
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
---------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Basic EPS............ $1,613 5,542 $0.291
======
Plus -- incremental
shares from assumed
exercise of stock
options............ 67
------ -----
Diluted EPS.......... $1,613 5,609 $0.288
====== ===== ======
</TABLE>
Options to purchase ordinary 406,200 ordinary shares at $8.625 per share
were outstanding during the last quarter of 1996 and during 1997 but were not
included in the computation of diluted EPS because the options' exercise price
was greater than the average market price of the ordinary shares.
NOTE 11 -- BALANCES AND TRANSACTIONS WITH RELATED PARTIES:
a. Balances:
1) Convergys:
<TABLE>
<CAPTION>
DECEMBER 31
--------------
1998 1997
----- -----
(IN THOUSANDS)
<S> <C> <C>
Current assets -- accounts receivable -- trade.............. $754
====
Current liabilities -- accounts payable and accruals........ $253 $449
==== ====
</TABLE>
2) Other:
<TABLE>
<S> <C> <C>
Current assets:
Accounts receivable -- other.............................. $456 $ 11
==== ====
Non-current receivable -- loan to a related party, see
note 2................................................. $450
====
Current liabilities -- accounts payable and
accruals -- other......................................... $ 45
====
</TABLE>
b. As to the sale of the investment in the proportionately consolidated
company to a related party, see note 2.
c. As to commitments with related parties, see note 5a, b, c and f.
F-27
<PAGE> 66
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each shareholder
of the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary, at the applicable address set forth below:
The Depositary for the Offer is:
IBJ WHITEHALL BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: For Information: By Hand or Overnight Delivery:
IBJ Whitehall Bank (212) 858-2103 IBJ Whitehall Bank
& Trust Company (Call Collect) & Trust Company
P.O. Box 84 Facsimile: One State Street
Bowling Green Station (212) 858-2611 New York, New York 10004
New York, New York 10274-0084 To Confirm Facsimile Attn: Securities Processing Window
Attn: Reorganization Transmission Call: Subcellar One (SC-1)
Operations Dept. (212) 858-2103
</TABLE>
Any questions or requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and
the other tender offer materials may be directed to the Information Agent the
address and telephone number set forth below. Shareholders may also contact
their broker, dealer, commercial bank, trust company or other nominee for
assistance concerning the Offer.
The Information Agent for the Offer is:
(GEORGESON LOGO)
Wall Street Plaza
New York, New York 10005
(212) 440-9800 (Call Collect)
or
Call Toll Free (800) 223-2064
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER ORDINARY SHARES
OF
WIZTEC SOLUTIONS LTD.
PURSUANT TO THE OFFER TO PURCHASE
DATED APRIL 1, 1999
BY
CONVERGYS ISRAEL INVESTMENTS LTD.
A WHOLLY OWNED SUBSIDIARY
OF
CONVERGYS CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT NEW YORK CITY
TIME, ON WEDNESDAY, APRIL 28, 1999, UNLESS EXTENDED.
The Depositary for the Offer is:
IBJ WHITEHALL BANK & TRUST COMPANY
By Mail:
IBJ Whitehall Bank & Trust Company
P.O. Box 84
Bowling Green Station
New York, New York 10274-0084
Attn.: Reorganization
Operations Dept.
For Information:
(212) 858-2103
(Call Collect)
Facsimile:
(212) 858-2611
To Confirm Facsimile
Transmission Call:
(212) 858-2103
By Hand or Overnight Delivery:
IBJ Whitehall Bank & Trust Company
One State Street
New York, New York 10004
Attn.: Securities Processing Window
Subcellar One (SC-1)
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER OTHER
THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY.
THE INSTRUCTIONS CONTAINED WITHIN THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used by shareholders of Wiztec
Solutions Ltd. either if certificates for Shares (as defined below) are to be
forwarded herewith or, unless an Agent's Message (as defined in Instruction 2
below) is utilized, if delivery of Shares is to be made by book-entry transfer
to an account maintained by the Depositary at the Book-Entry Transfer Facility
(as defined in and pursuant to the procedures set forth in Section 3 of the
Offer to Purchase). Shareholders who deliver Shares by book-entry transfer are
referred to herein as "Book-Entry Shareholders" and other shareholders are
referred to herein as "Certificate Shareholders."
Shareholders whose certificates for Shares ("Share Certificates") are not
immediately available or who cannot deliver their Share Certificates and all
other documents required hereby to the Depositary on or prior to the Expiration
Date (as defined in Section 1 of the Offer to Purchase) or who are unable to
complete the procedure for book-entry transfer on a timely basis must tender
their Shares according to the guaranteed delivery procedure set forth in Section
3 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO THE
BOOK-ENTRY TRANSFER FACILITY WILL NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
<PAGE> 2
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
TO THE DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY AND
COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY TRANSFER
FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution
--------------------------------------------------------------------------
Account Number
--------------------------------------------------------------------------
Transaction Code Number
--------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s)
--------------------------------------------------------------------------
Window Ticket Number (if any)
--------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
--------------------------------------------------------------------------
Name of Institution which Guaranteed Delivery
--------------------------------------------------------------------------
Account Number
--------------------------------------------------------------------------
Transaction Code Number
--------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- -------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN BLANK EXACTLY AS NAME(S) SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
APPEAR(S) ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY)
- -------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER OF
SHARE SHARES NUMBER
CERTIFICATE REPRESENTED BY OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
TOTAL SHARES
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by Book-Entry Shareholders
** Unless otherwise indicated, all Shares represented by Share Certificates
delivered to the Depositary will be deemed to have been tendered. See
Instruction 4.
2
<PAGE> 3
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to Convergys Israel Investments Ltd., a
company limited by shares duly registered under the laws of the State of Israel
(the "Sub") and a wholly owned subsidiary of Convergys Corporation, an Ohio
corporation ("Parent"), the above-described Ordinary Shares, each with New
Israeli Shekel 1 par value (the "Shares"), of Wiztec Solutions Ltd., a company
limited by shares duly registered under the laws of the State of Israel (the
"Company"), at a purchase price of $18.30 per Share, net to the seller in cash
without interest thereon, upon the terms and subject to the conditions set forth
in the Sub's Offer to Purchase dated April 1, 1999 (the "Offer to Purchase") and
this Letter of Transmittal (which together with the Offer to Purchase,
constitutes the "Offer"), receipt of which is hereby acknowledged. The
undersigned understands that Sub reserves the right to transfer or assign, in
whole or from time to time in part, to one or more of its affiliates, the right
to purchase all or any portion of the Shares tendered pursuant to the Offer. By
tendering Shares pursuant to the Offer, a Company shareholder is approving a
Plan in accordance with Section 236 of the Companies Ordinance as set forth in
Section 7 of the Offer to Purchase.
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith in accordance with the terms and subject to the conditions of
the Offer, the undersigned hereby sells, assigns and transfers to, or upon the
order of, the Sub all right, title and interest in and to all of the Shares that
are being tendered hereby and any and all dividends, distributions and rights
declared, paid or issued with respect to the tendered Shares on or after March
25, 1999 (collectively, "Distributions") and hereby irrevocably constitutes and
appoints the Depositary true and lawful agent and attorney-in-fact of the
undersigned with respect to such Shares (and any Distributions), with full power
of substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to (a) deliver certificates for such Shares (and any
Distributions) or transfer ownership of such Shares (and any Distributions) on
the account books maintained by a Book-Entry Transfer Facility, together, in any
such case, with all accompanying evidences of transfer and authenticity to, or
upon the order of, the Sub upon receipt by the Depositary, as the undersigned's
agent, of the purchase price, (b) present such Shares (and any Distributions)
for transfer on the Company's books and (c) receive all benefits and otherwise
exercise all rights of beneficial ownership of such Shares (and any
Distributions), all in accordance with the terms of the Offer.
The undersigned hereby represents and warrants that (a) the undersigned has
full power and authority to tender, sell, assign and transfer the Shares (and
any Distributions) tendered hereby and (b) when the Shares are accepted for
payment, Sub will acquire good, marketable and unencumbered title to the Shares
(and any Distributions), free and clear of all liens, restrictions, charges and
encumbrances, and the same will not be subject to any adverse claim. The
undersigned, upon request, shall execute and deliver any signature guarantee or
additional documents deemed by the Depositary or Sub to be necessary or
desirable to complete the sale, assignment and transfer of the Shares (and any
Distributions) tendered hereby. In addition, the undersigned shall promptly
remit and transfer to the Depositary for the account of the Sub any and all
Distributions in respect of the Shares tendered hereby, accompanied by
appropriate documentation of transfer and, pending such remittance or
appropriate assurance thereof, the Sub shall be entitled to all rights and
privileges as owner of any such Distribution and may withhold the entire
purchase price or deduct from the purchase price the amount or value thereof, as
determined by the Sub in its sole discretion.
No authority conferred or agreed to be conferred in this Letter of
Transmittal shall be affected by, and all such authority shall survive, the
death or incapacity of the undersigned. All obligations of the undersigned
hereunder shall be binding upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy and legal representatives of the
undersigned. Except as stated in the Offer to Purchase, this tender of Shares
hereby made is irrevocable.
The undersigned hereby irrevocably appoints William D. Baskett III, Steven
G. Rolls and Roy T. Heggland, and each of them, as the attorneys-in-fact and
proxies of the undersigned, each with full power of substitution, to vote in
such manner as each such attorney and proxy or any substitute thereof shall deem
proper in the sole discretion of such attorney-in-fact and proxy or such
substitute, and otherwise act (including pursuant to written
3
<PAGE> 4
consent) with respect to all of the Shares tendered hereby and all Distributions
which have been accepted for payment by the Sub prior to the time of such vote
or action, which the undersigned is entitled to vote at any meeting of
shareholders (whether annual or special and whether or not an adjourned meeting)
of the Company or otherwise. This proxy and power of attorney is coupled with an
interest in the Shares and is irrevocable and is granted in consideration of,
and is effective upon, the acceptance for payment of such Shares and all
Distributions by the Sub in accordance with the terms of the Offer. Such
acceptance for payment shall revoke any other proxy granted by the undersigned
at any time with respect to such Shares and all Distributions and no subsequent
proxies will be given (or, if given, will not be deemed effective) with respect
thereto by the undersigned. The undersigned understands that in order for Shares
to be deemed validly tendered pursuant to the Offer, immediately upon the Sub's
acceptance of such Shares and all Distributions for payment, the Sub or its
designee must be able to exercise full voting rights with respect to such Shares
and all Distributions, including, without limitation, voting at any meeting of
the Company's shareholders then scheduled.
The undersigned understands that the valid tender of Shares pursuant to any
one of the procedures described in Section 3 of the Offer to Purchase and in the
Instructions hereto will constitute a binding agreement between the undersigned
and Sub upon the terms and subject to the conditions of the Offer (and if the
Offer is extended or amended,d the terms or conditions of any such extension or
amendment).
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price of all Shares purchased and/or
return any certificate(s) for Shares not tendered or accepted for payment in the
name(s) of the registered holder(s) appearing under "Description of Shares
Tendered." Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the purchase price of all Shares
purchased and/or return any certificates for Shares not tendered or not accepted
for payment (and accompanying documents, as appropriate) to the address(es) of
the registered holder(s) appearing under "Description of Shares Tendered." In
the event that both the Special Delivery Instructions and the Special Payment
Instructions are completed, please issue the check for the purchase price of all
Shares purchased and/or return any certificates for Shares not so tendered or
accepted for payment (and accompanying documents, as appropriate) in the name(s)
of, and deliver such check and/or return such certificates (and accompanying
documents, as appropriate) to, the person(s) so indicated. Unless otherwise
indicated herein under "Special Payment Instructions," in the case of a
book-entry transfer of Shares, please credit the account maintained at the
Book-Entry Transfer Facility indicated above with any Shares not accepted for
payment. The undersigned recognizes that the Sub has no obligation, pursuant to
the Special Payment Instructions, to transfer any Shares from the name(s) of the
registered holder(s) thereof if the Sub does not accept for payment any of the
Shares so tendered.
4
<PAGE> 5
<TABLE>
<S> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificate(s) To be completed ONLY if certificate(s) for
for Shares not tendered or not accepted for Shares not tendered and not accepted for
payment and/or the check for the purchase payment and/or the check for the purchase
price of Shares purchased are to be issued price of Shares accepted for payment are to
in the name of someone other than the be sent to someone other than the
undersigned or if Shares tendered by undersigned, or to the undersigned at the
book-entry transfer which are not accepted address other than that shown above.
for payment are to be returned by credit to
an account maintained at a Book-Entry
Transfer Facility.
Issue [ ] Check [ ] Certificates to: Mail [ ] Check [ ] Certificates to:
Name: Name:
------------------------------------------ ------------------------------------------
(PLEASE PRINT) (PLEASE PRINT)
Address: Address:
---------------------------------------- ----------------------------------------
-------------------------------------------- --------------------------------------------
(INCLUDE ZIP CODE) (INCLUDE ZIP CODE)
-------------------------------------------- --------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY
NO.) NO.)
(SEE SUBSTITUTE FORM W-9) (SEE SUBSTITUTE FORM W-9)
[ ] Credit unpurchased Shares delivered by
book-entry transfer to the Book-Entry
Transfer Facility account set forth
below:
--------------------------------------------
(ACCOUNT NUMBER)
</TABLE>
5
<PAGE> 6
IMPORTANT -- SHAREHOLDERS SIGN HERE
(AND COMPLETE SUBSTITUTE FORM W-9 BELOW)
X
- --------------------------------------------------------------------------------
X
- --------------------------------------------------------------------------------
SIGNATURE(S) OF HOLDER(S)
Dated:
- ------------------------, 1999
(Must be signed by registered holder(s) exactly as name(s) appear(s) on Share
Certificate(s) or on a security position listing or by the person(s) authorized
to become registered holder(s) by certificates and documents transmitted
herewith. If signature is by an officer of a corporation or by an executor,
administrator, trustee, guardian, attorney-in-fact, agent or any other person
acting in a fiduciary or representative capacity, please set forth full title
and see Instruction 5.)
Name(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
- --------------------------------------------------------------------------------
Taxpayer Identification or Social Security No.:
- ----------------------------------------------------------------------------
(COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature(s):
- --------------------------------------------------------------------------------
Name:
- --------------------------------------------------------------------------------
Name of Firm:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
- --------------------------------------------------------------------------------
Dated:
- ------------------------, 1999
6
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this
Letter of Transmittal (i) if this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this document, shall include
any participant in the Book-Entry Transfer Facility whose name appears on a
security position listing as the holder of Shares) of Shares tendered herewith,
unless such holder(s) has (have) completed either the box entitled "Special
Payment Instructions" or the box entitled "Special Delivery Instructions" above,
or (ii) if such Shares are tendered for the account of a firm which is a bank,
broker, dealer, credit union, savings association or other entity which is a
member in good standing of a recognized Medallion Program approved by the
Securities Transfer Association (each of the foregoing being herein called an
"Eligible Institution"). In all other cases all signatures of this Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed by shareholders of the
Company either if Share Certificates are to be forwarded herewith or, unless an
Agent's Message is utilized, if tenders are to be made by Book-Entry Transfer
pursuant to the procedures set forth herein and in Section 3 of the Offer to
Purchase. Share Certificates evidencing all physically tendered Shares or
confirmation of any book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facility of Shares tendered by book-entry transfer, as well
as this Letter of Transmittal or a facsimile thereof, properly completed and
duly executed with any required signature guarantees or an Agent's Message, and
any other documents required by this Letter of Transmittal, must be received by
the Depositary at one of its addresses set forth herein on or prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase).
Shareholders whose certificates for Shares are not immediately available or
who cannot deliver their Share Certificates and all other required documents to
the Depositary prior to the Expiration Date or who cannot comply with the
Book-Entry Transfer procedures on a timely basis may tender their Shares by
properly completing and duly executing the Notice of Guaranteed Delivery
pursuant to the guaranteed delivery procedure set forth herein and in Section 3
of the Offer to Purchase. Pursuant to such guaranteed delivery procedure, (i)
such tender must be made by or through an Eligible Institution; (ii) a properly
completed and duly executed Notice of Guaranteed Delivery, substantially in the
form provided by Sub, must be received by the Depositary prior to the Expiration
Date; and (iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation with respect to all tendered Shares),
together with a properly completed and duly executed Letter of Transmittal (or a
facsimile thereof), with any required signature guarantees (or, in the case of a
Book-Entry Transfer, an Agent's Message) and any other required documents, must
be received by the Depositary within three trading days after the date of
execution of such Notice of Guaranteed Delivery. A "trading day" is any day on
which the New York Stock Exchange is open for business.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares, that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that Sub may
enforce such agreement against the participant.
THE METHOD OF DELIVERY OF SHARES, THIS LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY,
IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER. THE SHARES WILL BE
DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN
THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS
BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
STRONGLY RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE
TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering shareholders, by execution of
this Letter of Transmittal (or facsimile thereof), waive any right to receive
any notice of the acceptance of their Shares for payment.
7
<PAGE> 8
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares tendered should be listed on a
separate signed schedule and attached hereto.
4. PARTIAL TENDER (NOT APPLICABLE TO SHAREHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all Shares evidenced by any Share Certificate submitted
are to be tendered, fill in the number of Shares which are to be tendered in the
box entitled "Number of Shares Tendered." In such case, new certificate(s) for
the remainder of the Shares that were evidenced by old tendered certificate(s),
but which were not tendered by you, will be sent to the registered holder(s),
unless otherwise provided in the appropriate box on this Letter of Transmittal,
as soon as practicable after the Expiration Date of the Offer. All Shares
represented by certificates delivered to the Depositary will be deemed to have
been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the Share Certificate(s) without alteration, enlargement or any
change whatsoever.
If any of the Shares tendered hereby are held of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any Share Certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to Sub of the authority of such person so to act must be submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of Share Certificates or
separate stock powers are required unless payment or certificates for Shares not
tendered or not accepted for payment are to be issued in the name of a person
other than the registered holder(s). Signatures on any such Share Certificates
or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares evidenced by certificates listed and
transmitted hereby, the Share Certificates must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on the Share Certificates. Signature(s) on any
such Share Certificate or stock powers must be guaranteed by an Eligible
Institution.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction
6, the Sub will pay all stock transfer taxes with respect to the transfer and
sale of purchased Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price is to be made to, or if certificates for Shares
not tendered or purchased are to be registered in the name of, any person other
than the registered holder(s) or if tendered certificates are registered in the
name of any person other than the person(s) signing this Letter of Transmittal,
the amount of any stock transfer taxes (whether imposed on the registered holder
or such person) payable on account of the transfer to such person will be
deducted from the purchase price unless satisfactory evidence of the payment of
such taxes or exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE SHARE CERTIFICATE(S) LISTED IN THIS
LETTER OF TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares accepted for payment is to be issued in the name of, and/or
Share Certificates for Shares not accepted for payment or not tendered are to be
issued in the name of and/or returned to, a person other than the signer of this
Letter of Transmittal or if a check is to be sent, and/or such certificates are
to be returned, to a person other than the signer of this Letter of Transmittal,
or to an address other than that shown above, the appropriate boxes on this
Letter of Transmittal should be completed. Any shareholder(s) delivering Shares
by Book-Entry Transfer may request that Shares not purchased be credited to such
account maintained at the Book-Entry Transfer Facility as such
8
<PAGE> 9
shareholder(s) may designate in the box entitled "Special Payment Instructions."
If no such instructions are given, any such Shares not purchased will be
returned by crediting the account at the Book-Entry Transfer Facility designated
above as the account from which such Shares were delivered.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance or additional copies of the Offer to Purchase, this Letter of
Transmittal, the Notice of Guaranteed Delivery, Form W-8, Certificate of Foreign
Status and the Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 may be directed to the Information Agent at the address and
phone number set forth below, or from brokers, dealers, commercial banks or
trust companies.
9. WAIVER OF CONDITIONS. Sub reserves the absolute right in its sole
discretion to waive, at any time or from time to time, any of the specified
conditions of the Offer, in whole or in part, in the case of any Shares
tendered.
10. BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. In order to avoid "backup
withholding" of federal income tax on payments of cash pursuant to the Offer, a
shareholder surrendering Shares in the Offer must, unless an exemption applies,
provide the Depositary with such shareholder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 in this Letter of Transmittal and certify,
under penalties of perjury, that such TIN is correct and that such shareholder
is not subject to backup withholding. If the Depositary is not provided with the
correct TIN, the Internal Revenue Service may subject the shareholder or other
payee to a $50 penalty. In addition, payments that are made to such shareholder
or other payee with respect to Shares purchased pursuant to the Offer may be
subject to a 31% backup withholding.
Certain shareholders (including, among others, all corporations and certain
foreign individuals and entities) are not subject to backup withholding and
reporting requirements. Non-corporate foreign shareholders should complete and
sign the main signature form and a Form W-8, Certificate of Foreign Status, a
copy of which is enclosed with this Letter of Transmittal, in order to avoid
backup withholding. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for more instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any such payments made to a shareholder or other payee. Backup withholding is
not an additional income tax. Rather, the amount of the backup withholding can
be credited against the federal income tax liability of the person subject to
the backup withholding, provided that the required information is given to the
IRS. If backup withholding results in an overpayment of tax, a refund can be
obtained by the shareholder upon filing an income tax return.
The shareholder is required to give the Depositary the TIN (i.e., social
security number or employer identification number) of the record owner of the
Shares. If the Shares are held in more than one name or are not in the name of
the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
number to report.
If the tendering shareholder has not been issued a TIN and has applied for
a TIN or intends to apply for a TIN in the near future, such shareholder should
write "Applied For" in the space provided for the TIN in Part 1 of the
Substitute Form W-9 and sign and date the Substitute Form W-9, and the
shareholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the Certificate of Awaiting Taxpayer Identification Number
is completed, the Depositary will withhold 31% on all payments made prior to the
time a properly certified TIN is provided to the Depositary. However, such
amounts will be refunded to such shareholder if a TIN is provided to the
Depositary within 60 days.
11. LOST, DESTROYED OR STOLEN SHARE CERTIFICATES. If any certificate(s)
representing Shares have been lost, destroyed or stolen, the shareholder should
promptly notify the Depositary by checking the box immediately preceding the
special payment/special delivery instructions and indicating the number of
Shares lost. The shareholder will then be instructed as to the steps that must
be taken in order to replace the Share Certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen Share Certificates have been followed.
9
<PAGE> 10
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF) TOGETHER WITH ANY
REQUIRED SIGNATURE GUARANTEES, OR, IN THE CASE OF A BOOK-ENTRY TRANSFER AN
AGENT'S MESSAGE, AND ANY OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE
DEPOSITARY PRIOR TO THE EXPIRATION DATE AND EITHER CERTIFICATES FOR TENDERED
SHARES MUST BE RECEIVED BY THE DEPOSITARY OR SHARES MUST BE DELIVERED PURSUANT
TO THE PROCEDURES FOR BOOK-ENTRY TRANSFER, IN EACH CASE PRIOR TO THE EXPIRATION
DATE, OR THE TENDERING SHAREHOLDER MUST COMPLY WITH THE PROCEDURES FOR
GUARANTEED DELIVERY.
10
<PAGE> 11
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
PLEASE PROVIDE YOUR SOCIAL SECURITY OR OTHER TAXPAYER IDENTIFICATION NUMBER ON THIS SUBSTITUTE FORM W-9 AND CERTIFY THAT
YOU ARE NOT SUBJECT TO BACKUP WITHHOLDING. FAILURE TO DO SO WILL SUBJECT YOU TO THIRTY-ONE PERCENT FEDERAL INCOME TAX
WITHHOLDING FROM YOUR PROCEEDS.
- --------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN Social Security Number
FORM W-9 AT RIGHT AND CERTIFY BY SIGNING --------------------------------------------
AND DATING BELOW or Employer Identification Number
--------------------------------------------
or Awaiting TIN
--------------------------------------------
---------------------------------------------------------------------------------------
PART 2--For Payees exempt from backup withholding, see the enclosed Guidelines for
DEPARTMENT OF Certification of Taxpayer Identification Number on Substitute Form W-9 and complete as
THE TREASURY instructed herein.
INTERNAL Certification--Under penalties of perjury, I certify that:
REVENUE SERVICE (1) The number shown on this form is my correct taxpayer identification number (or I am
waiting for a number to be issued to me), and
(2) I am not subject to backup withholding because I have not been notified by the
Internal Revenue Service (IRS) that I am subject to backup withholding as a result of
failure to report all interest or dividends, or the IRS has notified me that I am no
longer subject to backup withholding.
---------------------------------------------------------------------------------------
PART 3--Certificate Instructions -- You must cross out item (2) if you have been
notified by the IRS that you are subject to backup withholding because of
PAYER'S REQUEST FOR underreporting interest or dividends on your tax return. However, if after being
TAXPAYER IDENTIFICATION notified by the IRS that you are no longer subject to backup withholding do not cross
NUMBER ("TIN") out item (2).
AND CERTIFICATION Signature ------------------------------------------------ Date -----------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING
CERTIFICATE IF YOU WROTE "APPLIED FOR" IN PART I OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number within sixty (60) days, 31%
of all reportable payments made to me thereafter will be withheld until I
provide a number.
Signatures: Dated:
- -------------------------------------------------- ---------------------------
THE INFORMATION AGENT FOR THE OFFER IS:
(GEORGESON LOGO)
WALL STREET PLAZA
NEW YORK, NY 10005
(212) 440-9800 (CALL COLLECT)
OR
CALL TOLL-FREE (800) 223-2064
11
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR
ORDINARY SHARES
OF
WIZTEC SOLUTIONS LTD.
TO
CONVERGYS ISRAEL INVESTMENTS LTD.
A WHOLLY OWNED SUBSIDIARY
OF
CONVERGYS CORPORATION
This form or one substantially equivalent hereto must be used to accept the
Offer (as defined below) if certificates for Ordinary Shares, each with New
Israeli Shekel 1 par value (the "Shares"), of Wiztec Solutions Ltd., a company
limited by shares duly registered under the laws of the State of Israel, are not
immediately available or time will not permit all required documents to reach
the Depositary on or prior to the Expiration Date (as defined in Section 1 of
the Offer to Purchase) or if the procedure for book-entry transfer cannot be
completed on a timely basis. Such form may be delivered by hand or sent by
telegram, telecopier, telex, facsimile transmission or mail to the Depositary.
See Section 3 of the Offer to Purchase.
The Depositary:
IBJ WHITEHALL BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: For Information: By Hand or Overnight Delivery:
IBJ Whitehall Bank & Trust Company (212) 858-2103 IBJ Whitehall Bank & Trust Company
P.O. Box 84 (Call Collect) One State Street
Bowling Green Station Facsimile: New York, New York 10004
New York, New York 10274-0084 (212) 858-2611 Attn.: Securities Processing Window
Attn.: Reorganization To Confirm Facsimile Subcellar One (SC-1)
Operations Dept. Transmission Call:
(212) 858-2103
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS
VIA A FACSIMILE OR TELEX NUMBER, OTHER THAN AS SET FORTH ABOVE, DOES NOT
CONSTITUTE A VALID DELIVERY.
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A
LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION"
UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE
APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to Convergys Israel Investments Ltd., a
company limited by shares duly registered under the laws of the State of Israel
(the "Sub") and a wholly owned subsidiary of Convergys Corporation, an Ohio
corporation, upon the terms and subject to the conditions set forth in the Sub's
Offer to Purchase dated April 1, 1999, and the related Letter of Transmittal
(which together constitute the "Offer"), receipt of which is hereby
acknowledged, the number of Shares as set forth below pursuant to the guaranteed
delivery procedure set forth in Section 3 of the Offer to Purchase. By tendering
Shares pursuant to an Offer, a Company shareholder is approving a Plan in
accordance with Section 236 of the Companies Ordinance as set forth in Section 7
of the Offer to Purchase.
<TABLE>
<S> <C>
Signature(s) Check box if Share(s) will be tendered by book-entry
- ----------------------------------------------------- transfer: [ ]
Name(s)
- -----------------------------------------------------
- -----------------------------------------------------
(Please type or print)
Address
- ----------------------------------------------------- Account Number
- ----------------------------------------------------- ----------------------------------------------------
Zip Code
Number of Shares
- -----------------------------------------------------
Share Certificate Number(s) (if available)
- -----------------------------------------------------
Area Code and Tel. No.:
- -----------------------------------------------------
Dated , 1999
--
</TABLE>
THE GUARANTEE SET FORTH BELOW MUST BE COMPLETED
GUARANTEE
The undersigned, a participant in the Security Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Guarantee Program, the
Stock Exchange Medallion Program or an "eligible guarantor institution" as such
term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended, hereby guarantees to deliver to the Depositary either certificates
representing the Shares tendered hereby, in proper form for transfer, or
confirmation of book-entry transfer of such Shares into the Depositary's
accounts at The Depository Trust Company, in each case with delivery of a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees, or an Agent's Message (as
defined in the Offer to Purchase), and any other required documents, within
three trading days (as defined in the Offer to Purchase) after the date hereof.
<TABLE>
<S> <C>
- ----------------------------------------------------- -----------------------------------------------------
NAME OF FIRM AUTHORIZED SIGNATURE
- ----------------------------------------------------- Name
ADDRESS -----------------------------------------------------
- ----------------------------------------------------- PLEASE PRINT OR TYPE
ZIP CODE Title
Area Code and Tel. No. -----------------------------------------------------
- ----------------------------------------------------- Date , 1999
--
</TABLE>
DO NOT SEND STOCK CERTIFICATES WITH THIS NOTICE OF GUARANTEED DELIVERY
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING ORDINARY SHARES
OF
WIZTEC SOLUTIONS LTD.
BY
CONVERGYS ISRAEL INVESTMENTS LTD.
A WHOLLY OWNED SUBSIDIARY OF
CONVERGYS CORPORATION
AT
$18.30 NET PER SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON WEDNESDAY, APRIL 28, 1999, UNLESS EXTENDED.
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
We have been appointed by Convergys Israel Investments Ltd., a company
limited by shares duly registered under the laws of the State of Israel (the
"Sub") and a wholly owned subsidiary of Convergys Corporation, an Ohio
corporation ("Parent"), to act as Information Agent in connection with Sub's
offer to purchase all outstanding Ordinary Shares (including Shares which may be
issued during the course of the Offer as a result of exercise of options and
warrants), each with New Israeli Shekel 1 par value (the "Shares"), of Wiztec
Solutions Ltd., a company limited by shares duly registered under the laws of
the State of Israel (the "Company"), at $18.30 per Share net to the seller in
cash, without interest, upon the terms and subject to the conditions set forth
in the Offer to Purchase dated April 1, 1999 (the "Offer to Purchase") and in
the related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer") enclosed herewith.
Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold Shares registered in your name or in the name of your
nominee.
The Offer is subject to the conditions set forth in the Offer to Purchase.
See Section 12 of the Offer to Purchase.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, we are enclosing
the following documents:
1. Offer to Purchase dated April 1, 1999;
2. Letter of Transmittal for your use in accepting the Offer and
tendering Shares and for the information of your clients;
3. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares and all other required documents cannot be
delivered to IBJ Whitehall Bank & Trust Company (the "Depositary"), or if
the procedures for book-entry transfer cannot be completed, by the
Expiration Date (as defined in the Offer to Purchase);
4. A printed form of letter which may be sent to your clients for
whose accounts you hold Shares registered in your name or in the name of
your nominee, with space provided for obtaining such clients' instructions
with regard to the Offer;
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9;
6. Form W-8, Certificate to Foreign Status;
7. Schedule 14D-9; and
8. A return envelope addressed to the Depositary.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), Sub will accept for payment and pay for Shares which are validly
tendered prior to the Expiration Date (as defined in the Offer to Purchase) and
not theretofore properly withdrawn when, as and if Sub gives oral or written
notice to the Depositary of Sub's acceptance of such Shares for payment pursuant
to the Offer. Payment for Shares purchased pursuant to the Offer will in all
cases be made only after timely receipt by the Depositary of (i) certificates
for such Shares, or timely confirmation of a book-entry transfer of such Shares
into the Depositary's account at The Depository Trust Company, pursuant to the
procedures described in Section 3 of the Offer to Purchase, (ii) a properly
completed and duly executed Letter of Transmittal (or a properly completed and
manually signed facsimile thereof) or an Agent's Message (as defined in the
Offer to Purchase) in connection with a book-entry transfer and (iii) all other
documents required by the Letter of Transmittal.
<PAGE> 2
Sub will not pay any fees or commissions to any broker or dealer or other
person (other than the Depositary and the Information Agent as described in the
Offer to Purchase) for soliciting tenders of Shares pursuant to the Offer. Sub
will, however, upon request, reimburse brokers, dealers, commercial banks and
trust companies for customary mailing and handling costs incurred by them in
forwarding the enclosed materials to their customers.
Sub will pay or cause to be paid all stock transfer taxes applicable to its
purchase of Shares pursuant to the Offer, except as otherwise provided in
Instruction 6 of the Letter of Transmittal.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
WEDNESDAY, APRIL 28, 1999, UNLESS THE OFFER IS EXTENDED.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or an Agent's Message in connection with a book-entry
transfer of Shares, and any other required documents, should be sent to the
Depositary, and certificates representing the tendered Shares should be
delivered or such Shares should be tendered by book-entry transfer, all in
accordance with the Instructions set forth in the Letter of Transmittal and in
the Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents or to complete the
procedures for delivery by book-entry transfer prior to the expiration of the
Offer, a tender may be effected by following the guaranteed delivery procedures
specified in Section 3 of the Offer to Purchase.
Any inquiries you may have with respect to the Offer should be addressed
to, and additional copies of the enclosed materials may be obtained from, the
Information Agent or the undersigned at the addresses and telephone numbers set
forth on the back cover of the Offer to Purchase.
Very truly yours,
Georgeson & Company Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU THE
AGENT OF PARENT, SUB, THE COMPANY, THE INFORMATION AGENT, THE DEPOSITARY, OR ANY
AFFILIATE OF ANY OF THE FOREGOING, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE
ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH
THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS
CONTAINED THEREIN.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING ORDINARY SHARES
OF
WIZTEC SOLUTIONS LTD.
BY
CONVERGYS ISRAEL INVESTMENTS LTD.
A WHOLLY OWNED SUBSIDIARY
OF
CONVERGYS CORPORATION
AT
$18.30 NET PER SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON WEDNESDAY, APRIL 28, 1999, UNLESS EXTENDED.
To Our Clients:
Enclosed for your consideration are an Offer to Purchase dated April 1,
1999 and the related Letter of Transmittal (which together constitute the
"Offer") relating to the offer by Convergys Israel Investments Ltd., a company
limited by shares duly registered under the laws of the State of Israel (the
"Sub") and a wholly owned subsidiary of Convergys Corporation, an Ohio
corporation ("Parent"), to purchase all outstanding Ordinary Shares (including
Shares which may be issued during the course of the Offer as a result of the
exercise of options and warrants), each with New Israeli Shekel 1 par value (the
"Shares"), of Wiztec Solutions Ltd., a company limited by shares duly registered
under the laws of the State of Israel (the "Company"), at $18.30 per Share net
to the seller in cash. We are the holder of record of Shares held by us for your
account. A tender of such Shares can be made only by us as the holder of record
and pursuant to your instructions. The Letter of Transmittal is furnished to you
for your information only and cannot be used by you to tender Shares.
We request instruction as to whether you wish to tender any or all Shares
held by us for your account, pursuant to the terms and conditions set forth in
the Offer.
Please note the following:
1. The tender offer price is $18.30 per Share net to you in cash, upon
the terms and subject to the conditions set forth in the Sub's Offer to
Purchase dated April 1, 1999 and the related Letter of Transmittal.
2. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Wednesday, April 28, 1999, unless extended.
3. The Offer is being made for all outstanding Shares.
4. The Offer is conditioned upon the satisfaction of certain
conditions set forth in the Offer to Purchase.
5. Any stock transfer taxes will be borne by the Sub, except as
otherwise provided in the Letter of Transmittal.
<PAGE> 2
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and is being made to all holders of Shares. Sub is not aware of any
state where the making of the Offer is prohibited by administrative or judicial
action pursuant to any valid state statute. If Sub becomes aware of any valid
state statute prohibiting the making of the Offer or the acceptance of the
Shares pursuant thereto, Sub shall make a good faith effort to comply with such
statute or seek to have such statute declared inapplicable to the Offer. If,
after such good faith effort, Sub cannot comply with such state statute, the
Offer will not be made to (nor will tenders be accepted from or on behalf of)
holders of Shares in such state. In those jurisdictions where the securities,
blue sky or other laws require the Offer to be made by a licensed broker or
dealer, the Offer will be deemed to be made on behalf of Sub by one or more
registered brokers or dealers licensed under the laws of such jurisdictions.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form set forth
on the reverse side of this letter. An envelope to return your instructions to
us is enclosed. If you authorize the tender of your Shares, all such Shares will
be tendered unless otherwise specified on the reverse side of this letter. Your
instructions should be forwarded to us in ample time to permit us to submit a
tender on your behalf prior to the expiration of the Offer.
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE
ALL OUTSTANDING ORDINARY SHARES
OF
WIZTEC SOLUTIONS LTD.
BY
CONVERGYS ISRAEL INVESTMENTS LTD.
A WHOLLY OWNED SUBSIDIARY
OF
CONVERGYS CORPORATION
AT
$18.30 NET PER SHARE
The undersigned acknowledge(s) receipt of your letter enclosing the Offer
to Purchase dated April 1, 1999 of Convergys Israel Investments Ltd., a company
limited by shares duly registered under the laws of the State of Israel and a
wholly owned subsidiary of Convergys Corporation, an Ohio corporation, and the
related Letter of Transmittal, relating to Ordinary Shares, each with New
Israeli Shekel 1 par value (the "Shares"), of Wiztec Solutions Ltd., a company
limited by shares duly registered under the laws of the State of Israel.
This will instruct you to tender the number of Shares indicated below held
by you for the account of the undersigned, pursuant to the terms and conditions
set forth in the Offer to Purchase and the related Letter of Transmittal.
Number of Shares to be Tendered:*
Shares
- ------------------------------------
Dated: , 1999
- ------------------------------------
SIGN HERE
------------------------------------
------------------------------------
Signature(s)
------------------------------------
------------------------------------
(Please print name(s) and
address(es) here)
------------------------------------
Area Code and Telephone Number(s)
------------------------------------
Taxpayer Identification or Social
Security Number(s)
- ---------------
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER -- Social Security numbers have nine digits separated by two hyphens:
i.e., 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e., 00-0000000. The table below will help determine the
number to give the payer.
<TABLE>
<CAPTION>
- ------------------------------- GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
- ------------------------------- NUMBER OF--
<C> <S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, any one of the
individuals(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint
funds, either person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor or
guardian or committee for incompetent person(3)
a designated ward, minor
or incompetent person
7. a. The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also
trustee)
b. So-called trust account The actual owner(1)
that is not a legal or
valid trust under state
law
8. Sole proprietorship The owner(4)
account
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------- GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
- ------------------------------- NUMBER OF--
<C> <S> <C>
9. A valid trust, estate or The legal entity (Do not
pension trust furnish the identifying
number of the personal
representative or
trustee unless the legal
entity itself is not
designated in the
account title.)(5)
10. Corporate account The corporation
11. Religious, charitable or The organization
educational organization
account
12. Partnership account held The partnership
in the name of the
business
13. Association, club or other The organization
tax-exempt organization
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as a state or
local government, school
district or prison) that
receives agricultural
program payments
</TABLE>
- ---------------------------------------------------------------
- ---------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's, or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension trust.
NOTE:If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEE EXEMPT FROM BACKUP WITHHOLDING
- - Payees specifically exempted from backup withholding on ALL payments include
the following:
- - A corporation.
- - A financial institution.
- - An organization exempt from tax under Section 501(a) or an individual
retirement plan.
- - The United States or any agency or instrumentality thereof.
- - A state, the District of Columbia, a possession of the United States or any
subdivision or instrumentality thereof.
- - A foreign government, a political subdivision of a foreign government or any
agency or instrumentality thereof.
- - An international organization or any agency or instrumentality thereof.
- - A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- - A real estate investment trust.
- - A common trust fund operated by a bank under Section 584(a).
- - An exempt charitable remainder trust or a nonexempt trust described in Section
4947(a)(1).
- - An entity registered at all times under the Investment Company Act of 1940.
- - A foreign central bank of issue.
PAYMENTS NOT GENERALLY SUBJECT TO BACKUP WITHHOLDING
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- - Payments to nonresident aliens subject to withholding under section 1441.
- - Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- - Payments of patronage dividends where the amount received is not paid in
money.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- - Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and you have not provided your
correct taxpayer identification number to the payer.
- - Payments of tax-exempt interest (including exempt interest dividends under
section 852).
- - Payments described in section 6049(b)(5) to non-resident aliens.
- - Payments on tax-free covenant bonds under section 1451.
- - Payments made by certain foreign organizations.
- - Payments made to nominee.
Exempt payees described above should file form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends and patronage dividends that are
not subject to information reporting are also not subject to backup withholding.
For details, see the regulations under section 6041, 6041A(a), 6045 and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend, interest
or other payments to give taxpayer identification numbers to payers who must
report the payments to the IRS. The IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
clause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications of affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE> 1
<TABLE>
<CAPTION>
CERTIFICATE OF FOREIGN STATUS
FORM W-8
(Rev. November 1992)
Department of the Treasury
Internal Revenue Service
- ------------------------------------------------------------------------------------------------------------------------------------
PLEASE PRINT OR TYPE
<S> <C>
Name of owner (if joint account, also give joint owner's name.) (See SPECIFIC INSTRUCTIONS) U.S. TAXPAYER IDENTIFICATION NUMBER
(if any)
- ------------------------------------------------------------------------------------------------------------------------------------
PERMANENT ADDRESS (See SPECIFIC INSTRUCTIONS.) (Include apt. or suite no.)
- ------------------------------------------------------------------------------------------------------------------------------------
City, province or state, postal code, and country
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT MAILING ADDRESS, if different from permanent address (Include apt. or suite no., or P.O. box if mail is not delivered to
street address.)
- ------------------------------------------------------------------------------------------------------------------------------------
City, town or post office, state and ZIP code (If foreign address, enter city, province or state, postal code, and country.)
- ------------------------------------------------------------------------------------------------------------------------------------
List account information
here (Optional, see
SPECIFIC INSTRUCTIONS.)
Account number Account type Account number Account type
- ------------------------------------------------------------------------------------------------------------------------------------
NOTICE OF CHANGE IN STATUS. To notify the payer, mortgage interest recipient, broker, or barter exchange that you no longer
qualify for exemption, check here.................................................................................... [ ]
IF YOU CHECK THIS BOX, REPORTING WILL BEGIN ON THE ACCOUNT(S) LISTED.
- ------------------------------------------------------------------------------------------------------------------------------------
PLEASE SIGN HERE
CERTIFICATION.-(Check applicable box(es)). Under penalties of perjury, I certify that:
[ ] For INTEREST PAYMENTS, I am not a U.S. citizen or resident (or I am filing for a foreign corporation, partnership,
estate, or trust).
[ ] For DIVIDENDS, I am not a U.S. citizen or resident (or I am filing for a foreign corporation, partnership, estate, or
trust).
[ ] For BROKER TRANSACTIONS or BARTER EXCHANGES, I am an exempt foreign person as defined in the
instructions below.
PLEASE SIGN HERE
Signature Date
--------------------------------------------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
GENERAL INSTRUCTIONS
(Section references are to the Internal
Revenue Code unless otherwise noted.)
PURPOSE
Use Form W-8 or a substitute form containing a substantially similar statement
to tell the payer, mortgage interest recipient, middleman, broker, or barter
exchange that you are a nonresident alien individual, foreign entity, or exempt
foreign person not subject to certain U.S. information return reporting or
backup withholding rules.
CAUTION: Form W-8 does not exempt the payee from the 30% (or lower treaty)
nonresident withholding rates.
NONRESIDENT ALIEN INDIVIDUAL
For income tax purposes, "nonresident alien individual" means an individual who
is neither a U.S. citizen nor resident. Generally, an alien is considered to be
a U.S. resident if:
- -- The individual was a lawful permanent resident of the United States at any
time during the calendar year, that is, the alien held an immigrant visa (a
"green card"), or
- -- The individual was physically present in the United States on:
(1) at least 31 days during the calendar year, and
(2) 183 days or more during the current year and the 2 preceding calendar
years (counting all the days of physical presence in the current year, one-third
the number of days of presence in the first preceding year, and only one-sixth
of the number of days in the second preceding year).
See Pub. 519, U.S. Tax Guide for Aliens, for more information on resident and
nonresident alien status.
NOTE: If you are a nonresident alien individual married to a U.S. citizen or
resident and have made an election under section 6013(g) or (h), you are treated
as a U.S. resident and MAY NOT use Form W-8.
EXEMPT FOREIGN PERSON
For purposes of this form, you are an "exempt foreign person" for a calendar
year in which:
1. You are a nonresident alien individual or a foreign corporation,
partnership, estate, or trust,
2. You are an individual who has not been, and plans not to be, present in the
United States for a total of 183 days or more during the calendar year, and
3. You are neither engaged, nor plan to be engaged during the year, in a U.S.
trade or business that has effectively connected gains from transactions with a
broker or barter exchange.
If you do not meet the requirements of 2 or 3 above, you may instead certify
on FORM 1001, Ownership, Exemption, or Reduced Rate Certificate, that your
country has a tax treaty with the United States that exempts your transactions
from U.S. tax.
FILING INSTRUCTIONS
WHEN TO FILE. -- File Form W-8 or substitute form before a payment is made.
Otherwise, the payer may have to withhold and send part of the payment to the
Internal Revenue Service (see BACKUP WITHHOLDING below). This certificate
generally remains in effect for three calendar years. However, the payer may
require you to file a new certificate each time a payment is made to you.
WHERE TO FILE. -- File this form with the payer of the qualifying income who is
the withholding agent (see WITHHOLDING AGENT ON PAGE 2). KEEP A COPY FOR YOUR
OWN RECORDS.
BACKUP WITHHOLDING
A U.S. taxpayer identification number or Form W-8 or substitute form must be
given to the payers of certain income. If a taxpayer identification number or
Form W-8 or substitute form is not provided or the wrong taxpayer identification
number is provided, these payers may have to withhold 20% of each payment or
transaction. This is called backup withholding.
NOTE: On January 1, 1993, the backup withholding rate increases from 20% to 31%.
Reportable payments subject to backup withholding rules are:
- -- Interest payments under section 6049(a).
- -- Dividend payments under sections 6042(a) and 6044.
- -- Other payments (i.e., royalties and payments from brokers and barter
exchanges) under sections 6041, 6041A(a), 6045, 6050A, and 6050N.
If backup withholding occurs, an exempt foreign person who is a nonresident
alien individual may get a refund by filing FORM 1040NR, U.S. Nonresident Alien
Income Tax Return, with the Internal Revenue Service Center, Philadelphia, PA
19255, even if filing the return is not otherwise required.
(Continued on back.)
- --------------------------------------------------------------------------------
Cat. No. 10230M Form W-8 (Rev. 11-92)
<PAGE> 2
Form W-8 (Rev. 11-92) Page 2
- --------------------------------------------------------------------------------
U.S. TAXPAYER IDENTIFICATION NUMBER
The Internal Revenue law requires that certain income be reported to the
Internal Revenue Service using a U.S. taxpayer identification number (TIN). This
number can be a social security number assigned to individuals by the Social
Security Administration or an employer identification number assigned to
businesses and other entities by the Internal Revenue Service.
Payments to account holders who are foreign persons (nonresident alien
individuals, foreign corporations, partnerships, estates, or trusts) generally
are not subject to U.S. reporting requirements. Also, foreign persons are not
generally required to have a TIN, nor are they subject to any backup withholding
because they do not furnish a TIN to a payer or broker.
However, foreign persons with income effectively connected with a trade or
business in the United States (income subject to regular (graduated) income
tax), must have a TIN. To apply for a TIN, use FORM SS-4, Application for
Employer Identification Number, available from local Internal Revenue Service
offices, or FORM SS-5, Application for a Social Security Card, available from
local Social Security Administration offices.
SPECIAL RULES
MORTGAGE INTEREST. -- For purposes of the reporting rules, mortgage interest is
interest paid on a mortgage to a person engaged in a trade or business
originating mortgages in the course of that trade or business. A mortgage
interest recipient is one who receives interest on a mortgage that was acquired
in the course of a trade or business.
Mortgage interest is not subject to backup withholding rules, but is subject
to reporting requirements under section 6050H. Generally, however, the reporting
requirements do not apply if the payer of record is a nonresident alien
individual who pays interest on a mortgage not secured by real property in the
United States. Use Form W-8 or substitute form to notify the mortgage interest
recipient that the payer is a nonresident alien individual.
PORTFOLIO INTEREST. -- Generally, portfolio interest paid to a nonresident alien
individual or foreign partnership, estate, or trust is not subject to backup
withholding rules. However, if interest is paid on portfolio investments to a
beneficial owner that is neither a financial institution nor a member of a
clearing organization, Form W-8 or substitute form is required.
REGISTERED OBLIGATIONS NOT TARGETED TO FOREIGN MARKETS qualify as portfolio
interest not subject to 30% withholding, but require the filing of Form W-8 or
substitute form. See INSTRUCTIONS TO WITHHOLDING AGENTS on this page for
reporting rules.
See PUB. 515, Withholding of Tax on Nonresident Aliens and Foreign
Corporations, for REGISTERED OBLIGATIONS TARGETED TO FOREIGN MARKETS and when
Form W-8 or substitute form is not required on these payments.
BEARER OBLIGATIONS. -- The interest from bearer obligations targeted to
foreign markets is treated as portfolio interest and is not subject to 30%
withholding. Form W-8 or substitute form is not required.
DIVIDENDS. -- Any distribution or payment of dividends by a U.S. corporation
sent to a foreign address is subject to the 30% (or lower treaty) withholding
rate, but is not subject to backup withholding. Also, there is no backup
withholding on dividend payments made to a foreign person by a foreign
corporation. However, the 30% withholding (or lower treaty) rate applies to
dividend payments made to a foreign person by a foreign corporation if:
- -- 25% or more of the foreign corporation's gross income for the three preceding
taxable years was effectively connected with a U.S. trade or business, and
- -- The corporation was not subject to the branch profits tax because of an
income tax treaty (see section 884(e)).
If a foreign corporation makes payments to another foreign corporation, the
recipient must be a qualified resident of its country of residence to benefit
from that country's tax treaty.
BROKER OR BARTER EXCHANGES. -- Income from transactions with a broker or barter
exchanges is subject to reporting rules and backup withholding unless Form W-8
or substitute form is filed to notify the broker or barter exchange that you are
an exempt foreign person as defined on page 1.
SPECIFIC INSTRUCTIONS
NAME OF OWNER. -- If Form W-8 is being filed for portfolio interest, enter the
name of the beneficial owner.
U.S. TAXPAYER IDENTIFICATION NUMBER. -- If you have a U.S. taxpayer
identification number, enter your number in this space (see the discussion
earlier).
PERMANENT ADDRESS. -- Enter your complete address in the country where you
reside permanently for income tax purposes.
<TABLE>
<CAPTION>
SHOW THE
IF YOU ARE: ADDRESS OF:
<S> <C>
An individual Your permanent
residence
A partnership or Principal office
corporation
An estate or trust Permanent residence
or principal office
of any fiduciary
</TABLE>
Also show your current mailing address if it differs from your permanent
address.
ACCOUNT INFORMATION (OPTIONAL). -- If you have MORE THAN ONE ACCOUNT (savings,
certificate of deposit, pension, IRA, etc.) with the same payer, list all
account numbers and types on one Form W-8 or substitute form unless your payer
requires you to file a separate certificate for each account.
If you have MORE THAN ONE PAYER, file a separate Form W-8 with each payer.
SIGNATURE. -- If only one foreign person owns the account(s) listed on this
form, that foreign person should sign the Form W-8.
If each owner of a joint account is a foreign person, EACH should sign a
separate Form W-8.
NOTICE OF CHANGE IN STATUS. -- If you become a U.S. citizen or resident after
you have filed Form W-8 or substitute form, or you cease to be an exempt foreign
person, you must notify the payer in writing within 30 days of your change in
status.
To notify the payer, you may check the box in the space provided on this form
or use the method prescribed by the payer.
Reporting will then begin on the account(s) listed and backup withholding may
also begin unless you certify to the payer that:
(1) The U.S. taxpayer identification number you have given is correct, AND
(2) The Internal Revenue Service has not notified you that you are subject to
backup withholding because you failed to report certain income.
You may use FORM W-9, Request for Taxpayer Identification Number and
Certification, to make these certifications.
If an account is no longer active, you do not have to notify a payer of your
change in status unless you also have another account with the same payer that
is still active.
FALSE CERTIFICATE. -- If you file a false certificate when you are not entitled
to the exemption from withholding or reporting, you may be subject to fines
and/or imprisonment under U.S. perjury laws.
INSTRUCTIONS TO WITHHOLDING AGENTS
WITHHOLDING AGENT. -- Generally, the person responsible for payment of the items
discussed above to a nonresident alien individual or foreign entity is the
withholding agent (see Pub. 515).
RETENTION OF STATEMENT. -- Keep Form W-8 or substitute form in your records
for at least four years following the end of the last calendar year during which
the payment is paid or collected.
PORTFOLIO INTEREST. -- Although registered obligations not targeted to foreign
markets are not subject to 30% withholding, you must file FORM 1042S, Foreign
Person's U.S. Source Income Subject to Withholding, to report the interest
payment. Both Form 1042S and a copy of Form W-8 or substitute form must be
attached to FORM 1042, Annual Withholding Tax Return for U.S. Source Income of
Foreign Persons.
<PAGE> 1
IMMEDIATE JOHN PRATT, CONVERGYS PUBLIC RELATIONS
513-723-3333 OR 888-284-9900
E-MAIL: [email protected]
CHRIS PERRY, EDELMAN WORLDWIDE
312-240-2688 OR [email protected]
CONVERGYS CORPORATION ANNOUNCES
TENDER OFFER FOR WIZTEC SOLUTIONS LTD.
(CINCINNATI; MARCH 26, 1999) - - CONVERGYS (SM) CORPORATION ANNOUNCED TODAY THAT
ITS BOARD OF DIRECTORS HAS AUTHORIZED ITS WHOLLY-OWNED SUBSIDIARY, CONVERGYS
ISRAEL INVESTMENTS LTD., TO ACQUIRE THROUGH A TENDER OFFER ALL OF THE
OUTSTANDING SHARES OF WIZTEC SOLUTIONS LTD., (NASDAQ: WIZTF), NOT BENEFICIALLY
OWNED BY CONVERGYS, AT A PRICE OF $18.30 PER SHARE NET TO SELLER IN CASH. THIS
REPRESENTS A 10 PERCENT PREMIUM OVER THE CLOSING PRICE OF WIZTEC ON MARCH 25. IT
ALSO REPRESENTS A 20 PERCENT PREMIUM OVER THE $15.25 PER SHARE PRICE PAID MARCH
2, 1999, TO WIZTEC'S THEN CONTROLLING STOCKHOLDER FOR 50 PERCENT OF THE SHARES.
CONVERGYS IS THE GLOBAL LEADER IN PROVIDING OUTSOURCED, INTEGRATED, CUSTOMER
CARE AND BILLING SERVICES, AND WIZTEC IS A LEADING PROVIDER OF SUBSCRIBER
MANAGEMENT SYSTEMS FOR MULTI-CHANNEL SUBSCRIPTION TELEVISION.
CONVERGYS CURRENTLY OWNS APPROXIMATELY 70 PERCENT OF WIZTEC.
THE TENDER OFFER IS SUBJECT TO A NUMBER OF CONDITIONS THAT ARE DETAILED IN THE
OFFER TO PURCHASE THAT WILL BE DISTRIBUTED TO THE WIZTEC STOCKHOLDERS BEGINNING
APRIL 1, 1999. THE TENDER OFFER IS SCHEDULED TO EXPIRE AT MIDNIGHT, WEDNESDAY,
APRIL 28, 1999.
<PAGE> 2
THE INFORMATION AGENT IS GEORGESON & COMPANY, INC., AND THE DEPOSITORY BANK IS
IBJ WHITEHALL BANK & TRUST COMPANY. THE TENDER OFFER DOCUMENTS ARE AVAILABLE
FROM THE INFORMATION AGENT.
THIS NEWS RELEASE IS NOT AN OFFER OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OF WIZTEC SOLUTIONS LTD., AND NO SUCH OFFER OR SOLICITATION WILL BE
MADE EXCEPT IN COMPLIANCE WITH APPLICABLE SECURITIES LAWS.
ABOUT CONVERGYS
- ---------------
CONVERGYS CORPORATION IS THE GLOBAL LEADER IN PROVIDING OUTSOURCED, INTEGRATED,
CUSTOMER CARE AND BILLING SERVICES, BRINGING TOGETHER WORLD-CLASS RESOURCES AND
EXPERTISE TO HELP CLIENTS TRANSFORM CUSTOMER RELATIONSHIPS INTO A COMPETITIVE
ADVANTAGE.
CONVERGYS SOFTWARE PRODUCES MORE THAN ONE MILLION BILLS EACH DAY, AND CONVERGYS
CALL CENTERS HANDLE MORE THAN ONE MILLION CALLS EACH DAY.
CONVERGYS SERVES THE TOP COMPANIES IN A WIDE RANGE OF INDUSTRIES, INCLUDING
COMMUNICATIONS, TECHNOLOGY, CABLE AND BROADBAND SERVICES, CONSUMER PRODUCTS,
FINANCIAL SERVICES, UTILITIES, HEALTHCARE, HOSPITALITY, AND DIRECT RESPONSE.
HEADQUARTERED IN CINCINNATI, OHIO, CONVERGYS EMPLOYS OVER 33,000 PEOPLE AT ITS
MORE THAN 30 CALL CENTERS, DATA CENTERS, AND OTHER OFFICES IN THE UNITED STATES,
CANADA, AND EUROPE. CONVERGYS (NYSE:CVG) IS ON THE WEB AT www.convergys.com
CONVERGYS IS PRONOUNCED: KUN VER JIS CONVERGYS AND THE CONVERGYS LOGO ARE
SERVICE MARKS OF CONVERGYS CORPORATION.
##
<PAGE> 1
COURT OF COMMON PLEAS
HAMILTON COUNTY, OHIO
- ----------------------------------------------
)
JIM CARRAZZA and HAROLD SACHS, on )
behalf of themselves and all others similarly ) Case No. A9901656
situated, ) -------------
) (______________, Judge)
Plaintiff, )
)
vs. ) CLASS ACTION COMPLAINT
) ----------------------
WIZTEC SOLUTIONS, LTD., CONVERGYS )
CORPORATION, STEVEN G. ROLLS, BRIAN ) (JURY TRIAL DEMANDED)
C. HENRY, ROY T. HEGGLAND, YARON )
POLAK, THOMAS SMALDONE, KATRIEL )
ZIMET and RON ZOR, )
)
Defendants. )
- ----------------------------------------------)
Plaintiffs, by their attorneys, allege upon information and belief,
except as to paragraph 1 which is alleged upon knowledge, as follows:
THE PARTIES
-----------
1. Plaintiffs are owners of shares of common stock of defendant Wiztec
Solutions, Ltd ("Wiztec" or the "Company") and have been the owners continuously
of such shares since prior to the wrongs complained of herein.
2. Defendant Wiztec, an Israeli company, has offices located at 8
Maskit Street, Herzlia, 46766 Israel. The Company transacts business in this
county. Wiztec develops, markets, and supports computer software which provides
multi-channel subscription television system operators with a comprehensive
customer care and billing system. The Company's software, marketed under the
"Wizard" name, incorporates subscriber management functions such as billing,
collection, customer service, and work order processing.
<PAGE> 2
As of September 30, 1998, Wiztec had approximately 6.6 million shares
outstanding. Wiztec shares trade on the NASDAQ National Market.
3. Defendant Convergys Corporation ("Convergys"), a Ohio corporation,
has offices located at 201 East Fourth Street, Cincinnati, Ohio. Convergys is a
provider of outsourced billing and customer management solutions, which
encompass activities such as targeting, acquiring, serving and retaining
customers on behalf of its clients. Convergys beneficially owns approximately
70% of the outstanding shares of Wiztec.
4. Defendant Steven G. Rolls ("Rolls") is and was at all relevant times
hereto a director of Wiztec and Chief Financial Officer of Convergys.
5. Defendant Brian C. Henry ("Henry") is and was at all relevant times
hereto a director of the Company and Chief Operating Officer of Convergys
Information Management Group, Inc. ("Convergys IMG"), a subsidiary of Convergys.
6. Defendant Roy T. Heggland ("Heggland") is and was at all relevant
times hereto a director of the Company and Senior Vice President and General
Counsel of Convergys.
7. Defendant Yaron Polak ("Polak") is and was at all relevant times
herein President, Chief Executive and Director of the Company.
8. Defendants Thomas Smaldone, Katriel Zimet and Ron Zor are and were
at all relevant times hereto directors of the Company.
9. The defendants referred to in paragraphs 4 through 8 are
collectively referred to herein as the "Director Defendants."
10. By reason of the above Director Defendants' positions with the
Company as officers and/or directors, said individuals are in a fiduciary
relationship with plaintiffs and the other public shareholders of Wiztec, and
owe plaintiffs and the other members of the class the highest obligations of
good faith, fair dealing, due care, loyalty and full, candid and adequate
disclosure.
-2-
<PAGE> 3
CLASS ACTION ALLEGATIONS
------------------------
11. Plaintiffs bring this action for declaratory, injunctive and other
relief on their own behalf and as a class action pursuant to Ohio Rules of Civil
Procedure on behalf of all common shareholders of Wiztec (except defendants
herein and any person, firm, trust, corporation or other entity related to or
affiliated with any of the defendants) or their successors in interest, who are
being damaged by the wrongful acts of the defendants as described herein.
12. This action is properly maintainable as a class action for the
following reasons:
(a) The class of shareholders for whose benefit this action is
brought is so numerous that joinder of all class members is impracticable. There
are approximately 6.6 million shares of Wiztec outstanding, owned by at least
hundreds of shareholders of record. Members of the Class are scattered
throughout the United States.
(b) There are questions of law and fact which are common to members
of the Class and which predominate over all questions affecting only individual
members, including whether the defendants have breached or aided and abetted a
breach of the fiduciary duties owed by them to plaintiffs and members of the
Class by reason of the acts described herein and whether plaintiffs and the
other class members would be irreparably damaged if the defendants are not
enjoined in the manner described below.
(c) The claim of plaintiffs are typical of the claims of the other
members of the Class and plaintiffs have no interests that are adverse or
antagonistic to the interests of the Class.
(d) Plaintiffs are committed to the vigorous prosecution of this
action and has retained competent counsel experienced in litigation of this
nature. Accordingly, plaintiffs are adequate representatives of the Class and
will fairly and adequately protect the interests of the Class.
(e) The prosecution of separate actions by individual members of
the Class would create a risk of inconsistent or varying adjudications with
respect to individual members of the Class and establish incompatible standards
of conduct for the party opposing the Class.
-3-
<PAGE> 4
(f) Defendants have acted and are about to act on grounds generally
applicable to the Class, thereby making appropriate final injunctive or
corresponding declaratory relief with respect to the Class as a whole.
FACTUAL ALLEGATIONS
-------------------
13. On March 3, 1999, the Company announced over the BusinessWire that
Formula Systems (1985) Ltd. along with certain other shareholders have
consummated a transaction with Convergys IMG to sell all of their ordinary
shares in Wiztec, approximately 50% of the outstanding ordinary shares of the
Company. Formula, received for its 42% holdings in Wiztec ordinary shares $35
million in net proceeds, or $15.25 a share. This increased Convergys' holdings
in Wiztec to 70% of the Company's ordinary shares. In connection with the
consummation of the transaction, Dan Goldstein, Gad Goldstein and Shai Beilis
resigned as directors of the Board of Directors of Wiztec and were replaced by
Steven G. Rolls, Brian C. Henry and Roy T. Heggland.
14. On March 26, 1999, Convergys announced over the BUSINESSWIRE that
its board of directors has authorized its wholly-owned subsidiary, Convergys
Israel Investments Ltd., to acquire through a tender offer all of the
outstanding shares of Wiztec at a price of $18.30 per share. This proposal is
for the 30% of Wiztec ordinary shares outstanding not beneficially owned by
Convergys.
15. The announcement that Wiztec is considering acquiring the remaining
outstanding public shares of Wiztec comes at a time when Wiztec has performed
well and when defendants who are most knowledgeable about the Company's existing
and future financial condition expect it will continue to perform well. As
stated above, Convergys IMG owns a 70% stake in Wiztec and three of Wiztec Board
members are also Convergys officers and/or directors.
16. Because of Convergys control over Wiztec, no competition proposal
can reasonably be made.
-4-
<PAGE> 5
17. The purpose of any proposed acquisition is to enable Convergys to
acquire the shares of Wiztec it does not already own for Convergys' own benefit
and at the expense of Wiztec's public shareholders.
18. Defendants and Convergys are in a position of control and power
over the Wiztec minority shareholders and have access to internal financial
information about Wiztec, its true value, expected increase in true value and
the benefits to Convergys of 100% ownership of Wiztec to which plaintiffs and
the Class members are not privy. Defendants would be using their positions of
power and control to benefit Convergys in this transaction, to the detriment of
the Wiztec shareholders and in breach of the duties owed by Convergys, Wiztec
and their directors to the Wiztec shareholders.
19. The Director Defendants have clear and material conflicts of
interest and are acting to better their own interests and the interests of
Convergys at the expense of Wiztec's public shareholders.
20. The loyalties of Wiztec's Board of Directors are, at best, divided
and they cannot be expected to act in the best interest of Wiztec's
shareholders.
21. Defendants have breached, conspired to breach, or aided and abetted
the breach of their fiduciary and other common law duties owed to plaintiffs and
other members of the Class in that they have not and are not exercising
independent business judgment and have acted and are acting to the detriment of
the Class in order to benefit themselves. Any contemplated transaction would not
be the product of arm's length negotiations and is not based upon any
independent evaluation of the current value of Wiztec's common stock, assets or
business. Defendants have failed and refused to take those steps necessary to
ensure that the Company's shareholders will receive maximum value for their
shares of Wiztec's stock. As a result, defendants are acting to put their own
interests ahead of the public shareholders, all at the expense and to the
detriment of the Company's public stockholders.
22. By virtue of the acts and conduct alleged herein, the defendants,
who control the actions of the Company, have violated their fiduciary duties
owed to plaintiffs and the Class in
-5-
<PAGE> 6
that they have not and are not exercising independent business judgment and have
acted and are acting to the detriment of Wiztec's public shareholders for their
own personal benefit.
23. As a result of the actions of the defendants, plaintiffs and the
other members of the Class have been and will be damaged in that they have not
and will not receive their fair proportion of the value of Wiztec's assets and
businesses and/or have been and will be prevented from obtaining a fair and
adequate price for their Wiztec shares.
24. Plaintiffs seek preliminary and permanent injunctive relief and
declaratory relief preventing defendants from inequitably and unlawfully
depriving plaintiffs and the Class of their right to realize a full and fair
value for their stock.
25. Plaintiffs and the class have no adequate remedy at law. Only
through the exercise of this Court's equitable powers can plaintiffs be fully
protected from the immediate and irreparable injury which defendants' actions
threaten to inflict.
26. Unless enjoined by this Court, defendants will continue to breach
their fiduciary duties owed to plaintiffs and the other members of the Class, by
Wiztec's failing to take the steps set forth herein above, excluding the Class
from its fair proportionate share of Wiztec's valuable assets and businesses,
all to the irreparable harm of the Class.
27. Plaintiffs and the other members of the Class have no adequate
remedy at law.
WHEREFORE, plaintiffs demand judgment as follows:
(A) declaring plaintiffs as adequate class representatives;
(B) declaring this to be a proper class action;
(C) preliminarily and permanently enjoining the proposed
transaction until defendants have taken the steps set forth herein and requiring
defendants to make full and fair disclosure of all material facts to the class
before the completion of any such transaction;
(D) to the extent, if any, that the transaction complained of is
consummated prior to the entry of this Court's final judgment, rescinding such
transaction or transactions, including, but not limited to rescissory damages;
-6-
<PAGE> 7
(E) directing that defendants pay to plaintiffs and the class
all damages caused to them and account for all profits and any special benefits
obtained as a result of their unlawful conduct;
(F) awarding to plaintiffs the cost and disbursement of this
action, including a reasonable allowance for the fees and expenses of
plaintiffs' attorneys and expert; and
(G) granting such other further relief as may be just and
proper.
Dated: March 29, 1999 Respectfully submitted,
STRAUSS & TROY
By:
--------------------------------
Richard S. Wayne (0022390)
William K. Flynn (0029536)
2100 PNC Center
OF COUNSEL: 201 East Fifth Street
Cincinnati, OH 45202-4186
(513) 621-2120
ABBEY, GARDY & SQUITIERI, LLP
212 East 39th Street
New York,NY 10016
(212) 889-3700
-7-
<PAGE> 8
JURY DEMAND
-----------
Plaintiff demands a trial by jury for all issues so triable.
--------------------------
William K. Flynn (0029536)
-8-
<PAGE> 1
COURT OF COMMON PLEAS
HAMILTON COUNTY, OHIO
___________________________________________
)
EARL TUCKER )
6 Kim Court ) Case No. A9901672
Gilford, CT 06437, on behalf of himself and ) ---------------
all others similarly situated, ) (_______________, Judge)
)
)
Plaintiff, )
)
vs. ) CLASS ACTION COMPLAINT
) ----------------------
WIZTEC SOLUTIONS, LTD., CONVERGYS )
CORPORATION, STEVEN G. ROLLS, BRIAN ) (JURY TRIAL DEMANDED)
C. HENRY, ROY T. HEGGLAND, YARON )
POLAK, THOMAS SMALDONE, KATRIEL )
ZIMET and RON ZOR, )
)
Defendants. )
____________________________________________)
Plaintiff, by his attorneys, alleges upon information and belief, except
as to paragraph 1 which is alleged upon knowledge, as follows:
THE PARTIES
-----------
1. Plaintiff is the owner of shares of common stock of Defendant Wiztec
Solutions, Ltd ("Wiztec" or the "Company") and has been the owners continuously
of such shares since prior to the wrongs complained of herein.
2. Defendant Wiztec, an Israeli company, has offices located at 8 Maskit
Street, Herzlia, 46766 Israel. The Company transacts business in this county.
Wiztec develops, markets, and supports computer software which provides
multi-channel subscription television system operators with a comprehensive
customer care and billing system. The Company's software, marketed under the
"Wizard" name, incorporates subscriber management functions
<PAGE> 2
such as billing, collection, customer service, and work order processing. As of
September 30, 1998, Wiztec had approximately 6.6 million shares outstanding.
Wiztec shares trade on the NASDAQ National Market.
3. Defendant Convergys Corporation ("Convergys"), a Ohio corporation,
has offices located at 201 East Fourth Street, Cincinnati, Ohio. Convergys is a
provider of outsourced billing and customer management solutions, which
encompass activities such as targeting, acquiring, serving and retaining
customers on behalf of its clients. Convergys beneficially owns approximately
70% of the outstanding shares of Wiztec.
4. Defendant Steven G. Rolls ("Rolls") is and was at all relevant times
hereto a director of Wiztec and Chief Financial Officer of Convergys.
5. Defendant Brian C. Henry ("Henry") is and was at all relevant times
hereto a director of the Company and Chief Operating Officer of Convergys
Information Management Group, Inc. ("Convergys IMG"), a subsidiary of Convergys.
6. Defendant Roy T. Heggland ("Heggland") is and was at all relevant
times hereto a director of the Company and Senior Vice President and General
Counsel of Convergys.
7. Defendant Yaron Polak ("Polak") is and was at all relevant times
herein President, Chief Executive and Director of the Company.
8. Defendants Thomas Smaldone, Katriel Zimet and Ron Zor are and were at
all relevant times hereto directors of the Company.
9. The Defendants referred to in paragraphs 4 through 8 are collectively
referred to herein as the "Director Defendants."
10. By reason of the above Director Defendants' positions with the
Company as officers and/or directors, said individuals are in a fiduciary
relationship with Plaintiff and the other public shareholders of Wiztec, and owe
Plaintiff and the other members of the Class the highest obligations of good
faith, fair dealing, due care, loyalty and full, candid and adequate disclosure.
-2-
<PAGE> 3
CLASS ACTION ALLEGATIONS
------------------------
11. Plaintiffs bring this action for declaratory, injunctive and other
relief on their own behalf and as a class action pursuant to Ohio Rules of Civil
Procedure on behalf of all common shareholders of Wiztec (except Defendants
herein and any person, firm, trust, corporation or other entity related to or
affiliated with any of the defendants) or their successors in interest, who are
being damaged by the wrongful acts of the Defendants as described herein.
12. This action is properly maintainable as a class action for the
following reasons:
(a) The class of shareholders for whose benefit this action is
brought is so numerous that joinder of all Class Members is impracticable. There
are approximately 6.6 million shares of Wiztec outstanding, owned by at least
hundreds of shareholders of record. Members of the Class are scattered
throughout the United States.
(b) There are questions of law and fact which are common to members
of the Class and which predominate over all questions affecting only individual
members, including whether the Defendants have breached or aided and abetted a
breach of the fiduciary duties owed by them to Plaintiff and members of the
Class by reason of the acts described herein and whether Plaintiff and the other
Class Members would be irreparably damaged if the Defendants are not enjoined
in the manner described below.
(c) The claim of Plaintiffs are typical of the claims of the other
members of the Class and Plaintiff have no interests that are adverse or
antagonistic to the interests of the Class.
(d) Plaintiff is committed to the vigorous prosecution of this
action and has retained competent counsel experienced in litigation of this
nature. Accordingly, Plaintiff is adequate representatives of the Class and will
fairly and adequately protect the interests of the Class.
(e) The prosecution of separate actions by individual members of the
Class would create a risk of inconsistent adjudications with respect to
individual members of the Class and establish incompatible standards of conduct
for the party opposing the Class.
-3-
<PAGE> 4
(f) Defendants have acted and are about to act on grounds generally
applicable to the Class, thereby making appropriate final injunctive or
corresponding declaratory relief with respect to the Class as a whole.
FACTUAL ALLEGATIONS
-------------------
13. On March 3, 1999, the Company announced over the BUSINESSWIRE that
Formula Systems (1985) Ltd. along with certain other shareholders have
consummated a transaction with Convergys IMG to sell all of their ordinary
shares in Wiztec, approximately 50% of the outstanding ordinary shares of the
Company. Formula, received for its 42% holdings in Wiztec ordinary shares $35
million in net proceeds, or $15.25 a share. This increased Convergys' holdings
in Wiztec to 70% of the Company's ordinary shares. In connection with the
consummation of the transaction, Dan Goldstein, Gad Goldstein and Shai Beilis
resigned as directors of the Board of Directors of Wiztec and were replaced by
Steven G. Rolls, Brian C. Henry and Roy T. Heggland.
14. On March 26, 1999, Convergys announced over the BUSINESSWIRE that
its board of directors has authorized its wholly-owned subsidiary, Convergys
Israel Investments Ltd., to acquire through a tender offer all of the
outstanding shares of Wiztec at a price of $18.30 per share. This proposal is
for the 30% of Wiztec ordinary shares outstanding not beneficially owned by
Convergys.
15. The announcement that Wiztec is considering acquiring the remaining
outstanding public shares of Wiztec comes at a time when Wiztec has performed
well and when Defendants who are most knowledgeable about the Company's existing
and future financial condition expect it will continue to perform well. As
stated above, Convergys IMG owns a 70% stake in Wiztec and three of Wiztec Board
members are also Convergys officers and/or directors.
16. Because of Convergys control over Wiztec, no competition proposal
can reasonably be made.
-4-
<PAGE> 5
17. The purpose of any proposed acquisition is to enable Convergys to
acquire the shares of Wiztec it does not already own for Convergys' own benefit
and at the expense of Wiztec's public shareholders.
18. Defendants and Convergys are in a position of control and power over
the Wiztec minority shareholders and have access to internal financial
information about Wiztec, its true value, expected increase in true value and
the benefits to Convergys of 100% ownership of Wiztec to which Plaintiff and the
Class members are not privy. Defendants would be using their positions of power
and control to benefit Convergys this transaction, to the detriment of the
Wiztec shareholders and in breach of the duties owed by Convergys, Wiztec and
their directors to the Wiztec shareholders.
19. The Director Defendants have clear and material conflicts of
interest and are acting to better their own interests and the interests of
Convergys at the expense of Wiztec's public shareholders.
20. The loyalties of Wiztec's Board of Directors are, at best, divided
and they cannot be expected to act in the best interest of Wiztec's
shareholders.
21. Defendants have breached, conspired to breach, or aided and abetted
the breach of their fiduciary and other common law duties owed to Plaintiff and
other members of the Class in that they have not and are not exercising
independent business judgment and have acted and are acting to the detriment of
the Class in order to benefit themselves. Any contemplated transaction would not
be the product of arm's length negotiations and is not based upon any
independent evaluation of the current value of Wiztec's common stock, assets or
business. Defendants have failed and refused to take those steps necessary to
ensure that the Company's shareholders will receive maximum value for their
shares of Wiztec's stock. As a result, Defendants are acting to put their own
interests ahead of the public shareholders, all at the expense and to the
detriment of the Company's public stockholders.
-5-
<PAGE> 6
22. By virtue of the acts and conduct alleged herein, the Defendants,
who control the actions of the Company, have violated their fiduciary duties
owed to Plaintiff and the Class in that they have not and are not exercising
independent business judgment and have acted and are acting to the detriment of
Wiztec's public shareholders for their own personal benefit.
23. As a result of the actions of the Defendants, Plaintiff and the
other members of the Class have been and will be damaged that they have not and
will not receive their fair proportion of the value of Wiztec's assets and
businesses and/or have been and will be prevented from obtaining a fair and
adequate price for their Wiztec shares.
24. Plaintiff seeks preliminary and permanent injunctive relief and
declaratory relief preventing Defendants from inequitably and unlawfully
depriving Plaintiff and the Class of their right to realize a full and fair
value for their stock.
25. Plaintiff and the Class have no adequate remedy at law. Only through
the exercise of this Court's equitable powers can Plaintiff be fully protected
from the immediate and irreparable injury which Defendants' actions threaten to
inflict.
26. Unless enjoined by this Court, Defendants will continue to breach
their fiduciary duties owed to Plaintiffs and the other members of the Class, by
Wiztec's failing to take the steps set forth herein above, excluding the Class
from its fair proportionate share of Wiztec's valuable assets and businesses,
all to the irreparable harm of the Class.
27. Plaintiff and the other members of the Class have no adequate remedy
at law.
WHEREFORE, Plaintiff demands judgment as follows:
(A) declaring Plaintiff as adequate Class representatives;
(B) declaring this to be a proper class action;
(C) preliminarily and permanently enjoining the proposed transaction
until Defendants have taken the steps set forth herein and requiring Defendants
to make full and fair disclosure of all material facts to the class before the
completion of any such transaction;
-6-
<PAGE> 7
(D) to the extent, if any, that the transaction complained of is
consummated prior to the entry of this Court's final judgment, rescinding such
transaction or transactions, including, but not limited to rescissory damages;
(E) directing that Defendants pay to Plaintiff and the class all
damages caused to them and account for all profits and any special benefits
obtained as a result of their unlawful conduct;
(F) awarding to Plaintiffs the cost and disbursement of this action,
including a reasonable allowance for the fees and expenses of Plaintiff's
attorneys and expert; and
(G) granting such other further relief as may be just and proper.
Dated: March 29, 1999 Respectfully submitted,
STRAUSS & TROY
By:
---------------------------------
Richard S. Wayne (0022390)
William K. Flynn (0029536)
2100 PNC Center
OF COUNSEL: 201 East Fifth Street
Cincinnati, OH 45202-4186
(513) 621-2120
FARUQI & FARUQI, LLP
415 Madison Avenue
New York,NY 10017
(212) 966-1074
-7-
<PAGE> 8
JURY DEMAND
-----------
Plaintiff demands a trial by jury for all issues so triable.
---------------------------
Richard S. Wayne (0022390)
-8-
