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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-3
(Amendment No. 5)
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
$73,589,850 (1)............................................... $14,717.97 (2)
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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
$25.00, the per share cash tender offer price, by 2,943,594 Ordinary
Shares, New Israeli Shekel 1 par value, which represents all Ordinary
Shares outstanding as of June 29, 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 June 29, 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: $14,717.97
Filing Parties: Convergys Corporation and Convergys Israel Investments Ltd.
Form or Registration No.: Schedule 14D-1
Date Filed: July 2, 1999
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INTRODUCTION
Convergys Corporation, an Ohio corporation ("Parent"), and 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 Parent,
hereby amend and supplement their Transaction Statement on Schedule 13e-3,
originally filed on April 1, 1999, as amended (the "Schedule 13E-3"). This
amendment relates to certain private purchases of securities by Sub prior to
July 2, 1999 (the "Private Purchases") and a tender offer by Sub 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 $25.00 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 July 2, 1999 (the "July
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 "July Offer"). Capitalized terms used herein but not defined are
used as defined in the July Offer to Purchase. This Amendment to Schedule 13E-3
is being filed by Sub and Parent. The Schedule 13E-3 is amended and supplemented
as follows.
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 classes of equity securities which
are 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) Pursuant to the Private Purchases, Sub purchased (i) an aggregate
of 168,782 Series A Warrants to purchase Ordinary Shares; New Israeli Shekel
("NIS") 1, par value, of the Company and (ii) an aggregate of 22,000 Ordinary
Shares, NIS 1, par value of the Company. In the July Offer, the class of equity
securities and the amount of such outstanding securities being sought are
2,285,061 Ordinary Shares, NIS 1 par value, of the Company and 658,533 Ordinary
Shares which may be issued during the course of the July Offer as a result of
the exercise of any of the warrants and options to purchase Ordinary Shares
which were outstanding as of June 29, 1999. There were 7,137,000 shares
outstanding as of June 29, 1999. As of June 29, 1999 there were 17 holders of
record of Ordinary Shares.
(c) With regard to the Ordinary Shares, the information set forth in
"The Tender Offer - Section 6: Price Range of the Shares; Dividends on the
Shares" of the July Offer to Purchase is incorporated herein by reference. The
Series A Warrants are not traded on a public market.
(d) With regard to the Ordinary Shares, the information set forth in
"The Tender Offer - Section 6: Price Range of the Shares; Dividends on the
Shares" of the July Offer to Purchase is incorporated herein by reference.
(e) With regard to the Ordinary Shares, the information set forth in
"Special Factors - Background to the Offer" of the July Offer to Purchase is
incorporated herein by reference.
(f) The information set forth in "Special Factors - Background to the
Offer," "Special Factors - Beneficial Ownership of Shares" and "The Tender Offer
- - Section 6: Price Range of the Shares; Dividends on the Shares" of the July
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 July 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 July 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 July 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,"
"The Tender Offer - Section 11: Dividends and Distributions" and "The Tender
Offer - Section 12: Certain Conditions of the Offer" of the July Offer to
Purchase is incorporated herein by reference. All conditions to the July Offer
must be waived or satisfied prior to the Expiration Date.
(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
July Offer to Purchase is incorporated herein by reference.
ITEM 6. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION.
(a) In regard to the July Offer, the information set forth in "The
Tender Offer - Section 10: Sources and Amount of Funds" of the July Offer to
Purchase is incorporated herein by reference. The source of funds of the Private
Purchases is the credit facility described in "The Tender Offer - Sources of
Funds" of the July Offer to Purchase.
(b) In regard to the July Offer, the information set forth in "The
Tender Offer - Section 14: Fees and Expenses" of the July Offer to Purchase is
incorporated herein by reference. In regard to the Private Purchases, fees were
de minimus.
(c) In regard to the July Offer, the information set forth in "The
Tender Offer - Section 10: Sources and Amount of Funds" of the July 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 to 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 July Offer to Purchase is
incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a) - (b) In regard to the July Offer, the information set forth in the
"Introduction" and "Special Factors - Fairness of the Offer" of the July Offer
to Purchase is incorporated herein by reference.
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(c) In regard to the July Offer, the information set forth in "Special
Factors--Fairness of the Offer" of the July 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
July Offer or preparing a report concerning the fairness of the transaction.
(e) In regard to the July Offer, the information set forth in the
"Introduction" of the July Offer to Purchase is incorporate herein by reference.
(f) Not applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a) - (c) In regard to the July Offer, the information set forth in
"Special Factors - Fairness of the Offer," of the July 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 to the Offer," "Special Factors - Interests of Certain
Persons in Offer," "Special Factors - Beneficial Ownership of Shares" and "The
Tender Offer - Section 9: Certain Information Concerning Parent and Sub" of the
July 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) In regard to the July Offer, the information set forth in the
"Introduction" and "Special Factors - Interests of Certain Persons in Offer" of
the July Offer to Purchase is incorporated herein by reference.
(b) In regard to the July Offer, the information set forth in the
"Introduction" and "Special Factors - Beneficial ownership of Shares" of the
July Offer to Purchase is incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) In regard to the July Offer, 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
July Offer to Purchase is incorporated herein by reference.
(b) Not Applicable.
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(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 July Offer to
Purchase is incorporated herein by reference.
(b) Not applicable.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) Not applicable.
(b) In regard to the July Offer, the information set forth in the
"Introduction" and "The Tender Offer - Section 14: Fees and Expenses" of the
July 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, filed as Exhibit (a) to the Schedule
13E-3 filed April 1, 1999 by Parent and Sub.
(b) Not applicable.
(c) Not applicable.
(d)(1) Offer to Purchase dated July 2, 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.
(e) Not applicable.
(f) Not applicable.
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: July 2, 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, filed as Exhibit (a) to the Schedule
13E-3 filed April 1, 1999 by Parent and Sub.
(b) Not applicable.
(c) Not applicable.
(d)(1) Offer to Purchase dated July 2, 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
(e) Not applicable
(f) Not applicable.
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OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING ORDINARY SHARES
OF
WIZTEC SOLUTIONS LTD.
AT
$25.00 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 JULY 30, 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 THE AVAILABILITY OF FINANCING OR ON THE
APPROVAL OF THE BOARD OF DIRECTORS OF WIZTEC SOLUTIONS LTD. OR ANY COMMITTEE
THEREOF. CONVERGYS ISRAEL INVESTMENTS LTD., A WHOLLY OWNED SUBSIDIARY OF
CONVERGYS CORPORATION, CURRENTLY OWNS 4,851,939 SHARES, REPRESENTING
APPROXIMATELY 68% OF THE ISSUED AND OUTSTANDING SHARES AT JUNE 29, 1999 AND HAS
ACQUIRED WARRANTS TO PURCHASE AN ADDITIONAL 168,782 SHARES.
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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.
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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.
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The Information Agent for the Offer is:
(LOGO)
July 2, 1999
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION................................................ 3
SPECIAL FACTORS............................................. 6
Background to the Offer................................... 6
Fairness of the Offer..................................... 8
Purpose of the Offer; Reasons of Parent and Sub for the
Offer.................................................. 9
Plans for the Company After the Offer; Certain Effects of
the Offer.............................................. 9
Rights of Shareholders in the Offer....................... 10
Interest of Certain Persons in the Offer.................. 10
Related Party Transactions................................ 11
Beneficial Ownership of Shares............................ 11
Certain Litigation........................................ 12
THE TENDER OFFER............................................ 12
1. Terms of the Offer.................................... 12
2. Acceptance for Payment and Payment.................... 14
3. Procedures for Tendering Shares....................... 15
4. Withdrawal Rights..................................... 17
5. Certain U.S. Federal Income Tax and Israeli Income Tax
Consequences........................................... 18
6. Price Range of the Shares; Dividends on the Shares.... 19
7. Effect of the Offer on the Market for the Shares;
Stock Price Quotation; Exchange Act Registration;
Margin Regulations.................................... 20
8. Certain Information Concerning the Company............ 22
9. Certain Information Concerning Parent and Sub......... 24
10. Sources and Amount of Funds........................... 25
11. Dividends and Distributions........................... 26
12. Certain Conditions of the Offer....................... 26
13. Certain Legal Matters and Regulatory Approvals........ 28
14. Fees and Expenses..................................... 28
15. Miscellaneous......................................... 29
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 $25.00 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"). Shares presently held by Sub will also be referred to
hereinafter as "Shares."
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 such person. See Section 14.
Sub currently owns 4,851,939 Shares, constituting approximately 68% of the
issued and outstanding Shares (excluding options and warrants). The purpose of
the Offer is to continue the execution of the plan, pursuant to Section 236 of
the Companies Ordinance, as described below, for Sub to acquire all of the
Shares for cash (the "Plan") which was initiated in the tender offer commenced
by Sub on April 1, 1999, which tender offer was consummated on April 28, 1999
(the "April Tender Offer"). Upon the consummation of this Offer, should Sub own
90% of the Shares that were outstanding as of April 1, 1999 and Shares that were
issued as a result of the exercise of warrants and options since April 1, 1999
and prior to the Expiration Date (as defined herein) ("90% of the Outstanding
Shares") the Company's shareholders will be regarded as having approved the Plan
for purposes of Section 236.
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.
The officers of the Company who hold Shares have indicated to Parent and
Sub that they will tender their Shares into the Offer. The aggregate number of
Shares that will be tendered by the officers is 144,500, which constitutes 6.32%
of the outstanding Shares of the Company not owned by Sub. The officers do not
currently plan to tender Shares which may be issued to them as a result of the
exercise of vested options with regard to which two years have not elapsed since
their award, unless they determine that they will suffer no unusual tax
consequences thereby. Unvested options will also not be exercised unless they
vest during the course of the Offer.
Section 236 of the Companies Ordinance [New Version], 5743-1983, of the
State of Israel (the "Companies Ordinance") provides a mechanism by which a
company which proposes a plan or contract which involves the transfer of shares
to it from another company may compel the sale of shares by minority
shareholders in the other company in accordance with the conditions described
more fully below. Sub believes that, under Section 236 of the Companies
Ordinance, (i) since this Offer continues the execution of the Plan, Shares
purchased by Sub pursuant to this Offer may be aggregated with Shares purchased
by Sub pursuant to the April Tender Offer and (ii) the Shares held by Convergys
Information Management Group Inc. ("Convergys IMG"), a subsidiary of
3
<PAGE> 4
Parent, prior to the April Tender Offer and purchased by Sub pursuant to the
April Tender Offer were not held by Sub, by any of Sub's subsidiaries or for
them. Therefore, if Sub acquires at least 90% of the Outstanding Shares
(including Shares presently held by Sub) within four months of April 1, 1999
(the "Initial Period"), Sub shall be entitled, pursuant to Section 236 of 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"). If Sub's belief is correct and if holders
of at least 1,571,361 Shares (representing approximately 68.8% of the
outstanding Shares not held by Sub) or at least 2,164,041 Shares (representing
approximately 73.5% of the outstanding Shares not held by Sub 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.
Should Sub acquire at least 90% of the Outstanding Shares (including Shares
presently held by Sub) prior to the end of the Initial Period, Sub intends to
give the 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 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.
In the event that, after the consummation of the Offer, (i) less than
750,000 Shares (excluding Shares held by Sub, Shares held directly or indirectly
by any officer or director of the Company and Shares held by any other person
who is the beneficial owner of more than 10 percent of the total Shares
outstanding) are outstanding or (ii) there are less than 400 shareholders who
hold at least 100 Shares each, the Company will fail to meet the Nasdaq National
Market continued listing requirements. The Nasdaq National Market is the only
public market on which the Shares trade. Further, even if that does not happen,
if the number of shareholders resident in the United States is below 300 holders
of Shares, Sub may elect to cause the Company to terminate its registration of
the Shares under the Securities Exchange Act of 1934 (the "Exchange Act").
Following termination of this registration, the Company will no longer be
required to file reports or other information with the Securities and Exchange
Commission (the "SEC"). In addition, after the consummation of the Offer, Sub
may 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. In such case, again, the Company may fail
to meet the Nasdaq National Market continued listing requirements.
If the Compulsory Acquisition does not occur, Parent and Sub may take
certain steps to obtain a Final Court Order approving an Acquisition Arrangement
(as those terms are herein defined) pursuant to Section 233 of the Companies
Ordinance. See "THE TENDER OFFER -- Section 7. The Companies Ordinance Section
233."
Following the consummation of the Compulsory Acquisition or the Acquisition
Arrangement, 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 herein.
No assurance can be given as to whether 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.
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THE OFFER IS SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN THIS OFFER TO
PURCHASE. SEE "THE TENDER OFFER-SECTION 1. TERMS OF THE OFFER" AND "SECTION 12.
CERTAIN CONDITIONS OF THE OFFER." ALL CONDITIONS TO THE OFFER MUST BE SATISFIED
OR WAIVED PRIOR TO THE EXPIRATION DATE.
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. SUB CURRENTLY OWNS
BENEFICIALLY 4,851,939 SHARES, REPRESENTING APPROXIMATELY 68% OF THE ISSUED AND
OUTSTANDING SHARES AT JUNE 29, 1999
According to information received by Parent and Sub from the Company, as of
June 29, 1999, the authorized capital of the Company consisted of: 10,000,000
Ordinary Shares, each with NIS 1 Par Value, 7,137,000 Shares of which were
issued and outstanding. In addition, the Company had: underwriters warrants to
purchase 136,189 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 48,534 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 7,500 Shares
were issued and outstanding; Series A Warrants to purchase 331,200 Shares, of
which warrants to purchase 256,210 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 210,100 Shares were issued and
outstanding (the foregoing outstanding options and warrants are collectively
referred to as "Options"). Of the total Options, options to purchase 80,951
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.
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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"), then 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 First Agreement Option, the Call
Option and the Put Option (each 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 into 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. Pursuant to the Marketing Agreement,
Convergys IMG has paid to the Company approximately $5,888,000. Convergys IMG
and the Company also entered into a Joint Development Agreement, dated as of
October 6, 1997 (the "Development Agreement"), under which Convergys IMG and the
Company committed to
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<PAGE> 7
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 $1,812,000.
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 April Tender Offer. On March 26, 1999, Parent issued a press
release announcing the April Tender Offer. In addition, on March 30, 1999, the
Sub Board of Directors determined to proceed with the April Tender Offer.
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On April 1, 1999, Sub commenced the April Tender Offer for all of the
outstanding shares of the Company at a price of $18.30 per Share, net to the
seller in cash. At 12:00 midnight, Eastern Daylight Time, on April 28, 1999, the
tender offer expired. 4,829,939 Shares (or approximately 68.2% of the Shares
outstanding) were validly tendered and not withdrawn pursuant to the Offer,
including 4,750,200 Shares tendered by Convergys IMG, a sister company of Sub,
and 79,739 Shares April Tender tendered by shareholders not affiliated with Sub.
Sub accepted for payment all such Shares at the purchase price of $18.30 per
Share, net to the seller in cash.
Since holders of at least 90% of the Shares did not accept the April Tender
Offer, in furtherance of the Plan, on May 24, 1999, Parent and Sub announced
their intention to engage, from time to time, in their sole discretion, in open
market and privately negotiated purchases of Shares and warrants to purchase
Shares.
Since May 24, 1999, Sub has made the following private purchases of Shares:
on June 10, 1999, Sub purchased 2,200 Shares at the purchase price of $20.483
per Share; on June 14, 1999, Sub purchased 8,400 Shares at the purchase price of
$20.5826 per Share; on June 15, 1999, Sub purchased 8,500 Shares at the purchase
price of $20.794 per Share; and on June 23, 1999, Sub purchased 2,900 Shares at
the purchase price of $23.00 per Share.
In addition, on June 30, 1999, Sub purchased Series A Warrants to purchase
168,782 Shares from two individuals for the aggregate price of $2,384,046. The
$14.125 per Share price reflected an amount equal to the difference between
$22.75, a negotiated price for the underlying Shares, and the $8.625 exercise
price of the Series A Warrants. Sub plans to exercise the Series A Warrants
prior to the Expiration Date.
For purposes of Section 236 of the Companies Ordinance, the Initial Period
expires on August 1, 1999, and, in order for Parent and Sub to avail themselves
of the Section 236 procedures, they must acquire 90% of the Outstanding Shares
by August 1, 1999. It is for this reason that Parent and Sub are making this
Offer at this time and why Parent and Sub will not extend this Offer beyond its
Expiration Date unless required to do so by law. On June 29, 1999 the Sub Board
of Directors determined to proceed with the Offer.
FAIRNESS OF THE OFFER
Sub owns a majority of the outstanding shares of the Company. 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 and Sub, and, in connection with the Offer, Parent and Sub have
filed with the SEC 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 Parent included the following:
(i) The current and historical trading prices of the Shares and the
fact that the $25.00 per Share price to be paid in the Offer represents a
premium of approximately 5.26% over the closing price for the Shares on
June 30, 1999, two trading days before the commencement of the Offer (as
reported on the Nasdaq National Market), a premium of approximately 63.93%
over the $15.25 per Share price paid to Formula and certain other
shareholders on March 2, 1999, and a premium of 13.95% and 19.34% over the
average closing prices of the Shares for the 30 and 60 day periods,
respectively, immediately prior to July 1, 1999.
(ii) The terms of the Offer provide for a prompt cash payment to
shareholders for their Shares.
(iii) 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.
(iv) Sub has no present intention of selling its Shares to a third
party and no third party has made a bid for the Shares.
In reaching their conclusion that the Offer is fair, Parent and Sub also
considered certain countervailing factors, including that the Offer will deprive
current shareholders of the Company of the opportunity to
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<PAGE> 9
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. Parent has not received any information and analysis from any
financial advisor regarding whether the Offer is fair, from a financial point of
view, to the Company's shareholders other than Sub.
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 their 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.
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 68% 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 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 commenced.
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 Acquisition 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, dividend policy, 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 continue, however, its 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
658,533 Shares. Of the total Options, options to purchase 80,951 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 76,384 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 herein.
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 68% to 100%. On a pro forma basis as if the Offer
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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
$16,547,800 (68%) to $24,335,000 (100%) and in the Company's net earnings from
$3,823,640 (68%) 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. In the event
that, after the consummation of the Offer, (i) less than 750,000 Shares
(excluding Shares held by Sub, Shares held directly or indirectly by an officer
or director of the Company and Shares held by any other person who is the
beneficial owner of more than 10 percent of the total Shares outstanding) are
outstanding or (ii) there are less than 400 shareholders who hold at least 100
Shares each, the Company will fail to meet the Nasdaq National Market continued
listing requirements. The Nasdaq National Market is the only public market on
which the Shares trade. Further, even if that does not happen, if the number of
shareholders resident in the United States is below 300 holders of Shares, Sub
may elect to cause the Company to terminate its registration of the Shares under
the Exchange Act. Following termination of this registration, the Company will
no longer be required to file reports or other information with the SEC. In
addition, Sub may 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. In such case, again, the
Company may fail to meet the Nasdaq National Market continued listing
requirements. See "THE TENDER OFFER -- Section 7. Effect of the Offer on the
Market for the 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, 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 (including Shares presently
held by it), 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 the
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 or Sub 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, one is
the Senior Vice President and General Counsel of Convergys IMG and a director of
Sub, one is the Chief Operating Officer of Convergys IMG, and one is the
President of the Cable and Broadband Solutions Group of Convergys IMG and a
director of Sub.
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 Sub which, in turn, owns approximately 68%
of the issued and outstanding Shares and its ability to elect all of the
Company's directors, Parent controls the Company.
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The officers of the Company who hold Shares have indicated to Parent and
Sub that they will tender their Shares into the Offer. The aggregate number of
Shares that will be tendered by the officers is 144,500, which constitutes 6.32%
of the outstanding Shares of the Company not owned by Sub. The officers do not
currently plan to tender Shares which may be issued to them as a result of the
exercise of vested options with regard to which two years have not elapsed since
their award, unless they determine that they will suffer no unusual tax
consequences thereby. Unvested options will also not be exercised unless they
vest during the course of the Offer.
RELATED PARTY TRANSACTIONS
Potential Conflicts of Interest with Affiliates
Since Parent owns directly and beneficially 100% of the common shares of
Sub, as long as Parent continues to beneficially own more than 50% of the common
shares of Sub, Parent will have the power to elect all of the directors of Sub
and thereby control Sub. As long as Sub owns more than 50% of the outstanding
Shares, Sub (and Parent indirectly) will have the power to elect all of the
directors of the Company and thereby to control the Company. In addition, as
specified above, 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 the Marketing
Agreement, dated as of October 6, 1997, 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. Pursuant to the Marketing Agreement,
Convergys IMG has paid to the Company approximately $5,888,000. Convergys IMG
and the Company also are parties to the Development Agreement, dated as of
October 6, 1997, 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 $1,812,000.
BENEFICIAL OWNERSHIP OF SHARES
Sub currently owns 4,851,939 Shares, which represents approximately 68% 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 their
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. Rivka Allon, Chief Operating Officer of the Company, has sold Shares in
transactions in the past 60 days. On June 6, 1999, Ms. Allon sold 3,000 Shares
at $20.375 per Share and 3,500 Shares at $21.50 per Share and on June 8, 1999
Ms. Allon sold 4,000 Shares at $21.50 per Share. Between June 10, 1999 and June
23, 1999, Sub purchased an aggregate of 22,000 Shares in four private
transactions at purchase prices ranging from $20.483 to $23.00 per Share. In
addition, on June 30, 1999, Sub purchased Series A Warrants to purchase 168,782
Shares for the aggregate price of $2,384,046. See "SPECIAL FACTORS -- Background
of the Offer."
Except in connection with the March Transaction, the April Tender Offer 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. Other than the purchases of
Convergys IMG in the March Transaction and pursuant to the First Purchase
Agreement and purchases of Sub pursuant to the April Tender Offer and the
private purchases described above, no affiliate of Parent (including Sub) has
purchased any Shares.
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It is Parent's and Sub's belief that, because of potential conflicts of
interest and the pending litigation described in "Special Factors -- Certain
Litigation," no executive officer or affiliate of the Company unrelated to
Parent or Sub will make any recommendation concerning the Offer.
CERTAIN LITIGATION
Since the announcement by Parent and Sub of the intention to commence the
April Tender Offer, five lawsuits were commenced by shareholders who are
unaffiliated with the defendants (the "unaffiliated shareholders"). Four of the
lawsuits were in the Court of Common Pleas, Hamilton County, Ohio: Carrazza, et
al., vs. Wiztec Solutions, Ltd., et al., Case No. A9901656; Tucker vs. Wiztec
Solutions, Ltd., et al., Case No. A9901672; Papier vs. Wiztec Solutions, Ltd.,
et al., Case No. A9901742; and Kuris vs. Steven G. Rolls, et al., Case No.
A9901848. The fifth lawsuit, Forman, et al. vs. Wiztec Solutions Ltd., et al.,
Case No. CV 99 1731, is in the United States District Court for the Eastern
District of New York. Each of the actions purported to be a class action brought
on behalf of unaffiliated shareholders and asserted claims against the Company,
Parent and members of the Company's Board of Directors. The actions each alleged
that, through the conduct of the defendants, Parent 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 purported by their terms to seek injunctive relief preventing
consummation of the April Tender Offer, or rescission if it is successfully
consummated, compensatory damages, and attorneys' fees and expenses.
By Order entered April 19, 1999, the Court of Common Pleas, Hamilton
County, Ohio consolidated the Carrazza, Tucker and Papier cases and restyled the
consolidated cases as In re Wiztec Solutions, Ltd. Securities Litigation. By
Order entered April 26, 1999, the Court consolidated the Kuris case into In re
Wiztec Solutions, Ltd. Securities Litigation. The Parent and defendant board
members of the Company who were amenable to service of process in Ohio filed a
Motion to Dismiss on April 29, 1999. On May 17, 1999, plaintiff Sachs, a
plaintiff in the Carrazza case, filed a First Amended Complaint, in substance
alleging that he had tendered his shares in the April Tender Offer and demanding
damages on behalf of himself and all other tendering shareholders. By Order
entered June 23, 1999, plaintiffs voluntarily dismissed without prejudice the
claims of Mr. Carrazza and the Tucker, Papier, and Kuris cases, leaving only the
claim of plaintiff Sachs pending in In re Wiztec Solutions, Ltd. Securities
Litigation. Plaintiff Sachs has until July 1 to respond to the Company's Motion
to Dismiss. Parent has an extension of time until July 6, 1999 to respond to the
Complaint in the Forman case.
The Company and its Israeli directors believe that they have the basis to
challenge the exercise of personal jurisdiction by, and venue in, a United
States court. Parent believes the actions to be without merit and intends to
contest the actions vigorously.
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 July 30, 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
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<PAGE> 13
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. However, Parent and Sub have determined
not to extend the Offer unless required to do so by law.
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 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 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.
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<PAGE> 14
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 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 (as defined herein)
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.
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<PAGE> 15
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."
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.
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<PAGE> 16
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.
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
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Shares or other securities issued or issuable in respect of such Shares on or
after June 28, 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 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 August 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
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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 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
18
<PAGE> 19
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 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 Sub 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.
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 quoted on
the Nasdaq National Market under the symbol "WIZTF." The following table sets
forth, for each of the fiscal quarters indicated, the
19
<PAGE> 20
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............................................. $19.375 $12.357
Second Quarter (through June 30, 1999).................... $24.3750 $18.0625
</TABLE>
On June 30, 1999, two trading days prior to the commencement of the Offer
by Parent and Sub, the last reported closing sales price of the Shares on the
Nasdaq National Market was $23.75 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. In the event that, after the consummation of the
Offer, (i) less than 750,000 Shares (excluding Shares held by Sub, Shares held
directly or indirectly by any officer or director of the Company and by any
other person who is the beneficial owner of more than 10 percent of the total
Shares outstanding) are outstanding or (ii) there are less than 400 shareholders
who hold at least 100 Shares each, the Company will fail to meet the Nasdaq
National Market continued listing requirements. In the event the Shares were no
longer 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. If the number of shareholders resident in the United States is
below 300 holders of Shares, Sub may elect to cause the Company to terminate its
registration of the Shares under the Exchange Act. 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.
20
<PAGE> 21
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. Section 236 of the Companies Ordinance
provides a mechanism by which a company which proposes a plan or contract which
involves the transfer of shares to it from another company may compel the sale
of shares by minority shareholders in the other company in accordance with the
conditions described more fully below. Sub believes that, under Section 236 of
the Companies Ordinance, (i) since this Offer continues the execution of the
Plan, Shares purchased by Sub pursuant to this Offer may be aggregated with
Shares purchased by Sub pursuant to the April Tender Offer and (ii) the Shares
held by Convergys IMG prior to the April Tender Offer and purchased by Sub
pursuant to the April Tender Offer were not held by Sub, by any of Sub's
subsidiaries or for them. Therefore, if Sub acquires at least 90% of the
Outstanding Shares (including Shares presently held by Sub and acquired pursuant
to the April Tender Offer) during 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 their Shares. Following such notice, Sub will be entitled
and obligated to complete the Compulsory Acquisition. If Sub's belief is correct
and if holders of at least 1,571,361 Shares (representing approximately 68.8% of
the outstanding Shares not held by Sub) or at least 2,164,041 Shares
(representing approximately 73.5% of the outstanding Shares not held by Sub
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.
Should Sub have acquired at least 90% of the Outstanding Shares (including
Shares presently held by Sub) prior to the end of the Initial Period, Sub
intends to give the 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.
This Offer continues the execution of the Plan which was initiated in the
April Tender Offer. Should Sub own 90% of the Shares upon the consummation of
the Offer, the Company's shareholders will be regarded as having approved the
Plan.
Companies Ordinance Section 233. Should Sub not have acquired at least 90%
of the Outstanding Shares (including Shares presently held by Sub) prior to the
end of the Initial Period, Parent, Sub, and the Company may enter into an
agreement pursuant to which the Company will be sold to Sub in exchange for
Sub's payment of consideration in cash, notes or shares for each outstanding
Share (the "Acquisition Arrangement"). Such consideration may be cash, notes, or
shares of Parent and, depending on various factors at the time, may have a value
of less or more than $25.00 net per Share. Thereafter, the Company would file a
motion under Section 233 of the Companies Ordinance with the Court requesting
the Court to issue an order that an Extraordinary General Meeting be convened
for the purposes of approving the Acquisition Arrangement.
Pursuant to Section 233 of the Companies Ordinance, the Court is
authorized, upon the motion of the Company, to convene a meeting of shareholders
of the Company to adopt the Acquisition Arrangement by the affirmative vote of
both (a) the majority of the shareholders represented at the Extraordinary
General Meeting, in person or by properly executed proxy, and voting thereon,
and (b) the holders of not less than 75% of the voting
21
<PAGE> 22
power of Shares represented at the Extraordinary General Meeting, in person or
by properly executed proxy, and voting thereon.
If the Acquisition Arrangement is approved at the Extraordinary General
Meeting by the shareholders of the Company by the requisite vote under Section
233 of the Companies Ordinance and the Company's Articles of Association, the
Company would file with the Court a second motion requesting that the Court
issue an order approving the Acquisition Arrangement (the "Final Court Order").
There can be no assurance that the Court would render the Final Court Order
even if the Acquisition Arrangement is approved by the requisite vote at the
Extraordinary General Meeting. The Court has broad discretion under Section 233
of the Companies Ordinance in approving or rejecting such approval, and
objections to the approval of the Acquisition Arrangement may be submitted to
the Court by shareholders and other parties. The Court is authorized, at its
discretion, to issue an order approving the Acquisition Arrangement, rejecting
the Acquisition Arrangement or approving the Acquisition Arrangement subject to
modifications. Among other factors, the Court considers the fairness of the
Acquisition Arrangement and any objections filed by objecting parties. As soon
as practicable following the satisfaction or waiver of all conditions precedent
to the obligations of the parties under the Acquisition Agreement, including the
Final Court Order, and upon deposit by Sub of the requisite consideration for
purchase of the Shares with the exchange paying agent, the Company would file
the Final Court Order with the Israeli Registrar of Companies, which filing will
effect the Acquisition Arrangement. Upon such filing, all of the Shares issued
and outstanding at such time would be deemed transferred to Sub, Sub will own
100% of the outstanding Shares of the Company and the Company will become a
wholly owned subsidiary of Sub.
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.
22
<PAGE> 23
WIZTEC SOLUTIONS LTD.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED QUARTER ENDED
DECEMBER 31, MARCH 31,
------------------ ------------------
1998 1997 1999 1998
------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenues.................................. $20,297 $11,975 $ 7,335 $ 3,510
Net Income................................ 5,623 2,130 3,006 681
Earnings Per Share:
Basic..................................... $ .85 $ .34 $ 0.445 $ 0.103
Diluted................................... $ .80 $ .34 0.412 0.098
Weighted Average Common Shares Outstanding:
Basic..................................... 6,619 6,194 6,755 6,600
Diluted................................... 7,007 6,295 7,303 6,924
Other Data:
Ratio of Earnings to Fixed Charges (1).... 47.05x 22.60x 88.83x 23.77x
Book Value per Diluted Share.............. $ 3.47 $ 2.90 $ 4.00 $ 2.71
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT MARCH 31,
------------------ ----------------------
1998 1997 1999 1998
------- ------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Balance Sheet Data:
Total Current Assets.................... $22,479 $14,379 $27,425 $14,864
Total Assets............................ 28,442 20,671 33,524 21,227
Total Current Liabilities............... 3,853 2,055 4,007 1,948
Total Liabilities....................... 4,107 2,385 4,293 2,260
Shareholders' Equity.................... 24,335 18,286 29,231 18,967
</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. 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 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
23
<PAGE> 24
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 BUSINESS), 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, 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."
Previously, in the Offer to Purchase for the April Tender Offer, Parent and
Sub presented a Consolidated Company Forecast for the Year Ended December 31,
1999 that Parent had received from the Company. For the first quarter 1999, the
Company Forecast projected revenues of approximately $7.3 million and net income
of approximately $2.3 million. Actual first quarter results were revenues of
approximately $7.3 million and net income of approximately $3.0 million. For the
second quarter 1999, the Company Forecast projected revenues of approximately
$7.1 million and net income of approximately $2.0 million. As of June 25, 1999,
the Company indicated to Parent that, although it still projected its second
quarter revenues to be approximately $7.1 million, the Company had increased its
forecast of net income to approximately $2.8 million.
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.
Sub is a company limited by shares duly registered under the laws of the
State of Israel, organized in connection with the Plan and has not carried on
any significant activities other than in connection with the April Tender Offer
and the Offer. The principal executive offices of Sub are located at 29B Keren
Hayesod Street, Jerusalem 94188 Israel. The telephone number of Sub at such
location is 972-2-625-7751. All of the outstanding
24
<PAGE> 25
capital stock of Sub is owned directly or beneficially by Parent. Other than its
purchases of Shares pursuant to the April Tender Offer and subsequent private
purchases described herein, and activities incident to its formation and
capitalization, Sub does not have any significant assets or liabilities and has
not engaged in any significant activities.
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, 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, 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 $73.7 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.
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 June 28,
1999, Parent had
25
<PAGE> 26
borrowed approximately $280,000,000 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 June 28, 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 June 28, 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 at any time on or after June 28, 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 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
26
<PAGE> 27
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.
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.
Israel Investment Center. The Israel Investment Center has approved the
transfer of 100% of the Shares to Sub. However, the approval is contingent upon
the following conditions: (i) the Company will continue its business activity in
the same format as prior to the transfer and will not change into a development
center
27
<PAGE> 28
working on a cost-plus basis, (ii) the trade relationship between the Company
and Sub and its affiliates will be on a market basis with suitable allocation of
expenses and with transfer prices at the same levels as prior to the share
transfer and (iii) the period of tax benefits available to the Company as an
Approved Enterprise will be recomputed. No further approval of the Israel
Investment Center is required as a condition of the Offer.
13. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS.
General. Except as described in Section 12 and 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.
14. FEES AND EXPENSES.
Sub and Parent have retained Georgeson & Company Inc. to serve as the
Information Agent and The Bank of New York 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>
Information Agent Fees...................................... $ 12,000
Depositary Fees............................................. 15,000
Filing Fees................................................. 14,718
Legal Fees.................................................. 60,000
Printing and Mailing Costs, Miscellaneous................... 50,000
--------
Total............................................. $151,718
========
</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
28
<PAGE> 29
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 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.
July 2, 1999
29
<PAGE> 30
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, Director, 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 Coopers &
Lybrand L.L.P., 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> 31
Brian H. Rowe, Director; Retired Chairman of General Electric Aircraft
Engines (GEAE) since 1995; Chairman of GEAE, 1993-1995; Senior Vice President of
General Electric Company, 1979-1993.
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> 32
SCHEDULE II
WIZTEC SOLUTIONS LTD.
(AN ISRAELI CORPORATION)
1998 CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 33
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-9 - F-27
</TABLE>
F-1
<PAGE> 34
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> 35
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> 36
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> 37
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> 38
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> 39
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> 40
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> 41
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> 42
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> 43
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> 44
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> 45
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> 46
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> 47
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> 48
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> 49
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> 50
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> 51
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> 52
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> 53
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> 54
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> 55
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 8 -- 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> 56
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> 57
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> 58
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> 59
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> 60
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, her or its 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:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: Facsimile By Hand or Overnight Courier:
Tender & Exchange Department Transmission: Tender & Exchange Department
P.O. Box 11248 (for Eligible 101 Barclay Street
Church Street Station Institutions Only) Receive and Deliver Window
New York, New York (212) 815-6213 New York, New York 10286
10286-1248
For Confirmation
Telephone:
(800) 507-9357
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TO A NUMBER OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY.
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 & COMPANY INC. 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 JULY 2, 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 FRIDAY, JULY 30, 1999, UNLESS EXTENDED.
The Depositary for the Offer is:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
BY MAIL: FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
(for Eligible Institutions
Only)
(212) 815-6213
Tender & Exchange Department Tender & Exchange Department
P.O. Box 11248 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
FOR CONFIRMATION TELEPHONE:
(800) 507-9357
</TABLE>
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 $25.00 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 July 2, 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 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 June
28, 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, 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 or Employer Identification Number___________
AND DATING BELOW 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:
(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:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
BY MAIL: FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
(for Eligible Institutions
Only)
(212) 815-6213
Tender & Exchange Department Tender & Exchange Department
P.O. Box 11248 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
FOR CONFIRMATION TELEPHONE:
(800) 507-9357
</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 July 2, 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 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.
<TABLE>
<S> <C>
Signature(s) Check box if Share(s) will be tendered by book-entry
- ----------------------------------------------------- transfer: [ ]
Name(s) Account Number
- -----------------------------------------------------
- -----------------------------------------------------
(Please type or print)
Address
- -----------------------------------------------------
- -----------------------------------------------------
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
- ----------------------------------------------------- Title
ZIP CODE ------------------------------------------------
Date _________________, 1999
Area Code and Tel. No.
-------------------------------
</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
$25.00 NET PER SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, JULY 30, 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 $25.00 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 July 2, 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 July 2, 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 The Bank of New York (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
FRIDAY, JULY 30, 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
$25.00 NET PER SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, JULY 30, 1999, UNLESS EXTENDED.
To Our Clients:
Enclosed for your consideration are an Offer to Purchase dated July 2, 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 $25.00 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 $25.00 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 July 2, 1999 and the related Letter of Transmittal.
2. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Friday, July 30, 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
$25.00 NET PER SHARE
The undersigned acknowledge(s) receipt of your letter enclosing the Offer
to Purchase dated July 2, 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. By
tendering Shares pursuant to the Offer, a shareholder is approving the Plan in
accordance with Section 236 of the Companies Ordinance as set forth in Section 7
of the Offer to Purchase.
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
FORM W-8 [GRAPHIC]
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.
