<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
PURSUANT TO SECTION 14(d)(1) OF THE
SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
------------------------
BEST SOFTWARE, INC.
(Name of Subject Company)
BOBCAT ACQUISITION CORP.
THE SAGE GROUP PLC
(Bidders)
------------------------
COMMON STOCK, NO PAR VALUE
(Title of Class of Securities)
------------------------
000865791
(CUSIP Number of Class of Securities)
------------------------
PAUL WALKER
CHIEF EXECUTIVE
THE SAGE GROUP PLC
SAGE HOUSE
BENTON PARK
NEWCASTLE UPON TYNE
ENGLAND NE7 7LZ
(191) 255-3000
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications on Behalf of Bidder)
COPY TO:
RONALD C. BARUSCH, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
1440 NEW YORK AVENUE, NW
WASHINGTON, D.C. 20005
(202) 371-7000
------------------------
CALCULATION OF FILING FEE
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<TABLE>
<S> <C>
TRANSACTION VALUATION* AMOUNT OF FILING FEE
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$458,282,720 $91,657
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</TABLE>
* For purposes of calculating fee only. This amount assumes (i) the purchase of
11,826,614 outstanding shares of common stock of Best Software, Inc. and (ii)
1,267,178 shares of common stock of Best Software, Inc. which may be issued
upon exercise of outstanding options, in each case, at $35.00 in cash per
share. The amount of the filing fee calculated in accordance with Regulation
240.0-11 of the Securities Exchange Act of 1934, as amended, equals 1/50 of
one percentum of the value of shares to be purchased.
[ ] 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: Not applicable. Filing Party: Not
applicable.
Form or Registration No.: Not applicable. Date Filed: Not
applicable.
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<PAGE> 2
SCHEDULE 14D-1
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CUSIP No. 000865791
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<TABLE>
<S> <C> <C>
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1. Names of Reporting Person
S.S. or I.R.S. Identification Nos. of Above Persons
Bobcat Acquisition Corp.
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2. Check the Appropriate Box if a Member of a Group (a) [ ]
(b) [ ]
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3. SEC Use Only
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4. Source of Funds
AF
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5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Item 2(e) or 2(f) [ ]
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6. Citizenship or Place of Organization
Virginia
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7. Aggregate Amount Beneficially Owned By Each Reporting Person
1,007,859
(see the Offer to Purchase)
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8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares [ ]
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9. Percent of Class Represented By Amount in Row (7)
6.4%
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10. Type of Reporting Person
CO
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</TABLE>
<PAGE> 3
SCHEDULE 14D-1
- ------------------------------
CUSIP No. 000865791
- ------------------------------
<TABLE>
<S> <C> <C>
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1. Names of Reporting Person
S.S. or I.R.S. Identification Nos. of Above Persons
The Sage Group plc
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2. Check the Appropriate Box if a Member of a Group (a) [ ]
(b) [ ]
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3. SEC Use Only
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4. Source of Funds
WC, OO
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5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Item 2(e) or 2(f) [ ]
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6. Citizenship or Place of Organization
United Kingdom
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7. Aggregate Amount Beneficially Owned By Each Reporting Person
3,359,883
(see the Offer to Purchase)
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8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares [ ]
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9. Percent of Class Represented By Amount in Row (7)
21.2%
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10. Type of Reporting Person
CO
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</TABLE>
<PAGE> 4
TENDER OFFER
This Tender Offer Statement on Schedule 14D-1 (this "Statement") relates to
the offer by Bobcat Acquisition Corp., a Virginia corporation (the "Purchaser"),
and a wholly owned subsidiary of The Sage Group plc, a company organized under
the laws of England ("Parent"), to purchase all of the outstanding shares (the
"Shares") of common stock, no par value (the "Common Stock") of Best Software,
Inc., a Virginia corporation (the "Company"), at $35.00 per Share, net to the
seller in cash, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated January 14, 2000 (the "Offer to Purchase"), a copy of
which is attached hereto as Exhibit (a)(1), and in the related Letter of
Transmittal, a copy of which is attached hereto as Exhibit (a)(2) (which
together constitute the "Offer"). This Statement also constitutes a Statement on
Schedule 13D of each of Parent and the Purchaser.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Best Software, Inc., a Virginia
corporation, and the address of its principal executive offices is 11413 Isaac
Newton Square, Reston, Virginia 20190.
(b) The class of securities to which this Statement relates is the Common
Stock. The Company has represented that as of January 12, 2000 there were
11,826,614 shares of Common Stock issued and outstanding and (b) outstanding
options to purchase an aggregate of 1,633,578 shares of Common Stock. Purchaser
is seeking to purchase all of the outstanding Shares at a purchase price of
$35.00 per Share, net to the seller in cash.
(c) The information set forth in "Section 6 -- Price Range of the Shares;
Dividends on the Shares" of the Offer to Purchase is incorporated herein by
reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d), (g) This Statement is being filed by Parent and the Purchaser. The
information set forth in the "INTRODUCTION" and "Section 9 -- Certain
Information Concerning Parent and the Purchaser" of the Offer to Purchase is
incorporated herein by reference. The name, business address, present principal
occupation or employment, the material occupations, positions, offices or
employments for the past five years and citizenship of each director and
executive officer of Parent and the Purchaser 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 of the Offer to Purchase and incorporated herein by reference.
(e)-(f) During the last five years neither Parent or the Purchaser nor, to
the best knowledge of Parent and the Purchaser, any of the persons listed in
Schedule I of the Offer to Purchase have been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or was a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction as a
result of which any such person was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)(1) Other than the transactions described in Item 3(b) below, neither
Parent or the Purchaser nor, to the best knowledge of Parent and the Purchaser,
any of the persons listed in Schedule I of the Offer to Purchase, has entered
into any transaction with the Company, or any of the Company's affiliates which
are corporations, since the commencement of the Company's third full fiscal year
preceding the date of this Statement, the aggregate amount of which was equal to
or greater than one percent of the consolidated revenues of the Company for (i)
the fiscal year in which such transaction occurred or (ii) the portion of the
current fiscal year which has occurred if the transaction occurred in such year.
(a)(2) Other than the transactions described in Item 3(b) below, neither
Parent or the Purchaser nor, to the best knowledge of Parent and the Purchaser,
any of the persons listed in Schedule I of the Offer to Purchase, has entered
into any transaction since the commencement of the Company's third full fiscal
year
2
<PAGE> 5
preceding the date of this Statement, with the executive officers, directors or
affiliates of the Company which are not corporations, in which the aggregate
amount involved in such transaction or in a series of similar transactions,
including all periodic installments in the case of any lease or other agreement
providing for periodic payments or installments, exceeded $40,000.
(b) The information set forth in the "INTRODUCTION", "Section 9 -- Certain
Information Concerning Parent and the Purchaser", "Section 11 -- Background of
the Offer; Purpose of the Offer and the Merger; the Merger Agreement and Certain
Other Agreements" and "Section 12 -- Plans for the Company; Other Matters" of
the Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in "Section 10 -- Source and Amount of
Funds" of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the "INTRODUCTION", "Section
11 -- Background of the Offer; Purpose of the Offer and the Merger; the Merger
Agreement and Certain Other Agreements" and "Section 12 -- Plans for the
Company; Other Matters" of the Offer to Purchase is incorporated herein by
reference.
(f)-(g) The information set forth in "Section 7 -- Effect of the Offer on
the Market for the Shares; Stock Listing; Exchange Act Registration; Margin
Regulations" of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in "Section 9 -- Certain Information
Concerning Parent and the Purchaser" and "Section 11 -- Background of the Offer;
Purpose of the Offer and the Merger; the Merger Agreement and Certain Other
Agreements" of the Offer to Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the "INTRODUCTION", "Section 10 -- Source and
Amount of Funds", "Section 11 -- Background of the Offer; Purpose of the Offer
and the Merger; the Merger Agreement and Certain Other Agreements", "Section
12 -- Plans for the Company; Other Matters" and "Section 16 -- Fees and
Expenses" of the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in "Section 16 -- Fees and Expenses" of the Offer
to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in "Section 9 -- Certain Information Concerning
Parent and the Purchaser" of the Offer to Purchase is incorporated herein by
reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) Except as disclosed in Items 3 and 7 above, there are no present or
proposed material contracts, arrangements, understandings or relationships
between Parent or the Purchaser or, to the best knowledge of Parent and the
Purchaser, any of the persons listed in Schedule I of the Offer to Purchase, and
the Company or any of its executive officers, directors, controlling persons or
subsidiaries.
3
<PAGE> 6
(b)-(c) The information set forth in the "INTRODUCTION", "Section
14 -- Conditions of the Offer" and "Section 15 -- Certain Legal Matters" of the
Offer to Purchase is incorporated herein by reference.
(d) The information set forth in "Section 7 -- Effect of the Offer on the
Market for Shares; Stock Listing; Exchange Act Registration; Margin Regulations"
and "Section 15 -- Certain Legal Matters" of the Offer to Purchase is
incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the Letters of
Transmittal, to the extent not otherwise incorporated herein by reference, is
incorporated herein by reference.
ITEM 11. MATERIALS TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(a)(1) Offer to Purchase dated January 14, 2000.
(a)(2) Letter of Transmittal.
(a)(3) Letter for use by Brokers, Dealers, Banks, Trust Companies
and Nominees to their Clients.
(a)(4) Letter to Clients.
(a)(5) Notice of Guaranteed Delivery.
(a)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(7) Press Release issued by Parent, dated January 12, 2000.
(a)(8) Form of Summary Advertisement, dated January 14, 2000.
(a)(9) Financial Statements of Parent for the fiscal years ended
September 30, 1998 and 1997.
(b)(1) Vendor Placing Agreement, dated January 12, 2000, by and
between Parent and Deutsche Bank AG London.
(c)(1) Agreement and Plan of Merger, dated January 12, 2000, by and
among Parent, the Purchaser and the Company.
(c)(2) Shareholders Agreement, dated January 12, 2000, by and among
Parent, the Purchaser and certain Shareholders of the
Company.
(c)(3) Stock Option Agreement, dated January 12, 2000, by and among
Parent and the Company.
(c)(4) Mutual Non-Disclosure Agreement, dated October 14, 1999, by
and between Parent and the Company.
(c)(5) Letter Agreement, dated December 22, 1999, by and between
Parent and the Company.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
4
<PAGE> 7
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Date: January 14, 2000
BOBCAT ACQUISITION CORP.
By: /s/ PAUL WALKER
------------------------------------
Name: Paul Walker
Title: President
5
<PAGE> 8
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Date: January 14, 2000
THE SAGE GROUP PLC
By: /s/ PAUL WALKER
------------------------------------
Name: Paul Walker
Title: Chief Executive
6
<PAGE> 9
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
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<S> <C>
(a)(1) Offer to Purchase dated January 14, 2000.
(a)(2) Letter of Transmittal.
(a)(3) Letter for use by Brokers, Dealers, Banks, Trust Companies
and Nominees to their Clients.
(a)(4) Letter to Clients.
(a)(5) Notice of Guaranteed Delivery.
(a)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(7) Press Release issued by Parent, dated January 12, 2000.
(a)(8) Form of Summary Advertisement, dated January 14, 2000.
(a)(9) Financial Statements of Parent for the fiscal years ended
September 30, 1998 and 1997.
(b)(1) Vendor Placing Agreement, dated January 12, 2000, by and
between Parent and Deutsche Bank AG London.
(c)(1) Agreement and Plan of Merger, dated January 12, 2000, by and
among Parent, the Purchaser and the Company.
(c)(2) Shareholders Agreement, dated January 12, 2000, by and among
Parent, the Purchaser and certain Shareholders of the
Company.
(c)(3) Stock Option Agreement, dated January 12, 2000, by and among
Parent and the Company.
(c)(4) Mutual Non-Disclosure Agreement, dated October 14, 1999, by
and between Parent and the Company.
(c)(5) Letter Agreement, dated December 22, 1999, by and between
Parent and the Company.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
7
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
BEST SOFTWARE, INC.
BY
BOBCAT ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
THE SAGE GROUP PLC
AT
$35.00 NET PER SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, FEBRUARY 11, 2000, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED
JANUARY 12, 2000 (THE "MERGER AGREEMENT"), BY AND AMONG THE SAGE GROUP PLC
("PARENT"), BOBCAT ACQUISITION CORP. (THE "PURCHASER") AND BEST SOFTWARE, INC.
(THE "COMPANY"). THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT EACH
OF THE MERGER AGREEMENT, THE OFFER, THE MERGER, THE OPTION AGREEMENT AND THE
SHAREHOLDERS AGREEMENT IS FAIR TO AND IN THE BEST INTERESTS OF THE SHAREHOLDERS
OF THE COMPANY, AND RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY ACCEPT THE
OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER, THAT NUMBER OF
SHARES WHICH, WHEN ADDED TO THE SHARES THEN OWNED BY PARENT OR THE PURCHASER, IF
ANY, REPRESENTS AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A FULLY DILUTED
BASIS (WITHOUT GIVING PRO FORMA EFFECT TO THE POTENTIAL ISSUANCE OF ANY SHARES
ISSUABLE UNDER THE OPTION AGREEMENT DESCRIBED BELOW) ON THE DATE OF PURCHASE
(THE "MINIMUM CONDITION"), THE EXPIRATION OR TERMINATION OF ANY APPLICABLE
WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976,
AS AMENDED, AND THE REGULATIONS THEREUNDER, AND THE OTHER CONDITIONS SET FORTH
IN THIS OFFER TO PURCHASE. SEE SECTION 14. AS USED HEREIN "FULLY DILUTED BASIS"
TAKES INTO ACCOUNT THE CONVERSION OR EXERCISE OF ALL OUTSTANDING OPTIONS AND
OTHER RIGHTS AND SECURITIES EXERCISABLE OR CONVERTIBLE INTO SHARES OF COMMON
STOCK.
------------------------
IMPORTANT
Any shareholder who desires to tender all or any portion of such
shareholder's Shares (as defined herein) should either (i) complete and sign the
Letter of Transmittal (or facsimile thereof) in accordance with the instructions
in the Letter of Transmittal, mail or deliver it and any other required
documents to the Depositary (as defined herein), and either deliver the
certificates for such Shares to the Depositary or tender such Shares pursuant to
the procedures for book-entry transfer set forth in Section 3 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 person to tender their Shares.
Any shareholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available, or who cannot comply
with the procedures for book-entry transfer on a timely basis, may tender such
Shares by following the procedures for guaranteed delivery set forth in Section
3.
Questions and requests for assistance may be directed to the Information
Agent (as defined herein) or the Dealer Manager (as defined herein) at their
respective locations and telephone numbers set forth on the back cover of this
Offer to Purchase. Requests for additional copies of this Offer to Purchase, the
Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to
the Information Agent, or the Dealer Manager, or to brokers, dealers, commercial
banks or trust companies. A shareholder also may contact brokers, dealers,
commercial banks or trust companies for assistance concerning the Offer.
------------------------
THE DEALER MANAGER FOR THE OFFER IS:
DEUTSCHE BANC ALEX. BROWN
Deutsche Bank Securities Inc.
------------------------
January 14, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY TERM SHEET.......................................... 1
INTRODUCTION................................................ 4
THE OFFER................................................... 6
1. Terms of the Offer.................................... 6
2. Acceptance for Payment and Payment.................... 9
3. Procedure for Tendering Shares........................ 10
4. Withdrawal Rights..................................... 12
5. Certain Federal Income Tax Consequences............... 13
6. Price Range of the Shares; Dividends on the Shares.... 13
7. Effect of the Offer on the Market for the Shares;
Stock Listing; Exchange Act Registration; Margin
Regulations........................................... 14
8. Certain Information Concerning the Company............ 15
9. Certain Information Concerning Parent and the
Purchaser............................................. 17
10. Source and Amount of Funds............................ 20
11. Background of the Offer; Purpose of the Offer and the
Merger; the Merger Agreement and Certain Other
Agreements............................................ 21
12. Plans for the Company; Other Matters.................. 35
13. Dividends and Distributions........................... 38
14. Conditions of the Offer............................... 38
15. Certain Legal Matters................................. 39
16. Fees and Expenses..................................... 41
17. Miscellaneous......................................... 42
</TABLE>
SCHEDULE I -- Directors and Executive Officers of Bobcat Acquisition Corp.
and The Sage Group plc.
i
<PAGE> 3
SUMMARY TERM SHEET
Bobcat Acquisition Corp. is offering to purchase all of the outstanding
common stock of Best Software, Inc. for $35.00 per share in cash. The following
are some of the questions you, as a shareholder of Best Software, Inc., may have
and answers to those questions. We urge you to carefully read the remainder of
this offer to purchase and the letter of transmittal because the information in
this summary is not complete and additional important information is contained
in the remainder of this offer to purchase and the letter of transmittal.
WHO IS OFFERING TO BUY MY SECURITIES?
Our name is Bobcat Acquisition Corp. We are a Virginia corporation formed
for the purpose of making a tender offer for all of the common stock of Best
Software, Inc. We are a wholly owned subsidiary of The Sage Group plc, a company
organized under the laws of England.
WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFER?
We are seeking to purchase all of the outstanding common stock of Best
Software.
HOW MUCH ARE YOU OFFERING TO PAY AND WHAT IS THE FORM OF PAYMENT?
We are offering to pay $35.00 per share, net to you, in cash. If you tender
your shares to us in the offer, you will not have to pay brokerage fees or
similar expenses.
DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT?
The Sage Group, our parent company, will provide us with approximately $445
million, which we will use to purchase all shares validly tendered and not
withdrawn in the offer and to provide funding for the merger which is expected
to follow the successful completion of the offer in accordance with the terms
and conditions of the Merger Agreement. It is anticipated that all of such funds
will be obtained from the proceeds of an offering of shares of The Sage Group
stock which is not being made in the U.S. The offering of shares of The Sage
Group has not been registered in the U.S. and accordingly you are not being
offered, and you may not purchase shares in the offering.
IS YOUR FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER IN THE OFFER?
Because the form of payment consists solely of cash and all of the funding
which will be needed will come from the sale of shares of The Sage Group which
has already been arranged, we do not think our financial condition is relevant
to your decision whether to tender in the offer.
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER?
You will have at least until 12:00 midnight, New York City time, on
February 11, 2000, to decide whether to tender your shares in the offer.
Further, if you cannot deliver everything that is required in order to make a
valid tender by that time, you may be able to use a guaranteed delivery
procedure, which is described later in this offer to purchase.
CAN THE OFFER BE EXTENDED AND UNDER WHAT CIRCUMSTANCES?
Subject to the terms of the Merger Agreement, we can extend the offer. We
have agreed in the Merger Agreement that:
- we can extend the offer for up to 10 business days after the initial
expiration date if as of such date at least 90% of the outstanding shares
have not been tendered, so that the merger can be effected without a
meeting of Best Software's shareholders; and
- we may extend the offer for up to 120 calendar days in our discretion if
all conditions to the offer are not satisfied or waived by the initial
expiration date of the offer; and
<PAGE> 4
- at the request of Best Software, we will extend the offer for up to 90
calendar days if all conditions to the offer are not satisfied or waived
by the initial expiration date of the offer, (i) however if Best Software
makes such a request, we may cancel the offer to be conditioned upon the
continued availability of The Sage Group's financing arrangements
discussed above or the availability of new financing arrangements; and
- we may extend the initial expiration date of the offer to include a
subsequent offering period any time after January 24, 2000. A subsequent
offering period, if one is included, will be an additional opportunity
for shareholders to tender their shares and receive the offer
consideration following the expiration of the offer. However, we do not
currently intend to include a subsequent offering period although we
reserve the right to do so.
HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED?
If we extend the offer, we will inform BankBoston, N.A. (which is the
depositary for the offer) of that fact and will make a public announcement of
the extension, not later than 9:00 a.m., New York City time, on the day after
the day on which the offer was scheduled to expire.
WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER?
We are not obligated to purchase any shares which are validly tendered
unless that number of shares which, when added to the shares then owned by us
and The Sage Group, if any, represents at least a majority of the shares of Best
Software outstanding on a fully diluted basis. We may, however, decide to
purchase all shares tendered, even though such number may be less than a
majority of the outstanding shares on a fully diluted basis, in our sole
discretion. We are also not obligated to purchase shares which are validly
tendered if, among other things, there is a material adverse change in Best
Software or its business or if the shares of The Sage Group which will be sold
to finance the acquisition of Best Software are not admitted for listing on the
London Stock Exchange before we accept the shares which have been validly
tendered.
HOW DO I TENDER MY SHARES?
To tender shares, you must deliver the certificates representing your
shares, together with a completed letter of transmittal, to BankBoston, N.A.,
the depositary for the offer, not later than the time the tender offer expires.
If your shares are held in street name, the shares can be tendered by your
nominee through The Depository Trust Company. If you cannot get something that
is required to the depositary by the expiration of the tender offer, you may get
a little extra time to do so by having a broker, a bank or other fiduciary which
is a member of the Securities Transfer Agents Medallion Program or other
eligible institution to guarantee that the missing items will be received by the
depositary within three Nasdaq Stock Market trading days. However, the
depositary must receive the missing items within that three trading day period.
UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED SHARES?
You can withdraw shares at any time until the offer has expired and, if we
have not by March 13, 2000, agreed to accept your shares for payment, you can
withdraw them at any time after such time until we accept shares for payment.
This right to withdraw will not apply to any subsequent offering period
discussed in Section 1, if one is included.
HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES?
To withdraw shares, you must deliver a written notice of withdrawal, or a
facsimile of one, with the required information to the depositary while you
still have the right to withdraw the shares.
WHAT DOES THE BEST SOFTWARE BOARD OF DIRECTORS THINK OF THE OFFER?
We are making the offer pursuant to an agreement and plan of merger among
us, The Sage Group and Best Software, which has been approved by the Best
Software Board of Directors. The Best Software Board
2
<PAGE> 5
approved the merger agreement, our tender offer and the proposed merger of us
with and into Best Software, with Best Software as the surviving corporation and
a wholly owned subsidiary of The Sage Group, and has determined that the merger
agreement, the offer and the merger are in the best interests of the Company's
shareholders.
IF A MAJORITY OF THE SHARES ARE TENDERED AND ACCEPTED FOR PAYMENT, WILL BEST
SOFTWARE CONTINUE AS A PUBLIC COMPANY?
No. If the merger takes place, Best Software no longer will be publicly
owned. Even if the merger does not take place, if we purchase all the tendered
shares, there may be so few remaining shareholders and publicly held shares that
Best Software common stock will no longer be eligible to be traded through a
Nasdaq market or on a securities exchange, there may not be a public trading
market for Best Software stock, and Best Software may cease making filings with
the Securities and Exchange Commission or otherwise cease being required to
comply with the SEC rules relating to publicly held companies.
WILL THE TENDER OFFER BE FOLLOWED BY A MERGER IF ALL THE BEST SOFTWARE SHARES
ARE NOT TENDERED IN THE OFFER?
If we accept for payment and pay for at least a majority of the outstanding
shares of Best Software on a fully diluted basis, Bobcat Acquisition Corp. will
be merged with and into Best Software. If that merger takes place, The Sage
Group will own all of the shares of Best Software and all remaining shareholders
of Best Software (other than us and The Sage Group) will receive $35.00 per
share in cash (or any other higher price per share which is paid in the offer).
We may attempt to effect the merger even if we own less than a majority of the
shares of Best Software, but in such event the merger is not certain to occur.
IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES?
If the merger described above takes place, shareholders not tendering the
offer will receive the same amount of cash per share which they would have
received had they tendered your shares in the offer. Therefore, if the merger
takes place, the only difference to you between tendering your shares and not
tendering your shares is that you will be paid earlier if you tender your
shares. However, if the merger does not take place, the number of shareholders
and of shares of Best Software which are still in the hands of the public may be
so small that there no longer will be an active public trading market (or,
possibly, any public trading market) for the Best Software common stock. Also,
as described above, Best Software may cease making filings with the SEC or
otherwise being required to comply with the SEC rules relating to publicly held
companies.
WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE?
On January 11, 2000, the last trading day before we announced the tender
offer and the possible subsequent merger, the last sale price of Best Software
common stock reported on the Nasdaq National Market was $29 15/16 per share.
Between October 1, 1999 and January 13, 2000, the price of a share of Best
Software common stock ranged between $18 1/16 and $34 17/32. We advise you to
obtain a recent quotation for shares of Best Software common stock in deciding
whether to tender your shares.
WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE TENDER OFFER?
You can call MacKenzie Partners ((800) 334-2640 (toll free)). MacKenzie
Partners is acting as the information agent for our tender offer.
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TO THE HOLDERS OF COMMON STOCK OF BEST SOFTWARE, INC.:
INTRODUCTION
Bobcat Acquisition Corp., a Virginia corporation (the "Purchaser") and a
wholly owned subsidiary of The Sage Group plc, a company organized under the
laws of England ("Parent"), hereby offers to purchase all issued and outstanding
shares of common stock ("Common Stock"), no par value (the "Shares"), of Best
Software, Inc., a Virginia corporation (the "Company"), at a price of $35.00 per
Share, net to the seller in cash, upon the terms and subject to the conditions
set forth in this Offer to Purchase and in the related Letter of Transmittal
(which, together with any amendments or supplements hereto or thereto,
collectively constitute the "Offer"). Tendering shareholders will not be
obligated to pay brokerage fees or commissions or, except as set forth in
Instruction 6 of the Letter of Transmittal, transfer taxes on the sale of Shares
pursuant to the Offer. The Purchaser will pay all fees and expenses incurred in
connection with the Offer of Deutsche Bank Securities Inc., which is acting as
the Dealer Manager (the "Dealer Manager"), MacKenzie Partners, Inc., which is
acting as the Information Agent (the "Information Agent") and BankBoston, N.A.,
which is acting as the Depositary (the "Depositary").
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER, THAT NUMBER OF
SHARES WHICH REPRESENTS, WHEN ADDED TO THE SHARES THEN OWNED BY PARENT AND THE
PURCHASER, IF ANY, AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A FULLY
DILUTED BASIS (WITHOUT GIVING PRO FORMA EFFECT TO THE POTENTIAL ISSUANCE OF ANY
SHARES OF COMMON STOCK ISSUABLE UNDER THE OPTION AGREEMENT (AS DEFINED BELOW))
ON THE DATE OF PURCHASE (THE "MINIMUM CONDITION"). SEE SECTION 14.
As used in this Offer to Purchase, "fully diluted basis" takes into account
the conversion or exercise of all outstanding options and other rights and
securities exercisable or convertible into shares of Common Stock (without
giving pro forma effect to the potential issuance of any Shares issuable under
the Option Agreement). The Company has informed the Purchaser that, as of
January 12, 2000, there were (i) 11,826,614 shares of Common Stock issued and
outstanding and (ii) outstanding options to purchase an aggregate of 1,633,578
shares of Common Stock under the Company's stock plans. The Merger Agreement (as
defined below) provides, among other things, that the Company will not, without
the prior written consent of Parent, issue any additional Shares (except on the
exercise of outstanding options and other rights and securities). Based on the
foregoing, and after giving effect to the exercise of all outstanding options
and warrants, the Purchaser believes that the Minimum Condition would be
satisfied, without giving effect to the exercise of the Company Option (as
defined below) pursuant to the Option Agreement or the Shareholder Option (as
defined below) pursuant to the Shareholders Agreement (as described below) if
6,730,097 shares of Common Stock are validly tendered and not withdrawn prior to
the expiration of the Offer.
As a condition and inducement to Parent's and the Purchaser's entering into
the Merger Agreement and incurring the liabilities therein, certain shareholders
of the Company (each, a "Shareholder"), who have voting power and dispositive
power with respect to 1,007,859 Shares in the aggregate, concurrently with the
execution and delivery of the Merger Agreement entered into a Shareholders
Agreement (the "Shareholders Agreement"), dated January 12, 2000, with Parent
and the Purchaser. Pursuant to the Shareholders Agreement, the Shareholders have
agreed, among other things, to tender the Shares held by them in the Offer, and
to grant Parent a proxy with respect to the voting of such Shares in favor of
the Merger (as defined below) with respect to such Shares upon the terms and
subject to the conditions set forth therein. In addition, in the Shareholders
Agreement, each Shareholder has granted Parent an option (the "Shareholder
Option") to purchase all Shares beneficially owned or controlled by such
Shareholder as of the date of the Shareholders Agreement, or beneficially owned
or controlled by such Shareholder at any time thereafter (including, without
limitation, by way of exercise of options, warrants or other rights to purchase
Company Common Stock), subject to certain conditions. The Shareholder Option is
exercisable only in the event a Shareholder does not tender his shares in
accordance with the terms of the Shareholders Agreement or withdraws tendered
shares in violation of the Shareholders Agreement. See Section 11.
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As a condition and further inducement to Parent's and the Purchaser's
entering into the Merger Agreement and incurring the liabilities therein,
concurrently with the execution and delivery of the Merger Agreement, Parent and
the Company entered into a Stock Option Agreement, dated January 12, 2000 (the
"Option Agreement"), pursuant to which, among other things, the Company has
granted the Purchaser an option (the "Company Option") to purchase 2,352,024
newly-issued shares of Common Stock, subject to certain conditions. See Section
11.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
January 12, 2000 (the "Merger Agreement"), by and among Parent, the Purchaser
and the Company pursuant to which, as soon as practicable after the completion
of the Offer and satisfaction or waiver of all conditions to the Merger, the
Purchaser will be merged with and into the Company and the separate corporate
existence of the Purchaser will thereupon cease. The merger, as effected
pursuant to the immediately preceding sentence, is referred to herein as the
"Merger," and the Company as the surviving corporation of the Merger is
sometimes herein referred to as the "Surviving Corporation." At the effective
time of the Merger (the "Effective Time"), each share of Common Stock then
outstanding (other than Shares held by Parent, the Purchaser or any other wholly
owned subsidiary of Parent, and other than Shares held by shareholders who have
properly exercised dissenters' rights, if any) will be cancelled and retired and
converted into the right to receive $35.00 per Share, net to the seller in cash
or any higher price per share of Common Stock paid in the Offer (such price,
being referred to herein as the "Offer Price"), in cash payable to the holder
thereof without interest (the "Merger Consideration"). The Merger Agreement is
more fully described in Section 11.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT EACH OF THE
MERGER AGREEMENT, THE OFFER, THE MERGER, THE OPTION AGREEMENT AND THE
SHAREHOLDERS AGREEMENT IS FAIR TO AND IN THE BEST INTERESTS OF THE SHAREHOLDERS
OF THE COMPANY, AND RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY ACCEPT THE
OFFER AND TENDER THEIR SHARES TO THE PURCHASER PURSUANT TO THE OFFER.
Hambrecht & Quist LLC, the Company's financial advisor, has delivered to
the Company's Board of Directors its written opinion (the "Fairness Opinion"),
dated January 12, 2000, to the effect that, as of such date, the consideration
to be received by the holders of shares of Company Common Stock (as defined in
the Fairness Opinion) (other than Parent, the Purchaser and any affiliate
thereof), pursuant to the Offer and under the terms of the Merger Agreement, is
fair from a financial point of view to such holders. Such opinion is set forth
in full as an exhibit to the Company's Solicitation/Recommendation Statement on
Schedule 14D-9 (the "Schedule 14D-9") that is being mailed to shareholders of
the Company.
The Merger Agreement provides that the initial scheduled expiration date of
the Offer shall be not later than the twenty-fifth business day after the date
the Offer is commenced (the "Initial Expiration Date"). If as of the Initial
Expiration Date all conditions to the Offer shall not have been satisfied or
waived, the Merger Agreement provides (A) that the Purchaser may extend the
expiration date of the Offer for up to 10 business days after the Initial
Expiration Date if as of the Initial Expiration Date there shall not have been
tendered at least 90% of the outstanding Shares so that the Merger can be
effected without a meeting of the Company's shareholders in accordance with the
Virginia Stock Corporation Act (the "VSCA"), (B) that in the event that any
condition to the Offer is not satisfied on a date on which the Offer is
scheduled to expire, the Purchaser may, from time to time, in its sole
discretion, extend the expiration date of the Offer up to a maximum of 120
calendar days following the Initial Expiration Date, (C) that in the event that
any condition to the Offer is not satisfied on a date on which the Offer is
scheduled to expire, at the written request of the Company delivered no later
than two business days prior to the Initial Expiration Date, the Purchaser
shall, and shall continue to, extend the Offer from time to time for the period
commencing on the date of the notice referred to above until a date not later
than 90 calendar days following the Initial Expiration Date (it being understood
that the Purchaser may determine the interim expiration dates of any extension
of the Offer during such extension period), provided, however, that in the event
that the Purchaser extends the expiration date of the Offer in accordance with
such request and the financing described in Section 10 hereof (the "Financing")
shall no longer be reasonably available to Parent: (i) Section 14 hereof shall
be deemed to be amended to provide an additional condition that the Purchaser
shall not be required to accept for payment or pay for any
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<PAGE> 8
tendered Shares unless and until Parent and the Purchaser shall have obtained
sufficient financing (the "Substitute Financing") in replacement, if necessary,
of the Financing in order to permit Parent and the Purchaser to acquire all of
the Shares in the Offer and the Merger and to pay the anticipated expenses in
connection therewith, (ii) the condition set forth in paragraph (i) of Section
14 shall be amended and replaced with the condition set forth in clause (i)
above, (iii) from and after such time Parent shall not be subject to Section
6.10 of the Merger Agreement and (iv) Parent shall use all commercially
reasonable efforts to secure the Substitute Financing prior to June 12, 2000 and
to provide funds to the Purchaser to permit it to perform its obligations
hereunder and in the Offer (provided that Parent shall not be required to obtain
Substitute Financing on economic terms materially less favorable to it than the
Financing), (D) that the Purchaser may extend the expiration date of the Offer
for up to 10 business days in order to amend the Schedule 14D-1 to permit the
announcement of a Subsequent Offering Period (as hereinafter defined) to the
Offer, and (E) that the Purchaser may include a subsequent offering period (as
such term is defined in new Rule 14D-1 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), effective on January 24, 2000, the
"Subsequent Offering Period") to the Offer for a period up to 20 business days.
In addition, the Merger Agreement provides that the Purchaser shall, on the
terms and subject to the prior satisfaction or waiver of the conditions of the
Offer, accept for payment and purchase, as soon as permitted under the terms of
the Offer, all Shares validly tendered and not withdrawn prior to the expiration
of the Offer.
Consummation of the Merger is conditioned upon, among other things, the
approval and adoption by the requisite vote of shareholders of the Company of
the Merger Agreement, if required by applicable law in order to consummate the
Merger. See Section 11. Under the VSCA, if the Purchaser acquires at least 90%
of the Shares then outstanding, the Purchaser will be able to approve the Merger
Agreement and the transactions contemplated thereby, including the Merger,
without a vote of the shareholders. In such event, Parent, the Purchaser and the
Company have agreed in the Merger Agreement to take, subject to the satisfaction
of the conditions set forth in the Merger Agreement, all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after the acceptance and payment for Shares by the Purchaser
pursuant to the Offer without a meeting of the shareholders, in accordance with
Section 13.1-719 of the VSCA.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
THE OFFER
1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the
Offer, the Purchaser will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 4 of this Offer to Purchase. The term "Expiration Date"
shall mean 12:00 Midnight, New York City time, on Friday, February 11, 2000,
unless and until the Purchaser, in accordance with the terms of the Merger
Agreement, shall have extended the period of time for 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 the Purchaser, shall expire.
The Offer is conditioned upon, among other things, the satisfaction of the
Minimum Condition, and the expiration or termination of all waiting periods
imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the regulations thereunder (the "HSR Act"). See Section 14. If such
conditions are not satisfied prior to the Expiration Date, the Purchaser
reserves the right (but shall not be obligated) to (i) decline to purchase any
of the Shares tendered and terminate the Offer, subject to the terms of the
Merger Agreement, (ii) waive any of the conditions to the Offer, to the extent
permitted by applicable law and the provisions of the Merger Agreement, and,
subject to complying with applicable rules and regulations of the Securities and
Exchange Commission (the "Commission"), purchase all Shares validly tendered,
(iii) subject to the terms of the Merger Agreement, extend the Offer and,
subject to the right of
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<PAGE> 9
shareholders to withdraw Shares until the Expiration Date, retain the Shares
which will have been tendered during the period or periods for which the Offer
is open or extended, or (iv) amend the Offer.
Subject to the terms of the Merger Agreement, the Purchaser may, and under
certain circumstances shall, from time to time, (i) 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 (ii) amend the Offer by giving oral or written notice of
such amendment to the Depositary. Any extension, 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 the public announcement
requirements of Rule 14d-4(c) under the Exchange Act. Without limiting the
obligation of the Purchaser under such Rule or the manner in which the Purchaser
may choose to make any public announcement, the Purchaser currently intends to
make announcements by issuing a press release to the Dow Jones News Service.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER PRICE TO BE PAID BY
THE PURCHASER FOR THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY
DELAY IN MAKING SUCH PAYMENT.
The Merger Agreement provides that, except as described below, the
Purchaser will not, without the prior written consent of the Company, (i)
decrease the Offer Price or change the form of consideration payable in the
Offer, (ii) decrease the number of Shares sought to be purchased in the Offer,
(iii) impose conditions to the Offer other than those described in Section 14,
(iv) amend any condition of the Offer described in Section 14, (v) extend the
Initial Expiration Date, provided, however, (A) that the Purchaser may extend
the expiration date of the Offer for up to 10 business days after the Initial
Expiration Date if as of the Initial Expiration Date there shall not have been
tendered at least 90% of the outstanding Shares so that the Merger can be
effected without a meeting of the Company's shareholders in accordance with the
VSCA, (B) that in the event that any condition to the Offer is not satisfied on
a date on which the Offer is scheduled to expire, the Purchaser may, from time
to time, in its sole discretion, extend the expiration date of the Offer up to a
maximum of 120 calendar days following the Initial Expiration Date, (C) in the
event that any condition to the Offer is not satisfied on a date on which the
Offer is scheduled to expire, at the written request of the Company delivered no
later than two business days prior to the Initial Expiration Date, the Purchaser
shall, and shall continue to, extend the Offer from time to time for the period
commencing on the date of the notice referred to above until a date not later
than 90 calendar days following the Initial Expiration Date (it being understood
that the Purchaser may determine the interim expiration dates of any extension
of the Offer during such extension period), provided, however, that in the event
that the Purchaser extends the expiration date of the Offer in accordance with
such request and the Financing shall no longer be reasonably available to
Parent: (I) Annex I shall be deemed to be amended to provide an additional
condition that the Purchaser shall not be required to accept for payment or pay
for any tendered Shares unless and until Parent and the Purchaser shall have
Substitute Financing in replacement, if necessary, of the Financing in order to
permit Parent and the Purchaser to acquire all of the Shares in the Offer and
the Merger and to pay the anticipated expenses in connection therewith, (II) the
condition set forth in paragraph (i) of Annex I shall be amended and replaced
with the condition set forth in clause (I) above, (III) from and after such time
Parent shall not be subject to Section 6.10 of the Merger Agreement and (IV)
Parent shall use all commercially reasonable efforts to secure the Substitute
Financing prior to June 12, 2000 and to provide funds to the Purchaser to permit
it to perform its obligations hereunder and in the Offer (provided that Parent
shall not be required to obtain Substitute Financing on economic terms
materially less favorable to it than the Financing), (D) that the Purchaser may
extend the expiration date of the Offer for up to 10 business days in order to
amend the Schedule 14D-1 to permit the announcement of a Subsequent Offering
Period to the Offer, and (E) that the Purchaser may include a Subsequent
Offering Period to the Offer for a period up to 20 business days, or (vi) amend
any other term of the Offer in any manner adverse to the holders of Shares
without the written consent of the Company.
If the Purchaser extends the Offer, or if the Purchaser (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 the Purchaser's rights under the Offer, the
Depositary may retain tendered Shares on behalf of the Purchaser, and such
Shares may not be withdrawn except to the
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extent tendering shareholders are entitled to withdrawal rights as described in
Section 4. However, the ability of the Purchaser to delay the payment for Shares
which the Purchaser has accepted for payment is limited by Rule 14e-l(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 the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
the Purchaser 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 Commission has stated that in its view an offer must remain open
for a minimum period of time following a material change in the terms of the
Offer and that waiver of a material condition, such as the Minimum Condition, is
a material change in the terms of the 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, 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. As used in
this Offer to Purchase, "business day" has the meaning set forth in Rule 14d-1
under the Exchange Act.
Pursuant to Rule 14d-11 under the Exchange Act, scheduled to become
effective January 24, 2000, the Purchaser may, subject to certain conditions,
include a Subsequent Offering Period following the expiration of the Offer on
the Expiration Date. Rule 14d-11 provides that the Purchaser may include a
Subsequent Offering Period so long as, among other things, (i) the Offer remains
open for a minimum of 20 business days and has expired, (ii) all conditions to
the Offer are deemed satisfied or waived by the Purchaser on or before the
Expiration Date, (iii) the Purchaser accepts and promptly pays for all
securities tendered during the Offer prior to close of the Offer, (iv) the
Purchaser announces the results of the Offer, including the approximate number
and percentage of Shares deposited in the Offer, no later than 9:00 Eastern time
on the next business day after the Expiration Date and immediately begins the
Subsequent Offering Period, and (v) the Purchaser immediately accepts and
promptly pays for Shares as they are tendered during the Subsequent Offering
Period. The Purchaser will be able to include a Subsequent Offering Period, if
it satisfies the conditions above, after January 24, 2000. In a public release,
the Commission has expressed the view that the inclusion of a Subsequent
Offering Period would constitute a material change to the terms of the Offer
requiring the Purchaser to disseminate new information to shareholders in a
manner reasonably calculated to inform them of such change sufficiently in
advance of the Expiration Date (generally five business days). In the event the
Purchaser elects to include a Subsequent Offering Period, it will notify
shareholders of the Company consistent with the requirements of the Commission.
A Subsequent Offering Period, if one is included, is not an extension of
the Offer. A Subsequent Offering Period would be an additional period of time,
following the expiration of the Offer, in which shareholders may tender Shares
not tendered into the Offer. THE PURCHASER DOES NOT CURRENTLY INTEND TO INCLUDE
A SUBSEQUENT OFFERING PERIOD IN THE OFFER, ALTHOUGH IT RESERVES THE RIGHT TO DO
SO IN ITS SOLE DISCRETION.
PURSUANT TO RULE 14d-7 UNDER THE EXCHANGE ACT, SCHEDULED TO BECOME
EFFECTIVE JANUARY 24, 2000, NO WITHDRAWAL RIGHTS APPLY TO SHARES TENDERED INTO A
SUBSEQUENT OFFERING PERIOD AND NO WITHDRAWAL RIGHTS APPLY DURING THE SUBSEQUENT
OFFERING PERIOD WITH RESPECT TO SHARES TENDERED IN THE OFFER AND ACCEPTED FOR
PAYMENT. THE SAME CONSIDERATION, THE OFFER PRICE, WILL BE PAID TO SHAREHOLDERS
TENDERING SHARES IN THE OFFER OR IN A SUBSEQUENT OFFERING PERIOD, IF ONE IS
INCLUDED.
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The Company has provided the Purchaser 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 by the Purchaser to record holders of Shares and will be
furnished by the Purchaser to brokers, dealers, banks 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), the Purchaser will
accept for payment and will pay, promptly after the Expiration Date, for all
Shares validly tendered prior to the Expiration Date and not properly withdrawn
in accordance with Section 4. All determinations concerning the satisfaction of
such terms and conditions will be within the Purchaser's discretion, which
determinations will be final and binding. See Sections 1 and 14. The Purchaser
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, including, without limitation, the HSR Act. Any such delays will
be effected in compliance with Rule 14e-l(c) under the Exchange Act (relating to
a bidder's obligation to pay the consideration offered or return the securities
deposited by or on behalf of holders of securities promptly after the
termination or withdrawal of such bidder's offer).
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. The per share
consideration paid to any holder of Common Stock pursuant to the Offer will be
the highest per Share consideration paid to any other holder of such shares
pursuant to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares properly tendered to the Purchaser
and not withdrawn as, if and when the Purchaser gives oral or written notice to
the Depositary of the Purchaser's acceptance for payment of such Shares. 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 the Purchaser
and transmitting payment to tendering shareholders. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE OFFER PRICE TO BE PAID BY THE PURCHASER FOR THE SHARES,
REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
If the Purchaser is delayed in its acceptance for payment of, or payment
for, Shares or is unable to accept for payment or pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer (including such rights as are set forth in Sections 1 and 14) (but
subject to compliance with Rule 14e-1(c) under the Exchange Act), the Depositary
may, nevertheless, on behalf of the Purchaser, 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.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, certificates for any such Shares will be returned, without expense to
the tendering shareholder (or, in the case of Shares delivered by book-entry
transfer of such Shares into the Depositary's account at the Book-Entry Transfer
Facility (as defined below) pursuant to the procedures set forth in Section 3,
such Shares will be credited to an account maintained at the Book-Entry Transfer
Facility), as promptly as practicable after the expiration or termination of the
Offer.
The Purchaser reserves the right to transfer or assign, in whole or in
part, to Parent or to any affiliate of Parent, the right to purchase Shares
tendered pursuant to the Offer, but any such transfer or assignment will not
relieve the Purchaser 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.
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3. PROCEDURE 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 (as defined below), 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 for tendered Shares must be received by
the Depositary at one of such addresses or such Shares must be delivered
pursuant to the procedures for book-entry transfer set forth below (and a
Book-Entry Confirmation (as defined below) received by the Depositary), in each
case, prior to the Expiration Date or (ii) the tendering shareholder must comply
with the guaranteed delivery procedures set forth below.
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 systems 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 the Book-Entry Transfer Facility's procedure 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." DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY
TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S
PROCEDURES DOES 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 the 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 the
Purchaser may enforce such agreement against the participant.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal (i) if the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section, includes any participant in
the Book-Entry Transfer Facility's systems whose name appears on a security
position listing as the owner of the Shares) of Shares tendered therewith and
such registered holder has not completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on the
Letter of Transmittal or (ii) if such Shares are tendered for the account of a
financial institution (including most commercial banks, savings and loan
associations and brokerage houses) that is a participant in the Security
Transfer Agent's Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program (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
10
<PAGE> 13
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 aforesaid. See Instruction 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 the Purchaser, is received
by the Depositary, as provided below, prior to the Expiration Date; and
(iii) the certificates for (or a Book-Entry Confirmation with respect
to) such 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 National Association of
Security Dealers Automated Quotation System, Inc. (the "NASDAQ") is open
for business.
The Notice of Guaranteed Delivery may be delivered by hand to the
Depositary or transmitted by telegram, facsimile transmission or mail 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 (i) certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares, (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, and (iii) 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
Shares are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE OFFER PRICE TO BE PAID BY THE PURCHASER FOR THE SHARES,
REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
The valid tender of Shares pursuant to one of the procedures described
above will constitute a binding agreement between the tendering shareholder and
the Purchaser upon the terms and subject to the conditions of the Offer.
Appointment. By executing the Letter of Transmittal as set forth above,
the tendering shareholder will irrevocably appoint designees of the Purchaser,
and each of them, 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 the
Purchaser and with respect to any and all other Shares or other securities or
rights issued or issuable in respect of such Shares. All such proxies will be
considered coupled with an interest in the tendered Shares. Such appointment
will be effective when, and only to the extent that, the Purchaser accepts for
payment Shares tendered by such shareholder as provided herein. Upon such
appointment, all prior powers of attorney, proxies and consents given by such
shareholder with respect to such Shares or other securities or rights 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 the Purchaser will
thereby be empowered to exercise all voting and other rights with respect to
such Shares and other securities or rights, including, without limitation, in
respect of any annual, special or adjourned meeting of the Company's
shareholders, actions by written consent in lieu of any such meeting or
otherwise, as they in their sole discretion deem proper. The Purchaser reserves
the right to require that, in order for Shares to be deemed validly tendered,
immediately upon the Purchaser's acceptance for payment of such Shares, the
11
<PAGE> 14
Purchaser must be able to exercise full voting, consent and other rights with
respect to such Shares and other related securities or rights, including voting
at any meeting of shareholders.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by the Purchaser, in its sole discretion, which determination
will be final and binding. The Purchaser 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, or payment for which may, in the opinion of the
Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute
right, in its sole discretion, subject to the provisions of the Merger
Agreement, to waive any of the conditions of the Offer or any defect or
irregularity in the tender of any 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 the Purchaser, Parent, the Depositary, the Information Agent, the Company 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. Subject to the terms of the Merger Agreement, the Purchaser'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. Under the "backup withholding" provisions of U.S.
federal income tax law, unless a tendering registered holder, or his assignee
(in either case, the "Payee"), satisfies the conditions described in Instruction
9 of the Letter of Transmittal or is otherwise exempt, the cash payable as a
result of the Offer may be subject to backup withholding tax at a rate of 31% of
the gross proceeds. To prevent backup withholding, each Payee should complete
and sign the Substitute Form W-9 provided in the Letter of Transmittal or other
applicable form. See Instruction 9 of the Letter of Transmittal.
4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4,
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 and paid for by the
Purchaser pursuant to the Offer, may also be withdrawn at any time after March
13, 2000, except as provided above with respect to a Subsequent Offering Period.
For a withdrawal to be effective, a written, telegraphic 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 and
must specify the name of the person having tendered the Shares to be withdrawn,
the number of Shares to be withdrawn and the name of the registered holder of
the Shares to be withdrawn, if different from the name of the person who
tendered the Shares. If certificates for Shares 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 appropriate Book-Entry
Transfer Facility to be credited with the withdrawn Shares and otherwise comply
with such Book-Entry Transfer Facility's procedures. Withdrawals of tenders of
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 any time prior to the Expiration Date.
In the event the Purchaser includes a Subsequent Offering Period following
the Offer, no withdrawal rights will apply to Shares tendered in such Subsequent
Offering Period or to Shares tendered in the Offer and accepted for payment.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, which determination will be final and binding. None of the
Purchaser, 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.
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<PAGE> 15
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for Shares
pursuant to the Offer or the Merger will be a taxable transaction for U.S.
federal income tax purposes and may also be a taxable transaction under state,
local, or foreign tax laws. In general, a shareholder who tenders Shares in the
Offer or receives cash in exchange for Shares in the Merger will recognize gain
or loss for U.S. federal income tax purposes equal to the difference, if any,
between the amount of cash received and the shareholder's tax basis in the
Shares sold. Gain or loss will be determined separately for each block of Shares
(i.e., Shares acquired at the same time and price) exchanged pursuant to the
Offer or the Merger. Such gain or loss generally will be capital gain or loss if
the Shares disposed of were held as capital assets by the shareholder and will
be long-term capital gain or loss if such Shares have been held for more than
one year.
A shareholder who perfects his or her shareholder's appraisal rights, if
any, under the VSCA will probably recognize gain or loss at the Effective Time
in an amount equal to the difference between the "amount realized" and such
shareholder's adjusted tax basis of such Shares. For this purpose, although
there is no authority to this effect directly on point, the amount realized
should generally equal the trading value per share of the Shares at the
Effective Time. Ordinary interest income and/or capital gain (capital loss),
assuming that the Shares were held as capital assets, should be recognized by
such shareholder at the time of actual receipt of payment, to the extent that
such payment exceeds (or is less than) the amount realized at the Effective
Time.
The foregoing summary is for general information purposes only and is based
on the U.S. federal income tax law now in effect, which is subject to change,
possibly retroactively. This summary does not discuss all aspects of U.S.
federal income taxation which may be important to particular shareholders in
light of their individual investment circumstances or to certain types of
shareholders subject to special tax rules (including, but not limited to,
insurance companies, tax-exempt organizations, financial institutions, or broker
dealers, foreign shareholders and shareholders who have acquired their Shares
pursuant to the exercise of employee stock options or otherwise as
compensation), nor does it address state, local, or foreign tax consequences.
Each shareholder is urged to consult his or her tax advisor regarding the
specific U.S. federal, state, local and foreign income and other tax
consequences of the Offer and Merger.
6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES. Since September 30,
1997, the shares of Common Stock have been traded through the Nasdaq National
Market under the symbol "BEST". The following table sets forth, for each of the
calendar quarters indicated, the high and low reported sales price per share of
Common Stock on the Nasdaq National Market based on published financial sources.
The Company did not declare or pay any cash dividends during any of the periods
indicated in the table below. In addition, under the terms of the Merger
Agreement, the Company is not permitted to declare or pay dividends with respect
to the Shares without the prior written consent of Parent.
<TABLE>
<CAPTION>
COMMON
STOCK
---------------
HIGH LOW
---- ---
<S> <C> <C>
1997
Third Quarter............................................... $15 3/8 $14 1/4
Fourth Quarter............................................ 15 8 1/4
1998
First Quarter............................................. $16 5/8 $ 9 1/8
Second Quarter............................................ 22 7/8 15 1/16
Third Quarter............................................. 24 11/16 16 5/8
Fourth Quarter............................................ 28 1/2 14
1999
First Quarter............................................. $24 3/16 $13 3/8
Second Quarter............................................ 17 5/8 9
Third Quarter............................................. 23 13/16 14 31/32
Fourth Quarter............................................ 31 13/16 18 1/16
2000
First Quarter (through January 13, 2000).................. $34 63/64 $25 3/8
</TABLE>
13
<PAGE> 16
On January 11, 2000, the last full trading day prior to the public
announcement of the execution of the Merger Agreement by the Company, Parent and
the Purchaser, the last reported sales price of the Shares on the Nasdaq
National Market was $29 15/16 per share of Common Stock. On January 13, 2000,
the last full trading day prior to the commencement of the Offer, the last
reported sales price of the Shares on the Nasdaq National Market was $34 17/32
per share of Common Stock. SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET
QUOTATION FOR THE SHARES.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK LISTING;
EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS.
Market for the Shares. The purchase of Shares by the Purchaser pursuant to
the Offer will reduce the number of Shares that might otherwise trade publicly
and will reduce the number of holders of Shares, which could adversely affect
the liquidity and market value of the remaining Shares held by the public.
Stock Listing. The Common Stock is traded through the Nasdaq National
Market. Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the requirements of the National Association of
Securities Dealers, Inc. (the "NASD") for continued inclusion on the Nasdaq
National Market, which requires that an issuer either (i) have at least 750,000
publicly held shares, held by at least 400 round-lot shareholders, with a market
value of at least $5,000,000, net tangible assets (total assets (excluding
goodwill) less total liabilities) of at least $4 million and have a minimum bid
price of $1 or (ii) have at least 1,100,000 publicly held shares, held by at
least 400 round-lot shareholders, with a market value of at least $15,000,000,
have a minimum bid price of $5 and have either (A) a market capitalization of at
least $50,000,000 or (B) total assets and revenues each of at least $50,000,000.
If the Nasdaq National Market and the NASDAQ Smallcap Market were to cease to
publish quotations for the Shares, it is possible that the Shares would continue
to trade in the over-the-counter market and that price or other quotations would
be reported by other sources. The extent of the public market for such Shares
and the availability of such quotations would depend, however, upon such factors
as the number of shareholders and/or the aggregate market value of such
securities remaining at such time, the interest in maintaining a market in the
Shares on the part of securities firms, the possible termination of registration
under the Exchange Act as described below, and other factors. The Purchaser
cannot predict whether the reduction in the number of Shares that might
otherwise trade publicly would have an adverse or beneficial effect on the
market price for, or marketability of, the Shares or whether it would cause
future market prices to be greater or lesser than the Offer Price. The Company
has represented that, as of January 12, 2000, 11,826,614 Shares were issued and
outstanding.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the Commission if the Shares are
neither listed on a national securities exchange nor held by 300 or more holders
of record. Termination of registration of the Shares under the Exchange Act,
assuming there are no other securities of the Company subject to registration,
would substantially reduce the information required to be furnished by the
Company to its shareholders and to the Commission and would make certain
provisions of the Exchange Act, such as the short-swing profit recovery
provisions of Section 16(b), the requirement of furnishing a proxy statement
pursuant to Section 14(a) in connection with shareholders' meetings and the
related requirement of furnishing an annual report to shareholders and the
requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions, 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.
The Purchaser may seek to cause the Company to apply for termination of
registration of the Shares under the Exchange Act as soon after the completion
of the Offer as the requirements for such termination are met. If the Nasdaq
National Market listing and the Exchange Act registration of the Shares are not
terminated prior to the Merger, then the Shares will be delisted from the Nasdaq
National Market and the registration of the Shares under the Exchange Act will
be terminated following the consummation of the Merger.
14
<PAGE> 17
Margin Regulations. The Shares presently are "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 such securities.
Depending upon factors similar to those described above regarding listing and
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. If registration of the Shares under the Exchange Act
were terminated, the Shares would no longer be "margin securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY. The information concerning
the Company contained in this Offer to Purchase, including that set forth below
under the caption "Selected Financial Information," has been furnished by the
Company or has been taken from or based upon publicly available documents and
records on file with the Commission and other public sources. Neither Parent nor
the Purchaser 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 the Purchaser.
The Company provides corporate resource management software solutions. The
Company is a Virginia corporation with its principal executive offices at 11413
Isaac Newton Square, Reston, VA 20190. The telephone number of the Company at
such offices is (703) 709-5200.
Selected Financial Information. Set forth below is certain selected
consolidated financial information with respect to the Company, excerpted or
derived from the Company's Annual Reports on Form 10-K for the fiscal years
ended December 31, 1997 and December 31, 1998, and with respect to financial
information for the fiscal year ended December 31, 1999, from the Company's
Current Report on Form 8-K filed with the Commission on January 13, 2000. The
selected consolidated financial information with respect to the year ended
December 31, 1999 and as of December 31, 1999 is unaudited. More comprehensive
financial information is included in such reports and in other documents filed
by the Company with the Commission. 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 and other documents may be inspected and copies may be obtained from the
Commission in the manner set forth below.
BEST SOFTWARE, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
DECEMBER 31,
---------------------------------
1999 1998 1997
----------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING DATA:
Net sales......................................... $91,414 $69,330 $36,541
Operating income................................ 13,622 6,800 5,856
Net earnings.................................... 9,863 5,623 3,769
Basic net earnings per share.................... .84 .49 .45
Diluted net earnings per share.................. .79 .46 .38
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets.................................... 90,045 74,570 57,010
Total liabilities............................... 39,796 34,485 27,256
Shareholders' equity............................ 50,249 40,085 29,574
</TABLE>
Certain Company Projections. To the knowledge of Parent and the Purchaser,
the Company does not as a matter of course, make public forecasts as to its
future financial performance. However, in connection with the discussions
concerning the Offer and the Merger and as part of Parent's due diligence review
of the
15
<PAGE> 18
Company, the Company furnished Parent and the Purchaser with unaudited financial
statements for the fiscal year ended December 31, 1999 and discussed various
projections of revenues and earnings as a basis of an operating budget for
fiscal year 2000. The financial projections discussed were based on numerous
assumptions concerning revenue growth in all product areas, additional spending
in research and development on new initiatives in its Best! Imperativ product
offerings as well as significant investment in an application service provider
model as well as increases in sales and marketing and general administrative
expenses. The financial projections did not contemplate any changes that may be
necessary based on the Company's fourth quarter performance.
The Company's various projections for fiscal year 2000 provided to Parent
projected net revenues ranging from approximately $123 million to approximately
$129 million. Projected operating income for fiscal 2000 ranged from
approximately $20 million to approximately $27 million exclusive of
acquisition-related amortization charges. The high end of the range excluded
certain other possible charges.
The Company's 2000 operating budget and the financial projections provided
to Parent were prepared for the limited purpose of managing the operating plan
of the Company for fiscal year 2000. They do not reflect recent developments
which have occurred since they were prepared, such as the Offer and the Merger.
This reference to the projections is provided solely because such projections
have been provided to the Purchaser and none of the Purchaser, Parent, the
Company or any of their respective affiliates or representatives believes that
such projections should be relied upon.
IT IS THE UNDERSTANDING OF PARENT AND THE PURCHASER THAT THE PROJECTIONS
WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH PUBLISHED
GUIDELINES OF THE COMMISSION OR THE GUIDELINES ESTABLISHED BY THE AMERICAN
INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS OR FORECASTS AND
ARE INCLUDED HEREIN ONLY BECAUSE SUCH INFORMATION WAS PROVIDED TO PARENT AND THE
PURCHASER. THE PROJECTIONS DO NOT PURPORT TO PRESENT OPERATIONS IN ACCORDANCE
WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND THE COMPANY'S INDEPENDENT
AUDITORS HAVE NOT EXAMINED OR COMPILED THE PROJECTIONS PRESENTED HEREIN, AND
ACCORDINGLY ASSUME NO RESPONSIBILITY FOR THEM. THESE FORWARD-LOOKING STATEMENTS
(AS THAT TERM IS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995) ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THE PROJECTIONS. THE COMPANY HAS ADVISED THE
PURCHASER AND PARENT THAT ITS INTERNAL FINANCIAL FORECASTS (UPON WHICH THE
PROJECTIONS PROVIDED TO PARENT AND THE PURCHASER WERE BASED IN PART) ARE, IN
GENERAL, PREPARED SOLELY FOR INTERNAL USE AND CAPITAL BUDGETING AND OTHER
MANAGEMENT DECISIONS, AND ARE SUBJECTIVE IN MANY RESPECTS AND THUS SUSCEPTIBLE
TO INTERPRETATIONS AND PERIODIC REVISION BASED ON ACTUAL EXPERIENCE AND BUSINESS
DEVELOPMENTS. THE PROJECTIONS ALSO REFLECT NUMEROUS ASSUMPTIONS (NOT ALL OF
WHICH WERE PROVIDED TO PARENT AND THE PURCHASER), ALL MADE BY MANAGEMENT OF THE
COMPANY, WITH RESPECT TO INDUSTRY PERFORMANCE, GENERAL BUSINESS, ECONOMIC,
MARKET AND FINANCIAL CONDITIONS AND OTHER MATTERS, INCLUDING EFFECTIVE TAX RATES
CONSISTENT WITH HISTORICAL LEVELS FOR THE COMPANY, ALL OF WHICH ARE DIFFICULT TO
PREDICT, MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL AND NONE OF WHICH WERE
SUBJECT TO APPROVAL BY PARENT OR THE PURCHASER. ACCORDINGLY, THERE CAN BE NO
ASSURANCE THAT THE ASSUMPTIONS MADE IN PREPARING THE PROJECTIONS WILL PROVE
ACCURATE, AND ACTUAL RESULTS MAY BE MATERIALLY GREATER OR LESS THAN THOSE
CONTAINED IN THE PROJECTIONS. THE INCLUSION OF INFORMATION THE PROJECTIONS
HEREIN SHOULD NOT BE REGARDED AS AN INDICATION THAT ANY OF PARENT, THE
PURCHASER, THE COMPANY OR THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES
CONSIDERED OR CONSIDER THE PROJECTIONS TO BE A RELIABLE
16
<PAGE> 19
PREDICTION OF FUTURE EVENTS, AND THE PROJECTIONS SHOULD NOT BE RELIED UPON AS
SUCH. NONE OF PARENT, THE PURCHASER, THE COMPANY OR ANY OF THEIR RESPECTIVE
AFFILIATES OR REPRESENTATIVES HAS MADE, OR MAKES ANY REPRESENTATION TO ANY
PERSON REGARDING THE ULTIMATE PERFORMANCE OF THE COMPANY COMPARED TO THE
INFORMATION CONTAINED IN THE PROJECTIONS AND NONE OF THEM INTENDS TO UPDATE OR
OTHERWISE REVISE THE PROJECTIONS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE
DATE WHEN MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS EVEN IN THE EVENT
THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THE PROJECTIONS ARE SHOWN TO BE IN
ERROR. IT IS EXPECTED THAT THERE WILL BE DIFFERENCES BETWEEN ACTUAL AND
PROJECTED RESULTS, AND ACTUAL RESULTS MAY BE MATERIALLY HIGHER OR LOWER THAN
THOSE PROJECTED.
Available Information. The Company 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 Commission
relating to its business, financial condition and other matters. Information as
of particular dates concerning the Company's directors and officers, their
remuneration, options granted to them, the principal holders of the Company's
securities and any material interests of such persons in transactions with the
Company is required to be disclosed in proxy statements distributed to the
Company's shareholders and filed with the Commission. Such reports, proxy
statements and other information should be available for inspection at the
public reference facilities of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission 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 Commission's
customary charges, by writing to the Commission's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549. The Commission also maintains a website at
http://www.sec.gov that contains reports, proxy statements and other information
relating to the Company that have been filed via the EDGAR System. Such material
should also be available for inspection at the offices of the NASD, Reports
Section, 1735 K Street, Washington, D.C. 20006.
9. CERTAIN INFORMATION CONCERNING PARENT AND THE PURCHASER.
Parent and the Purchaser. Parent is a company organized under the laws of
England. Parent develops, distributes and provides support for mainstream PC
accounting software and related products for small to medium sized enterprises.
The Purchaser is a Virginia corporation newly formed at the direction of Parent
for the purpose of effecting the Offer and the Merger. Parent owns, directly and
indirectly, all of the outstanding capital stock of the Purchaser. It is not
anticipated that, prior to the consummation of the Offer, the Purchaser will
have any significant assets or liabilities or will engage in any activities
other than those incident to the Offer and the Merger and the financing thereof.
The offices of Parent are located at Sage House, Benton Park Road, Newcastle
Upon Tyne, NE7 7LZ, England. The offices of the Purchaser are located c/o Sage
Software, Inc., 56 Technology Drive, Irvine, California 92618.
For certain information concerning the executive officers and directors, as
the case may be, of the Purchaser and Parent, see Schedule I.
Pursuant to the Option Agreement and the Shareholders Agreement, Parent may
be deemed to beneficially own 3,359,883 shares of Common Stock constituting
approximately 21.25% of the total currently outstanding shares of Common Stock
on a fully diluted basis. See Section 11. Each of the Purchaser and Parent
disclaims beneficial ownership of such shares. Except as set forth in this Offer
to Purchase, none of the Purchaser, Parent, or, to the best knowledge of the
Purchaser or Parent, any of the persons listed on Schedule I, or any associate
or majority owned subsidiary of any of the foregoing, beneficially owns or has a
right to acquire any Shares, and none of the Purchaser, Parent, or, to the best
knowledge of the Purchaser or 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 Shares during the past
60 days.
17
<PAGE> 20
Sage Software, Inc. ("SSI"), a wholly owned subsidiary of Parent acquired
in March, 1998 has been a remarketer and distributor of certain of the Company's
products since 1995 (such arrangement, the "Business Alliance").
Except as set forth in this Offer to Purchase, none of the Purchaser,
Parent, or, to the best knowledge of the Purchaser and Parent, any of the
persons listed on Schedule I, has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Company, including, but not limited to, any contract, arrangement, understanding
or relationship concerning the transfer or the voting of any securities of the
Company, joint ventures, loan or option arrangements, puts or calls, guarantees
of loans, guarantees against loss, or the giving or withholding of proxies.
Except as set forth in this Offer to Purchase, none of the Purchaser, Parent, or
any of their respective affiliates, or, to the best knowledge of the Purchaser
and Parent, any of the persons listed on Schedule I, has had, since January 1,
1993, any business relationships or transactions with the Company or any of its
executive officers, directors or affiliates that would require reporting under
the rules of the Commission. Except as set forth in this Offer to Purchase,
since January 1, 1993, there have been no contacts, negotiations or transactions
between the Purchaser or Parent, any of their respective affiliates or, to the
best knowledge of the Purchaser 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.
Parent is not subject to the informational reporting requirements of the
Exchange Act, and, accordingly, does not file reports or other information with
the Commission relating to its business, financial condition and other matters.
Set forth below is certain selected consolidated financial information
relating to Parent and its subsidiaries for the fiscal years ended September 30,
1999, 1998 and 1997 (the "Financial Statements"). The selected consolidated
financial information is denominated in pounds sterling and prepared in
accordance with generally accepted accounting principles in the United Kingdom
("UK GAAP"). UK GAAP differs in certain significant respects from generally
accepted accounting principles in the United States ("US GAAP"). Immediately
following Parent's summary consolidated financial information set forth below is
a brief summary of certain differences between UK GAAP and US GAAP. Parent has
not examined whether adjustments necessary to conform its Financial Statements
with US GAAP would be material. Parent's financial statements for the fiscal
years ended September 30, 1998 and 1997 are incorporated herein by reference and
a copy of which has been filed with the Commission as Exhibit (a)(9) to the
Schedule 14D-1 may be inspected at the Commission's public reference facilities
in Washington D.C., and copies thereof may be obtained from such facilities upon
payment of the Commission's customary charges, in the manner set forth in
Section 8 above under "Available Information" (although they will not be
available at the regional offices of the Commission). Set forth below is certain
summary financial information excerpted or derived from Parent's Financial
Statements. Such summary information is qualified in its entirety by reference
to the Purchaser's Financial Statements and all the financial information and
related notes contained therein.
18
<PAGE> 21
THE SAGE GROUP PLC
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS OF POUNDS STERLING(1), EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
-------------------------------
1999(2) 1998 1997
-------- -------- --------
L000 L000 L000
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Amounts in accordance with UK GAAP
Turnover.................................................... 307,041 191,547 152,089
Operating profit............................................ 79,938 50,761 40,080
Profit on ordinary activities before interest............... 79,938 51,993 40,080
Profit on ordinary activities before taxation............... 74,313 47,635 37,635
Profit attributable to shareholders......................... 50,459 32,392 25,215
PER SHARE DATA(3):
Amounts in accordance with UK GAAP
Earnings per share -- pence................................. 4.224 2.885 2.343
BALANCE SHEET DATA (AT END OF PERIOD):
Amounts in accordance with UK GAAP
Net current assets/(liabilities)............................ 2,437 14,297 (10,172)
Total assets................................................ 311,104 110,331 64,774
Total liabilities........................................... (235,926) (198,090) (111,015)
Shareholders/funds/(deficit)................................ 75,178 (79,759) (46,241)
</TABLE>
- ---------------
(1) Parent publishes its financial statements in pounds sterling. The United
States dollar exchange rate based on the London closing mid-rates for pounds
sterling to dollars, expressed in $1 per (L)1, for the fiscal dates
indicated, are as follows and are based on published financial sources:
<TABLE>
<CAPTION>
YEAR END RATE YEAR HIGH YEAR LOW YEAR AVERAGE
------------- --------- -------- ------------
<S> <C> <C> <C> <C>
Fiscal Year ended 9/30/97............................... 1.6142 1.7153 1.5628 1.6332
Fiscal Year ended 9/30/98............................... 1.7001 1.707 1.6122 1.6596
Fiscal Year ended 9/30/99............................... 1.6463 1.7218 1.552 1.6369
</TABLE>
(2) Amounts included for the year ended September 30, 1999 are extracted from
Parent's unaudited preliminary results announcement dated December 8, 1999.
(3) The weighted average number of shares outstanding during the fiscal years
ended September 30, 1997, 1998 and 1999 were 1,076,411,760, 1,122,811,930,
and 1,194,676,630, respectively. In each case these amounts have been
restated to reflect the 9 for 1 bonus issue of shares approved by
shareholders on December 16, 1999.
Certain Differences Between UK GAAP and US GAAP. Although UK GAAP differs
in certain significant respects from US GAAP, Parent believes that the
differences are not material to a decision by a holder of Shares whether to
sell, tender or hold any Shares because any such differences would not reflect
the ability of the Purchaser to obtain sufficient funds to pay for the Shares to
be acquired pursuant to the Offer. While the following is not a comprehensive
summary of all the differences between UK GAAP and US GAAP, other differences
are unlikely to have a significant effect on the consolidated income or
shareholder's funds of the Purchaser.
Goodwill and US Purchase Accounting. Under US GAAP and UK GAAP, purchase
consideration in respect of subsidiaries acquired is allocated on the basis of
appraised values to the various net assets of the subsidiaries at the dates of
acquisition and any net balance is treated as goodwill. However, US GAAP also
requires value to be assigned to any separately identifiable intangible
assets -- which would be amortized over their estimated useful lives not to
exceed 40 years -- and to acquired in-process research and development which
would be written off to the profit and loss account in the period of the
acquisition. Also, US GAAP requires goodwill to be recognized as an asset and
amortized over its estimated useful life not to exceed 40 years. Under UK GAAP
for fiscal years up to and including September 30, 1998, Parent wrote off
goodwill directly to a goodwill reserve. With respect to the year ended
September 30, 1999, UK GAAP for goodwill
19
<PAGE> 22
changed to require goodwill purchased in that year to be capitalized as an
intangible asset with the rebuttable presumption that its useful economic life
is limited to a maximum of 20 years from the date of acquisition. Parent has
evaluated that the goodwill it acquired in the year ended September 30, 1999 has
an indefinite economic life and accordingly no amortization charge has been made
in that year. While this treatment is in accordance with the relevant accounting
standard in the UK, Parent has had to invoke what are referred to as the true
and fair override provisions with regard to UK companies legislation to apply
this policy. Such override provisions do not exist in the US with regard to US
companies legislation.
Ordinary Dividends. Under UK GAAP, final ordinary dividends are provided
for in the fiscal year in respect of which they are recommended by the board of
directors for approval by the shareholders. Under US GAAP, such dividends are
not provided for until declared by the board of directors.
Deferred Taxation. Under UK GAAP, no provision is made for deferred
taxation if there is reasonable evidence that such deferred taxation will not be
payable in the foreseeable future, deferred tax assets are generally not
recognized under UK GAAP unless they are likely to be recovered in the
foreseeable future (i.e. one year from the balance sheet date). Under US GAAP,
deferred tax assets and liabilities are recognized in full and any net deferred
tax assets are then assessed for probable recoverability. As long as it is more
likely than not that sufficient future taxable income will be available to
utilize the deferred tax assets, no valuation allowance is provided.
Depreciation on freehold buildings. Under UK GAAP, companies are permitted
to carry freehold buildings at undepreciated historical cost or valuation so
long as these buildings are "well-maintained". US GAAP requires that all
tangible fixed assets in service, other than freehold land, be depreciated over
their estimated useful lives.
Deferred consideration on acquisitions. Under UK GAAP, an estimate is made
of likely future payments of deferred consideration under acquisitions and this
sum is provided for in the first balance sheet following acquisition with the
calculation being re-performed and necessary adjustments booked in future
balance sheets. Under US GAAP, provision for deferred consideration is only made
at the point when the amount of such deferred consideration is resolved.
10. SOURCE AND AMOUNT OF FUNDS. Parent and the Purchaser estimate that the
total amount of funds required by the Purchaser to (i) purchase all of the
Shares pursuant to the Offer and finance the Merger Consideration and (ii) pay
fees and expenses incurred in connection with the Offer and the Merger will be
approximately L272 million (or approximately $445 million). It is anticipated
that all of such funds will be obtained from the proceeds of an offering (the
"Vendor Placing") of New Ordinary Shares (as defined below) of Parent. The
Vendor Placing will consist of the allotment and issue of new ordinary shares of
Parent (the "New Ordinary Shares") pursuant to the terms of the Vendor Placing
Agreement, dated January 12, 2000 (the "Vendor Placing Agreement"), by and
between Parent and Deutsche Bank AG London ("Deutsche Bank AG"). The New
Ordinary Shares, which represent the consideration for the transfer of shares,
will not be allotted to shareholders of the Company, but will be allotted and
issued, credited as fully paid, by Parent to such persons as may be nominated by
Deutsche Bank AG under the Vendor Placing Agreement, and if no such person is
nominated by Deutsche Bank AG then to Deutsche Bank AG itself. The shareholders
of the Company will receive the full amount due to them of $35.00 per Share
accepted for payment in the Offer. The shareholders of the Company will not
obtain any right under the Offer which any of them may enforce against Deutsche
Bank AG (or any person nominated by Deutsche Bank AG to accept the allotment and
issue of the New Ordinary Shares).
THE OFFER DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO PURCHASE NEW ORDINARY SHARES OR ANY OTHER SECURITIES OF PARENT. The New
Ordinary Shares have not been and will not be registered under the Securities
Act, and they may not, as part of their distribution, be offered, sold, taken
up, renounced or delivered, directly or indirectly, in the United States, except
pursuant to an exemption from, or in transaction not subject to, the
registration requirements of the Securities Act.
20
<PAGE> 23
11. BACKGROUND OF THE OFFER; PURPOSE OF THE OFFER AND THE MERGER; THE
MERGER AGREEMENT AND CERTAIN OTHER AGREEMENTS. The following description was
prepared by the Purchaser and the Company. Information about the Company was
provided by the Company, and neither the Purchaser nor Parent takes any
responsibility for the accuracy or completeness of any information regarding
meetings or discussions in which Parent or its representatives did not
participate.
BACKGROUND OF THE OFFER.
Since 1995, SSI and the Company have discussed periodically their
respective businesses and operations and potential strategic alliances,
including the Business Alliance. In late summer 1999, members of senior
management of the Company and senior management of SSI discussed the potential
acquisition of the Company by Parent. In mid-September 1999, Timothy A.
Davenport, Chairman of the Board, President & Chief Executive Officer of the
Company and Paul Walker, Chief Executive of Parent, met in Parent's headquarters
in the U.K.
On October 4, 1999, members of Parent's senior management and senior
management of SSI, and representatives of Parent's financial advisor, Deutsche
Bank Securities Inc. ("Deutsche Bank"), preliminarily discussed a potential
acquisition of the Company. At the conclusion of such discussion, Parent
authorized Deutsche Bank to examine Parent's acquisition of the Company, as well
as similar acquisition opportunities in the U.S., in greater detail.
From October 4, 1999, through October 11, 1999, Deutsche Bank internally
reviewed the potential acquisition of the Company by Parent as well as the
acquisition of similar companies in the U.S. by Parent. Throughout October 1999,
members of senior management of Parent and SSI discussed with Deutsche Bank the
acquisition of the Company and similar acquisition alternatives.
On October 14, 1999, Parent and the Company executed the Confidentiality
Agreement. On October 14 and 15, 1999, members of senior management of SSI and
the Company met in Reston, Virginia to discuss the business and operations of
the Company and provided Parent with financial information concerning the
Company.
From October 16, 1999, through November 9, 1999, members of senior
management of Parent and SSI and representatives of Deutsche Bank had
intermittent discussions concerning the attractiveness of the Company as an
acquisition candidate, possible financing arrangements for an acquisition of the
Company and valuations of the Company.
On November 10, 1999, representatives of Deutsche Bank contacted
representatives of Hambrecht & Quist LLC ("Chase H&Q"), financial advisor to the
Company, to express Parent's preliminary indication of interest in acquiring the
Company at a price per share between $27 and $29, based on the information
supplied to Parent and its preliminary review of possible financing
arrangements.
On November 11, 1999, representatives of Chase H&Q contacted
representatives of Deutsche Bank and expressed Chase H&Q's view that the price
range indicated on November 10, 1999 was insufficient and that the Company had
also received an indication of interest from one other party (the "First
Competing Offer"). Deutsche Bank and Chase H&Q agreed that the Company and
Parent should meet in person to further explore the acquisition of the Company
by Parent.
On November 17, 1999, members of senior management of Parent, SSI and the
Company and representatives of Deutsche Bank and Chase H&Q met at Dulles Airport
in Virginia to further discuss a potential acquisition. Members of senior
management of SSI discussed their prior business activities with the Company and
the Company provided Deutsche Bank and Parent with additional financial
information of the Company. The result of such meeting was the decision by the
parties to continue to explore a business combination between Parent and the
Company.
On November 23, 1999, representatives of Deutsche Bank and members of
senior management of Parent participated in a conference call in which Deutsche
Bank reviewed its financial and strategic analyses of Parent's acquisition of
the Company and recommended pursuing the acquisition.
21
<PAGE> 24
On November 26, 1999, representatives of Chase H&Q informed representatives
of Deutsche Bank that the First Competing Offer had increased in value to a
price superior to the price range proposed by Deutsche Bank on November 10,
1999.
On November 27, 1999, representatives of Deutsche Bank and members of
senior management of the Company discussed, among other things, structures for
the potential acquisition of the Company by Parent, the terms of such an
acquisition, financing alternatives and the price per share that would be
required to acquire the Company in light of the First Competing Offer.
On November 30, 1999, Parent proposed to the Company a non-binding letter
of intent (the "Letter of Intent") to acquire the Company at a price per Share
of $31.00 in cash. The Letter of Intent proposed, among other things, that the
structure of the transaction would be a cash tender offer followed by a merger
of the Company with an acquisition subsidiary of Parent and requested that the
Company negotiate with Parent on an exclusive basis until January 14, 2000. The
Company did not agree to the Letter of Intent.
On December 6, 1999, representatives of Chase H&Q informed representatives
of Deutsche Bank that the Company had received another indication of interest in
an acquisition of the Company (the "Second Competing Offer").
On December 7, 1999, representatives of Deutsche Bank notified Parent of
the existence of the Second Competing Offer. Representatives of Deutsche Bank
and members of senior management of the Company discussed raising Parent's
offer.
On December 8 and 9, 1999, members of senior management of Parent and the
Company had additional conversations concerning the business and operations of
the Company.
From December 9, 1999 through December 17, 1999, Deutsche Bank and Chase
H&Q had intermittent discussions concerning, among other things, the valuation
of the Company, the structure of a potential acquisition, an exclusivity
arrangement concerning negotiations and the First Competing Offer and the Second
Competing Offer.
On December 17, 1999, Parent was advised that Chase H&Q sent a letter to
Parent and the parties making the First Competing Offer and the Second Competing
Offer soliciting such parties to submit "best and final" offers for the Company
by December 21, 1999 and informing them that the Company was prepared to provide
an exclusive arrangement for a limited time period to negotiate a definitive
agreement with the party submitting the best offer.
On December 21, 1999, Deutsche Bank submitted a proposal to Chase H&Q to
acquire the Company for $35.00 per Share in cash pursuant to the two-step,
tender offer/merger structure previously proposed and conditioning its final bid
on an exclusivity agreement executed by the Company which would expire on
January 14, 2000.
On December 23, 1999, Chase H&Q notified Deutsche Bank that the Board of
Directors of the Company determined to negotiate with Parent on an exclusive
basis and pursue a transaction with Parent, and Parent and the Company signed an
agreement to negotiate on an exclusive basis through January 14, 2000.
Additional financial information concerning the Company was also provided to
Parent.
From December 23, 1999 through January 11, 2000, Parent's legal counsel,
accountants and Deutsche Bank performed a financial and legal due diligence
investigation of the Company at the Company's headquarters.
On December 30, 1999, Parent's legal counsel provided the Company, its
legal counsel and Chase H&Q with draft agreements of the Merger Agreement, the
Option Agreement and the Shareholders Agreement.
From January 3, 2000 through January 12, 2000, Parent and the Company and
their respective legal and financial advisors negotiated the Merger Agreement
and the Option Agreement. Parent and the Shareholders, their respective legal
counsel negotiated the Shareholders Agreement during such time. Negotiations of
the agreements were completed on January 12, 2000.
22
<PAGE> 25
On January 4 and 5, 2000, members of senior management of Parent, SSI and
the Company and representatives of Deutsche Bank met at the Company's
headquarters in Reston, Virginia to discuss the business and operations of the
Company and to continue to negotiate the Merger Agreement, the Option Agreement
and the Shareholders Agreement.
On January 12, 2000, the Board of Directors of Parent approved the Offer,
the Merger, the Merger Agreement, the Option Agreement and the Shareholders
Agreement.
On January 12, 2000, Parent, the Purchaser and the Company executed the
Merger Agreement and the Option Agreement and Parent, the Purchaser and the
Shareholders executed the Shareholders Agreement.
On January 12, 2000, Parent issued a press release in the United States
announcing the proposed acquisition of the Company.
On January 14, 2000, the Purchaser commenced the Offer.
PURPOSE OF THE OFFER AND THE MERGER.
The purpose of the Offer, the Merger and the Merger Agreement is to enable
Parent to acquire control of, and the entire equity interest in, the Company.
The Offer is being made pursuant to the Merger Agreement and is intended to
increase the likelihood that the Merger will be effected. The purpose of the
Merger is to acquire all outstanding Shares not purchased pursuant to the Offer.
The transaction is structured as a merger in order to ensure the acquisition by
Parent of all the outstanding Shares.
If the Merger is consummated, Parent's common equity interest in the
Company would increase to 100% and Parent would be entitled to all benefits
resulting from that interest. These benefits include control over management
with regard to the future conduct of the Company's business and any increase in
its value. Similarly, Parent will also bear the risk of any losses incurred in
the operation of the Company and any decrease in the value of the Company.
Shareholders of the Company who sell their Shares in the Offer will cease
to have any equity interest in the Company or to participate in its earnings and
any future growth. If the Merger is consummated, the Company's shareholders will
no longer have an equity interest in the Company and instead will have only the
right to receive cash consideration pursuant to the Merger Agreement. See
Section 12. Similarly, the shareholders of the Company will not bear the risk of
any decrease in the value of the Company after selling their Shares in the Offer
or the subsequent Merger.
The primary benefits of the Offer and the Merger to the shareholders of the
Company are that such shareholders are being afforded an opportunity to sell all
of their Shares for cash at a price which represents a premium of approximately
17% over the closing market price of the Common Stock on the last full trading
day prior to the public announcement that the Company, Parent and the Purchaser
executed the Merger Agreement, and a more substantial premium over recent
historical trading prices.
MERGER AGREEMENT.
The following is a summary of certain provisions of the Merger Agreement.
The summary is qualified in its entirety by reference to the Merger Agreement
which is incorporated herein by reference and a copy of which has been filed
with the Commission as an exhibit to the Schedule 14D-1. The Merger Agreement
may be examined and copies may be obtained at the places and in the manner set
forth in Section 8 of this Offer to Purchase.
The Offer. The Merger Agreement provides that the Purchaser will commence
the Offer and that, upon the terms and subject to the prior satisfaction or
waiver of the conditions to the Offer described in Section 14, the Purchaser
will purchase all Shares validly tendered pursuant to the Offer. The Merger
Agreement provides that, without the prior written consent of the Company, the
Purchaser will not (i) decrease the Offer Price or change the form of
consideration payable in the Offer, (ii) decrease the number of Shares sought to
be purchased in the Offer, (iii) impose conditions to the Offer in addition to
those described in Section 14, (iv) amend any condition to the Offer described
in Section 14, (v) extend the Initial Expiration Date, except
23
<PAGE> 26
as required by law and except (A) that the Purchaser may extend the expiration
date of the Offer for up to 10 business days after the Initial Expiration Date
if as of the Initial Expiration Date there shall not have been tendered at least
90% of the outstanding Shares so that the Merger can be effected without a
meeting of the Company's shareholders in accordance with VSCA, (B) that in the
event that any condition to the Offer is not satisfied on a date on which the
Offer is scheduled to expire, the Purchaser may, from time to time, in its sole
discretion, extend the expiration date of the Offer up to a maximum of 120
calendar days following the Initial Expiration Date, (C) in the event that any
condition to the Offer is not satisfied on a date on which the Offer is
scheduled to expire, at the written request of the Company delivered no later
than two business days prior to the Initial Expiration Date, the Purchaser
shall, and shall continue to, extend the Offer from time to time for the period
commencing on the date of the notice referred to above until a date not later
than 90 calendar days following the Initial Expiration Date (it being understood
that the Purchaser may determine the interim expiration dates of any extension
of the Offer during such extension period), provided, however, that in the event
that the Purchaser extends the expiration date of the Offer in accordance with
such request and the Financing (as defined in the Merger Agreement) shall no
longer be reasonably available to Parent: (I) Annex I of the Merger Agreement
shall be deemed to be amended to provide an additional condition that the
Purchaser shall not be required to accept for payment or pay for any tendered
Shares unless and until Parent and the Purchaser shall have obtained sufficient
financing (the "Substitute Financing") in replacement, if necessary, of the
Financing in order to permit Parent and the Purchaser to acquire all of the
Shares in the Offer and the Merger and to pay the anticipated expenses in
connection therewith, (II) the condition set forth in paragraph (i) of Annex I
of the Merger Agreement shall be amended and replaced with the condition set
forth in clause (I) above, (III) from and after such time Parent shall not be
subject to Section 6.10 of the Merger Agreement and (IV) Parent shall use all
commercially reasonable efforts to secure the Substitute Financing prior to June
12, 2000 and to provide funds to the Purchaser to permit it to perform its
obligations under the Merger Agreement and in the Offer (provided that Parent
shall not be required to obtain Substitute Financing on economic terms
materially less favorable to it than the Financing), (d) that the Purchaser may
extend the expiration date of the Offer for up to 10 business days in order to
amend the Schedule 14D-1 to permit the announcement of a Subsequent Offering
Period to the Offer, and (e) that the Purchaser may include a Subsequent
Offering Period to the Offer for a period up to 20 business days, or (vi) amend
any other term of the Offer in any manner adverse to any holders of Shares. The
Merger Agreement provides that the Initial Expiration Date shall be no later
than midnight on the twenty-fifth business day after the Offer is commenced.
The Purchaser shall, on the terms and subject to the prior satisfaction or
waiver of the conditions to the Offer described in Section 14, accept for
payment and pay for Shares tendered as soon as the Purchaser is legally
permitted to do so under applicable law.
The Merger. Following the consummation of the Offer, the Merger Agreement
provides that, subject to the terms and conditions thereof, at the Effective
Time the Purchaser shall be merged with and into the Company and, as a result of
the Merger, the separate corporate existence of the Purchaser shall cease and
the Company shall continue as the surviving corporation (sometimes hereinafter
referred to as the "Surviving Corporation").
The respective obligations of Parent and the Purchaser, on the one hand,
and the Company, on the other hand, to effect the Merger are subject to the
satisfaction on or prior to the Closing Date (as defined in the Merger
Agreement) of each of the following conditions: (i) the Purchaser shall have
purchased, or caused to be purchased, the Shares pursuant to the Offer, unless
such failure to purchase is a result of a breach of the Purchaser's obligations
under the Merger Agreement, (ii) the Merger Agreement shall have been approved
and adopted by the requisite vote of the holders of the Shares, to the extent
required by the Company's Articles of Incorporation and the VSCA (iii) no
statute, rule or regulation shall have been enacted or promulgated by any United
States or United Kingdom governmental entity which prohibits the consummation of
the Merger, and there shall be no order or injunction of a court of competent
jurisdiction in effect preventing the consummation of the Merger, and (iv) the
applicable waiting period under the HSR Act shall have expired or been
terminated. The obligations of Parent and Purchaser to consummate the Merger are
further subject to fulfillment of the condition that all actions relating to the
cancellation of the Cash-Out
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<PAGE> 27
Options (as defined below) under the Stock Plans (as defined below) as
contemplated by the Merger Agreement shall have been taken.
At the Effective Time of the Merger (i) each issued and outstanding Share
(other than any Shares owned by Parent, the Purchaser or any other wholly owned
subsidiary of Parent and any Dissenting Shares (as defined in the Merger
Agreement)), will be cancelled and extinguished and converted into the right to
receive the Offer Price paid pursuant to the Offer and (ii) each issued and
outstanding share of common stock, par value $.01 per share, of the Purchaser
will be converted into one share of common stock of the Surviving Corporation.
The Company's Board of Directors. The Merger Agreement provides that
promptly upon the purchase of and payment for any Shares by the Purchaser
pursuant to the Offer, and from time to time thereafter as Shares are acquired
by the Purchaser, Parent shall be entitled to designate such number of
directors, rounded up to the next whole number, on the Company's Board of
Directors as is equal to the product of the total number of directors on the
Company's Board of Directors (determined after giving effect to the directors
designated by Parent) multiplied by the percentage that the aggregate number of
Shares which the Purchaser or any affiliate of the Purchaser owns beneficially
(excluding any unexercised portion of the options granted under the Option
Agreement or the Shareholders Agreement) bears to the total number of Shares
then outstanding provided, however, that in the event the Purchaser accepts
Shares for payment and the Minimum Condition is not satisfied, Parent shall not
be entitled to designate more than two directors. The Company shall promptly
secure the resignations of such number of its incumbent directors as is
necessary to enable Parent's designees to be elected to the Company's Board of
Directors and, in the event the Company is unable to secure a sufficient number
of resignations of its incumbent directors in accordance with the foregoing, the
Company shall use its best efforts promptly to increase the size of the
Company's Board of Directors as is necessary to enable Parent's designees to be
so elected to the Company's Board of Directors, provided that (i) in the event
that Parent's designees are appointed or elected to the Company's Board of
Directors, and until the Effective Time, the Company's Board of Directors will
have at least two directors who are directors as of the date of the execution of
the Merger Agreement and neither of whom is an officer of the Company or a
designee, shareholder, affiliate or associate (within the meaning of federal
securities laws) of Parent (one or more of such directors, the "Independent
Directors") and (ii) if no Independent Directors remain, the other directors
shall designate one person to fill one of the vacancies who shall not be a
shareholder, affiliate or associate of Parent or the Purchaser, such person so
designated being deemed an Independent Director. The Company's obligation to
appoint Parent's designees to the Company's Board of Directors is subject to
compliance with Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder.
Following the election of Parent's designees to the Company's Board of
Directors and prior to the Effective Time, the affirmative vote of a majority of
the Independent Directors shall be required to (i) amend or terminate the Merger
Agreement on behalf of the Company, (ii) exercise or waive any of the Company's
rights, benefits or remedies under the Merger Agreement, or (iii) take any other
action by the Company's Board of Directors under or in connection with the
Merger Agreement which would adversely affect the rights of the Company's
shareholders under the Merger Agreement; provided, further, that if there will
be no Independent Directors, such actions may be effected by the unanimous vote
of the entire Board of Directors of the Company.
Shareholders' Meeting. Pursuant to the Merger Agreement, the Company will,
if required by applicable law or the Company's Articles of Incorporation, in
order to consummate the Merger, and following (i) acceptance for payment of
Shares by the Purchaser pursuant to the Offer or (ii) the expiration of the
Offer without the Purchaser purchasing any Shares hereunder, in the case of
either clause (i) or (ii), without the termination of the Merger Agreement by
Parent or the Company, duly call, give notice of, convene and hold a special
meeting of its shareholders as promptly as practicable following the acceptance
for payment and purchase of Shares by the Purchaser pursuant to the Offer for
the purpose of considering and taking action upon the approval of the Merger and
the adoption of the Merger Agreement. The Merger Agreement provides that the
Company will, if required by applicable law in order to consummate the Merger,
prepare and file with the Commission a preliminary proxy or information
statement relating to the Merger and the Merger Agreement and use its best
efforts (i) to obtain and furnish the information required to be included by the
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<PAGE> 28
Commission in the Proxy Statement (as hereinafter defined) and, after
consultation with Parent, to respond promptly to any comments made by the
Commission with respect to the preliminary proxy statement and cause a
definitive proxy or information statement (the "Proxy Statement") to be mailed
to its shareholders, provided that no amendment or supplement to the Proxy
Statement will be made by the Company without consultation with Parent and its
counsel and (ii) to obtain the necessary approvals of the Merger and the Merger
Agreement by its shareholders. Subject to the terms of the Merger Agreement, the
Company has agreed to include in the Proxy Statement the recommendation of the
Company's Board of Directors that shareholders of the Company vote in favor of
the approval of the Merger and the adoption of the Merger Agreement.
The Merger Agreement provides that in the event that Parent or the
Purchaser acquires at least 90% of outstanding Shares, pursuant to the Offer or
otherwise (including as a result of the exercise of the Option Agreement),
Parent, the Purchaser and the Company will, at the request of Parent and subject
to the terms of the Merger Agreement, take all necessary and appropriate action
to cause the Merger to become effective as soon as practicable after such
acquisition, without a meeting of shareholders of the Company, in accordance
with Section 13.1-719 of the VSCA.
Options. Pursuant to the Merger Agreement, the Company shall take all
actions necessary to provide that at the Effective Time, (i) each Cash-Out
Option (as defined below) shall be cancelled and (ii) in consideration of such
cancellation, each holder of a Cash-Out Option shall receive in consideration
thereof an amount (subject to any applicable withholding tax) in cash equal to
the product of (x) the excess, if any, of the Offer Price over the per Share
exercise price of such Cash-Out Option and (y) the number of Shares subject to
such Cash-Out Option. The Company shall use all commercially reasonable efforts
to effectuate the foregoing, including, without limitation, providing that any
unexercised Cash-Out Options will become exercisable in full as of a specified
time prior to the Effective Time and will terminate immediately prior to the
Effective Time, amending the Stock Plans (as defined below) and obtaining any
necessary consents from holders of Cash-Out Options. The Merger Agreement
further provides that at the Effective Time, each Assumed Option (as defined
below) shall be assumed by Parent (and Parent shall take all action necessary
under applicable law, to cause such result or equivalent result without
disadvantage to the Option (as defined below) holders) and shall thereupon
constitute an option to acquire that number of Parent Common Shares (as defined
below) equal to (i) the number of Shares subject to the Assumed Option
immediately prior to the Effective Time, multiplied by (ii) the Exchange Ratio
(as defined below), rounded down to the nearest whole share, at a price per
Parent Common Share equal to (x) the exercise price of the Assumed Option
immediately prior to the Effective Time divided by (y) the Exchange Ratio,
rounded up to the nearest whole cent. Other than as described in the immediately
preceding sentence, the Assumed Options shall be subject to the same terms and
conditions as applicable immediately prior to the Effective Time; provided,
however, that Parent shall take all actions necessary for the terms of the Stock
Plans to be amended as necessary to comply with all applicable securities laws
and laws of the jurisdiction of the Parent (but without disadvantage to the
Option holder). Parent shall take all action necessary for the Parent Common
Shares to rank pari passu in all respects with all other Parent Common Shares
then in issue and to be listed and issuable upon exercise of the Assumed Options
so that the Parent Common Shares underlying such Assumed Options shall be freely
tradeable on the London Stock Exchange. The Merger Agreement further provides
that to the extent any Option or portion thereof is not assumed pursuant to the
terms of the Merger Agreement, such Options or portion thereof shall be treated
as a Cash-Out Option.
"Cash-Out Options" shall mean each option outstanding at the Effective Time
to purchase Shares (an "Option") granted under the Company's 1988 Nonqualified
Stock Option Plan, 1992 Nonqualified Stock Option Plan, the 1997 Stock Incentive
Plan or the 1997 Director Stock Option Plan or any other stock-based incentive
plan or arrangement of the Company (excluding any options granted under the
Company's Employee Stock Purchase Plan) (the "Stock Plans") that is not an
Assumed Option (as defined below).
"Assumed Options" shall mean those Options or portions thereof as
identified on Section 2.3 of the Company Disclosure Schedule attached to the
Merger Agreement granted under the 1992 Nonqualified Stock Option Plan and the
1997 Stock Incentive Plan that will not have vested and become exercisable as of
the
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<PAGE> 29
Effective Time as identified on Section 2.3(a) of the Company Disclosure
Schedule. To the extent any Options or portions thereof, as identified on
Section 2.3 of the Company Disclosure Schedule, cannot be assumed by Parent,
such Options or portions thereof shall be treated as Cash-Out Options and shall
be cancelled as of the Effective Time in consideration for a cash payment.
"Exchange Ratio" shall mean the quotient of (x) the Offer Price multiplied
by the average of the mid-point of the bid and ask price of the rate of currency
exchange of pounds sterling for U.S. dollars quoted in The Financial Times for
each of the business days in a consecutive 20 business day period ending two
business days prior to the Effective Date and (y) the average per Share closing
price of the ordinary shares of 1 pence each in the capital of Parent (a "Parent
Common Share") as reported on the London Stock Exchange on each of the 10
trading days immediately preceding the Effective Time.
Pursuant to the Merger Agreement, except as may be otherwise agreed to by
Parent or the Purchaser and the Company or as otherwise contemplated or required
to effectuate the treatment of Options as described in this paragraph, the Stock
Plans shall terminate as of the Effective Time and the provisions in any other
plan, program or arrangement providing for the issuance or grant of any other
interest in respect of the capital stock of the Company or any of its
Subsidiaries shall be deleted as of the Effective Time. In the Merger Agreement,
the Company has agreed to take all necessary actions to provide that as of the
Effective Time no holder of Options under the Stock Plans will have any right to
receive shares of common stock of the Surviving Corporation upon exercise of any
such Option. The Company has further agreed to take all actions necessary to
provide that at or immediately prior to the Effective Time, (i) each then
outstanding Option under the Company's Employee Stock Purchase Plan (the "Stock
Purchase Plan") shall automatically be exercised and (ii) in lieu of the
issuance of certificates, each Option holder shall receive an amount in cash
(subject to any applicable withholding tax) equal to the product of (x) the
number of Shares otherwise issuable upon such exercise and (y) the Offer Price.
The Company shall use all reasonable efforts to effectuate the foregoing,
including, without limitation, amending the Stock Purchase Plan and obtaining
any necessary consents from holders of Options. The Company (i) shall not permit
the commencement of any new offering period under the Stock Purchase Plan
following the date hereof, (ii) shall not permit any optionee to increase his or
her rate of contributions under the Stock Purchase Plan following the date
hereof, (iii) shall terminate the Stock Purchase Plan as of the Effective Time,
and (iv) shall take any other actions necessary to provide that as of the
Effective Time no holder of Options under the Stock Purchase Plan will have any
right to receive shares of common stock of the Surviving Corporation upon
exercise of any such Option.
Interim Operations; Covenants. Pursuant to the Merger Agreement, the
Company has agreed that, except (i) as expressly contemplated by the Merger
Agreement or the Option Agreement, (ii) as set forth in Section 5.2 of the
Company Disclosure Schedule attached to the Merger Agreement, (iii) in the
ordinary course of business consistent with past practice, or (iv) as agreed to
in writing by Parent, after the date of execution of the Merger Agreement, and
prior to the earlier of (x) the termination of the Merger Agreement in
accordance with its terms and (y) the time the designees of Parent have been
elected to and shall constitute a majority of the Company's Board of Directors,
(a) the business of the Company and its Subsidiaries will be conducted only in
the ordinary course consistent with past practice, each of the Company and its
Subsidiaries will use its commercially reasonable efforts to preserve its
present business organization intact and maintain its satisfactory relations
with customers, suppliers, employees, contractors, distributors and others
having business dealings with it, (b) the Company will not, directly or
indirectly, (i) amend its Articles of Incorporation or By-laws or similar
organizational documents or (ii) split, combine or reclassify the outstanding
Shares or any outstanding capital stock of the Company, (c) neither the Company
nor any of its Subsidiaries shall: (i) declare, set aside or pay any dividend or
other distribution payable in cash, stock or property with respect to its
capital stock, (ii) issue, sell, pledge, dispose of or encumber any additional
shares of, or securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire any shares of
capital stock of any class of the Company or its Subsidiaries, other than Shares
reserved for issuance on the date of the Merger Agreement pursuant to the
exercise of the Options or other rights to purchase shares of Common Stock
pursuant to the Stock Purchase Plan outstanding on the date of the Merger
Agreement, (iii) transfer, lease, license, sell, mortgage, pledge, dispose of,
or encumber any of its material assets, or incur or modify any material
indebtedness or other liability, other than in the ordinary and usual
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<PAGE> 30
course of business and consistent with past practice, (iv) redeem, purchase or
otherwise acquire, any shares of any class or series of its capital stock or any
instrument or security which consists of or includes a right to acquire such
shares except as permitted by the Merger Agreement and other than in connection
with the exercise of options or rights under the Stock Plans or the Stock
Purchase Plan, (d) neither the Company nor any of its Subsidiaries shall
increase the compensation payable or to become payable to any of its officers,
directors, employees, agents or consultants (other than general increases in
wages to employees who are not directors or affiliates in the ordinary course
consistent with past practice) or to persons providing management services;
enter into or amend any employment, severance, consulting, termination or other
agreement or employee benefit plan or make any loans to any of its officers,
directors, employees, affiliates, agents or consultants; or make any change in
its existing borrowing or lending arrangements for or on behalf of any of such
persons pursuant to any employee benefit plan or otherwise, (e) except to the
extent permitted by the Merger Agreement, neither the Company nor any of its
Subsidiaries shall pay or make any accrual or arrangement for payment of any
pension, retirement allowance or other employee benefit pursuant to any existing
plan, agreement or arrangement to any officer, director, employee or affiliate
or pay or agree to pay or make any accrual or arrangement for payment to any
officers, directors, employees or affiliates of the Company of any amount
relating to unused vacation days, except payments and accruals made in the
ordinary course consistent with past practice; adopt or pay, grant, issue,
accelerate or accrue salary or other payments or benefits pursuant to any
pension, profit-sharing, bonus, extra compensation, incentive, deferred
compensation, stock purchase, stock option, stock appreciation right, group
insurance, severance pay, retirement or other employee benefit plan, agreement
or arrangement, or any employment or consulting agreement with or for the
benefit of any director, officer, employee, agent or consultant, whether past or
present; or amend in any material respect any such existing plan, agreement or
arrangement in a manner inconsistent with the foregoing, (f) the Company shall
not, in any material respect, modify, amend or terminate any of the Company
Agreements (as defined in the Merger Agreement), and neither the Company nor any
of its Subsidiaries shall waive, release or assign any material rights or claims
under any of the Company Agreements (as defined in the Merger Agreement), (g)
neither the Company nor any of its Subsidiaries will permit any insurance policy
naming it as a beneficiary or a loss payable payee to be cancelled or terminated
without notice to Parent, (h) neither the Company nor any of its Subsidiaries
will make any loans, advances or capital contributions to or investments in any
other person; incur or assume any long-term debt or any short-term indebtedness;
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person; or
enter into any material commitment or transaction (including, but not limited
to, any borrowing, capital expenditure or purchase, sale or lease of assets or
real estate), (i) neither the Company nor any of its Subsidiaries will pay,
discharge or satisfy any claims or liabilities (whether absolute, accrued,
contingent or otherwise) other than in the ordinary course of business and
consistent with past practices or reflected or reserved against in, or
contemplated by the consolidated financial statements (or the notes thereto) of
the Company, (j) except to the extent permitted by the Merger Agreement, neither
the Company nor any of its Subsidiaries will adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring, recapitalization
or other reorganization of the Company (other than the Merger), (k) except as
permitted to be taken pursuant to Section 5.3 of the Merger Agreement, neither
the Company nor any of its Subsidiaries will take, or agree in writing or
otherwise to take, any action that would or is reasonably likely to result in
any of the conditions to the Merger or the Offer not being satisfied, or would
make any representation or warranty of the Company contained in the Merger
Agreement inaccurate in any material respect, at or as of any time prior to the
Effective Time, or that would materially impair the Company's ability to
consummate the Merger or materially delay such consummation, (l) change any of
the accounting methods used by it materially affecting its assets, liabilities
or business, except for such changes required by generally accepted accounting
principles, make any tax election, change any tax election already made, adopt
any tax accounting method, change any tax accounting method, enter into any
closing agreement or settle any tax audit, or (m) except for actions permitted
to be taken pursuant to Section 5.3 of the Merger Agreement, enter into any
written agreement, contract, commitment or arrangement with respect to the
foregoing or authorize, recommend, propose, in writing or announce an intention
to do any of the foregoing.
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No Solicitation. Pursuant to the Merger Agreement, the Company has agreed
to notify Parent and the Purchaser promptly if, on or after the date of the
Merger Agreement, any proposals are received by, any information is requested
from, or any negotiations or discussions are sought to be initiated or continued
with the Company or its representatives, in each case in connection with any
Acquisition Proposal (as defined below) or the possibility or consideration of
making an Acquisition Proposal ("Acquisition Proposal Interest") indicating, in
connection with such notice, the name of the Person (as defined below)
indicating such Acquisition Proposal Interest and the terms and conditions of
any proposals or offers. In addition, the Company has agreed that it will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted prior to the date of the
Merger Agreement with respect to any Acquisition Proposal Interest and that it
will keep Parent and the Purchaser informed, on a current basis, of the status
and terms of any Acquisition Proposal Interest. Pursuant to the Merger
Agreement, except as set forth below, from the date of the Merger Agreement
until the earlier of the termination of the Merger Agreement or the Effective
Time, the Company has agreed that it will not, nor shall it authorize or permit
its officers, directors, or employees to (and will use reasonable best efforts
to ensure that such persons and the Company's investment bankers, attorneys,
accountants and other agents do not), directly or indirectly (i) initiate,
solicit or knowingly encourage, or knowingly take any action to facilitate the
making of, any offer or proposal which constitutes or is reasonably likely to
lead to any Acquisition Proposal, (ii) enter into any agreement with respect to
any Acquisition Proposal, or (iii) in the event of an unsolicited Acquisition
Proposal for the Company engage in negotiations or discussion with, or provide
information or data to, any Person (other than Parent, any of its affiliates or
representatives) relating to any Acquisition Proposal, except that the Merger
Agreement does not prohibit the Company or the Company's Board of Directors from
(x) taking and disclosing to the Company's shareholders a position with respect
to tender or exchange offer by a third party pursuant to Rules 14d-9 and 14e-2
promulgated under the Exchange Act, (y) making such disclosure to the Company's
shareholders as, in the good faith judgment of the Board of Directors, after
receiving advice from outside counsel, that such disclosure is required under
applicable law and that the failure to make such disclosure is reasonably likely
to cause the Company's Board of Directors to violate with its fiduciary duties
to the Company's shareholders under applicable law or (z) otherwise complying
with their fiduciary duties to shareholders.
An "Acquisition Proposal" means any tender or exchange offer involving the
Company, any proposal for a merger, consolidation or other business combination
involving the Company, any proposal or offer to acquire in any manner a
substantial equity interest in, or a substantial portion of the business or
assets of, the Company (other than immaterial or insubstantial assets or
inventory in the ordinary course of business or assets held for sale), any
proposal or offer with respect to the Company or any proposal or offer with
respect to any other transaction similar to any of the foregoing with respect to
the Company other than pursuant to the transactions effected pursuant to the
Merger Agreement.
Notwithstanding the foregoing, prior to the acceptance of Shares pursuant
to the Offer, the Company may furnish information concerning its business,
properties or assets to any Person (as defined in the Merger Agreement) pursuant
to a confidentiality agreement with terms no less favorable to the Company than
those contained in the Mutual Non-Disclosure Agreement, dated October 14, 1999,
entered into between SSI and the Company and may negotiate an Acquisition
Proposal if (a) such entity or group has on an unsolicited basis submitted a
bona fide written proposal to the Company relating to any such transaction which
the Board of Directors determines in good faith, after receiving advice from a
nationally recognized investment banking firm, represents a superior transaction
to the Offer and the Merger and which is not conditioned upon obtaining
additional financing, the certainty of closing of which is less certain than the
satisfaction of the condition set forth in paragraph (i) of Section 14 (as it
may be deemed to be amended pursuant to Section 1.1(a) of the Merger Agreement)
on conditions less favorable to the Company than the Financing, and (b) in the
good faith opinion of the Company's Board of Directors, only after consultation
with outside legal counsel to the Company, providing such information or access
or engaging in such discussions or negotiations is in the best interests of the
Company and its shareholders and the failure to provide such information or
access or to engage in such discussions or negotiations would cause the Board of
Directors to violate its fiduciary duties to the Company's shareholders under
applicable law (an Acquisition Proposal which satisfied clauses (a) and (b), a
"Superior Proposal"). Within one business day following receipt by the Company
of a Superior
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Proposal, the Company must notify Parent of the receipt thereof. The Company
must then provide Parent any material nonpublic information regarding the
Company provided to the other party which was not previously provided to Parent.
Except as permitted under the terms of the Merger Agreement, neither the
Company's Board of Directors nor any committee thereof permitted by law to do
so, shall (i) withdraw or modify, or propose (publicly or to a third party) to
withdraw or modify, in a manner adverse to Parent or the Purchaser, the approval
or recommendation of the Company's Board of Directors, or any such committee of
the Offer, the Merger Agreement or the Merger, (ii) approve or recommend, or
propose (publicly or to a third party) to approve or recommend, any Acquisition
Proposal or (iii) enter into any agreement with respect to any Acquisition
Proposal (other than a confidentiality agreement as contemplated by Section
5.3(b) of the Merger Agreement). Notwithstanding the foregoing, prior to the
time of acceptance for payment of Shares in the Offer, the Board of Directors of
the Company may withdraw or modify its approval or recommendation of the Offer,
the Merger Agreement or the Merger, approve or recommend a Superior Proposal, or
enter into an agreement with respect to a Superior Proposal, in each case at any
time after the fifth business day following the Company's delivery to Parent of
written notice advising Parent that the Board of Directors has received a
Superior Proposal, specifying the material terms and conditions of such Superior
Proposal and identifying the person making such Superior Proposal; provided that
the Company shall not enter into an agreement with respect to a Superior
Proposal unless the Company also shall have furnished Parent with written notice
that it intends to enter into such agreement.
Indemnification and Insurance. The Merger Agreement provides that from and
after the Effective Time, the Surviving Corporation (or any successor to the
Surviving Corporation) shall indemnify, defend and hold harmless, the present
and former officers and directors of the Company and its subsidiaries, and any
persons who become any of the foregoing prior to the Effective Time (each, an
"Indemnified Party") against all losses, claims, damages, liabilities costs,
fees and expenses (including reasonable fees, disbursements of counsel and
judgments, fines, losses, claims, liabilities and amounts paid in settlement
(provided that any such settlement is effected with the written consent of
Parent or the Surviving Corporation)) arising out of the actions or omissions
occurring at or prior to the Effective Time to the fullest extent permissible
under applicable provisions of the VSCA, the terms of the Company's Articles of
Incorporation or the By-laws, and under any agreements as in effect at the date
of the Merger Agreement (including rights to reimbursement or advancement of
expenses and exculpation from liability). The Merger Agreement also provides
that Parent or the Surviving Corporation will maintain the Company's existing
officers' and directors' liability insurance ("D&O Insurance") for a period of
not less than six years after the Effective Time, provided, that if the
aggregate annual premiums for such D&O Insurance at any time shall exceed 150%
of the annualized premiums paid by the Company for such insurance in 1999, then
Parent will cause the Company or the Surviving Corporation to provide the
maximum coverage then available at an annual premium not in excess of 150% of
the 1999 premium.
Representations and Warranties. Pursuant to the Merger Agreement, the
Company has made customary representations and warranties to Parent and the
Purchaser with respect to, among other things, its organization, capitalization,
authority relative to the Merger, financial statements, public filings, conduct
of business, employee benefit plans, intellectual property, employment matters,
compliance with laws, tax matters, litigation, environmental matters, material
contracts, potential conflicts of interest, brokers' fees, real property,
insurance, accounts receivable and inventory, vote required to approve the
Merger Agreement, absence dissenter's rights, undisclosed liabilities,
information in the Proxy Statement and the absence of any material adverse
effect on the Company since September 30, 1999.
Termination; Fees. The Merger Agreement may be terminated and the
transactions contemplated therein abandoned at any time prior to the Effective
Time, whether before or after approval of the shareholders of the Company
(provided that if Shares are purchased pursuant to the Offer, Parent may not in
any event terminate the Merger Agreement):
a. By mutual written consent of Parent and the Company; or
b. (i) By Parent if the Offer shall have expired without any Shares
being accepted for purchase thereunder by the Purchaser and without the
Purchaser having had an obligation under Section 1.1(a) of
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<PAGE> 33
the Merger Agreement to extend the Offer; provided, however, that Parent
shall not be entitled to terminate the Merger Agreement if it or the
Purchaser is in material breach of its representations and warranties,
covenants or other obligations under the Agreement; or (ii) by the Company
(A) if the Offer has not commenced within five business days of the
execution of the Merger Agreement or (B) the Offer shall have expired
without any Shares being accepted for purchase thereunder by the Purchaser
or (C) if prior to the acceptance for purchase of Shares pursuant to the
Offer, there has been a material breach by either Parent or the Purchaser
of any representation, warranty, covenant or agreement set forth in the
Merger Agreement (and such breach is not reasonably capable of being cured
within 30 days of notice thereof); provided, however, that the Company
shall not be entitled to terminate the Merger Agreement pursuant to this
subsection if it is in material breach of its representations and
warranties, covenants or other obligations under the Merger Agreement; or
c. By either Parent or the Company (i) if a court of competent
jurisdiction or other governmental entity shall have issued an order,
decree or ruling or taken any other action, in each case permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by the Merger Agreement, the Option Agreement or the
Shareholders Agreement, (ii) prior to the acceptance for purchase of Shares
pursuant to the Offer, if there has been a willful breach by the other
party of any representation, warranty, covenant or agreement set forth in
the Merger Agreement, which breach shall result in any condition set forth
in Section 14 (other than the Minimum Condition) not being satisfied (and
such breach is not reasonably capable of being cured and such condition
satisfied within 30 days after the receipt of notice thereof) or (iii) if
by June 12, 2000 the Purchaser has not purchased any Shares pursuant to the
Offer; provided, however, that the right to terminate the Merger Agreement
pursuant to this clause (iii) shall not be available to any party whose
failure to fulfill any obligation under the Merger Agreement has been the
cause of, or resulted in, the Purchaser's failure to make such purchases;
or
d. By the Company to allow the Company to enter into an agreement with
respect to a Superior Proposal which the Board of Directors has determined
is more favorable to the shareholders of the Company than the transactions
contemplated by the Merger Agreement; provided, however, that it has
complied with all provisions of the Merger Agreement, including the notice
provision therein, and that it makes simultaneous payment of the
Termination Fee (as hereinafter defined), plus any amounts then due as a
reimbursement of expenses; or
e. By Parent, at any time prior to the purchase of the Shares pursuant
to the Offer, if (i) the Company's Board of Directors or any Committee
thereof shall have withdrawn, modified, or changed its recommendation in
respect of the Merger Agreement or the Offer in a manner adverse to the
Purchaser or (ii) the Company's Board of Directors or any Committee thereof
shall have recommended any proposal other than by Parent or the Purchaser
in respect of an Acquisition Proposal, (iii) the Company shall have
exercised a right with respect to an Acquisition Proposal referenced in
Section 5.3(b) of the Merger Agreement and directly or through its
representatives, continue discussions with any third party concerning an
Acquisition Proposal for more than 10 business days after the date of
receipt of such Acquisition Proposal, or (iv) an Acquisition Proposal that
is publicly disclosed shall have been commenced, publicly proposed or
communicated to the Company which contains a proposal as to price (without
regard to whether such proposal specifies a specific price or a range of
potential prices) and the Company shall not have rejected such proposal
within 10 business days of its receipt or, if sooner, the date its
existence first becomes publicly disclosed.
If (i) Parent shall have terminated the Merger Agreement pursuant to clause
(e), (ii)(x) Parent shall have terminated the Agreement pursuant to clause
(c)(ii) and (y) following the date of the Merger Agreement but prior to such
termination there shall have been an Acquisition Proposal Interest or (iii) the
Company shall have terminated this Agreement pursuant to clause (d), then the
Company shall pay (A) simultaneously with such termination if pursuant to clause
(d), or (B) promptly, but in no event later than two business days after the
date of such termination if pursuant to clause (c)(ii) or (e), to Parent a
termination fee (the "Termination Fee") of $12,000,000 plus an amount, not in
excess of $1,500,000, equal to the Purchaser's reasonable actual and documented
out-of-pocket expenses incurred by Parent and the
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Purchaser in connection with the Offer, the Merger, the Merger Agreement and the
consummation of the transactions contemplated thereby.
If the Merger Agreement is terminated, and at any time on or prior to June
12, 2000 all of the conditions set forth in Section 14 hereof have been
fulfilled except (i) the condition set forth in paragraph (i) of Section 14
hereof and (ii) any other conditions that are not fulfilled as a result,
directly or indirectly, of a breach by Parent or the Purchaser of any
representation, warranty, covenant or agreement set forth in the Merger
Agreement, then promptly, but in no event later than two business days after the
date of such termination, Parent shall pay to the Company a termination fee of
$12,000,000 plus an amount, not in excess of $1,500,000, equal to the Company's
reasonable actual and documented out-of-pocket expenses incurred by the Company
in connection with the Offer, the Merger, the Merger Agreement and the
consummation of the transactions contemplated thereby.
SHAREHOLDERS AGREEMENT.
The following is a summary of certain provisions of the Shareholders
Agreement. The summary is qualified in its entirety by reference to the
Shareholders Agreement which is incorporated herein by reference and a copy of
which has been filed with the Commission as an Exhibit to the Schedule 14D-1.
As a condition and inducement to Parent and the Purchaser's entering into
the Merger Agreement and incurring the liabilities therein, certain shareholders
of the Company (each a "Shareholder") who have voting power and dispositive
power with respect to an aggregate of 563,409 Shares, representing approximately
4.2% of the Shares on a fully diluted basis and with respect to 444,450 Shares
issuable on the exercise of Options, representing approximately 3.3% of the
Shares on a fully diluted basis, concurrently with the execution and delivery of
the Merger Agreement entered into the Shareholders Agreement. The Shareholders
are certain directors and officers of the Company. Pursuant to the Shareholders
Agreement, each of the Shareholders has agreed to validly tender, in accordance
with the terms of the Offer promptly, all Shares subject to the Shareholders
Agreement. Each Shareholder agreed not to withdraw his Shares so tendered unless
the Offer is terminated or has expired without Purchaser purchasing all Shares
validly tendered in the Offer or the Merger Agreement has been terminated by
Parent in accordance with its terms.
Each of the Shareholders has granted Parent an irrevocable proxy with
respect to the voting of such Shares in favor of the Merger and against any
action or agreement that would impede, interfere with or prevent the Merger.
Subject to the terms and conditions of the Shareholders Agreement, each of the
Shareholders has granted to Parent an irrevocable and continuing option (the
"Shareholder Option") to purchase for cash all or any portion of the Shares
beneficially owned or controlled by such Shareholder as of the date of the
Shareholders Agreement, or beneficially owned or controlled by such Shareholder
at any time after the date of the Shareholders Agreement (including, without
limitation, by way of exercise of options, warrants or other rights to purchase
Company Common Stock as contemplated by the Shareholders Agreement or by way of
dividend, distribution, exchange, merger, consolidation, recapitalization,
reorganization, stock split, grant of proxy or otherwise) at a purchase price
equal to the Offer Price. The Shareholder Option shall become exercisable only
(i) in the event any Shareholder fails to tender any of such Shareholder's
Shares in the Offer by the end of the fifth business day following the
commencement of the Offer, or (ii) withdraws any Shares from the Offer for any
reason whatsoever, other than (a) the termination or expiration of the Offer by
the Purchaser without the Purchaser having accepted for purchase any Shares in
the Offer or (b) the termination of the Merger Agreement in accordance with its
terms.
Each of the Shareholders has agreed that, prior to the termination of the
Shareholders Agreement pursuant to its terms, such Shareholder will not (i)
transfer, or consent to the transfer of, any or all of the Shares; (ii) enter
into any contract, option or other agreement or understanding with respect to
any transfer of any or all of the Shares or any interest therein; (iii) grant
any proxy, power-of-attorney or other authorization in or with respect to the
Shares; (iv) deposit the Shares into a voting trust or enter into a voting
agreement or arrangement with respect to the Shares or (v) take any other action
that would in any way restrict, limit or interfere with the performance of the
Shareholder's obligations under the Shareholders Agreement or the transactions
contemplated thereby.
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The Shareholders Agreement, and all rights and obligations of the parties
thereto, shall terminate immediately upon the earlier of (i) six months
following the termination of the Merger Agreement in accordance with its terms
or (ii) the Effective Time.
OPTION AGREEMENT.
The following is a summary of certain provisions of the Option Agreement.
The summary is qualified in its entirety by reference to the Option Agreement
which is incorporated herein by reference and a copy of which has been filed
with the Commission as an exhibit to the Schedule 14D-1.
Pursuant to the Option Agreement, the Company granted to Parent an
irrevocable option (the "Company Option") to purchase up to 2,352,024
newly-issued shares of Common Stock (the "Company Option Shares") at a purchase
price per share of $35.00, subject to the terms and conditions set forth in the
Option Agreement; provided, however, that in no event shall the number of Shares
exceed 19.9% of the Company's issued and outstanding shares of Common Stock
(without giving effect to any Shares subject to or issued pursuant to the
Company Option).
The Option Agreement provides that, at any time or from time to time prior
to the termination of the Company Option in accordance with the terms of the
Option Agreement, Parent (or its designee) may exercise the Company Option, in
whole or in part, if on or after the date of the Option Agreement, (a) the
Purchaser accepts for payment pursuant to the Offer shares of Common Stock
constituting at least a majority but less than 90% of the shares of Common Stock
then outstanding on a fully diluted basis; or (b) any corporation, partnership,
limited liability company, individual, trust, unincorporated association, or
other entity or "person" (as defined in Section 13(d)(3) of the Exchange Act),
other than Parent or any of its "affiliates" (as defined in the Exchange Act) (a
"Third Party"), shall have (i) commenced a bona fide tender offer or exchange
offer for any shares of Common Stock, the consummation of which would result in
"beneficial ownership" (as defined under the Exchange Act) by such Third Party
(together with all such Third Party's affiliates and "associates" (as such term
is defined in the Exchange Act)) of 15% or more of the then outstanding voting
equity of the Company (either on a primary or a fully diluted basis), (ii)
acquired beneficial ownership of shares of Common Stock which, when aggregated
with any shares of Common Stock already owned by such Third Party, its
affiliates and associates, would result in the aggregate beneficial ownership by
such Third Party, its affiliates and associates of 15% or more of the then
outstanding voting equity of the Company (either on a primary or a fully diluted
basis), provided, however, that "Third Party" for purposes of this clause (ii)
shall not include any corporation, partnership, limited liability company,
person or other entity or group which beneficially owns more than 15% of the
outstanding voting equity of the Company (either on a primary or a fully diluted
basis) as of the date of the Option Agreement and that does not, after the date
of the Option Agreement, increase such ownership percentage by more than an
additional 1% of the outstanding voting equity of the Company (either on a
primary or a fully diluted basis), or (iii) solicited "proxies" in a
"solicitation" subject to the proxy rules under the Exchange Act or executed any
written consent with respect to, or become a "participant" in, any
"solicitation" (as such terms are defined in Regulation 14A under the Exchange
Act), in each case with respect to the Common Stock; or (c) any of the events
specified in the Option Agreement that would allow Parent to terminate the
Merger Agreement has occurred (but without the necessity of Parent having
terminated the Merger Agreement).
Parent's obligation to purchase Shares and the Company's obligation to
deliver shares upon any exercise of the Company Option is subject (at its
election) to the conditions that (i) no preliminary or permanent injunction or
other order against the purchase, issuance or delivery of the Shares issued by
any federal, state or foreign court of competent jurisdiction shall be in effect
(and no action or proceeding shall have been commenced or threatened for
purposes of obtaining such an injunction or order) and (ii) any applicable
waiting period under the HSR Act and the regulations thereunder, and any
applicable antitrust or competition laws of Canada, the European Union, any
member state of the European Union, and any other foreign jurisdictions shall
have expired and (iii) there shall have been no material breach of the
representations, warranties, covenants or agreements of the Company contained in
the Option Agreement or the Merger Agreement; provided, however, that any
failure by Parent to purchase Shares upon exercise of the Company
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Option at any closing of such purchase as a result of the nonsatisfaction of any
of such conditions shall not affect or prejudice Parent's right to purchase such
Shares upon the subsequent satisfaction of such conditions.
If, at any time during which the Company Option may be exercised, Parent
may elect to require the Company to pay Parent, in exchange for the cancellation
of the Company Option with respect to such number of Shares as Parent specifies,
an amount net of U.S. federal withholding taxes, if any, (the "Cancellation
Amount") in cash equal to such number of Company Option Shares multiplied by the
difference between (a) the Market/Offer Price (as defined below) and (b) the
Exercise Price.
The term "Market/Offer Price" shall mean the highest of (i) the price per
Share at which a tender offer or exchange offer therefor has been made, (ii) the
price per Share to be paid by any third party pursuant to an agreement with the
Company, (iii) the highest closing price for the Shares as reported on the
Nasdaq National Market System within the 30 trading days immediately preceding
the date Parent gives notice of the required repurchase of Shares subject to the
Company Option or (iv) in the event of a sale of all or a substantial portion of
the Company's assets, the sum of the price paid in such sale of such assets and
the current market value of the remaining assets of the Company as determined by
a nationally recognized investment banking firm mutually selected by Parent and
the Company, divided by the number of Shares outstanding at the time of such
sale. In determining the Market/Offer Price, the value of consideration other
than cash shall be determined by a nationally recognized investment banking firm
mutually selected by Parent and the Company.
Notwithstanding anything to the contrary in the Option Agreement, (1)
Parent's Total Payment (as defined below), if any, which Parent may derive
thereunder shall in no event exceed $22,000,000 and Parent shall pay any excess
over such amount to the Company and (2) the Company Option may not be exercised
for a number of Shares as would, as of the date of exercise, result in a
Notional Total Payment (as defined below), together with the actual Total
Payment immediately preceding such exercise, exceeding $22,000,000; provided
that if any exercise of the Company Option would result in a Notional Total
Payment, together with the actual Total Payment immediately preceding such
exercise, exceeding $22,000,000, then Parent, at its election, may either (A)
reduce the number of Shares subject to the Company Option, (B) deliver to the
Company for cancellation shares of Company Common Stock previously purchase by
Parent, (C) pay cash to the Company, or (D) take any action representing any
combination of the preceding clauses (A), (B) and (C) so that Parent's Notional
Total Payment, when aggregated with the actual Total Payment immediately
preceding such exercise, does not exceed $22,000,000 after taking into account
the foregoing actions. As used herein (1) "Total Payment" shall mean the sum
(net of withholding taxes, if any) of the following: (i) any Cancellation Amount
received by Parent, (ii)(x) the net cash amounts received by Parent pursuant to
the sale, within 12 months following exercise of the Company Option, of Shares
(or any other securities into which such Shares shall be converted or exchanged)
to any unaffiliated party, less (y) the aggregate exercise price for such
Company Option Shares, (iii) any amounts received by Parent upon transfer of the
Company Option (or any portion thereof) to any unaffiliated party, and (iv) the
amount actually received by Parent as a Termination Fee and related expenses
pursuant to the Merger Agreement; and (2) "Notional Total Payment" with respect
to any number of Shares as to which Parent may propose to exercise the Company
Option shall be the Total Payment determined as of the date of such proposed
exercise assuming that the Company Option was exercised on such date for such
number of Shares and assuming further that such Shares, together with all other
Shares held by Parent as of such date, were sold for cash at the closing market
price for the Company Common Stock as of the close of business on the preceding
trading day (less customary brokerage commissions).
CONFIDENTIALITY AGREEMENT.
The following is a summary of the Confidentiality Agreement, dated October
14, 1999, between the Company and SSI. The summary is qualified by reference to
the Confidentiality Agreement which is incorporated herein by reference and a
copy of which is filed as an exhibit to the 14D-1.
The Confidentiality Agreement contains customary provisions pursuant to
which, among other things, SSI and the Company, and each of their respective
subsidiaries, divisions, affiliates or parent company agreed
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to keep confidential for a period of two years all nonpublic, confidential or
proprietary information furnished to one another subject to certain exceptions
(the "Confidential Information"), and to use the Confidential Information solely
in connection with evaluating a business combination among the parties.
EXCLUSIVITY AGREEMENT.
The following is a summary of a letter agreement, dated December 22, 1999
(the "Exclusivity Agreement"), by and between Parent and the Company. The
summary is qualified in its entirety by reference to the Exclusivity Agreement,
which is incorporated herein by reference and a copy of which has been filed
with the Commission as an Exhibit to the Schedule 14D-1, a copy of which is
filed as an Exhibit(c)(5) to the Schedule 14D-1. Such summary is qualified in
its entirety by reference to the Letter Agreement.
The Exclusivity Agreement provides that for a period of 12 months from the
date of the Exclusivity Agreement, neither Parent nor any of its affiliates will
(i) acquire, agree to acquire or make any proposal to acquire any securities or
property of the Company, (ii) solicit or propose to solicit proxies from
shareholders of the Company or otherwise seek to influence or control the
management or the policies of the Company or any of its affiliates or (iii) or
assist any other person in doing any of the foregoing, other than the proposal
made in connection with the Offer and the Merger. Such provisions shall
terminate in the event that (a) any third party unaffiliated with Parent
initiates a tender or exchange offer for, or otherwise proposes or agrees to
acquire, the Common Stock or other equity interests of the Company, (b) it is
publicly disclosed that voting securities representing more than or equal to 25%
of the total voting power of the Company then outstanding have been acquired or
are proposed to be acquired by any person or group unaffiliated with Parent in a
single transaction or a series of related transactions or (c) the Company enters
into any agreement to merge with, or sell or dispose of 50% or more of its
assets or earning power to, any person not affiliated with Parent. The
Exclusivity Agreement further provides that Parent and the Company shall
negotiate on an exclusive basis until the earlier of (a) January 14, 2000 or (y)
termination by Parent of the negotiations of the Merger Agreement.
12. PLANS FOR THE COMPANY; OTHER MATTERS.
Plans for the Company. Parent intends to conduct a detailed review of the
Company and its assets, corporate structure, dividend policy, capitalization,
operations, properties, policies, management and personnel and will consider,
subject to the terms of the Merger Agreement, what, if any, changes would be
desirable in light of the circumstances which exist upon completion of the
Offer. Such changes could include changes in the Company's business, corporate
structure, articles of incorporation, by-laws, capitalization, Board of
Directors, management or dividend policy, although, except as disclosed in this
Offer to Purchase, Parent has no current plans with respect to any of such
matters. The Merger Agreement provides that, promptly upon the purchase of and
payment for any Shares by the Purchaser pursuant to the Offer, and from time to
time thereafter as Shares are acquired by the Purchaser, Parent has the right to
designate such number of directors, rounded up to the next whole number, on the
Company's Board of Directors as is equal to the product of the total number of
directors on the Company's Board of Directors (giving effect to the directors
designated by Parent) multiplied by the percentage that the number of Shares
beneficially owned by the Purchaser or any affiliate of the Purchaser bears to
the total number of Shares then outstanding provided that in the event the
Purchaser accepts Shares for payment and the Minimum Condition is not satisfied,
Parent shall not be entitled to designate more than two directors. See Section
11. Parent is considering, following consummation of the Offer and the Merger, a
transfer of the shares it owns in the Purchaser (which following the Merger will
represent shares in the Company) to a subsidiary of Parent. The Merger Agreement
provides that the directors of the Purchaser and the officers of the Company at
the Effective Time of the Merger will, from and after the Effective Time, be the
initial directors and officers, respectively, of the Surviving Corporation.
Except as disclosed in this Offer to Purchase, neither Parent nor the
Purchaser has any present plans or proposals that would result in an
extraordinary corporate transaction, such as a merger, reorganization,
liquidation, relocation of operations, or sale or transfer of assets, involving
the Company or any of its subsidiaries, or any material changes in the Company's
corporate structure, business or composition of its management or personnel.
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OTHER MATTERS.
Shareholder Approval. Under the VSCA and the Company's Articles of
Incorporation, the approval of the Board of Directors of the Company and the
affirmative vote of the holders of a majority of the outstanding Shares are
required to adopt and approve the Merger Agreement and the transactions
contemplated thereby. The Company has represented in the Merger Agreement that
the execution and delivery of the Merger Agreement by the Company and the
consummation by the Company of the transactions contemplated by the Merger
Agreement, the Option Agreement and the Shareholders Agreement have been duly
authorized by all necessary corporate action on the part of the Company, subject
to the approval of the Merger by the Company's shareholders in accordance with
the VSCA. In addition, the Company has represented that the affirmative vote of
the holders of a majority of the outstanding shares of Common Stock is the only
vote of the holders of any class or series of the Company's capital stock which
is necessary to approve the Merger Agreement and the transactions contemplated
thereby, including the Merger. Therefore, unless the Merger is consummated
pursuant to the short-form merger provisions under the VSCA described below (in
which case no further corporate action by the shareholders of the Company will
be required to complete the Merger), the only remaining required corporate
action of the Company will be the approval of the Merger Agreement and the
transactions contemplated thereby by the affirmative vote of the holders of a
majority of the shares of Common Stock. The Merger Agreement provides that
Parent will vote, or cause to be voted, all of the Shares then owned by Parent,
the Purchaser or any of Parent's other subsidiaries and affiliates in favor of
the approval of the Merger and the adoption of the Merger Agreement. In the
event that the Minimum Condition is satisfied, the Purchaser will have
sufficient voting power to cause the approval of the Merger Agreement and the
transactions contemplated thereby without the affirmative vote of any other
shareholders of the Company.
Short-Form Merger. Section 13.1-719 of the VSCA provides that, if the
parent corporation owns at least 90% of the outstanding shares of each class of
the subsidiary corporation, the merger into the subsidiary corporation of the
parent corporation may be effected by a resolution or plan of merger adopted and
approved by the board of directors of the parent corporation and the appropriate
filings with the Virginia State Corporation Commission, without any action or
vote on the part of the shareholders of the subsidiary corporation (a
"short-form merger"). Under the VSCA, if the Purchaser acquires at least 90% of
the outstanding Shares, the Purchaser will be able to effect the Merger without
a vote of the shareholders of the Company. In such event, Parent, the Purchaser
and the Company have agreed in the Merger Agreement to take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after such acquisition, without a meeting of the Company's
shareholders.
In the event that less than 90% of the Shares then outstanding on a fully
diluted basis are tendered pursuant to the Offer on the Initial Expiration Date,
the Purchaser may extend the Offer for up to 10 business days so that the merger
may be consummated as a short-form merger.
Virginia Affiliated Transactions Statute. The Company is also subject to
Article 14 (the "Affiliated Transactions Statute") of the VSCA. The Affiliated
Transactions Statute generally prohibits a publicly held Virginia corporation
from engaging in an "affiliated transaction" with an "interested shareholder"
for a period of three years after the date of the transaction in which the
person became an interested shareholder, unless (i) a majority of disinterested
directors approved in advance the transaction in which the interested
shareholder became an interested shareholder, or (ii) the affiliated transaction
is approved by the affirmative vote of a majority of the disinterested directors
and by the affirmative vote of the holders of two-thirds of the voting shares
other than the shares beneficially owned by the interested shareholder. A
corporation may engage in an affiliated transaction with an interested
shareholder beginning three years after the date of the transaction in which the
person became an interested shareholder if (A) the transaction is approved by a
majority of the disinterested directors or by the affirmative vote of the
holders of two-thirds of the voting shares other than the shares beneficially
owned by the interested shareholder, or (B) the corporation complies with
certain statutory fair price provisions.
Subject to certain exceptions, under the VSCA an "interested shareholder"
is a person who beneficially owns more than 10% or more of any class of the
corporation's outstanding voting securities or an affiliate or associate of the
corporation that was an interested shareholder at any time within the preceding
three years. In
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general terms, an "affiliated transaction" includes: (i) any merger or share
exchange with an interested shareholder; (ii) the transfer to any interested
shareholder of corporate assets with a fair market value greater than 5% of the
corporation's consolidated net worth; (iii) the issuance to any interested
shareholder of voting shares with a fair market value greater than 5% of the
aggregate fair market value of all outstanding voting shares of the corporation;
(iv) any reclassification of securities or corporate reorganization that will
have the effect of increasing by more than 5% or more the percentage of the
corporation's outstanding voting shares beneficially owned by any interested
shareholder; and (v) the dissolution of the corporation if proposed by or on
behalf of any interested shareholder.
Because the Company's Board of Directors has approved the Merger Agreement,
the Option Agreement and the Shareholders Agreement and the transactions
contemplated thereby, the provisions of the Affiliated Transactions Statute are
not applicable to the Offer, the Merger, the Company Option, the Shareholders
Option and the other transactions contemplated by the Merger Agreement, the
Option Agreement and the Shareholders Agreements.
Control Share Acquisition Statute. The Company is also subject to Article
14.1 of the VSCA (the "Control Share Acquisition Statute"). The Control Share
Acquisition Statute provides that shares of a publicly held Virginia corporation
that are acquired in a "control share acquisition" generally will have no voting
rights unless such rights are conferred on those shares by the vote of the
holders of a majority of all the outstanding shares other than interested
shares. A control share acquisition is defined, with certain exceptions, as the
acquisition of the beneficial ownership of voting shares which would cause the
acquirer to have voting power within the following ranges or to move upward from
one range into another: (i) 20% to 33 1/3%; (ii) 33 1/3% to 50%; or (iii) more
than 50%, of such votes.
The Control Share Acquisition Statute does not apply to an acquisition of
shares of a publicly held Virginia corporation (i) pursuant to a merger or share
exchange effected in compliance with the VSCA if the issuing public corporation
is a party to the merger or share exchange agreement, (ii) pursuant to a tender
or exchange offer that is made pursuant to an agreement to which the issuing
public corporation is a party, or (iii) directly from the issuing public
corporation.
Because the Control Share Acquisition Statute specifically exempts a merger
effected in compliance with the VSCA if the publicly held Virginia corporation
is a party to the merger agreement and a tender offer made pursuant to an
agreement to which the publicly held Virginia corporation is a party, the
provisions of the Control Share Acquisition Statute are not applicable to the
Offer or the Merger. In addition, because the Control Share Acquisition Statute
specifically exempts an acquisition of shares of an issuing public corporation
directly from the issuing public corporation, the provisions of the Control
Share Acquisition Statute are not applicable to the Company Option.
Dissenters' Rights. No dissenters' or appraisal rights are available in
connection with the Offer. No shareholder is entitled to dissenter's rights,
rights of appraisal or other similar rights in connection with the Merger
pursuant to the VSCA unless, (i) in the event the vote of the shareholders is
required to approve the Merger pursuant to the VSCA, on the record date fixed by
the Company's Board of Directors to determine the shareholders of the Company
entitled to receive notice of and to vote at a meeting to approve the Merger or
(ii) in the event no shareholder vote is required to approve the Merger pursuant
to the VSCA, immediately prior to the effective time of the Merger, the Shares
are not (A) listed on a national securities exchange or on the NASDAQ or (B)
held by at least 2,000 record shareholders. In the event shareholders of the
Company are entitled to dissenters' rights under the VSCA. In the event
dissenters' rights become available, Article 15 of the VSCA provides that
shareholders of the Company will be entitled to receive the "fair value" of
their Shares, provided that the procedures set forth in Article 15 of the VSCA
are followed. Shareholders should be aware that the "fair value" as determined
under Article 15 of the VSCA, could be more than, the same as or less than the
Offer Price and that failure to follow the steps required by Article 15 of the
VSCA for perfecting dissenters' rights may result in the loss of such rights.
The preceding discussion is only a summary for general information on the
dissenters' rights provisions of the VSCA which are incorporated herein by
reference.
Rule 13e-3. The Merger would have to comply with any applicable Federal
law operative at the time. Rule 13e-3 under the Exchange Act is applicable to
certain "going private" transactions; however, the
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Purchaser believes that Rule 13e-3 will not be applicable to the Merger because
it is anticipated that the Merger will be effected within one year following the
consummation of the Offer. If Rule 13e-3 were applicable to the Merger, it would
require, among other things, that certain financial information concerning the
Company, and certain information relating to the fairness of the proposed
transaction and the consideration offered to minority shareholders in such a
transaction, be filed with the Commission and disclosed to minority shareholders
prior to consummation of the transaction.
13. DIVIDENDS AND DISTRIBUTIONS. The Merger Agreement provides that
neither the Company nor any of its Subsidiaries shall: (i) declare, set aside or
pay any dividend or other distribution payable in cash, stock or property with
respect to its capital stock; (ii) issue, sell, pledge, dispose of or encumber
any additional shares of, or securities convertible into or exchangeable for, or
options, warrants, calls, commitments or rights of any kind to acquire, any
shares of capital stock of any class of the Company or its Subsidiaries, other
than Shares reserved for issuance on the date of the Merger Agreement pursuant
to the exercise of Options outstanding on the date of the Merger Agreement; or
(iii) redeem, purchase or otherwise acquire any shares of any class or series of
its capital stock.
14. CONDITIONS OF THE OFFER. Notwithstanding any other provisions of the
Offer, and in addition to (and not in limitation of) the Purchaser's rights to
extend and amend the Offer at any time in its sole discretion (subject to the
provisions of the Merger Agreement), the Purchaser shall not be required to
accept for payment or, subject to any applicable rules and regulations of the
Commission, including Rule 14e-l(c) under the Exchange Act (relating to the
Purchaser's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for, and may delay the acceptance
for payment of or, subject to the restriction referred to above, the payment
for, any validly tendered Shares unless the Minimum Condition has been
satisfied. Furthermore, notwithstanding any other provisions of the Offer, the
Purchaser shall not be required to accept for payment or pay for any validly
tendered Shares if, at the scheduled expiration date, (i) any applicable waiting
period under the HSR Act has not expired or terminated prior to termination of
the Offer, or (ii) any of the following events shall occur, or shall be deemed
to have occurred, and be continuing:
a. there shall be threatened in writing or pending any suit, action or
proceeding by any United States or United Kingdom Governmental Entity (as
defined in the Merger Agreement) against the Purchaser, Parent, the Company
or any Subsidiary of the Company (i) seeking to prohibit or impose any
material limitations on Parent's or the Purchaser's ownership or operation
(or that of any of their respective Subsidiaries or affiliates) of all or a
material portion of their or the Company's and its Subsidiaries' businesses
or assets, taken as a whole, or to compel Parent or the Purchaser or their
respective Subsidiaries and affiliates to dispose of or hold separate any
material portion of the business or assets of the Company or Parent and
their respective Subsidiaries, in each case taken as a whole, (ii)
challenging the acquisition by Parent or the Purchaser of any Shares under
the Offer, seeking to restrain or prohibit the making or consummation of
the Offer or the Merger or the performance of any of the other transactions
contemplated by the Merger Agreement, or seeking to obtain from the
Company, Parent or the Purchaser any damages that are material in relation
to the Company and its Subsidiaries taken as a whole, (iii) seeking to
impose material limitations on the ability of the Purchaser, or render the
Purchaser unable, to accept for payment, pay for or purchase some or all of
the Shares pursuant to the Offer and the Merger, or (iv) seeking to impose
material limitations on the ability of Purchaser or Parent effectively to
exercise full rights of ownership of the Shares, including, without
limitation, the right to vote the Shares purchased by it on all matters
properly presented to the Company's shareholders;
b. there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated, or deemed applicable
(pursuant to an authoritative interpretation by or on behalf of a
Government Entity, to the Offer or the Merger) or any other action shall be
taken by any Governmental Entity, other than the application to the Offer
or the Merger of applicable waiting periods under the HSR Act, that is
reasonably likely to result, directly or indirectly, in any of the
consequences referred to in clauses (i) through (iv) of paragraph (a)
above;
c. there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on the London Stock Exchange, the
New York Stock Exchange, the American Stock
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Exchange or the NASDAQ Stock Market for a period in excess of 24 hours
(excluding suspensions or limitations resulting solely from physical damage
or interference with such exchanges not related to market conditions), (ii)
a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States or the United Kingdom (whether or not
mandatory), (iii) a commencement of a war, armed hostilities or other
international or national calamity directly or indirectly involving the
United States or the United Kingdom that constitutes a Company Material
Adverse Effect or materially or adversely affects or delays the
consummation of the Offer, (iv) any limitation (whether or not mandatory)
by any United States or United Kingdom Governmental Entity on the extension
of credit generally by banks or other financial institutions, or (v) a
change in general financial, bank or capital market conditions which
materially and adversely affects the ability of financial institutions in
the United States to extend credit or syndicate loans;
d. the representations and warranties of the Company set forth in the
Merger Agreement that are qualified by reference to a Company Material
Adverse Effect (as defined in the Merger Agreement) were not true and
correct in any respect, or any other such representations or warranties
were not true and correct in any respect that (when taken together with all
such other representations and warranties not true and correct) would
reasonably be expected to have a Company Material Adverse Effect (i) in the
case of any representation or warranty which addresses matters as of a
particular date, as of such date, or (ii) in the case of all other
representations and warranties, as of the date of the Merger Agreement and
as of the scheduled expiration of the Offer;
e. since the date of this Agreement, there shall have occurred any
change (or any development that is reasonably likely to result in any
change) that constitutes a Company Material Adverse Change;
f. (i) the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified in a manner adverse to Parent or the
Purchaser its approval or recommendation of the Offer, the Merger or the
Merger Agreement, or approved or recommended any Acquisition Proposal or
(ii) the Company shall have entered into any agreement with respect to any
Superior Proposal in accordance with Section 5.3(b) of the Merger
Agreement;
g. the Company shall have failed, in any material respect, to perform
or to comply with any agreement or covenant to be performed or complied
with by it under the Merger Agreement;
h. all consents, permits and approvals of Governmental Entities shall
not have been obtained;
i. The London Stock Exchange shall have failed to admit to the
Official List of the London Stock Exchange the shares of capital stock of
Parent to be issued in connection with the equity financing contemplated in
connection with the Transactions (as defined in the Merger Agreement) or
such admission shall not have become effective in accordance with paragraph
7.1 of the listing rules of the London Stock Exchange, provided that
Purchaser shall not be entitled to rely on this condition if the Financing
is not consummated for any reason other than the failure to have Parent's
shares of capital stock admitted for listing as provided in this clause
(i);
j. the Merger Agreement shall have been terminated in accordance with
its terms; and
k. the Company shall have provided Parent with the audited
consolidated financial statements of the Company for the year ended
December 31, 1999 which will not be inconsistent with the December 1999
Financial Statements in any respect which is materially adverse.
The foregoing conditions are for the sole benefit of Parent and the
Purchaser, may be asserted by Parent or the Purchaser regardless of the
circumstances giving rise to such condition and may be waived by Parent or the
Purchaser in whole or in part at any time and from time to time in the sole
discretion of Parent or the Purchaser, subject in each case to the terms of the
Merger Agreement. The failure by Parent or the Purchaser 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.
15. CERTAIN LEGAL MATTERS. Except as described in this Section 15, based
on information provided by the Company, none of the Company, Purchaser or Parent
is aware of any license or regulatory permit that
39
<PAGE> 42
appears to be material to the business of the Company that might be adversely
affected by the Purchaser's acquisition of Shares as contemplated herein or of
any approval or other action by a domestic or foreign governmental,
administrative or regulatory agency or authority that would be required for the
acquisition and ownership of the Shares by the Purchaser as contemplated herein.
Should any such approval or other action be required, the Purchaser and Parent
presently contemplate that such approval or other action will be sought, except
as described below under "State Takeover Laws." While, except as otherwise
described in this Offer to Purchase, the Purchaser 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, the
Purchaser could decline to accept for payment or pay for any Shares tendered.
See Section 14 for certain conditions to the Offer, including conditions with
respect to governmental actions.
State Takeover Laws. In addition to Virginia, a number of states have
adopted laws and regulations applicable to attempts to acquire securities of
corporations which are incorporated, or have substantial assets, shareholders,
principal executive offices or principal places of business, or whose business
operations otherwise have substantial economic effects, in such states. In Edgar
v. MITE Corp., the Supreme Court of the United States invalidated on
constitutional grounds the Illinois Business Takeover Statute, which, as a
matter of state securities law, made takeovers of corporations meeting certain
requirements more difficult. However, in 1987, in CTS Corp. v. Dynamics Corp. of
America, the Supreme Court held that the State of Indiana may, as a matter of
corporate law and, in particular, with respect to those aspects of corporate law
concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without the prior
approval of the remaining shareholders. The state law before the Supreme Court
was by its terms applicable only to corporations that had a substantial number
of shareholders in the state and were incorporated there.
The Company, directly or through subsidiaries, conducts business in a
number of states throughout the United States, some of which have enacted
takeover laws. The Purchaser does not know whether any of these laws will, by
their terms, apply to the Offer or the Merger and has not complied with any such
laws. Should any person seek to apply any state takeover law, the Purchaser will
take such action as then appears desirable, which may include challenging the
validity or applicability of any such statute in appropriate court proceedings.
In the event it is asserted that one or more state takeover laws are applicable
to the Offer or the Merger, and an appropriate court does not determine that it
is inapplicable or invalid as applied to the Offer, the Purchaser might be
required to file certain information with, or receive approvals from, the
relevant state authorities. In addition, if enjoined, the Purchaser might be
unable to accept for payment any Shares tendered pursuant to the Offer, or be
delayed in continuing or consummating the Offer and the Merger. In such case,
the Purchaser may not be obligated to accept for payment, or pay for, any Share
tendered pursuant to the Offer. See Section 14.
Antitrust. Under the HSR Act, and the rules that have been promulgated
thereunder by the Federal Trade Commission (the "FTC"), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice (the "Antitrust
Division") and the FTC and certain waiting period requirements have been
satisfied.
A Notification and Report Form with respect to the Offer is expected to be
filed under the HSR Act on or about January 19, 2000, and if filed on such date,
the waiting period with respect to the Offer under the HSR Act will expire at
11:59 P.M., New York City time, on February 6, 2000. Before such time, however,
either the FTC or the Antitrust Division may extend the waiting period by
requesting additional information or material from the Purchaser. If such
request is made, the waiting period will expire at 11:59 P.M., New York City
time, on the tenth calendar day after the Purchaser has substantially complied
with such request. Thereafter, the waiting period may be extended only by court
order or with the Purchaser's consent.
40
<PAGE> 43
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's acquisition of Shares
pursuant to the Offer and the Merger. At any time before or after the
Purchaser's acquisition of Shares, the Antitrust Division or the FTC could take
such action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the acquisition of Shares pursuant
to the Offer or otherwise or seeking divestiture of Shares acquired by the
Purchaser or divestiture of substantial assets of Parent or its subsidiaries.
Private parties, as well as state governments, may also bring legal action under
the antitrust laws under certain circumstances. Based upon an examination of
publicly available information relating to the businesses in which Parent and
the Company are engaged, Parent and the Purchaser believe that the acquisition
of Shares by the Purchaser will not violate the antitrust laws. Nevertheless,
there can be no assurance that a challenge to the Offer or other acquisition of
Shares by the Purchaser on antitrust grounds will not be made or, if such a
challenge is made, of the result. See Section 14 for certain conditions to the
Offer, including conditions with respect to litigation and certain governmental
actions.
The Offer and the Merger cannot be consummated until the Federal Cartel
Office of Germany has been notified and approves of the acquisition of the
Company by Parent under the German Act Against Restraints of Competition (the
"Competition Act"). Upon receipt of notification, the Federal Cartel Office will
conduct a preliminary review for a period of up to one month. Upon conclusion of
the preliminary review, the Federal Cartel Office may either approve the
acquisition of the Company by Parent or initiate an in-depth review for a period
of up to four months from the date of the original notification if further
examination is necessary to determine whether the acquisition of the Company by
Parent violates the Competition Act. The parties will prepare and file a joint
filing with the Federal Cartel Office on or about January 17, 2000. The parties
believe that Parent's acquisition of the Company will be cleared during the
preliminary review phase, however, there can be no assurance that the Federal
Cartel Office will not conduct an in-depth review to further examine the merits
of the Offer and the Merger under the Competition Act.
In addition to the United States and Germany, the antitrust and competition
laws of other countries may apply to the Offer and the Merger and additional
filings and notifications may be required. Parent and the Company are reviewing
whether any such filings are required and intend to make such filings promptly
to the extent required.
Federal Reserve Board Regulations. Regulations G, U and X (the "Margin
Regulations") of the Federal Reserve Board restrict the extension or maintenance
of credit for the purpose of buying or carrying margin stock, including the
Shares, if the credit is secured directly or indirectly by margin stock. Such
secured credit may not be extended or maintained in an amount that exceeds the
maximum loan value of all the direct and indirect collateral securing the
credit, including margin stock and other collateral. All financing for the Offer
will be structured so as to be in full compliance with the Margin Regulations.
16. FEES AND EXPENSES. Except as set forth below, neither Parent nor the
Purchaser will pay any fees or commissions to any broker, dealer or other person
for soliciting tenders of Shares pursuant to the Offer.
Deutsche Bank is acting as the Dealer Manager in connection with the Offer
and is acting as financial advisor to Parent in connection with its effort to
acquire the Company. In connection with the Offer, Parent has agreed to pay
Deutsche Bank for its services (i) $100,000 as a retainer fee (the "Retainer
Fee"), (ii) $600,000 (the "Announcement Fee") payable upon the announcement of
the commencement of a tender offer for part or all of the Shares or the
execution of a definitive agreement with the Company to acquire all or a portion
of the Company (a "Transaction"), (iii) $3,500,000 in the event a Transaction is
consummated (the "Transaction Fee") provided the Transaction Fee shall be
reduced by the amount of any previously paid Retainer Fee and Announcement Fee
and (iv) in the event a Transaction is not consummated, 20% of any break-up,
lock-up option, topping fee or other termination fee. Parent has also agreed,
whether or not the Offer is consummated, to pay Deutsche Bank (in its capacity
as Dealer Manager and financial advisor) for its reasonable out-of-pocket
expenses, including the reasonable fees and expenses of its legal counsel,
incurred in connection with its engagement, and to indemnify Deutsche Bank
against certain liabilities and expenses in connection with their engagement.
Deutsche Bank renders various investment banking and other advisory
41
<PAGE> 44
services to Parent and its affiliates and is expected to continue to render such
services, for which it has received and will continue to receive customary
compensation from Parent and its affiliates.
The Purchaser has retained MacKenzie Partners, Inc. to act as the
Information Agent and BankBoston, N.A. to act as the Depositary in connection
with the Offer. Such firms each will receive reasonable and customary
compensation for their services. The Purchaser has also agreed to reimburse each
such firm for certain reasonable out-of-pocket expenses and to indemnify each
such firm against certain liabilities in connection with their services,
including certain liabilities under federal securities laws.
The Purchaser will not pay any fees or commissions to any broker or dealer
or other person (other than the Information Agent and the Dealer Manager) for
making solicitations or recommendations in connection with the Offer. Brokers,
dealers, banks and trust companies will be reimbursed by the Purchaser for
customary mailing and handling expenses incurred by them in forwarding material
to their customers.
17. MISCELLANEOUS. The Offer is being made to all holders of Shares. The
Purchaser is not aware of any jurisdiction in which the making of the Offer or
the tender of Shares in connection therewith would not be in compliance with the
laws of such jurisdiction. If the Purchaser becomes aware of any jurisdiction in
which the making of the Offer would not be in compliance with applicable law,
the Purchaser will make a good faith effort to comply with any such law. If,
after such good faith effort, the Purchaser cannot comply with any such law, the
Offer will not be made to (nor will tenders be accepted from or on behalf of)
the holders of Shares residing in such jurisdiction. In any jurisdiction where
the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on behalf of the
Purchaser by one or more registered brokers or dealers licensed under the laws
of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF PARENT OR THE PURCHASER 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.
The Purchaser and Parent have filed with the Commission the Schedule 14D-1
pursuant to Rule 14d-3 under the Exchange Act furnishing certain additional
information with respect to the Offer. The Schedule 14D-1 and any amendments
thereto, including exhibits, may be examined and copies may be obtained from the
offices of the Commission and the Nasdaq National Market in the manner set forth
in Section 9 of this Offer to Purchase (except that they will not be available
at the regional offices of the Commission).
Bobcat Acquisition Corp.
January 14, 2000
42
<PAGE> 45
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
OF
BOBCAT ACQUISITION CORP.
AND
THE SAGE GROUP PLC
1. BOBCAT ACQUISITION CORP. Set forth below is the name, business address
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 the Bobcat Acquisition Corp. Unless otherwise indicated,
(a) each such person is a citizen of the United Kingdom, and (b) the business
address of each such person is c/o Sage Software, Inc., 56 Technology Drive,
Irvine, California 92618.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AND ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ---------------- --------------------------------------------------
<S> <C>
Aidan John Hughes Director of Bobcat Acquisition Corp. since formation;
Finance Director of The Sage Group plc since January
1994; Director of Sagesoft Ltd. from 1993 to 1997.
Paul Ashton Walker Director and President of Bobcat Acquisition Corp. since
formation; Director of The Sage Group plc from October
1988 to present, and Chief Executive from January 1994
to present; Director of Sagesoft Ltd. since October
1987; Director of DacEasy, Inc. since 1991; Director of
Sage France SA since November 1996; Director of KHK
Software GmbH & Co. KG since February 1997; Director of
Cussins Property Group plc since February 1997.
Paul Stobart Director and Vice President of Bobcat Acquisition Corp.
since formation; Chief Operating Officer of The Sage
Group plc since January 2000; Business Development
Director of The Sage Group plc from May 1996 through
December 1999; Director of Sagesoft Ltd. since July
1996; Director of KHK Software GmbH & Co. KG since
February 1997; Director of Lopex plc since 1997;
Director of Interbrand Design UK Limited from 1988 to
1996; Director of Interbrand Group Limited from 1988 to
1996; Director of Interbrand UK Limited from 1988 to
1996; Director of Markforce Associates Limited from1988
to 1992; Director of Asda Interactive Sampling Limited
from 1989 to 1995; Director of Novamark International
Limited from 1988 to 1996; Director of Sportsmanager
(Bisham Abbey) Limited from 1992 to 1994.
James R. Eckstaedt Director, Chief Financial Officer and Corporate
Secretary of Bobcat Acquisition Corp. since formation;
Vice President, Finance, Chief Financial Officer and
Corporate Secretary, Sage Software, Inc. (formerly State
of The Art) since March 1997; Senior Vice President,
Chief Financial Officer and Corporate Secretary of the
Cerplex Group from July 1996 through March 1997; various
senior financial management positions, Western Digital
Corporation, March 1988 through July 1996. Mr. Eckstaedt
is a citizen of the United States.
</TABLE>
2. THE SAGE GROUP PLC. Set forth below is the name, business address and
present principal occupation or employment, and material occupations, positions,
offices or employments for the past five years, of the
43
<PAGE> 46
directors and executive officers of The Sage Group plc. Unless otherwise
indicated, (a) each such person is a citizen of the United Kingdom, and (b) the
business address of each such person is c/o The Sage Group plc, The Sage Group
House, Benton Park Road, Newcastle Upon Tyne, NE7 7LZ, England.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AND ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ---------------- --------------------------------------------------
<S> <C>
Michael Edward Wilson Jackson Director and President of Bobcat Acquisition Corp. since
formation; Director of The Sage Group plc from October
1988 to present, and Chairman from October 1997 to
present; Director of Sagesoft Ltd. since October 1988;
Director of Hat Pin plc since June 1996; Director of
Bywel Holdings Ltd. since June 1996; Director of Weyrad
Electronics Ltd. since February 1996; Director of
Quality & Safety Services Ltd. since November 1995;
Director of BR QAS Ltd. since November 1995; Director of
Steve Dudman PlantLtd. since November 1995; Director of
Elderstreet Corporate Finance Ltd. since June 1995;
Director of Photoaward Ltd. since June 1995; Director of
Select Software plc since September 1992; Director of
Matrix Aegis plc since February 1992; Director of A&M
Furniture Hire Ltd. since January 1992; Director of
Faverwise Ltd. since October 1991; Director of Elmbridge
Village Ltd. since March 1991; Director of ID Data
Holdings Ltd. since December 1992; Director of Micromuse
plc since September 1993; Director of Golf Park
Developments Ltd. since September 1993; Director of
Baldwin & Francis Ltd since May 1994; Director of
Starburst Ltd. since May 1994; Director of Spargo
Consulting plc since May 1994; Director of Cedars
Village Ltd. since June 1994; Director of Elderstreet
Capital Partners Ltd. since June 1995; Director of
Service Power Business Solutions until December 1996;
Director of W Fearnehough Limited until February 1995;
Director of Target Resources Ltd. until January 1994;
Director of SLS Information Systems until October 1994;
Director of Brightstone Properties plc until October
1993; Director of Pharmasol Ltd. until February 1993.
Aidan John Hughes See Part 1 of this Schedule I.
Paul Ashton Walker See Part 1 of this Schedule I.
Lindsay Claude Neils Bury Director of The Sage Group plc since January 1996;
Chairman of Casewise Systems plc since 1997; Director of
Wray-Tech (UK) Ltd. since 1995; Director of Electric and
General Investment Co. plc since 1995; Director of
Roxboro plc since 1993; Chairman of South Staffordshire
Water Holdings plc since 1979; Chairman of Unicorn
International plc from 1995 to 1997; Director of Portals
Group plc from 1973 to 1995; Director of ACT plc from
1968 to 1995; Director of Christie Group plc from 1988
to 1994; Director Millichope Management since October
1990.
</TABLE>
44
<PAGE> 47
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AND ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ---------------- --------------------------------------------------
<S> <C>
Charles John Constable Director of The Sage Group plc since January 1996;
Partner, Constable & Constable; Director of NMBZ
Holdings Ltd. since March 1997; Chairman of Harpur Trust
since 1997; Chairman of Truesand Ltd. since 1992;
Chairman of Brigtech Developments Ltd. since 1989;
Director of Foundation for Management Education (FME)
Ltd. since 1985; Director of Lloyds Abbey Life PLC from
1987 to April 1997; Trustee of the Pensions Trust, 15
Rathbone Street, London W1P 2AJ, England; Visiting
Professor at Cranfield School of Management, Cranfield
University, Cranfield, Bedfordshire, MK43 OAL, England;
Visiting Associate Professor at Ashridge Management
College, Berkhamstead, Hertfordshire, HP4 INS, England.
Paul Lancelot Stobart See Part 1 of this Schedule I.
Guy Berruyer Director of The Sage Group plc since 1998; Chief
Executive of Sage France since 1998; Chief Executive of
the European Division of Intuit, from 1995 through 1998.
Mr. Berruyer is a citizen of France.
Andrew William Graham Wylie Director of The Sage Group plc since August 1988;
Managing Director of Sagesoft Ltd. since August 1988.
Nicholas Ian Cooper Secretary and Corporate Counsel of The Sage Group plc
since January 2000; Company Solicitor, The Asda Group
plc, from 1994 through December 1999.
</TABLE>
45
<PAGE> 48
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for Shares and
any other required documents should be sent or delivered by each shareholder of
the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary, at one of the addresses set forth below:
Depositary for the Offer is:
BANKBOSTON, N.A.
<TABLE>
<S> <C> <C>
By First Class Mail: By Hand: By Overnight, Certified or
BankBoston, N.A. Securities Transfer & Express Mail:
ATTN: Corporate Actions Reporting Services, Inc. BankBoston, N.A.
P.O. Box 8029 c/o Boston EquiServe LP ATTN: Corporate Actions
Boston, MA 02266-8029 100 William Street, Galleria 150 Royall Street
New York, NY 10038 Canton, MA 02021
</TABLE>
By Facsimile Transmission:
(For Eligible Institutions Only)
(781) 575-2233/2232
Confirm Receipt by Telephone:
(781) 575-3128
Questions and requests for assistance or additional copies of this Offer to
Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and the
Guidelines for Certification of Taxpayer Identification on Substitute Form W-9
may be directed to the Information Agent at the locations and telephone numbers
set forth below. Shareholders may also contact Deutsche Bank Securities Inc.,
Dealer Manager for the Offer, or their broker, dealer, commercial bank or trust
company for assistance concerning the Offer.
The Information Agent for the Offer is:
MacKenzie Partners, Inc. logo
156 Fifth Street
New York, New York 10010
Banks and Brokers Call Collect:
(212) 929-5500
All others Call Toll-Free:
(800) 322-2885
The Dealer Manager for the Offer is:
DEUTSCHE BANC ALEX. BROWN
Deutsche Bank Securities Inc.
101 California Street, 48th Floor
San Francisco, California 94111
(415) 617-2800 (Call Collect)
or
Call Toll-Free (800) 334-2640
46
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER
SHARES OF COMMON STOCK
OF
BEST SOFTWARE, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED JANUARY 14, 2000
BY
BOBCAT ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
THE SAGE GROUP PLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, FEBRUARY 11, 2000, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
BANKBOSTON, N.A.
<TABLE>
<S> <C> <C>
By First Class Mail: By Hand: By Overnight, Certified or
Express Mail:
BANKBOSTON, N.A. SECURITIES TRANSFER & BANKBOSTON, N.A.
ATTN: CORPORATE ACTIONS REPORTING SERVICES, INC. ATTN: CORPORATE ACTIONS
P.O. BOX 8029 C/O BOSTON EQUISERVE LP 150 ROYALL STREET
BOSTON, MA 02266-8029 100 WILLIAM STREET, GALLERIA CANTON, MA 02021
NEW YORK, NY 10038
</TABLE>
By Facsimile Transmission:
(For Eligible Institutions only)
(781) 575-2233/2232
Confirm Receipt by Telephone:
(781) 575-3128
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF
TRANSMITTAL IN THE APPROPRIATE SPACE PROVIDED THEREFOR AND COMPLETE THE
SUBSTITUTE FORM W-9 PROVIDED BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF SHARES TENDERED
- ---------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON SHARE CERTIFICATE(S) AND SHARES TENDERED
SHARE CERTIFICATES) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
- ---------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES
SHARE EVIDENCED BY
CERTIFICATE SHARE NUMBER OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
Total
Shares
- ---------------------------------------------------------------------------------------------------------------
* Need not be completed by shareholders delivering Shares by Book-Entry Transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by each Share Certificate
delivered to the Depositary are being tendered hereby. See Instruction 4.
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 2
This Letter of Transmittal is to be used either if certificates are to be
forwarded herewith or if delivery of Shares (as defined below) is to be made by
book-entry transfer to an account maintained by the Depositary at The Depository
Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures
set forth in Section 3 of the Offer to Purchase (as defined below). Delivery of
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Depositary. 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 evidencing Shares ("Share Certificates")
are not immediately available or who cannot deliver their Share Certificates and
all other documents required hereby to the Depositary or complete the procedures
for book-entry transfer prior to the Expiration Date (as defined in Section 1 of
the Offer to Purchase) must tender their Shares according to the guaranteed
delivery procedure set forth in Section 3 of the Offer to Purchase. See
Instruction 2.
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY AT THE BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE SYSTEM OF 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 Holder(s):
Window Ticket No. (if any):
Date of Execution of Notice of Guaranteed Delivery:
Name of Institution which Guaranteed Delivery:
Account Number (if delivered by Book-Entry Transfer):
Transaction Code Number:
[ ] CHECK HERE IF ANY OF YOUR SHARE CERTIFICATES HAVE BEEN LOST, DESTROYED OR
STOLEN AND CALL (781) 575-3128 TO OBTAIN AN AFFIDAVIT OF LOSS. SEE
INSTRUCTION 10.
Number of Shares represented by lost, destroyed or stolen Share
Certificates:
BOXES ABOVE FOR USE BY ELIGIBLE INSTITUTIONS ONLY.
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
2
<PAGE> 3
Ladies and Gentlemen:
The undersigned hereby tenders to Bobcat Acquisition Corp., a Virginia
corporation (the "Offeror"), and a wholly owned subsidiary of The Sage Group
plc, a Company organized under the laws of England ("Parent"), the
above-described shares of Common Stock, no par value (the "Shares"), pursuant to
the Offeror's offer to purchase all outstanding Shares at a price of $35.00 per
Share, net to the seller in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated January 14, 2000 (the "Offer to
Purchase"), receipt of which is hereby acknowledged, and in this Letter of
Transmittal (which, together with the Offer to Purchase and any amendments or
supplements hereto or thereto, constitute the "Offer"). The undersigned
understands that the Offeror reserves the right to transfer or assign, in whole
or in part from time to time, to any direct or indirect wholly owned subsidiary
of Parent, the right to purchase Shares tendered pursuant to 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 any such extension
or amendment), effective upon acceptance for payment of and payment for the
Shares tendered herewith, the undersigned hereby sells, assigns and transfers
to, or upon the order of the Offeror, all right, title and interest in and to
all the Shares that are being tendered hereby (and any and all other Shares or
other securities issued or issuable in respect thereof (collectively,
"Distributions")), and irrevocably constitutes and appoints the Depositary the
true and lawful agent and attorney-in-fact of the undersigned with respect to
such Shares and all 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 all Distributions, or transfer
ownership of such Shares and all Distributions on the account books maintained
by the Book-Entry Transfer Facility, together, in any such case, with all
accompanying evidences of transfer and authenticity, to or upon the order of the
Offeror, upon receipt by the Depositary, as the undersigned's agent, of the
purchase price (adjusted, if appropriate, as provided in the Offer to Purchase),
(b) present such Shares and all Distributions for cancellation and transfer on
the Company's books and (c) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Shares and all Distributions, all in
accordance with the terms of the Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the tendered
Shares and all Distributions and that, when the same are accepted for payment by
the Offeror, the Offeror will acquire good, marketable and unencumbered title
thereto, free and clear of all liens, restrictions, claims, charges and
encumbrances, and the same will not be subject to any adverse claims. The
undersigned will, upon request, execute any signature guarantees or additional
documents deemed by the Depositary or the Offeror to be necessary or desirable
to complete the sale, assignment and transfer of the tendered Shares and all
Distributions. In addition, the undersigned shall promptly remit and transfer to
the Depositary for the account of the Offeror any such Distributions issued to
the undersigned, in respect of the tendered Shares, accompanied by documentation
of transfer, and pending such remittance or appropriate assurance thereof, the
Offeror shall be entitled to all rights and privileges as owner of any such
Distributions and, subject to the terms of the Merger Agreement (as defined in
the Offer to Purchase), may withhold the entire purchase price or deduct from
the purchase price the amount or value thereof, as determined by the Offeror, in
its sole discretion.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned hereby irrevocably appoints Michael Jackson and Paul Walker
and each of them, and any other designees of the Offeror, the attorneys and
proxies of the undersigned, each with full power of substitution, to vote at any
annual, special or adjourned meeting of the Company's shareholders or otherwise
act in such manner as each such attorney and proxy or his or her substitute
shall in his or her sole discretion deem proper and to otherwise act with
respect to all the Shares tendered hereby which have been accepted for payment
by the Offeror prior to the time any such vote or action is taken (and any and
all Distributions issued or issuable in respect thereof) and with respect to
which the undersigned is entitled to vote. This appointment
3
<PAGE> 4
is effective when, and only to the extent that, the Offeror accepts for payment
such Shares as provided in the Offer to Purchase.
This power of attorney and proxy is coupled with an interest in the
tendered Shares, is irrevocable and is granted in consideration of the
acceptance for payment of such Shares in accordance with the terms of the Offer.
Such acceptance for payment shall revoke all prior powers of attorney and
proxies given by the undersigned at any time with respect to such Shares and no
subsequent powers of attorney or proxies may be given by the undersigned (and,
if given, will not be deemed effective). The Offeror reserves the right to
require that, in order for Shares to be deemed validly tendered, immediately
upon the Offeror's acceptance for payment of such Shares, the Offeror must be
able to exercise full voting and other rights with respect to such Shares,
including voting at any shareholders meeting then scheduled.
The undersigned understands that the valid tender of Shares to the Offeror
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 the Offeror upon the terms and subject to the
conditions of the Offer. The undersigned recognizes that under certain
circumstances set forth in the Offer to Purchase, the Offeror may not be
required to accept for payment any of the tendered Shares. The Offeror's
acceptance for payment of Shares pursuant to the Offer will constitute a binding
agreement between the undersigned and the Offeror upon the terms and subject to
the conditions of the Offer.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price of any Shares purchased, and/or
return any certificates 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 any Shares
purchased, and/or any certificates for Shares not tendered or 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 any
Shares purchased, and/or return any certificates for Shares not tendered or
accepted for payment in the name(s) of, and mail said check and/or any
certificates to, the person or persons so indicated. In the case of a book-entry
delivery 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 Offeror has no obligation pursuant to the
Special Payment Instructions to transfer any Shares from the name of the
registered holder(s) thereof if the Offeror does not accept for payment any of
the Shares so tendered.
4
<PAGE> 5
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares or Share
Certificates evidencing Shares not tendered or not purchased are to be issued in
the name of someone other than the undersigned.
Issue check and/or certificate(s) to:
Name: --------------------------------------------------------------------------
(PLEASE PRINT)
Address: -----------------------------------------------------------------------
-----------------------------------------------------------------------
(INCLUDE ZIP CODE)
- ------------------------------------------------------
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares or Share
Certificates evidencing Shares not tendered or not purchased are to be issued in
the name of someone other than the undersigned, or to the undersigned at an
address other than that shown under "Description of Shares Tendered."
Mail check and/or certificate(s) to:
Name: --------------------------------------------------------------------------
(PLEASE PRINT)
Address: -----------------------------------------------------------------------
-----------------------------------------------------------------------
(INCLUDE ZIP CODE)
5
<PAGE> 6
IMPORTANT
SHAREHOLDER(S): SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) OF HOLDER(S)
Dated: ------------------ , 2000
(Must be signed by registered holder(s) exactly as name(s) appear(s) on Share
Certificates or on a security position listing or by a person(s) authorized to
become registered holder(s) by certificates and documents transmitted herewith.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, please provide the following information. See
Instruction 5.)
Name(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PROVIDE FULL TITLE)
Address:
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Telephone No.:
- --------------------------------------------------------------------------------
(INCLUDE AREA CODE)
Taxpayer Identification or
Social Security Number:
- --------------------------------------------------------------------------------
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:
- --------------------------------------------------------------------------------
Name:
- --------------------------------------------------------------------------------
Name of Firm:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Title:
- --------------------------------------------------------------------------------
Telephone No.:
- --------------------------------------------------------------------------------
(INCLUDE AREA CODE)
Dated: ------------------ , 2000
6
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a financial
institution (including most commercial banks, savings and loan associations and
brokerage houses) that is a participant in the Security Transfer Agent's
Medallion Program, the New York Stock Exchange Medallion Signature Guarantee
Program or the Stock Exchange Medallion Program (each an "Eligible Institution,"
and collectively, "Eligible Institutions"). 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 owner of Shares) of Shares tendered herewith,
unless such holder(s) has completed either the box entitled "Special Delivery
Instructions" or the box entitled "Special Payment Instructions" in this Letter
of Transmittal or (ii) if such Shares are tendered for the account of an
Eligible Institution. See Instruction 5.
2. Delivery of Letter of Transmittal and Certificates; Guaranteed Delivery
Procedures. This Letter of Transmittal is to be completed by shareholders
either if Share Certificates are to be forwarded herewith or if a tender of
Shares is to be made pursuant to the procedures for delivery by book-entry
transfer set forth in Section 3 of the Offer to Purchase. 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 (as defined in the Offer to Purchase), and any other required
documents, must be received by the Depositary at one of the Depositary's
addresses set forth herein prior to the Expiration Date (as defined in the Offer
to Purchase) and either certificates for tendered Shares must be received by the
Depositary at one of such addresses or such Shares must be delivered pursuant to
the procedures for book-entry transfer (and a Book Entry Confirmation received
by the Depositary), in each case, prior to the Expiration Date, or (ii) the
tendering shareholder must comply with the guaranteed delivery procedure set
forth below.
Shareholders whose Share Certificates are not immediately available or who
cannot complete the procedures for book-entry transfer on a timely basis, or
time will not permit all required documents to reach the Depositary prior to the
Expiration Date, may tender their Shares pursuant to the guaranteed delivery
procedure set forth in Section 3 of the Offer to Purchase. Pursuant to such
procedures, (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 the Offeror (or facsimile thereof), must
be received by the Depositary prior to the Expiration Date and (iii) the
certificates for (or a Book-Entry Confirmation with respect to) such Shares,
together with this 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, all as provided in Section 3 of
the Offer to Purchase. A "trading day" is any day on which the National
Association of Securities Dealers Automated Quotation System, Inc. is open for
business. The Notice of Guaranteed Delivery may be delivered by hand to the
Depositary or transmitted by telegram, facsimile transmission or mail to the
Depositary and must include a guarantee by an Eligible Institution in the form
set forth in such Notice of Guaranteed Delivery.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THIS LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY
TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER.
SHARE CERTIFICATES 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.
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 under "Description of
Shares Tendered" is inadequate, the Share Certificate numbers and/or the number
of Shares evidenced by such Share Certificates and the number of Shares tendered
should be listed on a separate schedule attached hereto.
4. Partial Tenders. If fewer than all the Shares evidenced by any Share
Certificate delivered to the Depositary herewith 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 Share Certificate(s) for the remainder of the
Shares that were evidenced by the Share Certificate(s) delivered to the
Depositary herewith will be sent to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the box entitled "Special Delivery
Instructions" on the reverse hereof, as soon as practicable after the expiration
or termination of the Offer. All Shares represented by Share 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) evidencing such shares without any change
whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the Shares tendered hereby 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 such
Shares.
If this Letter of Transmittal or any Share Certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to the Offeror of such person's authority so to act must be
submitted.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and tendered hereby, no endorsements of Share Certificates or
separate stock powers are required unless payment or Share Certificates
evidencing Shares not tendered or not accepted for payment are to be issued in
the name of a person other than the registered holder(s), in which case the
Share Certificate(s) evidencing the Shares tendered hereby 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 such Share Certificate(s).
Signatures on such Share Certificate(s) or stock powers must be guaranteed by an
Eligible Institution. See Instruction 1.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the certificates evidencing
the Shares tendered hereby 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 such Share Certificates. Signatures on such Share
Certificate(s) or stock powers must be guaranteed by an Eligible Institution.
See Instruction 1.
6. Stock Transfer Taxes. Except as set forth in this Instruction 6, the
Offeror will pay, or cause to be paid, any stock transfer taxes with respect to
the transfer and sale of Shares to it or its assignee pursuant to the Offer. If,
however, payment of the purchase price for any Shares is to be made to, or if
Share Certificates evidencing Shares not tendered or accepted for payment are to
be issued in the name of, a person other than the registered holder(s), or if
tendered Share Certificates are registered in the name of a person other than
the person(s) signing this Letter of Transmittal, the amount of any stock
transfer taxes (whether imposed on the registered holder(s), such person or
otherwise) payable on the account of the transfer to such other person will be
deducted from the purchase price of such Shares purchased, unless evidence
satisfactory to the Offeror 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 Certificates
evidencing the Shares tendered hereby.
8
<PAGE> 9
7. Special Payment and Delivery Instructions. If a check is to be issued
in the name of and/or Share Certificates not accepted for payment are to be
returned to a person other than the signer of this Letter of Transmittal or if a
check is to be sent and/or such Share 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 in the box entitled "Description of Shares Tendered" on
the reverse hereof, the appropriate boxes on the reverse side of this Letter of
Transmittal should be completed. Any shareholder tendering Shares by book-entry
transfer will have any Shares not accepted for payment returned by crediting the
account maintained by such shareholder at the Book-Entry Transfer Facility from
which such transfer was made.
8. Waiver of Conditions. Except as otherwise provided in the Offer to
Purchase, the Offeror reserves the absolute right, in its sole discretion, to
waive any of the conditions of the Offer or any defect or irregularity in the
tender of any Shares of any particular shareholder, whether or not similar
defects or irregularities are waived in the case of other shareholders.
9. Taxpayer Identification Number and Backup Withholding. U.S. federal
income tax law generally requires that a shareholder tendering Shares pursuant
to the Offer must provide the Depositary (the "Payor") with his correct Taxpayer
Identification Number ("TIN"), which, in the case of a shareholder who is an
individual, is his social security number. If the Payor is not provided with the
correct TIN or an adequate basis for an exemption, such shareholder may be
subject to a $50 penalty imposed by the Internal Revenue Service and backup
withholding at the rate of 31% may be imposed upon the gross proceeds of any
payment received hereunder. If withholding results in an overpayment of taxes, a
refund may be obtained.
To prevent backup withholding, each tendering shareholder must provide his
correct TIN by completing the "Substitute Form W-9" set forth herein, which
requires such shareholder to certify that the TIN provided is correct (or that
such shareholder is awaiting a TIN) and that (i) the shareholder has not been
notified by the Internal Revenue Service that he is subject to backup
withholding as a result of a failure to report all interest or dividends or (ii)
the Internal Revenue Service has notified the shareholder that he is no longer
subject to backup withholding.
Exempt shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. To prevent possible erroneous backup withholding, an exempt
shareholder must enter its correct TIN in Part 1 of Substitute Form W-9, write
"Exempt" in Part 2 of such form, and sign and date the form. See the enclosed
Guidelines for Certification of Taxpayer Identification Number of Substitute
Form W-9 (the "W-9 Guidelines") for additional instructions. In order for a
nonresident alien or foreign entity to qualify as exempt, such person must
submit a completed Form W-8, "Certificate of Foreign Status" signed under
penalties of perjury attesting to such exempt status. Such forms may be obtained
from the Payor.
If Shares are held in more than one name or are not in the name of the
actual owner, consult the W-9 Guidelines for information on which TIN to report.
If you do not have a TIN, consult the W-9 Guidelines for instructions on
applying for a TIN, write "Applied For" in the space for the TIN in Part 1 of
the Substitute Form W-9, and sign and date the Substitute Form W-9 and the
Certificate of Awaiting Taxpayer Identification Number set forth herein. If you
do not provide your TIN to the Payor within 60 days, backup withholding will
begin and continue until you furnish your TIN to the Payor. NOTE: WRITING
"APPLIED FOR" ON THE FORM MEANS THAT YOU HAVE ALREADY APPLIED FOR A TIN OR THAT
YOU INTEND TO APPLY FOR ONE IN THE NEAR FUTURE.
10. Lost or Destroyed Certificates. If any Share Certificate has been lost
or destroyed, the shareholder should check the appropriate box on the reverse
side of the Letter of Transmittal. The Company's stock transfer agent will then
instruct such shareholder as to the procedure to be followed in order to replace
the Share Certificate. The shareholder will have to post a surety bond of
approximately 2% of the current market value of the stock. This Letter of
Transmittal and related documents cannot be processed until procedures for
replacing lost or destroyed Share Certificates have been followed.
11. Requests for Assistance or Additional Copies. Questions and requests
for assistance or additional copies of the Offer to Purchase, the Letter of
Transmittal, the Notice of Guaranteed Delivery and the
9
<PAGE> 10
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 may be directed to the Information Agent at the locations and telephone
numbers set forth below.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY THEREOF),
TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES, OR IN THE CASE OR A BOOK-ENTRY
TRANSFER, AN AGENT'S MESSAGE, AND SHARE CERTIFICATES, OR A BOOK-ENTRY
CONFIRMATION, FOR SHARES AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY
THE DEPOSITARY, OR THE NOTICE OF GUARANTEED DELIVERY (OR A FACSIMILE COPY
THEREOF) MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE
(AS DEFINED IN THE OFFER TO PURCHASE).
10
<PAGE> 11
<TABLE>
<CAPTION>
<C> <S> <C>
PAYER'S NAME: CHASEMELLON SHAREHOLDER SERVICES, AS DEPOSITARY
SUBSTITUTE PART I -- Taxpayer Identification Num- ------------------------------------------
FORM W-9 ber -- For All Accounts Social Security Number
DEPARTMENT OF THE ENTER YOUR TIN IN THE BOX AT RIGHT. (For most OR
TREASURY individuals, this is your social security
INTERNAL REVENUE SERVICE number. If you do not have a TIN, see ------------------------------------------
Obtaining a Number in the enclosed Employer Identification Number
Guidelines). CERTIFY BY SIGNING AND DATING (If awaiting TIN, write "Applied For")
BELOW.
NOTE: If the account is in more than one
name, see the chart in the enclosed Guide-
lines to determine which number to give the
payor.
</TABLE>
<TABLE>
<C> <S>
PART II -- For Payees Exempt from Backup Withholding, see the enclosed Guidelines and
complete as instructed therein.
PAYER'S REQUEST FOR PART III -- CERTIFICATION -- Under penalties of perjury, I certify that:
TAXPAYER IDENTIFICATION (1) The number shown on this form is my correct Taxpayer Identification Number (or I am
NUMBER (TIN) waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because (a) I am exempt from backup
withholding, (b) I have not been notified by the Internal Revenue Service (the
"IRS") that I am subject to backup withholding as a result of failure to report
all interest or dividends, or (c) the IRS has notified me that I am no longer
subject to backup withholding.
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding you received another
notification from the IRS that you are no longer subject to backup withholding, do not
cross out item (2). (Also see instructions in the enclosed Guidelines.)
Signature --------------------------------------- Date -------------------- , 2000
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY
IMPOSED BY THE INTERNAL REVENUE SERVICE AND 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 the 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 by the time of payment, 31%
of all reportable payments made to me thereafter will be withheld until I
provide a number.
Signature ---------------------------------------- Date ---------------- , 2000
11
<PAGE> 12
Questions and requests for assistance or additional copies of the Offer to
Purchase, Letter of Transmittal and other tender offer materials may be directed
to the Dealer Manager and the Information Agent at the locations and telephone
numbers set forth below:
THE INFORMATION AGENT FOR THE OFFER IS:
MACKENZIE PARTNERS, INC. LOGO
156 FIFTH STREET
NEW YORK, NEW YORK 10010
BANKS AND BROKERS CALL COLLECT:
(212) 929-5500
ALL OTHERS CALL TOLL-FREE:
(800) 322-2885
THE DEALER MANAGER FOR THE OFFER IS:
DEUTSCHE BANC ALEX. BROWN
DEUTSCHE BANK SECURITIES INC.
101 CALIFORNIA STREET, 48TH FLOOR
SAN FRANCISCO, CALIFORNIA 94111
(415) 617-2800 (CALL COLLECT)
OR
CALL TOLL-FREE (800) 334-2640
12
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
BEST SOFTWARE, INC.
AT
$35.00 NET PER SHARE
BY
BOBCAT ACQUISITION CORP.
A
WHOLLY OWNED SUBSIDIARY OF
THE SAGE GROUP PLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, FEBRUARY 11, 2000 (THE "INITIAL EXPIRATION DATE"), UNLESS THE
OFFER IS EXTENDED.
January 14, 2000
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Bobcat Acquisition Corp., a Virginia corporation
(the "Offeror") and a wholly owned subsidiary of The Sage Group plc, a company
organized under the laws of England ("Parent"), to act as Dealer Manager in
connection with the Offeror's offer to purchase all outstanding shares (the
"Shares") of common stock, no par value (the "Common Stock") of Best Software,
Inc., a Virginia corporation (the "Company"), at a price of $35.00 per Share,
net to the seller in cash, without interest, upon the terms and subject to the
conditions set forth in the Offeror's Offer to Purchase, dated January 14, 2000
(the "Offer to Purchase"), and the related Letter of Transmittal (which, as
amended or supplemented from time to time, together constitute the "Offer")
enclosed herewith. The Offer is being made in connection with the Agreement and
Plan of Merger, dated as of January 12, 2000, by and among Parent, the Offeror
and the Company. 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.
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
copies of the following documents:
1. Offer to Purchase;
2. Letter of Transmittal to tender Shares for your use and for the
information of your clients;
3. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares are not immediately available or time will not
permit all required documents to reach the Depositary by the Expiration
Date (as defined in the Offer to Purchase) or if the procedure for
book-entry transfer cannot be completed on a timely basis;
4. A letter to the shareholders of the Company from Timothy A.
Davenport, President and Chief Executive Officer of the Company, together
with a Solicitation/Recommendation Statement on Schedule 14D-9 filed with
the Securities and Exchange Commission by the Company;
5. A 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;
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and
<PAGE> 2
7. Return envelope addressed to BankBoston, N.A. (the "Depositary").
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, FEBRUARY 11, 2000, UNLESS THE OFFER IS EXTENDED.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i) the
certificates evidencing such Shares or timely confirmation of a book-entry
transfer of such Shares into the Depositary's account at one of the Book-Entry
Transfer Facilities (as defined in the Offer to Purchase), (ii) a Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or an Agent's Message (as defined in the
Offer to Purchase) in connection with a book-entry delivery, and (iii) any other
documents required by the Letter of Transmittal.
If holders of Shares wish to tender Shares, but cannot deliver such
holders' certificates or other required documents, or cannot comply with the
procedure for book-entry transfer, prior to the expiration of the Offer, a
tender may be effected by following the guaranteed delivery procedure described
in Section 3 of the Offer to Purchase.
Neither the Offeror nor Parent will pay any fees or commissions to any
broker, dealer or other person (other than Deutsche Bank Securities Inc. (the
"Dealer Manager") and MacKenzie Partners, Inc. (the "Information Agent")) for
soliciting tenders of Shares pursuant to the Offer. However, upon request, the
Offeror will reimburse you for customary mailing and handling expenses incurred
by you in forwarding any of the enclosed materials to your clients. The Offeror
will pay or cause to be paid any stock transfer taxes payable with respect to
the transfer of Shares to it, except as otherwise provided in the Letter of
Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
the Information Agent or to the Dealer Manager, at the respective addresses and
telephone numbers set forth on the back cover page of the Offer to Purchase.
Additional copies of the enclosed material may be obtained from the
Information Agent at the address and telephone number set forth on the back
cover page of the Offer to Purchase.
Very truly yours,
DEUTSCHE BANK SECURITIES INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL AUTHORIZE YOU
OR ANY OTHER PERSON TO ACT ON BEHALF OF OR AS THE AGENT OF PARENT, THE
PURCHASER, THE COMPANY, THE DEALER MANAGER, THE INFORMATION AGENT OR THE
DEPOSITARY, OR OF ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER
PERSON TO USE ANY DOCUMENT OR TO MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN
CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS
CONTAINED THEREIN.
2
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
BEST SOFTWARE, INC.
AT
$35.00 NET PER SHARE
BY
BOBCAT ACQUISITION CORP.
A
WHOLLY OWNED SUBSIDIARY OF
THE SAGE GROUP PLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, FEBRUARY 11, 2000 (THE "INITIAL EXPIRATION DATE"), UNLESS THE
OFFER IS EXTENDED.
January 14, 2000
To Our Clients:
Enclosed for your consideration are an Offer to Purchase, dated January 14,
2000 (the "Offer to Purchase"), and a related Letter of Transmittal (which, as
amended or supplemented from time to time, together constitute the "Offer")
relating to the offer by Bobcat Acquisition Corp., a Virginia corporation (the
"Offeror") and wholly owned subsidiary of The Sage Group plc, a company
organized under the laws of England ("Parent"), to purchase all outstanding
shares (the "Shares") of common stock, no par value (the "Common Stock"), of
Best Software, Inc., a Virginia corporation (the "Company"), at a price of
$35.00 per Share, net to the seller in cash, without interest, upon the terms
and subject to the conditions set forth in the Offer. The Offer is being made in
connection with the Agreement and Plan of Merger, dated as of January 12, 2000,
by and among Parent, the Offeror and the Company (the "Merger Agreement"). Also
enclosed is the Letter to Shareholders of the Company from Timothy A. Davenport,
President and Chief Executive Officer of the Company, together with a
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission by the Company.
WE ARE (OR OUR NOMINEE IS) 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 HELD
BY US FOR YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish to have us
tender on your behalf any or all of the Shares held by us (or our nominee) for
your account, upon the terms and subject to the conditions set forth in the
Offer.
Your attention is invited to the following:
1. The tender price is $35.00 per Share, net to the seller in cash,
without interest.
2. The Offer is being made for all outstanding Shares.
3. The Board of Directors of the Company has determined that each of
the Merger Agreement, the Offer and the Merger is fair to and in the best
interests of the shareholders of the Company and recommends that the
shareholders of the Company accept the Offer and tender their Shares to the
Offeror pursuant to the Offer.
4. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Friday, February 11, 2000, unless the Offer is extended.
<PAGE> 2
5. Tendering shareholders will not be obligated to pay brokerage fees
or commissions or, except as otherwise provided in the Letter of
Transmittal, stock transfer taxes with respect to the purchase of Shares by
the Offeror pursuant to the Offer. However, U.S. federal income tax backup
withholding at a rate of 31% may be required, unless an exemption is
provided or unless the required taxpayer identification information is
provided. See Instruction 9 of the Letter of Transmittal.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing, detaching and returning to us the instruction form
contained in this letter. An envelope in which 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 in your instructions. 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.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and any supplements or amendments thereto, and is being made to all
holders of Shares. The Offer is not being made to (nor will tenders be accepted
from or on behalf of) holders of Shares in any jurisdiction in which the making
of the Offer or the acceptance thereof would not be in compliance with the laws
of such jurisdiction. In any jurisdiction where the securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of the Offeror by Deutsche Bank
Securities Inc. or one or more registered brokers or dealers licensed under the
laws of such jurisdiction.
2
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
BEST SOFTWARE, INC.
BY
BOBCAT ACQUISITION CORP.
A
WHOLLY OWNED SUBSIDIARY OF
THE SAGE GROUP PLC
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated January 14, 2000, and the related Letter of Transmittal
(which, as amended or supplemented from time to time, together constitute the
"Offer") in connection with the offer by Bobcat Acquisition Corp., a Virginia
corporation and a wholly owned subsidiary of The Sage Group plc, a company
organized under the laws of England, to purchase all outstanding shares (the
"Shares") of common stock, no par value (the "Common Stock"), of Best Software,
Inc., a Virginia corporation (the "Company").
This will instruct you to tender the number of Shares indicated below (or,
if no number is indicated below, all Shares) that are held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer.
Date:___________________________ , 2000 SIGN HERE
_________________________________
_________________________________
Signature(s) of Holder(s)
Number of shares to be Tendered: _________________________________
Name(s) of Holder(s)
____________ shares of Common Stock*
_________________________________
Please Type or Print
_________________________________
Address
_________________________________
Zip Code
_________________________________
Area Code and Telephone Number
_________________________________
Taxpayer Identification or Social
Security Number
____________
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
3
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
BEST SOFTWARE, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED JANUARY 14, 2000
TO
BOBCAT ACQUISITION CORP.
A
WHOLLY OWNED SUBSIDIARY OF
THE SAGE GROUP PLC
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially in the form
hereof, must be used to accept the Offer (as defined below) if certificates
evidencing shares (the "Shares") of common stock, no par value (the "Common
Stock"), of Best Software, Inc., a Virginia corporation (the "Company"), are not
immediately available or time will not permit all required documents to reach
BankBoston, N.A., as Depositary (the "Depositary"), prior to the Expiration Date
(as defined in Section 1 of the Offer to Purchase (as defined below)) or the
procedure for delivery by book-entry transfer cannot be completed on a timely
basis. This Notice of Guaranteed Delivery may be delivered by hand or
transmitted by telegram, facsimile transmission or mail to the Depositary. See
Section 3 of the Offer to Purchase.
The Depositary for the Offer is:
BANKBOSTON, N.A.
<TABLE>
<CAPTION>
By Overnight, Certified or
By First Class Mail: By Hand: Express Mail:
<S> <C> <C>
BANKBOSTON, N.A. SECURITIES TRANSFER & BANKBOSTON, N.A.
ATTN: CORPORATE ACTIONS REPORTING SERVICES, INC. ATTN: CORPORATE ACTIONS
P.O. BOX 8029 C/O BOSTON EQUISERVE L.P. 150 ROYALL STREET
BOSTON, MA 02266-8029 100 WILLIAM STREET, GALLERIA CANTON, MA 02021
NEW YORK, NY 10038
</TABLE>
By Facsimile Transmission:
(For Eligible Institutions only)
(781) 575-2233/2232
Confirm Receipt by Telephone:
(781) 575-3128
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, AND TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE, WILL 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.
SHARES MAY NOT BE TENDERED PURSUANT TO THE GUARANTEED DELIVERY PROCEDURES.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to Bobcat Acquisition Corp., a Virginia
corporation and a wholly owned subsidiary of The Sage Group plc, a company
organized under the laws of England, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated January 14, 2000 (the
"Offer to Purchase"), and the related Letter of Transmittal (which, as amended
or supplemented from time to time, together constitute the "Offer"), receipt of
each of which is hereby acknowledged, the number of Shares specified below
pursuant to the guaranteed delivery procedure described in Section 3 of the
Offer to Purchase.
Series and Certificate Nos. of Shares (if available):
<TABLE>
<S> <C>
Common Stock, no par value Name(s) of Record Holder(s)
Certificate Nos.
------------------------ ---------------------------------------------------
- ------------------------
---------------------------------------------------
PLEASE TYPE OR PRINT
- ------------------------
Number of Shares
Tendered
- ------------------------------- Address(s):
-------------------------------------------------
If Share(s) will be delivered by
book-entry transfer, check this
box [ ] ---------------------------------------------------
ZIP CODE
Account number:
---------------------- Area Code and Tel. No.:
-----------------------------------
Signature(s):
------------------------------------------------
Dated:
---------------------------------------------------
</TABLE>
2
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR THE SIGNATURE GUARANTEE)
The undersigned, an Eligible Institution (as defined in the Offer to
Purchase), hereby guarantees delivery to the Depositary, at one of its addresses
set forth above, certificates ("Share Certificates") evidencing the Shares
tendered hereby, in proper form for transfer, or confirmation of book-entry
transfer of such Shares into the Depositary's account at The Depository Trust
Company, in each case with delivery of a Letter of Transmittal (or facsimile
thereof) properly completed and duly executed, or an Agent's Message (as defined
in the Offer to Purchase) in the case of a book-entry delivery, and any other
required documents, all within three days on which the National Association of
Securities Dealers Automated Quotation System, Inc. is open for business after
the date hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and Share
Certificates to the Depositary within the time period set forth above. Failure
to do so could result in a financial loss to such Eligible Institution.
Name of Firm:
-------------------------------------------------------------------
Authorized Signature:
-----------------------------------------------------------
Name:
---------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Title:
--------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(CITY, STATE, ZIP CODE)
Area Code and Telephone Number:
-------------------------------------------------
Dated: , 2000
-------------------------
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE
CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
3
<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
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
- ---------------------------------------------------------
---------------------------------------------------------
<TABLE>
<CAPTION>
GIVE THE
SOCIAL
SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- ---------------------------------------------------------
<C> <S> <C>
1. An individual The individual
2. Two or more individuals The actual owner of
(joint account) the account or, if
combined funds, the
first individual on
the account(1)
3. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
4. a. The unusual revocable The grantor-
savings trust (grantor is trustee(1)
also trustee)
b. So-called trust account The actual owner(1)
that is not a legal or
valid trust under state
law
5. Sole proprietorship The owner(3)
<CAPTION>
GIVE THE
EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- ---------------------------------------------------------
<C> <S> <C>
6. Sole proprietorship The owner(3)
7. A valid trust, estate or Legal entity(4)
pension trust
8. Corporate The corporation
9. Association, club, The organization
religious, charitable,
educational, or other
tax-exempt organization
10. Partnership The partnership
11. A broker or registered The broker or nominee
nominee
12. Account with the Department The public entity
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. If
only one person on a joint account has a social security number, that
person's number must be furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your social security number or
employer identification number.
(4) List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the identifying number of the person, representative or
trustee unless the legal entity itself is not designated in the account
title.)
NOTE:If no name is circled when more than one name is listed, 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 do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card, at the
local office of the Social Security Administration or Form SS-4. Applications
for Employer Identification Number at the Internal Revenue Service (the "IRS")
and apply for a number.
If you do not have a number, write "Applied For" in the space for the taxpayer
identification number in Part 1, sign and date the substitute Form W-9 and
return it to the payor. You must provide a payor with a taxpayer identification
number within 60 days. During this 60-day period, a payor has two options for
withholding on reportable interest or dividend payments:
(1) a payor must backup withhold on any withdrawals you make from the account
after 7 business days after a payor receives the substitute Form W-9: or
(2) a payor must backup withhold on any reportable interest or dividend
payments made to your account, regardless of whether you make any withdrawals.
Under this option, backup withholding must begin no later than 7 business days
after a payor receives the Substitute Form W-9. Under this option, a payor
must refund the amounts withheld if a payor receives your certified taxpayer
identification number within the 60-day period and you are not otherwise
subject to backup withholding during the period.
With respect to other reportable payments, if a payor does not receive your
taxpayer identification number within the 60 days, a payor must backup withhold
until you furnish your taxpayor identification number.
CERTIFICATION
For interest, dividends and broker transactions, you must sign the certification
or backup withholding will apply. If you are subject to backup withholding and
you are merely providing your correct taxpayer identification number to a payor,
you must cross out item 2 in Part III before signing the form.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- An organization exempt from tax under section 501(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), or an individual retirement account or
a custodial account under section 403(b)(7) of the Code if the account
satisfies the requirements of section 401(1)(2) of the Code.
- The United States or any of its agencies or instrumentalities.
- A State, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities.
- A foreign government or any of its political subdivisions, agencies or
instrumentalities.
- An international organization or any of its agencies or instrumentalities.
Other payees that may be exempt from backup withholding include the following:
- A corporation.
- A financial institution.
- A dealer in securities or commodities required to register in the United
States, the District of Columbia, or a possession of the United States.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a) of the Code.
- An entity registered at all times during the tax year under the Investment
Company Act of 1940.
- A foreign central bank of issue.
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 payor's trade or business and you have not provided
your current taxpayer identification number to the payor.
- Payments of tax-exempt interest (including exempt interest dividends under
section 852 of the Code).
- Payments described in section 6049(b)(5) of the Code to non-resident aliens.
- Payments on tax-free covenant funds under section 1451 of the Code.
- Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYOR. FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER. 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 sections 6041, 6041A, 6042, 6044, 6045, 6049,
6050A and 6050N of the Code and their regulations.
PRIVACY ACT NOTICE
Section 6109 of the Code requires recipients of dividend, interest, or other
payments to give taxpayer identification numbers to payors who must report the
payments to the IRS. The IRS uses the numbers for identification purposes. The
Payor must be given the numbers whether or not recipients are required to the
tax returns. Payors 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 payor. 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 payor, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause 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 that results in no backup
withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
ADVISOR OR THE IRS.
<PAGE> 1
EXHIBIT (a)(7)
FOR IMMEDIATE RELEASE
Media Contact: Paul Wood Company Contact: Jean Tung-Navarro
Paine & Associates Sage US, Inc.
(714) 427-3122 (949) 754-3503
[email protected] [email protected]
THE SAGE GROUP TO ACQUIRE BEST SOFTWARE
ACQUISITION EXPANDS SAGE(R) PRODUCT OFFERINGS IN HR, PAYROLL, FIXED ASSET, AND
PLANNING SOFTWARE PRODUCTS AND SERVICES
IRVINE, CALIF. - JANUARY 12, 2000 - The Sage Group plc, the world's leading
provider of PC-based accounting software today announced that it entered into a
definitive agreement to acquire Best Software (NASDAQ: BEST) for $35 a share in
an all cash-deal valued at $445 million, subject to certain conditions. Best(R)
will become a wholly-owned subsidiary of The Sage Group plc. The transaction is
expected to close approximately in mid-February.
The acquisition of Best expands and strengthens Sage's market position in
the US by adding a complementary line of the leading HR, payroll, fixed asset
and analytic solutions to Sage's market-leading accounting and business
management software. The combined client base will be in excess of 2.1 million
business customers worldwide. Sage Group annual revenues for the year ended
September 30, 1999 were $499 million. Best annual revenues for the year ended
December 31, 1999 were approximately $91.4 million.
Following the acquisition of Best Software, Sage Group will have four
major businesses in the US market:
- - Peachtree(R): a leading provider of accounting software to very small
businesses.
- - Sage Software, Inc: a leading provider of accounting software solutions to
small to mid-size businesses.
- - Sage Time Division: a leading provider of time and fee billing software to
accountants in practice as well as to the legal community.
<PAGE> 2
-- more --
SAGE ACQUIRES BEST
Page Two
- - Best Software: a leading provider of HR/payroll, fixed asset and planning
solutions to both the mid-size and small enterprise businesses.
"The acquisition of Best Software provides an exciting opportunity for
the Sage Group," said Paul Walker, chief executive officer for Sage Group plc,
Sage Software's parent company headquartered in Newcastle, England. "Best
Software has excellent products, a powerful value-added reseller network and a
substantial customer base. The strategic fit with our existing US businesses is
strong. Our combined businesses will represent a powerful force in the US small
to medium-sized business market."
Following the acquisition, Tim Davenport, President, CEO and Chairman of
Best Software, will report to Paul Walker, CEO of Sage Group, plc. Best Software
and Sage Software Inc. will work together on a range of marketing initiatives to
promote Best's product range to existing Sage customers. In particular, Sage
Software, Inc. will be encouraging its 10,000 strong value added reseller
network to sell Best's product range as part of an overall Sage accounting and
business management solution. Sage Software, Inc. currently markets Best's FAS
and Abra products as a key part of MAS 90 and also bundles Best's Imperativ
products with its Acuity solution.
"We are very excited about the acquisition of Best Software, the
undisputed leader in their market segment," said David Hanna, chief executive
officer of Sage US, Inc. "Strategically, the acquisition will make Sage by far
the largest and broadest player in the US market by adding market leading HR,
payroll, fixed asset and planning products to our core accounting and business
management applications. We are also very excited about the opportunity to
leverage Imperativ's leading-edge Internet technology as we continue to
web-enable our applications."
<PAGE> 3
- more -
SAGE ACQUIRES BEST
Page Three
ABOUT THE SAGE GROUP
The Sage Group plc, headquartered in Newcastle upon Tyne, England, is the
world's leading provider of personal computer accounting software to small- and
medium-sized businesses. Sage Group's revenues for its fiscal year ending
September 30, 1999 were 307 million pounds ($499 million). Sage Group has major
operations in the US, UK, France and Germany. The US operations accounted for
37% of revenues in the latest fiscal year.
ABOUT SAGE US, INC.
Headquartered in Irvine, Calif., Sage US, Inc. (www.Sage.com) is a
wholly-owned subsidiary of The Sage Group plc, the world's leading PC-based
accounting software company with more than two million customers. Sage markets
five major accounting software packages in the U.S. Peachtree(R), DacEasy(R) and
BusinessWorks(R) are easy to use and provide the full accounting features needed
by most small businesses of up to 50 employees. MAS 90(R) is the leading
accounting software for medium-sized businesses with up to 500 employees, and is
recommended by more CPAs than any other mid-range accounting product. Acuity(R)
is perfect for larger businesses of up to 1,000 employees, and for three
consecutive years it has won Microsoft's Industry Solution Award for Best
Technology Integration.
ABOUT BEST SOFTWARE
Best Software, Inc., with more than 50,000 customers worldwide and
offices in the US, Canada and Europe, is a leading provider of solutions which
help organizations better manage their people, assets and planning, and is
focusing on transforming organizations into web-centric management. It's
scalable, cost-effective solutions complement core financial management systems
and support the full spectrum of Microsoft platforms, including Windows 95,
Windows 98, Windows NT and BackOffice.
<PAGE> 4
SAGE IS A TRADEMARK OF THE SAGE GROUP PLC. ACUITY, MAS 90, BUSINESSWORKS, AND
DACEASY ARE TRADEMARKS OF SAGE SOFTWARE, INC. PEACHTREE IS A REGISTERED
TRADEMARK OF PEACHTREE SOFTWARE, INC. ALL OTHER BRANDS REFERENCED HEREIN ARE THE
TRADEMARKS OR THE REGISTERED TRADEMARKS OF THEIR RESPECTIVE HOLDERS.
# # #
<PAGE> 1
Exhibit (a)(8)
This announcement is neither an offer to purchase nor a solicitation of
an offer to sell Shares (as defined below). The Offer (as defined below) is made
solely by the Offer to Purchase, dated January 14, 2000 (the "Offer to
Purchase"), and the related Letter of Transmittal and is being made to all
holders of Shares. The Offer is not being made to (nor will tenders be accepted
from or on behalf of) holders of Shares in any jurisdiction in which the making
of the Offer or the acceptance thereof would not be in compliance with the laws
of such jurisdiction or any administrative or judicial action pursuant thereto.
In any jurisdiction where securities, blue sky or other laws require the Offer
to be made by a licensed broker or dealer, the Offer shall be deemed to be made
on behalf of the Purchaser (as defined below) by Deutsche Bank Securities Inc.
(the "Dealer Manager") or one or more registered brokers or dealers licensed
under the laws of such jurisdiction.
Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Best Software, Inc.
at
$35 Net Per Share
by
Bobcat Acquisition Corp.
a wholly owned subsidiary of
The Sage Group plc
Bobcat Acquisition Corp., a Virginia corporation (the "Purchaser") and
a wholly owned subsidiary of The Sage Group plc, a company organized under the
laws of England ("Parent"), is offering to purchase all of the issued and
outstanding shares (the "Shares") of common stock, no par value (the "Common
Stock"), of Best Software, Inc., a Virginia corporation (the "Company"), for $35
per Share, net to the seller in cash (the "Offer Price"), upon the terms and
subject to the conditions set forth in the Offer to Purchase and in the related
Letter of Transmittal (which, together with any amendments or supplements
thereto, collectively constitute the "Offer"). Tendering shareholders will not
be obligated to pay brokerage fees or commissions or, except as set forth in
Instruction 6 of the Letter of Transmittal, transfer taxes on the tender of
Shares pursuant to the Offer. The Purchaser is offering to acquire all Shares as
a first step in acquiring the entire equity interest in the Company. Following
consummation of the Offer, the Purchaser intends to effect the merger described
below.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, FEBRUARY 11, 2000, UNLESS THE OFFER IS EXTENDED.
The Offer is being made pursuant to an Agreement and Plan of Merger,
dated January 12, 2000 (the "Merger Agreement"), by and among Parent, the
Purchaser and the Company, pursuant to which, as soon as practicable after the
completion of the Offer and satisfaction or waiver of all conditions to the
Merger (as defined below), the Purchaser will be merged with and into the
Company and the separate corporate existence of the Purchaser will thereupon
cease. The merger, as effected pursuant to the immediately preceding sentence,
is referred to herein as the "Merger," and the Company as the surviving
corporation of the Merger is sometimes herein referred to as the "Surviving
Corporation." At the effective time of the Merger (the "Effective Time"), each
share of Common Stock then outstanding (other than Shares held by Parent, the
Purchaser or any other wholly owned subsidiary of Parent, and other than Shares
held by shareholders who have properly exercised dissenters' rights, if any, in
accordance with Virginia law) will be canceled and extinguished and converted
into the right to receive the Offer Price in cash, payable to the holder
thereof, without interest.
The Board of Directors of the Company has determined that each of the
Merger Agreement, the Offer, the Merger, the Option Agreement (as defined below)
and
<PAGE> 2
the Shareholders Agreement (as defined below) are fair to and in the best
interests of the shareholders of the Company and recommends that the
shareholders of the Company accept the Offer and tender their Shares to the
Purchaser pursuant to the Offer.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn, in accordance with the terms of the Offer and prior
to the expiration of the Offer, a number of shares of Common Stock which, when
added to the Shares owned by Parent and the Purchaser, if any, represents at
least a majority of the outstanding shares of Common Stock on a fully diluted
basis (without giving pro forma effect to the potential issuance of shares
issuable under the Option Agreement described below) (the "Minimum Condition").
The Purchaser will not be required to accept for payment or pay for any tendered
Shares until the expiration or termination of all applicable waiting periods
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The
Offer is also subject to other terms and conditions described in Section 14 of
the Offer to Purchase. As used herein "fully diluted basis" takes into account
the conversion or exercise of all outstanding options (other than the Option (as
defined below)) and other rights and securities exercisable or convertible into
shares of Common Stock.
As a condition and inducement to Parent and the Purchaser to enter into
the Merger Agreement, concurrently with the execution and delivery of the Merger
Agreement, Parent and the Company entered into an Option Agreement, dated
January 12, 2000 (the "Option Agreement"), pursuant to which, upon the terms set
forth therein, the Company granted to the Purchaser an irrevocable option (the
"Option") to purchase up to 2,352,024 newly issued shares of Common Stock (which
represents approximately 19.9% of the aggregate Shares currently outstanding) at
a purchase price per share of $35.00, subject to the terms and conditions set
forth in the Option Agreement. The Option will expire on the earliest of (i) the
Effective Time and (ii) six months after any termination of the Merger
Agreement.
As a condition and inducement to Parent and the Purchaser to enter into
the Merger Agreement, certain shareholders (the "Shareholders"), who have voting
power and dispositive power with respect to an aggregate of 563,409 Shares
directly, and hold stock options to purchase an aggregate of 444,450 Shares
(which Shares represent approximately 4.2% and 3.3% respectively, of the
Company's outstanding Shares on a fully diluted basis) concurrently with the
execution and delivery of the Merger Agreement entered into a Shareholders
Agreement, dated January 12, 2000 (the "Shareholders Agreement"), with Parent
and the Purchaser. Pursuant to the Shareholders Agreement, the Shareholders have
agreed, among other things, to (i) promptly tender the Shares held by them into
the Offer, (ii) grant the Purchaser an option, exercisable under certain
circumstances, to buy the Shares beneficially owned or controlled by them as of
or at any time after January 12, 2000 and (iii) grant Parent an irrevocable
proxy with respect to the voting of such Shares in favor of the Merger and
against any action or agreement that would impede, interfere with or prevent the
Merger. With certain exceptions, all of the rights and obligations of the
parties under the Shareholders Agreement will terminate upon the earlier of (i)
six months following the termination of the Merger Agreement in accordance with
its terms or (ii) the Effective Time.
For the purposes of the Offer, the Purchaser will be deemed to have
accepted for payment, and thereby purchased, Shares properly tendered to the
Purchaser and not withdrawn as of and when the Purchaser gives oral or written
notice to BankBoston, N.A. (the "Depositary") of the Purchaser's 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 purposes of receiving payment
from the Purchaser
<PAGE> 3
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 in the Offer to Purchase) 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 in the Offer to
Purchase) and (iii) any other documents required by the Letter of Transmittal.
The per share consideration paid to any holder of a Share pursuant to the Offer
will be the highest per share consideration paid to any other holder of Shares
pursuant to the Offer. Under no circumstances will interest be paid on the
purchase price to be paid by the Purchaser for the tendered Shares, regardless
of any extension of the Offer or any delay in making such payment. Except as
otherwise provided in the Offer to Purchase, 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 (as defined
in the Offer to Purchase) and, unless theretofore accepted for payment and paid
for by the Purchaser pursuant to the Offer, may also be withdrawn at any time
after March 13, 2000, as described in Section 4 of the Offer to Purchase.
For a withdrawal to be effective, a written, telegraphic 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 the Offer to Purchase and
must specify the name of the person having tendered the Shares to be withdrawn,
the number of Shares to be withdrawn and the name of the registered holder of
the Shares to be withdrawn, if different from the name of the person who
tendered the Shares. If certificates for Shares 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 (as defined in Section 3 of the Offer to Purchase), 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 of the Offer to Purchase, any notice of withdrawal must
also specify the name and number of the account at the Book-Entry Transfer
Facility (as defined in the Offer to Purchase) to be credited with the withdrawn
Shares and otherwise comply with such Book-Entry Transfer Facility's procedures.
Withdrawals of tenders of 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 tendered again by following one of the
procedures described in Section 3 of the Offer to Purchase any time prior to the
Expiration Date. In the event the Purchaser includes a Subsequent Offering
Period (as defined in Section 1 of the Offer to Purchase) to the Offer, no
withdrawal rights will apply to Shares tendered in such Subsequent Offering
Period or to Shares tendered in the Offer and accepted for payment.
The term "Expiration Date" shall mean 12:00 Midnight, New York City
time, on Friday, February 11, 2000, unless and until the Purchaser, in
accordance with the terms of the Offer, 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 the
Purchaser, shall expire. All questions as to the form and validity (including
time of receipt) of notices of withdrawal will be determined by the Purchaser,
in its sole discretion, which determination will be final and binding. None of
the Purchaser, Parent, the Depositary, MacKenzie Partners, Inc. (the
"Information Agent"), the Dealer Manager 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.
<PAGE> 4
Subject to the terms of the Merger Agreement, the Purchaser expressly
reserves the right, in its sole discretion, at any time or from time to time, to
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 by making a public
announcement of such extension by no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled expiration date. During
any such extension, all Shares previously tendered and not withdrawn will remain
subject to the Offer, subject to the right of a tendering shareholder to
withdraw such shareholder's Shares.
The information required to be disclosed by paragraph (e)(1)(vii) of
Rule 14d-6 under the Securities Exchange Act of 1934, as amended, is contained
in the Offer to Purchase and is incorporated herein by reference.
The Company has provided the Purchaser with the Company's shareholder
lists and security position listings for the purpose of disseminating the Offer
to holders of Shares. The Offer to Purchase, the related Letter of Transmittal
and other relevant documents will be mailed by the Purchaser to record holders
of Shares, and will be furnished by the Purchaser 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.
The Offer to Purchase and the Letter of Transmittal contain important
information and should be read in their entirety before any decision is made
with respect to the Offer.
Questions and requests for assistance or additional copies of the Offer
to Purchase, Letter of Transmittal and other tender offer documents may be
directed to the Information Agent or the Dealer Manager at the respective
addresses and telephone numbers set forth below, and copies will be furnished at
the Purchaser's expense. The Purchaser will not pay any fees or commissions to
any broker or dealer or other person (other than the Dealer Manager) for
soliciting tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
MacKenzie Partners, Inc. (Logo)
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL-FREE (800) 322-2885
The Dealer Manager for the Offer is:
Deutsche Banc Alex. Brown
Deutsche Bank Securities Inc.
101 California Street, 48th Floor
San Francisco, California 94111
(415) 617-2800 (Call Collect)
or
Call Toll-Free (800) 334-2640
January 14, 2000
<PAGE> 1
EXHIBIT (a)(9)
AUDITORS' REPORTS
AUDITORS' REPORT TO THE MEMBERS OF THE SAGE GROUP PLC
We have audited the financial statements on pages 28 to 46 which have been
prepared under the historical cost convention and the accounting policies set
out on pages 33 to 34.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As described on page 24 the Company's directors are responsible for the
preparation of the financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those statements and to report our
opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements.
It also includes an assessment of the significant estimates and judgements made
by the directors in the preparation of the financial statements, and of whether
the accounting policies are appropriate to the company's circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material mis-statement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
In our opinion the financial statements give a true and fair view of the
state of affairs of the Company and of the Group as at 30 September 1997 and of
the profit and cash flows of the Group for the year then ended and have been
properly prepared in accordance with the Companies Act 1985.
[LOGO OF PRICE WATERHOUSE] .
Chartered Accountants and Registered Auditors
Newcastle upon Tyne
22 December 1997
F-1
<PAGE> 2
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
REPORT BY THE AUDITORS TO THE DIRECTORS OF THE SAGE GROUP PLC ON CORPORATE
GOVERNANCE MATTERS
In addition to our audit of the financial statements we have reviewed your
statements on pages 22 and 23 concerning the Group's compliance with the
paragraphs of the Code of Best Practice specified for our review by the London
Stock Exchange and the adoption of the going concern basis in preparing the
financial statements. The objective of our review is to draw attention to non-
compliance with Listing Rules 12.43(j) and 12.43(v) if not otherwise disclosed.
BASIS OF OPINION
We carried out our review in accordance with guidance issued by the Auditing
Practices Board. That guidance does not require us to perform the additional
work necessary to, and we do not, express any opinion on the effectiveness of
either the Group's system of internal financial control or corporate governance
procedures nor on the ability of the Group to continue in operational
existence.
OPINION
In our opinion, your statements on internal financial controls and on going
concern on page 23 have provided the disclosures required by the Listing Rules
referred to above and are consistent with the information which came to our
attention as a result of our audit work on the financial statements.
In our opinion, based on enquiry of certain directors and officers of the
Company and examination of relevant documents, your statements on pages 22 and
23 appropriately reflect the Group's compliance with the other aspects of the
Code specified for our review by Listing Rule 12.43(j).
[LOGO OF PRICE WATERHOUSE] .
Chartered Accountants
Newcastle upon Tyne
22 December 1997
F-2
<PAGE> 3
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 SEPTEMBER 1997
<TABLE>
<CAPTION>
EXISTING 1997 1996
OPERATIONS ACQUISITION TOTAL TOTAL
NOTE (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
---- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Turnover................ 2 134,671 17,418 152,089 136,236
Cost of sales........... (21,273) (759) (22,032) (21,121)
------- ------- ------- -------
Gross profit............ 113,398 16,659 130,057 115,115
Selling and administra-
tive expenses.......... (75,099) (14,878) (89,977) (83,021)
------- ------- ------- -------
Operating profit ....... 2, 3 38,299 1,781 40,080 32,094
Interest receivable..... 529 291
Interest payable........ 4 (2,974) (2,332)
------- -------
Profit on ordinary ac-
tivities before taxa-
tion................... 37,635 30,053
Taxation on profit on
ordinary activities.... 6 (12,420) (10,218)
------- -------
Profit on ordinary ac-
tivities after taxa-
tion................... 25,215 19,835
Equity minority inter-
ests................... -- (7)
Profit for the financial
year attributable to
shareholders........... 25,215 19,828
Equity dividends........ 7 (3,137) (2,837)
------- -------
Amount transferred to
reserves .............. 16 22,078 16,991
------- -------
Earnings per share
(pence)................ 23 23.43p 18.50p
------- -------
Net dividend per share
(pence)................ 7 2.90p 2.64p
------- -------
</TABLE>
All operations in the year and in the comparative year were continuing. There
is no material difference between profits and losses as reported above and
historical cost profits and losses in either the current or comparative year.
F-3
<PAGE> 4
CONSOLIDATED BALANCE SHEET
AS AT 30 SEPTEMBER 1997
<TABLE>
<CAPTION>
1997 1996
NOTE (Pounds)'000 (Pounds)'000
---- ------------ ------------
<S> <C> <C> <C>
Fixed assets:
Tangible assets................................ 8 25,188 24,838
-------- --------
Current assets:
Stocks......................................... 10 3,299 3,350
Debtors........................................ 11 28,915 19,453
Cash at bank and in hand....................... 7,372 5,249
-------- --------
39,586 28,052
Creditors: amounts falling due within one year.. 12 (49,758) (41,393)
-------- --------
Net current liabilities......................... (10,172) (13,341)
-------- --------
Total assets less current liabilities......... 15,016 11,497
Creditors: amounts falling due after more than
one year....................................... 13 (40,974) (18,495)
Deferred maintenance income..................... (20,283) (16,112)
-------- --------
(46,241) (23,110)
-------- --------
Capital and reserves:
Called up equity share capital................. 15 1,081 1,073
Share premium.................................. 15 9,512 9,076
Profit and loss account........................ 16 77,260 52,229
-------- --------
87,853 62,378
Goodwill reserve................................ 17 (134,094) (85,592)
-------- --------
Equity shareholders' funds...................... (46,241) (23,214)
Minority equity interests....................... -- 104
-------- --------
(46,241) (23,110)
======== ========
</TABLE>
F-4
<PAGE> 5
COMPANY BALANCE SHEET
AS AT 30 SEPTEMBER 1997
<TABLE>
<CAPTION>
1997 1996
NOTE (Pounds)'000 (Pounds)'000
---- ------------ ------------
<S> <C> <C> <C>
Fixed assets
Investments..................................... 9 62,062 21,196
--- ------- ------
Current assets
Stocks.......................................... 10 694 300
Debtors......................................... 11 35,810 33,032
Cash at bank and in hand........................ 2,384 1,169
--- ------- ------
38,888 34,501
Creditors: amounts falling due within one year.... 12 (12,028) (9,767)
--- ------- ------
Net current assets................................ 26,860 24,734
--- ------- ------
Total assets less current liabilities............. 88,922 45,930
Creditors: amounts falling due after more than 1
year............................................. 13 (29,500) --
--- ------- ------
59,422 45,930
--- ------- ------
Capital and reserves
Called up equity share capital.................. 15 1,081 1,073
Share premium................................... 15 9,512 9,076
Profit and loss account......................... 16 48,829 35,781
--- ------- ------
Equity shareholders' funds........................ 59,422 45,930
--- ------- ------
</TABLE>
The financial statements on pages 28 to 46 were approved by the Board of
Directors on 22 December 1997 and are signed on their behalf by:
P.A. Walker
Director
A. J. Hughes
Director
F-5
<PAGE> 6
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 1997
<TABLE>
<CAPTION>
1997 1996
NOTE (Pounds)'000 (Pounds)'000
---- ------------ ------------
<S> <C> <C> <C>
Net cash inflow from operating activities..... 24(a) 40,400 37,024
Returns on investments and servicing of
finance
Interest received........................... 529 291
Interest paid............................... (2,403) (1,557)
Interest element of finance lease rental
payments................................... (545) (877)
--- ------- -------
Net cash outflow from returns on investments
and servicing of finance..................... (2,419) (2,143)
Taxation
Corporation tax (including ACT) paid........ (9,981) (8,542)
Capital Expenditure
Purchase of tangible fixed assets........... (4,733) (8,953)
Sale of tangible fixed assets............... 873 326
--- ------- -------
Net cash outflow from capital expenditure..... (3,860) (8,627)
Acquisitions
Purchase of subsidiary undertakings:
Net cash consideration - current year....... 18(c) (42,648) (16,979)
Net cash consideration - prior year......... (3,993) (3,406)
--- ------- -------
Net cash outflow from acquisitions.......... (46,641) (20,385)
Equity dividends paid....................... (2,943) (2,657)
--- ------- -------
Net cash outflow before financing........... (25,444) (5,330)
Financing
Shares issued............................... 24(c) 444 319
Movement in loan funding.................... 24(c) 26,697 4,420
Finance lease funding net of capital
payments................................... 24(c) (124) (235)
--- ------- -------
Net cash inflow from financing.............. 27,017 4,504
--- ------- -------
Increase/(Decrease) in cash in the year..... 24(b) 1,573 (826)
--- ------- -------
</TABLE>
F-6
<PAGE> 7
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 30 SEPTEMBER 1997
<TABLE>
<CAPTION>
1997 1996
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Profit for the financial year attributable to
shareholders......................................... 25,215 19,828
Translation of foreign currency net investments and
related borrowings................................... 2,953 949
------ ------
Total recognised gains and losses relating to the
year............................................... 28,168 20,777
====== ======
</TABLE>
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE YEAR ENDED 30 SEPTEMBER 1997
<TABLE>
<CAPTION>
1997 1996
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Profit for the financial year attributable to
shareholders........................................ 25,215 19,828
Dividends............................................ (3,137) (2,837)
------- -------
Amount transferred to reserves....................... 22,078 16,991
Translation of foreign currency net investments and
related borrowings.................................. 2,953 949
Movement in goodwill reserve in year................. (48,502) (25,821)
Shares issued for options............................ 444 319
------- -------
Movement for the year................................ (23,027) (7,562)
Opening shareholders' funds.......................... (23,214) (15,652)
------- -------
Closing shareholders' funds.......................... (46,241) (23,214)
======= =======
</TABLE>
F-7
<PAGE> 8
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 SEPTEMBER 1997
1. ACCOUNTING POLICIES
(a) Basis of accounting
The financial statements are prepared under the historical cost convention
and in accordance with applicable accounting standards in the United Kingdom.
(b) Basis of consolidation
The financial statements of the Group comprise the financial statements of
the Company and its subsidiaries prepared to 30 September 1997. The results of
subsidiary undertakings acquired during the year are included from the
effective date of acquisition.
(c) Goodwill
Goodwill, being the excess of the cost of shares in subsidiary undertakings
over the fair value of assets acquired, is written off directly to a goodwill
reserve in the year it is incurred.
(d) Turnover
Turnover represents invoiced sales to third parties after deducting credit
notes, allowances, trading discounts and value added tax and is adjusted to
include maintenance income on a straight line basis over the life of each
maintenance agreement.
(e) Tangible fixed assets
Tangible fixed assets are stated at cost less accumulated depreciation.
Depreciation on tangible fixed assets is provided for as follows:
<TABLE>
<S> <C>
Freehold land and buildings - 0%
Long leasehold land and buildings - over period of lease
Plant and equipment - 33.3% per annum on reducing balance
Fixtures and fittings - 15% per annum on reducing balance
Motor vehicles - 25% per annum on reducing balance
</TABLE>
No depreciation is charged on the Group's freehold buildings because it is
the Group's practice to maintain these assets in a continual state of sound
repair and the directors consider that the economic life of these properties
and their residual values are such that depreciation is not significant.
(f) Development costs and other intangible assets
All costs associated with the development of software are written off as
incurred.
(g) Stocks
Stocks are stated at the lower of cost and net realisable value.
(h) Leasing
Where plant and equipment is acquired by finance leasing arrangements which
give rights approximating to ownership the amount representing the purchase
price of such assets is included in tangible fixed assets and the related
obligations are included in creditors.
F-8
<PAGE> 9
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS--(CONTINUED)
1. ACCOUNTING POLICIES--CONTINUED
All other leases are classified as operating leases and the annual rentals
are charged to the profit and loss account as they fall due.
(i) Foreign currency translation
Foreign currency assets and liabilities are translated into sterling at rates
of exchange ruling at the year end. Trading results are translated at the
average rate prevailing during the year. Differences arising on the re-
translation of the net investments and the results for the year are taken
directly to reserves together with differences on foreign currency borrowings
to the extent that they are used to finance or provide a hedge against Group
equity investments in foreign enterprises. All other exchange differences are
dealt with in the profit and loss account.
(j) Deferred taxation
Provision is made for deferred taxation to the extent that there is a
reasonable probability that a liability will arise in the foreseeable future.
(k) Pension scheme
The Group operates defined contribution pension schemes for certain of its
employees. The costs are charged to the profit and loss account as they fall
due.
2. SEGMENT INFORMATION
The directors consider there to be only one class of business and therefore
only geographical segment information is given below.
(a) The geographical analysis of turnover by destination is as follows:
<TABLE>
<CAPTION>
1997 1996
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
United Kingdom........................................ 62,162 53,714
Mainland Europe....................................... 68,553 59,644
United States of America.............................. 18,255 19,779
Rest of World......................................... 3,119 3,099
------- -------
152,089 136,236
======= =======
</TABLE>
(b) The geographical analysis of turnover, operating profit and net
liabilities by origin is as follows:
<TABLE>
<CAPTION>
1997 1996
OPERATING NET OPERATING NET
TURNOVER PROFIT LIABILITIES TURNOVER PROFIT LIABILITIES
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
United Kingdom.......... 62,982 24,464 (36,281) 54,231 20,153 (12,399)
Mainland Europe......... 70,077 11,763 (8,978) 61,343 8,292 (9,040)
United States of
America................ 19,030 3,853 (982) 20,662 3,649 (1,671)
------- ------ ------- ------- ------ -------
152,089 40,080 (46,241) 136,236 32,094 (23,110)
======= ====== ======= ======= ====== =======
</TABLE>
In 1997 Mainland Europe includes the results of the KHK acquisition which
contributed (Pounds)17,418,000 to turnover and (Pounds)1,781,000 to operating
profit and had net liabilities at 30 September 1997 of (Pounds)2,483,000.
F-9
<PAGE> 10
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS--(CONTINUED)
3. OPERATING PROFIT
Operating profit is stated after charging:
<TABLE>
<CAPTION>
1997 1996
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Staff costs (including directors' emoluments):
- Wages and salaries................................ 40,715 34,158
- Social security costs............................. 9,857 9,536
- Other pension costs............................... 639 560
Research and development (including staff costs)...... 14,193 10,597
Depreciation of tangible fixed assets - owned......... 3,119 2,662
Depreciation of tangible fixed assets - leased........ 38 228
Loss on sale of tangible fixed assets................. 99 46
Operating lease rentals:
- Hire of plant and machinery 1,453 697
- Other............................................. 2,136 1,583
Auditors' remuneration................................ 181 159
Exceptional costs (see below)......................... - 1,157
====== ======
</TABLE>
Auditors' remuneration shown above includes (Pounds)13,000 (1996:
(Pounds)12,000) in respect of the Company. Non-audit services supplied by the
Company's auditors amounted to (Pounds)46,000 (1996: (Pounds)17,000).
Exceptional costs in 1996 comprised (Pounds)713,000 incurred in restructuring
Sybel and (Pounds)444,000 of costs incurred in successfully defending an
important legal case in the UK.
4. INTEREST PAYABLE
<TABLE>
<CAPTION>
1997 1996
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Interest payable on bank borrowings................... 2,429 1,455
Finance charges on finance leases..................... 545 877
----- -----
2,974 2,332
===== =====
</TABLE>
5. EMPLOYEES AND DIRECTORS
(a) Employees
The average number of persons employed by the Group during the year was:
<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C>
United Kingdom and Europe........................................... 1,493 1,415
United States of America............................................ 275 300
----- -----
1,768 1,715
===== =====
</TABLE>
F-10
<PAGE> 11
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS--(CONTINUED)
5. EMPLOYEES AND DIRECTORS--CONTINUED
(b) Directors
The directors and their interests and those of their families in the ordinary
share capital of the Company at the dates given below were as follows:
<TABLE>
<CAPTION>
AT 30 SEPTEMBER AT 30 SEPTEMBER
SHARES 1997 1996
- ------ --------------- ---------------
<S> <C> <C>
A D Goldman (Resigned 30 September 1997)........ 8,603,225 8,822,325
L C N Bury...................................... 50,000 --
C J Constable................................... 2,000 2,000
K C Howe........................................ 250,000 150,000
A J Hughes...................................... -- --
M E W Jackson................................... 53,925 53,925
T P Maxfield.................................... 2,540,700 2,990,700
P L Stobart..................................... -- --
P A Walker...................................... 900,465 900,465
A W G Wylie..................................... 12,442,140 12,542,140
---------- ----------
24,842,455 25,461,555
========== ==========
</TABLE>
The above interests in the ordinary share capital of the Company are
beneficial other than Mr A D Goldman's holding which includes 3,494,075 shares
(1996: 3,594,075) held by him as trustee in a non-beneficial capacity and Mr A
W G Wylie's holding which includes 4,000,000 (1996:nil) held by him as trustee
in a non-beneficial capacity.
There have been no changes in the directors' interests in the share capital
of the Company between 30 September 1997 and 10 December 1997.
Three executive directors exercised share options during the year as set out
in the table below:
<TABLE>
<CAPTION>
EXERCISE AT 30 SEPTEMBER EXERCISED IN AT 30 SEPTEMBER
OPTIONS PRICE 1996 THE YEAR 1997
- ------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C>
K C Howe.................. 62.0p 250,000 (250,000) --
A J Hughes................ 99.6p 250,000 (100,000) 150,000
T P Maxfield.............. 6.6p 11,060 -- 11,060
P L Stobart............... 432.0p 115,741 -- 115,741
P A Walker................ 6.6p 428,315 (130,000) 298,315
*....................... 99.6p 250,000 -- 250,000
*....................... 339.0p 156,000 -- 156,000
------ --------- -------- -------
1,461,116 (480,000) 981,116
====== ========= ======== =======
</TABLE>
Notes:
(1) All share options exercised above were exercised on 28 May 1997 when the
prevailing market price was (Pounds)6.50.
(2) Total gains on the exercise of share options were (Pounds)2,856,820 (1996:
nil).
(3) Including gains on share options, the total emoluments of the highest paid
director were (Pounds)1,662,000 (1996: (Pounds)297,000).
Exercise dates for these options are disclosed in note 15 as is relevant market
price information.
F-11
<PAGE> 12
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS--(CONTINUED)
5. EMPLOYEES AND DIRECTORS--CONTINUED
Directors' emoluments for the year ended 30 September 1997 were as follows:
<TABLE>
<CAPTION>
BENEFITS PENSION
SALARY BONUS IN KIND/3/ CONTRIBUTIONS/1/ TOTAL 1997 TOTAL 1996
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------ ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
A D Goldman/4/ (Resigned
30 September 1997)..... 160 64 16 32 272 297
L C N Bury.............. 19 -- -- -- 19 11
C J Constable........... 19 -- -- -- 19 11
K C Howe................ 177 -- 8 7 192 195
A J Hughes.............. 93 33 13 16 155 130
M E W Jackson/2/........ 72 -- 1 -- 73 65
T P Maxfield/4/......... 100 35 11 17 163 158
P L Stobart (Appointed 1
January 1997).......... 97 50 10 17 174 --
P A Walker.............. 185 74 13 32 304 245
A W G Wylie............. 115 50 15 18 198 178
B R Fisher (Resigned 31
December 1995)......... -- -- -- -- -- 3
----- --- --- --- ----- -----
1,037 306 87 139 1,569 1,293
===== === === === ===== =====
</TABLE>
- --------
Notes:
(1) Retirement benefits were accruing to 7 directors (1996: 6). All pension
contributions accrued under money purchase schemes.
(2) This amount includes payments of (Pounds)28,750 (1996: (Pounds)24,996) for
corporate advisory services.
(3) Benefits in kind include the provision of a company car, fuel, telephone
and medical insurance.
(4) In addition to the above, (Pounds)62,000 (1996: (Pounds)nil) was payable to
A D Goldman and (Pounds)20,000 (1996: nil) was payable to T P Maxfield upon
their retirement being non-cash benefits representing motor vehicles.
6. TAXATION
<TABLE>
<CAPTION>
1997 1996
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
UK Corporation tax.................................... 8,281 6,785
Overseas Corporation tax.............................. 4,139 3,612
Deferred tax.......................................... -- (179)
------ ------
12,420 10,218
====== ======
</TABLE>
7. DIVIDENDS
<TABLE>
<CAPTION>
1997 1996
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Interim paid 0.97p per share (1996: 0.88p)............ 1,052 948
Final proposed 1.93p per share (1996: 1.76p).......... 2,085 1,889
----- -----
Total 2.90p (1996: 2.64p)............................. 3,137 2,837
===== =====
</TABLE>
F-12
<PAGE> 13
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS--(CONTINUED)
8. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
LONG
FREEHOLD LEASEHOLD
LAND AND LAND AND PLANT AND FIXTURES MOTOR
BUILDINGS BUILDINGS EQUIPMENT AND FITTINGS VEHICLES TOTAL
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Cost
At 1 October 1996...... 17,304 217 10,003 5,623 1,951 35,098
Additions.............. 64 -- 3,131 795 743 4,733
Disposals.............. -- (5) (3,057) (532) (647) (4,241)
Business acquired...... -- -- 4,206 260 53 4,519
Exchange rate
movements............. (687) -- (877) (577) (79) (2,220)
------ --- ------ ----- ----- ------
At 30 September 1997... 16,681 212 13,406 5,569 2,021 37,889
====== === ====== ===== ===== ======
Depreciation
At 1 October 1996...... -- 92 6,715 2,643 810 10,260
Charge for the year.... -- 5 1,744 1,026 382 3,157
Disposals.............. -- (5) (2,727) (164) (373) (3,269)
Business acquired...... -- -- 3,305 111 21 3,437
Exchange rate
movements............. -- -- (546) (290) (48) (884)
------ --- ------ ----- ----- ------
At 30 September 1997.... -- 92 8,491 3,326 792 12,701
====== === ====== ===== ===== ======
Net book amount
At 30 September 1997... 16,681 120 4,915 2,243 1,229 25,188
------ --- ------ ----- ----- ------
At 30 September 1996... 17,304 125 3,288 2,980 1,141 24,838
====== === ====== ===== ===== ======
</TABLE>
Included above are fixed assets purchased under finance leases at a cost of
(Pounds)5,250,000 (1996: (Pounds)6,469,000). The accumulated depreciation on
these assets at 30 September 1997 amounted to (Pounds)1,231,000 (1996:
(Pounds)1,296,000).
9. INVESTMENTS
<TABLE>
<CAPTION>
COMPANY
1997
(Pounds)'000
------------
<S> <C>
Cost
At 1 October 1996................................................. 21,492
Additions......................................................... 40,866
------
At 30 September 1997.............................................. 62,358
======
Provision for diminution in value
At 1 October 1996 and at 30 September 1997........................ (296)
======
Net book amount
At 30 September 1997.............................................. 62,062
------
At 30 September 1996 21,196
======
</TABLE>
F-13
<PAGE> 14
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS--(CONTINUED)
9. INVESTMENTS--CONTINUED
Principal subsidiary undertakings at 30 September 1997, all of which are
wholly owned and are included in the Group accounts, were as follows:
<TABLE>
<CAPTION>
COUNTRY OF
INCORPORATION
COMPANY NATURE OF BUSINESS AND OPERATION
------- ------------------ -------------
<S> <C>
Sagesoft Limited Software Development and Publication England
Yorkshire Business Forms Limited Distribution of Computer Forms England
Multisoft Financial Systems Limited Software Development and Publication England
DacEasy Inc* Software Development and Publication USA
Telemagic Inc* Software Development and Publication USA
Timeslips Inc* Software Development and Publication USA
Prosoft Corp. (trading as Carpe Diem)* Software Development and Publication USA
Ciel SA* Software Development and Publication France
Sage France* Software Development and Publication France
KHK Software AG* Software Development and Publication Germany
</TABLE>
- --------
* Shares held by subsidiary undertaking
All investments are in ordinary share capital.
10. STOCKS
<TABLE>
<CAPTION>
1997 GROUP 1996 1997 COMPANY 1996
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Materials................... 886 950 88 120
Finished goods.............. 2,413 2,400 606 180
----- ----- --- ---
3,299 3,350 694 300
===== ===== === ===
</TABLE>
11. DEBTORS
<TABLE>
<CAPTION>
1997 GROUP 1996 1997 COMPANY 1996
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Trade debtors.............. 19,642 15,986 7,468 4,423
Amounts owed by Group
undertakings.............. -- -- 27,491 27,916
Debts factored with
recourse (note 12)........ 5,580 -- -- --
Other debtors.............. 1,549 1,559 32 23
Prepayments................ 1,623 1,436 298 198
Taxation recoverable....... 521 472 521 472
------ ------ ------ ------
28,915 19,453 35,810 33,032
====== ====== ====== ======
</TABLE>
Taxation recoverable represents advance corporation tax which is recoverable
more than one year after the balance sheet date.
F-14
<PAGE> 15
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS--(CONTINUED)
12. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
GROUP COMPANY
1997 1996 1997 1996
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Current portion of bank
loans and bank
overdraft.............. 5,110 3,158 4,500 --
Current portion of
finance lease
obligations............ 422 730 -- --
Trade creditors......... 9,374 8,555 1,345 1,469
Provision for debts
factored with recourse
(note 11).............. 5,580 -- -- --
Amounts owed to Group
undertakings........... -- -- 204 591
Corporation tax......... 11,041 8,574 29 --
Other taxes and social
security costs......... 7,285 7,889 1,525 1,048
Accruals................ 6,789 4,915 1,819 1,819
Deferred consideration
on acquisitions........ -- 3,241 -- 2,149
Advance corporation
tax.................... 521 472 521 472
Proposed dividend....... 2,085 1,889 2,085 1,889
Other creditors......... 1,551 1,970 -- 330
------ ------ ------ -----
49,758 41,393 12,028 9,767
====== ====== ====== =====
</TABLE>
Included in current portion of bank loans and bank overdraft is
(Pounds)4,500,000 (1996: (Pounds)3,098,000) of unsecured loans which are
repayable by instalments in less than five years and (Pounds)550,000 of bank
overdraft.
13. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
GROUP COMPANY
1997 1996 1997 1996
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Finance lease
obligations:
1-2 years............. 181 141 -- --
2-5 years............. 790 1,334 -- --
5 years and over...... 5,112 6,066 -- --
Bank loans:
1-2 years............. 8,748 3,158 8,400 --
2-5 years............. 25,558 7,151 21,100 --
5 years and over...... 585 645 -- --
------ ------ ------ ---
40,974 18,495 29,500 --
====== ====== ====== ===
</TABLE>
Included in Group bank loans above and in note 12 is (Pounds)38,278,000
(1996: (Pounds)10,069,000) of unsecured loans repayable by instalments in less
than five years which were taken out in connection with the Sybel and KHK
acquisitions. Loans repayable in excess of five years are secured on a Group
freehold property and accrue interest at a rate of 1.75% over the UK base rate
and are repayable at (Pounds)60,000 per annum.
F-15
<PAGE> 16
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS--(CONTINUED)
14. PROVISIONS FOR LIABILITIES AND CHARGES
The provision for deferred taxation at 30 September 1997 was (Pounds) nil
(1996: (Pounds) nil).
<TABLE>
<CAPTION>
GROUP COMPANY
1997 1996 1997 1996
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Full potential deferred tax
(asset)/liability:
Tax deferred by accelerated
capital allowances........ 714 126 -- --
Short term timing
differences............... (9,814) (2,788) -- 1
------ ------ --- ---
(9,100) (2,662) -- 1
====== ====== === ===
</TABLE>
Deferred tax has been calculated at 31% (1996: 33%) in respect of UK
companies and at the respective prevailing rates for the overseas subsidiaries.
No deferred tax has been provided in respect of the remittance of earnings
retained overseas, as there is no intention in the foreseeable future to remit
these earnings to the UK.
15. CALLED UP EQUITY SHARE CAPITAL AND SHARE PREMIUM ACCOUNT
(a) Ordinary share capital
<TABLE>
<CAPTION>
1997 1996
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Allotted and fully paid 108,072,478 Ordinary shares
of 1p each (1996: 107,326,095)...................... 1,081 1,073
============ ============
</TABLE>
The authorised share capital of the Company at 30 September 1997 and 30
September 1996 was (Pounds)1,438,500 comprising 143,850,000 ordinary shares of
1p each.
During the year, 745,950 1p ordinary shares were issued in respect of options
exercised under executive share option schemes which were exercised at prices
of 6.6p, 37.8p, 62.0p, 98.0p and 99.6p. Proceeds received in respect of these
shares were (Pounds)442,502. The following share options were outstanding at 30
September 1997:
<TABLE>
<CAPTION>
DATE OPTION GRANTED OPTION PRICE PER SHARE DATE EXERCISABLE NUMBER OF SHARES
- ------------------- ----------------------- ---------------------------------- ----------------
<S> <C> <C> <C>
16 March 1989 6.6p 6 December 1989--16 March 1999 309,375
11 January 1991 37.8p 11 January 1994--11 January 2001 103,160
20 December 1991 62.0p 20 December 1994--20 December 2001 130,000
5 January 1993 98.0p 5 January 1996--5 January 2003 75,000
16 December 1993 99.6p 16 December 1996--16 December 2003 400,000
15 January 1996 339.0p 15 January 1999--15 January 2006 156,000
3 May 1996 432.0p 3 May 1999--3 May 2006 160,741
10 February 1997 539.0p 10 February 2000--10 February 2007 15,000
19 May 1997 652.0p 19 May 2000--19 May 2007 150,000
</TABLE>
In addition options as follows were granted on 20 September 1996 under the
terms of The Sage Group plc 1996 Savings Related Share Option Scheme approved
by members on 7 February 1996:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
20 September 1996 346.0p 20 September 1999--19 March 2000 56,023
20 September 1996 346.0p 20 September 2001--19 March 2002 119,747
20 September 1996 346.0p 20 September 2003--19 March 2004 32,680
</TABLE>
Under the above scheme, 433 1p ordinary shares were issued during the year
for proceeds of (Pounds)1,498.
F-16
<PAGE> 17
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS--(CONTINUED)
15. CALLED UP EQUITY SHARE CAPITAL AND SHARE PREMIUM ACCOUNT--CONTINUED
The market price of the shares of the Company at 30 September 1997 was 696p
and the highest and lowest prices during the year were 720p and 458p
respectively.
(B) SHARE PREMIUM
<TABLE>
<CAPTION>
GROUP AND
COMPANY
(Pounds)'000
------------
<S> <C>
At 1 October 1996.................................................. 9,076
Shares issued for options exercised................................ 436
-----
At 30 September 1997............................................... 9,512
=====
</TABLE>
16. PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
GROUP COMPANY
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
At 1 October 1996..................................... 52,229 35,781
Retained profit for the year.......................... 22,078 13,048
Foreign currency translation differences.............. 2,953 --
------ ------
At 30 September 1997.................................. 77,260 48,829
====== ======
</TABLE>
Currency translation adjustments in the Group profit and loss account include
gains of (Pounds)1,172,000 (1996:(Pounds)545,000) relating to foreign currency
borrowings used to finance overseas investments.
17. GOODWILL RESERVE
<TABLE>
<CAPTION>
GROUP
(Pounds)'000
------------
<S> <C>
At 1 October 1996.................................................. 85,592
Goodwill arising in the year....................................... 48,502
-------
At 30 September 1997............................................... 134,094
=======
</TABLE>
Goodwill arising in the year comprises (Pounds)45.0m in respect of the
acquisition of KHK (see note 18(a)), (Pounds)2.5m in respect of the acquisition
of Prosoft Corp. (trading as Carpe Diem), (see note 18(b)), (Pounds)0.8m in
respect of the acquisition of minority interests in Ciel SA and (Pounds)0.2m
principally in respect of the final determination of fair values on the
acquisition of Sybel.
The cumulative amount of goodwill written off to reserves, before utilisation
of section 131(2) of the Companies Act 1985, amounts to (Pounds)137,871,000 at
30 September 1997 (1996: (Pounds)89,369,000).
F-17
<PAGE> 18
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS--(CONTINUED)
18. ACQUISITIONS
(a) KHK
On 27 February 1997 the Group completed the acquisition of KHK Software AG
for a net cash consideration of (Pounds)40.7m (inclusive of (Pounds)0.6m
costs). Total goodwill arising on the acquisition is (Pounds)45.0m. The fair
value of net assets acquired are based on provisional assessments pending final
determination of certain assets and liabilities.
The assets and liabilities of KHK at fair value were:
<TABLE>
<CAPTION>
FAIR VALUE ADJUSTMENTS
----------------------------------------------------
ALIGNMENT
OF ACCOUNTING FAIR VALUE
BOOK VALUE POLICIES(/1/) OTHER(/2/) TO GROUP
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Fixed assets.............. 1,585 (503) -- 1,082
Stocks.................... 568 -- (42) 526
Debtors................... 11,125 6,033 (5,859) 11,299
Cash at bank.............. 573 -- -- 573
Creditors falling due
within one year.......... (4,558) (6,033) (931) (11,522)
Provision for
reorganisation(3)........ (1,246) -- -- (1,246)
Deferred income........... (4,964) -- -- (4,964)
------ ------ ------ -------
3,083 (503) (6,832) (4,252)
Goodwill arising (note
17)...................... 45,011
------ ------ ------ -------
Cash consideration
including costs (note
18(c))................... (40,759)
====== ====== ====== =======
</TABLE>
Notes:
(1) Alignment of accounting policies relates to the elimination of intangible
fixed assets and the grossing up of debtors and borrowings to reflect trade
sales under a debt financing facility with full recourse.
(2) Other adjustments include a reappraisal of the provision for bad and
doubtful debts and an assessment of product warranty and recall costs.
(3) Relates to the reorganisation of an Austrian subsidiary which was a
commitment of management prior to acquisition.
Prior to acquisition the last full set of financial statements of KHK were
prepared to 31 December 1996 and showed a profit after taxation and minority
interests of DM 5.3m.
The pre-acquisition results for KHK for the period from 1 January 1997 to 26
February 1997 prepared under KHK's accounting policies and principles prior to
acquisition were as follows:
<TABLE>
<CAPTION>
DM'000
------
<S> <C>
Turnover................................................................ 11,291
------
Operating Loss before exceptional items................................. (313)
Exceptional Items--provision for reorganisation......................... (3,414)
------
Operating Loss after exceptional items.................................. (3,727)
Net Interest receivable................................................. 212
------
Loss before taxation.................................................... (3,515)
Taxation and minority interests......................................... (40)
------
Loss after taxation..................................................... (3,555)
======
</TABLE>
F-18
<PAGE> 19
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS--(CONTINUED)
18. ACQUISITIONS--CONTINUED
Other than the loss for the period there were no other gains or losses.
(b) Other
Other acquisitions comprise the purchase of Prosoft Corp. (trading as Carpe
Diem) for (Pounds)2.2m. The book value of assets acquired was (Pounds)0.2m.
Fair value adjustments relating to the deferral of maintenance revenues in
accordance with Group accounting policies and to adjustments to working capital
amounted to (Pounds)(0.5)m resulting in goodwill of (Pounds)2.5m. A maximum of
$2.8m further consideration is potentially payable for this acquisition
dependent upon achievement of revenue thresholds however none of this
additional consideration has been provided as it is considered unlikely that
further contractual payments will be made.
(c) Analysis of net outflow of cash in respect of acquisitions
Cash consideration:
<TABLE>
<CAPTION>
(Pounds)'000
------------
<S> <C>
KHK (note 18(a))................................................... 40,759
Prosoft Corp. (note 18(b))......................................... 2,180
Net cash acquired.................................................. (291)
------
42,648
======
</TABLE>
19. PARENT COMPANY PROFIT AND LOSS ACCOUNT
As permitted by Section 230(1) of the Companies Act 1985, The Sage Group plc
has not presented its own profit and loss account. The amount of profit for the
financial year before dividends dealt with in the accounts of the parent
company is (Pounds)16,185,000 (1996: (Pounds)12,926,000). There is no material
difference between the profits and losses as reported above and historical cost
profits and losses.
20. OPERATING LEASE COMMITMENTS
The Group's annual commitment under non-cancellable operating leases
comprises:
<TABLE>
<CAPTION>
1997 1996
PLANT AND LAND AND PLANT AND LAND AND
EQUIPMENT BUILDINGS EQUIPMENT BUILDINGS
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Expiring within 1 year..... 1,159 291 122 496
Expiring between 1 and 2
years..................... 600 716 108 421
Expiring between 2 and 5
years..................... 1,123 3,433 325 90
Expiring after more than 5
years..................... -- -- -- 439
----- ----- --- -----
2,882 4,440 555 1,446
===== ===== === =====
</TABLE>
The Company has no operating lease commitments (1996: nil).
F-19
<PAGE> 20
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS--(CONTINUED)
21. CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
The Group has no contracted capital commitments at 30 September 1997 (1996:
(Pounds)0.2m). The Group has no contingent liabilities at 30 September 1997
(1996: (Pounds)nil) with the exception of deferred consideration in respect of
the acquisition of Prosoft Corp.
22. PENSION COMMITMENTS
The Group operates one principal Group personal pension plan which is managed
by Norwich Union Life Assurance Society and covers the majority of its UK full
time employees. The Group also operates a fully insured executive pension plan
managed by the Scottish Equitable Life Assurance Society for its Executive
Directors. Both are defined contribution pension schemes.
23. EARNINGS PER SHARE
Earnings per share are calculated based on a weighted average number of 1p
shares in issue during the year of 107,641,176 (1996: 107,149,618).
24. CONSOLIDATED CASH FLOW STATEMENT
(A) RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
1997 1996
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Operating profit (1996--after exceptional costs of
(Pounds)1,157,000).................................. 40,080 32,094
Depreciation charges................................. 3,157 2,890
Loss on sale of tangible fixed assets................ 99 46
Exchange differences................................. (1,356) 26
Decrease/(Increase) in stocks........................ 578 (321)
Decrease/(Increase) in debtors....................... 2,298 (455)
(Decrease)/Increase in creditors..................... (4,650) 768
Increase in provision for deferred maintenance....... 194 1,976
------ ------
Net cash inflow from operating activities........... 40,400 37,024
====== ======
</TABLE>
Exceptional costs in 1996 include an amount of (Pounds)335,000 which had not
been paid at 30 September 1996.
F-20
<PAGE> 21
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS--(CONTINUED)
24. CONSOLIDATED CASH FLOW STATEMENT--CONTINUED
(B) ANALYSIS OF CHANGES IN NET CASH
<TABLE>
<CAPTION>
(Pounds)'000
------------
<S> <C>
At 1 October 1996.................................................. 5,249
Net cash movement.................................................. 1,573
-----
At 30 September 1997.............................................. 6,822
</TABLE>
KHK's overdraft balance was (Pounds)282,000 on acquisition and
(Pounds)550,000 at the year end, the movement resulting principally from
operating cash flows.
(C) ANALYSIS OF CHANGES IN FINANCING DURING THE YEAR
<TABLE>
<CAPTION>
SHARE CAPITAL OBLIGATIONS UNDER
(INCLUDING PREMIUM) LOANS FINANCE LEASES
(Pounds)'000 (Pounds)'000 (Pounds)'000
------------------- ------------ -----------------
<S> <C> <C> <C>
At 1 October 1996........... 10,149 14,112 8,271
Acquisitions................ -- 399 --
Exchange differences........ -- (1,757) (1,642)
Net cash flow from
financing.................. 444 26,697 (124)
------ ------ ------
At 30 September 1997....... 10,593 39,451 6,505
====== ====== ======
</TABLE>
(D) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT (INCLUSIVE OF
FINANCE LEASES)
<TABLE>
<CAPTION>
(Pounds)'000
------------
<S> <C>
Increase in cash in the year....................................... 1,573
Cash inflow from increase in debt.................................. (26,573)
-------
Change in net debt resulting from cash flows....................... (25,000)
Loan acquired with subsidiary...................................... (399)
Exchange difference................................................ 3,399
-------
Movement in net debt in the year................................... (22,000)
Net debt at 1 October 1996......................................... (17,134)
-------
Net debt at 30 September 1997..................................... (39,134)
=======
</TABLE>
(E) ANALYSIS OF CHANGE OF NET DEBT (INCLUSIVE OF FINANCE LEASES)
<TABLE>
<CAPTION>
AT 1 AT 30
OCTOBER EXCHANGE SEPTEMBER
1997 CASH FLOW MOVEMENT 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net cash at bank and in
hand...................... 5,249 1,573 -- 6,822
Debt due within one year... (3,888) (1,655) 561 (4,982)
Debt due after one year.... (18,495) (25,317) 2,838 (40,974)
------- ------- ----- -------
Total.................... (17,134) (25,399) 3,399 (39,134)
======= ======= ===== =======
</TABLE>
25. RELATED PARTY TRANSACTIONS
In addition to fees in connection with services as a director as disclosed in
note 5, the Company rents premises from Elderstreet Investments Limited, a
company in which Mr M E W Jackson has an interest. The rental paid during the
year was (Pounds)15,000 and (Pounds) nil was due to Elderstreet Investments
Limited at 30 September 1997.
During the year the Group purchased for (Pounds)0.9m the 5% minority interest
held in Ciel SA of which (Pounds)0.5m was paid to Mr P Y Morlet who was, at the
time, Managing Director of the Group's French subsidiaries.
F-21
<PAGE> 22
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS--(CONTINUED)
26. POST BALANCE SHEET EVENT
On 18 December 1997, the Company's print management business, Dataform
(comprising Yorkshire Business Forms Limited and Venture Business Forms) was
sold to its management team for a gross consideration of (Pounds)7.2m inclusive
of a pre-disposal dividend of (Pounds)1.1m giving a net consideration of
(Pounds)6.1m. Dataform's operating profit for the year ended 30 September 1997
was (Pounds)0.9m.
F-22
<PAGE> 23
[SAGE LOGO]
Auditors' Report
AUDITORS' REPORT TO THE MEMBERS OF THE SAGE GROUP PLC
We have audited the financial statements on pages 32 to 51 which have been
prepared under the historical cost convention and the accounting policies set
out on pages 37 to 38.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As described on page 27 the Company's directors are responsible for the
preparation of the financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those statements and to report our
opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements. It
also includes an assessment of the significant estimates and judgements made by
the directors in the preparation of the financial statements, and of whether the
accounting policies are appropriate to the Company's circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material mis-statement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
In our opinion the financial statements give a true and fair view of the state
of affairs of the Company and of the Group as at 30 September 1998 and of the
profit and cash flows of the Group for the year then ended and have been
properly prepared in accordance with the Companies Act 1985.
PricewaterhouseCoopers
Chartered Accountants and Registered Auditors, Newcastle upon Tyne
9 December 1998
30
<PAGE> 24
The Sage Group plc
A Report on our Activities 1998
REPORT BY THE AUDITORS TO THE SAGE GROUP PLC ON CORPORATE GOVERNANCE MATTERS
In addition to our audit of the financial statements we have reviewed the
directors' statements on pages 24 to 26 concerning the Group's compliance with
the paragraphs of the Cadbury Code of Best Practice specified for our review by
the London Stock Exchange and their adoption of the going concern basis in
preparing the financial statements. The objective of our review is to draw
attention to non-compliance with Listing Rules 12.43(j) and 12.43(v).
We carried out our review in accordance with guidance issued by the Auditing
Practices Board. That guidance does not require us to perform the additional
work necessary to, and we do not, express any opinion on the effectiveness of
either the Group's system of internal financial control or the corporate
governance procedures nor on the ability of the Group to continue in operational
existence.
OPINION
With respect to the directors' statements on internal financial control on pages
25 and 26 and on going concern on page 25, in our opinion the directors have
provided the disclosures required by the Listing Rules referred to above and
such statements are not inconsistent with the information of which we are aware
from our audit work on the financial statements.
Based on enquiry of certain directors and officers of the Company, and
examination of relevant documents, in our opinion the directors' statement on
page 24 appropriately reflects the Group's compliance with the other aspects of
the Code specified for our review by Listing Rule 12.43(j).
PricewaterhouseCoopers
Chartered Accountants, Newcastle upon Tyne
9 December 1998
31
<PAGE> 25
[SAGE LOGO]
Consolidated Profit and Loss Account
For the year ended 30 September 1998
<TABLE>
<CAPTION>
CONTINUING OPERATIONS
DISCONTINUED
ACQUISITION OPERATION
NOTE (POUND STERLING) '000 (POUND STERLING) '000 (POUND STERLING) '000
---- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
TURNOVER 2,3 157,715 30,758 3,074
Cost of sales (11,496) (5,263) (2,353)
- ------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 146,219 25,495 721
Selling and administrative expenses (101,825) (19,347) (502)
- ------------------------------------------------------------------------------------------------------------------------
OPERATING PROFIT 2,3,4 44,394 6,148 219
Profit on disposal of businesses 20
Interest receivable
Interest payable 5
- ------------------------------------------------------------------------------------------------------------------------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
Taxation on profit on ordinary activities 7
- ------------------------------------------------------------------------------------------------------------------------
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION
AND FOR THE FINANCIAL YEAR
Equity dividends 8
- ------------------------------------------------------------------------------------------------------------------------
AMOUNT TRANSFERRED TO RESERVES 17
- ------------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE (PENCE) 25
NET DIVIDEND PER SHARE (PENCE) 8
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1998 1997
TOTAL TOTAL
(POUND STERLING) '000 (POUND STERLING) '000
------------------- -------------------
<S> <C> <C>
TURNOVER 191,547 152,089
Cost of sales (19,112) (22,032)
- -----------------------------------------------------------------------------------------
GROSS PROFIT 172,435 130,057
Selling and administrative expenses (121,674) (89,977)
- -----------------------------------------------------------------------------------------
OPERATING PROFIT 50,761 40,080
Profit on disposal of businesses 1,232 -
Interest receivable 1,486 529
Interest payable (5,844) (2,974)
- -----------------------------------------------------------------------------------------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 47,635 37,635
Taxation on profit on ordinary activities (15,243) (12,420)
- -----------------------------------------------------------------------------------------
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 32,392 25,215
and for the financial year
Equity dividends (3,700) (3,137)
- -----------------------------------------------------------------------------------------
Amount transferred to reserves 28,692 22,078
- -----------------------------------------------------------------------------------------
Earnings per share (pence) 28.85p 23.43p
- -----------------------------------------------------------------------------------------
Net dividend per share (pence) 3.19p 2.90p
</TABLE>
There is no material difference between profits and losses as reported above and
historical cost profits and losses in either the current or comparative year.
32
<PAGE> 26
The Sage Group plc
A Report on our Activities 1998
Consolidated Balance Sheet
As at 30 September 1998
<TABLE>
<CAPTION>
1998 1997
NOTE (POUND STERLING) '000 (POUND STERLING) '000
---- ------------------- -------------------
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets 9 31,087 25,188
- ------------------------------------------------------------------------------------------------------------------------
CURRENT ASSETS
Stocks 11 1,965 3,299
Debtors 12 41,005 28,915
Cash at bank and in hand 36,274 7,372
- ------------------------------------------------------------------------------------------------------------------------
79,244 39,586
CREDITORS: amounts falling due within one year 13 (64,947) (49,758)
- ------------------------------------------------------------------------------------------------------------------------
NET CURRENT ASSETS/(LIABILITIES) 14,297 (10,172)
- ------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS LESS CURRENT LIABILITIES 45,384 15,016
CREDITORS: amounts falling due after more than one year 14 (90,305) (40,974)
DEFERRED MAINTENANCE INCOME (34,838) (20,283)
- ------------------------------------------------------------------------------------------------------------------------
(79,759) (46,241)
- ------------------------------------------------------------------------------------------------------------------------
CAPITAL AND RESERVES
Called up equity share capital 16 1,160 1,081
Share premium account 16 85,373 9,512
Profit and loss account 17 107,348 77,260
- ------------------------------------------------------------------------------------------------------------------------
193,881 87,853
Goodwill reserve 18 (273,640) (134,094)
- ------------------------------------------------------------------------------------------------------------------------
EQUITY SHAREHOLDERS' FUNDS (79,759) (46,241)
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE> 27
[SAGE LOGO]
Company Balance Sheet
As at 30 September 1998
<TABLE>
<CAPTION>
1998 1997
Note [pound sterling]'000 [pound sterling]'000
---- ------------------ ------------------
<S> <C> <C> <C>
FIXED ASSETS
Investments 10 73,448 62,062
- -------------------------------------------------------------------------------------------------------------------------------
CURRENT ASSETS
Stocks 11 448 694
Debtors 12 159,493 35,810
Cash at bank and in hand 18,142 2,384
- -------------------------------------------------------------------------------------------------------------------------------
178,083 38,888
CREDITORS: amounts falling due within one year 13 (19,100) (12,028)
- -------------------------------------------------------------------------------------------------------------------------------
NET CURRENT ASSETS 158,983 26,860
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS LESS CURRENT LIABILITIES 232,431 88,922
CREDITORS: amounts falling due after more than one year 14 (83,294) (29,500)
- -------------------------------------------------------------------------------------------------------------------------------
149,137 59,422
- -------------------------------------------------------------------------------------------------------------------------------
CAPITAL AND RESERVES
Called up equity share capital 16 1,160 1,081
Share premium account 16 85,373 9,512
Profit and loss account 17 62,604 48,829
- -------------------------------------------------------------------------------------------------------------------------------
EQUITY SHAREHOLDERS' FUNDS 149,137 59,422
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The financial statements on pages 32 to 51 were approved by the Board of
Directors on 9 December 1998 and are signed on their behalf by:
P A WALKER
Director
A J HUGHES
Director
34
<PAGE> 28
The Sage Group plc
A Report on our Activities 1998
Consolidated Cash Flow Statement
For the year ended 30 September 1998
<TABLE>
<CAPTION>
1998 1997
Note (pound sterling)'000 (pound sterling)'000
----- ------------------- --------------------
<S> <C> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES 26(A) 54,200 40,400
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received 1,486 529
Interest paid (4,651) (2,403)
Interest element of finance lease rental payments (493) (545)
- --------------------------------------------------------------------------------------------------------------------------
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND (3,658) (2,419)
SERVICING OF FINANCE
TAXATION
Corporation tax (including ACT) paid (11,262) (9,981)
CAPITAL EXPENDITURE
Payments to acquire tangible fixed assets (8,815) (4,733)
Receipts from sales of tangible fixed assets 827 873
- --------------------------------------------------------------------------------------------------------------------------
NET CASH OUTFLOW FROM CAPITAL EXPENDITURE (7,988) (3,860)
ACQUISITIONS AND DISPOSALS Purchase of subsidiary undertakings:
Net cash consideration - current year acquisitions 19(c) (136,387) (42,648)
- prior year acquisitions 498 (3,993)
Sale of businesses - net cash received 9,803 -
- --------------------------------------------------------------------------------------------------------------------------
NET CASH OUTFLOW FROM ACQUISITIONS AND DISPOSALS (126,086) (46,641)
EQUITY DIVIDENDS PAID (3,326) (2,943)
- --------------------------------------------------------------------------------------------------------------------------
CASH OUTFLOW BEFORE FINANCING (98,120) (25,444)
FINANCING
Shares issued 26(c) 73,508 444
Movement in loan funding 26(c) 51,337 26,697
Finance lease funding net of capital payments 26(c) (299) (124)
- --------------------------------------------------------------------------------------------------------------------------
NET CASH INFLOW FROM FINANCING 124,546 27,017
- --------------------------------------------------------------------------------------------------------------------------
INCREASE IN CASH IN THE YEAR 26(B) 26,426 1,573
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE> 29
SAGE
Statement of Total Recognised Gains and Losses
For the year ended 30 September 1998
<TABLE>
<CAPTION>
1998 1997
pound sterling'000 pound sterling'000
------------------ ------------------
<S> <C> <C>
Profit for the financial year 32,392 25,215
Translation of foreign currency net investments and related borrowings 1,396 2,953
- ---------------------------------------------------------------------------------------------------------------------------
Total recognised gains and losses relating to the year 33,788 28,168
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Reconciliation of Movements in Equity Shareholders' Funds
For the year ended 30 September 1998
<TABLE>
<CAPTION>
1998 1997
pound sterling'000 pound sterling'000
------------------ ------------------
<S> <C> <C>
Profit for the financial year 32,392 25,215
Dividends (3,700) (3,137)
- -------------------------------------------------------------------------------------------------------------------------------
Amount transferred to reserves 28,692 22,078
Translation of foreign currency net investments and related borrowings 1,396 2,953
Movement in goodwill reserve in year (139,546) (48,502)
Shares issued 73,508 444
Reversal of relief under S131(2) Companies Act 1985 in respect of disposal 2,432 -
- -------------------------------------------------------------------------------------------------------------------------------
Net decrease in shareholders' funds (33,518) (23,027)
Opening shareholders' funds (46,241) (23,214)
- -------------------------------------------------------------------------------------------------------------------------------
Closing shareholders' funds (79,759) (46,241)
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE> 30
The Sage Group plc
A Report on our Activities 1998
Notes to the Accounts
For the year ended 30 September 1998
1. Accounting policies
(a) BASIS OF ACCOUNTING
The financial statements are prepared under the historical cost convention and
in accordance with applicable accounting standards in the United Kingdom.
(b) Basis of consolidation
The financial statements of the Group comprise the financial statements of the
Company and its subsidiaries prepared to 30 September 1998. The results of
subsidiary undertakings acquired during the year are included from the effective
date of acquisition and the results of operations sold during the year are
included up to the effective date of disposal.
(c) Goodwill
Goodwill, being the excess of the cost of acquisitions over the fair value of
assets acquired, is written off directly to a goodwill reserve in the year it is
incurred.
(d) Turnover
Turnover represents invoiced sales to third parties after deducting credit
notes, allowances, trading discounts and value added tax and is adjusted to
include maintenance income on a straight line basis over the life of each
maintenance agreement. Revenue not recognised under this policy is classified as
deferred maintenance income in the balance sheet.
(e) Tangible fixed assets
Tangible fixed assets are stated at cost less accumulated depreciation.
Depreciation on tangible fixed assets is provided for as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Freehold land and buildings - nil
Long leasehold land and buildings - over period of lease
Plant and equipment - 15%-33.3% per annum on reducing balance
Fixtures and fittings - 15% per annum on reducing balance
Motor vehicles - 25% per annum on reducing balance
</TABLE>
No depreciation is charged on the Group's freehold buildings because it is the
Group's practice to maintain these assets in a continual state of sound repair
and the directors consider that the economic life of these properties and their
residual values, based upon prices prevailing at the time of acquisition, are
such that depreciation is not significant.
(f) Development costs and other intangible assets
All costs associated with the development of software are written off as
incurred.
(g) Stocks
Stocks are stated at the lower of cost and net realisable value.
(h) Leasing
Where plant and equipment is acquired by finance leasing arrangements which give
rights approximating to ownership the amount representing the purchase price of
such assets is included in tangible fixed assets and the related obligations are
included as creditors.
All other leases are classified as operating leases and the annual rentals are
charged to the profit and loss account as they fall due.
37
<PAGE> 31
SAGE
Notes to the Accounts continued
1. Accounting policies - continued
(i) Foreign currency translation
Foreign currency assets and liabilities are translated into sterling at rates of
exchange ruling at the year end. Trading results are translated at the average
rate prevailing during the relevant period. Differences arising on the
re-translation of the net investments and the results for the year are taken
directly to reserves together with differences on foreign currency borrowings to
the extent that they are used to finance or provide a hedge against Group equity
investments in foreign enterprises. All other exchange differences are dealt
with in the profit and loss account.
(j) Deferred taxation
Provision is made for deferred taxation to the extent that there is a reasonable
probability that a liability will arise in the foreseeable future.
(k) Pension schemes
The Group operates money purchase pension schemes for certain of its employees.
The costs are charged to the profit and loss account as they fall due.
2. Analysis of operations
<TABLE>
<CAPTION>
1998 1997
Continuing Discontinued Total Continuing Discontinued Total
operations operation operations operation
(pound sterling) pound sterling) (pound sterling) (pound sterling) (pound sterling) (pound sterling)
'000 '000 '000 '000 '000 '000
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Turnover 188,473 3,074 191,547 139,492 12,597 152,089
Cost of sales (16,759) (2,353) (19,112) (12,920) (9,112) (22,032)
- ------------------------------------------------------------------------------------------------------------------------------
Gross profit 171,714 721 172,435 126,572 3,485 130,057
Selling and
administrative
expenses (121,172) (502) (121,674) (87,419) (2,558) (89,977)
- ------------------------------------------------------------------------------------------------------------------------------
Operating profit 50,542 219 50,761 39,153 927 40,080
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3. Segment information
The directors consider there to be only one class of business, being the
development, distribution and support of branded PC accounting software and
related products. Therefore, only geographical segment information is given
below.
The geographical analysis of turnover by destination is as follows:
<TABLE>
<CAPTION>
1998 1997
(pound sterling)'000 (pound sterling)'000
-------------------- --------------------
<S> <C> <C>
United Kingdom(1) 62,447 62,162
Mainland Europe 77,003 68,553
United States of America(2) 48,189 18,255
Rest of World 3,908 3,119
- -----------------------------------------------------------------------------------------
191,547 152,089
- -----------------------------------------------------------------------------------------
</TABLE>
Notes:
1 Includes contribution from discontinued activity, being Dataform (see note
20).
2 Includes post acquisition contribution of Sage Software, Inc. (formerly State
Of The Art, Inc.) (see note 19(a)).
38
<PAGE> 32
The Sage Group plc
A Report on our Activities 1998
3. Segment information - continued
The geographical analysis of turnover, operating profit and net
assets/liabilities by origin is as follows:
<TABLE>
<CAPTION>
1998 1997
Turnover Operating Net Turnover Operating Net
profit (liabilities) profit liabilities
/assets
[pound [pound [pound [pound [pound [pound
sterling]'000 sterling]'000 sterling]'000 sterling]'000 sterling]'000 sterling]'000
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
United Kingdom(1) 62,854 29,395 (78,990) 62,982 24,464 (36,281)
Mainland Europe 78,916 11,162 (8,051) 70,077 11,763 (8,978)
United States of
America(2) 49,777 10,204 7,282 19,030 3,853 (982)
- --------------------------------------------------------------------------------------------------------------------------------
191,547 50,761 (79,759) 152,089 40,080 (46,241)
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
(1) Includes contribution from discontinued activity, being Dataform (see note
20).
(2) Includes post acquisition contribution of Sage Software, Inc. (formerly
State Of The Art, Inc.) (see note 19(a)).
4. Operating profit
Operating profit is stated after charging:
<TABLE>
<CAPTION>
1998 1997
[pound sterling]'000 [pound sterling]'000
-------------------- --------------------
<S> <C> <C>
Staff costs (including directors' emoluments):
- Wages and salaries 54,788 40,715
- Social security costs 11,824 9,857
- Other pension costs 1,560 639
Research and development expenditure (including staff costs) 18,193 14,193
Depreciation of tangible fixed assets - owned 3,977 3,119
- leased 21 38
Loss on sale of tangible fixed assets 171 99
Operating lease rentals:
- Hire of plant and machinery 1,337 1,453
- Other operating leases 2,418 2,136
Auditors' remuneration 304 263
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Auditors' remuneration shown above includes [pound sterling] 15,000 (1997:
[pound sterling] 13,000) in respect of the Company. Non-audit services supplied
by the Company's auditors amounted to [pound sterling] 102,000 (1997: [pound
sterling] 46,000).
5. Interest payable
<TABLE>
<CAPTION>
1998 1997
[pound sterling]'000 [pound sterling]'000
--------------------- --------------------
<S> <C> <C>
Interest payable on borrowings 5,351 2,429
Finance charges on finance leases 493 545
- -----------------------------------------------------------------------------------------------------
5,844 2,974
- -----------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE> 33
SAGE
Notes to the Accounts continued
6. Employees and directors
(a) Employees
The average number of persons employed by the Group during the year was:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
United Kingdom and Europe 1,578 1,493
United States of America 553 275
- -----------------------------------------------------------------------------
2,131 1,768
- -----------------------------------------------------------------------------
</TABLE>
(b) Directors
The directors and their interests and those of their families in the ordinary
share capital of the Company at the dates given below were as follows:
<TABLE>
<CAPTION>
Shares At 30 September At 30 September
1998 1997
---- ----
<S> <C> <C>
L C N Bury 50,000 50,000
C J Constable 2,000 2,000
K C Howe 250,000 250,000
A J Hughes - -
M E W Jackson 40,925 53,925
P L Stobart - -
P A Walker 850,465 900,465
A W G Wylie 12,342,140 12,442,140
- ----------------------------------------------------------------------------------------
13,535,530 13,698,530
- ----------------------------------------------------------------------------------------
</TABLE>
The above interests in the ordinary share capital of the Company are beneficial
other than Mr A W G Wylie's holding which includes 3,950,000 (1997: 4,000,000)
held by him as trustee in a non-beneficial capacity.
There have been no changes in the directors' interests in the share capital of
the Company between 30 September 1998 and 9 December 1998.
The directors' interests in the share options in the Company are set out below:
<TABLE>
<CAPTION>
Options Exercise price At 30 September Granted in the year At 30 September
1997 1998
---- ----
<S> <C> <C> <C> <C>
A J Hughes 99.6p 150,000 - 150,000
P L Stobart 432.0p 115,741 - 115,741
" 811.0p - 40,000 40,000
P A Walker 6.6p 298,315 - 298,315
" 99.6p 250,000 - 250,000
" 339.0p 156,000 - 156,000
- -------------------------------------------------------------------------------------------------------------
970,056 40,000 1,010,056
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Exercise dates for these options are disclosed in note 16 as is relevant market
price information. There were no share options exercised by directors during the
year.
40
<PAGE> 34
The Sage Group plc
A Report on our Activities 1998
6. Employees and directors - continued
Directors' emoluments for the year ended 30 September 1998 were as follows:
<TABLE>
<CAPTION>
Salary Bonus Benefits Sub Pension(1) Total Total
in kind(3) total contributions 1998 1997
(pound (pound (pound (pound (pound (pound (pound
sterling) sterling) sterling) sterling) sterling) sterling) sterling)
'000 '000 '000 '000 '000 '000 '000
--------- --------- ---------- --------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
L C N Bury 20 - - 20 - 20 19
C J Constable 23 - - 23 - 23 19
A D Goldman
(resigned 30 September 1997) - - - - - - 272
K C Howe 184 - 3 187 7 194 192
A J Hughes 110 44 13 167 17 184 155
M E W Jackson(2) 110 - 1 111 15 126 73
T P Maxfield
(resigned 31 December 1997) - - - - - - 163
P L Stobart 180 90 9 279 27 306 174
P A Walker(4) 230 115 13 358 35 393 304
A W G Wylie 150 75 17 242 23 265 198
- -----------------------------------------------------------------------------------------------------------------------------------
1,007 324 56 1,387 124 1,511 1,569
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
1 Retirement benefits were accruing to six directors (1997: seven). All pension
contributions accrued under money purchase schemes.
2 This amount includes payments of (pound sterling) 25,000 (1997: (pound
sterling) 28,750) for corporate advisory services.
3 Benefits in kind include the provision of a company car, fuel, telephone and
medical insurance.
4 The highest paid director was P A Walker: emoluments (pound sterling) 393,000;
no share options exercised (1997: K C Howe: emoluments (pound sterling)
192,000; gains on share options exercised (pound sterling) 1,470,000).
7. Taxation
<TABLE>
<CAPTION>
1998 1997
(pound sterling)'000 (pound sterling)'000
--------------------- ---------------------
<S> <C> <C>
UK corporation tax at 31% (1997: 32%) 9,792 8,281
Overseas corporation tax (at prevailing local rates) 5,451 4,139
- -------------------------------------------------------------------------------------------------------------
15,243 12,420
- -------------------------------------------------------------------------------------------------------------
</TABLE>
8. Equity dividends
<TABLE>
<CAPTION>
1998 1997
(pound sterling)'000 (pound sterling)'000
-------------------- --------------------
<S> <C> <C>
Interim paid 1.07p per share (1997: 0.97p) 1,240 1,052
Final proposed 2.12p per share (1997: 1.93p) 2,460 2,085
- -------------------------------------------------------------------------------------------------------------
Total 3.19p (1997: 2.90p) 3,700 3,137
- -------------------------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE> 35
[SAGE LOGO]
Notes to the Accounts continued
9. Tangible fixed assets
<TABLE>
<CAPTION>
Long
Freehold leasehold Plant Fixtures
land and land and and and Motor
buildings buildings equipment fittings vehicles Total
(pound sterling)(pound sterling) (pound sterling) (pound sterling) (pound sterling) (pound sterling)
'000 '000 '000 '000 '000 '000
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Cost
At 1 October 1997 16,681 212 13,406 5,569 2,021 37,889
Additions 81 - 6,634 1,565 535 8,815
Disposals - - (2,910) (1,344) (1,021) (5,275)
Acquisitions - - 6,452 1,365 81 7,898
Exchange rate movements 38 - (102) (13) (3) (80)
- ----------------------------------------------------------------------------------------------------------------------------------
At 30 September 1998 16,800 212 23,480 7,142 1,613 49,247
- ----------------------------------------------------------------------------------------------------------------------------------
Depreciation
At 1 October 1997 - 92 8,491 3,326 792 12,701
Charge for the year - 5 2,601 1,078 314 3,998
Disposals - - (1,909) (983) (474) (3,366)
Acquisitions - - 4,098 789 8 4,895
Exchange rate movements - - (55) (10) (3) (68)
- ----------------------------------------------------------------------------------------------------------------------------------
At 30 September 1998 - 97 13,226 4,200 637 18,160
- ----------------------------------------------------------------------------------------------------------------------------------
Net book amount
At 30 September 1998 16,800 115 10,254 2,942 976 31,087
- ----------------------------------------------------------------------------------------------------------------------------------
At 30 September 1997 16,681 120 4,915 2,243 1,229 25,188
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Included above are fixed assets purchased under finance leases at a cost of
(pound sterling) 3,915,000 (1997: (pound sterling) 5,250,000). The accumulated
depreciation on these assets at 30 September 1998 amounted to (pound sterling)
159,000 (1997: (pound sterling) 1,231,000).
10. Investments
Equity interests in subsidiary undertakings are as follows:
<TABLE>
<CAPTION>
Company
1998
(pound sterling)'000
--------------------
<S> <C>
Cost
At 1 October 1997 62,358
Additions 101,106
Disposals(1) (89,720)
- ---------------------------------------------------------------------------------
At 30 September 1998 73,744
- ---------------------------------------------------------------------------------
Provision for diminution in value
At 1 October 1997 and 30 September 1998 (296)
- ---------------------------------------------------------------------------------
Net book amount
At 30 September 1998 73,448
- ---------------------------------------------------------------------------------
At 30 September 1997 62,062
- ---------------------------------------------------------------------------------
</TABLE>
Note:
1 Disposals to third parties during the year related to the Dataform business
(as disclosed in note 20). The remaining disposals were to subsidiary
undertakings under a group reorganisation.
42
<PAGE> 36
The Sage Group plc
A Report on our Activities 1998
10. Investments - continued
Principal trading subsidiary undertakings, included in the Group accounts, at 30
September 1998 are shown below. All of these subsidiary undertakings are wholly
owned and are engaged in the development, distribution and support of branded PC
accounting software and related products.
<TABLE>
<CAPTION>
Company Country of Incorporation(3)
- ------- -------------------------
<S> <C>
Sage Software Limited (formerly Sagesoft Limited) England
P.A.S.E. Limited(1) Scotland
Sage Software, Inc. (formerly State Of The Art, Inc.)(1) USA
Sage US Holdings, Inc.(1,2) USA
Prosoft Corp (trading as Carpe Diem)(1) USA
Ciel SA(1) France
Sage France(1) France
Meteor SA(1) France
Sage KHK Software Gmbh & Co KG (formerly KHK Software AG)(1) Germany
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
(1) Shares held by subsidiary undertaking.
(2) The businesses of DacEasy Inc, Telemagic Inc and Timeslips Inc were merged
into this company on 1 October 1997.
(3) All companies operate in their country of incorporation with the exception
of P.A.S.E. Limited which operates in England.
All investments are in ordinary share capital with the exception of Sage KHK
Software Gmbh & Co KG which is a partnership in which two subsidiary
undertakings are equity partners.
11. Stocks
<TABLE>
<CAPTION>
Group Company
1998 1997 1998 1997
(pound sterling)'000 (pound sterling)'000 (pound sterling)'000 (pound sterling)'000
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Materials 787 886 - 88
Finished goods 1,178 2,413 448 606
- ----------------------------------------------------------------------------------------------------------------------------------
1,965 3,299 448 694
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
12. Debtors
<TABLE>
<CAPTION>
Group Company
1998 1997 1998 1997
(pound sterling)'000 (pound sterling)'000 (pound sterling)'000 (pound sterling)'000
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Trade debtors 33,084 19,642 10,230 7,468
Amounts owed by Group undertakings - - 148,149 27,491
Debts factored with recourse (note 13) 1,544 5,580 - -
Other debtors 1,359 1,549 119 32
Prepayments 2,758 1,623 380 298
Taxation recoverable 2,260 521 615 521
- ----------------------------------------------------------------------------------------------------------------------------------
41,005 28,915 159,493 35,810
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Taxation recoverable includes Advance Corporation Tax of (pound sterling)
615,000 which is recoverable more than one year after the balance sheet date.
43
<PAGE> 37
SAGE
13. Creditors: amounts falling due within one year
<TABLE>
<CAPTION>
Group Company
1998 1997 1998 1997
[pound sterling]'000 [pound sterling]'000 [pound sterling]'000 [pound sterling]'000
-------------------- -------------------- -------------------- -------------------
<S> <C> <C> <C> <C>
Current portion of loans and bank overdrafts 7,696 5,110 4,610 4,500
Current portion of finance lease obligations 304 422 - -
Trade creditors 9,149 9,374 1,658 1,345
Provision for debts factored with recourse
(note 12) 1,544 5,580 - -
Amounts owed to Group undertakings - - 3,583 204
Corporation tax 16,322 11,041 140 29
Other taxes and social security costs 7,504 7,285 1,846 1,525
Accruals 10,913 6,789 2,930 1,819
Deferred consideration on acquisitions
and cost of share options assumed 4,875 - 1,258 -
Advance Corporation Tax 615 521 615 521
Proposed dividend 2,460 2,085 2,460 2,085
Other creditors 3,565 1,551 - -
- ---------------------------------------------------------------------------------------------------------------------------------
64,947 49,758 19,100 12,028
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Included in current portion of loans and bank overdrafts is [pound
sterling] 4,610,000 (1997: [pound sterling] 4,500,000) of unsecured loans and
[pound sterling] 3,026,000 (1997: [pound sterling] 550,000) of bank overdrafts.
14. Creditors: amounts falling due after more than one year
<TABLE>
<CAPTION>
Group Company
1998 1997 1998 1997
[pound sterling]'000 [pound sterling]'000 [pound sterling]'000 [pound sterling]'000
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Finance lease obligations:
1 - 2 years 221 181 - -
2 - 5 years 944 790 - -
5 years and over 4,798 5,112 - -
Loans:
1 - 2 years 14,062 8,748 13,719 8,400
2 - 5 years 56,124 25,558 55,944 21,100
5 years and over 14,156 585 13,631 -
- --------------------------------------------------------------------------------------------------------------------------
90,305 40,974 83,294 29,500
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
Included in loans above and in note 13 is [pound sterling] 88,616,000 (1997:
[pound sterling] 38,278,000) of unsecured loans taken out in connection with
acquisitions. Of this sum, $60,000,000 ([pound sterling] 35,561,000) of Senior
Notes were issued to the US private placement market. These Notes are repayable
in equal annual instalments from 2001 to 2005 with a fixed interest coupon of
6.77% per annum. The remaining [pound sterling] 53,055,000 is held as a five
year bank loan facility. In the table above these loans are stated net of
unamortised issue costs of [pound sterling] 711,000 (1997: [pound sterling]
nil). The Company incurred total issue costs of [pound sterling] 814,000 in
respect of these facilities. These costs, together with the interest expense,
are allocated to the profit and loss account over the term of the facility at a
constant rate on the carrying amount.
Other loans repayable in excess of five years include [pound sterling] 525,000
which are secured on a Group freehold property and accrue interest at a rate of
1.75% over the UK base rate and are repayable at [pound sterling] 60,000
per annum.
44
<PAGE> 38
THE SAGE GROUP PLC
A REPORT ON OUR ACTIVITIES 1998
15. PROVISIONS FOR LIABILITIES AND CHARGES
The provision for deferred taxation at 30 September 1998 was [pound sterling]
nil (1997: [pound sterling]nil)
<TABLE>
<CAPTION>
Group Company
1998 1997 1998 1997
[pound sterling]'000 [pound sterling]'000 [pound sterling]'000 [pound sterling]'000
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Full potential deferred tax asset:
Tax deferred by accelerated capital allowances 845 714 - -
Chargeable gains subject to rollover relief 780 - - -
Short term timing differences (13,437) (9,814) - -
- -----------------------------------------------------------------------------------------------------------------------------------
(11,812) (9,100) - -
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Deferred tax has been calculated at 30% (1997: 31%) in respect of UK companies
(being the prevailing UK corporation tax rate at 30 September 1998) and at the
respective prevailing rates for the overseas subsidiaries. No deferred tax has
been provided in respect of the remittance of earnings retained overseas as
there is no intention in the foreseeable future to remit these earnings to the
UK.
16. CALLED UP EQUITY SHARE CAPITAL AND SHARE PREMIUM ACCOUNT
(a) ordinary share capital
<TABLE>
<CAPTION>
GROUP AND COMPANY
1998 1997
[pound sterling]'000 [pound sterling]'000
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Allotted and fully paid
116,039,449 ordinary shares of 1p each (1997: 108,072,478) 1,160 1,081
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The authorised share capital of the Company at 30 September 1998 and 30
September 1997 was [pound sterling] 1,438,500 comprising 143,850,000 ordinary
shares of 1p each.
During the year 7,826,694 1p ordinary shares were issued to investing
institutions at 960p in respect of the acquisition of State Of The Art, Inc.
(now Sage Software, Inc.). In addition, 134,870 1p ordinary shares were issued
in respect of options exercised under executive share option schemes which were
exercised at prices of 6.6p, 62p, 595p and 695p. Proceeds received in respect of
these share issues were [pound sterling] 75,237,935. The following share options
were outstanding under executive share option schemes at 30 September 1998:
<TABLE>
<CAPTION>
Date Option Option Price Date Exercisable Number
Granted Per Share of Shares
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
16 March 1989 6.6p 6 December 1989 - 16 March 1999 298,315
11 January 1991 37.8p 11 January 1994 - 11 January 2001 103,160
5 January 1993 98.0p 5 January 1996 - 5 January 2003 75,000
16 December 1993 99.6p 16 December 1996 - 16 December 2003 400,000
15 January 1996 339.0p 15 January 1999 - 15 January 2006 156,000
3 May 1996 432.0p 3 May 1999 - 3 May 2006 160,741
10 February 1997 539.0p 10 February 2000 - 10 February 2007 15,000
19 May 1997 652.0p 19 May 2000 - 19 May 2007 150,000
17 December 1997 811.0p 17 December 2000 - 17 December 2007 330,660
7 January 1998 827.0p 7 January 2001 - 7 January 2008 35,000
20 January 1998 987.5p 20 January 2001 - 20 January 2008 15,000
20 April 1998 468.7p - 1041.0p 8 August 1999 - 3 March 2009 345,583
15 May 1998 1400.0p 15 May 2001 - 15 May 2008 335,356
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
45
<PAGE> 39
SAGE
NOTES TO ACCOUNTS CONTINUED
16. CALLED UP EQUITY SHARE CAPITAL AND SHARE PREMIUM ACCOUNT - CONTINUED
In addition options as follows were granted on 20 September 1996 and 9 January
1998 under the terms of The Sage Group plc 1996 Savings Related Share Option
Scheme approved by members on 7 February 1996:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
20 September 1996 346.0p 20 September 1999 - 19 March 2000 35,655
20 September 1996 346.0p 20 September 2001 - 19 March 2002 102,564
20 September 1996 346.0p 20 September 2003 - 19 March 2004 27,045
9 January 1998 648.0p 9 January 2001 - 8 July 2001 69,633
9 January 1998 648.0p 9 January 2003 - 8 July 2003 38,782
9 January 1998 648.0p 9 January 2005 - 8 July 2005 12,031
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Under the above scheme, 5,407 1p ordinary shares were issued during the year for
proceeds of [pound sterling] 18,887.
The market price of the shares of the Company at 30 September 1998 was 1,283p
and the highest and lowest prices during the year were 1,783p and 686p
respectively.
(b) Share premium account
<TABLE>
<CAPTION>
Group and
Company
[Pound Sterling]'000
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
At 1 October 1997 9,512
Shares issued 73,429
Reversal of relief under S131(2) Companies Act 1985 in respect of disposal of Dataform (note 20) 2,432
- --------------------------------------------------------------------------------------------------------------------
At 30 September 1998 85,373
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
17. PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
Group Company
[Pound Sterling]'000 [Pound Sterling]'000
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
At 1 October 1997 77,260 48,829
Retained profit for the year 28,692 13,775
Foreign currency translation differences 1,396 -
- ---------------------------------------------------------------------------------------------------------------------
At 30 September 1998 107,348 62,604
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Currency translation adjustments in the Group profit and loss account include
gains of [pound sterling] 1,654,000 (1997: [pound sterling] 1,172,000) relating
to foreign currency borrowings used to finance overseas investments.
18. GOODWILL RESERVE
<TABLE>
<CAPTION>
Group
Pound Sterling'000
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
At 1 October 1997 134,094
Goodwill arising in the year 139,546
- -------------------------------------------------------------------------------------------------------------------
At 30 September 1998 273,640
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Goodwill arising in the year comprises [pound sterling] 134.1m in respect of the
acquisition of State Of The Art, Inc. (now Sage Software, Inc.) (see note
19(a)), [pound sterling] 7.1m in respect of other acquisitions (see note 19(b)),
[pound sterling] 1.0m principally in respect of the final determination of
product warranty and reorganisation liabilities existing prior to the
acquisition of KHK Software AG (now Sage KHK Software Gmbh & Co KG), [pound
sterling] 0.3m in respect of adjustments to costs of acquisitions in prior years
and [pound sterling] (3.0m) in respect of businesses sold during the year (see
note 20).
46
<PAGE> 40
The Sage Group plc
A Report on Our Activities 1998
18. GOODWILL RESERVE - CONTINUED
The cumulative amount of goodwill written off to reserves before utilisation of
S131(2) of the Companies Act 1985 amounts to [pound sterling]274,985,000 at 30
September 1998 (1997: [pound sterling] 137,871,000).
19. ACQUISITIONS
(a) Sage Software, Inc. (formerly State Of The Art, Inc.)
On 3 March 1998 the Group completed the acquisition of State Of The Art, Inc.
(now Sage Software, Inc.) for a net cash consideration of [pound sterling]132.4m
(inclusive of [pound sterling]1.5m related costs). Total goodwill arising on the
acquisition is [pound sterling]134.1m. The fair value of net assets acquired is
based on provisional assessments pending final determination of the value of
certain assets and liabilities.
The assets and liabilities of Sage Software, Inc. (formerly State Of The Art,
Inc.) at fair value were:
<TABLE>
<CAPTION>
Fair Value Adjustments
Alignment Other(2)
of Accounting Fair Value
Book Value Policies(1) to Group
[pound sterling]'000 [pound sterling]'000 [pound sterling]'000 [pound sterling]'000
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed assets 4,867 (1,948) - 2,919
Stocks 552 - (67) 485
Debtors 5,876 - (151) 5,725
Cash at bank 29,026 - - 29,026
Creditors falling due within one year (4,411) - (345) (4,756)
Deferred income (4,142) - - (4,142)
- ------------------------------------------------------------------------------------------------------------------------------------
31,768 (1,948) (563) 29,257
Cash consideration including costs (note 19(c)) 161,444
Cost of share options assumed 1,871
- ------------------------------------------------------------------------------------------------------------------------------------
Goodwill arising (note 18) 134,058
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
(1) Alignment of accounting policies relates to the elimination of
intangible fixed assets previously held in the books of State Of The
Art, Inc..
(2) Other adjustments include a provision in respect of an onerous contract
and reassessments of the provisions for bad and doubtful debts and
product returns.
Prior to acquisition the last full set of financial statements of State Of The
Art, Inc. (now Sage Software, Inc.) was prepared to 31 December 1997 and showed
a profit after taxation and minority interests of $6,543,000.
The pre-acquisition results for State Of The Art, Inc. (now Sage Software, Inc.)
for the period from 1 January 1998 to 2 March 1998 prepared under State Of The
Art, Inc. accounting policies and principles prevailing prior to acquisition
were as follows:
<TABLE>
<CAPTION>
$'000
- ----------------------------------------------------------------------------------------
<S> <C>
Turnover 8,982
- ----------------------------------------------------------------------------------------
Operating loss (1,221)
Net interest receivable 274
- ----------------------------------------------------------------------------------------
Loss before taxation (947)
Taxation and minority interests -
- ----------------------------------------------------------------------------------------
Loss after taxation (947)
- ----------------------------------------------------------------------------------------
</TABLE>
Other than the loss for the period, there were no other gains or losses.
47
<PAGE> 41
[SAGE LOGO]
NOTES TO THE ACCOUNTS CONTINUED
19. ACQUISITIONS - CONTINUED
(b) Other acquisitions
Other acquisitions comprise the purchase of P.A.S.E. Limited, PACS Holdings
Limited, Meteor SA and the unincorporated businesses of Cerium, AMI Logidis and
Acquarious.
i) P.A.S.E. Limited was acquired on 28 September 1998 for an initial cash
consideration of (pound sterling) 1.6m (including costs). A maximum of (pound
sterling) 1.1m further consideration is potentially payable for this acquisition
dependent primarily upon the achievement of revenue thresholds. This has been
provided in these accounts.
ii) PACS Holdings Limited was acquired on 12 February 1998 for an initial cash
consideration of (pound sterling) 0.8m (including costs). A maximum of (pound
sterling) 1.3m further consideration is potentially payable for this acquisition
dependent upon the achievement of revenue thresholds. This has been provided in
these accounts.
iii) Meteor SA was acquired on 16 September 1998 for a cash consideration of
(pound sterling) 1.0m (including costs). No deferred consideration is payable.
iv) Cerium, AMI Logidis and Acquarious were acquired during the year for a total
cash consideration of (pound sterling) 0.4m. No deferred consideration is
payable under these acquisitions.
The fair value of net assets acquired in respect of the above, based on
provisional assessments pending final determination of certain assets and
liabilities, is summarised below:
<TABLE>
<CAPTION>
Fair Value Adjustments
----------------------
Alignment Other(2)
of Accounting Fair Value
Book Value Policies(1) to Group
(Pound Sterling)'000 (Pound Sterling)'000 (Pound Sterling)'000 (Pound Sterling)'000
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed assets 155 - (39) 116
Stocks 14 - - 14
Debtors 340 - - 340
Cash at bank 411 - - 411
Creditors falling due within one year (1,507) - (62) (1,569)
Deferred income (88) (37) - (125)
- -----------------------------------------------------------------------------------------------------------------------------------
(675) (37) (101) (813)
Cash consideration including pound sterling
0.1m of costs (note 19(c) 3,880
Deferred consideration 2,373
- -----------------------------------------------------------------------------------------------------------------------------------
Goodwill arising (note 18) 7,066
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
(1) Alignment of accounting policies relates to the recognition of deferred
maintenance income in accordance with the Company's accounting policy.
(2) Other adjustments include a provision for diminution in value of fixed
assets and a reassessment of the provision for product returns.
(c) Analysis of net outflow of cash in respect of acquisitions
Cash consideration:
<TABLE>
<CAPTION>
(Pound Sterling)'000
- -----------------------------------------------------------------------------
<S> <C>
Sage Software, Inc. (formerly State Of The Art, Inc.),
(note 19(a)) 161,444
Other acquisitions (note 19(b)) 3,880
Net cash acquired (28,937)
- -----------------------------------------------------------------------------
136,387
- -----------------------------------------------------------------------------
</TABLE>
48
<PAGE> 42
THE SAGE GROUP PLC
A REPORT ON OUR ACTIVITIES 1998
20. DISPOSALS
On 17 December 1997 the Group disposed of its investments in Yorkshire Business
Forms Ltd and Venture Business Forms (together trading as Dataform) to
Dataform's management team led by Mr B Holbrook. On 9 March 1998 Multisoft
Financial Systems Limited, a subsidiary undertaking, sold its direct sales
division. Details of assets and liabilities sold under these transactions were
as follows:
<TABLE>
<CAPTION>
Pound Sterling'000
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Fixed assets 987
Stocks 1,290
Debtors 3,771
Bank overdraft (643)
Creditors falling due within one year (2,931)
- ---------------------------------------------------------------------------------------------------------------------
2,474
Gross goodwill arising on acquisition(1) 5,454
Less: proceeds of disposal - cash 9,160
- ---------------------------------------------------------------------------------------------------------------------
Profit on disposal 1,232
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Note:
(1) Stated before merger relief under S131(2) Companies Act 1985 of pound
sterling 2,432,000 giving pound sterling 3,022,000 of net goodwill.
21. PARENT COMPANY PROFIT AND LOSS ACCOUNT
As permitted by Section 230(1) of the Companies Act 1985, The Sage Group plc has
not presented its own profit and loss account. The amount of profit for the
financial year before dividends within the accounts of the parent company is
pound sterling 17,475,000 (1997: pound sterling 16,185,000). There is no
material difference between the profits and losses as reported above and
historical cost profits and losses and there are no other gains or losses in the
year.
22. OPERATING LEASE COMMITMENTS
The Group's annual commitment under non-cancellable operating leases comprises:
<TABLE>
<CAPTION>
1998 1997
Plant and Land and Plant and Land and
Equipment Buildings Equipment Buildings
Pound Sterling'000 Pound Sterling'000 Pound Sterling'000 Pound Sterling'000
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expiring within 1 year 136 199 1,159 291
Expiring between 1 and 2 years 1,265 292 600 716
Expiring between 2 and 5 years 585 1,910 1,123 3,433
- ----------------------------------------------------------------------------------------------------------------------------
1,986 2,401 2,882 4,440
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company has no operating lease commitments (1997: none).
23. CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
The Group and Company have no contracted capital commitments at 30 September
1998 (1997: none). The Group and Company have no contingent liabilities at 30
September 1998 (1997: none).
49
<PAGE> 43
SAGE
Notes to the Accounts continued
24. PENSION COMMITMENTS
The Group operates pension plans throughout the world. These plans are devised
in accordance with local conditions and practices in the country concerned. All
pension plans are money purchase schemes.
25. EARNINGS PER SHARE
The calculation of earnings per share is based on pound sterling 32.4m (1997:
pound sterling 25.2m) profit attributable to shareholders and on 112,281,193
shares (1997: 107,641,176) being the weighted average number of shares in issue
during the year. Earnings per share would not be materially different if the
2,705,525 (1997: 1,707,726) shares under option referred to in note 16 were
taken into the calculation.
26. CONSOLIDATED CASH FLOW STATEMENT
(a) Reconciliation of operating profit to net cash inflow from operating
activities
<TABLE>
<CAPTION>
1998 1997
Pound Sterling'000 Pound Sterling'000
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating profit 50,761 40,080
Depreciation charges 3,998 3,157
Loss on sale of tangible fixed assets 171 99
Exchange differences (134) (1,356)
Decrease in stocks 425 578
(Increase)/decrease in debtors (6,567) 2,298
Decrease in creditors (658) (4,650)
Deferred consideration in respect of acquisitions (4,875) -
Increase in provision for deferred maintenance income 11,079 194
- ----------------------------------------------------------------------------------------------------------------
Net cash inflow from operating activities 54,200 40,400
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(b) Analysis of changes in net cash
<TABLE>
<CAPTION>
Pound Sterling'000
<S> <C>
- -------------------------------------------------------------------------------------------------------
At 1 October 1997 6,822
Net cash movement 26,426
- -------------------------------------------------------------------------------------------------------
At 30 September 1998 33,248
- -------------------------------------------------------------------------------------------------------
</TABLE>
The net cash balance at 30 September 1998 is disclosed in the balance sheet as
cash at bank and in hand of pound sterling 36,274,000 (1997: pound
sterling 7,372,000) and bank overdrafts of pound sterling 3,026,000 (1997: pound
sterling550,000).
(c) Analysis of changes in financing during the year
<TABLE>
<CAPTION>
SHARE CAPITAL
(INCLUDING OBLIGATIONS UNDER
PREMIUM) LOANS FINANCE LEASES
POUND STERLING'000 POUND STERLING'000 POUND STERLING'000
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
At 1 October 1997 10,593 39,451 6,505
Exchange differences -- (1,776) 61
Reversal of relief under S131(2) Companies Act 1985
in respect of disposal of Dataform (note 20) 2,432 -- --
Net cash flow from financing 73,508 51,337 (299)
- ------------------------------------------------------------------------------------------------------------------
At 30 September 1998 86,533 89,012 6,267
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
50
<PAGE> 44
THE SAGE GROUP PLC
A REPORT ON OUR ACTIVITIES 1998
26. CONSOLIDATED CASH FLOW STATEMENT - CONTINUED
(d) Reconciliation of net cash flow to movement in net debt (inclusive of
finance leases)
<TABLE>
<CAPTION> [POUND STERLING]'000
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase in cash in the year 26,426
Cash inflow from increase in debt (51,038)
- --------------------------------------------------------------------------------------------------------------------
Change in net debt resulting from cash flows (24,612)
Exchange difference 1,715
- --------------------------------------------------------------------------------------------------------------------
Movement in net debt in the year (22,897)
Net debt at 1 October 1997 (39,134)
- --------------------------------------------------------------------------------------------------------------------
Net debt at 30 September 1998 (62,031)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(e) Analysis of change of net debt (inclusive of finance leases)
<TABLE>
<CAPTION>
AT CASH FLOW ACQUISITIONS EXCHANGE AT
1 OCTOBER /DISPOSALS MOVEMENT 30 SEPTEMBER
1997 1998
[POUND [POUND [POUND [POUND [POUND
STERLING]'000 STERLING]'000 STERLING]'000 STERLING]'000 STERLING]'000
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net cash at bank and in hand 6,822 (3,138) 29,580 (16) 33,248
Loans due within one year (4,560) (154) - 44 (4,670)
Finance leases due within one year (422) 125 - (7) (304)
Loans due after more than one year (34,891) (51,183) - 1,732 (84,342)
Finance leases due after more than one year (6,083) 174 - (54) (5,963)
- ------------------------------------------------------------------------------------------------------------------------------------
(39,134) (54,176) 29,580 1,699 (62,031)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(f) Summary of effects of acquisitions and disposals on cash flow
A summary of the net cash outflow in respect of acquisitions is given in note
19(c) and the net cash inflow in respect of businesses sold during the year is
given in note 20.
The subsidiary undertakings acquired during the year absorbed [pound
sterling]3,197,000 of the Group's net operating cash flows, received [pound
sterling]237,000 in respect of net returns on investments and servicing of
finance, paid [pound sterling]1,287,000 in respect of taxation and utilised
[pound sterling]1,514,000 for capital expenditure.
The business sold during the year contributed [pound sterling] 446,000 to the
Group's net operating cash flows and utilised [pound sterling] 64,000 for
capital expenditure.
27. RELATED PARTY TRANSACTIONS
On the 17 December 1997, the Group disposed of its subsidiary undertakings,
Yorkshire Business Forms Limited and Venture Business Forms (together trading as
Dataform). Since that date, purchases by the Group from Dataform amounted to
[pound sterling] 1,751,773. At 30 September 1998 outstanding balances payable to
Dataform were [pound sterling] 411,075.
51
<PAGE> 1
EXHIBIT (b)(1)
12 JANUARY 2000
THE SAGE GROUP PLC
DEUTSCHE BANK AG LONDON
===============================================
VENDOR PLACING AGREEMENT
===============================================
<PAGE> 2
CONTENTS
CLAUSE PAGE
1. DEFINITIONS................................................................1
2. CONDITIONS.................................................................4
3. PLACING AND SUBSEQUENT OFFERS AND RESALES OF THE PLACING SHARES............5
4. DELIVERY OF DOCUMENTS......................................................9
5. ALLOTMENT, PAYMENT AND REGISTRATION........................................9
6. FEES, COMMISSIONS AND EXPENSES............................................11
7. FURTHER ASSURANCES OF THE COMPANY.........................................13
8. WARRANTIES AND UNDERTAKINGS OF THE COMPANY................................14
9. INDEMNITY.................................................................19
10. UNDERTAKINGS AND ACKNOWLEDGEMENT..........................................20
11. TERMINATION AND CONTINUING PROVISIONS.....................................21
12. NOTICES...................................................................22
13. MISCELLANEOUS.............................................................23
<PAGE> 3
AN AGREEMENT made on 12 January 2000
BETWEEN
THE SAGE GROUP PLC whose registered office is at Sage House, Benton Park Road,
Newcastle-upon-Tyne, NE7 7LZ (the COMPANY); and
DEUTSCHE BANK AG LONDON of Winchester House, 1 Great Winchester Street, London
EC2N 2DB (DEUTSCHE BANK).
WHEREAS
(A) By an agreement dated the same date as this Agreement (the MERGER
AGREEMENT), made between Best Software, Inc. (BEST), Bobcat Acquisition Corp.
(BIDCO) and the Company, Bidco has agreed to offer, by means of the Tender Offer
Documentation, to acquire from the Vendors all shares of the issued and
outstanding common stock, no par value, of Best on a fully diluted basis (the
STOCK) and proposes to satisfy the consideration for such acquisition from the
proceeds of the allotment and issue to the persons nominated by Deutsche Bank or
to Deutsche Bank (as the case may be) of 43,707,488 new ordinary shares in the
capital of the Company (the PLACING SHARES), credited as fully paid (such shares
to rank, upon issue, in all respects pari passu with the existing issued
ordinary shares of the Company, save that they will not rank for any final
dividend in respect of the year ended 30 September 1999 declared in respect of
such ordinary shares). The Placing Shares to be offered by Deutsche Bank, as
agent of the Company, are being offered and sold only (i) outside the United
States in reliance on Regulation S under the Securities Act of 1933, as amended,
(the SECURITIES ACT) or (ii) in the United States to qualified institutional
buyers (as defined in Rule 144A of the Securities Act, a QIB) in reliance on an
exemption from registration requirements in Section 4(2) of the Securities Act.
(B) Deutsche Bank is willing to procure investors (other than the Vendors) to
accept the allotment of or, to the extent that it does not do so, itself as
principal to accept the allotment of the Placing Shares in accordance with the
provisions of this Agreement (the PLACING) on terms that the aggregate value of
the Placing Shares will be used to enable Bidco to fulfil its obligations under
the Merger Agreement and the Tender Offer Documentation.
IT IS AGREED as follows:
DEFINITIONS
1.1 In this Agreement (including the Recitals) the following expressions
shall, except where the context otherwise requires, have the following meanings:
<PAGE> 4
ACQUISITION means the proposed acquisition by Bidco of the Stock pursuant to the
Tender Offer Documentation;
ACT means the Companies Act 1985;
ADMISSION means the admission of the Placing Shares to the Official List of the
London Stock Exchange;
ADMISSION CONDITION means the condition set out in clause 2.1(d);
BEST SHARES has the meaning set out in clause 2.1(a);
BIDCO has the meaning set out in Recital (A);
COMMISSION means the United States Securities and Exchange Commission;
CONDITIONS has the meaning set out in clause 2.1;
CREST means the system of paperless settlement of trades and the holding of
Uncertificated Shares administered by CRESTCo;
CRESTCo means CRESTCo Limited, a company incorporated under the laws of England
and Wales;
DEALING DAY means any day on which the London Stock Exchange is open for
business in London;
DIRECTORS means the directors for the time being of the Company;
DRAFT TENDER OFFER DOCUMENTATION means the latest draft of the Tender Offer
Documentation as at the date of this Agreement in the agreed form;
EXISTING SHARES means the ordinary shares of 1 pence each in the capital of the
Company in issue at the date of this Agreement;
FSA means the Financial Services Act 1986;
FULLY DILUTED BASIS has the meaning given to it in the Tender Offer
Documentation;
GROUP has the meaning given in clause 8.1(d) and, for the avoidance of doubt,
will not be taken to include any entities acquired pursuant to the Acquisition;
LISTING RULES means the listing rules made by the London Stock Exchange pursuant
to Part IV of the FSA (as amended from time to time);
LONDON STOCK EXCHANGE means the London Stock Exchange Limited;
MERGER has the meaning given to it in the Merger Agreement;
MERGER AGREEMENT means the agreement referred to in Recital (A);
PAGE 2
<PAGE> 5
MINIMUM CONDITION has the meaning set out in clause 2.1(a)(ii);
NON-US PERSON has the meaning set out in clause 3.5(i);
OPTION AGREEMENT means the share option agreement between the Company and Mr.
Michael Jackson in the agreed form;
ORDINARY SHARES means ordinary shares of 1 pence each in the capital of the
Company;
PLACING has the meaning set out in Recital (B);
PLACEES has the meaning set out in clause 3.1;
PLACING LETTER means the agreed form of letter to be despatched by Deutsche Bank
to the Placees inviting them to agree to acquire the Placing Shares;
PLACING LIST has the meaning set out in clause 3.3;
PLACING PRICE means the price per Placing Share (which shall be not less than
621.5 pence per share) at which those Placing Shares for which Deutsche Bank
shall have procured investors pursuant to clause 3.1(a) are to be issued as
determined by Deutsche Bank following the tender process and to be set out in
the Placing Letters;
PLACING SHARES has the meaning set out in Recital (A);
PRESS ANNOUNCEMENTS means the press announcements to be issued in the United
Kingdom (the UK PRESS ANNOUNCEMENT) and the United States respectively, in the
form of the agreed drafts;
QIBS has the meaning set out in Recital (A);
REGULATION S has the meaning set out in clause 3.5(i);
RULE 144A has the meaning set out in clause 3.5(i);
SECURITIES ACT has the meaning set out in Recital (A);
SECURITIES ACT AFFILIATE has the meaning set out in clause 3.3;
STOCK has the meaning set out in Recital (A);
TENDER OFFER means the US tender offer by Bidco to acquire the Stock;
TENDER OFFER DOCUMENTATION means the Schedule 14-D-1 document and the associated
letter of transmittal to be issued by Bidco in connection with the Acquisition;
PAGE 3
<PAGE> 6
TENDER OFFER FORCE MAJEURE CONDITION means the condition set out in Section 14c
(Conditions of The Offer) in the offer to purchase comprising part of the Draft
Tender Offer Documentation;
UNCERTIFICATED SHARES means those Placing Shares which will be delivered to
Placees in uncertificated form pursuant to the Uncertificated Securities
Regulations 1995;
VENDORS means the holders of the Stock; and
WARRANTIES means the representations, warranties and undertakings set out in
clause 8.
1.2 References to the Recitals and clauses are to the Recitals to, and
clauses of, this Agreement (except where the context otherwise requires).
1.3 The expressions HOLDING COMPANY, SUBSIDIARY and SUBSIDIARY UNDERTAKING
shall have the meanings given to those terms by the Act.
1.4 Any reference to an AGREED DRAFT or AGREED FORM is to the form of the
relevant document agreed by or on behalf of the Company and, for the purposes of
its commitments hereunder, by or on behalf of Deutsche Bank and initialled by
them or on their behalf (in each case with such amendments as may be agreed by
or on behalf of the Company and Deutsche Bank).
1.5 Any reference to an enactment is a reference to it as from time to time
amended, consolidated or re-enacted (with or without modification) and includes
all instruments or orders made thereunder.
1.6 Words denoting the singular include the plural and vice versa. Words
importing gender shall include all genders and words denoting persons shall
include corporations, unincorporated associations and partnerships.
1.7 References in this Agreement to the word MATERIAL shall mean material in
the context of the Placing or the underwriting of the Placing.
CONDITIONS
2.1 Deutsche Bank's obligations under clause 3.1 are conditional upon each of
the following conditions (the CONDITIONS) having been satisfied:
(a)(i) without prejudice to paragraph (ii) below, each of the conditions
to the Tender Offer, save only for the Admission Condition, having
been satisfied or (except for the Minimum Condition) waived; and
(ii) there having been validly tendered and not withdrawn prior to the
expiration of the Tender Offer that number of shares of Best (BEST
SHARES) which, when added to the Best Shares then owned by Bidco,
if any, represents at least a majority of the Best Shares
PAGE 4
<PAGE> 7
outstanding on a fully diluted basis (without giving effect to an
option held by Sage to purchase 19.9% of the outstanding Best
Shares) (the MINIMUM CONDITION), and the Tender Offer not having
been terminated in accordance with its terms;
(b) the release of the UK Press Announcement in accordance with clause 7.1;
(c) the Company having allotted the Placing Shares in accordance with clause
5 (conditional only upon satisfaction of the Admission Condition); and
(d) the Admission of the Placing Shares becoming effective in accordance with
paragraph 7.1 of the Listing Rules by 8.00 a.m. on any day until and
including 29 February 2000.
Deutsche Bank may, in its absolute discretion, agree to extend the time for
satisfaction of any of the Conditions (including the timing for Admission) to
not later than 8.00 a.m. on 31 March 2000 (in which case, references to such
Condition in this Agreement shall be to such Condition as so varied) or to waive
the satisfaction of any of the Conditions (except for the Admission Condition).
2.2 The Company will use all reasonable endeavours to procure the
satisfaction of the Conditions by the specified times and dates.
2.3 If any of the Conditions is not satisfied or (except for the Admission
Condition) waived by Deutsche Bank in its absolute discretion on or by the
required times or dates therefor (including any extension pursuant to clause
2.1), the obligations of Deutsche Bank under this Agreement shall cease and
determine.
PLACING AND SUBSEQUENT OFFERS AND RESALES OF THE PLACING SHARES
3.1 Deutsche Bank hereby undertakes, subject to the Conditions and in
reliance upon the representations, undertakings, covenants and warranties of the
Company set out in this Agreement (including the Warranties):
(a) as agent for the Company to procure investors (to such extent as Deutsche
Bank shall in its absolute discretion determine) to acquire the Placing
Shares (PLACEES) in accordance with a tender process discussed with the
Company, and on the terms and conditions set out in the Placing Letter;
and
(b) to the extent it does not procure such investors who have agreed to
acquire the Placing Shares at not less than 621.5 pence per Placing
Share, itself to acquire as principal such Placing Shares at 621.5 pence
per Placing Share,
PAGE 5
<PAGE> 8
in all cases free of all stamp duty, stamp duty reserve tax and other expenses.
3.2 Subject to the terms and conditions of this Agreement, the Company
authorises Deutsche Bank, as its agent, to issue or cause to be issued copies of
the UK Press Announcement together with Placing Letters to such persons outside
the United States as Deutsche Bank shall in its absolute discretion determine
for the purpose of arranging the Placing on the terms and conditions set out in
the Placing Letter and, in the United States, the UK Press Announcement and the
Placing Letter can only be issued to US persons that are reasonably considered
by Deutsche Bank to be QIBs.
3.3 Deutsche Bank shall give the Company written notice, by 5.00 p.m. on 13
January 2000, listing the name of each Placee and the number of Placing Shares
to be allotted to each Placee (the PLACING LIST). For the avoidance of doubt,
Deutsche Bank may (at its absolute discretion) nominate itself in the Placing
List to be a Placee at the Placing Price in respect of some or all of the
Placing Shares. Deutsche Bank agrees that all offers of Placing Shares by
Deutsche Bank and its affiliates (as defined in Rule 501(b) of Regulation D
under the Securities Act, a SECURITIES ACT AFFILIATE) into the United States
will cease upon the filing of the Schedule 14D-1 by Bidco.
3.4 The Company hereby irrevocably and unconditionally appoints Deutsche Bank
as its agent for the purpose of effecting the Placing under Clause 3.1(a) on the
terms and subject to the conditions set out in this Agreement and the Placing
Letter and solely on the basis of the information contained in the UK Press
Announcement and other information published by the Company. Deutsche Bank
hereby accepts such appointment. The Company hereby confirms that this
appointment confers on Deutsche Bank all powers, authorities and discretions on
behalf of the Company which are reasonably necessary for, or reasonably
incidental to, the Placing and the Company hereby agrees to ratify and confirm
everything which Deutsche Bank may lawfully do in the exercise of that
appointment and those powers, authorities and discretions.
3.5 Offer and Sale Procedures: Deutsche Bank and the Company hereby establish
and agree to observe the following procedures in connection with the offer and
sale of the Placing Shares:
(i) Offers and Sales Only to QIBs or Regulation S Persons: Offers and sales
of the Placing Shares will be made on behalf of the Company only through
Deutsche Bank or Securities Act Affiliates thereof qualified to do so in
the jurisdictions in which such offers or sales are made. Each such offer
or sale shall only be made (a) in the United States to persons whom the
offeror or seller reasonably believes to be QIBs in transactions meeting
the requirements of Rule 144A under the Securities Act (RULE 144A) or (b)
to non-US persons (as defined in Regulation S) outside the United States
(a NON-US PERSON) in accordance with Rule 903 of Regulation S under the
Securities Act (REGULATION S);
PAGE 6
<PAGE> 9
(ii) No General Solicitation; No Directed Selling Efforts: No general
solicitation or general advertising (within the meaning of Rule 502(c)
under the Securities Act) will be used in connection with the offering of
the Placing Shares or in any manner involving a public offering within
the meaning of Section 4(2) of the Securities Act; no directed selling
efforts (as that term is defined under Regulation S) will be used in
connection with the offering of Placing Shares pursuant to Regulation S;
(iii) Purchase by Non-bank Fiduciaries: In the case of a non-bank purchaser
acting as a fiduciary for one or more third parties in connection with an
offer and sale pursuant to sub-paragraph (i) hereof, each third party
shall, in the judgment of Deutsche Bank, be a QIB or a non-US person
outside the United States;
(iv) Subsequent Purchaser Notification: Deutsche Bank will take reasonable
steps to inform, and cause each of its Securities Act Affiliates to take
reasonable steps to inform, persons acquiring Placing Shares through
Deutsche Bank or its Securities Act Affiliates, as the case may be, on
behalf of the Company that such Placing Shares (a) have not been and will
not be registered under the Securities Act, (b) are being sold to them
without registration under the Securities Act in reliance on an exemption
from the registration requirements of the Securities Act provided in
Section 4(2) thereof and (c) may not be offered, sold or otherwise
transferred except (i) to the Company, (ii) outside the United States in
accordance with Regulation S or (iii) inside the United States in
accordance with Rule 144A to a person whom the seller reasonably believes
is a QIB that is purchasing such Placing Shares for its own account or
for the account of a QIB to whom notice is given that the offer, sale or
transfer is being made in reliance on Rule 144A;
(v) Restrictions on Transfer: The transfer restrictions and the other
provisions set forth in the Placing Letter in the "Notice to Investors"
section shall apply to the Placing;
(vi) Delivery of Placing Letter: In connection with the original distribution
of the Placing Shares, Deutsche Bank shall deliver to each purchaser to
whom Deutsche Bank procures as a Placee, a copy of the Placing Letter, as
amended and supplemented as of the date of such delivery; and a letter of
confirmation shall be required from each such Placee;
(vii) Blue Sky Laws: Deutsche Bank will comply with the restrictions with
respect to resales of the Placing Shares in accordance with applicable
requirements of the securities or Blue Sky laws of the various states in
the United States; and
(viii) Broker-Dealer Requirements. All offers and sales of the Placing Shares in
the United States will be effected only in accordance with all applicable
United States broker-dealer requirements.
PAGE 7
<PAGE> 10
3.6 Resale Pursuant to Rule 903 of Regulation S: Deutsche Bank understands
that the Placing Shares have not been and will not be registered under the
Securities Act and may not be offered or sold within the United States except
pursuant to an exemption from the registration requirements of the Securities
Act. Deutsche Bank represents and agrees that, except as permitted herein, it
will only procure Placees outside the U.S. (i) as part of its distribution at
any time and (ii) otherwise until 40 days after the later of the date upon which
the offering of the Placing Shares commences and the settlement date in respect
of the Placing Shares only in accordance with Rule 903 of Regulation S.
Accordingly, neither it nor it's Securities Act Affiliates or any persons acting
on its or their behalf have engaged or will engage in any directed selling
efforts with respect to the Placing Shares, and Deutsche Bank, its Securities
Act Affiliates and any person acting on its or their behalf have complied and
will comply with the offering restriction requirements of Regulation S. Terms
used in this paragraph have the meanings given to them by Regulation S.
3.7 No substantial US Market Interest: The Company reasonably believes at the
commencement of the Placing that there will be no "Substantial US Market
Interest" (as such term is defined in Rule 902(n)(2) under the Securities Act).
3.8 Covenants of the Company: The Company covenants with Deutsche Bank that
it will not and will cause its Securities Act Affiliates not to make any offer
or sale of securities of the Company within six months after completion of the
Placing if, as a result of the doctrine of "integration" referred to in Rule 502
under the Securities Act, such offer or sale would render invalid the exemption
from the registration requirements of the Securities Act provided by Section
4(2) thereof or by Rule 144A or by Regulation S or otherwise.
3.9 Additional Covenants of Company: The Company further covenants with
Deutsche Bank as follows:
(i) Rule 144A Information: that, in order to render the US Shares eligible
for resale pursuant to Rule 144A under the Securities Act, it will make
available, upon request, to any holder of US Shares or prospective
purchasers of US Shares designated by the relevant holder the information
specified in Rule 144A(d)(4), unless the Company furnishes information to
the Commission pursuant to Section 13 or 15(d) of the Securities Act or
is exempt from reporting pursuant to Rule 12g3-2(b) under the Securities
Exchange Act of 1934;
(ii) Rule 144(A)(d)(3): the Placing Shares satisfy the requirements set forth
in Rule 144A(d)(3) under the Securities Act; and
(iii) Opinion: that it will use its reasonable best efforts to cause its U.S.
counsel to provide to Deutsche Bank prior to the settlement date in
respect of the Placing Shares in a form reasonably satisfactory to
PAGE 8
<PAGE> 11
Deutsche Bank's U.S. counsel, a favourable opinion stating that the
Placing Shares offered and sold by the Company in the manner prescribed
in this Agreement, will not require registration under the Securities
Act.
DELIVERY OF DOCUMENTS
4.1 The Company shall deliver to Deutsche Bank forthwith upon its execution
of this Agreement:
(a) a certified copy of the minutes of a meeting of the Directors (or a duly
authorised committee thereof) in the agreed form approving and
authorising, inter alia, the execution by the Company of this Agreement
and the Merger Agreement, the making of the Tender Offer, the signing of
a London Stock Exchange form of application for listing in respect of the
Placing Shares on behalf of the Company and the issue of the Press
Announcements;
(b) a certified copy of the minutes of the meeting of the Directors at which
any committee referred to in clause 4.1(a) was appointed;
(c) a certified copy of the minutes of the meeting of the members of the
Company authorising the Directors to allot, inter alia, the Placing
Shares; and
(d) copies of the Press Announcements, the Merger Agreement and the Draft
Tender Offer Documentation in the agreed forms, signed for the purpose of
identification by a Director or other person duly authorised to do so as
stated in the minutes.
4.2 The Company shall, from time to time, procure to be communicated or
delivered to Deutsche Bank all such information and documents (signed by the
appropriate person where so required) as Deutsche Bank may reasonably require to
enable it to discharge its obligations hereunder or pursuant to the Placing or
as may be required to comply with the requirements of the London Stock Exchange.
ALLOTMENT, PAYMENT AND REGISTRATION
5.1 Subject to Deutsche Bank having complied with its obligations under
Clause 3.3, the Company shall deliver to Deutsche Bank by 7.00 a.m. on the day
of Admission (or such later time and/or date as the Company and Deutsche Bank
may agree in writing) a certified copy of the minutes of a meeting of the
Directors (or of the duly authorised committee referred to at clause 4.1(a)) in
the agreed form allotting the Placing Shares to the Placees and at the price(s)
stated, and in the proportions specified, in the Placing List, subject only to
the satisfaction of the Admission Condition.
PAGE 9
<PAGE> 12
5.2 The Placing Shares shall be allotted and issued fully paid up and free
from all claims, charges, liens, equities, encumbrances and other third party
rights of any nature whatsoever and shall rank pari passu in all respects with
the Existing Shares including the right to receive dividends and other
distributions hereafter declared, paid or made in respect of such shares save
that they shall not rank for the proposed final dividend of 0.233 pence (net)
per share in respect of the year ended 30 September 1999.
5.3 Following allotment by the Company of the Placing Shares in accordance
with clause 5, Deutsche Bank shall on behalf of the Company inform the London
Stock Exchange that the Placing Shares have been allotted subject only to the
satisfaction of the Admission Condition and request the London Stock Exchange to
undertake all such steps as are necessary for Admission to occur as soon as
practicable thereafter and in any event by 8.00 a.m. on the day of allotment of
the Placing Shares (or such later time and/or the date as the Company and
Deutsche Bank may agree in writing).
5.4 On the day of Admission (or such later date as may be agreed between
Deutsche Bank and the Company), subject to the Admission Condition having been
satisfied, Deutsche Bank shall make or procure payment to the account of the
Company (acting as trustee for the benefit of Sky Software Limited and at such
bank account as the Company shall notify to Deutsche Bank) of (less any
deductions permitted to be made under clause 6.2 and clause 6.4):
(a) an amount equal to the Placing Price multiplied by the number of Placing
Shares for which Deutsche Bank procures investors pursuant to clause
3.1(a); and
(b) an amount equal to 621.5 pence multiplied by the number of Placing Shares
which Deutsche Bank itself is obliged to acquire pursuant to clause
3.1(b).
The receipt of such amounts in such account shall be an absolute discharge of
Deutsche Bank's obligations hereunder, and the obligations of the Placees, in
respect of all amounts payable (whether to the Vendors or otherwise) in respect
of the allotment and issue of the Placing Shares (whether or not such amount is
sufficient to satisfy the consideration payable under the Tender Offer or
pursuant to the Merger Agreement) and the Company acknowledges that it shall
have no right or interest whatsoever in any amounts received subsequently by
Deutsche Bank from the Placees. Deutsche Bank acknowledges that it shall have no
recourse against the Company if it fails to receive the relevant amounts from
the Placees.
5.5 The Company shall procure that, with effect from Admission, all Placing
Shares which are Uncertificated Shares are credited to the CREST stock account
of Deutsche Bank, being Participant Code 490.
PAGE 10
<PAGE> 13
5.6 Other than in respect of Placing Shares (if any) of which it has
nominated itself to be a Placee or which it acquires as principal pursuant to
clause 3.1(b), Deutsche Bank shall hold the Placing Shares received by it
pursuant to clause 5.5 as nominee on behalf of the Placees entitled thereto,
pursuant to this Agreement and/or the Placing Letter, in each case until the
transfer of legal title to such persons has been effected through CREST except
insofar as any such Uncertificated Share is dealt with in a different manner in
accordance with the terms of the relevant Placing Letter.
5.7 The Company shall procure that its registrars shall, as soon as
reasonably practicable following Admission, (without a registration fee being
payable by Deutsche Bank and/or the Placees) register Deutsche Bank and/or those
Placees procured by it, as holders of the Placing Shares with effect from
Admission and shall as soon as reasonably practicable following Admission, and
in any event by not later than the second dealing day following Admission:
(a) register Deutsche Bank as the holder of the relevant Placing Shares which
are Uncertificated Shares (as nominee on behalf of the Placees entitled
thereto or as principal in respect of the Placing Shares (if any) of
which it has nominated itself to be a Placee or which it acquires as
principal pursuant to clause 3.1(b)); and
(b) deliver to Deutsche Bank or as it shall direct fully paid share
certificates in respect of the Placing Shares which are not
Uncertificated Shares and shall, pending such delivery, certify all
transfers of such Placing Shares against the Company's register of
members.
5.8 In the event of any difficulties or delays in the admission of the
Company's securities to CREST or the use of CREST in relation to the Placing,
the Company and Deutsche Bank may agree that all of the Placing Shares should be
issued in certificated form and the provisions in this Agreement relating to the
placing arrangements will then be deemed to be modified accordingly.
5.9 The Company agrees that any Placing Shares delivered in the United States
in certificated form shall contain a legend containing the restriction on
transfer information contained in the "Notice to Investor" section of the
Placing Letter.
FEES, COMMISSIONS AND EXPENSES
6.1 The Company shall pay to Deutsche Bank for its services hereunder:
(a) whether or not Deutsche Bank's obligations under clause 3.1 become
unconditional or this Agreement is terminated by Deutsche Bank in
accordance with its terms, a commitment commission of one half of one per
cent. of a sum equal to the Placing Price multiplied by the number of
Placing Shares in respect of the first thirty days of Deutsche Bank's
commitment hereunder (such period commencing on the date of this
PAGE 11
<PAGE> 14
Agreement) or if less the period commencing on the date of this Agreement
up to and including the date on which Deutsche Bank's obligations
hereunder shall cease and determine;
(b) whether or not Deutsche Bank's obligations under clause 3.1 become
unconditional or this Agreement is terminated by Deutsche Bank in
accordance with its terms, an additional commitment commission of 1/8th
of one per cent. of a sum equal to the Placing Price multiplied by the
number of Placing Shares for each and every period of seven days or part
thereof (if any) commencing on the day next following the expiry of the
thirty day period referred to in paragraph (a) above, up to and including
the earlier of (i) the date on which the Admission Condition is satisfied
and (ii) the date on which Deutsche Bank's obligations hereunder shall
cease and determine; and
(c) an advisory and underwriting fee as provided in the engagement letter
between Deutsche Bank and the Company dated 7 January 2000,
together in each case with value added tax thereon, if any.
Any fees and commissions payable to Placees shall be paid by Deutsche Bank.
6.2 In addition to the commissions referred to in Clause 6.1, the Company
shall pay all other costs and expenses (excluding fees and/or commissions
payable to Placees) of, and in connection with, the Merger Agreement, the Tender
Offer Documentation, this Agreement, the allotment and issue of the Placing
Shares, the Placing and securing Admission including (but not limited to) the
London Stock Exchange listing fees, printing and advertising costs, postage, its
own and Deutsche Bank's legal expenses, Deutsche Bank's out-of-pocket expenses,
all accountancy and other professional fees and all stamp duty and stamp duty
reserve tax and other duties and taxes in relation to the allotment or issue of
Placing Shares pursuant to this Agreement (including, for the avoidance of
doubt, to investors in the United States). The Company shall promptly following
a request by Deutsche Bank pay or reimburse the amount of any costs and expenses
incurred by Deutsche Bank which are to be borne by the Company and which
Deutsche Bank has paid on behalf of the Company. The Company hereby authorises
Deutsche Bank to deduct from any sums payable by it to the Company the
commissions, fees and expenses (and related value added tax, if any) payable by
the Company pursuant to this Clause 6.
6.3 Where, pursuant to this Agreement, a sum is reimbursed to Deutsche Bank,
the Company shall, in addition, pay to Deutsche Bank in respect of value added
tax:
(a) where the payment (or any part of it) constitutes the consideration (or
part of it) for any supply of services by Deutsche Bank to the Company,
PAGE 12
<PAGE> 15
such amount as equals any value added tax payable thereon and on such
irrecoverable value added tax, if any, as is referred to in (b) below;
(b) (except where the payment falls within (c) below), such amount as equals
any value added tax charged to Deutsche Bank in respect of any cost,
charge, duty, tax or expense which gives rise to the payment and which is
not recoverable by Deutsche Bank by repayment or credit; and
(c) on any reimbursement of or other payment to Deutsche Bank in respect of
or indemnification for costs, charges, duties, taxes or expenses incurred
by Deutsche Bank as agent for the Company, such amount as equals the
amount included in the costs, charges, duties, taxes or expenses in
respect of value added tax.
6.4 The commissions and fee referred to in clause 6.1 (together with any
related amounts payable under clause 6.3) shall be paid (where applicable), if
Admission occurs, by deducting such amounts from the payments to be made by
Deutsche Bank under clause 5.4 or, if earlier by payment in cleared funds by the
Company, not later than two dealing days after the date on which Deutsche Bank's
obligations under this Agreement cease and determine pursuant to clause 2 or are
terminated pursuant to clause 11.
FURTHER ASSURANCES OF THE COMPANY
7.1 The Company undertakes to Deutsche Bank at the Company's expense:
(a) to procure publication of the UK Press Announcement through the
Regulatory News Service (as defined in the Listing Rules) as soon as
reasonably practicable and, in any event, by no later than 8.00 a.m.
today;
(b) to deliver to the London Stock Exchange all such further documents as and
when required by the London Stock Exchange in connection with the
Company's application for the Admission of the Placing Shares in
accordance with its rules and requirements;
(c) to supply all such information, pay such fees, give such undertakings and
do or procure to be done all such acts or things as may be required by
the London Stock Exchange to procure Admission;
(d) to procure that the Tender Offer Documentation is despatched to the
Vendors by 19 January 2000;
(e) to execute and/or provide or procure to be executed or provided all such
documents and to do or procure to be done all such other acts and things
as are necessary to cause the Placees to receive the entire right, title
and interest to and in the Placing Shares pursuant to this Agreement and
the Placing and to enable the provisions of this Agreement and the
Placing to be carried out and given full force and effect; and
PAGE 13
<PAGE> 16
(f) subject to clause 7.3, to use its reasonable endeavours to procure that
(so far as lies within its control) the Acquisition is completed and the
Merger Agreement becomes unconditional in all respects and is not
terminated in accordance with its terms and that the Merger is completed
in accordance with the Merger Agreement.
7.2 Deutsche Bank undertakes to give the Company all reasonable assistance
(at the expense of the Company) in connection with clause 7.1 and obtaining
Admission.
7.3 The Company further undertakes that it will not, except as previously
agreed in writing by Deutsche Bank:
(a) agree to any (i) alteration, revision or amendment of any of the terms or
conditions of the Merger Agreement or the Tender Offer Documentation
(including, without limitation, any alteration, revision or amendment
which materially affects any of the conditions set out in the Draft
Tender Offer Documentation) or waive, vary, compromise or release any
obligation or condition (including, without limitation, any reduction of
the number of Best Shares required to satisfy the Minimum Condition) or
grant any other time for performance or completion thereof or other
indulgence thereunder which, in any such case, is material; or (ii)
alteration to or increase in the consideration payable to the Vendors
under the Tender Offer; or
(b) proceed to completion of the Merger Agreement or the Acquisition prior to
the satisfaction of all of the terms and conditions set out in the Merger
Agreement and the Tender Offer Documentation (including, without
limitation, the Draft Tender Offer Documentation) which are material; or
(c) should it be aware prior to Admission that it is entitled to rescind or
terminate the Merger Agreement or the Acquisition, exercise its right to
proceed with completion of, or (subject to Deutsche Bank's agreement not
being unreasonably withheld or delayed) to terminate, the Merger
Agreement or the Acquisition.
7.4 The Company's obligations under clause 7.3 shall cease to apply in the
event of Deutsche Bank terminating its obligations under this Agreement.
WARRANTIES AND UNDERTAKINGS OF THE COMPANY
8.1 The Company represents, warrants and undertakes to Deutsche Bank that:
(a) application will be made by the Company to the London Stock Exchange in
accordance with section 143 of the Financial Services Act 1986 for
admission of the Placing Shares to the Official List of the London Stock
Exchange;
PAGE 14
<PAGE> 17
(b) the information (other than expressions of opinion, intention or
expectation) contained in each of the Press Announcements is true and
accurate in all material respects, is in accordance with the facts and is
not misleading and each expression of opinion, intention or expectation
(including any forecast or estimate of profits or dividends) contained in
each of the Press Announcements is fairly based and honestly held by each
of the Directors and has been made reasonably and on reasonable grounds
after due and careful consideration and there are no other facts known,
or which could on reasonable enquiry have been known, to the Company or
to its Directors which are not disclosed in each of the Press
Announcements the omission of which would make any such statement of fact
or expression of opinion, intention or expectation false or misleading or
which would affect the import of any information contained therein or
which, in the context of the Placing, is or would be material for
disclosure to Deutsche Bank or to a Placee;
(c) following the issue of the UK Press Announcement in accordance with
clause 7.1(a), all information which it is necessary for the Company to
notify to comply with the FSA and the Listing Rules will have been
notified to the Company Announcements Office of the London Stock Exchange
and all statements of fact so notified will have been true and accurate
in all material respects at that time and not misleading at that time
(whether by omission or otherwise) and all expressions of opinion,
intention or expectation so notified will have been made on reasonable
grounds and will have been fairly based and honestly held; the Company is
not aware of any circumstances (other than in connection with the Tender
Offer or the Merger Agreement) now subsisting or proposed or likely to
come about which are likely to lead to any obligation on the Company to
make any announcement through or notification to the London Stock
Exchange within a period of one month commencing on the date of
Admission, except for any announcement or notification which is required
under the Listing Rules in connection with the Company's annual general
meeting in February 2000;
(d) the audited consolidated balance sheet of the Company and its subsidiary
undertakings (GROUP) as at 30 September 1998, the audited consolidated
profit and loss account of the Group for the financial year ended on such
date and the statement of cash flows of the Group for such financial year
and the notes to such financial statements (together with the remainder
of the annual report and accounts of the Company for that year being
referred to herein as the ACCOUNTS) give a true and fair view of the
assets, liabilities (including contingent liabilities whether for
taxation or otherwise), reserves, profits (or losses) and state of
affairs of the Group as at such date and the financial year ended on that
date and the Accounts have been prepared in accordance with the Act and
all applicable statements of standard accounting practice and with
generally accepted accounting principles and practice consistently
applied; that all statements of fact contained in the Accounts concerning
the financial or
PAGE 15
<PAGE> 18
trading position or prospects of the Group were at the date of approval
of the Accounts by the board of directors of the Company true and
accurate in all material respects and were not at the date of approval of
the Accounts by the board of directors of the Company misleading in any
material respect; that all expressions of opinion, intention or
expectation on the part of the directors of the Company contained in the
Accounts concerning the financial or trading position or prospects of the
Group were at that date made on reasonable grounds and were fairly based
and honestly held and that since such date and, save as disclosed in the
Accounts or any document (PRIOR DOCUMENT) issued or announcement (PRIOR
ANNOUNCEMENT) made to the public or the press or the London Stock
Exchange by the Company since that date, the operations of the Group have
been carried on in the ordinary and usual course and there has been no
material adverse change in the financial or trading position or prospects
of the Group and no contracts or commitments of an unusual or onerous
nature (other than the Merger Agreement) have been entered into by any
member of the Group which are material;
(e) the unaudited preliminary results of the Group for the year ended 30
September 1999 (PRELIMINARY RESULTS) were prepared with all due care and
attention and have been properly compiled in accordance with all
applicable statements of standard accounting practice and on a basis
consistent with the accounting policies and principles applied in the
preparation of the Accounts, and fairly set out the results of the Group
for the year ended on that date, and all statements of fact contained in
the Preliminary Results are true and accurate and are not misleading and
all expressions of opinion, intention and expectation which are contained
in the Preliminary Results concerning the financial position or prospects
of the Group were made on reasonable grounds, were honestly held and were
fairly based;
(f) the entry into of this Agreement and the Merger Agreement and the
publication of the Tender Offer Documentation by the Company and/or Bidco
(as the case may be) and the performance of the Company's and/or Bidco's
(as the case may be) obligations thereunder (including, without
limitation, the allotment and issue of the Placing Shares and the payment
of the commissions, fees and expenses) are within the powers of the
Company and/or Bidco and their respective directors without the need for
any further sanction or consent by members of the Company or any class of
them or any other person and will comply with all relevant requirements
of the Act, the rules and regulations of the London Stock Exchange, the
FSA and all other applicable laws, rules and regulations and with all
agreements to which any member of the Group is a party or by which it or
any of them or its or any of their property is bound and will not
infringe any limits, restrictions, obligations or commitments of any
member of the Group howsoever arising and the Placing Shares will, upon
issue, be free from
PAGE 16
<PAGE> 19
all claims, charges, liens, encumbrances, equities and other third party
rights of any nature whatsoever and will on Admission rank pari passu in
all respects with the Existing Shares including the right to receive
dividends and other distributions hereafter declared, paid or made in
respect of such shares save that they shall not rank for the proposed
final dividend of 0.233 pence (net) per share in respect of the year
ended 30 September 1999;
(g) all authorisations, approvals, consents and licences required by the
Company and/or Bidco (as the case may be) for the entry into of this
Agreement and the Merger Agreement and the publication of the Tender
Offer Documentation have been unconditionally obtained and are in full
force and effect;
(h) the Merger Agreement has not been terminated or rescinded and is valid
and binding on the parties thereto; the Company is not aware of any
circumstance which is likely to result in the Merger Agreement or the
Tender Offer being terminated or rescinded, or any of the conditions to
the Merger Agreement or the Tender Offer ceasing to be capable of
fulfilment and the Company is not aware of any reason why:
(i) the representations and warranties on the part of Best
contained in the Merger Agreement are not true in accordance with
their terms (subject to disclosures made prior to the date hereof
by Best); or
(ii) the undertakings on the part of Best contained in the Merger
Agreement are not capable of being, or are likely not to be,
performed in accordance with their terms;
(i) no member of the Group has (i) been notified in writing of any claims
outstanding against it or (ii) is engaged in, or has within the previous
twelve months been engaged in any litigation or arbitration proceedings
or similar proceedings or in any government, regulatory or similar
investigation or enquiry which, in any case, individually or collectively
may have or during the twelve months preceding the date hereof has had a
significant effect on the financial or trading position or prospects of
the Group or which individually or collectively are or may be material
for disclosure and no such litigation or arbitration or similar
proceedings or any such investigation or enquiry is threatened nor, to
the best of the knowledge, information and belief of the Directors
(having made all reasonable enquiries), are there any circumstances which
may give rise to any such litigation or arbitration proceedings or
similar proceedings or any such investigation or enquiry;
(j) except as disclosed in the Accounts, any Prior Document or any Prior
Announcement, and except for options under the Company's employee share
option schemes or under the Option Agreement, there are no
PAGE 17
<PAGE> 20
arrangements which (contingently or otherwise) may give rise to an
obligation on any member of the Group to allot or issue any securities;
(k) no borrowing of any member of the Group has been declared payable before
its stated maturity which has not been satisfied in full and no
circumstances have arisen or, so far as the Company is aware, are about
to arise such that any person is entitled (or would, with the giving of
notice or lapse of time or fulfilment of any condition that is not within
the control of the Company or the making of any determination, become
entitled) to require payment before its stated maturity of, or to take
any step to enforce security over, any indebtedness in respect of
borrowed moneys of any member of the Group and the Company and its
directors have complied with all restrictions affecting their respective
powers to borrow contained in the Articles of Association of the Company
or any other restriction on such powers;
(l) no member of the Group has taken any action nor, so far as the Company is
aware, have any other steps been taken or legal proceedings started or
threatened against any of them for their winding up or dissolution, or
for any of them to enter into any arrangement or composition for the
benefit of creditors, or for the appointment of a receiver,
administrator, trustee or similar officer of any of them, or any of their
respective properties, revenues or assets in the previous twelve months;
and
(m) all information supplied by the Company to Deutsche Bank in connection
with this Agreement or its advice given relating to the Acquisition is
true and accurate in all material respects and not misleading in any
material respect.
8.2 The Company shall immediately notify Deutsche Bank if it comes to the
knowledge of the Company or any of the Directors at any time prior to Admission
that any of the Warranties was untrue or inaccurate or misleading or would, if
repeated by reference to the facts and circumstances in existence at any time
prior to Admission, be untrue or inaccurate or misleading. If any such
notification is given by the Company as a result of any Warranty which would, if
repeated after the date of this Agreement (a REPEATED WARRANTY), become untrue
or inaccurate or misleading by reference to facts or circumstances arising only
after the date of this Agreement, Deutsche Bank acknowledges that, except for
its obligation to notify (but without prejudice to Deutsche Bank's rights under
the indemnity contained in clause 9), the Company will have no further liability
to Deutsche Bank pursuant to this clause 8.2 in relation to such Repeated
Warranty.
8.3 The Company hereby acknowledges that neither Deutsche Bank nor any
subsidiary undertaking or holding company thereof or subsidiary undertaking of
any such holding company (an AFFILIATE) has been requested by the Company to
carry out (a) any form of investigation or verification exercise
PAGE 18
<PAGE> 21
relating to the accuracy and fairness of any information contained in the Press
Announcements or otherwise published by or on behalf of the Company in
connection with the Placing or the Acquisition or (b) (save for Deutsche Bank
Securities, Inc., which has been requested to provide certain advisory services
to the Company pursuant to an engagement letter dated 4 January 2000), any
evaluation of the terms of the Acquisition or of the Company's investigations
into Best.
INDEMNITY
9.1 No claim shall be made against Deutsche Bank or any Affiliate or any of
their respective directors, officers, employees, agents and advisers (together
with Deutsche Bank hereinafter called the INDEMNIFIED PERSONS) to recover any
loss, liability, damage, cost, charge or expense which any member of the Group
or their respective directors, officers or agents may suffer or incur by reason
of or arising out of the carrying out by Deutsche Bank (or on its behalf) of its
obligations under this Agreement or in connection with the Acquisition save to
the extent that such loss, damage, liability, cost, charge or expense arises
from the negligence or wilful default of an Indemnified Person or from any
breach by an Indemnified Person of its duties and obligations under the FSA or
under the regulatory system (as defined in the Rules of the Securities and
Futures Authority) or from a breach by an Indemnified Person of Deutsche Bank's
obligations under this Agreement.
9.2 The Company hereby agrees and undertakes with Deutsche Bank to keep each
and every Indemnified Person indemnified against all actions, claims, demands,
proceedings or judgements (collectively INDEMNIFIED CLAIMS) and all losses,
liabilities, damages, costs, charges and expenses of whatever nature (including
costs, charges and expenses incurred in investigating or defending any
indemnified claim and in complying with any request made pursuant to clause 9.3
below (collectively INDEMNIFIED LOSSES)) made against or incurred by any
Indemnified Person directly or indirectly relating to or arising from the
carrying out or performance by or on behalf of Deutsche Bank of its obligations
or services under or in connection with this Agreement or in connection with the
Acquisition or the Placing PROVIDED THAT this indemnity shall not extend to such
claims or losses to the extent that they are attributable to the negligence or
wilful default of such Indemnified Person or persons or to a breach by an
Indemnified Person of Deutsche Bank's obligations under this Agreement or under
the FSA or under the regulatory system (as defined in the Rules of the
Securities and Futures Authority).
For the avoidance of doubt, the Company hereby acknowledges that any such
negligence, wilful default or breach by an Indemnified Person in relation to one
indemnified claim or indemnified loss shall not prejudice the rights of an
Indemnified Person to recover under this indemnity in relation to any other
indemnified claim or indemnified loss.
PAGE 19
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9.3 Any Indemnified Person against whom an indemnified claim is made shall be
entitled to defend, compromise, settle or deal with such indemnified claim as
Deutsche Bank may see fit after having considered all reasonable requests which
the Company may make and Deutsche Bank will, or will procure that the
Indemnified Person will, promptly notify the Company in writing of the fact that
an indemnified claim has been made and keep the Company informed on the conduct
of any defence to such claim and in relation to any settlement or compromise of
it.
9.4 If any amount becomes payable under the indemnity in this clause 9, the
Company shall pay such additional amount (if any) as is required to ensure that
the net amount received by the relevant Indemnified Person, after all deductions
and withholdings required by law or any taxation authority to be made from such
aggregate payment and all taxation suffered in respect of its receipt, will
equal the full amount which would have been received had no such deduction or
withholding been made and had no such taxation been suffered.
9.5 The benefit of this clause 9 shall survive any termination of the
arrangements contained in this Agreement and is in addition to any rights which
any Indemnified Person may have at common law or otherwise including, but not
limited to, any right of contribution.
9.6 Deutsche Bank shall have no liability to the Company in connection with
this Agreement save as a result of its negligence, wilful default or breach of
its obligations to the Company hereunder or under the FSA or its breach of any
duty owed to the Company under the rules of the Securities and Futures
Authority.
UNDERTAKINGS AND ACKNOWLEDGEMENT
10.1 The Company undertakes to Deutsche Bank that it shall not, at any time
between the date hereof and one month after the date of Admission, enter into
any agreement or arrangement or do or (so far as it lies within its powers to
prevent) permit to be done any other act or thing which, in any case, would give
rise to any obligation to make an announcement to the London Stock Exchange in
accordance with the Listing Rules save for (i) issuing the Press Announcements
and entering into and completing the Tender Offer Documentation as contemplated
by the Merger Agreement and (ii) any announcement or notification which is
required under the Listing Rules in connection with (a) the Company's annual
general meeting in February 2000 (which announcement or notification shall be
agreed with Deutsche Bank in advance) or (b) the issue of options in the
ordinary course under the Company's employee share option schemes or under the
Option Agreement.
10.2 Without prejudice to the obligations of the Company under clause 10.3
and/or the Listing Rules, the Company hereby undertakes to Deutsche Bank that it
will not, at any time between the date hereof and one month after the
PAGE 20
<PAGE> 23
date of Admission or the date on which Deutsche Bank's obligations hereunder
cease and determine, make any public announcement or statement regarding the
Placing or otherwise relating to the financial condition or trading or prospects
of the Group, whether in response to enquiries or otherwise, without the prior
consent of Deutsche Bank, save for issuing the Press Announcements and entering
into and completing the Tender Offer Documentation as contemplated by the Merger
Agreement.
10.3 The Company hereby undertakes to Deutsche Bank that it will not at any
time for a period of one month from the date of Admission make any announcement,
statement or communication via the London Stock Exchange, without first
consulting with Deutsche Bank as to the content, form and manner of publication
of such announcement, statement or communication.
10.4 The Company undertakes to make all such announcements concerning the
Placing and/or the Acquisition as shall be necessary to comply with the Listing
Rules and/or section 47 of the FSA and, in particular, the Company undertakes to
announce through the Regulatory News Service (as defined in the Listing Rules)
the Placing Price as soon as reasonably practicable after its determination by
Deutsche Bank and its notification to the Company. Deutsche Bank reserves the
right to make any such announcement if the Company fails to fulfil its
obligations under this clause 10.4.
10.5 The Company undertakes to do all such acts and things as are reasonably
necessary or desirable to enable the provisions of this Agreement and the
Placing to be carried out and given full force and effect.
10.6 The Company undertakes, for the purposes of clause 11.2 only, to notify
Deutsche Bank immediately if at any time prior to Admission it becomes aware of
any fact, event or circumstance which might entitle the Company or any other
member of its Group to treat any of the conditions to the Tender Offer
including, without limitation, the Tender Offer Force Majeure Condition as
incapable of being satisfied.
TERMINATION AND CONTINUING PROVISIONS
11.1 If Deutsche Bank shall become aware, at any time prior to Admission,
that:
(a) the Company is in breach of any of its obligations hereunder in a manner
which Deutsche Bank acting reasonably regards as material; or
(b) any of the Warranties given by the Company hereunder is untrue,
inaccurate or misleading in any respect which Deutsche Bank acting
reasonably regards as material,
Deutsche Bank shall be entitled, in its absolute discretion by notice in writing
to the Company given prior to Admission, forthwith to terminate its obligations
hereunder.
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<PAGE> 24
11.2 Without prejudice to clause 7.3, if the Company and Deutsche Bank agree
that any of the events contained in the Tender Offer Force Majeure Condition has
occurred so that such condition is incapable of being satisfied, neither the
Company nor any other member of its Group shall declare that the conditions to
the Tender Offer have been satisfied or waived and the obligations of Deutsche
Bank hereunder shall terminate upon the Company and Deutsche Bank reaching such
agreement.
11.3 Termination of Deutsche Bank's obligations in accordance with this clause
11 shall be without prejudice to, or to Deutsche Bank's rights under, clauses 6,
8, 9 and this clause 11 which shall continue in full force and effect for all
purposes.
11.4 The representations, warranties, undertakings and indemnities set out in
this Agreement and the Warranties shall remain in full force and effect
notwithstanding Admission and/or fulfilment by Deutsche Bank of its obligations
hereunder and shall be in addition to and shall not be construed to limit,
affect or prejudice any other right or remedy available to the person in whose
favour such representation, warranty, undertaking, indemnity or Warranty is
made.
NOTICES
12.1 Any notice to be given under this Agreement shall be in writing for the
attention of the person stated below and served personally or sent by pre-paid
registered mail to the respective addresses shown above or by facsimile as
stated below, or as the party required to receive the same may otherwise from
time to time notify to the other:
THE COMPANY:
Facsimile Number: 0191 255 0306
Attention: The Company Secretary
DEUTSCHE BANK:
Facsimile Number: 0207 547 4577
Attention: Nicola Beale
12.2 Any such notice shall be deemed to have been served if delivered, at the
time of delivery; if sent by facsimile, at the time of effective transmission
unless the same shall be transmitted after 5.30 p.m. in which event it shall be
deemed to have been served at 10.00 a.m. on the next following business day; if
posted, at 10.00 a.m. on the second business day after it was put into the post.
PAGE 22
<PAGE> 25
MISCELLANEOUS
13. Without prejudice to Deutsche Bank's discretion under clause 2, time
shall be of the essence of this Agreement, both as regards the times, dates and
any period mentioned herein and as to any times, dates and periods which may, by
agreement in writing between the parties hereto, be substituted for them. All
references to business days shall mean days on which banks are generally open
for business in the City of London.
14. Any failure to exercise or delay in exercising a right or remedy provided
by this Agreement or by law does not constitute a waiver of the right or remedy
or a waiver of other rights or remedies. No single or partial exercise of a
right or remedy provided by this Agreement or by law prevents further exercise
of the right or remedy or the exercise of another right or remedy.
15. This Agreement shall be governed by and construed in all respects in
accordance with English law and the parties hereto irrevocably submit to the
exclusive jurisdiction of the courts of England.
AS WITNESS the hands of the duly authorised signatories of the parties the day
and year first before written
SIGNED by )
for and on behalf of ) /s/ PAUL WALKER
THE SAGE GROUP PLC )
SIGNED by and ) /s/ CHRISTOPHER AIREY
for and on behalf of )
DEUTSCHE BANK AG LONDON ) /s/ NICOLA BEALE
PAGE 23
<PAGE> 1
AGREEMENT AND PLAN OF MERGER
by and among
THE SAGE GROUP PLC
BOBCAT ACQUISITION CORP.
and
BEST SOFTWARE, INC.
dated
January 12, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
THE OFFER AND MERGER.................................................................................
SECTION 1.1 THE OFFER..............................................................................3
SECTION 1.2 COMPANY ACTIONS........................................................................6
SECTION 1.3 DIRECTORS..............................................................................8
SECTION 1.4 THE MERGER............................................................................10
SECTION 1.5 EFFECTIVE TIME........................................................................10
SECTION 1.6 CLOSING...............................................................................11
SECTION 1.7 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION...................................11
SECTION 1.8 EFFECTS OF THE MERGER.................................................................11
SECTION 1.9 SUBSEQUENT ACTIONS....................................................................11
SECTION 1.10 SHAREHOLDERS' MEETING................................................................12
SECTION 1.11 MERGER WITHOUT MEETING OF SHAREHOLDERS...............................................13
SECTION 1.12 EARLIEST CONSUMMATION................................................................13
ARTICLE II
CONVERSION OF SECURITIES.............................................................................
SECTION 2.1 CONVERSION OF CAPITAL STOCK...........................................................13
SECTION 2.1A DISSENTING SHARES.....................................................................14
SECTION 2.2 SURRENDER OF SHARES; STOCK TRANSFER BOOKS.............................................15
SECTION 2.3 COMPANY STOCK PLANS....................................................................17
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................................
SECTION 3.1 ORGANIZATION..........................................................................20
SECTION 3.2 CAPITALIZATION........................................................................21
SECTION 3.3 AUTHORIZATION; VALIDITY OF AGREEMENT; COMPANY ACTION..................................23
SECTION 3.4 CONSENTS AND APPROVALS; NO VIOLATIONS.................................................24
SECTION 3.5 SEC REPORTS AND FINANCIAL STATEMENTS..................................................25
SECTION 3.6 ABSENCE OF CERTAIN CHANGES............................................................26
SECTION 3.7 NO UNDISCLOSED LIABILITIES............................................................26
SECTION 3.8 LITIGATION............................................................................26
SECTION 3.9 EMPLOYEE BENEFIT PLANS; ERISA.........................................................27
SECTION 3.10 TAXES................................................................................30
SECTION 3.11 CONTRACTS............................................................................31
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
SECTION 3.12 REAL PROPERTY........................................................................32
SECTION 3.13 INTELLECTUAL PROPERTY................................................................32
SECTION 3.14 LABOR MATTERS........................................................................33
SECTION 3.15 COMPLIANCE WITH LAWS.................................................................33
SECTION 3.16 ENVIRONMENTAL MATTERS................................................................34
SECTION 3.17 PRODUCT WARRANTIES...................................................................34
SECTION 3.18 INFORMATION IN PROXY STATEMENT.......................................................35
SECTION 3.19 POTENTIAL CONFLICT OF INTEREST.......................................................35
SECTION 3.20 OPINION OF FINANCIAL ADVISOR.........................................................36
SECTION 3.21 INSURANCE............................................................................36
SECTION 3.22 STATE TAKEOVER STATUTES; REQUIRED VOTE...............................................36
SECTION 3.23 BROKERS..............................................................................37
SECTION 3.24 FULL DISCLOSURE......................................................................37
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
SECTION 4.1 ORGANIZATION..........................................................................37
SECTION 4.2 AUTHORIZATION; VALIDITY OF AGREEMENT; NECESSARY ACTION................................38
SECTION 4.3 CONSENTS AND APPROVALS; NO VIOLATIONS.................................................38
SECTION 4.4 INFORMATION IN PROXY STATEMENT........................................................39
SECTION 4.5 INTERIM OPERATIONS OF THE PURCHASER...................................................39
SECTION 4.6 BROKERS...............................................................................39
SECTION 4.7 FINANCING. ...........................................................................40
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER...............................................................
SECTION 5.1 ACQUISITION PROPOSALS.................................................................40
SECTION 5.2 INTERIM OPERATIONS OF THE COMPANY.....................................................41
SECTION 5.3 NO SOLICITATION.......................................................................44
ARTICLE VI
ADDITIONAL AGREEMENTS................................................................................
SECTION 6.1 ADDITIONAL AGREEMENTS.................................................................46
SECTION 6.2 NOTIFICATION OF CERTAIN MATTERS.......................................................47
SECTION 6.3 ACCESS; CONFIDENTIALITY...............................................................47
SECTION 6.4 CONSENTS AND APPROVALS................................................................48
SECTION 6.5 PUBLICITY.............................................................................48
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
SECTION 6.6 DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION................................49
SECTION 6.7 PURCHASER COMPLIANCE..................................................................50
SECTION 6.8 BEST REASONABLE EFFORTS...............................................................50
SECTION 6.9 STATE TAKEOVER LAWS...................................................................51
SECTION 6.10 FINANCING RELATED EFFORTS.............................................................51
ARTICLE VII
CONDITIONS...........................................................................................
SECTION 7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER...........................51
SECTION 7.2 CONDITIONS TO OBLIGATIONS OF PARENT AND THE PURCHASER TO EFFECT THE MERGER............52
ARTICLE VIII.........................................................................................
TERMINATION..........................................................................................
SECTION 8.1 TERMINATION...........................................................................52
SECTION 8.2 EFFECT OF TERMINATION.................................................................54
SECTION 8.3 INDEMNITY.............................................................................55
ARTICLE IX
MISCELLANEOUS........................................................................................
SECTION 9.1 AMENDMENT AND MODIFICATION............................................................57
SECTION 9.2 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES........................................57
SECTION 9.3 EXPENSES..............................................................................57
SECTION 9.4 NOTICES...............................................................................58
SECTION 9.5 INTERPRETATION........................................................................59
SECTION 9.6 COUNTERPARTS..........................................................................60
SECTION 9.7 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES........................................60
SECTION 9.8 SEVERABILITY..........................................................................60
SECTION 9.9 GOVERNING LAW.........................................................................61
SECTION 9.10 ASSIGNMENT............................................................................61
</TABLE>
iii
<PAGE> 5
Index of Defined Terms
<TABLE>
<CAPTION>
Defined Term Section No.
- ------------ -----------
<S> <C>
Acquisition Proposal.............................................................................5.1
Acquisition Proposal Interest....................................................................5.1
Agreement...................................................................................Recitals
Appointment Date.................................................................................5.2
Articles of Incorporation........................................................................1.4
Assignee........................................................................................9.10
Assumed Options...........................................................................2.3(a)(ii)
Audit........................................................................................3.10(b)
Average Premium...............................................................................6.6(b)
Benefit Plans.................................................................................3.9(a)
By-laws..........................................................................................1.4
Cash-Out Options...........................................................................2.3(a)(i)
Certificates..................................................................................2.2(b)
Closing..........................................................................................1.6
Closing Date.....................................................................................1.6
Code..........................................................................................3.9(b)
Common Stock..................................................................................3.2(a)
Commonly Controlled Entity....................................................................3.9(b)
Company.....................................................................................Recitals
Company Agreements...............................................................................3.4
Company Board of Directors..................................................................Recitals
Company Disclosure Schedule..............................................................Article III
Company Material Adverse Change ..............................................................3.1(a)
Company Material Adverse Effect...............................................................3.1(a)
Company SEC Documents............................................................................3.5
Confidentiality Agreement.....................................................................5.3(b)
Contest.......................................................................................8.3(b)
December 1999 Financial Statements...............................................................3.5
Dissenting Shares...............................................................................2.1A
D&O Insurance.................................................................................6.6(b)
Effective Time...................................................................................1.5
Encumbrances..................................................................................3.2(b)
Environmental Claims............................................................................3.16
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C>
Environmental Laws..............................................................................3.16
ERISA.........................................................................................3.9(b)
Exchange Act..................................................................................1.1(a)
Exchange Ratio...........................................................................2.3(a)(iii)
Financing .......................................................................................4.7
Financing Document ..............................................................................4.7
Financial Statements.............................................................................3.5
GAAP.............................................................................................3.5
Governmental Entity..............................................................................3.4
HSR Act..........................................................................................3.4
Indemnified Party.............................................................................6.6(a)
Independent Directors.........................................................................1.3(c)
Initial Expiration Date.......................................................................1.1(a)
Intellectual Property Rights....................................................................3.13
London Stock Exchange ...........................................................................6.7
Materials of Environmental Concern..............................................................3.16
Merger...........................................................................................1.4
Merger Consideration..........................................................................2.1(c)
Minimum Condition............................................................................Annex I
Offer.......................................................................................Recitals
Offer Documents...............................................................................1.1(b)
Offer Price.................................................................................Recitals
Offer to Purchase.............................................................................1.1(a)
Option Agreement............................................................................Recitals
Option.....................................................................................2.3(a)(i)
Owned Intellectual Property..................................................................3.13(a)
Parachute Gross-Up Payment....................................................................3.9(g)
Parent......................................................................................Recitals
Parent Common Share......................................................................2.3(a)(iii)
Paying Agent..................................................................................2.2(a)
Pension Plans.................................................................................3.9(b)
Permitted Investments.........................................................................2.2(a)
Person...........................................................................................9.5
Plan of Merger...................................................................................1.4
Possible Withholding Taxes....................................................................8.3(a)
Preferred Stock...............................................................................3.2(a)
Proxy Statement..........................................................................1.10(a)(ii)
Purchaser...................................................................................Recitals
</TABLE>
v
<PAGE> 7
<TABLE>
<S> <C>
Purchaser Common Stock...........................................................................2.1
Real Property...................................................................................3.12
Reg M-A Amendments............................................................................9.5(b)
Schedule 14D-l................................................................................1.1(b)
Schedule 14D-9................................................................................1.2(b)
SEC...........................................................................................1.1(b)
Securities Act...................................................................................3.5
Shares......................................................................................Recitals
Special Meeting...........................................................................1.10(a)(i)
Stock Plans................................................................................2.3(a)(i)
Shareholder.................................................................................Recitals
Shareholders Agreement......................................................................Recitals
Stock Purchase Plan...........................................................................2.3(f)
Subsidiary....................................................................................3.1(a)
Subsequent Offering Period....................................................................1.1(a)
Substitute Financing..........................................................................1.1(a)
Superior Proposal.............................................................................5.3(b)
Surviving Corporation............................................................................1.4
Tax Authority................................................................................3.10(b)
Tax Returns..................................................................................3.10(b)
Taxes........................................................................................3.10(b)
Termination Fee...............................................................................8.2(b)
Transactions..................................................................................1.2(a)
Transmittal Documents.........................................................................2.2(b)
Voting Debt...................................................................................3.2(a)
VSCA........................................................................................Recitals
</TABLE>
vi
<PAGE> 8
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter referred to as this
"Agreement"), dated January 12, 2000, by and among The Sage Group plc, a company
organized under the laws of England ("Parent"), Bobcat Acquisition Corp., a
Virginia corporation and a wholly owned subsidiary of Parent (the "Purchaser"),
and Best Software, Inc., a Virginia corporation (the "Company").
WHEREAS, the Board of Directors of each of Parent, the
Purchaser and the Company has approved, and deems it advisable and in the best
interests of its respective shareholders to consummate, the acquisition of the
Company by Parent upon the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance thereof, it is proposed that Purchaser
make a cash tender offer (the "Offer") to acquire all shares (the "Shares") of
the issued and outstanding common stock, no par value, of the Company, for
$35.00 per share, net to the seller in cash (such price, or any such higher
price per Share as may be paid to any holder of Shares in the Offer, being
referred to herein as the "Offer Price");
WHEREAS, also in furtherance of such acquisition, the Board of
Directors of each of Parent, Purchaser and the Company has approved the Merger
(as defined below) following the Offer in accordance with the Virginia Stock
Corporation Act (the "VSCA") and upon the terms and subject to the conditions
set forth herein, whereby each issued and outstanding Share not owned directly
or indirectly by Parent, the Purchaser or the Company will be converted into the
right to receive an amount equal to the Offer Price in cash;
WHEREAS, the Board of Directors of the Company (the "Company
Board of Directors") has determined that the consideration to be paid for each
Share in the Offer and the Merger is fair to the holders of such Shares and has
resolved to recommend that the holders of such Shares accept the Offer and
approve this Agreement and each of the transactions contemplated hereby upon the
terms and subject to the conditions set forth herein;
WHEREAS, as a condition and further inducement to Parent and
the Purchaser to enter into this Agreement and incurring the obligations set
forth herein, certain shareholders of the Company (each a "Shareholder")
concurrently herewith
<PAGE> 9
are entering into a Shareholders Agreement (the "Shareholders Agreement"), dated
as of the date hereof, with Parent and the Purchaser, in the form attached
hereto as Exhibit A, pursuant to which each Shareholder has agreed, among other
things, to tender the Shares held by each in the Offer and to grant Parent a
proxy with respect to the voting of such Shares in favor of the Merger upon the
terms and subject to the conditions set forth therein;
WHEREAS, as a condition and further inducement to Parent and
the Purchaser to enter into this Agreement and incurring the obligations set
forth herein, concurrently with the execution and delivery of this Agreement,
the Purchaser and the Company are entering into a Stock Option Agreement in the
form of Exhibit B hereto (the "Option Agreement"), pursuant to which, among
other things, the Company has granted Parent an option to purchase certain
newly-issued shares of Common Stock (as hereinafter defined), subject to certain
conditions;
WHEREAS, the Board of Directors of the Company has approved
the acquisition of Shares pursuant to the Offer, the Option Agreement, the
Shareholders Agreement and the Merger for the purposes of Article 14 and Article
14.1 of the VSCA such that the provisions of Article 14 and Article 14.1 of the
VSCA will not apply to any such agreement or Transaction (as hereinafter
defined), such approval occurring prior to the time Parent or the Purchaser
became an "interested shareholder", as that term is defined in Section 13.1-725
of the VSCA; and
WHEREAS, the Company, Parent and Purchaser desire to make
certain representations, warranties, covenants and agreements in connection with
the Offer and Merger and also to prescribe to certain various conditions to the
Offer and the Merger.
NOW, THEREFORE, in consideration of the foregoing and the
mutual representations, warranties, covenants and agreements set forth herein,
the parties hereto agree as follows:
2
<PAGE> 10
ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer.
(a) Provided that this Agreement shall not have been
terminated in accordance with Section 8.1 hereof and none of the events set
forth in Annex I shall have occurred and be existing, as promptly as practicable
(but in no event later than five business days after the public announcement of
the execution of this Agreement), the Purchaser shall commence (within the
meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) the Offer at the Offer Price. The obligations of the Purchaser
to accept for payment and to pay for any Shares validly tendered on or prior to
the expiration of the Offer and not withdrawn shall be subject only to the
conditions set forth in Annex I hereto. The Offer shall be made by means of an
offer to purchase (the "Offer to Purchase") subject to the conditions set forth
in Annex I hereto. The Purchaser shall not, without the prior written consent of
the Company, (i) decrease the Offer Price or change the form of consideration
payable in the Offer, (ii) decrease the number of Shares sought to be purchased
in the Offer, (iii) impose conditions to the Offer in addition to those set
forth in Annex I, (iv) amend any condition of the Offer set forth in Annex I,
(v) extend the initial expiration date (the "Initial Expiration Date") of the
Offer, except as required by law and except (A) that the Purchaser may extend
the expiration date of the Offer for up to ten (10) business days after the
Initial Expiration Date if as of the Initial Expiration Date there shall not
have been tendered at least ninety percent (90%) of the outstanding Shares so
that the Merger can be effected without a meeting of the Company's shareholders
in accordance with VSCA, (B) that in the event that any condition to the Offer
is not satisfied on a date on which the Offer is scheduled to expire, the
Purchaser may, from time to time, in its sole discretion, extend the expiration
date of the Offer up to a maximum of one hundred twenty (120) calendar days
following the Initial Expiration Date, (C) in the event that any condition to
the Offer is not satisfied on a date on which the Offer is scheduled to expire,
at the written request of the Company delivered no later than two business days
prior to the Initial Expiration Date, the Purchaser shall, and shall continue
to, extend the Offer from time to time for the period commencing on the date of
the notice referred to above until a date not later than ninety (90) calendar
days following the Initial Expiration Date (it being understood that the
Purchaser may determine the interim expiration dates of any extension of the
Offer during such
3
<PAGE> 11
extension period) provided, however, that in the event that the Purchaser
extends the expiration date of the Offer in accordance with such request and the
Financing (as defined below) shall no longer be reasonably available to Parent:
(I) Annex I shall be deemed to be amended to provide an additional condition
that the Purchaser shall not be required to accept for payment or pay for any
tendered Shares unless and until Parent and the Purchaser shall have obtained
sufficient financing (the "Substitute Financing") in replacement, if necessary,
of the Financing in order to permit Parent and the Purchaser to acquire all of
the Shares in the Offer and the Merger and to pay the anticipated expenses in
connection therewith, (II) the condition set forth in paragraph (i) of Annex I
shall be amended and replaced with the condition set forth in clause (I) above,
(III) from and after such time Parent shall not be subject to Section 6.10 and
(IV) Parent shall use all commercially reasonable efforts to secure the
Substitute Financing prior to June 12, 2000 and to provide funds to the
Purchaser to permit it to perform its obligations hereunder and in the Offer
(provided that Parent shall not be required to obtain Substitute Financing on
economic terms materially less favorable to it than the Financing), (D) that the
Purchaser may extend the expiration date of the Offer for up to ten (10)
business days in order to amend the Schedule 14D-1 to permit the announcement of
a Subsequent Offering Period (as hereinafter defined) to the Offer, and (E) that
the Purchaser may include a subsequent offering period (as such term is defined
in new Rule 14D-1 promulgated under the Exchange Act, effective on January 24,
2000, the "Subsequent Offering Period") to the Offer for a period up to twenty
(20) business days or (vi) amend any other term of the Offer in any manner
adverse to any holders of the Shares. The Purchaser shall, on the terms and
subject to the prior satisfaction or waiver of the conditions of the Offer,
accept for payment and pay for Shares tendered as soon as it is legally
permitted to do so under applicable law. Parent shall provide or cause to be
provided to the Purchaser on a timely basis the funds necessary to accept for
payment, and pay for, any Shares that the Purchaser becomes obligated to accept
for payment, and pay for, pursuant to the Offer. The Initial Expiration Date
shall be no later than midnight on the twenty-fifth business day after the Offer
is commenced.
(b) Concurrently with the commencement of the Offer, Parent
and the Purchaser shall file with the United States Securities and Exchange
Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with respect
to the Offer (together with all amendments and supplements thereto and including
the exhibits thereto, the "Schedule 14D-l"). The Schedule 14D-1 will include, as
exhibits, the Offer to Purchase and a form of letter of transmittal and summary
advertisement (collectively, together with any amendments and supplements
thereto, the "Offer
4
<PAGE> 12
Documents"). Parent and the Purchaser agree that the Offer Documents will comply
in all material respects with the provisions of the Exchange Act, the rules and
regulations thereunder and other applicable federal securities laws and, on the
date filed with the SEC and on the date first published or sent to the Company's
shareholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading, except that no representation is made by Parent
or the Purchaser with respect to information furnished by the Company expressly
for inclusion in the Offer Documents. The information supplied by the Company
expressly in writing for inclusion in the Offer Documents and by Parent or the
Purchaser expressly in writing for inclusion in the Schedule 14D-9 (as
hereinafter defined) will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. No representation, warranty or covenant is
made or shall be made herein by the Company with respect to information
contained in the Offer Documents other than information supplied by the Company
in writing expressly for inclusion in the Offer Documents.
(c) Each of Parent and the Purchaser will take all steps
necessary to cause the Offer Documents to be filed with the SEC and to be
disseminated to holders of the Shares, in each case as and to the extent
required by applicable federal securities laws. Each of Parent and the
Purchaser, on the one hand, and the Company, on the other hand, will promptly
correct any information provided by it for use in the Schedule 14D-1 or the
Offer Documents if and to the extent that it shall have become false or
misleading in any material respect, and the Purchaser further will take all
steps necessary to cause the Schedule 14D-1 or the Offer Documents as so
corrected to be filed with the SEC and to be disseminated to holders of the
Shares, in each case as and to the extent required by applicable federal
securities laws. The Company and its counsel shall be given the reasonable
opportunity to review and comment on the Schedule 14D-1 (as well as all
amendments or supplements thereto) before any such document is filed with the
SEC. In addition, Parent and the Purchaser will provide the Company and its
counsel with any comments or other communications, whether written or oral,
Parent, the Purchaser or their counsel may receive from time to time from the
SEC or its staff with respect to the Offer Documents promptly after the receipt
of such comments or other communications.
5
<PAGE> 13
Section 1.2 Company Actions.
(a) The Company represents that the Company Board of
Directors, at a meeting duly called and held has (i) determined that each of the
Agreement, the Offer, the Merger, the Option Agreement and the Shareholders
Agreement are fair to and in the best interests of the shareholders of the
Company, (ii) duly approved this Agreement, the Option Agreement, the
Shareholders Agreement and the transactions contemplated hereby and thereby,
including the Offer and the Merger (collectively, the "Transactions"), and such
approval constitutes approval of this Agreement, the Option Agreement, the
Shareholders Agreement and the Transactions, for purposes of Sections 13.1-727
and Sections 13.1-728.1 et. seq. of the VSCA, (iii) amended the Company's
By-laws to provide that Article 14.1 of the VSCA does not apply to the Company,
and (iv) resolved to recommend that the shareholders of the Company accept the
Offer and tender their shares thereunder to the Purchaser and approve and adopt
this Agreement and the Merger (provided, however, that subject to and in
accordance with the provisions of Section 5.3, such recommendation may be
withdrawn, modified or amended in connection with a Superior Proposal (as
defined in Section 5.3)).
(b) As soon as practicable on or after the date the Offer is
commenced, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 (together with all amendments or supplements thereto
and including the exhibits thereto, the "Schedule 14D-9") which shall, subject
to the provisions of Section 5.3(c) contain the recommendation referred to in
clause (iv) of Section 1.2(a) hereof. The Schedule 14D-9 will comply in all
material respects with the provisions of the Exchange Act, the rules and
regulations thereunder, and other applicable federal securities laws and, on the
date filed with the SEC and on the date first published or sent to the Company's
shareholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading, except that no representation is made by the
Company with respect to information furnished by Parent or the Purchaser
expressly in writing for inclusion in the Schedule 14D-9. No representation,
warranty or covenant is made or shall be made herein by Parent or the Purchaser
with respect to information contained in the Schedule 14D-9 other than the
information supplied by Parent or the Purchaser in writing expressly for
inclusion in the Schedule 14D-9. The Company further agrees to take all steps
necessary to cause the Schedule 14D-9 to be filed with the SEC and to be
disseminated to holders
6
<PAGE> 14
of the Shares, in each case, as and to the extent required by the Exchange Act,
the rules and regulations thereunder and other applicable federal securities
laws. The Company shall mail, or cause to be mailed, such Schedule 14D-9 to the
shareholders of the Company at the same time the Offer Documents are first
mailed to the shareholders of the Company together with such Offer Documents.
Each of the Company, on the one hand, and Parent and the Purchaser, on the other
hand, agrees promptly to correct any information provided by it for use in the
Schedule 14D-9 if and to the extent that it shall have become false or
misleading in any material respect and the Company further agrees to take all
steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the
SEC and to be disseminated to holders of the Shares, in each case, as and to the
extent required by applicable federal securities laws. Parent and its counsel
shall be given the reasonable opportunity to review and comment on the Schedule
14D-9 (as well as all amendments or supplements thereto) before it is filed with
the SEC. In addition, the Company agrees to provide Parent, the Purchaser and
their counsel with any comments, whether written or oral, that the Company or
its counsel may receive from time to time from the SEC or its staff with respect
to the Schedule 14D-9 promptly after the receipt of such comments or other
communications.
(c) In connection with the Offer, the Company will, or will
cause its transfer agent following a request by the Purchaser to, promptly
furnish to the Purchaser mailing labels, security position listings and any
available listing or computer file containing the names and addresses of all
record holders of Shares, each as of a recent date, and shall promptly furnish
the Purchaser with such additional information (including, but not limited to,
updated mailing labels, security position listings and available listings or
computer files containing the names and addresses of all recordholders of
Shares, or any of such other information and assistance) as the Purchaser or its
agents may reasonably request in communicating the Offer to the record and
beneficial holders of the Shares. Subject to the requirements of applicable law,
and except for such steps as are necessary to disseminate the Offer Documents
and any other document necessary to consummate the Merger, Parent, the Purchaser
and their agents shall hold in confidence the information contained in any such
labels, listings and files, will use such information only in connection with
the Offer and the Merger and, if this Agreement shall be terminated, will
deliver, and will use their reasonable efforts to cause their agents to deliver,
to the Company all copies and any extracts or summaries from such information
then in their possession or control.
7
<PAGE> 15
Section 1.3 Directors.
(a) Subject to compliance with applicable law, promptly upon
the purchase of and payment for any Shares by the Purchaser pursuant to the
Offer, and from time to time thereafter as Shares are acquired by the Purchaser,
Parent shall be entitled to designate such number of directors, rounded up to
the next whole number, on the Company Board of Directors as is equal to the
product of the total number of directors on such Board (determined after giving
effect to the directors designated by Parent pursuant to this sentence)
multiplied by the percentage that the aggregate number of Shares which the
Purchaser or any affiliate of the Purchaser owns beneficially (excluding any
unexercised portion of the options granted under the Option Agreement or the
Shareholders Agreement) bears to the total number of Shares then outstanding,
provided, however, that in the event the Purchaser accepts Shares for payment
and the Minimum Condition is not satisfied, Parent shall not be entitled to
designate more than two (2) directors. In furtherance thereof, subject to Parent
having theretofore provided the Company with the information with respect to
Parent's designees required pursuant to Section 14(f) of the Exchange Act and
Rule 14f-1 thereunder, the Company shall, upon the request of Parent, promptly
secure the resignations of such number of its incumbent directors as is
necessary to enable Parent's designees to be elected to the Company Board of
Directors and shall take all actions available to the Company to cause Parent's
designees to be so elected. In furtherance of the foregoing, in the event the
Company is unable to secure a sufficient number of resignations of its incumbent
directors in accordance with the immediately preceding sentence, the Company
shall use its best efforts promptly to increase the size of the Company Board of
Directors as is necessary to enable the number of Parent's designees computed in
accordance with the first sentence of this Section 1.3(a) (after taking into
account the increase in the size of the Company Board of Directors) to be so
elected to the Company Board of Directors and shall take all actions available
to the Company to cause Parent's designees to be so elected. At such time, the
Company shall, if requested by Parent, also cause persons designated by Parent
to constitute at least the same percentage (rounded up to the next whole number)
as is on the Company Board of Directors of (i) each committee of the Company
Board of Directors, (ii) each board of directors (or similar body) of each
Subsidiary (as hereinafter defined) of the Company and (iii) each committee (or
similar body) of each such board.
(b) The Company shall promptly take all actions required
pursuant to Section 14(f) of the Exchange Act and Rule 14f-l promulgated
thereun-
8
<PAGE> 16
der in order to fulfill its obligations under Section 1.3(a) hereof, and
shall include in the Schedule 14D-9 mailed to shareholders promptly after the
commencement of the Offer (or an amendment thereof or an information statement
pursuant to Rule 14f-1 if the Purchaser has not theretofore designated
directors) such information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1 in order to fulfill
its obligations under Section 1.3(a). Parent or the Purchaser shall supply to
the Company in writing and solely be responsible for any information with
respect to either of them and their nominees, officers, directors and affiliates
required by such Section 14(f) and Rule 14f-1. The provisions of this Section
1.3 are in addition to and shall not limit any rights which the Parent, the
Purchaser or any of their affiliates may have as a holder or beneficial owner of
Shares as a matter of law with respect to the election of directors or
otherwise.
(c) In the event that Parent's designees are elected to the
Company Board of Directors, subject to the other terms of this Agreement and
until the Effective Time, the Company Board of Directors shall have at least two
(2) directors who are directors on the date hereof and neither of whom is an
officer of the Company nor a designee, shareholder, affiliate or associate
(within the meaning of the federal securities laws) of Parent (one or more of
such directors, the "Independent Directors"), provided that, in such event, if
the number of Independent Directors shall be reduced below two (2) for any
reason whatsoever, to the extent permitted by the VSCA, any remaining
Independent Director shall be entitled to designate persons to fill such
vacancies who shall be deemed Independent Directors for purposes of this
Agreement or, if no Independent Director then remains, the other directors shall
designate one person to fill one of the vacancies who shall not be a
shareholder, affiliate or associate of Parent or the Purchaser and such person
shall be deemed to be an Independent Director for purposes of this Agreement,
and the Purchaser shall use its reasonable best efforts to cause its designees
to designate such person. Notwithstanding anything in this Agreement to the
contrary, in the event that Parent's designees are elected to the Company Board
of Directors, after the acceptance for payment of Shares pursuant to the Offer
and prior to the Effective Time (as hereinafter defined), the affirmative vote
of a majority of the Independent Directors shall be required to (a) amend or
terminate this Agreement on behalf of the Company, (b) exercise or waive any of
the Company's rights, benefits or remedies hereunder, (c) extend the time for
performance of the Purchaser's obligations hereunder or (d) take any other
action by the Company Board of Directors under or in connection with this
Agreement; provided, however, that if there shall be no such
9
<PAGE> 17
directors, such actions may be effected by unanimous vote of the entire Company
Board of Directors.
Section 1.4 The Merger. Upon the terms and subject to
satisfaction or waiver of the conditions of this Agreement, and in accordance
with the applicable provisions of this Agreement and the VSCA and the Plan of
Merger attached hereto as Exhibit I (the "Plan of Merger"), at the Effective
Time, the Company and the Purchaser shall consummate a merger (the "Merger")
pursuant to which (a) the Purchaser shall be merged with and into the Company
and the separate corporate existence of the Purchaser shall thereupon cease, (b)
the Company shall be the successor or the surviving corporation in the Merger
(sometimes hereinafter referred to as the "Surviving Corporation") and shall
continue to be governed by the laws of the Commonwealth of Virginia and (c) the
separate corporate existence of the Company with all of its rights, privileges,
immunities, powers and franchises shall continue unaffected by the Merger,
except as set forth in this Section 1.4. Pursuant to the Merger, (x) the
Articles of Incorporation of the Company (the "Articles of Incorporation"),
shall be amended in its entirety to read as the Articles of Incorporation of the
Purchaser in effect immediately prior to the Effective Time, except that Article
I thereof shall read as follows: "The name of the Corporation is BEST SOFTWARE,
INC." and, as so amended, shall be the articles of incorporation of the
Surviving Corporation until thereafter amended as provided by law and such
Articles of Incorporation and (y) the By-laws of the Purchaser (the "By-laws"),
as in effect immediately prior to the Effective Time (as hereinafter defined),
shall be the By-laws of the Surviving Corporation until thereafter amended as
provided by law, by such Articles of Incorporation or by such By-laws.
Section 1.5 Effective Time. As soon as practicable after the
satisfaction or waiver of the conditions set forth in Article VII hereof,
Parent, the Purchaser and the Company shall cause to be executed and filed on
the Closing Date (as hereinafter defined) (or on such other date as Parent and
the Company may agree) with the State Corporation Commission of the Commonwealth
of Virginia in the manner required by the VSCA Articles of Merger with respect
to the Merger and the Purchaser, and the parties shall take such other and
further actions as may be required by law to make the Merger effective. The
Merger shall become effective upon the issuance of a certificate of merger by
the State Corporation Commission of the Commonwealth of Virginia or as provided
in the Articles of Merger (the "Effective Time").
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Section 1.6 Closing. The closing of the Merger (the "Closing")
shall take place at 10:00 a.m. on a date to be specified by the parties, which
shall be no later than the second business day after satisfaction or waiver of
all of the conditions set forth in Article VII hereof (the "Closing Date"), at
the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 1440 New York Avenue,
N.W., Washington, D.C. 20005, unless another date or place is agreed to in
writing by the parties hereto.
Section 1.7 Directors and Officers of the Surviving
Corporation. Subject to applicable law, the directors of the Purchaser and the
officers of the Company at the Effective Time shall, from and after the
Effective Time, be the directors and officers of the Surviving Corporation until
their successors shall have been duly elected or appointed or qualified or until
their earlier death, resignation or removal in accordance with the Articles of
Incorporation and the By-laws. If, at the Effective Time, a vacancy shall exist
on the Company Board of Directors or in any office of the Surviving Corporation,
such vacancy may thereafter be filled in the manner provided by law.
Section 1.8 Effects of the Merger. At the Effective Time, the
Merger shall have the effects set forth in Section 13.1-721 of the VSCA. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time all the property, rights, privileges, powers and franchises of the Company
and the Purchaser shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and the Purchaser shall become the debts,
liabilities and duties of the Surviving Corporation.
Section 1.9 Subsequent Actions. If at any time after the
Effective Time the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the Company or the Purchaser acquired
or to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger or otherwise to carry out this Agreement, the officers and
directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of either the Company or the Purchaser, all
such deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf of each of such corporations or otherwise, all such other
actions and things as may be necessary or desirable to vest, perfect or confirm
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any and all rights, title and interest in, to and under such rights, properties
or assets in the Surviving Corporation or otherwise to carry out this Agreement.
Section 1.10 Shareholders' Meeting.
(a) If required by the Articles of Incorporation and/or
applicable law in order to consummate the Merger, the Company, acting through
its Board of Directors, shall, in accordance with applicable law and its
Articles of Incorporation and By-laws, and following (i) acceptance for payment
of Shares by the Purchaser pursuant to the Offer or (ii) the expiration of the
Offer without the Purchaser purchasing any Shares thereunder, in the case of
either clause (i) or (ii), without the termination of this Agreement by Parent
or the Company in accordance with Section 8.1:
(i) duly call, give notice of, convene and hold a
special meeting of its shareholders (the "Special Meeting") as promptly
as practicable following the acceptance for payment and purchase of
Shares by the Purchaser pursuant to the Offer for the purpose of
considering and taking action upon the approval of the Merger and the
adoption of this Agreement;
(ii) prepare and file with the SEC a preliminary
proxy or information statement relating to the Merger and this
Agreement and use its commercially reasonable efforts (x) to obtain and
furnish the information required to be included by the SEC in the Proxy
Statement (as hereinafter defined) and, after consultation with Parent,
to respond promptly to any comments made by the SEC with respect to the
preliminary proxy or information statement and cause a definitive proxy
or information statement, including any amendment or supplement thereto
(the "Proxy Statement") to be mailed to its shareholders, provided that
no amendment or supplement to the Proxy Statement will be made by the
Company without consultation with Parent and its counsel and (y) to
obtain the necessary approvals of the Merger and this Agreement by its
shareholders; and
(iii) subject to Section 5.3(c) hereof, include in
the Proxy Statement the recommendation of the Company Board of
Directors that shareholders of the Company vote in favor of the
approval of the Merger and the adoption of this Agreement.
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(b) Parent promptly will provide the Company with the
information concerning Parent and the Purchaser required to be included in the
Proxy Statement. Parent shall vote, or cause to be voted, all of the Shares then
owned by it, the Purchaser or any of its other subsidiaries and affiliates in
favor of the approval of the Merger and the approval and adoption of this
Agreement.
Section 1.11 Merger Without Meeting of Shareholders.
Notwithstanding Section 1.10 hereof, in the event that Parent, the Purchaser and
any other Subsidiaries of Parent shall have acquired in the aggregate at least
ninety percent (90%) of the outstanding Shares pursuant to the Offer or
otherwise (including as a result of the exercise of the Option Agreement), the
parties hereto shall take all necessary and appropriate action to cause the
Merger to become effective as soon as practicable after the acceptance for
payment of and payment for Shares by the Purchaser pursuant to the Offer,
without a meeting of shareholders of the Company, in accordance with Section
13.1-719 of the VSCA.
Section 1.12 Earliest Consummation. Each party hereto shall
use its commercially reasonable efforts to consummate the Merger as soon as
practicable. If the conditions set forth in Annex I hereto are satisfied, or
waived, the Purchaser shall consummate the Offer and accept for payment Shares
validly tendered and not withdrawn therein and thereafter effectuate the Merger
as soon as practicable after the Purchaser accepts the Shares for payment
pursuant to the Offer.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. As of the Effective
Time, by virtue of the Merger and without any action on the part of the holders
of any Shares or holders of common stock, par value $.01 per share, of the
Purchaser (the "Purchaser Common Stock"):
(a) Each issued and outstanding share of Purchaser Common
Stock shall be converted into and become one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.
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(b) All Shares owned by Parent, the Purchaser or any other
wholly owned Subsidiary of Parent shall be cancelled and retired, and shall
cease to exist and no consideration shall be delivered in exchange therefor and
Dissenting Shares (as defined below), if any, shall be treated in accordance
with Article 15 of the VSCA.
(c) Each issued and outstanding Share immediately before the
Effective Time (other than any Shares to be cancelled pursuant to Section 2.1(b)
and any Dissenting Shares (as defined below)) shall be cancelled and
extinguished and be converted into the right to receive the Offer Price in cash,
payable to the holder thereof, without interest (the "Merger Consideration"),
upon surrender of the certificate formerly representing such Share in the manner
provided in Section 2.2 hereof. All such Shares, when so converted, shall no
longer be outstanding and shall automatically be cancelled and retired and shall
cease to exist, and each holder of a certificate representing any such Shares
shall cease to have any rights with respect thereto, except the right to receive
the Merger Consideration therefor upon the surrender of such certificate in
accordance with Section 2.2, without interest.
Section 2.1A Dissenting Shares. Notwithstanding anything in
this Agreement to the contrary, Shares that are issued and outstanding
immediately prior to the Effective Time of the Merger and that are held by a
shareholder (other than Parent or Purchaser and their subsidiaries, which waive
the right to dissent) who has the right (to the extent such right is available
by law) to demand and receive payment of the fair value of his Shares of Company
Common Stock pursuant to Section 13.1-730 of the VSCA (the "Dissenting Shares")
shall not be converted into or be exchangeable for the right to receive the
consideration provided in Section 2.1 of this Agreement, unless and until such
holder shall fail to perfect his or her right to dissent or shall have
effectively withdrawn or lost such right under the VSCA, as the case may be. If
such holder shall have so failed to perfect his right to dissent or shall have
effectively withdrawn or lost such right, each of his Shares of Company Common
Stock shall thereupon be deemed to have been converted into, at the Effective
Time of the Merger, the right to receive the Offer Price as provided in Section
2.1 of the Agreement.
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Section 2.2 Surrender of Shares; Stock Transfer Books.
(a) Before the Effective Time, the Purchaser shall designate a
bank or trust company reasonably acceptable to the Company to act as agent for
the holders of Shares in connection with the Merger (the "Paying Agent") to
receive the funds necessary to make the payments contemplated by Section 2.1(c).
At the Effective Time, the Purchaser shall deposit, or cause to be deposited,
immediately available funds in trust with the Paying Agent for the benefit of
holders of Shares the aggregate consideration to which such holders shall be
entitled at the Effective Time. Such funds shall be invested as directed by
Parent or the Surviving Corporation pending payment thereof by the Paying Agent
to holders of the Shares in obligations of or guaranteed by the United States of
America, in commercial paper obligations receiving the highest investment grade
rating from both Moody's Investors Services, Inc. and Standard & Poor's
Corporation, or in certificates of deposit, bank repurchase agreements or
banker's acceptances of commercial banks with capital exceeding $100,000,000
(collectively, "Permitted Investments"); provided, however, that the maturities
of Permitted Investments shall be such as to permit the Paying Agent to make
prompt payment to former holders of Shares who have validly tendered their
Shares pursuant to the Offer. Earnings from Permitted Investments shall be the
sole and exclusive property of the Purchaser and the Surviving Corporation and
no part thereof shall accrue to the benefit of the holders of the Shares. Such
funds held by the Paying Agent shall not be used for any purpose except as
expressly provided in this Agreement.
(b) As soon as reasonably practicable after the Effective Time
(and in any event within five (5) business days), the Paying Agent shall mail to
each holder of record of a certificate or certificates, which immediately prior
to the Effective Time represented outstanding Shares (the "Certificates"), whose
Shares were converted pursuant to Section 2.1 into the right to receive the
Merger Consideration, (i) a letter of transmittal (which shall specify that
delivery shall be effected and that the risk of loss of and title to the
Certificates shall pass only upon delivery of the Certificates to the Paying
Agent and shall be in such form and have such other provisions not inconsistent
with this Agreement as Parent and the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of Certificates in exchange for
payment of the Merger Consideration (together, the "Transmittal Documents").
Upon surrender of a Certificate for cancellation to the Paying Agent, together
with such letter of transmittal, duly executed, the holder of such Certificate
shall be entitled to receive in exchange therefor the Merger Consideration
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for each Share formerly represented by such Certificate, and the Certificate so
surrendered shall forthwith be cancelled. If payment of the Merger Consideration
is to be made to a person other than the person in whose name the surrendered
Certificate is registered, it shall be a condition of payment that the
Certificate so surrendered shall be properly endorsed or shall otherwise be in
proper form for transfer and that the person requesting such payment shall have
paid any transfer and other taxes required by reason of the payment of the
Merger Consideration to a person other than the registered holder of the
Certificate surrendered or shall have established to the satisfaction of the
Surviving Corporation that such tax either has been paid or is not applicable.
Until surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration in cash as contemplated by this Section 2.2.
Upon the surrender of Certificates in accordance with the terms and instructions
contained in the Transmittal Documents, the Purchaser shall cause the Paying
Agent to pay the holder of such Certificates in exchange therefor cash in an
amount equal to the Merger Consideration multiplied by the number of Shares
represented by such Certificate (other than Certificates representing Shares
held by the Purchaser or in the treasury of the Company). In the event that any
Certificate shall have been lost, stolen or destroyed, the Paying Agent shall
issue in exchange therefor upon the making of an affidavit of that fact by the
holder thereof the Merger Consideration for the Shares represented by such
Certificate; provided, however, that Parent or the Paying Agent may, in their
discretion, require delivery of a reasonable and customary bond or indemnity by
the holder of such Shares.
(c) At the Effective Time, the stock transfer books of the
Company shall be closed and there shall not be any further registration of
transfers of shares of any shares of capital stock thereafter on the records of
the Company. From and after the Effective Time, the holders of certificates
evidencing ownership of the Shares outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such Shares,
except as otherwise provided for herein or by applicable law. If, after the
Effective Time, Certificates are presented to the Surviving Corporation, they
shall be cancelled and exchanged for cash as provided in this Article II. No
interest shall accrue or be paid on any cash payable upon the surrender of a
Certificate or Certificates which immediately before the Effective Time
represented outstanding Shares.
(d) Promptly following the date which is one year after the
Effective Time, the Surviving Corporation shall be entitled to require the
Paying
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Agent to deliver to it any cash (including any interest received with
respect thereto), Certificates and other documents in its possession relating to
the transactions contemplated hereby, which had been made available to the
Paying Agent and which have not been disbursed to holders of Certificates, and
thereafter such holders shall be entitled to look to the Surviving Corporation
(subject to abandoned property, escheat or similar laws) only as general
creditors thereof with respect to the Merger Consideration payable upon due
surrender of their Certificates, without any interest thereon. Notwithstanding
the foregoing, neither the Surviving Corporation nor the Paying Agent shall be
liable to any holder of a Certificate for Merger Consideration delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
(e) The Merger Consideration paid in the Merger shall be net
to the holder of Shares in cash, subject to reduction only for any applicable
federal withholding taxes or, as set forth in Section 2.2(b), stock transfer
taxes payable by such holder.
Section 2.3 Company Stock Plans.
(a) For purposes of this Agreement, the following terms shall
have the meanings set forth below:
(i) "Cash-Out Options" shall mean each option
outstanding at the Effective Time to purchase Shares (an "Option") granted under
the Company's 1988 Nonqualified Stock Option Plan, 1992 Nonqualified Stock
Option Plan, the 1997 Stock Incentive Plan or the 1997 Director Stock Option
Plan or any other stock-based incentive plan or arrangement of the Company
(excluding any options granted under the Company's Employee Stock Purchase Plan)
(the "Stock Plans") that is not an Assumed Option (as defined below).
(ii) "Assumed Options" shall mean those Options or
portions thereof as identified on Section 2.3 of the Company Disclosure Schedule
granted under the 1992 Nonqualified Stock Option Plan and the 1997 Stock
Incentive Plan that will not have vested and become exercisable as of the
Effective Time as identified on Section 2.3(a) of the Company Disclosure
Schedule. To the extent any Options or portions thereof, as identified on
Section 2.3 of the Company Disclosure Schedule, cannot be assumed by Parent,
such Options or portions thereof shall be
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treated as Cash-Out Options and shall be cancelled as of the Effective Time in
consideration for a cash payment in accordance with Section 2.3(b).
(iii) "Exchange Ratio" shall mean the quotient of (x)
the Offer Price multiplied by the average of the mid-point of the bid and ask
price of the rate of currency exchange of pounds sterling for U.S. dollars
quoted in The Financial Times for each of the business days in a consecutive
twenty (20) business day period ending two (2) business days prior to the
Effective Date and (y) the average per Share closing price of the ordinary
shares of 1 pence each in the capital of Parent (a "Parent Common Share") as
reported on the London Stock Exchange on each of the ten (10) trading days
immediately preceding the Effective Time.
(b) The Company shall take all actions necessary to provide
that at the Effective Time, (i) each Cash-Out Option shall be cancelled and (ii)
in consideration of such cancellation, each holder of a Cash-Out Option shall
receive in consideration thereof an amount (subject to any applicable
withholding tax) in cash equal to the product of (x) the excess, if any, of the
Offer Price over the per Share exercise price of such Cash-Out Option and (y)
the number of Shares subject to such Cash-Out Option. The Company shall use all
commercially reasonable efforts to effectuate the foregoing, including, without
limitation, providing that any unexercised Cash-Out Options will become
exercisable in full as of a specified time prior to the Effective Time and will
terminate immediately prior to the Effective Time, amending the Stock Plans and
obtaining any necessary consents from holders of Cash-Out Options.
(c) At the Effective Time, each Assumed Option shall be
assumed by Parent (and Parent shall take all action necessary under applicable
law, to cause such result or equivalent result without disadvantage to the
Option holders) and shall thereupon constitute an option to acquire that number
of Parent Common Shares equal to (i) the number of Shares subject to the Assumed
Option immediately prior to the Effective Time, multiplied by (ii) the Exchange
Ratio, rounded down to the nearest whole share, at a price per Parent Common
Share equal to (x) the exercise price of the Assumed Option immediately prior to
the Effective Time divided by (y) the Exchange Ratio, rounded up to the nearest
whole cent. Other than as described in the immediately preceding sentence, the
Assumed Options shall be subject to the same terms and conditions as applicable
immediately prior to the Effective Time; provided, however, that Parent shall
take all actions necessary for the terms of the Stock Plans to be amended as
necessary to comply with all applicable securities laws
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and laws of the jurisdiction of the Parent (but without disadvantage to the
option holder). As soon as reasonably practicable following the Effective Time,
Parent shall deliver to each holder of an Assumed Option an appropriate notice
setting forth the terms of such assumption. With respect to any Assumed Option
that is an incentive stock option (within the meaning of Section 422 of the
Code) immediately prior to the Effective Time, such assumption shall, to the
extent reasonably practicable, conform to the requirements of Section 424(a) of
the Code. Parent shall take all action necessary for the Parent Common Shares to
rank pari passu in all respects with all other Parent Common Shares then in
issue and to be listed and issuable upon exercise of the Assumed Options so that
the Parent Common Shares underlying such Assumed Options shall be freely
tradeable on the London Stock Exchange. Notwithstanding the foregoing provisions
of this Section 2.3(c), to the extent any Option or portion thereof is not
assumed pursuant to this Section 2.3(c), such Options or portion thereof shall
be treated as a Cash-Out Option.
(d) Except as may be otherwise agreed to by Parent or the
Purchaser and the Company or as otherwise contemplated or required to effectuate
this Section 2.3, the Stock Plans shall terminate as of the Effective Time and
the provisions in any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any of its Subsidiaries shall be deleted as of the Effective Time.
(e) The Company shall take all necessary actions to provide
that as of the Effective Time no holder of Options under the Stock Plans will
have any right to receive shares of common stock of the Surviving Corporation
upon exercise of any such Option.
(f) The Company shall take all actions necessary to provide
that at or immediately prior to the Effective Time, (i) each then outstanding
Option under the Company's Employee Stock Purchase Plan (the "Stock Purchase
Plan") shall automatically be exercised and (ii) in lieu of the issuance of
Certificates, each option holder shall receive an amount in cash (subject to any
applicable withholding tax) equal to the product of (x) the number of Shares
otherwise issuable upon such exercise and (y) the Merger Consideration. The
Company shall use all reasonable efforts to effectuate the foregoing, including
without limitation amending the Stock Purchase Plan and obtaining any necessary
consents from holders of Options. The Company (i) shall not permit the
commencement of any new offering period under the Stock Purchase Plan following
the date hereof, (ii) shall not permit any optionee
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to increase his or her rate of contributions under the Stock Purchase Plan
following the date hereof, (iii) shall terminate the Stock Purchase Plan as of
the Effective Time, and (iv) shall take any other actions necessary to provide
that as of the Effective Time no holder of options under the Stock Purchase Plan
will have any right to receive shares of common stock of the Surviving
Corporation upon exercise of any such option.
ARTICLE III
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
Except as set forth in the schedule of exceptions to the
Company's representations and warranties set forth herein, delivered to Parent
prior to the execution of this Agreement (the "Company Disclosure Schedule"),
the Company represents and warrants to Parent and the Purchaser as set forth
below. Each exception set forth in the Company Disclosure Schedule is identified
by reference to, or has been grouped under a heading referring to, a specific
individual section of this Agreement.
Section 3.1 Organization.
(a) Each of the Company and its Subsidiaries (as defined
below) is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization and has
all requisite corporate power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as is now being conducted, except where the failure to be so organized, existing
and in good standing or to have such power and authority and governmental
approvals would not, individually or in the aggregate, have a Company Material
Adverse Effect (as hereinafter defined). As used in this Agreement, the term
"Subsidiary" shall mean, with respect to any party, any corporation, limited
liability company or other organization, whether incorporated or unincorporated
or domestic or foreign to the United States of which (i) such party or any other
Subsidiary of such party is a general partner (excluding such partnerships where
such party or any Subsidiary of such party does not have a majority of the
voting interest in such partnership) or (ii) at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect a
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majority of the board of directors or others performing similar functions with
respect to such corporation, limited liability company or other organization is
directly or indirectly owned or controlled by such party or by any one or more
of its Subsidiaries, or by such party and one or more of its Subsidiaries. As
used in this Agreement, "Company Material Adverse Change" or "Company Material
Adverse Effect" means any change or effect that is materially adverse to the
business, operations, properties (including intangible properties), financial
condition, results of operations, assets or liabilities of the Company or its
Subsidiaries, taken as a whole, other than (i) changes or effects which are or
result from occurrences relating to the economy in general or such entity's
industry in general and not specifically relating to such entity, (ii) set forth
or described in the Company SEC Reports filed prior to the date hereof, (iii)
changes or effects which result from the loss of customers or delay or
cancellation or cessation of orders for the Company's products directly
attributable to the announcement of this Agreement or stockholder litigation
brought or threatened against the Company or any member of its Board of
Directors in respect to this Agreement, the Offer or the Merger, (iv) the
financial condition and results of operations of the Company set forth on
Section 3.1(a) of the Company Disclosure Schedule or (v) solely as a result of
the decline in the market price of the Shares. The Company Disclosure Schedule
sets forth in Section 3.1(a) a complete list of the Company's Subsidiaries.
(b) Except as set forth in Section 3.1(b) of the Company
Disclosure Schedule, the Company and each of its Subsidiaries is duly qualified
or licensed to do business and in good standing in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except where
the failure to be so duly qualified or licensed and in good standing would not
individually or in the aggregate reasonably be expected to have a Company
Material Adverse Effect. Except as set forth in Section 3.1(b) of the Company
Disclosure Schedule, other than its Subsidiaries, the Company does not own any
significant equity interest in any corporation or other entity.
Section 3.2 Capitalization.
(a) The authorized capital stock of the Company consists of
(i) 40,000,000 shares of common stock, no par value per share (the "Common
Stock") and (ii) 1,000,000 shares of preferred stock (the "Preferred Stock"). As
of the date hereof, (i) 11,826,614 Shares are issued and outstanding, (ii) no
shares of Preferred
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Stock are issued and outstanding, (iii) no Shares are issued and held in the
treasury of the Company and (iv) a total of 1,633,578 Shares are reserved for
issuance pursuant to the Stock Plans. All the outstanding shares of the
Company's capital stock are, and all Shares which may be issued pursuant to the
exercise of outstanding Options will be, when issued in accordance with the
terms thereof, duly authorized, validly issued, fully paid and non-assessable.
There are no bonds, debentures, notes or other indebtedness having general
voting rights (or convertible into securities having such rights) ("Voting
Debt") of the Company or any of its Subsidiaries issued and outstanding. Except
as disclosed in this Section 3.2 or as set forth in Section 3.2(a) of the
Company Disclosure Schedule or other than pursuant to the Option Agreement, (i)
there are no shares of capital stock of the Company authorized, issued or
outstanding, (ii) there are no existing options, warrants, calls, pre-emptive
rights, subscriptions or other rights, agreements, arrangements or commitments
of any character, relating to the issued or unissued capital stock of the
Company or any of its Subsidiaries, obligating the Company or any of its
Subsidiaries to issue, transfer or sell or cause to be issued, transferred or
sold any shares of capital stock or Voting Debt of, or other equity interest in,
the Company or any of its Subsidiaries or securities convertible into or
exchangeable for such shares or equity interests, or obligating the Company or
any of its Subsidiaries to grant, extend or enter into any such option, warrant,
call, subscription or other right, agreement, arrangement or commitment and
(iii) there are no outstanding contractual obligations of the Company or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any Shares, or the
capital stock of the Company or any Subsidiary or affiliate of the Company or to
provide funds to make any investment (in the form of a loan, capital
contribution or otherwise) in any Subsidiary or any other entity.
(b) Except as set forth in Section 3.2(b) of the Company
Disclosure Schedule, all of the outstanding shares of capital stock of each of
the Subsidiaries are beneficially owned by the Company, directly or indirectly,
and all such shares have been validly issued and are fully paid and
nonassessable and are owned by either the Company or one of its Subsidiaries
free and clear of all liens, charges, security interests, options, claims,
mortgages, pledges or other encumbrances and restrictions of any nature
whatsoever ("Encumbrances").
(c) Except as set forth in Section 3.2(c) of the Company
Disclosure Schedule and as provided in the Shareholders Agreement, there are no
voting trusts or other agreements or understandings to which the Company or any
of its
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Subsidiaries is a party with respect to the voting of the capital stock of the
Company or any of its Subsidiaries.
Section 3.3 Authorization; Validity of Agreement; Company
Action.
(a) The Company has full corporate power and authority to
execute and deliver this Agreement (including the Plan of Merger), the Option
Agreement and to consummate the Transactions. The execution, delivery and
performance by the Company of this Agreement (including the Plan of Merger) and
the Option Agreement, and the consummation by it of the Transactions, have been
duly and validly authorized by the Company Board of Directors and no other
corporate action on the part of the Company is necessary (other than, with
respect to the Merger, the approval and adoption of the Merger, this Agreement
and the Plan of Merger by holders of a majority of the Shares) to authorize the
execution and delivery by the Company of this Agreement and the Option
Agreement, and the consummation by it of the Transactions. Each of this
Agreement and the Option Agreement has been duly executed and delivered by the
Company and, assuming due and valid authorization, execution and delivery hereof
by Parent and the Purchaser, is a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms except that (i)
such enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in effect,
affecting creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceedings therefor may be brought.
(b) The Company Board of Directors has duly and validly
approved this Agreement, the Plan of Merger, the Option Agreement, the
Shareholders Agreement and the Transactions, including the Offer, the Merger,
and the acquisition of Shares pursuant to the Offer, the Option Agreement, the
Shareholders Agreement and the Merger for the purposes of Article 14 and Article
14.1 of the VSCA such that the provisions of Article 14 and Article 14.1 of the
VSCA will not apply to any of the Transactions, including the Offer and the
Merger, such approval occurring prior to the time Parent or the Purchaser became
an "interested shareholder," as that term is defined in Section 13.1-725 of the
VSCA. This Agreement, the Plan of Merger, the Option Agreement, the Shareholders
Agreement and the Transactions have been duly and validly approved by at least a
majority of the
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"disinterested directors" of the Company, as that term is defined in Section
13.1-725 of the VSCA.
Section 3.4 Consents and Approvals; No Violations. Except as
set forth in Section 3.4 of the Company Disclosure Schedule, none of the
execution, delivery or performance of this Agreement (including the Plan of
Merger) by the Company, the consummation by the Company of the Transactions or
compliance by the Company with any of the provisions hereof will (i) conflict
with or result in any breach of any provision of the Articles of Incorporation,
the By-laws or similar organizational documents of the Company or any of its
Subsidiaries, state securities laws or blue sky laws and the VSCA, (ii) require
any filing by the Company with, or permit, authorization, consent or approval
of, any court, arbitral tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency, foreign or domestic (a
"Governmental Entity") (except for (A) compliance with any applicable
requirements of the Exchange Act, (B) the filing of articles of merger in
connection with the Merger pursuant to the VSCA and appropriate documents with
the relevant authorities of other states in which the Company is qualified to
do business, (C) filings, permits, authorizations, consents and approvals as
may be required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act") and comparable merger and notifications, laws or
regulations of foreign jurisdictions, (D) the filing with the SEC and the
Nasdaq Stock Market, Inc. of (1) the Schedule 14D-9, (2) a proxy statement
relating to shareholder approval, if such approval is required by law and (3)
such reports under Section 13(a) of the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated by this
Agreement or (E) such filings and approvals as may be required by any
applicable state securities, "blue sky" or takeover laws), (iii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which the Company or any of its Subsidiaries
is a party or by which any of them or any of their properties or assets may be
bound which provides for the payment to or from the Company in excess of
$250,000 annually or $1,000,000 in the aggregate (the "Company Agreements") or
(iv) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company, any of its Subsidiaries or any of their properties
or assets, except in the case of clause (ii), (iii) or (iv) where failure to
obtain such permits, authorizations, consents or approvals or to make such
filings, or where such violations, breaches or
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defaults which would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect.
Section 3.5 SEC Reports and Financial Statements. The
Company has filed with the SEC all forms, reports, schedules, statements and
other documents required to be filed by it since December 31, 1997 under the
Exchange Act or the Securities Act of 1933, as amended (the "Securities Act")
(as such documents have been amended since the time of their filing,
collectively, the "Company SEC Documents"). As of their respective dates, or if
amended, as of the date of the last such amendment, the Company SEC Documents
(a) did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading and (b) complied in all material respects with the
applicable requirements of the Exchange Act and the Securities Act, as the case
may be, and the applicable rules and regulations of the SEC thereunder. None of
the Company's Subsidiaries is required to file any forms, reports or other
documents with the SEC. The financial statements included in the Company SEC
Documents and the unaudited consolidated statement of operations for the 3
months ended and for the year ended and condensed consolidated balance sheet at
December 31, 1999 (the "December 1999 Financial Statements") (other than for the
absence of footnotes, in the case of the December 1999 Financial Statements and
interim financial statements) set forth in Section 3.5 of the Company Disclosure
Schedule (collectively, the "Financial Statements") (i) have been prepared from
and are in accordance with, the books and records of the Company and its
consolidated Subsidiaries, (ii) comply in all material respects with applicable
accounting requirements and, as to the Company SEC Documents, with the published
rules and regulations of the SEC with respect thereto, (iii) have been prepared
in accordance with United States generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto and except, in the case of the unaudited
interim statements, as may be permitted under Form 10-Q of the Exchange Act) and
(iv) fairly present in all material respects the consolidated financial position
and the consolidated results of operations and cash flows (subject, in the case
of unaudited interim financial statements, to normal year-end adjustments) of
the Company and its consolidated Subsidiaries as of the times and for the
periods referred to therein. The audited consolidated financial statements of
the Company for the year ended December 31, 1999 will not be inconsistent with
the December 1999 Financial Statements in any respect which is materially
adverse.
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Section 3.6 Absence of Certain Changes. Except as
contemplated by this Agreement and except as set forth in Section 3.6 of the
Company Disclosure Schedule or in the Company SEC Documents filed prior to the
date hereof, since September 30, 1999, the Company and its Subsidiaries have
conducted their respective businesses only in the ordinary and usual course.
From September 30, 1999 through the date of this Agreement, there has not
occurred (i) any event, change or effect (including the incurrence of any
liabilities of any nature, whether or not accrued, contingent or otherwise)
having, individually or in the aggregate, a Company Material Adverse Effect,
(ii) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to the equity
interests of the Company or any of its Subsidiaries or (iii) any change in
accounting principles or methods, except insofar as may be required by a change
in GAAP. Since September 30, 1999, neither the Company nor any of its
Subsidiaries has taken any of the actions prohibited by Section 5.2 hereof.
Section 3.7 No Undisclosed Liabilities. Except (a) as
recognized or disclosed in the Financial Statements or the Company SEC Documents
and (b) for liabilities and obligations (i) incurred in the ordinary course of
business since September 30, 1999, (ii) pursuant to the terms of this Agreement,
(iii) as disclosed in Section 3.7 of the Company Disclosure Schedule, (iv) as
disclosed in Section 3.8 of the Company Disclosure Schedule or (v) as would not
reasonably be expected to have a Company Material Adverse Effect, neither the
Company nor any of its Subsidiaries has incurred any liabilities or obligations
of any nature, whether or not accrued, contingent or otherwise required by GAAP
to be recognized or disclosed on a consolidated balance sheet of the Company and
its Subsidiaries or in the notes thereto. Section 3.7 of the Company Disclosure
Schedule sets forth the amount of principal and unpaid interest outstanding
under each instrument evidencing any material amount of indebtedness for
borrowed money of the Company and its Subsidiaries which will accelerate or
become due or result in a right of redemption or repurchase on the part of the
holder of such indebtedness (with or without due notice or lapse of time) as a
result of this Agreement, the Merger or the other transactions contemplated
hereby or thereby.
Section 3.8 Litigation. Except as set forth in Section 3.8
of the Company Disclosure Schedule or in the Company SEC Documents, as of the
date hereof, there is no suit, claim, action, proceeding, including, without
limitation, arbitration proceeding or alternative dispute resolution proceeding,
or investigation pending or, to the knowledge of the Company, threatened against
or affecting, the
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Company or any of its Subsidiaries before any Governmental Entity as to which
there is a reasonable possibility of an adverse determination and that, either
individually or in the aggregate, if adversely determined, would reasonably be
expected to have a Company Material Adverse Effect.
Section 3.9 Employee Benefit Plans; ERISA.
(a) Except as disclosed in the Company SEC Documents, since
the audited financial statements for the year ended December 31, 1998 until the
date hereof, there has not been any adoption or amendment (or an agreement to
adopt or amend) in any material respect by the Company or any of its
subsidiaries of any employment or consulting agreement, collective bargaining
agreement or any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, stock appreciation right or other stock-based incentive, retirement,
vacation, severance, change in control or termination pay, disability, death
benefit, hospitalization, medical or other insurance or any other plan, program,
agreement, arrangement or understanding (whether or not legally binding)
providing benefits to any current or former employee, officer or director of the
Company or any Subsidiary (collectively, the "Benefit Plans"). Except as
disclosed in the Company SEC Documents, or in Section 3.9(a) of the Company
Disclosure Schedule, there exist, as of the date hereof, no employment,
consulting, severance, termination or indemnification agreements, arrangements
or understandings between the Company or any of its Subsidiaries, and any
current or former employee, consultant, officer or director of the Company.
(b) Section 3.9(b) of the Company Disclosure Schedule contains
a list and brief description of all "employee pension benefit plans" (as defined
in Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) (sometimes referred to herein as "Pension Plans"), "employee
welfare benefit plans" (as defined in Section 3(1) of ERISA) and all other
Benefit Plans sponsored, maintained, contributed to or required to be
contributed to, by the Company or any of its Subsidiaries or any person or
entity that, together with the Company and its Subsidiaries, is treated as a
single employer under Section 414(b), (c), (m) or (o) of the Internal Revenue
Code of 1986, as amended (the "Code") (the Company and each such other person or
entity, a "Commonly Controlled Entity") for the benefit of any current or former
employees, officers or directors of the Company or any of its Subsidiaries. The
Company has made available to Parent true, complete and correct copies of (1)
each Benefit Plan (or, in the case of any unwritten Benefit
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Plans, descriptions thereof), (2) the most recent annual report on Form 5500
filed with the Internal Revenue Service with respect to each Benefit Plan (if
any such report was required), (3) the most recent summary plan description for
each Benefit Plan for which such summary plan description is required (together
with all Summaries of Material Modification issued with respect thereto), (4)
each trust agreement and group annuity contract relating to any Benefit Plan and
(5) all material contracts and employee communications relating to each Benefit
Plan. Each Benefit Plan has been administered materially in accordance with its
terms. The Company, each of its Subsidiaries and all the Benefit Plans are all
in material compliance with applicable provisions of ERISA, the Code and other
applicable laws.
(c) All Pension Plans have been the subject of determination
letters from the Internal Revenue Service to the effect that such Pension Plans
are qualified and exempt from Federal income taxes under Sections 401(a) and
501(a), respectively, of the Code, a true, complete and correct copy of each
such determination letter has been made available to Parent, and no such
determination letter has been revoked nor has any event occurred since the date
of the most recent determination letter or application therefor for each Pension
Plan that would adversely affect its qualification or materially increase its
costs.
(d) Neither the Company, nor any of its Subsidiaries, nor any
Commonly Controlled Entity has at any time maintained, contributed or been
obligated to contribute to any Benefit Plan that is subject to Title IV of
ERISA, including, without limitation, any "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA).
(e) Except as set forth in Section 3.9(e) of the Company
Disclosure Schedule, no employee of the Company or any of its Subsidiaries will
be entitled to any additional compensation or benefits or any acceleration of
the time of payment or vesting or any other enhancement of any compensation or
benefits under any Benefit Plan as a result of the transactions contemplated by
this Agreement or the Option Agreement.
(f) Except as set forth in Section 3.9(f) of the Company
Disclosure Schedule, the deduction of any amount payable pursuant to the terms
of the Benefit Plans will not be subject to disallowance under Section 162(m) of
the Code.
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(g) Except as set forth in Section 3.9(g) of the Company
Disclosure Schedule, no amount that could be received (whether in cash or
property or the vesting of property) by any employee, consultant, officer or
director of the Company or any of its Subsidiaries under any employment,
consulting, severance or termination agreement, other compensation arrangement
or other Benefit Plan currently in effect would be an "excess parachute payment"
(as such term is defined in Section 280G(b)(1) of the Code). No such person is
entitled to receive any additional payment from the Company or any of its
Subsidiaries, the Surviving Corporation or any other person (a "Parachute
Gross-Up Payment") in the event that the excise tax of Section 4999(a) of the
Code is imposed on such person. The Company Board of Directors has not granted
to any officer, director, consultant or employee of the Company any right to
receive any Parachute Gross-Up Payment.
(h) No Benefit Plan provides benefits, including, without
limitation, death or medical benefits (whether or not insured), with respect to
current or former employees of the Company, its subsidiaries or any Commonly
Controlled Entity after retirement or other termination of service, other than
(i) coverage mandated by applicable law, (ii) death benefits or retirement
benefits under any Pension Plan, (iii) deferred compensation benefits accrued as
liabilities on the books of the Company, the Subsidiary or any Commonly
Controlled Entity, (iv) benefits, the full cost of which is borne by the current
or former employee, officer or director (or his beneficiary), (v) life insurance
benefits for which the employee dies while in service with the Company or (vi)
any employee stock options that may be exercised after termination of
employment.
(i) There are no pending or, to the Company's knowledge,
threatened or anticipated claims by or on behalf of any Benefit Plan, by any
employee or beneficiary under any Benefit Plan or otherwise involving any
Benefit Plan (other than routine claims for benefits).
(j) Neither the Company, any Subsidiary, any Commonly
Controlled Entity, any of the Benefit Plans, any trust created thereunder nor
any trustee or administrator thereof has engaged in a transaction or has taken
or failed to take any action in connection with which any such person or entity
or any party dealing with the Benefit Plans or any such trust could be subject
to either a civil penalty assessed pursuant to section 409 or 502(i) or ERISA or
a tax imposed pursuant to section 4975, 4976, or 4980B of the Code.
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Section 3.10 Taxes.
(a) Except as set forth in Section 3.10 of the Company
Disclosure Schedule:
(i) the Company and its Subsidiaries (x) have duly
filed (or there have been filed on their behalf) with the appropriate
Tax Authorities (as hereinafter defined) all material Tax Returns (as
hereinafter defined) required to be filed by them, and to the knowledge
and belief of the Company, such Tax Returns are true, correct and
complete in all material respects and (y) have duly paid in full (or
there has been paid on their behalf), or have established reserves (in
accordance with GAAP) as reflected on the Financial Statements, all
material Taxes (as hereinafter defined) that are due and payable;
(ii) there are no material liens for Taxes upon any
property or assets of the Company or any Subsidiary thereof, except for
liens for Taxes not yet due or for which adequate reserves have been
established in accordance with GAAP;
(iii) as of the date hereof, no material Federal,
state, local or foreign Audits are pending (A) with regard to any
material Taxes or material Tax Returns of the Company or its
Subsidiaries and (B) for which the Company or any of its Subsidiaries
has received written notice. To the best knowledge of the Company and
its Subsidiaries no such Audit is threatened;
(iv) the United States Federal income Tax Returns of
the Company and its Subsidiaries have been examined by the applicable
Tax Authorities for all periods through and including December 31,
1998, and as of the date hereof no material adjustments have been
asserted as a result of such examinations which have not been (x)
resolved and fully paid or (y) reserved on the Financial Statements in
accordance with GAAP;
(v) neither the Company nor any of its Subsidiaries
has given or been requested to give any waiver of statutes of
limitations relating to the payment of Taxes or has executed powers of
attorney with respect to Tax matters, which waivers or powers of
attorney are outstanding;
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(vi) neither the Company nor any of its Subsidiaries
is a party to any agreement providing for the allocation,
indemnification or sharing of Taxes with any Person other than the
Company and its Subsidiaries, and the Company has provided Parent with
copies of any such agreement that the Company or any Subsidiary has
entered into with any other Subsidiary; and
(vii) neither the Company nor any of its Subsidiaries
has been a member of any "affiliated group" (as defined in section
1504(a) of the Code) other than the affiliated group of which Company
is the "parent" and, except with respect to any group of which only the
Company and/or its Subsidiaries are members, is not subject to Treas.
Reg. 1.1502-6 (or any similar provision under foreign, state or local
law) for any period.
(b) "Audit" means any audit, assessment or other examination
relating to Taxes by any Tax Authority or any judicial or administrative
proceedings relating to Taxes. "Tax" or "Taxes" means all Federal, state, local
and foreign taxes, and other assessments of a similar nature (whether imposed
directly or through withholding), including any interest, additions to tax, or
penalties applicable thereto, imposed by any Tax Authority. "Tax Authority"
means the Internal Revenue Service and any other domestic or foreign
governmental authority responsible for the administration of any Taxes. "Tax
Returns" mean all Federal, state, local and foreign tax returns, declarations,
statements, reports, schedules, forms, and information returns and any
amendments thereto.
Section 3.11 Contracts. Each Company Agreement is valid,
binding and enforceable and in full force and effect, except where failure to be
valid, binding and enforceable and in full force and effect would not REASONABLY
BE EXPECTED TO have a Company Material Adverse Effect, and there are no defaults
thereunder, except those defaults that would not reasonably be expected to have
a Company Material Adverse Effect. Section 3.11 of the Company Disclosure
Schedule sets forth a true and complete list of (i) all material Company
Agreements (defined as any agreement required to be filed as an Exhibit to an
Annual Report on form 10-K of the Company pursuant to Item 601(b)(10) of
Regulation S-K of the Securities Act) entered into by the Company or any of its
Subsidiaries since December 31, 1998 and all amendments to any Company
Agreements included as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1998 and (ii) all non-competition
agreements imposing restrictions on the ability of the
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Company or any of its Subsidiaries to conduct business in any jurisdiction or
territory.
Section 3.12 Real Property. Neither the Company nor any of
its Subsidiaries owns any real property. Section 3.12 of the Company Disclosure
Schedule sets forth a complete list of all real property leased by the Company
or its Subsidiaries (the "Real Property"). Except as disclosed in Section 3.12
of the Company Disclosure Schedule, the Company is not a party to any lease,
assignment or similar arrangement under which the Company is a lessor, assignor
or otherwise makes available for use by any third party any portion of the Real
Property.
Section 3.13 Intellectual Property. Other than as would not
have a Company Material Adverse Effect, the Company and its Subsidiaries own
free and clear of all liens and encumbrances, or are validly licensed or
otherwise have the right to use, all trademarks, trade secrets, trademark
rights, trade names, trade name rights, service marks, service marks rights, and
copyrights, and to the Company's knowledge, all patents and patent applications,
and other proprietary intellectual property rights which are used in the conduct
of the business of the Company and its Subsidiaries either individually or taken
as a whole (collectively, "Intellectual Property Rights"). Except as would not
have a Company Material Adverse Effect, to the knowledge of the Company, all
patents, copyrights, and trademarks, and all registrations and applications
relating thereto (i) have been duly maintained (including the proper, sufficient
and timely submission of all necessary filings and fees), (ii) have not lapsed,
expired or been abandoned, and (iii) are not the subject of any opposition,
interference, cancellation or other proceeding before any governmental
registration or other authority in any jurisdiction. Except as would not have
Company Material Adverse Effect, (x) the Company will continue to own or be
licensed to the Intellectual Property Rights after consummation of the Offer and
the Merger (consistent with their ownership and license rights prior to said
consummation) and (y) the consummation of the Offer and Merger will not result
in the material breach of any license, sublicense or other agreement relating to
the Intellectual Property Rights. Except as would not have a Company Material
Adverse Effect, to the knowledge of the Company, no claim, suit, action or
proceeding involving any infringement of, or conflict with, any intellectual
property rights of any third party has been made or asserted against the Company
or any of its Subsidiaries in respect of the operation of the Company's or any
Subsidiary's business, nor is there any basis for such. Except as would not have
a Company Material Adverse Effect, to the knowledge of the Company, no person is
infringing, or taking any action in conflict with, the rights of the Company or
any Subsidiary with respect to any Intellectual
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Property Right. Except as would not have a Company Material Adverse Effect, to
the knowledge of the Company, neither the Company nor any Subsidiary has
licensed, or otherwise granted, to any third party, any rights in or to any
material Intellectual Property Rights other than in the ordinary course of the
Company's business of licensing applications software to resellers and
end-users. Except where such disclosure would not have a Company Material
Adverse Effect, no trade secret, know-how or other confidential information
relating to the Company or its Subsidiaries has been disclosed or authorized to
be disclosed to any third party, other than pursuant to a standard
non-disclosure agreement.
Section 3.14 Labor Matters. The Company and each of its
Subsidiaries has good labor relations and there are no controversies pending, or
to the knowledge of the Company, threatened between the Company and any of its
Subsidiaries and any of their respective employees, which failure to have good
labor relations or controversies would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. There are
no collective bargaining or other labor union agreements to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound. Since December 31, 1997, neither the Company nor any of
its Subsidiaries has encountered any labor union organizing activity, nor had
any actual or, to the knowledge of the Company, threatened employee strikes,
work stoppages, slowdowns or lockouts.
Section 3.15 Compliance with Laws. The Company and its
Subsidiaries have complied in a timely manner and in all material respects with
all laws, rules and regulations, ordinances, judgments, decrees, orders, writs
and injunctions of all United States federal, state, local, foreign governments
and agencies thereof which affect the business, properties or assets of the
Company and its Subsidiaries, except where the failure to comply would not
reasonably be expected to have, individually or in the aggregate a Company
Material Adverse Effect, and no notice, charge, claim, action or assertion has
been received by the Company or any of its Subsidiaries or has been filed,
commenced or, to the Company's knowledge, threatened against the Company or any
of its Subsidiaries alleging any violation of any of the foregoing, except
alleged violations that individually or in the aggregate, would not reasonably
be expected to have a Company Material Adverse Effect. All licenses, permits and
approvals required under such laws, rules and regulations are in full force and
effect except where the failure to be in full force and effect would not
reasonably be expected to have a Company Material Adverse Effect.
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Section 3.16 Environmental Matters. Except as set forth in
Section 3.16 of the Company Disclosure Schedule, (a) the Company and its
Subsidiaries are in compliance in all material respects with federal, state,
local and foreign laws and regulations relating to pollution or protection or
preservation of human health or the environment, including, without limitation,
laws and regulations relating to emissions, discharges, releases or threatened
releases of toxic or hazardous substances or hazardous waste, petroleum and
petroleum products, asbestos or asbestos-containing materials, polychlorinated
biphenyls, radon, or lead or lead-based paints or materials ("Materials of
Environmental Concern"), or otherwise relating to the generation, storage,
containment (whether above ground or underground), disposal, transport or
handling of Materials of Environmental Concern, or the preservation of the
environment or mitigation of adverse effects thereon (collectively,
"Environmental Laws"), and including, but not limited to, compliance with any
permits or other governmental authorizations or the terms and conditions
thereof, except where noncompliance is not reasonably likely to have a Company
Material Adverse Effect; (b) neither the Company nor any of its Subsidiaries has
received any communication or notice, whether from a Governmental Entity or
otherwise, alleging any violation of or noncompliance with any Environmental
Laws by any of the Company or its Subsidiaries or for which any of them is
responsible, and there is no pending or, to the Company's knowledge, no
threatened claim, action, investigation or notice by any person or entity
alleging potential liability for investigatory, cleanup or governmental response
costs, or natural resources or property damages, or personal injuries,
attorney's fees or penalties relating to (i) the presence, or release into the
environment, of any Materials of Environmental Concern at any location owned or
operated by the Company or its Subsidiaries, now or in the past or (ii) any
violation, or alleged violation, of any Environmental Law (collectively,
"Environmental Claims"), except where such notices, communications, claims,
actions, investigations or Environmental Claims would not have a Company
Material Adverse Effect; and (c) to the Company's knowledge, there are no past
or present facts or circumstances that are reasonably likely to form the basis
of any Environmental Claim against the Company or its Subsidiaries or against
any person or entity whose liability for any Environmental Claim the Company or
its Subsidiaries have retained or assumed either contractually or by operation
of law, except where such Environmental Claim, if made, would not have a Company
Material Adverse Effect.
Section 3.17 Product Warranties. Except as described in
Section 3.17 of the Company Disclosure Schedule, all products are sold or
licensed by the Company pursuant to (i) the Company's disclaimer of all
warranties, express or
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implied, including those of merchantability and fitness for a particular
purpose; (ii) the Company's disclaimer of all consequential damages arising from
the use or possession of the product, regardless of whether such liability is
based in tort, contract or otherwise; and (iii) language stating that if the
foregoing disclaimers are held to be unenforceable, the Company's maximum
liability shall not exceed the amount of money(ies) paid for such product(s),
except, in each case, where the failure so to provide would not have a Company
Material Adverse Effect.
Section 3.18 Information in Proxy Statement. The Proxy
Statement, if any (or any amendment thereof or supplement thereto), at the date
mailed to the Company's shareholders and at the time of the meeting of Company
shareholders to be held in connection with the Merger, will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading, except
that no representation is made by the Company with respect to statements made
therein based on information supplied in writing by Parent or the Purchaser
expressly for inclusion in the Proxy Statement. The Proxy Statement will comply
in all material respects with the provisions of the Exchange Act and the rules
and regulations thereunder.
Section 3.19 Potential Conflict of Interest. Except as set
forth in Section 3.19 of the Company Disclosure Schedule or in the SEC Reports
filed prior to the date hereof, since December 31, 1998 there have been no
transactions, agreements, arrangements or understandings between the Company or
its Subsidiaries, on the one hand, and their respective affiliates, on the other
hand, that would be required to be disclosed under Item 404 of Regulation S-K
under the Securities Act (except for amounts due as normal salaries and bonuses
and in reimbursements of ordinary expenses). Except as set forth in Section 3.19
of the Company Disclosure Schedule or in the SEC Reports filed prior to the date
hereof, no officer of the Company or any of its Subsidiaries owns, directly or
indirectly, any interest in (excepting not more than one percent (1%) stock
holdings for investment purposes in securities of publicly held and traded
companies) or is an officer, director, employee or consultant of any person
which is a competitor, lessor, lessee, customer or supplier of the Company; and
no officer or director of the Company or any of its Subsidiaries (i) owns,
directly or indirectly, in whole or in part, any Intellectual Property which the
Company or any of its Subsidiaries is using or the use of which is necessary for
the business of the Company or its Subsidiaries, (ii) has any claim, charge,
action or cause of action against the Company or any of its Subsidiaries,
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except for claims for accrued vacation pay, accrued benefits under the Plans and
similar matters and agreements existing on the date hereof, (iii) has made, on
behalf of the Company or any of its Subsidiaries, any payment or commitment to
pay any commission, fee or other amount to, or to purchase or obtain or
otherwise contract to purchase or obtain any goods or services from, any other
Person of which any officer or director of the Company or any of its
Subsidiaries, or, to the Company's knowledge, a relative of any of the
foregoing, is a partner or shareholder (except stock holdings solely for
investment purposes in securities of publicly held and traded companies) or (iv)
owes any money to the Company or any of its Subsidiaries (except for
reimbursement of advances in the ordinary course).
Section 3.20 Opinion of Financial Advisor. The Company has
received the written opinion of Hambrecht & Quist LLC, dated the date hereof, to
the effect that, based upon and subject to the matters set forth therein and as
of such date, the consideration to be received in the Offer and the Merger by
the Company's shareholders is fair to the Company's shareholders from a
financial point of view, a copy of which opinion has been delivered to Parent
and the Purchaser.
Section 3.21 Insurance. The Company and each of its
Subsidiaries has policies of insurance and bonds of the type and in amounts
customarily carried by persons conducting businesses or owning assets similar to
those of the Company and its Subsidiaries. There is no material claim pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All premiums
due and payable under all such policies and bonds have been paid and the Company
and its Subsidiaries are otherwise in compliance in all material respects with
the terms of such policies and bonds. The Company has no knowledge of any
threatened termination of, or material premium increase with respect to, any of
such policies.
Section 3.22 State Takeover Statutes; Required Vote;
Dissenter's Rights.
(a) Except for Articles 14 and 14.1 of the VSCA, no Virginia
takeover statute or similar statute applies or purports to apply to the Offer or
the Merger, or to this Agreement, the Option Agreement or the Shareholders
Agreement or the transactions contemplated hereby. In the event the Special
Meeting is required to approve the Merger and the adoption of this Agreement the
approval by the
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holders of a majority of the outstanding Shares is the only vote required to
approve the Merger and the adoption of this Agreement.
(b) No shareholder is entitled to dissenter's rights, rights
of appraisal or other similar rights pursuant to the VSCA or applicable law
unless the shares cease to be listed on the Nasdaq Stock Market and (i) are not
then listed on a national securities exchange or (ii) held by at least 2,000
record shareholders.
Section 3.23 Brokers. No broker, investment banker,
financial advisor or other person, other than Hambrecht & Quist LLC, the fees
and expenses of which will be paid by Company, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Company.
Section 3.24 Full Disclosure. To the knowledge of the
Company, the representations and warranties by the Company in this Agreement and
the documents referred to herein (including the Schedules and Exhibits hereto),
taken together with all the other information provided to the Parent or its
counsel in connection with the transactions contemplated hereby, do not contain
any untrue statements of a material fact or omit to state any material fact
necessary, in order to make the statements made herein or therein, in light of
the circumstances under which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER
Parent and the Purchaser represent and warrant to the Company
as follows:
Section 4.1 Organization. Each of Parent and the Purchaser is
a corporation duly organized and validly existing under the laws of the
jurisdiction of its incorporation or organization and has all requisite
corporate power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as now being
conducted, except where the failure to be so organized and existing or to have
such power, authority, and governmental
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approvals would not, individually or in the aggregate, impair in any material
respect the ability of each of Parent and the Purchaser to perform its
obligations under this Agreement, as the case may be, or prevent or materially
delay the consummation of any of the Transactions.
Section 4.2 Authorization; Validity of Agreement; Necessary
Action. Each of Parent and the Purchaser has full corporate power and authority
to execute and deliver this Agreement and the Shareholders Agreement and to
consummate the Transactions. The execution, delivery and performance by Parent
and the Purchaser of this Agreement and the Shareholders Agreement and the
consummation of the Offer, Merger and of the Transactions have been duly
authorized by the boards of directors of the Purchaser and Parent and by the
shareholders of the Purchaser, and no other corporate authority or approval on
the part of Parent or the Purchaser is necessary to authorize the execution and
delivery by Parent and the Purchaser of this Agreement and the Shareholders
Agreement and the consummation of the Transactions. Each of this Agreement and
the Shareholders Agreement has been duly executed and delivered by Parent and
the Purchaser and, assuming due and valid authorization, execution and delivery
hereof by the Company and the other parties to the Shareholders Agreement, is
the valid and binding obligation of each of Parent and the Purchaser enforceable
against each of them in accordance with its terms, except that (i) such
enforcement may be subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws, now or hereafter in effect, affecting
creditors' rights generally, and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
Section 4.3 Consents and Approvals; No Violations. None of
the execution, delivery or performance of this Agreement by Parent or the
Purchaser, the consummation by Parent or the Purchaser of the Transactions or
compliance by Parent or the Purchaser with any of the provisions hereof will (i)
conflict with or result in any breach of any provision of the organizational
documents of Parent or the Articles of Incorporation or By-laws of the
Purchaser, (ii) require any filing by Parent or the Purchaser with, or permit,
authorization, consent or approval of, any Governmental Entity (except for (i)
compliance with any applicable requirements of the Exchange Act, (ii) the filing
of articles of merger in connection with the Merger pursuant to the VSCA, (iii)
filings, permits, authorizations, consents and approvals as may be required
under, the HSR Act and comparable merger and notifications,
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laws or regulations of foreign jurisdictions, (iv) the filing with the SEC and
the Nasdaq Stock Market, Inc. of (A) the Schedule 14D-1, (B) a proxy statement
relating to shareholder approval, if such approval is required by law and (C)
such reports under Section 13(a) of the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated by this
Agreement or (v) such filings and approvals as may be required by any applicable
state securities, "blue sky" or takeover laws), (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which Parent, or any of its Subsidiaries or the Purchaser is a party or by
which any of them or any of their respective properties or assets may be bound,
or (iv) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Parent, any of its Subsidiaries or any of their properties or
assets, except in the case of clause (ii), (iii) or (iv) such violations,
breaches or defaults which would not, individually or in the aggregate, impair
in any material respect the ability of each Parent and the Purchaser to perform
its obligations under this Agreement, as the case may be, or prevent or
materially delay the consummation of any the Transactions.
Section 4.4 Information in Proxy Statement. None of the
information supplied by Parent or the Purchaser in writing expressly for
inclusion or incorporation by reference in the Proxy Statement (or any amendment
thereof or supplement thereto) will, at the date mailed to shareholders and at
the time of the meeting of shareholders to be held in connection with the
Merger, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they are
made, not misleading.
Section 4.5 Interim Operations of the Purchaser. The
Purchaser was formed solely for the purpose of engaging in the Transactions, and
has engaged in no other business activities other than in connection with the
Transactions as contemplated hereby.
Section 4.6 Brokers. No broker, investment banker, financial
advisor or other person, other than Deutsche Banc Alex.Brown, the fees and
expenses of which will be paid by Parent, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated
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by this Agreement based upon arrangements made by or on behalf of Parent or
Purchaser.
Section 4.7 Financing. Purchaser has, or will have available
to it upon the consummation of the Offer, sufficient funds to consummate the
Transactions, including payment in full for all Shares validly tendered into the
Offer or outstanding at the Effective Time, subject to the terms and conditions
of the Offer and this Agreement. Parent and the Purchaser have received, and
have furnished to the Company, true and complete copies of the Vendor Placing
Agreement, dated January 12, 2000 between Parent and Deutsche Bank AG London
(the "Financing Document") with respect to the financing of the acquisition of
the Shares in the Offer and the Merger (the "Financing"). The aggregate proceeds
of the Financing, together with internal corporate funds of Parent or the
Purchaser, are sufficient to acquire all of the Shares in the Offer and the
Merger and to pay anticipated expenses in connection therewith.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.1 Acquisition Proposals. The Company will notify
Parent and the Purchaser promptly if on or after the date of this Agreement any
proposals are received by, any information is requested from, or any
negotiations or discussions are sought to be initiated or continued with the
Company or its officers, directors, employees, investment bankers, attorneys,
accountants or other agents, in each case in connection with any Acquisition
Proposal (as hereinafter defined) or the possibility or consideration of making
an Acquisition Proposal ("Acquisition Proposal Interest") indicating, in
connection with such notice, the name of the Person indicating such Acquisition
Proposal Interest and the material terms and conditions of any proposals or
offers. Subject to Section 5.3, the Company agrees that it will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal Interest. The Company agrees that it shall keep Parent and
the Purchaser informed, on a current basis, of the status and terms of any
Acquisition Proposal Interest. As used in this Agreement, "Acquisition Proposal"
shall mean any tender or exchange offer involving the Company, any proposal for
a merger, consolidation or other business combination involving the Company, any
proposal or offer to
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acquire in any manner a substantial equity interest in, or a substantial portion
of the business or assets of, the Company (other than immaterial or
insubstantial assets or inventory in the ordinary course of business or assets
held for sale), any proposal or offer with respect to any recapitalization or
restructuring with respect to the Company or any proposal or offer with respect
to any other transaction similar to any of the foregoing with respect to the
Company other than pursuant to the transactions to be effected pursuant to this
Agreement.
Section 5.2 Interim Operations of the Company. The Company
covenants and agrees that, except (i) as expressly contemplated by this
Agreement or the Option Agreement, (ii) as set forth in Section 5.2 of the
Company Disclosure Schedule, (iii) in the ordinary course of business consistent
with past practice or (iv) as agreed in writing by Parent, after the date
hereof, and prior to the earlier of (x) the termination of this Agreement in
accordance with Article VIII hereof and (y) the time the designees of Parent
have been elected to, and shall constitute a majority of, the Board of Directors
of the Company pursuant to Section 1.3 hereof (the "Appointment Date"):
(a) the business of the Company and its Subsidiaries shall
be conducted only in the ordinary course consistent with past practice and each
of the Company and its Subsidiaries shall use its commercially reasonable
efforts to preserve its present business organization intact and maintain its
satisfactory relations with customers, suppliers, employees, contractors,
distributors and others having business dealings with it;
(b) the Company will not, directly or indirectly, (i) amend
its Articles of Incorporation or By-laws; or (ii) split, combine or reclassify
the outstanding Shares or any outstanding capital stock of the Company;
(c) neither the Company nor any of its Subsidiaries shall:
(i) declare, set aside or pay any dividend or other distribution payable in
cash, stock or property with respect to its capital stock; (ii) issue, sell,
pledge, dispose of or encumber any additional shares of, or securities
convertible into or exchangeable for, or options, warrants, calls, commitments
or rights of any kind to acquire, any shares of capital stock of any class of
the Company or its Subsidiaries, other than Shares reserved for issuance on the
date hereof pursuant to the exercise of the Options or other rights to purchase
shares of Common Stock pursuant to the Employee Stock Purchase Plan outstanding
on the date hereof; (iii) transfer, lease, license, sell,
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mortgage, pledge, dispose of, or encumber any of its material assets, or incur
or modify any material indebtedness or other liability, other than in the
ordinary and usual course of business and consistent with past practice; or (iv)
redeem, purchase or otherwise acquire any shares of any class or series of its
capital stock, or any instrument or security which consists of or includes a
right to acquire such shares except as permitted by Section 5.2(b) and other
than in connection with the exercise of options or rights under the Stock Plans
or the Employee Stock Purchase Plan;
(d) neither the Company nor any of its Subsidiaries shall
increase the compensation payable or to become payable to any of its officers,
directors, employees, agents or consultants (other than general increases in
wages to employees who are not directors or affiliates in the ordinary course
consistent with past practice), or to persons providing management services,
enter into or amend any employment, severance, consulting, termination or other
agreement or employee benefit plan or make any loans to any of its officers,
directors, employees, affiliates, agents or consultants or make any change in
its existing borrowing or lending arrangements for or on behalf of any of such
persons pursuant to an employee benefit plan or otherwise;
(e) except to the extent permitted and contemplated by
Section 2.3 hereof or as disclosed on Schedule 5.2(e) hereof, neither the
Company nor any of its Subsidiaries shall pay or make any accrual or arrangement
for payment of any pension, retirement allowance or other employee benefit
pursuant to any existing plan, agreement or arrangement to any officer,
director, employee or affiliate or pay or agree to pay or make any accrual or
arrangement for payment to any officers, directors, employees or affiliates of
the Company of any amount relating to unused vacation days, except payments and
accruals made in the ordinary course consistent with past practice; adopt or
pay, grant, issue, accelerate or accrue salary or other payments or benefits
pursuant to any pension, profit-sharing, bonus, extra compensation, incentive,
deferred compensation, stock purchase, stock option, stock appreciation right,
group insurance, severance pay, retirement or other employee benefit plan,
agreement or arrangement, or any employment or consulting agreement with or for
the benefit of any director, officer, employee, agent or consultant, whether
past or present; or amend in any material respect any such existing plan,
agreement or arrangement in a manner inconsistent with the foregoing;
(f) the Company shall not, in any material respect, modify,
amend or terminate any of the Company Agreements, and neither the Company nor
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any of its Subsidiaries shall waive, release or assign any material rights on
claims under any of the Company Agreements;
(g) neither the Company nor any of its Subsidiaries will
permit any insurance policy naming it as a beneficiary or a loss payable payee
to be cancelled or terminated without notice to Parent;
(h) neither the Company nor any of its Subsidiaries will (i)
incur or assume any long-term debt or any short-term indebtedness; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person; (iii) make
any loans, advances or capital contributions to, or investments in, any other
person; or (iv) enter into any material commitment or transaction (including,
but not limited to, any borrowing, capital expenditure or purchase, sale or
lease of assets or real estate);
(i) neither the Company nor any of its Subsidiaries will (i)
change any of the accounting methods used by it materially affecting its assets,
liabilities or business, except for such changes required by GAAP or (ii) make
any Tax election or change any Tax election already made, adopt any Tax
accounting method, change any Tax accounting method, enter into any closing
agreement or settle any Tax Audit;
(j) neither the Company nor any of its Subsidiaries will
pay, discharge or satisfy any claims, liabilities or obligations (whether
absolute, accrued, contingent or otherwise), other than the payment, discharge
or satisfaction of any such claims, liabilities or obligations, in the ordinary
course of business and consistent with past practice, or of claims, liabilities
or obligations reflected or reserved against in, or contemplated by, the
consolidated financial statements (or the notes thereto) of the Company;
(k) except as otherwise permitted pursuant to Section 5.3,
neither the Company nor any of its Subsidiaries will adopt a plan of complete or
partial liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any of its
Subsidiaries (other than the Merger);
(l) except for the actions permitted to be taken pursuant to
Section 5.3 hereof, neither the Company nor any of its Subsidiaries will take,
or agree in writing or otherwise to take, any action that would or is reasonably
likely to
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result in any of the conditions to the Merger set forth in Article VII or any of
the conditions to the Offer set forth in Annex I not being satisfied, or would
make any representation or warranty of the Company contained herein inaccurate
in any material respect at, or as of any time prior to, the Effective Time,
other than those representations and warranties which by their terms address
matters as of a particular date, or that would materially impair the ability of
the Company to consummate the Merger in accordance with the terms hereof or
materially delay such consummation; and
(m) except for the actions permitted to be taken pursuant to
Section 5.3 hereof, neither the Company nor any of its Subsidiaries will enter
into any written agreement, contract, commitment or arrangement to do any of the
foregoing, or authorize, recommend, propose, in writing or announce an intention
to do any of the foregoing.
Section 5.3 No Solicitation.
(a) Except as provided in Section 5.3(b) below, the Company,
from the date of this Agreement until the earlier of termination of this
Agreement or the Effective Time, will not nor shall it authorize or permit its
officers, directors, employees, to (and will use reasonable best efforts to
ensure that such persons and the Company's investment bankers, attorneys,
accountants and other agents do not) directly or indirectly (i) initiate,
solicit or knowingly encourage, or knowingly take any action to facilitate the
making of, any offer or proposal which constitutes or is reasonably likely to
lead to any Acquisition Proposal, (ii) enter into any agreement with respect to
any Acquisition Proposal, or (iii) in the event of an unsolicited Acquisition
Proposal for the Company engage in negotiations or discussions with, or provide
any information or data to, any Person (other than Parent, any of its affiliates
or representatives) relating to any Acquisition Proposal; provided, however,
that nothing contained in this Section 5.3 or any other provision hereof shall
prohibit the Company or the Company Board of Directors from (A) taking and
disclosing to the Company's shareholders its position with respect to a tender
or exchange offer by a third party pursuant to Rules 14d-9 and 14e-2 promulgated
under the Exchange Act, (B) making such disclosure to the Company's shareholders
as, in the good faith judgment of the Company Board of Directors after receipt
of advice from outside legal counsel to the Company that such disclosure is
required under applicable law and that the failure to make such disclosure is
reasonably likely to cause the Company Board of Directors to violate its
fiduciary duties to the Company's shareholders
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under applicable law or (C) otherwise complying with their fiduciary duties to
shareholders.
(b) Notwithstanding the foregoing, prior to the acceptance
of Shares pursuant to the Offer, the Company may furnish information concerning
its business, properties or assets to any Person pursuant to a confidentiality
agreement with terms no less favorable to the Company than those contained in
the Mutual Non-Disclosure Agreement, dated October 14, 1999 entered into between
a Subsidiary of Parent and the Company (the "Confidentiality Agreement") and may
negotiate and participate in discussions and negotiations with such Person
concerning an Acquisition Proposal if (x) such entity or group has on an
unsolicited basis submitted a bona fide written proposal to the Company relating
to any such transaction which the Board of Directors determines in good faith,
after receiving advice from a nationally recognized investment banking firm,
represents a superior transaction to the Offer and the Merger and which is not
conditioned upon obtaining additional financing the certainty of closing of
which is less certain than the satisfaction of the condition set forth in
paragraph (i) of Annex I (as it may be deemed to be amended pursuant to Section
1.1(a)) on conditions less favorable to the Company than the Financing and (y)
in the good faith opinion of the Company Board of Directors, only after
consultation with outside legal counsel to the Company, providing such
information or access or engaging in such discussions or negotiations is in the
best interests of the Company and its shareholders and the failure to provide
such information or access or to engage in such discussions or negotiations
would cause the Company Board of Directors to violate its fiduciary duties to
the Company's shareholders under applicable law (an Acquisition Proposal which
satisfies clauses (x) and (y) being referred to herein as a "Superior
Proposal"). The Company shall promptly, and in any event within one business day
following receipt of a Superior Proposal, notify Parent of the receipt of the
same and prior to providing any such party with any material non-public
information. The Company shall promptly provide to Parent any material
non-public information regarding the Company provided to any other party which
was not previously provided to Parent.
(c) Except as set forth herein, neither the Company Board of
Directors nor any committee thereof permitted by law to do so shall (i) withdraw
or modify, or propose (publicly or to a third party) to withdraw or modify, in a
manner adverse to Parent or the Purchaser, the approval or recommendation by
such Company Board of Directors or any such committee of the Offer, this
Agreement or the Merger, (ii) approve or recommend or propose (publicly or to a
third party) to
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approve or recommend, any Acquisition Proposal or (iii) enter into any agreement
with respect to any Acquisition Proposal (other than a confidentiality agreement
as contemplated by Section 5.3(b)). Notwithstanding the foregoing, prior to the
time of acceptance for payment of Shares in the Offer, the Company Board of
Directors may (subject to the terms of this and the following sentence) withdraw
or modify its approval or recommendation of the Offer, this Agreement or the
Merger, approve or recommend a Superior Proposal, or enter into an agreement
with respect to a Superior Proposal, in each case at any time after the fifth
business day following the Company's delivery to Parent of written notice
advising Parent that the Board of Directors has received a Superior Proposal,
specifying the material terms and conditions of such Superior Proposal and
identifying the person making such Superior Proposal; provided that the Company
shall not enter into an agreement with respect to a Superior Proposal unless the
Company also shall have furnished Parent with written notice that it intends to
enter into such agreement.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Additional Agreements. Subject to the terms and
conditions as herein provided, the Company, Parent and Purchaser will each
comply in all material respects with all applicable laws and with all applicable
rules and regulations of any Governmental Entity to achieve the satisfaction of
the Minimum Condition and all conditions set forth in Annex I attached hereto
and Article VII hereof, and to consummate and make effective the Merger and the
other transactions contemplated hereby. Each of the parties hereto agrees to use
all commercially reasonable efforts to obtain in a timely manner all necessary
waivers, consents and approvals and to effect all necessary registrations and
filings, and to use all commercially reasonable efforts to take, or cause to be
taken, all other actions and to do, or cause to be done, all other things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement. In case at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers and directors of the
Company, Parent and the Purchaser shall use all reasonable efforts to take, or
cause to be taken, all such necessary actions.
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Section 6.2 Notification of Certain Matters. The Company
shall give prompt notice to the Purchaser and the Purchaser shall give prompt
notice to the Company, of (i) the occurrence, or non-occurrence of any event
whose occurrence, or non-occurrence would be likely to cause either (x) any
representation or warranty contained in this Agreement of such party to be
untrue or inaccurate in any material respect at any time from the date hereof to
the Effective Time or (y) any condition set forth in Annex I to be unsatisfied
in any material respect at any time from the date hereof to the date the
Purchaser purchases Shares pursuant to the Offer (except to the extent it refers
to a specific date) and (ii) any material failure of the Company, the Purchaser
or Parent, as the case may be, or any officer, director, employee or agent
thereof, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this Section 6.2 shall not limit or otherwise affect
the remedies available hereunder to the party receiving such notice or the
representations or warranties of the parties or the conditions to the
obligations of the parties hereto.
Section 6.3 Access; Confidentiality.
(a) From the date hereof to the Appointment Date, upon
reasonable notice and subject to the terms of the Confidentiality Agreement, the
Company shall (and shall cause each of its Subsidiaries to) afford to the
officers, employees, accountants, counsel, financing sources and other
representatives of Parent, reasonable access, during normal business hours
during the period prior to the Appointment Date, to all its properties, books,
contracts, commitments and records and, during such period, the Company shall
(and shall cause each of its Subsidiaries to), subject to any limitations
imposed by law with respect to records of employees, furnish promptly to Parent
(a) a copy of each report, schedule, registration statement and other document
filed or received by it during such period pursuant to the requirements of
federal securities laws and (b) all other information concerning its business,
properties and personnel as Parent may reasonably request. After the Appointment
Date, the Company shall provide Parent and such persons as Parent shall
designate with all such information as is in Company's possession or control and
as Parent shall reasonably request, at such time as Parent shall reasonably
request.
(b) Unless otherwise required by law or regulation (including
stock exchange rules) and until the Appointment Date, Parent and the Purchaser
will hold any such information which is non-public in confidence in accordance
with the terms of the Confidentiality Agreement (except as may be required by
law or by any listing
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agreement with or by the listing rules of the London Stock Exchange) and, in the
event this Agreement is terminated for any reason, Parent shall promptly return
or destroy such information in accordance with paragraph 10 of the
Confidentiality Agreement. No investigation pursuant to this Section 6.5(a)
shall affect any representation or warranty made by the parties hereunder.
Section 6.4 Consents and Approvals.
(a) Each of Parent, the Purchaser and the Company will use
all commercially reasonable efforts to take all reasonable actions necessary to
comply promptly with all legal requirements which may be imposed on it with
respect to this Agreement and the Transactions (which actions shall include,
without limitation, furnishing all information required under the HSR Act and in
connection with approvals of or filings with any other Governmental Entity) and
will promptly cooperate with and, subject to such confidentiality agreements as
may be reasonably necessary or requested, furnish information to each other or
their counsel in connection with any such requirements imposed upon any of them
or any of their Subsidiaries in connection with this Agreement and the
Transactions.
(b) Each of the Company, the Purchaser and Parent shall use
all commercially reasonable efforts to take all actions necessary to file as
soon as practicable notifications under the HSR Act, or under comparable merger
notification laws under non-U.S. jurisdictions and to respond as promptly as
practicable to any inquiries received from the Federal Trade Commission and the
Antitrust Division of the Department of Justice or the authorities of such other
jurisdictions for additional information or documentation and to respond as
promptly as practicable to all inquiries and requests received from any State
Attorney General or other Governmental Entity in connection with antitrust
matters.
Section 6.5 Publicity. The initial press release with respect
to the execution of this Agreement shall be a joint press release acceptable to
Parent and the Company. Thereafter, so long as this Agreement is in effect,
neither the Company, Parent, the Purchaser nor any of their respective
affiliates shall issue or cause the publication of any press release or other
announcement with respect to the Merger, this Agreement or the other
Transactions without the prior consultation of the other party, except as such
party believes, after receiving the advice of outside counsel, may be required
by law or by any listing agreement with or listing rules of a national
securities exchange or trading market or inter-dealer quotation system or by the
listing
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rules of The London Stock Exchange (the "London Stock Exchange") in which case,
the party proposing to issue such press release or make such public announcement
shall use its best efforts to consult in good faith with the other party before
issuing such press release or making such public announcements.
Section 6.6 Directors' and Officers' Insurance and
Indemnification.
(a) From and after the Effective Time, the Surviving
Corporation (or any successor to or assign of the Surviving Corporation) shall
indemnify, defend and hold harmless the present and former officers and
directors of the Company and its Subsidiaries, and persons who become any of the
foregoing prior to the Effective Time (each an "Indemnified Party") against all
losses, claims, damages, liabilities, costs, fees and expenses (including
reasonable fees and disbursements of counsel and judgments, fines, losses,
claims, liabilities and amounts paid in settlement (provided that any such
settlement is effected with the written consent of the Parent or the Surviving
Corporation which consent shall not unreasonably be withheld)) arising out of
actions or omissions occurring at or prior to the Effective Time to the full
extent permissible under applicable provisions of the VSCA, the terms of the
Company's Articles of Incorporation or the By-laws, and under any agreements as
in effect at the date hereof (true and correct copies of which have been
previously provided to Parent) (including rights to reimbursement or advancement
of expenses and exculpation from liability).
(b) Parent or the Surviving Corporation (or any successor to
or assign of the Surviving Corporation) shall maintain the Company's existing
officers' and directors' liability insurance ("D&O Insurance") for a period of
not less than six years after the Effective Time; provided, that, Parent may
substitute therefor policies of substantially equivalent coverage and amounts
containing terms no less favorable to such former directors or officers;
provided, further, if the existing D&O Insurance expires, is terminated or
cancelled during such period, Parent or the Surviving Corporation will use all
reasonable efforts to obtain substantially similar D&O Insurance of at least the
same coverage containing terms and conditions that are not materially less
advantageous; provided, further, however, that in no event shall Parent be
required to pay aggregate premiums for insurance under this Section 6.6(b) in
excess of 150% of the premiums paid by the Company in 1999 on an annualized
basis for such purpose (the "Average Premium"), which true and correct amounts
are set forth in Section 6.6(b) of the Company Disclosure Schedule; and
provided, further, that if Parent or the Surviving Corporation is unable to
obtain the amount of insurance
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required by this Section 6.6(b) for such aggregate premium, Parent or the
Surviving Corporation shall obtain as much insurance as can be obtained for an
annual premium not in excess of 150% of the Average Premium.
Section 6.7 Purchaser Compliance. Parent shall cause the
Purchaser, or any assignee of the Purchaser pursuant to Section 9.10 hereof, to
comply with all of its obligations under this Agreement.
Section 6.8 Best Reasonable Efforts.
(a) Prior to the Closing, upon the terms and subject to the
conditions of this Agreement, Parent, the Purchaser and the Company, agree to
use their respective best reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things reasonably necessary and
appropriate, under any applicable laws to consummate and make effective the
transactions contemplated by this Agreement as promptly as practicable
including, but not limited to (i) the preparation and filing of all forms,
registrations and notices required to be filed to consummate the transactions
contemplated by this Agreement and the taking of such actions as are necessary
to obtain any requisite approvals, consents, orders, exemptions or waivers by
any third party or Governmental Entity, and (ii) the satisfaction of the other
parties' conditions to Closing. In addition, no party hereto shall take any
action after the date hereof that would reasonably be expected to materially
delay the obtaining of, or result in not obtaining, any permission, approval or
consent from any Governmental Entity necessary to be obtained prior to Closing.
(b) Prior to the Closing, each party shall promptly consult
with the other parties hereto with respect to and subject to such
confidentiality agreements as may be reasonably necessary or requested, provide
any necessary information with respect to and provide the other (or its counsel)
copies of, all filings made by such party with any Governmental Entity or any
other information supplied by such party to a Governmental Entity in connection
with this Agreement and the transactions contemplated by this Agreement. Each
party hereto shall promptly inform the other of any communication from any
Governmental Entity regarding any of the transactions contemplated by this
Agreement unless otherwise prohibited by law. If any party hereto or affiliate
thereof receives a request for additional information or documentary material
from any such Government Entity with respect to the transactions contemplated by
this Agreement, then such party will endeavor in good faith to make, or cause to
be made, as soon as reasonably practicable and after consultation
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with the other party, an appropriate response in compliance with such request.
To the extent that transfers of permits or Environmental Permits are required as
a result of execution of this Agreement or consummation of the transactions
contemplated hereby, the Company shall use its commercially reasonable efforts
to effect such transfers.
(c) Notwithstanding the foregoing, nothing in this Agreement
shall be deemed to require Parent, the Purchaser or the Company to defend
against any litigation brought by any Governmental Entity seeking to prevent the
consummation of the transactions contemplated hereby.
Section 6.9 State Takeover Laws. The Company shall, upon the
request of the Purchaser, take all commercially reasonable steps to assist in
any challenge by the Purchaser to the validity or applicability to the
transactions contemplated by this Agreement, the Option Agreement, and the
Shareholders Agreement including the Offer and the Merger, of any state takeover
law.
Section 6.10 Financing Related Efforts.
(a) Parent shall use all commercially reasonable efforts to
cause the Financing to be consummated and Parent shall provide funds to the
Purchaser to permit it to perform its obligations hereunder and in the Offer.
(b) Parent will provide the Company with true, correct and
complete copies of all amendments and supplements to the Financing Document as
well as true, correct and complete copies of all other commitments and
agreements with respect to the transaction contemplated by this Agreement and
any amendments or supplements thereto from third parties to provide financing to
the Parent or to the Purchaser.
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Each Party's Obligations to Effect
the Merger. The respective obligations of each party to effect the Merger shall
be subject to the satisfaction on or prior to the Closing Date of each of the
following conditions,
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any and all of which may be waived in whole or in part by Parent, the Purchaser
and the Company, as the case may be, to the extent permitted by applicable law:
(a) Shareholder Approval. The Merger and this Agreement
shall have been approved and adopted by the requisite vote of the holders of the
Shares, to the extent required pursuant to the requirements of the Articles of
Incorporation and the VSCA;
(b) Statutes; Court Orders. No statute, rule or regulation
shall have been enacted or promulgated by any United States or United Kingdom
Governmental Entity which prohibits the consummation of the Merger; and there
shall be no order or injunction of a court of competent jurisdiction in effect
preventing consummation of the Merger; provided, that any party asserting this
condition shall first have used its commercially reasonable efforts to obtain
the dismissal of such order; and
(c) Purchase of Shares in Offer. The Purchaser shall have
purchased, or caused to be purchased, the Shares pursuant to the Offer;
provided, that this condition shall be deemed to have been satisfied with
respect to the obligation of Parent and the Purchaser to effect the Merger if
the Purchaser fails to accept for payment or pay for Shares validly tendered
pursuant to the Offer in violation of the terms of the Offer or of this
Agreement; and
(d) HSR Approval. The applicable waiting period under the
HSR Act shall have expired or been terminated.
Section 7.2 Conditions to Obligations of Parent and the
Purchaser to Effect the Merger. The obligations of Parent and Purchaser to
consummate the Merger are further subject to fulfillment of the condition that
all actions contemplated by Section 2.3 hereof shall have been taken, which may
be waived in whole or in part by Parent and the Purchaser.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be terminated
and the transactions contemplated herein may be abandoned at any time before the
Effective
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Time, whether before or after shareholder approval thereof (provided, however,
that if Shares are purchased pursuant to the Offer, Parent may not in any event
terminate this Agreement):
(a) By mutual written consent of Parent and the Company; or
(b) (i) By Parent if the Offer shall have expired without
any Shares being accepted for purchase thereunder by the Purchaser and without
the Purchaser having had an obligation under Section 1.1(a) of this Agreement to
extend the Offer; provided, however, that Parent shall not be entitled to
terminate this Agreement pursuant to this Section 8.1(b) if it or the Purchaser
is in material breach of its representations and warranties, covenants or other
obligations under this Agreement; or (ii) by the Company (A) if the Offer has
not commenced within five business days of the execution of this Agreement or
(B) the Offer shall have expired without any Shares being accepted for purchase
thereunder by the purchaser or (C) if prior to the acceptance for Purchase of
Shares pursuant to the Offer, there has been a material breach by either Parent
or the Purchaser of any representation, warranty, covenant or agreement set
forth herein (and such breach is not reasonably capable of being cured within 30
days of notice thereof); provided, however, that the Company shall not be
entitled to terminate this Agreement pursuant to this Section 8.1(b) if it is in
material breach of its representations and warranties, covenants or other
obligations under this Agreement; or
(c) By either Parent or the Company (i) if a court of
competent jurisdiction or other Governmental Entity shall have issued an order,
decree or ruling or taken any other action, in each case permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement, the Option Agreement or the Shareholders Agreement, (ii) prior
to the acceptance for purchase of Shares pursuant to the Offer, if there has
been a willful breach by the other party of any representation, warranty,
covenant or agreement set forth in this Agreement, which breach shall result in
any condition set forth in Annex I (other than the Minimum Condition) not being
satisfied (and such breach is not reasonably capable of being cured and such
condition satisfied within thirty (30) days after the receipt of notice
thereof), or (iii) if by June 12, 2000 the Purchaser has not purchased any
Shares pursuant to the Offer; provided, however, that the right to terminate
this Agreement pursuant to this clause (iii) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the Purchaser's failure to make such purchases;
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(d) By the Company to allow the Company to enter into an
agreement in accordance with Section 5.3(c) with respect to a Superior Proposal
which the Company Board of Directors has determined is more favorable to the
shareholders of the Company than the transactions contemplated hereby; provided,
however, that it has complied with all provisions thereof, including the notice
provision therein, and that it makes simultaneous payment of the Termination
Fee, plus any amounts then due as a reimbursement of expenses; or
(e) By Parent, at any time prior to the acceptance for
purchase of the Shares pursuant to the Offer, if (i) the Company Board of
Directors, or any committee thereof, shall have withdrawn, modified, or changed
its recommendation in respect of this Agreement or the Offer in a manner adverse
to the Purchaser, (ii) the Company Board of Directors, or any committee thereof,
shall have recommended any proposal other than by Parent or the Purchaser in
respect of an Acquisition Proposal, (iii) the Company shall have exercised a
right with respect to an Acquisition Proposal referenced in Section 5.3(b) and
shall, directly or through its representatives, continue discussions with any
third party concerning an Acquisition Proposal for more than ten business days
after the date of receipt of such Acquisition Proposal, or (iv) an Acquisition
Proposal that is publicly disclosed shall have been commenced, publicly proposed
or communicated to the Company which contains a proposal as to price (without
regard to whether such proposal specifies a specific price or a range of
potential prices) and the Company shall not have rejected such proposal within
ten business days of its receipt or, if sooner, the date its existence first
becomes publicly disclosed.
Section 8.2 Effect of Termination.
(a) In the event of the termination of this Agreement as
provided in Section 8.1 hereof, written notice thereof shall forthwith be given
to the other party or parties specifying the provision hereof pursuant to which
such termination is made, and this Agreement shall forthwith become null and
void and there shall be no liability on the part of Parent, the Purchaser or the
Company, except (i) as set forth in Sections 6.5(b), 8.2 and 9.3 hereof and (ii)
nothing herein shall relieve any party from liability for any breach of this
Agreement.
(b) If (i) Parent shall have terminated this Agreement
pursuant to Section 8.1(e), (ii) (x) Parent shall have terminated this Agreement
pursuant to Section 8.1(c) (ii) and (y) following the date hereof but prior to
such termination there
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shall have been an Acquisition Proposal Interest, or (iii) the Company shall
have terminated this Agreement pursuant to Section 8.1(d), then the Company
shall pay (A) simultaneously with such termination if pursuant to Section
8.1(d), or (B) promptly, but in no event later than two business days after the
date of such termination if pursuant to Section 8.1(c)(ii) or Section 8.1(e), to
Parent a termination fee (the "Termination Fee") of $12,000,000 plus an amount,
not in excess of $1,500,000, equal to the Purchaser's reasonable actual and
documented out-of-pocket expenses incurred by Parent and the Purchaser in
connection with the Offer, the Merger, this Agreement and the consummation of
the transactions contemplated hereby, which amount shall be payable by wire
transfer to such account as Parent may designate in writing to the Company.
(c) If this Agreement is terminated, and at any time on or
prior to June 12, 2000 all of the conditions set forth on Annex I have been
fulfilled except (i) the condition set forth in paragraph (i) of Annex I and
(ii) any other conditions that are not fulfilled as a result, directly or
indirectly, of a breach by Parent or the Purchaser of any representation,
warranty, covenant or agreement set forth in this Agreement, then promptly, but
in no event later than two business days after the date of such termination,
Parent shall pay to the Company a termination fee of $12,000,000 plus an amount,
not in excess of $1,500,000, equal to the Company's reasonable actual and
documented out-of-pocket expenses incurred by the Company in connection with the
Offer, the Merger, this Agreement and the consummation of the transactions
contemplated hereby, which amount shall be payable by wire transfer to such
account as the Company may designate in writing to Parent. The Company shall not
withhold any United States withholding taxes on any payment under this Section
8.2.
Section 8.3 Indemnity.
(a) Subject to the provisions of this Section 8.3, Parent
hereby agrees to indemnify the Company with respect to any liability for United
States federal withholding taxes (including any interest, additions to tax, or
penalties related thereto) with respect to the payment by the Company to Parent
of the Termination Fee described in Section 8.2 of this Agreement and with
respect to any payment under Section 1.5 of the Option Agreement ("Possible
Withholding Taxes").
(b) If the Company is notified, in writing, as part of an
audit or other administrative proceeding related to taxes (a "Contest"), that
the Internal
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Revenue Service is asserting a claim for Possible Withholding Taxes, then (i)
the Company shall promptly notify Parent of such claim in writing, (ii) the
Company shall permit Parent, at Parent's own cost and expense, to control that
portion of the Contest related to Possible Withholding Taxes, including the
execution of any powers-of-attorney or similar documents necessary for Parent to
control such portion of the Contest; provided that in executing such
powers-of-attorney or similar documents, the Company and Parent agree that such
powers shall be limited to such portion of the Contest, and (iii) the Company
shall not settle or otherwise compromise such portion of the Contest related to
Possible Withholding Taxes without the prior written consent of Parent which
consent shall not be unreasonably withheld. If Parent does not assume control
under Section 8.3(b)(ii) above, then Parent shall reimburse the Company promptly
upon demand for reasonable out-of-pocket expenses incurred in connection with
that portion of a Contest related to Possible Withholding Taxes. Parent must
inform the Company of all terms of any proposed settlement prior to settling
that portion of the Contest related to Possible Withholding Taxes and, if the
Company objects to Parent entering into such settlement, Parent shall pay to the
Company the amount that would be payable by Parent under Section 8.3(a) if such
settlement were entered into and upon payment of such amount, any liability of
Parent under this Section 8.3 shall terminate. Parent shall keep the Company
informed of material developments in that portion of the Contest that is
controlled by Parent. Further, without the prior written consent of Parent, the
Company shall not take any position on any tax return or similar filing that
Possible Withholding Taxes may be due and owing, unless such position is
required by law pursuant to a final determination. Neither the Company nor its
officers, employees, representatives, or affiliates shall take any action that
prejudices the defense by Parent of any claim subject to indemnification
hereunder. Parent and the Company shall (i) provide, or cause to be provided, to
each other, the assistance of officers, employees, representatives and
affiliates, or such assistance as may reasonably be requested by any of them in
connection with the portion of the Contest related to Possible Withholding Taxes
and (ii) retain, or cause to be retained, for so long as the taxable year in
which a payment was made by the Company to Parent shall remain open for
adjustments, any records or information which may be relevant to any Tax Returns
or Audits for such taxable year related to Possible Withholding Taxes. If the
Company fails to comply with any of the provisions set forth in this Section
8.3(b), Parent shall be relieved of any obligation under Section 8.3(a) to the
extent of any actual prejudice suffered by Parent as a result of such failure.
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(c) In connection with the payment of a Termination Fee under
Section 8.2(b) or a payment under Section 1.5 of the Option Agreement, Parent
shall provide a Form 1001 or similar form on a protective basis certifying that
if the payment of a Termination Fee under Section 8.2(b) or a payment under
Section 1.5 of the Option Agreement were deemed to be United States source
income, such payments would be exempt from withholding tax under the United
Kingdom-U.S. Income Tax Treaty as in effect as of the date any such payment is
made.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Amendment and Modification. Subject to applicable
law and as otherwise provided in the Agreement, this Agreement may be amended,
modified and supplemented in any and all respects, whether before or after any
vote of the shareholders of the Company contemplated hereby, by written
agreement of the parties hereto, by action taken by their respective Boards of
Directors or equivalent governing bodies, but, after the purchase of Shares
pursuant to the Offer, no amendment shall be made which decreases the Merger
Consideration and, after the approval of this Agreement by the shareholders, no
amendment shall be made which by law requires further approval by such
shareholders without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
Section 9.2 Non-survival of Representations and Warranties.
None of the representations and warranties in this Agreement or in any schedule,
instrument or other document delivered pursuant to this Agreement shall survive
the Effective Time or termination of this Agreement. This Section 9.2 shall not
limit any covenant or agreement of the parties hereto that by its terms requires
performance after the Effective Time.
Section 9.3 Expenses. Except as expressly set forth in
Section 8.2(b), all fees, costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such fees, costs and expenses, whether or not the Merger is
consummated, except any transfer, stamp or similar taxes shall be borne by
Parent.
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Section 9.4 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by a nationally recognized overnight
courier service, such as Federal Express or United Parcel Service (providing
proof of delivery), to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent or the Purchaser, to:
The Sage Group plc
Sage House
Benton Park Road
Newcastle upon Tyne, NE7 7LZ
Attention: Paul Walker
Telephone No.: (191) 255-3003
Telecopy No.: (191) 255-0306
with a copy to:
Bobcat Acquisition Corp.
Sage House
Benton Park Road
Newcastle upon Tyne, NE7 7LZ
Attention: Paul Walker
Telephone No.: (191) 255-3003
Telecopy No.: (191) 255-0306
and
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, D.C. 20005-2111
Attention: Ronald C. Barusch, Esq.
Telephone: (202) 371-7000
Facsimile: (202) 393-5760
and
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(b) if to the Company, to:
Best Software, Inc.
11413 Isaac Newton Square
Reston, Virginia 20190
Attention: Timothy Davenport
Telephone No.: (703) 709-5200
Telecopy No.:
with a copy to:
Hale and Dorr LLP
1455 Pennsylvania Avenue, N.W.
Washington, DC 20004
Attention: David Sylvester
Telephone No.: (202) 942-8400
Telecopy No.: (202) 942-8484
and a copy to:
Hunton & Williams
951 East Byrd Street
Richmond, Virginia 23219-4074
Attention: T. Justin Moore, III
Telephone No.: (804) 788-8200
Telecopy No.: (804) 788-8218
Section 9.5 Interpretation.
(a) When a reference is made in this Agreement to Sections,
such reference shall be to a Section of this Agreement unless otherwise
indicated. Whenever the words "include", "includes" or "including" are used in
this Agreement they shall be deemed to be followed by the words "without
limitation." As used in this Agreement, the term "affiliates" shall have the
meaning set forth in Rule 12b-2 of the Exchange Act. As used in this Agreement,
the term "Person" shall mean a natural person, partnership, corporation, limited
liability company, business trust, joint stock
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company, trust, unincorporated association, joint venture, Governmental Entity
or other entity or organization.
(b) In the event the Offer is commenced on or after January
24, 2000, all references in this Agreement to "Schedule 14D-1 or "Schedule
14D-9" shall be deemed to refer to the successor forms of such schedules as
provided in new rules, and amendments to existing rules, promulgated under the
Exchange Act which become effective on January 24, 2000 (the "Reg M-A
Amendments"). In addition, all references to the "Exchange Act" shall include
all the Reg M-A Amendments from and after such date. The parties agree that
their obligations under this Agreement and the Option Agreement shall in no way
be effected by the effectiveness of the Reg M-A Amendments and shall use
commercially reasonable efforts to cause their obligations to be fulfilled in
accordance with the Reg M-A Amendments.
Section 9.6 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties.
Section 9.7 Entire Agreement; No Third Party Beneficiaries.
This Agreement and the Confidentiality Agreement:
(a) constitute the entire agreement among the parties with
respect to the subject matter hereof and thereof and supersedes all other prior
agreements and understandings, both written and oral, among the parties or any
of them with respect to the subject matter hereof and thereof (provided that the
provisions of this Agreement shall supersede any conflicting provisions of the
Confidentiality Agreement), and
(b) except as provided in Sections 2.3 and 6.8 is not intended
to confer upon any person other than the parties hereto any rights or remedies
hereunder.
Section 9.8 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or
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incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the extent possible.
Section 9.9 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the Commonwealth of Virginia
without giving effect to the principles of conflicts of law thereof, provided,
however, that the laws of the respective jurisdictions of incorporation of each
of the parties shall govern the relative rights, obligations, powers, duties and
other internal affairs of such party and its board of directors.
Section 9.10 Assignment. This Agreement shall not be assigned
by any of the parties hereto (whether by operation of law or otherwise) without
the prior written consent of the other parties, except that the Purchaser may
assign, in its sole discretion and without the consent of any other party, any
or all of its rights, interests and obligations hereunder to (i) Parent, (ii) to
Parent and one or more direct or indirect wholly owned Subsidiaries of Parent,
or (iii) to one or more direct or indirect wholly owned Subsidiaries of Parent
(each, an "Assignee"). Any such Assignee may thereafter assign, in its sole
discretion and without the consent of any other party, any or all of its rights,
interests and obligations hereunder to one or more additional Assignees. Subject
to the preceding sentence, but without relieving any party hereto of any
obligation hereunder, this Agreement will be binding upon, inure to the benefit
of and be enforceable by the parties and their respective successors and
assigns.
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IN WITNESS WHEREOF, Parent, the Purchaser and the Company have
caused this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
THE SAGE GROUP PLC
By: /s/ Paul Walker
-------------------------------------
Name: Paul Walker
Title: Chief Executive Officer
BOBCAT ACQUISITION CORP.
By: /s/ Paul Walker
-------------------------------------
Name: Paul Walker
Title: President
BEST SOFTWARE, INC.
By: /s/ Timothy A. Davenport
-------------------------------------
Name: Timothy A. Davenport
Title: President and Chief Executive
Officer
<PAGE> 70
ANNEX I
Notwithstanding any other provisions of the Offer, and in
addition to (and not in limitation of) the Purchaser's rights to extend and
amend the Offer at any time in its sole discretion (subject to the provisions of
the Merger Agreement), the Purchaser shall not be required to accept for payment
or, subject to any applicable rules and regulations of the SEC, including Rule
14e-l(c) under the Exchange Act (relating to the Purchaser's obligation to pay
for or return tendered Shares promptly after termination or withdrawal of the
Offer), pay for, and may delay the acceptance for payment of or, subject to the
restriction referred to above, the payment for, any validly tendered Shares
unless there are validly tendered and not withdrawn prior to the expiration date
for the Offer that number of Shares which, when added to the Shares owned by the
Purchaser or Parent, if any, will represent at least a majority of the
outstanding Shares on a fully diluted basis (without giving pro forma effect to
the potential issuance of any Shares issuable under the Option Agreement) on the
date of purchase (the "Minimum Condition"). Furthermore, notwithstanding any
other provisions of the Offer, the Purchaser shall not be required to accept for
payment or pay for any validly tendered Shares if, at the scheduled expiration
date, (i) any applicable waiting period under the HSR Act has not expired or
terminated prior to termination of the Offer, or (ii) any of the following
events shall occur, or shall be deemed to have occurred, and be continuing:
(a) there shall be threatened in writing or pending any suit,
action or proceeding by any United States or United Kingdom Governmental Entity
against the Purchaser, Parent, the Company or any Subsidiary of the Company (i)
seeking to prohibit or impose any material limitations on Parent's or the
Purchaser's ownership or operation (or that of any of their respective
Subsidiaries or affiliates) of all or a material portion of their or the
Company's and its Subsidiaries' businesses or assets, taken as a whole, or to
compel Parent or the Purchaser or their respective Subsidiaries and affiliates
to dispose of or hold separate any material portion of the business or assets of
the Company or Parent and their respective Subsidiaries, in each case taken as a
whole, (ii) challenging the acquisition by Parent or the Purchaser of any Shares
under the Offer, seeking to restrain or prohibit the making or consummation of
the Offer or the Merger or the performance of any of the other transactions
contemplated by the Merger Agreement, or seeking to obtain from the Company,
Parent or the Purchaser any damages that are material in relation to the Company
and its Subsidiaries taken as a whole, (iii) seeking to impose material
limitations on the ability of
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the Purchaser, or render the Purchaser unable, to accept for payment, pay for or
purchase some or all of the Shares pursuant to the Offer and the Merger, or (iv)
seeking to impose material limitations on the ability of Purchaser or Parent
effectively to exercise full rights of ownership of the Shares, including,
without limitation, the right to vote the Shares purchased by it on all matters
properly presented to the Company's shareholders;
(b) there shall be any statute, rule, regulation, judgment,
order or injunction enacted, entered, enforced, promulgated, or deemed
applicable, pursuant to an authoritative interpretation by or on behalf of a
Government Entity, to the Offer or the Merger, or any other action shall be
taken by any Governmental Entity, other than the application to the Offer or the
Merger of applicable waiting periods under HSR Act, that is reasonably likely to
result, directly or indirectly, in any of the consequences referred to in
clauses (i) through (iv) of paragraph (a) above;
(c) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on the London Stock
Exchange, the New York Stock Exchange, the American Stock Exchange or the NASDAQ
Stock Market for a period in excess of 24 hours (excluding suspensions or
limitations resulting solely from physical damage or interference with such
exchanges not related to market conditions), (ii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States or the United Kingdom (whether or not mandatory), (iii) a commencement of
a war, armed hostilities or other international or national calamity directly or
indirectly involving the United States or the United Kingdom that constitutes a
Company Material Adverse Effect or materially adversely affects or delays the
consummation of the Offer, (iv) any limitation (whether or not mandatory) by any
United States or United Kingdom Governmental Entity on the extension of credit
generally by banks or other financial institutions, or (v) a change in general
financial, bank or capital market conditions which materially and adversely
affects the ability of financial institutions in the United States to extend
credit or syndicate loans;
(d) the representations and warranties of the Company set
forth in the Merger Agreement that are qualified by reference to a Company
Material Adverse Effect were not true and correct in any respect, or any other
such representations or warranties were not true and correct in any respect that
(when taken together with all such other representations and warranties not true
and correct) would reasonably be expected to have a Company Material Adverse
Effect (i) in the case of
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any representation or warranty which addresses matters as of a particular date,
as of such date, or (ii) in the case of all other representations and
warranties, as of the date of this Agreement and as of the scheduled expiration
of the Offer;
(e) since the date of this Agreement, there shall have
occurred any change (or any development that is reasonably likely to result in
any change) that constitutes a Company Material Adverse Change;
(f) (i) the Company Board of Directors of the Company or any
committee thereof shall have withdrawn or modified in a manner adverse to Parent
or the Purchaser or its approval or recommendation of the Offer, the Merger or
this Agreement, or approved or recommended any Acquisition Proposal or (ii) the
Company shall have entered into any agreement with respect to any Superior
Proposal in accordance with Section 5.3(b) of this Agreement;
(g) the Company shall have failed, in any material respect, to
perform or to comply with any agreement or covenant to be performed or complied
with by it under this Agreement;
(h) all consents, permits and approvals of Governmental
Entities shall not have been obtained;
(i) The London Stock Exchange shall have failed to admit to
the Official List of the London Stock Exchange the shares of capital stock of
Parent to be issued in connection with the equity financing contemplated in
connection with Transactions or such admission shall have not become effective
in accordance with paragraph 7.1 of the listing rules of the London Stock
Exchange, provided that Purchaser shall not be entitled to rely on this
condition if the Financing is not consummated for any reason other than the
failure to have Parent's shares of capital stock admitted for listing as
provided in this clause (i);
(j) the Merger Agreement shall have been terminated in
accordance with its terms; and
(k) the Company shall have provided Parent with the audited
consolidated financial statements of the Company for the year ended December 31,
1999 which will not be inconsistent with the December 1999 Financial Statements
in any respect which is materially adverse.
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The foregoing conditions are for the sole benefit of Parent
and the Purchaser, may be asserted by Parent or the Purchaser regardless of the
circumstances giving rise to such condition and may be waived by Parent or the
Purchaser in whole or in part at any time and from time to time in the sole
discretion of Parent or the Purchaser, subject in each case to the terms of this
Agreement. The failure by Parent or the Purchaser 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.
The capitalized terms used in this Annex I shall have the
meanings set forth in the Agreement to which it is annexed, except that the term
"Merger Agreement" shall be deemed to refer to the Agreement to which this Annex
I is appended.
<PAGE> 74
EXHIBIT I
PLAN OF MERGER
OF
BOBCAT ACQUISITION CORP.
INTO
BEST SOFTWARE, INC.
Section 1. Merger. Pursuant to the Agreement and Plan of Merger (the
"Merger Agreement"), dated January 12, 2000, by and among The Sage Group plc, a
company organized under the laws of England ("Parent"), Bobcat Acquisition
Corp., a Virginia corporation and a wholly owned subsidiary of Parent (the
"Purchaser"), and Best Software, Inc., a Virginia corporation (the "Company"),
Purchaser shall, upon the time that Articles of Merger are made effective by the
State Corporation Commission of Virginia (the "Effective Time"), be merged (the
"Merger") into the Company, which shall be the "Surviving Corporation".
Section 2. Conversion of Shares. At the Effective Time, by virtue of
the Merger and without any action on the part of the holders of any issued and
outstanding shares ("Shares") of common stock, no par value per share (the
"Common Stock"), of the Company or holders of common stock, par value $.01 per
share, of the Purchaser (the "Purchaser Common Stock"):
(a) Each issued and outstanding share of Purchaser Common
Stock shall be converted into and become one validly issued, fully paid
and nonassessable share of common stock of the Surviving Corporation.
(b) All Shares owned by Parent, the Purchaser or any other
wholly owned Subsidiary (as defined below) of Parent shall be cancelled
and retired, and shall cease to exist and no consideration shall be
delivered in exchange therefor and Dissenting Shares (as defined in
Section 5 hereof), if any, shall be treated in accordance with Article
15 of the Virginia Stock Corporation Act (the "VSCA"). As used in this
Plan of Merger, the term "Subsidiary" shall mean, with respect to any
party, any corporation, limited liability
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<PAGE> 75
company or other organization, whether incorporated or unincorporated
or domestic or foreign to the United States of which (i) such party or
any other Subsidiary of such party is a general partner (excluding
such partnerships where such party or any Subsidiary of such party
does not have a majority of the voting interest in such partnership)
or (ii) at least a majority of the securities or other interests
having by their terms ordinary voting power to elect a majority of the
board of directors or others performing similar functions with respect
to such corporation, limited liability company or other organization
is directly or indirectly owned or controlled by such party or by any
one or more of its Subsidiaries, or by such party and one or more of
its Subsidiaries.
(c) Each issued and outstanding Share immediately before the
Effective Time (other than any Shares to be cancelled pursuant to
Section 2(b) hereof) and any Dissenting Shares (as defined in Section 5
hereof) shall be cancelled and extinguished and be converted into the
right to receive $35.00 per share, net to the seller in cash (such
price, or any such higher price per Share as may be paid to any holder
of Shares in connection with the cash tender offer (the "Offer") by the
Purchaser to acquire all Shares of the Company, being referred to
herein as the "Offer Price"), payable to the holder thereof, without
interest (the "Merger Consideration"), upon surrender of the
certificate formerly representing such Share in the manner provided in
Section 3 hereof. All such Shares, when so converted, shall no longer
be outstanding and shall automatically be cancelled and retired and
shall cease to exist, and each holder of a certificate representing any
such Shares shall cease to have any rights with respect thereto, except
the right to receive the Merger Consideration therefor upon the
surrender of such certificate in accordance with Section 3 hereof,
without interest.
Section 3. Conversion of Rights. At the Effective Time, each option to
purchase Shares issued under the Company's employee and director stock option
plans outstanding immediately prior to the Effective Time shall be assumed by
Parent and shall thereupon constitute an option to acquire that number of Parent
Common Shares (as defined below) equal to (i) the number of Shares subject to
the such option immediately prior to the Effective Time, multiplied by (ii) the
Exchange Ratio, rounded down to the nearest whole share, at a price per Parent
Common Share equal to (x) the exercise price of such option immediately prior to
the Effective Time divided by (y) the Exchange Ratio, rounded up to the nearest
whole cent.
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<PAGE> 76
For purposes of this Plan of Merger "Exchange Ratio" shall mean the quotient of
(x) the Offer Price multiplied by the average of the mid-point of the bid and
ask price of the rate of currency exchange of pounds sterling for U.S. dollars
quoted in The Financial Times for each of the business days in a consecutive
twenty (20) business day period ending two (2) business days prior to the
Effective Date and (y) the average per Share closing price of the ordinary
shares of 1 pence each in the capital of Parent (a "Parent Common Share") as
reported on the London Stock Exchange on each of the ten (10) trading days
immediately preceding the Effective Time.
Section 4. Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, Shares that are issued and outstanding immediately
prior to the Effective Time of the Merger and that are held by a shareholder
(other than Parent or Purchaser and their subsidiaries, which waive the right to
dissent) who has the right (to the extent such right is available by law) to
demand and receive payment of the fair value of his Shares of Company Common
Stock pursuant to Section 13.1-730 of the VSCA (the "Dissenting Shares") shall
not be converted into or be exchangeable for the right to receive the
consideration provided in Section 2 hereof, unless and until such holder shall
fail to perfect his or her right to dissent or shall have effectively withdrawn
or lost such right under the VSCA, as the case may be. If such holder shall have
so failed to perfect his right to dissent or shall have effectively withdrawn or
lost such right, each of his Shares of Company Common Stock shall thereupon be
deemed to have been converted into, at the Effective Time of the Merger, the
right to receive the Offer Price as provided in Section 2 hereof.
Section 5. Articles of Incorporation. The Articles of Incorporation of
the Company as in effect immediately prior to the Effective Time shall be
amended and restated at the Effective Time in their entirety as the Articles of
Incorporation of the Surviving Corporation to read as set forth on Annex A
hereto.
SECTION 6. Amendment. Pursuant to Section 13.1-718(I) of the VSCA, the
Board of Directors of each of Parent, Purchaser and Company (with the consent of
each of the other parties) reserves the right to amend this Plan of Merger at
any time prior to issuance of the certificate of merger by the State Corporation
Commission of Virginia; provided, however, that any such amendment made
subsequent to
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<PAGE> 77
the submission of this Plan of Merger to the shareholders of Purchaser
or to the shareholders of the Company, to the extent that this Plan of
Merger is required to be submitted to the shareholders of the Company,
may only be made to the extent permitted by Section 13.1-718(I) of the
VSCA.
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<PAGE> 78
ANNEX A
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
BEST SOFTWARE, INC.
Best Software, Inc., a Virginia corporation, does hereby set forth the
following:
1. Name.
The name of the corporation is Best Software, Inc.
(hereinafter, the "Corporation").
2. Duration.
The Corporation shall have perpetual duration.
3. Purpose.
The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the Virginia Stock
Corporation Act, as amended from time to time.
4. Authorized Capital.
The Corporation shall have two classes of common stock
consisting of Class A Common Stock and Class B Common Stock. The aggregate
number of shares of each class of Common Stock that the Corporation shall have
authority to issue and the par value per share of each class of Common Stock are
as follows:
<TABLE>
<CAPTION>
Class Number of Shares Par Value Per Share
----- ---------------- -------------------
<S> <C> <C>
Class A Common Stock 1000 $0.01
Class B Common Stock 1000 $0.01
</TABLE>
I-5
<PAGE> 79
5. Registered Office and Registered Agent.
The address of the initial registered office of the
Corporation is 5511 Staples Mill Road, Richmond, VA 23228, which is in the
County of Henrico. The Corporation's initial registered agent is Edward R.
Parker, who is a resident of the Commonwealth of Virginia and a member of the
Virginia State Bar, and whose business office is identical with the registered
office.
6. Preemptive Rights.
No holder of shares of any class of the Corporation's capital
stock shall have any preemptive or preferential right to purchase or subscribe
to any shares of any class of the Corporation's capital stock, whether now or
hereafter authorized.
I-6
<PAGE> 1
EXHIBIT (c)(2)
SHAREHOLDERS AGREEMENT
SHAREHOLDERS AGREEMENT (this "Agreement"), dated January 12, 2000, by and
among The Sage Group plc, a company organized under the laws of England
("Parent"), Bobcat Acquisition Corp., a Virginia corporation and a wholly owned
subsidiary of Parent (the "Purchaser"), the shareholders of the Company (as
defined below) set forth on Schedule 1 hereto (each a "Shareholder" and,
collectively the "Shareholders").
WHEREAS, each Shareholder is, as of the date hereof, the record and
beneficial owner of the number of shares of common stock, no par value (the
"Common Stock"), of Best Software, Inc., a Virginia corporation (the "Company")
set forth opposite the name of such Shareholder on Schedule 1 hereto;
WHEREAS, Parent, the Purchaser and the Company concurrently herewith are
entering into an Agreement and Plan of Merger, dated as of the date hereof (the
"Merger Agreement"), which provides, among other things, for the acquisition of
the Company by Parent by means of a cash tender offer by the Purchaser (the
"Offer") for all of the outstanding shares of Common Stock and for the
subsequent merger (the "Merger") of the Purchaser with and into the Company upon
the terms and subject to the conditions set forth in the Merger Agreement; and
WHEREAS, as a condition to the willingness of Parent and the Purchaser to
enter into the Merger Agreement, and in order to induce Parent and the Purchaser
to enter into the Merger Agreement, the Shareholders have agreed to enter into
this Agreement.
NOW, THEREFORE, in consideration of the execution and delivery by Parent
and the Purchaser of the Merger Agreement and the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein and
therein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Representations and Warranties of the Shareholders. Each of
the Shareholders hereby represents and warrants to Parent and the Purchaser,
severally and not jointly, as follows:
<PAGE> 2
(a) Such Shareholder is the record and beneficial owner of the
shares of Common Stock (as may be adjusted from time to time pursuant to Section
6 hereof, the "Shares") set forth opposite his name on Schedule 1 to this
Agreement. For purposes of this Agreement, the term "Shares" does not include
any option exercisable into Common Stock until such option is exercised.
Schedule 1 lists all options issued to the Shareholders.
(b) Such Shareholder has the legal capacity to execute and deliver
this Agreement and to consummate the transactions contemplated hereby.
(c) This Agreement has been validly executed and delivered by such
Shareholder and constitutes the legal, valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance with its terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally, and (ii) the availability of the remedy of specific
performance or injunctive or other forms of equitable relief may be subject to
equitable defenses and would be subject to the discretion of the court before
which any proceeding therefor may be brought.
(d) Neither the execution and delivery of this Agreement nor the
consummation by such Shareholder of the transactions contemplated hereby will
violate any other agreement to which such Shareholder is a party.
(e) The Shares and the certificates representing the Shares owned
by such Shareholder are now and at all times during the term hereof will be held
by such Shareholder, or by a nominee or custodian for the benefit of such
Shareholder, free and clear of all liens, claims, security interests, proxies,
voting trusts or agreements, understandings or arrangements or any other
encumbrances whatsoever, except for any such encumbrances or proxies arising
hereunder.
SECTION 2. Representations and Warranties of Parent and the Purchaser.
Each of Parent and the Purchaser hereby, jointly and severally, represents and
warrants to the Shareholders as follows:
(a) Parent is a corporation duly organized and validly existing
under the laws of England, the Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Virginia, and each of Parent and the Purchaser has all requisite corporate power
and authority to
2
<PAGE> 3
execute and deliver this Agreement and to consummate the transactions
contemplated hereby, and has taken all necessary corporate action to authorize
the execution, delivery and performance of this Agreement.
(b) This Agreement has been duly authorized, executed and
delivered by each of Parent and the Purchaser and constitutes the legal, valid
and binding obligation of each of Parent and the Purchaser, enforceable against
each of them in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally and (ii) the
availability of the remedy of specific performance or injunctive or other forms
of equitable relief may be subject to equitable defenses and would be subject to
the discretion of the court before which any proceeding therefor may be brought.
(c) Neither the execution and delivery of this Agreement nor
the consummation by each of Parent and the Purchaser of the transactions
contemplated hereby will result in a violation of, or a default under, or
conflict with, any contract, trust, commitment, agreement, understanding,
arrangement or restriction of any kind to which each of Parent and the Purchaser
is a party or bound. The consummation by each of Parent and the Purchaser of the
transactions contemplated hereby will not violate, or require any consent,
approval, or notice under, any provision of any judgment, order, decree,
statute, law, rule or regulation applicable to either Parent or the Purchaser,
except for any necessary filing under the HSR Act or state takeover laws.
SECTION 3. Tender of the Shares. Each of the Shareholders, hereby agrees
that it shall tender the Shares into the Offer promptly, and in any event no
later than the fifth business day following the commencement of the Offer
pursuant to Section 1.1 of the Merger Agreement, and that such Shareholder shall
not withdraw any Shares so tendered unless the Offer is terminated or has
expired without Purchaser purchasing all shares validly tendered in the Offer or
the Merger Agreement shall have been terminated by Parent in accordance with its
terms. The Purchaser hereby agrees to purchase all the Shares so validly
tendered at a price per Share equal to $35.00 or any higher price that may be
paid in the Offer; provided, however, that the Purchaser's obligation to accept
for payment and pay for the Shares in the Offer is subject to all the terms and
conditions of the Offer.
SECTION 4. Transfer of the Shares. Prior to the termination of this
Agreement, except as otherwise provided herein, none of the Shareholders shall:
(i)
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<PAGE> 4
transfer (which term shall include, without limitation, for the purposes of this
Agreement, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of the Shares; (ii) enter into any contract, option or
other agreement or understanding with respect to any transfer of any or all of
the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or
other authorization or consent in or with respect to the Shares; (iv) deposit
the Shares into a voting trust or enter into a voting agreement or arrangement
with respect to the Shares or (v) take any other action that would in any way
restrict, limit or interfere with the performance of such Shareholder's
obligations hereunder or the transactions contemplated hereby.
SECTION 5. Grant of Irrevocable Proxy; Appointment of Proxy.
(a) Each of the Shareholders hereby irrevocably grants to, and
appoints, Parent and any nominee thereof, its proxy and attorney-in-fact (with
full power of substitution), for and in the name, place and stead of such
Shareholder, to vote the Shares, or grant a consent or approval in respect of
the Shares, in connection with any meeting of the shareholders of the Company
(i) in favor of the Merger, and (ii) against any action or agreement which would
impede, interfere with or prevent the Merger, including any other extraordinary
corporate transaction, such as a merger, reorganization or liquidation involving
the Company and a third party or any other proposal of a third party to acquire
the Company.
(b) Such Shareholder represents that any proxies heretofore
given in respect of the Shares, if any, are not irrevocable, and that such
proxies are hereby revoked.
(c) Such Shareholder hereby affirms that the irrevocable proxy
set forth in this Section 5 is given in connection with the execution of the
Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of such Shareholder under this Agreement. Such
Shareholder hereby further affirms that the irrevocable proxy is coupled with an
interest and, except as set forth in Section 10 hereof, is intended to be
irrevocable in accordance with the provisions of Section 13.1-663 of the
Virginia Stock Corporation Act. If for any reason the proxy granted herein is
not irrevocable, the Shareholders agree to vote their Shares as instructed by
Parent in writing. The parties agree that the foregoing is a voting agreement
created under Section 13.1-671 of the Virginia Stock Corporation Act.
4
<PAGE> 5
SECTION 6. Certain Events. In the event of any stock split, stock
dividend, merger, reorganization, recapitalization or other change in the
capital structure of the Company affecting the Common Stock or the acquisition
of additional shares of Common Stock or other securities or rights of the
Company by any Shareholder, the number of Shares owned by such Shareholder shall
be adjusted appropriately, and this Agreement and the obligations hereunder
shall attach to any additional shares of Common Stock or other securities or
rights of the Company issued to or acquired by each of the Shareholders.
SECTION 7. Option.
(a) Grant of Option. Subject to the terms and conditions set
forth herein, each Shareholder hereby grants to Parent an irrevocable and
continuing option (the "Option") to purchase for cash all or any portion of the
Company Common Stock (including, without limitation, the Shares) beneficially
owned or controlled by such Shareholder as of the date hereof, or beneficially
owned or controlled by such Shareholder at any time hereafter (including,
without limitation, by way of exercise of options, warrants or other rights to
purchase Company Common Stock or by way of dividend, distribution, exchange,
merger, consolidation, recapitalization, reorganization, stock split, grant of
proxy or otherwise) by such Shareholder (as adjusted as set forth herein) (the
"Option Shares") at a purchase price of $35.00 per Option Share, or any higher
price that may be paid in the Offer (the "Purchase Price"), which Option shall
become exercisable only (i) in the event such Shareholder fails to tender any of
such Shareholder's Shares in the Offer by the end of the fifth business day
following the commencement of the Offer, or (ii) withdraws any Shares from the
Offer for any reason whatsoever, other than (a) the termination or the
expiration of the Offer by the Purchaser without the Purchaser having accepted
for purchase any Shares in the Offer or (b) the termination of the Merger
Agreement in accordance with its terms.
(b) Parent's Exercise of Option.
(i) Parent may exercise the Option, in whole or from
time to time in part, by notice given to any Shareholder at any time
prior to the termination of this Agreement.
(ii) In the event Parent wishes to exercise the Option,
it shall send to any such Shareholder a written notice (a "Notice," the
date of which is hereinafter referred to as the "Notice
5
<PAGE> 6
Date") specifying (x) the total number of Option Shares it intends to
purchase from such Shareholder pursuant to such exercise and (y) a place
and date at least ten business days following the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"); provided,
however, that Parent may at any time before the Closing withdraw the
Notice and decline to exercise the Option without prejudice to its right
to exercise the Option at any time thereafter during the term of the
Agreement. Parent shall not be under any obligation to exercise the
Option and may allow the Option to terminate without purchasing any
Company Common Stock hereunder from any Shareholder.
(c) Payment and Delivery of Certificates.
(i) On each Closing Date, Parent shall pay to any
Shareholder to whom a Notice has been delivered and not withdrawn
pursuant to Section 7(c)(ii) hereof, in immediately available funds by
wire transfer to a bank account designated by such Shareholder, an amount
equal to the Purchase Price multiplied by the number of Option Shares to
be purchased from such Shareholder on such Closing Date.
(ii) At each Closing, simultaneously with the delivery of
the Purchase Price for the Option Shares to be purchased at such Closing,
such Shareholder shall deliver to Parent a certificate or certificates
representing the Option Shares to be purchased at such Closing, which
Option Shares shall be free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever. If at any time during the term of
this Agreement the Company has issued rights pursuant to a rights
agreement, then each Option Share shall also be deemed to include and
represent such rights as are provided under such rights agreement then in
effect.
(d) Adjustment Upon Changes in Capitalization, etc.
(i) In the event of any change in the Company Common
Stock by reason of a stock dividend, stock split, split-up,
recapitalization, combination, exchange of shares or similar transaction,
the type and number of shares or securities subject to
6
<PAGE> 7
Option hereunder, and the Purchase Price therefor, shall be adjusted
appropriately.
(ii) In the event that the Company shall (x) enter into
an agreement to consolidate with or merge into any person, other than
Parent or one of its subsidiaries, and shall not be the continuing or
surviving corporation of such consolidation or merger, or (y) enter into
an agreement to permit any person, other than Parent or one of its
subsidiaries, to merge into the Company and the Company shall be the
continuing or surviving corporation, but, in connection with such merger,
the then outstanding the Company Common Stock shall be changed into or
exchanged for stock or other securities of the Company or any other
person or cash or any other property or (z) liquidate, then, and in each
such case, Parent shall thereafter be entitled to receive upon exercise
of the Option the Securities or properties to which a holder of the
number of Option Shares then deliverable upon the exercise thereof will
have been entitled to receive upon such consolidation, merger or
liquidation, and such Shareholder shall use its best efforts to assure
that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be practicable, in relation to any securities or property
thereafter deliverable upon exercise of the Option.
SECTION 8. Certain Other Agreements. Each of the Shareholders will
notify Parent and the Purchaser immediately if any proposals are received by,
any information is requested from, or any negotiations or discussions are sought
to be initiated or continued with such Shareholder or its officers, directors,
employees, investment bankers, attorneys, accountants or other agents, if any,
in each case in connection with any Acquisition Proposal or Acquisition Proposal
Interest (as such terms are defined in the Merger Agreement) indicating, in
connection with such notice, the name of the person indicating such Acquisition
Proposal Interest and the terms and conditions of any proposals or offers. Each
of the Shareholders agrees that it will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any Acquisition Proposal Interest. Such
Shareholder agrees that it shall keep Parent and the Purchaser informed, on a
current and continuing basis, of the status and terms of any Acquisition
Proposal Interest. Such Shareholder agrees that it will not, directly or
indirectly: (i) initiate, solicit or encourage, or take any action to facilitate
the making of, any offer or proposal which constitutes or is reasonably likely
to lead to
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<PAGE> 8
any Acquisition Proposal, or (ii) in the event of an unsolicited written
Acquisition Proposal engage in negotiations or discussions with, or provide any
information or data to, any person (other than Parent, any of its affiliates or
representatives and except for information which has been previously publicly
disseminated by the Company) relating to any Acquisition Proposal.
SECTION 9. Further Assurances. Each of the Shareholders shall, upon
request of Parent or the Purchaser, execute and deliver any additional documents
and take such further actions as may reasonably be deemed by Parent or the
Purchaser to be necessary or desirable to carry out the provisions hereof and to
vest the power to vote the Shares as contemplated by Section 5 hereof in Parent.
SECTION 10. Termination. Subject to Section 5(a) hereof, this Agreement,
and all rights and obligations of the parties hereunder, shall terminate
immediately upon the earlier of (a) six months following the termination of the
Merger Agreement in accordance with its terms or (b) the Effective Time (as
defined in the Merger Agreement); provided, however, that Sections 9 and 11
shall survive any termination of this Agreement.
SECTION 11. Expenses. All fees and expenses incurred by any one party
hereto shall be borne by the party incurring such fees and expenses.
SECTION 12. Public Announcements. Each of the Shareholders, the Parent
and the Purchaser agrees that it will not issue any press release or otherwise
make any public statement with respect to this Agreement or the transactions
contemplated hereby without the prior consent of the other party, which consent
shall not be unreasonably withheld or delayed; provided, however, that such
disclosure can be made without obtaining such prior consent if (i) the
disclosure is required by law or is required by any regulatory authority,
including but not limited to the London Stock Exchange and any other national
securities exchange, trading market or inter-dealer quotation system on which
the Shares trade, and (ii) the party making such disclosure has first used its
best efforts to consult with the other parties about the form and substance of
such disclosure.
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<PAGE> 9
SECTION 13. Miscellaneous.
(a) Capitalized terms used and not otherwise defined in
this Agreement shall have the respective meanings assigned to such terms in the
Merger Agreement.
(b) All notices and other communications hereunder shall be in
writing and shall be deemed given upon (i) transmitter's confirmation of a
receipt of a facsimile transmission, (ii) confirmed delivery by a standard
overnight carrier or when delivered by hand or (iii) the expiration of five
business days after the day when mailed in the United States by certified or
registered mail, postage prepaid, addressed at the following addresses (or at
such other address for a party as shall be specified by like notice):
(A) if to any of the Shareholders, at the address set forth
opposite the name of such Shareholder on Schedule 1 hereto:
with a copy to:
Hale and Dorr LLP
1455 Pennsylvania Avenue, N.W.
Washington, DC 20004
Attention: David Sylvester
Telephone No.: (202) 942-8400
Telecopy No.: (202) 942-8484
and a copy to:
Hunton & Williams
951 East Byrd Street
Richmond, Virginia 23219-4074
Attention: T. Justin Moore, III
Telephone No.: (804) 788-8200
Telecopy No.: (804) 788-8218
and
(B) if to Parent or the Purchaser, to:
9
<PAGE> 10
The Sage Group plc
Sage House
Benton Park Road
Newcastle upon Tyne, NE7 7LZ
Attention: Paul Walker
Telephone No.: (191) 255-3003
Telecopy No.: (191) 255-0306
with a copy to:
Skadden, Arps, Slate, Meagher
& Flom LLP
1440 New York Avenue, N.W.
Washington, D.C. 20005-2111
Telephone: (202) 371-7000
Facsimile: (202) 393-5760
Attention: Ronald C. Barusch, Esq.
(c) The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(d) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall be considered
one and the same agreement.
(e) This Agreement (including the Merger Agreement and any
other documents and instruments referred to herein) constitutes the entire
agreement, and supersedes all prior agreements and understandings, whether
written and oral, among the parties hereto with respect to the subject matter
hereof.
(f) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia without giving effect
to the principles of conflicts of law thereof, provided, however, that the laws
of the respective jurisdictions of incorporation of each of the parties shall
govern the relative rights, obligations, powers, duties and other internal
affairs of such party and its board of directors.
10
<PAGE> 11
(g) Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties except that Parent and the Purchaser may assign, in their sole
discretion and without the consent of any other party, any or all of their
rights, interests and obligations hereunder to each other or to one or more
direct or indirect wholly owned subsidiaries of Parent (each, an "Assignee").
Any such Assignee may thereafter assign, in its sole discretion and without the
consent of any other party, any or all of its rights, interests and obligations
hereunder to one or more additional Assignees. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by, the parties and their respective successors and assigns, and the
provisions of this Agreement are not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
(h) If any term, provision, covenant or restriction herein is
held by a court of competent jurisdiction or other authority to be invalid, void
or unenforceable or against its regulatory policy, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
(i) Each of the parties hereto acknowledges and agrees that in
the event of any breach of this Agreement, each non-breaching party would be
irreparably and immediately harmed and could not be made whole by monetary
damages. It is accordingly agreed that the parties hereto (i) will waive, in any
action for specific performance, the defense of adequacy of a remedy at law and
(ii) shall be entitled, in addition to any other remedy to which they may be
entitled at law or in equity, to compel specific performance of this Agreement
in any action instituted in any state or federal court located in the
Commonwealth of Virginia. The parties hereto consent to personal jurisdiction in
any such action brought in any state or federal court located in the
Commonwealth of Virginia and to service of process upon it in the manner set
forth in Section 11(b) hereof.
(j) No amendment, modification or waiver in respect of this
Agreement shall be effective against any party unless it shall be in writing and
signed by such party.
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<PAGE> 12
IN WITNESS WHEREOF, Parent, the Purchaser and the Shareholders have
caused this Agreement to be duly executed and delivered as of the date first
written above.
THE SAGE GROUP PLC
By: /s/ Paul Walker
-----------------------------------
Name: Paul Walker
Title: Chief Executive Officer
BOBCAT ACQUISITION CORP.
By: /s/ Paul Walker
-----------------------------------
Name: Paul Walker
Title: President
/s/ David Bosserman
-----------------------------------
David Bosserman
/s/ Herbert R. Brinberg
-----------------------------------
Herbert R. Brinberg
/s/ Timothy Davenport
-----------------------------------
Timothy Davenport
/s/ James Foster
-----------------------------------
James Foster
/s/ David L. G. Horn
-----------------------------------
David L. G. Horn
<PAGE> 13
/s/ Andreas Hoynigg
-----------------------------------
Andreas Hoynigg
/s/ Elaine Kelly
-----------------------------------
Elaine Kelly
/s/ W. Frank King
-----------------------------------
W. Frank King
/s/ Richard Lefebvre
-----------------------------------
Richard Lefebvre
/s/ Elvin J. Monteleone
-----------------------------------
Elvin J. Monteleone
/s/ Shelley Reback
-----------------------------------
Shelley Reback
/s/ Robert Skinner
-----------------------------------
Robert Skinner
/s/ James Petersen
-----------------------------------
James Petersen Trust u/a 12/31/98
/s/ James Petersen
-----------------------------------
James Petersen CRT Trust
<PAGE> 14
Schedule 1
to
Stock Option Agreement
<TABLE>
<CAPTION>
Name and Total Shares +
Address Shares Vested Options Vested Options
---------- ------ -------------- --------------
<S> <C> <C> <C>
Bosserman, David 3,651 33,900 37,551
c/o Best Software, Inc.
11413 Isaac Newton Square
Reston, VA 20190
Brinberg, Herbert R. 4,375 15,000 19,375
Parnassus Associates International, Inc.
145 East 48th Street
New York, NY 10017
Davenport, Timothy 122,911 195,000 317,911
c/o Best Software, Inc.
11413 Isaac Newton Square
Reston, VA 20190
Foster, James 989 80,000 80,989
Best Software, Inc.
Abra Products Group
888 Executive Center Drive West
Suite 300
St. Petersburg, FL 33702
Horn, David L. G. 902 17,150 18,052
c/o Best Software, Inc.
11413 Isaac Newton Square
Reston, VA 20190
Hoynigg, Andreas 110,000 0 110,000
c/o Best Software, Inc.
11413 Isaac Newton Square
Reston, VA 20190
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
1-1
<PAGE> 15
<TABLE>
<S> <C> <C> <C>
Kelly, Elaine 4,350 12,950 17,300
c/o Best Software, Inc.
11413 Isaac Newton Square
Reston, VA 20190
King, W. Frank 500 6,250 6,750
PSW
6300 Bridge Point Parkway
Building 3, Suite 200
Austin, TX 78730
Lefebvre, Richard 3,600 11,100 14,700
66 Island Estates Parkway
Palm Coast, FL 32137
Monteleone, Elvin J. 0 15,000 15,000
c/o Best Software, Inc.
11413 Isaac Newton Square
Reston, VA 20190
Reback, Shelley 7,393 7,100 14,493
c/o Best Software, Inc.
11413 Isaac Newton Square
Reston, VA 20190
Skinner, Robert 5,932 51,000 56,932
c/o Best Software, Inc.
11413 Isaac Newton Square
Reston, VA 20190
James Petersen Trust u/a 12/31/93 198,670 0 198,670
9706 Carmel Court
Bethesda, MD 20817
James Petersen CRT Trust 100,136 0 100,136
9706 Carmel Court ------- ------- ---------
Bethesda, MD 20817
TOTAL 563,409 444,450 1,007,859
======= ======= =========
</TABLE>
1-2
<PAGE> 1
EXHIBIT (c)(3)
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of January 12, 2000 (this "Agreement"),
between The Sage Group plc, a company organized under the laws of England
("Parent"), and Best Software, Inc., a Virginia corporation (the "Company").
WHEREAS, Parent, Bobcat Acquisition Corp., a Virginia corporation and a
wholly owned subsidiary of Parent (the "Purchaser"), and the Company,
concurrently with the execution and delivery of this Agreement, will enter into
an Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), providing for, among other things, the merger of the Purchaser with
and into the Company (the "Merger"); and
WHEREAS, as a condition to the willingness of Parent and the Purchaser to
enter into the Merger Agreement, Parent and the Purchaser have required that the
Company agree, and in order to induce Parent and the Purchaser to enter into the
Merger Agreement the Company has agreed, to grant Parent the Option (as
hereinafter defined) upon the terms and subject to the conditions of this
Agreement.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
ARTICLE I
THE OPTION
SECTION 1.1 Grant of Option. The Company hereby grants to Parent an
irrevocable option (the "Option") to purchase up to 2,352,024 newly-issued
shares (the "Shares") of the common stock, no par value, of the Company (the
"Company Common Stock") at a purchase price per share of $35.00 (the "Exercise
Price"), exercisable in the manner set forth in Sections 1.2 and 1.3 of this
Agreement. The number of Shares that may be received upon the exercise of the
Option and the Exercise Price are subject to adjustment as herein set forth,
1
<PAGE> 2
provided, however, that in no event shall the number of Shares exceed 19.9% of
the Company's issued and outstanding shares of Common Stock (without giving
effect to any Shares subject to or issued pursuant to the Option). This
Agreement shall terminate, and the Option hereby granted shall expire, on the
earliest of (i) the Effective Time (as defined in the Merger Agreement) and (ii)
six (6) months after any termination of the Merger Agreement pursuant to Article
VIII thereof; provided, however, this Agreement shall not terminate, and the
Option shall not expire if an Option Notice (as defined below) has been given by
Parent prior to such date.
SECTION 1.2 Exercise Of Option. At any time or from time to time prior to
the termination of the Option in accordance with the terms of this Agreement,
Parent (or its designee) may exercise the Option, in whole or in part, if on or
after the date hereof only if:
(a) the Purchaser accepts for payment pursuant to the Offer (as
defined in the Merger Agreement) shares of Company Common Stock constituting at
least a majority but less than 90% of the shares of Company Common Stock then
outstanding on a fully diluted basis; or
(b) any corporation, partnership, limited liability company,
individual, trust, unincorporated association, or other entity or "person" (as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), other than Parent or any of its "affiliates" (as defined
in the Exchange Act) (a "Third Party"), shall have:
(i) commenced a bona fide tender offer or
exchange offer for any shares of Company Common Stock, the consummation
of which would result in "beneficial ownership" (as defined under the
Exchange Act) by such Third Party (together with all such Third Party's
affiliates and "associates" (as such term is defined in the Exchange
Act)) of 15% or more of the then outstanding voting equity of the Company
(either on a primary or a fully diluted basis);
(ii) acquired beneficial ownership of shares of
Company Common Stock which, when aggregated with any shares of Company
Common Stock already owned by such Third Party, its affiliates and
associates, would result in the aggregate beneficial ownership by such
Third Party, its affiliates and associates of 15% or more of the then
2
<PAGE> 3
outstanding voting equity of the Company (either on a primary or a fully
diluted basis), provided, however, that "Third Party" for purposes of
this clause (ii) shall not include any corporation, partnership, limited
liability company, person or other entity or group which beneficially
owns more than 15% of the outstanding voting equity of the Company
(either on a primary or a fully diluted basis) as of the date hereof and
that does not, after the date hereof, increase such ownership percentage
by more than an additional 1% of the outstanding voting equity of the
Company (either on a primary or a fully diluted basis);
(iii) solicited "proxies" in a "solicitation"
subject to the proxy rules under the Exchange Act or executed any written
consent with respect to, or become a "participant" in, any "solicitation"
(as such terms are defined in Regulation 14A under the Exchange Act), in
each case with respect to the Company Common Stock; or
(c) any of the events described in Section 8.1(c)(ii) or
(e) of the Merger Agreement that would allow Parent to terminate the Merger
Agreement has occurred (but without the necessity of Parent having terminated
the Merger Agreement).
In the event that Parent wishes to exercise all or any part of the
Option, Parent shall give written notice (an "Option Notice," with the date of
the Option Notice being hereinafter called a "Notice Date") to the Company,
specifying the number of Shares it will purchase and a place and date (not
earlier than three (3) nor later than twenty (20) business days from the Notice
Date) for closing such purchase (a "Closing"). Parent's obligation to purchase
Shares and the Company's obligation to deliver Shares upon any exercise of the
Option is subject (at its election) to the conditions that (i) no preliminary or
permanent injunction or other order against the purchase, issuance or delivery
of the Shares issued by any federal, state or foreign court of competent
jurisdiction shall be in effect (and no action or proceeding shall have been
commenced or threatened for purposes of obtaining such an injunction or order)
and (ii) any applicable waiting period under the Hart Scott Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the regulations
thereunder, any applicable antitrust or competition laws of Canada, the European
Union, any member state of the European Union, and any other foreign
jurisdictions shall have expired and (iii) there shall have been no material
breach of the representations, warranties, covenants or agreements of the other
party contained in this Agreement or the Merger Agreement; provided,
3
<PAGE> 4
however, that any failure by Parent to purchase Shares upon exercise of the
Option at any Closing as a result of the nonsatisfaction of any of such
conditions shall not affect or prejudice Parent's right to purchase such Shares
upon the subsequent satisfaction of such conditions. Upon request by Parent, the
Company will promptly take all action required to effect all necessary filings
by the Company under the HSR Act and the regulations thereunder.
SECTION 1.3 Purchase of Shares. At any Closing, (i) the Company will
deliver to Parent the certificate or certificates representing the number of
Shares being purchased in proper form for transfer upon exercise of the Option
in the denominations designated by Parent in the Option Notice, and, if the
Option has been exercised in part, a new Option evidencing the rights of Parent
to purchase the balance of the Shares subject thereto, and (ii) Parent shall pay
the aggregate purchase price for the Shares to be purchased by delivery to the
Company of immediately available funds to the order of the Company in the amount
of the Exercise Price times the number of shares to be purchased set forth in
the Option Notice.
SECTION 1.4 Adjustments Upon Share Issuances, Changes in Capitalization,
etc. (a) In the event of any change in Company Common Stock or in the number of
outstanding shares of Company Common Stock by reason of a stock dividend,
split-up, recapitalization, combination, exchange of shares or similar
transaction or any other change in the corporate or capital structure of the
Company (including, without limitation, the declaration or payment of an
extraordinary dividend of cash, securities or other property), the type and
number of the Shares to be issued by the Company upon exercise of the Option and
the Exercise Price shall be adjusted appropriately, and proper provision shall
be made in the agreements governing such transaction, so that Parent shall
receive upon exercise of the Option the number and class of shares or other
securities or property that Parent would have received with respect to the
Company Common Stock if the Option had been exercised immediately prior to such
event or the record date therefor, as applicable, and Parent had elected to the
fullest extent it would have been permitted to elect, to receive such
securities, cash or other property.
(b) In the event that the Company shall enter into an agreement (i) to
consolidate with or merge into any person, other than Parent or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than Parent or one of
its subsidiaries, to merge into the Company and the Company shall be the
continuing
4
<PAGE> 5
or surviving corporation, but, in connection with such merger, the then
outstanding shares of Company Common Stock shall be changed into or exchanged
for stock or other securities of the Company or any other person or cash or any
other property, or the then outstanding shares of Company Common Stock shall
after such merger represent less than 50% of the outstanding shares and share
equivalents of the surviving corporation or (iii) to sell or otherwise transfer
all or substantially all of its assets to any person, other than Parent or one
of its subsidiaries, then, and in each such case, proper provision shall be made
in the agreements governing such transaction so that Parent shall receive upon
exercise of the Option the number and class of shares or other securities or
property that Parent would have received with respect to Company Common Stock if
the Option had been exercised immediately prior to such transaction or the
record date therefor, as applicable, and Parent had elected to the fullest
extent it would have been permitted to elect, to receive such securities, cash
or other property.
(c) The rights of Parent under this Section 1.4 shall be in addition
to, and shall in no way limit, its rights against the Company for any breach of
the Merger Agreement.
(d) The provisions of this Agreement shall apply with appropriate
adjustments to any securities for which the Option becomes exercisable pursuant
to this Section 1.4.
SECTION 1.5 Repurchase Obligation.
(a) If, at any time during which the Option may be exercised in
accordance with Section 1.1 hereof, Parent sends to the Company an exercise
notice indicating Parent's election to exercise its right pursuant to this
Section 1.5, then the Company shall pay to Parent on the Closing, in exchange
for the cancellation of the Option with respect to such number of Shares as
Parent specifies in the exercise notice, an amount (the "Cancellation Amount")
in cash equal to such number of Shares multiplied by the difference between (a)
the Market/Offer Price (as defined below) and (b) the Exercise Price.
The term "Market/Offer Price" shall mean the highest of (i) the price per
Share at which a tender offer or exchange offer therefor has been made, (ii) the
price per Share to be paid by any third party pursuant to an agreement with the
Company, (iii) the highest closing price for the Shares as reported on the
Nasdaq National Market System within the 30 trading days immediately preceding
the date
5
<PAGE> 6
Parent gives notice of the required repurchase of Shares subject to the Option
or (iv) in the event of a sale of all or a substantial portion of the Company's
assets, the sum of the price paid in such sale of such assets and the current
market value of the remaining assets of the Company (less any liabilities
remaining, including taxes resulting from such sale, after such sale) as
determined by a nationally recognized investment banking firm mutually selected
by Parent and the Company, divided by the number of Shares outstanding at the
time of such sale. In determining the Market/Offer Price, the value of
consideration other than cash shall be determined by a nationally recognized
investment banking firm mutually selected by Parent and the Company.
Notwithstanding the termination of the Option, Parent will be entitled to
exercise its rights under this Section 1.5 if it has exercised such rights in
accordance with the terms hereof prior to the termination of the Option.
(b) Notwithstanding anything to the contrary contained herein, (1)
Parent's Total Payment (as defined below), if any, which Parent may derive
hereunder shall in no event exceed $22,000,000 and Parent shall pay any excess
over such amount to the Company and (2) the Option may not be exercised for a
number of Shares as would, as of the date of exercise, result in a Notional
Total Payment (as defined below), together with the actual Total Payment
immediately preceding such exercise, exceeding $22,000,000; provided that if any
exercise of the option would result in a Notional Total Payment, together with
the actual Total Payment immediately preceding such exercise, exceeding
$22,000,000, then Parent, at its election, may either (A) reduce the number of
Shares subject to the Option, (B) deliver to the Company for cancellation shares
of Company Common Stock previously purchased by Parent, (C) pay cash to the
Company, or (D) take any action representing any combination of the preceding
clauses (A), (B) and (C) so that Parent's Notional Total Payment, when
aggregated with the actual Total Payment immediately preceding such exercise,
does not exceed $22,000,000 after taking into account the foregoing actions. As
used herein (1) "Total Payment" shall mean the sum of the following: (i) any
Cancellation Amount received by Parent pursuant to Section 1.5(a) hereof, (ii)
(x) the net cash amounts received by Parent pursuant to the sale, within twelve
(12) months following exercise of the Option, of Shares (or any other securities
into which such Shares shall be converted or exchanged) to any unaffiliated
party, less (y) the aggregate Exercise Price for such Shares, (iii) any amounts
received by Parent upon transfer of the Option (or any portion thereof) to any
unaffiliated party, and (iv) the amount actually received by Parent pursuant to
Section 8.2(b) of the Merger Agreement; and (2) "Notional Total Payment" with
respect to any number of Shares as to which Parent may propose to exercise the
Option shall be the Total Payment determined as of the date
6
<PAGE> 7
of such proposed exercise assuming that the Option were exercised on such date
for such number of Shares and assuming further that such Shares, together with
all other Shares held by Parent as of such date, were sold for cash at the
closing market price for the Company Common Stock as of the close of business on
the preceding trading day (less customary brokerage commissions). For purposes
of this Article 1, references to Parent shall be deemed to include references to
the Purchaser or any other affiliate of Parent.
(c) The Company shall not withhold any United States withholding taxes on
any payment under this Section 1.5 and the provisions of Section 8.3 of the
Merger Agreement shall apply with respect to any payment made under this Section
1.5.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent as follows:
SECTION 2.1 Authority Relative to this Agreement. The Company is a
corporation duly organized and validly existing under the laws of the
Commonwealth of Virginia. The Company has all necessary corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Company, and no other corporate proceeding on the part
of the Company is necessary to authorize this Agreement or for the Company to
consummate such transactions. This Agreement has been duly and validly executed
and delivered by the Company and, assuming this Agreement constitutes a valid
and binding obligation of Parent, constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms except that (i) such enforcement may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or
hereafter in effect, affecting creditors' rights generally, and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceedings therefor may be brought.
7
<PAGE> 8
SECTION 2.2 No Conflict; Required Filings and Consents. The execution and
delivery of this Agreement by the Company do not, and the performance of this
Agreement by the Company will not, (i) conflict with or violate the articles of
incorporation or by-laws of the Company, (ii) conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to the Company or by
which the Company is bound or affected, (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or encumbrance of any kind on any of the Shares pursuant to, any agreement,
contract, indenture, notice or instrument to which the Company is a party or by
which the Company is bound or affected, or (iv) except for applicable
requirements, if any, of the HSR Act and the regulations thereunder, any
applicable antitrust or competition laws of Canada, the European Union, any
member state of the European Union, and any other foreign jurisdiction, the
Exchange Act and the Securities Act of 1933, as amended (the "Securities Act"),
require any filing by the Company with, or any permit, authorization, consent or
approval of, any governmental or regulatory authority, domestic or foreign,
except in the case of the foregoing clauses (ii) through (iv) for any such
conflicts, violations, breaches, defaults, failures to file or obtain the
consent or approval of, or other occurrences that would not reasonably be
expected to have a Company Material Adverse Effect as defined in the Merger
Agreement.
SECTION 2.3 Option Shares. The Company has taken all necessary corporate
action to authorize and reserve for issuance upon exercise of the Option a total
of 2,352,024 Shares, and such Shares, when issued and delivered by the Company
to Parent upon exercise of the Option, will be duly authorized, validly issued,
fully paid and nonassessable shares of Company Common Stock, and will be free
and clear of any security interests, liens, claims, pledges, charges,
encumbrances or preemptive rights of any kind.
8
<PAGE> 9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to the Company as follows:
SECTION 3.1 Authority Relative to this Agreement. Parent is a corporation
duly organized and validly existing under the laws of England. Parent has all
necessary power and authority (corporate and otherwise) to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation by Parent of the transactions contemplated hereby have been
duly authorized by the Board of Directors of Parent, and no other corporate
proceeding on the part of Parent is necessary to authorize this Agreement or for
Parent to consummate such transactions. This Agreement has been duly executed
and delivered by Parent and, assuming its due authorization, execution and
delivery by the Company, constitutes the legal, valid and binding obligation of
Parent, enforceable against Parent in accordance with its terms except that (i)
such enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in effect,
affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceedings therefor may be brought.
SECTION 3.2 No Conflict, Required Filing and Consents. The execution and
delivery of this Agreement by Parent do not, and the performance of this
Agreement by Parent will not, (i) conflict with or violate the memorandum and
articles of association of Parent, (ii) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to Parent or by which Parent is
bound or affected, (iii) result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, contract, indenture, note or instrument to which
Parent is a party or by which it is bound or affected or (iv) except for
applicable requirements, if any, of the HSR Act and the regulations thereunder,
any applicable antitrust or competition laws of Canada, the European Union, any
member state of the European Union, and any other foreign jurisdiction, the
Exchange Act, and the Securities Act, require any filing by Parent with, or any
permit, authorization, consent or approval of, any governmental or regulatory
authority, domestic or foreign, except in the
9
<PAGE> 10
case of each of the foregoing clauses (i) through (iv) for any such conflicts,
violations, breaches, defaults, failures to file or obtain the consent or
approval of, or other occurrences that would not cause or create a material risk
of non-performance or delayed performance by Parent of its obligations under
this Agreement.
SECTION 3.3 Investment Intent. The purchase of Shares pursuant to this
Agreement is for the account of Parent for the purpose of investment and not
with a view to or for sale in connection with any distribution thereof within
the meaning of the Securities Act and the rules and regulations promulgated
thereunder.
ARTICLE IV
ADDITIONAL AGREEMENTS
SECTION 4.1 Registration Rights; Listing of Shares. (a) Upon the written
request of Parent, the Company agrees to use reasonable best efforts to effect
up to two registrations under the Securities Act on Form S-3 or other available
form and any applicable state securities laws covering any part or all of the
Option (provided that only Shares will be distributed to the public) and any
part or all of the Shares purchased under this Agreement, which registration
shall be continued in effect for 90 days, unless, in the written opinion of
counsel to the Company, addressed to Parent and reasonably satisfactory in form
and substance to counsel for Parent, such registration is not required for the
sale and distribution of such Shares in the manner contemplated by Parent. The
registration effected under this paragraph shall be effected at the Company's
expense except for any underwriting commissions, brokers' fees and the fees and
expenses of Parent's counsel. If Shares are offered pursuant to a firm
commitment underwriting, the Company will provide reasonable and customary
indemnification to the underwriters. In the event of any demand for registration
pursuant to this Section 4.1, the Company may delay the filing of the
registration statement for a period of up to 90 days if, in the good faith
judgment of the Board of Directors of the Company, such delay is necessary in
order to avoid interference with a planned material transaction involving the
Company. In the event the Company effects a registration of Company Common Stock
for its own account or for any other stockholder of the Company (other than on
Form S-4 or Form S-8, or any successor or similar form), it shall allow Parent
to participate in such registration; provided, however, that if the managing
underwriters in such offering advise the Company in writing that in their
opinion the number of shares of Company
10
<PAGE> 11
Common Stock requested to be included in such registration exceeds the number
which can be sold in such offering, the Company will include the securities
requested to be included therein pro rata among the holders requesting to be
included. In connection with any registration statement pursuant to this Section
4.1, Parent agrees to furnish the Company with such information concerning
itself and the proposed sale or distribution as shall be required in order to
ensure compliance with the Securities Act and to provide reasonable and
customary representations, warranties and indemnification to the Company and its
underwriters, if any.
(b) Upon issuance of the Shares, the Company shall, at its expense,
use its reasonable efforts to cause the Shares to be approved for quotation on
the Nasdaq National Market System subject to notice of issuance, as promptly as
practicable, and will provide prompt notice to The Nasdaq Stock Market, Inc. of
the issuance of each Share pursuant to any exercise of the Option.
SECTION 4.2 Transfer of Shares; Restrictive Legend. Prior to the time
Shares are registered under the Securities Act, Parent agrees not to transfer or
otherwise dispose of the Shares, or any interest therein, without first
providing to the Company an opinion of counsel for Parent, reasonably
satisfactory in form and substance to counsel for the Company, to the effect
that such transfer or disposition will not violate the Securities Act or any
applicable state law governing the offer and sale of securities, and the rules
and regulations thereunder. Prior to the time Shares are registered under the
Securities Act, Parent further agrees to the placement on the certificate(s)
representing the Shares of the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE."
provided that upon provision to the Company of any opinion of counsel for
Parent, reasonably satisfactory in form and substance to counsel for the
Company, to the effect that such legend is no longer required under the
provisions of the Securities Act or applicable state securities laws, the
Company shall promptly cause new unlegended certificates representing such
Shares to be issued to Parent against surrender of such legended certificates.
11
<PAGE> 12
SECTION 4.3 Reasonable Best Efforts. Subject to the terms and conditions
of this Agreement, Parent and the Company shall each use its reasonable best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement. Each party shall promptly consult with the other and provide any
necessary information and material with respect to all filings made by such
party with any governmental or regulatory authority in connection with this
Agreement or the transactions contemplated hereby.
SECTION 4.4 Further Assurances. The Company shall perform such further
acts and execute such further documents and instruments as may reasonably be
required to vest in Parent the power to carry out the provisions of this
Agreement. If Parent shall exercise the Option, or any portion thereof, in
accordance with the terms of this Agreement, the Company shall, without
additional consideration, execute and deliver all such further documents and
instruments and take all such further action as Parent may reasonably request
for the purpose of effectively carrying out the transactions contemplated by
this Agreement.
SECTION 4.5 Survival. All of the representations, warranties and
covenants contained herein shall survive a Closing and shall be deemed to have
been made as of the date hereof and as of the date of each Closing.
ARTICLE V
MISCELLANEOUS
SECTION 5.1 Specific Performance. The parties hereto agree that if any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof, without any requirement for securing or posting any bond, in addition to
any other remedy at law or equity.
SECTION 5.2 Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, both written and oral,
between the parties, or any of them, with respect to the subject matter hereof.
12
<PAGE> 13
SECTION 5.3 Amendment; Assignment. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto and specifically
referencing this Agreement. No party to this Agreement may assign any of its
rights or obligations under this Agreement without the prior written consent of
the other party hereto, except that the rights and obligations of Parent
hereunder may, upon written notice to the Company prior to or promptly following
such action, be assigned by Parent to one or more of its affiliates, and by such
affiliates to one or more other affiliates of Parent, but no such assignment
shall relieve Parent of its obligations hereunder if such transferee does not
perform such obligations.
SECTION 5.4 Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provisions hereof
or thereof shall not affect the validity and enforceability of the other
provisions hereof. If any provision of this Agreement, or the application
thereof to any person or entity or any circumstances, is invalid or
unenforceable, (i) a suitable and equitable provision shall be substituted
therefor in order to carry out, so far as may be valid and enforceable, the
intent and purpose of such invalid and unenforceable provision and (ii) the
remainder of this Agreement and the application of such provision to other
persons, entities or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability affect the
validity or enforceability of such provision, or the application thereof, in any
other jurisdiction.
SECTION 5.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Virginia without
giving effect to the principles of conflicts of law thereof, provided, however,
that the laws of the respective jurisdictions of incorporation of each of the
parties shall govern the relative rights, obligations, powers, duties and other
internal affairs of such party and its board of directors.
SECTION 5.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but each of which
together shall constitute one and the same document.
SECTION 5.7 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the addresses specified below (or at such other
address for a party as shall be specified by like notice): (i) if to Parent, to
its address set
13
<PAGE> 14
forth in Section 9.4(a) of the Merger Agreement; and (ii) if to the Company, to
the Company's address set forth in Section 9.4(b) of the Merger Agreement.
SECTION 5.8 Binding Effect. This Agreement shall be binding upon, inure
to the benefit of, and be enforceable by the successors and assigns of the
parties hereto. Nothing expressed or referred to in this Agreement is intended
or shall be construed to give any person other than the parties to this
Agreement, or their respective successors or assigns, any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
contained herein.
[SIGNATURE PAGE FOLLOWS]
14
<PAGE> 15
IN WITNESS WHEREOF, each of the Company and Parent have caused this
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the date first above written.
BEST SOFTWARE, INC.
By: /s/ Timothy A. Davenport
--------------------------------------------
Name: Timothy A. Davenport
Title: President and Chief Executive Officer
THE SAGE GROUP PLC
By: /s/ Paul Walker
--------------------------------------------
Name: Paul Walker
Title: Chief Executive Officer
<PAGE> 1
EXHIBIT (c)(4)
MUTUAL NON-DISCLOSURE AGREEMENT
This Agreement is entered into on October 14, 1999 between Best Software, Inc.,
with its principal place of business at 11413 Issac Newton Square, Reston, VA
20190 and Sage Software, Inc., with its principal place of business at 56
Technology Drive, Irvine, CA 92618.
WHEREAS, the Parties are contemplating business and technical discussions
concerning a possible business combination.
WHEREAS, the Parties may need or want to disclose certain Information to
each other on a confidential basis to further their discussions concerning such
business and technical developments;
NOW, THEREFORE, in consideration of the disclosure of Information (as
defined herein) by either Party, the Parties agree as follows;
1. Definitions:
"Information" is defined as communications or data including, but not
limited to, business information, marketing plans, technical or financial
information, customer lists or proposals, sketches, models, samples,
computer programs and documentation, drawings, specifications, whether
conveyed in oral, written, graphic, or electromagnetic form or otherwise.
"Party" is defined as either entity executing this Agreement and any
subsidiary, division, affiliate, or parent company of such entity.
2. All Information related to the parties' business or technical discussions
described in the Preamble to this Agreement that is disclosed by one
Party ("Disclosing Party") to the other ("Receiving Party") shall be
protected by the Receiving Party.
3. Information of the Disclosing Party shall remain the property of the
Disclosing Party. The Receiving Party agrees to protect the Information
of the Disclosing Party against unauthorized disclosure and warrants that
it applies reasonable safeguards against the unauthorized disclosure
Information.
4. The Receiving Party agrees that: (i) the Information shall be used solely
for the purpose described in the preamble to this Agreement; (ii) it will
not use any Information disclosed hereunder for any other purpose; and
(iii) it will not distribute, disclosure or disseminate Information to
anyone except its employees and agents with a need to know and who, in
1
<PAGE> 2
each case, have been informed of the confidential nature of the
Information and have agreed to be bound by the terms of this Agreement.
5. The Information shall be treated as confidential and safeguarded
hereunder by the Receiving Party for a period of two (2) years.
6. This Agreement shall not apply to Information that:
(a) is in or enters the public domain, through no fault of the
Receiving Party; or
(b) is or has been disclosed by the Disclosing Party to the Receiving
Party or to a third party without restriction; or
(c) is already in the possession of the Receiving Party, without
restriction and prior to disclosure of the information hereunder;
or
(d) is or has been lawfully disclosed by a third party to the
Receiving Party without an obligation of confidentiality.
Notwithstanding the above, nothing hereunder shall prevent the Receiving
Party from disclosing Information which it is required to disclose by
court order or pursuant to the rules and regulations of a governmental
agency or body, in either case having jurisdiction over the Receiving
Party, to the extent so required by such court order or the published
rules and regulations of such governmental authority; provided, however,
that prior to any such disclosure the Receiving Party shall (i) notify
the Disclosing Party promptly in writing of any order or request to
disclose and of the facts and circumstances surrounding such order or
request so that the Disclosure Party may seek an appropriate protective
order and (ii) cooperate with the Disclosing Party in any proceeding to
obtain an appropriate protective order.
7. In the event that the above-mentioned business combination is not
completed, each Party agrees not to solicit, entice or offer employment
to any employees of the other Party before one (1) year from the date of
this Letter; provided, however, that the foregoing shall not prohibit
either Party from employing any individual who has received notice of
termination from, or ceased to be employed by, the other Party prior to
the first time such individuals discussed, directly or with any
representatives, employment by the hiring Party.
8. Each Party acknowledges that in its examination of the Information it
will be exposed to material nonpublic information concerning the business
and financial condition of the Disclosing Party and consequently the
Receiving Party agrees that prior to the date two (2) years from the date
hereof, without the prior written approval of the Board of Directors of
the Disclosing Party, the Receiving Party will not (and will insure that
its affiliates (and any person acting on behalf of or in concern with the
Receiving Party or any affiliate) will not) purchase or otherwise acquire
(or enter into any agreement or
2
<PAGE> 3
make any proposal to purchase or otherwise acquire) any securities of the
Disclosing Party, any warrant or option to purchase such securities, any
security convertible into any such securities or any other right to
acquire such securities.
9. Except as expressly provided herein no license or right is granted by the
Disclosing Party to the Receiving Party under any patent, patent
application, trademark, copyright, software or trade secret.
10. At the Disclosing Party's request, all Information of the Disclosing
Party in tangible form, or any copies thereof, that is in the possession
of the Receiving Party shall be returned to the Disclosing Party or
destroyed.
11. Each Party agrees that it will not disclose the subject matter or terms
of this Agreement or the discussion between the Parties without the
written consent of the other Party.
12. This Agreement shall terminate two (2) years from the date first written
above. Any amendment of this Agreement must be in writing and signed by
authorized officials of each Party. No failure or delay in exercising any
right under this Agreement shall operate as a waiver thereof.
13. This Agreement shall be governed by the laws of the Commonwealth of
Virginia.
Best Software, Inc. Sage Software, Inc.
-------------------
By: /s/ David N. Bosserman By: /s/ James R. Eckstaedt
---------------------- -----------------------
Name: David N. Bosserman Name: James R. Eckstaedt
------------------ ------------------
Title: Chief Financial Officer Title: Vice President Finance and
----------------------- --------------------------
Chief Financial Officer
-----------------------
3
<PAGE> 1
EXHIBIT (c)(5)
THE SAGE GROUP PLC
Sage House
Benton Park Road
Newcastle upon Tyne
NE7 7LZ
United Kingdom
December 22, 1999
Best Software, Inc.
11413 Isaac Newton Square
Reston, Virginia 20190
Ladies and Gentlemen:
The Sage Group PLC ("Bidder") and Best Software, Inc. ("Best") have
proposed to exchange confidential information and begin discussions in
connection with the consideration of a possible transaction between the two
companies. Both parties desire (i) to confirm the continued validity of a
certain Non-Disclosure Agreement between them dated October 14, 1999; and (ii)
to set forth certain other agreements between them, as described in this letter
agreement.
Bidder hereby agrees that for a period of twelve months from the date
hereof, neither Bidder nor any of its affiliates, alone or with others, will in
any manner (1) acquire, agree to acquire, or make any proposal (or request
permission to make any proposal) to acquire any securities (or direct or
indirect rights, warrants or options to acquire any securities) or property of
Best (other than property transferred in the ordinary course of Best's business
and securities constituting less than 1% of the outstanding voting securities of
Best), unless such acquisition, agreement or making of a proposal shall have
been expressly first approved (or in the case of a proposal, expressly first
invited) by Best's Board of Directors, (2) solicit or propose to solicit proxies
from stockholders of Best or otherwise seek to influence or control the
management or policies of Best or any of its affiliates or (3) assist (including
by knowingly providing or arranging financing for that purpose) any other person
in doing any of the foregoing. Bidder hereby represents that it does not
beneficially own, nor is it aware that any of its affiliates beneficially owns,
any shares of the capital stock or other equity interests of Best, provided,
however, that nothing contained in herein shall limit Bidder or its affiliates
ability (i) to negotiate, modify and implement the proposal contemplated in
Bidder's proposal accompanying this letter agreement or (ii) to make other
confidential proposals that in Bidder's reasonable judgment will not require
Best to make a public disclosure thereof. The provisions of this paragraph shall
terminate in the event that (a) any third party unaffiliated with Bidder
initiates a tender or exchange offer for, or otherwise proposes or agrees to
acquire, the common stock or other equity interests in Best, (b) it is publicly
disclosed that voting securities representing more than or equal to 25% of the
total voting power of Best then outstanding have been acquired or are
<PAGE> 2
proposed to be acquired by any person or group unaffiliated with Bidder in a
single transaction or a series of related transactions, or (c) Best enters into
any agreement to merge with, or sell or dispose of 50% or more of its assets or
earning power to, any person not affiliated with Bidder.
From the date of this letter until the earlier of (a) January 14, 2000 or
(b) the termination by Bidder of negotiations for the transaction contemplated
herein, Best shall not and shall not authorize or permit its directors,
officers, employees, advisors or representatives (including, without limitation,
any investment banking, legal or accounting firm retained by Best or its
affiliates) (i) directly or indirectly initiate, solicit, seek, encourage or
engage in any negotiations with or provide any non-public information to any
other person, firm, corporation or other entity with respect to an acquisition
or investment transaction involving Best or its business, (ii) directly or
indirectly initiate, solicit, seek or encourage any proposal relating to the
acquisition of, investment in, consolidation, recapitalization, liquidation,
dissolution or other similar transaction involving Best or its business (and
during such period, Best will notify Bidder promptly of the receipt of any
unsolicited indication of interest, offer or proposal of such nature, including
the identity of the person indicating such interest or making such offer or
proposal and the terms thereof), or (iii) dispose of any assets that would
constitute a part of its business other than in the ordinary course of business;
provided, however, that nothing in this letter agreement shall prevent Best or
its Board of Directors from complying with Rule 14e-2 promulgated under the
Securities Exchange Act of 1934 with regard to any tender offer initiated by any
other party. Best shall and shall cause its affiliates, advisors and
representatives to immediately cease any discussions or negotiations regarding
any of the above mentioned transactions in which it or they have been engaged
prior to the date hereof.
It is further understood and agreed that no failure or delay by a party
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any right, power or privilege
hereunder.
Each party agrees that unless and until a definitive agreement between
Best and Bidder with respect to any transaction referred to in the first
paragraph of this letter has been executed and delivered, neither party will be
under any legal obligation of any kind whatsoever with respect to such a
transaction by virtue of this or any written or oral expression with respect to
such a transaction by any of either party's directors, officers, employees,
agents, or any other representatives or advisors except for the matters
specifically agreed to in this letter. Each party further agrees that it shall
have no obligation to authorize or pursue with the other party or any other
party any transaction referred to in the first paragraph of this letter and
understands that the other party has not, as of the date hereof, authorized any
such transaction. The agreements set forth in this letter may be modified or
waived only by a separate writing by both parties expressly so modifying or
waiving such agreements. In addition, each party hereby acknowledges that it is
aware, and that it will advise its representatives who are informed as to the
matters which are the subject of this letter, that United States securities laws
restrict, under certain circumstances, persons who have material, non-public
information concerning the matters which are the subject of this letter from
purchasing or selling securities of a company to which such information relates
or from communicating such information to any other person under circumstances
in which it is
<PAGE> 3
reasonably foreseeable that such person is likely to purchase or sell such
securities.
Bidder and Best acknowledge that money damages are an inadequate remedy
for breach of this letter agreement because of the difficulty of ascertaining
the amount of damage that will be suffered by the other party in the event that
this agreement is breached. Therefore, each party agrees that the other party
may, in addition to any other available remedy, seek specific performance of
this agreement and injunctive relief against any breach hereof. If any term,
provision, covenant or restriction of this letter agreement is held by a court
of competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated.
This letter agreement may be signed in more than one counterpart, each of
which shall be deemed an original, and all of which together shall constitute
one and the same instrument.
This letter agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware.
Very truly yours,
THE SAGE GROUP PLC
By: /s/ Paul Walker
--------------------------------
Name: Paul Walker
Title: Chief Executive Officer
Confirmed and Agreed to:
BEST SOFTWARE, INC.
By: /s/ Timothy A. Davenport
-----------------------------------------
Name: Timothy A. Davenport
Title: President and Chief Executive Officer
Date: December ____, 1999
