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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF
THE SECURITIES EXCHANGE ACT OF 1934
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BEST SOFTWARE, INC.
(Name of Subject Company)
BEST SOFTWARE, INC.
(Name of Person Filing Statement)
COMMON STOCK, NO PAR VALUE
(Title of Class of Securities)
000865791
(CUSIP Number of Class of Securities)
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TIMOTHY A. DAVENPORT
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
BEST SOFTWARE, INC.
11413 ISAAC NEWTON SQUARE
RESTON, VIRGINIA 20190
(703) 709-5200
(Name, address and telephone number of person authorized to
receive notices and communications on behalf of the person filing statement)
WITH A COPY TO:
T. JUSTIN MOORE, III, ESQ.
HUNTON & WILLIAMS
951 EAST BYRD STREET
RIVERFRONT PLAZA, EAST TOWER
RICHMOND, VIRGINIA 23219-4074
(804) 788-8200
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Best Software, Inc., a Virginia
corporation (the "Company"). The address of the principal executive offices of
the Company is 11413 Isaac Newton Square, Reston, Virginia 20190. The title of
the class of equity securities to which this Statement relates is common stock,
no par value, of the Company (the "Company Common Stock" or the "Shares").
ITEM 2. TENDER OFFER OF PURCHASER
This Solicitation/Recommendation Statement (this "Statement") relates to
the tender offer by Bobcat Acquisition Corp. ("Purchaser"), a Virginia
corporation and a wholly owned subsidiary of The Sage Group plc, a corporation
organized under the laws of England ("Parent"), disclosed in a Tender Offer
Statement on Schedule 14D-1 (the "Schedule 14D-1"), dated January 14, 2000,
offering to purchase all of the outstanding Shares at a price of $35.00 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 (the "Offer to Purchase"),
dated January 14, 2000, and the related Letter of Transmittal (which, together
with the Offer to Purchase, constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of January 12, 2000 (the "Merger Agreement"), by and among Parent, Purchaser
and the Company. The Merger Agreement provides, among other things, that
following satisfaction or waiver of the conditions set forth in the Merger
Agreement, Purchaser will be merged with and into the Company (the "Merger"),
the separate corporate existence of Purchaser will cease and the Company will
continue as the surviving corporation (the "Surviving Corporation") and a wholly
owned subsidiary of Parent. A copy of the Merger Agreement is filed as Exhibit 1
to this Statement and is incorporated herein by reference.
As set forth in the Schedule 14D-l, the principal executive offices of
Parent are located at Sage House, Benton Park Road, Newcastle Upon Tyne, NE7
7LZ, England, and the principal executive offices of Purchaser are located c/o
Sage Software, Inc., 56 Technology Drive, Irvine, California 92618.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and address of the Company, which is the person filing this
Statement, are set forth in Item 1 above.
(b) Except as set forth in this Item 3(b), to the knowledge of the Company,
there are no material contracts, agreements, arrangements or understandings and
no actual or potential conflicts of interest between the Company or its
affiliates and (i) the Company's executive officers, directors or affiliates or
(ii) Parent or Purchaser or their respective executive officers, directors or
affiliates.
Certain contracts, arrangements or understandings between the Company or
its affiliates and certain of the Company's directors, executive officers and
affiliates are described in the Information Statement of the Company attached to
this Statement as Schedule I (the "Information Statement"), which is filed as
Exhibit 2 to this Statement and is incorporated herein by reference. The
Information Statement is being furnished to the Company's shareholders pursuant
to Section 14(f) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Rule 14f-1 promulgated under the Exchange Act in connection
with Parent's right pursuant to the Merger Agreement (after acquiring any of the
Shares pursuant to the Offer) to designate persons to the Board of Directors of
the Company (the "Company Board") other than at a meeting of the shareholders of
the Company.
ARRANGEMENTS WITH EXECUTIVE OFFICERS, DIRECTORS OR AFFILIATES OF THE COMPANY
Employee Stock Options
The following is a summary of the treatment of the options held by
employees and directors of the Company to purchase the Shares. This summary is
qualified in its entirety by reference to the Merger
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Agreement which is incorporated herein by reference and a copy of which has been
filed as Exhibit 1 to this Statement.
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 of the Merger (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 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.
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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.
Directors' and Officers' Indemnification
The Merger Agreement provides that, 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 Virginia Stock
Corporation Act (the "VSCA"), the terms of the Company's Articles of
Incorporation or the Company's Bylaws, and under any agreements as in effect on
the date of the Merger Agreement (including rights to reimbursement or
advancement of expenses and exculpation from liability).
The Merger Agreement further provides that 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 such insurance in excess
of 150% of the premiums paid by the Company in 1999 for such purpose (the "1999
Premium"); and provided, further, that if Parent or the Surviving Corporation is
unable to obtain such amount of insurance 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 1999 Premium.
As allowed by Article 9 of the VSCA, the Company's Articles of
Incorporation (Article 5) and Bylaws (Article III, Section 14) eliminate the
liability of the officers and directors of the Company for
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monetary damages in any proceeding brought by or in the right of the Company or
brought by or on behalf of shareholders of the Company except in cases of
willful misconduct or a knowing violation of criminal law or any federal or
state securities law. As allowed by Article 10 of the VSCA, the Company's
Articles of Incorporation and Bylaws also provide for mandatory indemnification
of any director or officer of the Company who is, was, or is threatened to be
made a party to a proceeding (including a proceeding by or in the right of the
Company) because (a) he or she is or was a director or officer of the Company or
(b) he or she is or was serving the Company or other legal entity in any
capacity at the request of the Company while a director or officer of the
Company, against all liabilities and expenses incurred in connection with such
proceeding, except such liabilities as are incurred because of such individual's
willful misconduct or knowing violation of the criminal law. In addition, the
Company's Articles of Incorporation and Bylaws expressly authorize the Company
to enter into agreements to indemnify its officers and directors to the fullest
extent permitted by the Articles of Incorporation and Bylaws and to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified.
The full text of Article 5 of the Company's Articles of Incorporation is
filed as Exhibit 3 to this Statement and is incorporated herein by reference.
The full text of Article III, Section 14 of the Company's Bylaws is filed as
Exhibit 4 to this Statement and is incorporated herein by reference.
ARRANGEMENTS WITH PARENT, PURCHASER OR THEIR AFFILIATES
Merger Agreement
The following is a summary of certain provisions of the Merger Agreement,
which is qualified in its entirety by the full text of the Merger Agreement.
Capitalized terms not defined below shall have the meaning set forth in the
Merger Agreement.
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 set forth therein, 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 set
forth therein, (iv) amend any condition to the Offer set forth therein, (v)
extend the Initial Expiration Date, except 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 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 (as defined in the Merger Agreement) shall no
longer be reasonably available to Parent: (I) Annex I to 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
to 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
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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 the Merger Agreement, 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.
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 Options (as defined below) under the Stock Plans as
contemplated by the Merger Agreement shall have been taken.
At the Effective Time (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 Stock 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
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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 Securities and Exchange Commission (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 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 Stock 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. See discussion in "Arrangements with Executive Officers,
Directors or Affiliates of the Company -- Employee Stock Options."
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Interim Operations; Covenants. Pursuant to the Merger Agreement, the
Company has agreed that, except (i) as expressly contemplated by the Merger
Agreement or the Stock 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 Bylaws 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 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
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<PAGE> 9
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.
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 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
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<PAGE> 10
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 Confidentiality Agreement (as defined below) 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 Company's 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 to the Merger Agreement (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 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
Company's 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. See discussion in "Arrangements with
Executive Officers, Directors or Affiliates of the Company -- Directors' and
Officers' Indemnification."
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.
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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 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 the Merger Agreement (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
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<PAGE> 12
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 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 therein have been fulfilled except (i)
the condition set forth in paragraph (i) of Annex I thereto 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.
The full text of the Merger Agreement is filed as Exhibit 1 to this
Statement and is incorporated herein by reference.
Stock Option Agreement
As a condition and inducement to Parent and the Purchaser entering into the
Merger Agreement, Parent and the Company executed a Stock Option Agreement,
dated January 12, 2000 (the "Stock Option Agreement"). Pursuant to the Stock
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 (the
"Exercise Price"), subject to the terms and conditions set forth in the Stock
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 Stock 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 Stock Option Agreement, Parent (or its designee) may exercise the Company
Option, in whole or in part, if on or after the date of the Stock 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
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<PAGE> 13
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 Stock Option Agreement and that does not, after the date of the Stock 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 Stock 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 Stock Option Agreement or the Merger Agreement; provided, however, that any
failure by Parent to purchase Shares upon exercise of the Company 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 Stock 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
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<PAGE> 14
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).
The full text of the Stock Option Agreement is filed as Exhibit 5 to this
Statement and is incorporated herein by reference.
Shareholders Agreement
As a condition and inducement to Parent and the Purchaser entering into the
Merger Agreement and incurring the liabilities therein, certain shareholders of
the Company (each a "Management 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 Agreement"). The Management Shareholders are certain directors and
officers of the Company. Pursuant to the Shareholders Agreement, each of the
Management Shareholders has agreed to validly tender, in accordance with the
terms of the Offer promptly, all Shares subject to the Shareholders Agreement.
Each Management 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 Management 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 Management Shareholder as of the date
of the Shareholders Agreement, or beneficially owned or controlled by such
Management 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 Management 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 Management Shareholders has agreed that, prior to the
termination of the Shareholders Agreement pursuant to its terms, such Management
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
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<PAGE> 15
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 Management
Shareholder's obligations under the Shareholders Agreement or the transactions
contemplated thereby.
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.
The full text of the Shareholders Agreement is filed as Exhibit 6 to this
Statement and is incorporated herein by reference.
Confidentiality Agreement
On October 14, 1999, Sage Software, Inc. ("SSI"), a subsidiary of Parent,
and the Company executed a mutual non-disclosure agreement (the "Confidentiality
Agreement").
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 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.
The full text of the Confidentiality Agreement is filed as Exhibit 7 to
this Statement and is incorporated herein by reference.
Letter Agreement
On December 22, 1999, Parent and the Company executed a letter agreement
(the "Letter Agreement").
The Letter Agreement provides that for a period of 12 months from the date
of the Letter 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 Letter
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.
The full text of the Letter Agreement is filed as Exhibit 8 to this
Statement and is incorporated herein by reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) Recommendation of the Board of Directors
On January 11, 2000, the Company Board approved the Merger Agreement and
the transactions contemplated thereby, including the Offer and the Merger, and
determined that the terms of the Offer and the Merger, taken together, are fair
to, and in the best interests of, the Company and its shareholders. This
recommendation is based in part upon an opinion of Hambrecht & Quist LLC ("Chase
H&Q"), dated as
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of January 12, 2000, to the effect that, as of such date, the consideration to
be received by the Company's shareholders in the Offer and the Merger is fair to
the shareholders from a financial point of view (the "Fairness Opinion"). The
Fairness Opinion contains a description of the factors considered, the
assumptions made and the scope of the review undertaken by Chase H&Q in
rendering its opinion. The full text of the Fairness Opinion is attached as
Annex A to this Statement, filed as Exhibit 9 to this Statement, and
incorporated herein by reference. Shareholders are urged to read the Fairness
Opinion in its entirety.
(b) Background; Reasons for the Recommendation of the Company's Board of
Directors
BACKGROUND
Over the last several years, the Company's management periodically reported
to the Company Board about management's view of the industry in which the
Company operates and the Company's competitive position in that industry. In
these discussions, management conveyed that management believed consolidation
would continue in the Company's industry, that companies would need to continue
to broaden their product lines, that economies of scale would be needed to
effectively build sales and distribution channels to customers, and scale would
also be needed for research and development and global expansion. These
discussions also included management's views of the two best merger partners for
the Company, specifically the First Other Party (as defined below) and Parent.
In 1997, Chase H&Q arranged a meeting between the Company and another U.S.
publicly traded software company (the "First Other Party") to discuss a variety
of collaborative ways the two companies might work together, including a
possible stock-for-stock merger. This meeting initially did not lead to any
substantive discussions, but in the Spring of 1999, the First Other Party
initiated discussions with the Company about a possible merger. At that time,
the Company informally retained Chase H&Q to serve as its financial advisor. For
the next several months, the Company and the First Other Party conducted
preliminary business, financial and operational due diligence on each other and
conducted numerous discussions about the possible synergies and risks involved
in a possible combination and how the two companies would be integrated. After
these preliminary due diligence discussions were completed, the Company and the
First Other Party discussed several possible scenarios for a merger, including
proposed exchange ratios, but none of these scenarios were acceptable to the
Company. During the course of these discussions, the Company's management, in
conjunction with financial and legal advisors, held several meetings with the
Company Board to review the status of the discussions and present their views on
the advantages and disadvantages of the proposed transactions.
Since 1995, Parent and the Company have discussed periodically their
respective businesses and operations and potential strategic alliances.
Contemporaneously with the discussions with the First Other Party described
above, David Hanna, President of Parent's U.S. operations, initiated discussions
with Timothy A. Davenport, Chairman of the Board, President and Chief Executive
Officer of the Company, about a possible business combination. In mid-September
1999, Mr. Davenport and Paul A. Walker, Chief Executive Officer of Parent, met
in Parent's headquarters in the U.K.
While the discussions between the Company and the First Other Party
described above and Parent were occurring, a large, U.S. publicly traded
technology company (the "Second Other Party") initiated discussions with the
Company about a possible business arrangement whereby the Second Other Party
would license certain of the Company's software. During the course of their due
diligence review, the Second Other Party indicated a possible interest in an
outright acquisition of the Company.
On August 30, 1999, the Company executed an engagement letter with Chase
H&Q providing that Chase H&Q would serve as its financial advisor in connection
with discussions with these three parties.
On October 14 and 15, 1999, members of senior management of SSI and the
Company met to discuss the business and operations of the Company. On October
14, 1999, Parent and the Company executed the Confidentiality Agreement.
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On October 21, 1999, the Company Board met to discuss a proposal by the
First Other Party regarding a possible merger with the Company. Representatives
of Chase H&Q were present and participated in the discussion of this proposal.
After an in-depth discussion with its advisors, the Company Board determined
that such proposal, as then formulated, was not sufficiently attractive and
authorized Company management to seek a more attractive offer, if the
opportunity existed.
On November 10, 1999, representatives of Deutsche Bank Securities Inc.
("Deutsche Bank"), financial advisor to Parent, contacted representatives of
Chase H&Q 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 10, 1999, the Company Board met to discuss the status of
negotiations with the First Other Party and Parent. Representatives of Chase H&Q
were present and participated in these discussions. After a lengthy discussion,
the Company Board authorized Company management to continue negotiations with
both entities.
On November 11, 1999, representatives of Chase H&Q contacted
representatives of Deutsche Bank and stated that the price range indicated on
November 10, 1999 was insufficient and that the Company had also received an
indication of interest from the First Other Party. After discussions, Chase H&Q
indicated the Company would allow Parent to conduct supplemental due diligence
because Parent indicated their initial valuation range was preliminary and could
be increased based upon improving their understanding of the Company.
On November 17, 1999, members of senior management of Parent and the
Company and representatives of Deutsche Bank and Chase H&Q met at Dulles Airport
in Virginia to further discuss a potential acquisition.
In mid-November 1999, Chase H&Q, on behalf of the Company, requested all
parties to submit written, non-binding transaction proposals.
On November 30, 1999, all parties submitted written non-binding offers,
with Parent proposing an all cash transaction at $31.00 per Share, the First
Other Party proposing a stock-for-stock transaction with two possible exchange
ratio structures, and the Second Other Party proposing a stock-for-stock merger
at a specific price.
On December 7 and 8, 1999, the Company Board met to consider the three
proposals. Representatives of Chase H&Q and Hale & Dorr, the Company's regular
outside legal counsel, were present and participated in these discussions. The
Company Board considered the Second Other Party's preliminary proposal, as well
as a detailed analysis of the proposals of the First Other Party and Parent. Mr.
Davenport updated the Company Board on recent discussions with each company.
After discussing the relative merits of each proposal, the Company Board
directed the Company's management to focus its efforts on negotiations with
Parent.
After these Board meetings, management and Chase H&Q indicated to the First
Other Party and the Second Other Party that the Company was going to focus its
efforts on negotiations with Parent. When informed of this decision, the Second
Other Party informed Chase H&Q and Company management that although it needed to
conduct additional due diligence, it was prepared to pay a higher price than
included in its initial proposal, and it subsequently submitted a revised
written, non-binding offer with the higher price, which was superior to the
price proposed by Parent. As a result of this, the Company then indicated to
Parent it was going to suspend negotiations with Parent while the Second Other
Party completed additional due diligence, which it did on December 15 and 16,
1999.
While the Second Other Party was conducting its due diligence review, the
stock price of the First Other Party increased significantly. On December 16,
1999, the Company's management and Chase H&Q contacted the First Other Party to
inform them that the Company anticipated setting a new bid date, subject to
Board approval, and inquired whether the First Other Party would like to submit
a revised proposal. The First Other Party indicated they would submit a revised
proposal.
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On December 17, 1999, the Company Board met to discuss the status of the
ongoing negotiations with the three parties. Representatives of Chase H&Q were
present and participated in these discussions. Mr. Davenport updated the Company
Board on the status of negotiations with each of the companies, giving a
detailed account of subsequent discussions and stating that the Second Other
Party had submitted a revised proposal. A representative of Chase H&Q then
outlined a proposal to request that each of the three companies submit their
"best and final" offers to the Company. To ensure best and final offers would be
submitted, this letter would indicate that the Company was prepared to enter
into a "no-shop" agreement (a "No-Shop Letter") with the party submitting the
best offer, which would give that party the exclusive right for a limited time
period to negotiate a definitive agreement. The Company Board then had a lengthy
discussion regarding the process explained by Chase H&Q and the execution of a
No-Shop Letter. The Company Board authorized Chase H&Q to solicit "best and
final" offers from the three companies and to inform them that the Company would
enter into a No-Shop Letter with the party submitting the best offer.
On December 17, 1999, Chase H&Q sent a letter to all three parties
requesting them to submit their "best and final" offers by December 21, 1999 and
stating that the Company was willing to execute a No-Shop Letter with the party
submitting the best offer.
On December 20, 1999, the Second Other Party withdrew from the process.
On December 21, 1999, Parent submitted a written non-binding offer
proposing an all cash transaction at $35.00 per Share, and the First Other Party
proposed a stock-for-stock transaction where the value of the consideration to
be received by the Company's shareholders would fluctuate based upon the market
price for the First Other Party's publicly traded stock during a future period
shortly before consummation of the transaction. Based on the lowest and highest
closing prices of the First Other Party's publicly traded stock during the
six-month period immediately preceding December 23, 1999 (the date that the
Company Board considered the proposal), such value would have ranged between
approximately $25 and $40 per Share.
On December 23, 1999, the Company Board met to consider the two proposals.
Representatives of Chase H&Q, Hale & Dorr and Hunton & Williams, special legal
counsel to the Company, were present and participated in these discussions. Mr.
Davenport informed the Company Board that Parent and the First Other Party had
presented "best and final" proposals while the Second Other Party had withdrawn.
A representative of Chase H&Q gave a detailed analysis of the two offers. A
representative of Hunton & Williams advised the Company Board regarding the
Company Board's fiduciary duties under Virginia law in the consideration of the
acquisition proposals. The Company Board, with the assistance of its advisors,
compared the two proposals. After a lengthy discussion, the Company Board
concluded that Parent's all cash proposal compared favorably to the First Other
Party's proposal, even though the First Other Party's proposal may have yielded
a higher value per Share based on then existing market prices (although the
actual value would have depended upon the market price of the First Other
Party's publicly traded stock during a period shortly before consummation of the
transaction), because (i) the First Other Party's proposal contemplated that the
sale consideration would be a stock deal that could have taken several months to
complete, and this, coupled with the historic high volatility of the First Other
Party's publicly traded stock, imposed significantly greater risk on the
Company's shareholders, (ii) the First Other Party had been growing faster than
the Company, and the Company Board was concerned about the impact to the First
Other Party's stock price of an announcement of the transaction, (iii) the First
Other Party had never completed a large acquisition, and the conversations
between the two companies concerning, among other things, integration of the
business were not satisfactory to the Company's management or the Company Board,
(iv) given the high multiples the market had assigned to the First Other Party's
stock price, the Company Board was concerned that any disruption, even minor,
could significantly and adversely impact the First Other Party's stock price,
(v) the Company Board was concerned of the risk that the market would react
negatively to the proposed transaction and the fact that the Company's fourth
quarter results were expected to be below consensus expectations which could
have an adverse impact on the First Other Party's stock price, (vi) the Company
Board was concerned about the uncertainty of the Company's ability to consummate
a transaction that would be afforded pooling-of-interest accounting treatment
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(which was contemplated by the First Other Party's proposal) and (vii) the First
Other Party's proposal did not provide adequate downside protection against a
decline in market price of its stock. After extensive discussion, the Company
Board determined that Parent's proposal represented the best proposal and
authorized Company management to execute a No-Shop Letter with Parent that would
expire on January 14, 2000.
Between December 23, 1999 and January 11, 2000, Parent completed its legal
and financial due diligence review of the Company.
On December 30, 1999, Parent's legal counsel provided the Company and its
legal counsel and Chase H&Q with drafts 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 Management Shareholders and their
respective legal counsel negotiated the Shareholders Agreement during such time.
Negotiations of the agreements were completed on January 12, 2000.
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 6, 2000, the Company Board met and received an update on the
status of the negotiations. Representatives of Chase H&Q and Hunton & Williams
participated in the discussions. Representatives of Chase H&Q presented an
evaluation of the Offer and the Merger. Representatives of Chase H&Q and Hunton
& Williams provided a business and legal summary of the principal business and
legal terms and provisions of the drafts of the Merger Agreement, the Stock
Option Agreement and the Shareholders Agreement.
On January 11, 2000, the Company Board held a special meeting to review the
proposed final terms and conditions of the Merger Agreement, the Stock Option
Agreement and the Shareholders Agreement. Representatives of Chase H&Q, Hale &
Dorr and Hunton & Williams participated in these discussions. At such meeting,
Chase H&Q provided its oral opinion (which it agreed to confirm in writing)
that, as of that date, the proposed consideration to be received by the
shareholders of the Company was fair to such shareholders, from a financial
point of view. In addition, the Company's legal advisors summarized for the
Company Board the most recent drafts of the Merger Agreement, the Stock Option
Agreement and the Shareholders Agreement, copies and summaries of which had been
distributed to the Board prior to the meeting. Following the Company Board's
review of the proposed final terms of the Offer and the Merger, the Company
Board determined (which determination was unanimous other than John H.
Martinson, who dissented and informed the Company Board that, although he did
not have a specific objection to Parent, he had consistently maintained
throughout the process that it was not the optimal time to sell the Company)
that the Merger Agreement, and the transactions contemplated thereby, including
the Offer and the Merger, are fair to and in the best interests of the Company's
shareholders, approved the Merger Agreement, the Shareholders Agreement, the
Stock Option Agreement and the transactions contemplated thereby, including the
Offer and the Merger, authorized the execution and delivery of the Merger
Agreement and the Stock Option Agreement, recommended that the Company's
shareholders accept the Offer and tender their Shares pursuant to the Offer, and
recommended that the Company's shareholders approve and adopt the Merger
Agreement.
On January 12, 2000, the Company, Parent and Purchaser executed and
delivered the Merger Agreement, the Company and Parent executed and delivered
the Stock Option Agreement, and Parent, Purchaser and the Management
Shareholders executed and delivered the Shareholders Agreement.
After execution and delivery of the Merger Agreement on January 12, 2000,
the Company issued a press release announcing the definitive agreement,
including the Offer and the Merger, a copy of which is filed as Exhibit 10 to
this Statement and is incorporated herein by reference.
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REASONS FOR THE RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS
In light of the Company Board's review of the Company's competitive and
financial position, recent operating results and prospects, the Company Board
determined that the Offer and the Merger, taken together, are fair to, and in
the best interests of, the Company and its shareholders. In making such
recommendation and in approving the Merger Agreement and the transactions
contemplated thereby, the Company Board considered a number of factors,
including, but not limited to, the following:
1. the presentations and views expressed by management of the Company
regarding, among other things: (a) the financial condition, results of
operations, cash flows, business and prospects of the Company, including
the prospects of, and uncertainties facing, the Company if it remains
independent; (b) the continued viability of the Company's current
strategies; (c) the likelihood of achieving maximum long-term value on a
stand-alone basis; (d) the strategic alternatives available to the Company
and the associated advantages and disadvantages; (e) the fact that no other
party had submitted to the Company a proposal as attractive as the
transaction proposed by Parent, either as to price or as to other terms and
conditions; (f) the fact that in view of the discussions held with various
parties, management of the Company believed it was unlikely that any other
party would propose an acquisition or strategic business combination that
would be more favorable to the Company and its shareholders than the Offer
and the Merger; and (g) the recommendation of the Offer and the Merger by
the management of the Company;
2. the terms and conditions of the Merger Agreement, including the
parties' representations, warranties and covenants, the conditions to their
respective obligations, the limited ability of Parent and Purchaser to
terminate the Offer or the Merger Agreement and the provision for payment
of all cash with no financing condition;
3. the financial condition, results of operations, cash flows and
prospects of the Company;
4. the prospects of the Company if the Company were to remain
independent and the risks inherent in remaining independent, including
competitive risks;
5. the extensive arms-length negotiations between the Company and
Parent that resulted in the $35.00 per Share price in cash;
6. the history of the Company's discussions with Parent and other
parties;
7. that the Offer and the Merger provide for a prompt cash tender
offer for all outstanding Shares to be followed by a Merger for the same
consideration, thereby enabling the Company's shareholders to obtain the
benefits of the transaction in exchange for their Shares at the earliest
possible time;
8. the current status of the industries in which the Company competes
and the technological and financial resources available to the Company's
competitors;
9. the likelihood of continued consolidation in the industries in
which the Company competes and the possibility that changes in those
industries, including the rapid evolution of technology, could adversely
affect the Company and its shareholders;
10. the recent trading price of the Company's common stock and that
the $35.00 per Share in cash to be paid in the Offer and the Merger
represents (a) a premium of approximately 17% over the $29.94 closing sale
price for the common stock on the Nasdaq Stock Market on January 11, 2000
(the last trading day prior to announcement of the Offer), and (b) a
premium of approximately 26% over the $27.69 closing sale price for the
common stock on the Nasdaq Stock Market on December 22, 1999 (the last
trading day prior to the Company Board's consideration of Parent's
proposal);
11. that in view of the efforts of the Company and Chase H&Q to find
strategic partners and potential acquirors, the likelihood that an
unconditional superior offer would ultimately be made was insufficient to
justify the risk of delay in proceeding with the favorable transaction with
Parent;
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12. the presentations of Chase H&Q made to the Company Board on
October 21, 1999, November 10, 1999, December 7 and 8, 1999, December 17,
1999, December 23, 1999, January 6, 2000 and January 11, 2000 and the
Fairness Opinion delivered to the Company Board at the January 11, 2000
meeting of the Company Board to the effect that, as of such date and based
upon and subject to certain matters stated in such opinion, the cash
consideration of $35.00 per Share to be received by holders of shares of
the Company common stock in the Offer and the Merger was fair, from a
financial point of view, to such holders; SHAREHOLDERS ARE URGED TO READ
THE FAIRNESS OPINION IN ITS ENTIRETY;
13. the factors considered at the Company Board meeting on December
23, 1999 at which the Company Board compared the Parent's proposal to the
First Other Party's proposal (see discussion in "-- Background" above).
14. the Merger Agreement permits the Company Board, in the exercise of
its fiduciary duties, to furnish information and data, and enter into
discussions and negotiations, in connection with a Superior Proposal and to
withdraw its recommendation of the Merger with Parent and Purchaser in
favor of a Superior Proposal to the Company's shareholders;
15. the Merger Agreement permits the Company Board, in the exercise of
its fiduciary duties, to terminate the Merger Agreement in favor of a
Superior Proposal, provided, that following such termination, the Company
must pay Parent a fee of $12.0 million (representing approximately 2.7% of
the total value of the consideration to be paid to shareholders in the
Offer and the Merger) plus Parent's reasonable out-of pocket expenses not
in excess of $1.5 million;
16. the terms and provisions of the Stock Option Agreement, including
(a) that the stock option provided for therein would become exercisable by
Parent only upon the occurrence of certain events, and (b) that the
aggregate amount that Parent may obtain pursuant to the Stock Option
Agreement and the termination fee and expense reimbursement cannot exceed
$22.0 million in the aggregate and that Parent indicated it was unwilling
to proceed with the transaction without the Stock Option Agreement and the
fee indicated above; and
17. the business reputation of Parent and its management, and Parent's
financial strength, including its ability to finance the Offer.
The Company Board did not assign relative weights to the above factors or
determine that any factor was of particular importance. Rather, the Company
Board viewed its position and recommendations as being based on the totality of
the information presented to and considered by it. In addition, it is possible
that different members of the Company Board assigned different weights to the
factors.
The Company Board recognized that, while the consummation of the Offer
gives the Company's shareholders the opportunity to realize a premium over the
price at which the Shares were traded before the public announcement of the
Offer, tendering in the Offer would eliminate the opportunity for such
shareholders to participate in the future growth and profits of the Company. The
Company Board believes that the loss of the opportunity to participate in the
growth and profits of the Company was reflected in the Offer Price of $35.00 per
Share. The Company Board also recognized that there can be no assurance as to
the level of growth or profits to be attained by the Company in the future.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
Pursuant to the terms of the engagement letter dated August 30, 1999 (the
"Chase H&Q Engagement Letter"), the Company retained Chase H&Q as its financial
advisor in considering the Company's financial and strategic alternatives,
including the possible sale of (or other extraordinary transactions involving)
the Company and its subsidiaries.
The Company agreed in the Chase H&Q Engagement Letter to pay Chase H&Q in
cash (i) a non-refundable retainer of $50,000 payable upon signing the Chase H&Q
Engagement Letter, (ii) $350,000 upon delivery of the Fairness Opinion and (iii)
a transaction fee of 1% of the transaction value, less
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retainer fees and Fairness Opinion fees previously paid, which fee shall be
approximately $4.5 million, upon consummation of the Offer and the Merger.
Whether or not any transaction is proposed or consummated, the Company has
agreed to reimburse Chase H&Q for reasonable out-of-pocket expenses, including
reasonable legal fees and expenses. In the Chase H&Q Engagement Letter, the
Company agreed to indemnify Chase H&Q against certain liabilities arising out of
Chase H&Q's engagement.
Chase H&Q has rendered various investment banking and other advisory
services to the Company and its affiliates in the past for which Chase H&Q
received customary compensation. In the ordinary course of business, Chase H&Q
and its affiliates may actively trade securities of the Company, Parent and
their affiliates for their own accounts and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
Except as disclosed herein, neither the Company nor any person acting on
its behalf has employed, retained or agreed to compensate any person to make
solicitations or recommendations to the shareholders concerning the Offer or the
Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) During the past 60 days, no transactions in Shares have been effected
by the Company or, to the best of the Company's knowledge, by any of its
executive officers, directors, affiliates or subsidiaries (other than ordinary
course purchases under the Company's 1997 Employee Stock Purchase Plan).
(b) To the best knowledge of the Company, all of its executive officers,
directors (other than John H. Martinson), affiliates and subsidiaries currently
intend to tender pursuant to the Offer all Shares held of record or beneficially
owned by such persons (other than shares issuable upon the exercise of Options
and Shares, if any, which if tendered could cause such persons to incur
liability under the provisions of Section 16(b) of the Exchange Act), subject to
and consistent with any fiduciary obligations of such persons.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as set forth in this Statement, the Company is not engaged in
any negotiation in response to the Offer that relates to or would result in (i)
an extraordinary transaction, such as a merger or reorganization, involving the
Company or any subsidiary of the Company, (ii) a purchase, sale or transfer of a
material amount of assets by the Company or any subsidiary of the Company, (iii)
a tender offer for or other acquisition of securities by or of the Company or
(iv) any material change in the present capitalization or dividend policy of the
Company.
(b) Except as described in Item 3(b) or 4 above (the provisions of which
are hereby incorporated by reference), there are no transactions, Board of
Directors resolutions, agreements in principle or signed contracts in response
to the Offer that relate to or would result in one or more of the events
referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
Section 14(f) Information Statement
The Information Statement attached as Schedule I hereto and filed as
Exhibit 2 to this Statement is being furnished to the Company's shareholders
pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated under
the Exchange Act in connection with Parent's right pursuant to the Merger
Agreement (after acquiring any of the Shares pursuant to the Offer) to designate
persons to the Company Board other than at a meeting of the shareholders of the
Company.
Virginia Stock Corporation Act
Virginia Affiliated Transactions Statute. The Company is subject to
Article 14 (the "Affiliated Transactions Statute") of the VSCA. The Affiliated
Transactions Statute generally prohibits a publicly
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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) the
transaction in which the person became an interested shareholder was approved in
advance by a majority of the disinterested directors 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% 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 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% 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.
As a part of the Company Board's approval of the Merger Agreement, the
Option Agreement and the Shareholders Agreement and the transactions
contemplated thereby, the Company Board also took action to make the provisions
of the Affiliated Transactions Statute not applicable to the acquisition of
Shares pursuant to the Offer, the Merger, the exercise of the Company Option and
the Shareholders Agreement.
Control Share Acquisition Statute. Article 14.1 of the VSCA (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 voting 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 any of the following
ranges or to move upward from one range into another: (i) at least 20% but less
than 33 1/3%; (ii) at least 33 1/3% but less than 50%; or (iii) 50% or more, of
such votes.
On January 11, 2000, the Company Board amended the Bylaws of the Company to
provide that the Control Share Acquisition Statute shall not apply to any
acquisition of the capital stock of the Company. Therefore, the provisions of
the Control Share Acquisition Statute are not applicable to the Offer, the
Merger, the Company Option, the Shareholders Agreement and the other
transactions contemplated by the Merger Agreement, the Option Agreement and the
Shareholders Agreement.
Antitrust -- United States
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 United States Department of Justice (the "Antitrust
Division") and the FTC and certain waiting period requirements have been
satisfied. The acquisition of the Shares by Purchaser pursuant to the Offer is
subject to such requirements.
Under the provisions of the HSR Act applicable to the Offer, the purchase
of Shares under the Offer may not be consummated until the expiration of a
15-day calendar day waiting period following the filing by Parent of a
Notification and Report Form with respect to the Offer. Such filing is expected
to be made as soon as practicable from the day hereof. The Antitrust Division or
the FTC may extend the waiting
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periods of such filing by requesting additional information or documentary
material relevant to the acquisition. If such a request is made, the waiting
period will be extended until 11:59 P.M., New York City time, on the tenth day
after Parent has substantially complied with such request. Thereafter, such
waiting periods can be extended only by court order or consent. Although the
Company is required to file certain information and documentary material with
the Antitrust Division and the FTC in connection with the Offer, neither the
Company's failure to make such filings nor a request to the Company from the
Antitrust Division for additional information or documentary material will
extend the waiting period. However, if the Antitrust Division or the FTC raises
substantive issues in connection with a proposed transaction, the parties
frequently engage in negotiations with the relevant governmental agency
concerning possible means of addressing these issues and may agree to delay
consummation of the transaction while such negotiations continue.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions. At any time before or after the consummation
of any such transactions, the Antitrust Division or the FTC could,
notwithstanding termination of the waiting period, take such action under the
antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the purchase of the Shares pursuant to the Offer or
seeking divestiture of the Shares so acquired or divestiture of substantial
assets of Parent or the Company or any of their respective subsidiaries. State
attorneys general may also bring legal actions under the antitrust laws, and
private parties may bring such actions under certain circumstances. While the
Company does not believe that the acquisition of the Shares by Purchaser will
violate the antitrust laws, there can be no assurance that a challenge to the
Offer on antitrust grounds will not be made, or if such a challenge is made,
what the result will be.
Non-U.S. Regulatory Approvals
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.
Dissenters' Rights
No dissenters' or appraisal rights are available in connection with the
Offer. No shareholder is entitled to dissenters' 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 Board 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 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
24
<PAGE> 25
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.
ITEM 9. MATERIALS TO BE FILED AS EXHIBITS
<TABLE>
<S> <C>
Exhibit 1 Agreement and Plan of Merger, dated as of January 12, 2000,
by and among Parent, Purchaser and the Company.
Exhibit 2 The Company's Information Statement pursuant to Section
14(f) under the Exchange Act.*
Exhibit 3 Article 5 of the Company's Articles of Incorporation.
Exhibit 4 Article III, Section 14 of the Company's Bylaws.
Exhibit 5 Stock Option Agreement, dated as of January 12, 2000,
between Parent and the Company.
Exhibit 6 Shareholders Agreement, dated as of January 12, 2000, among
Parent and certain officers and directors of the Company
named therein.
Exhibit 7 Mutual Non-Disclosure Agreement, dated as of October 14,
1999, between SSI, a subsidiary of Parent, and the Company.
Exhibit 8 Letter Agreement, dated December 22, 1999, between Parent
and the Company.
Exhibit 9 Fairness Opinion of Hambrecht & Quist LLC, dated January 12,
2000.*
Exhibit 10 Press Release issued by the Company on January 12, 2000.
Exhibit 11 Letter to Shareholders, dated January 14, 2000.*
Exhibit 12 Letter, dated May 4, 1995, from the Company to Timothy A.
Davenport (incorporated herein by reference to Exhibit 10.16
of the Company's Registration Statement on Form S-1 (the
"Form S-1") filed on August 8, 1997, registration statement
no. 333-33275).
Exhibit 13 Employment Agreement, dated May 17, 1995, between the
Company and James F. Petersen (incorporated herein by
reference to Exhibit 10.15 of the Form S-1).
Exhibit 14 Revised Employment Agreement, dated January 27, 1999,
between the Company and James F. Petersen (incorporated
herein by reference to Exhibit 10.19 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1999).
Exhibit 15 Employee Incentive Stock Option Plan of the Company, as
amended (incorporated herein by reference to Exhibit 10.1 of
the Form S-1).
Exhibit 16 Amended and Restated 1992 Stock Option Plan of the Company
(incorporated herein by reference to Exhibit 10.2 of the
Form S-1).
Exhibit 17 1997 Employee Stock Purchase Plan of the Company
(incorporated herein by reference to Exhibit 10.3 of the
Form S-1).
Exhibit 18 1997 Stock Incentive Plan of the Company (incorporated
herein by reference to Exhibit 10.4 of the Form S-1).
Exhibit 19 1997 Director Stock Option Plan of the Company (incorporated
herein by reference to Exhibit 10.5 of the Form S-1).
</TABLE>
- ---------------
* Included in copies mailed to the shareholders of the Company.
25
<PAGE> 26
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
BEST SOFTWARE, INC.
By: /S/ Timothy A Davenport
------------------------------------
Name: Timothy A. Davenport
Title: Chairman of the Board,
President and Chief
Executive Officer
Dated: January 14, 2000
26
<PAGE> 27
EXHIBIT INDEX
<TABLE>
<S> <C>
Exhibit 1 Agreement and Plan of Merger, dated as of January 12, 2000,
by and among Parent, Purchaser and the Company.
Exhibit 2 The Company's Information Statement pursuant to Section
14(f) under the Exchange Act.*
Exhibit 3 Article 5 of the Company's Articles of Incorporation.
Exhibit 4 Article III, Section 14 of the Company's Bylaws.
Exhibit 5 Stock Option Agreement, dated as of January 12, 2000,
between Parent and the Company.
Exhibit 6 Shareholders Agreement, dated as of January 12, 2000, among
Parent and certain officers and directors of the Company
named therein.
Exhibit 7 Mutual Non-Disclosure Agreement, dated as of October 14,
1999, between a subsidiary of Parent and the Company.
Exhibit 8 Letter Agreement, dated December 22, 1999, between Parent
and the Company.
Exhibit 9 Fairness Opinion of Hambrecht & Quist LLC, dated January 12,
2000.*
Exhibit 10 Press Release issued by the Company on January 12, 2000.
Exhibit 11 Letter to Shareholders, dated January 14, 2000.*
Exhibit 12 Letter, dated May 4, 1995, from the Company to Timothy A.
Davenport (incorporated herein by reference to Exhibit 10.16
of the Company's Registration Statement on Form S-1 (the
"Form S-1") filed on August 8, 1997, registration statement
no. 333-33275).
Exhibit 13 Employment Agreement, dated May 17, 1995, between the
Company and James F. Petersen (incorporated herein by
reference to Exhibit 10.15 of the Form S-1).
Exhibit 14 Revised Employment Agreement, dated January 27, 1999,
between the Company and James F. Petersen (incorporated
herein by reference to Exhibit 10.19 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1999).
Exhibit 15 Employee Incentive Stock Option Plan of the Company, as
amended (incorporated herein by reference to Exhibit 10.1 of
the Form S-1).
Exhibit 16 Amended and Restated 1992 Stock Option Plan of the Company
(incorporated herein by reference to Exhibit 10.2 of the
Form S-1).
Exhibit 17 1997 Employee Stock Purchase Plan of the Company
(incorporated herein by reference to Exhibit 10.3 of the
Form S-1).
Exhibit 18 1997 Stock Incentive Plan of the Company (incorporated
herein by reference to Exhibit 10.4 of the Form S-1).
Exhibit 19 1997 Director Stock Option Plan of the Company (incorporated
herein by reference to Exhibit 10.5 of the Form S-1).
</TABLE>
- ---------------
* Included in copies mailed to the shareholders of the Company.
<PAGE> 1
EXHIBIT 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.
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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
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<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.
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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-
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<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
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<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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<PAGE> 19
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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<PAGE> 20
(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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<PAGE> 21
(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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<PAGE> 23
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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<PAGE> 24
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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<PAGE> 25
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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<PAGE> 65
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
58
<PAGE> 66
(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
59
<PAGE> 67
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
60
<PAGE> 68
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.
61
<PAGE> 69
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
to Agreement and
Plan of Merger
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
A-1
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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
A-2
<PAGE> 72
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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<PAGE> 73
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.
A-4
<PAGE> 74
EXHIBIT I
to Agreement and
Plan of Merger
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
I-1
<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
(a) For purposes of this Plan of Merger:
(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.
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.
I-4
<PAGE> 78
ANNEX A
to Plan
of Merger
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 2
SCHEDULE I
BEST SOFTWARE, INC.
11413 ISAAC NEWTON SQUARE
RESTON, VIRGINIA 20190
INFORMATION STATEMENT PURSUANT TO SECTION 14(F) OF THE
SECURITIES EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
GENERAL
This Information Statement is being mailed on or about January 14, 2000 as
part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of Best Software, Inc., a Virginia corporation (the
"Company"), to the holders of record of shares of common stock, no par value per
share, of the Company (the "Shares" or the "Company Common Stock"). You are
receiving this Information Statement in connection with the possible election of
persons designated by Parent (as defined below) to a majority of the seats on
the Board of Directors of the Company (the "Company Board"). As of January 11,
2000, there were 11,826,614 shares of the Company Common Stock outstanding.
On January 12, 2000, the Company, The Sage Group plc, a company organized
under the laws of England ("Parent"), and Bobcat Acquisition Corp., a Virginia
corporation and a wholly owned subsidiary of Parent ("Purchaser"), entered into
an Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which (i)
Parent shall cause Purchaser to commence a tender offer (the "Offer") for all
outstanding Shares at a price of $35.00 per Share, net to the seller in cash,
and (ii) Purchaser shall be merged with and into the Company (the "Merger"). As
a result of the Offer and the Merger, the Company will become a wholly owned
subsidiary of Parent.
The Merger Agreement provides that, promptly after the purchase of Shares
pursuant to the Offer, Parent shall be entitled to designate such number of
directors (the "Parent Designees") to the Company Board as will give Parent
representation proportionate to its ownership interest, subject to certain
conditions. The Merger Agreement requires the Company to take such action as
Parent may request to cause the Parent Designees to be elected to the Company
Board under the circumstances described therein. This Information Statement is
required by Section 14(f) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and Rule 14f-1 thereunder.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used and not otherwise
defined shall have the meaning set forth in the Schedule 14D-9.
The information contained in this Information Statement concerning Parent
and Purchaser has been furnished to the Company by Parent. The Company assumes
no responsibility for the accuracy or completeness of such information.
RIGHT TO DESIGNATE DIRECTORS; PARENT DESIGNEES
The Merger Agreement provides that, promptly upon the purchase of and
payment by Purchaser for Shares pursuant to the Offer and from time to time
thereafter as Shares are acquired by the Purchaser, Parent will be entitled to
designate such number of directors, rounded up to the next whole number, on the
Company Board as shall give Parent, subject to compliance with Section 14(f) of
the Exchange Act and Rule 14f-1 promulgated thereunder, representation on the
Company Board equal to the product of the total number of directors on the
Company Board (giving effect to the directors elected pursuant to this sentence)
multiplied by the percentage that the aggregate number of Shares beneficially
owned by Purchaser, Parent and any of their affiliates bears to the total number
of Shares then outstanding, provided, however, that in the event that Parent
does not purchase and pay for Shares pursuant to the Offer which represent at
least a majority of the outstanding Shares (on a fully diluted basis), Parent
shall not be able to designate more than two directors. The Company shall, upon
the request of Purchaser, use its reasonable best efforts to cause the Parent
Designees to be so elected, including, if necessary, increasing the size of the
Company Board or securing the resignations of incumbent directors.
S-1
<PAGE> 2
The following table sets forth certain information with respect to
individuals Parent may designate as the Parent Designees (including age as of
the date hereof, current principal occupation or employment and five-year
employment history). Unless otherwise noted, (a) each individual is a citizen of
the United Kingdom, and (b) the business address of each designee is c/o Sage
U.S. Holdings, Inc., 17950 Preston Road, Suite 800, Dallas, Texas 75252.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AND ADDRESS AGE MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ---------------- --- --------------------------------------------------
<S> <C> <C>
Aidan John Hughes 38 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 42 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 42 Director 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 from 1988 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 45 Director, Chief Officer and Corporate Secretary of
c/o Sage Software, Inc. Bobcat Acquisition Corp. since formation; Vice
56 Technology Drive President, Finance, Chief Financial Officer and
Irvine, CA 92618 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 Corpo-
ration, March 1988 through July 1996. Mr.
Eckstaedt is a citizen of the United States.
</TABLE>
S-2
<PAGE> 3
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AND ADDRESS AGE MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ---------------- --- --------------------------------------------------
<S> <C> <C>
Michael Edward Wilson Jackson 49 Director and President of Bobcat Acquisition Corp.
c/o The Sage Group plc since formation; Director of The Sage Group plc
The Sage Group House from October 1988 to present, and Chairman from
Benton Park Road October 1997 to present; Director of Sagesoft Ltd.
Newcastle Upon Tyne since October 1988; Director of Hat Pin plc since
NE7 7L7 June 1996; Director of Bywel Holdings Ltd. since
England 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 Plant Ltd. 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 Februa-
ry 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 Re-
sources 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.
</TABLE>
Parent has informed the Company that each of the individuals listed above
has consented to act as a director, if so designated. If necessary, Parent may
choose additional or other Parent Designees, subject to the requirements of Rule
14f-1.
Based solely on the information set forth in the Offer to Purchase, none of
the Parent Designees (i) is currently a director of, or holds any position with,
the Company, (ii) has a familial relationship with any directors or executive
officers of the Company, or (iii) to the best knowledge of Parent, beneficially
owns any securities (or any rights to acquire such securities) of the Company.
The Company has been advised by Parent that, to the best of Parent's knowledge,
none of the Parent Designees has been involved in any transactions with the
Company or any of its directors, officers, or affiliates which are required to
be disclosed pursuant to the rules and regulations of the Securities and
Exchange Commission (the "SEC"), except as may be disclosed herein.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The Company's Articles of Incorporation provide that the Company shall have
at least three and not more than eight directors, the exact number to be fixed
by resolution of the Board of Directors. The Board has three classes, each of
whose members serve for a staggered three-year term.
S-3
<PAGE> 4
Pursuant to a 1995 shareholders voting agreement (the "Voting Agreement")
between Mr. Petersen and Edison Venture Fund, L.P. ("Edison"), Edison agreed to
vote its shares in favor of Mr. Petersen's election as a director as well as for
the election of a nominee put forward by Mr. Petersen. The Voting Agreement
terminated upon the closing of the Company's initial public offering.
Mr. Davenport was initially appointed to the Board of Directors as a
condition of his employment.
Executive officers and directors of the Company, and their ages as of
January 11, 1999, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Timothy A. Davenport................. 43 Chairman of the Board, Chief Executive Officer
and President
David N. Bosserman................... 43 Executive Vice President and Chief Financial
Officer
James F. Foster...................... 45 Executive Vice President of Product Strategy
and Technology
Elvin J. Monteleone.................. 50 Executive Vice President of Sales, Marketing
and Services
Robert H. Skinner.................... 48 Executive Vice President of Business
Development
David L.G. Horn...................... 42 Vice President, Technical Support
Elaine Kelly......................... 36 Vice President, Marketing
Shelley Reback....................... 40 Vice President, Human Resources and Legal
Affairs
Andreas Hoynigg...................... 38 General Manager of European Operations and
Managing Director of Best Software Germany
GmbH
James F. Petersen(1)................. 55 Director
Herbert R. Brinberg(3)............... 73 Director
Richard A. Lefebvre(1)(2)............ 52 Director
John H. Martinson(1)(2)(3)........... 51 Director
W. Frank King........................ 60 Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee
(2) Member of the Option Subcommittee of the Compensation Committee
(3) Member of the Audit Committee
Timothy A. Davenport was appointed Chairman of the Board in April 1999. He
was appointed President, Chief Executive Officer and a director of the Company
in June 1995. From March 1987 to June 1995, Mr. Davenport served as Vice
President, Developer Tools Group, and Vice President, Graphics Division, for
Lotus Development Corporation ("Lotus"), a computer software company that
markets and develops productivity and work group applications. Prior to joining
Lotus, Mr. Davenport was employed from March 1985 to March 1987 as Vice
President of Product Marketing for Decision Resources, a division of Ashton-Tate
Corporation, a company that developed business graphics applications. Mr.
Davenport is a director of Axent Technologies, Inc., a provider of
enterprise-wide information security solutions.
David N. Bosserman has served as the Company's Executive Vice President,
Chief Financial Officer and Treasurer since October 1996. Previously, he served
as the Company's Vice President, Corporate Finance from June 1993 to September
1996, and Director, Finance and Operations from May 1992 to May 1993. From
January 1985 to May 1992, Mr. Bosserman served in various positions, leading to
Senior Manager, at Deloitte & Touche.
James F. Foster became Executive Vice President of Product Strategy and
Technology effective January 1, 2000. He has also served as President of Abra
Software, Inc., a wholly owned subsidiary of the Company ("Abra Software"),
since April 1993. From September 1992 until April 1993, Mr. Foster served as
Chief Operating Officer of Abra Software. Prior to joining Abra Software, Mr.
Foster was employed from July 1984 to September 1992 by Dun & Bradstreet
Software Services, Inc., a business application
S-4
<PAGE> 5
software provider, where he held a number of positions in the human resources
software area, most recently as Director of Sales and Marketing for the personal
computer human resources division.
David L.G. Horn has served as the Company's Vice President, Technical
Support since December 1997. Previously, he served as the Company's Vice
President, FAS Products Group since joining the Company in October 1995. From
February 1984 to October 1995, Mr. Horn was employed by Hewlett-Packard Co., a
manufacturer of electronic products, in various capacities, most recently as
Future Products Manager for its office products division.
Andreas Hoynigg became General Manager of the European Operations in March
1998 when the Company acquired HR Management Software GmbH ("HRS"). Dr. Hoynigg
purchased HRS in 1990 from an Austrian conglomerate, which started HRS in 1987.
He has served as the Managing Director since the purchase. Dr. Hoynigg was
previously employed by EFS where he served as a management consultant.
Elaine Kelly has served as Vice President, Marketing since September 1996.
From October 1993 to September 1996, Ms. Kelly served as a Director of
Marketing. From October 1990 until October 1993, Ms. Kelly served as Marketing
Manager of the Company. From July 1988 to September 1990, Ms. Kelly served as
Manager of Marketing Services for Netron Inc., a Canadian software company.
Elvin T. Monteleone was appointed Executive Vice President of Sales,
Marketing and Services effective January 1, 2000. Mr. Monteleone joined the
Company in January 1999 as Executive Vice President of the Financial
Applications Product Group. From June 1996 to January 1999, Mr. Monteleone
served as Vice President, Enterprise Alliances for Seagate Software, a leader in
business intelligence tools and solutions. From August 1993 to June 1996, Mr.
Monteleone served as Vice President of Marketing and Director of Sales at
Holistic Systems, a UK based OLAP tools and analytic applications provider that
was acquired by Seagate Technology in 1996.
Shelley Reback has served as Vice President, Human Resources and Legal
Affairs since June 1997. From September 1989 until June 1997, she served as
Corporate Counsel for the Company. From December 1987 through August 1989, Ms.
Reback was employed by Genex Corporation ("Genex"), a biotechnology company, as
Assistant Counsel. Prior to joining Genex, Ms. Reback was employed by the law
firm of Fenwick & West in Palo Alto, California.
Robert H. Skinner was appointed Executive Vice President of Business
Development effective January 1, 2000. He served as Senior Vice President, Sales
from April 1996 to December 31, 1999. Previously, he served as the Company's
Vice President of Sales and Marketing for FAS from April 1995 to April 1996, and
as Director of Sales from June 1992 to April 1995. From December 1982 to June
1992, Mr. Skinner served as Vice President of Sales and Marketing for Trinet,
Inc., a business information marketing company.
James F. Petersen co-founded the Company in 1982 and served as the
Company's Chairman of the Board from its inception until April 1999. He served
as President and Chief Executive Officer of the Company from 1982 to June 1995.
Before founding the Company, Mr. Petersen was Vice President and Treasurer of
Aspen Systems Corporation, an electronic information and publishing company.
Herbert R. Brinberg has served as a director of the Company since 1990.
Since 1990, Dr. Brinberg has served as President and Principal of Parnassus
Associates International, a company that assists organizations with information
and technology management. From 1978 to 1990, Dr. Brinberg was President and
Chief Executive Officer of Wolters Kluwer U.S. Corporation, an international
publishing company. Dr. Brinberg also serves as a director of K&F Industries,
Inc., and Brill Academic Publishers.
Richard A. Lefebvre became a director of the Company in February 1996. From
January 1989 through July 1997, Mr. Lefebvre served as Chairman and Chief
Executive Officer of Axent Technologies, Inc. ("Axent"), a provider of
enterprise-wide information security solutions. From July 1997 through December
1998, Mr. Lefebvre served as Chairman of Axent. Mr. Lefebvre also is a director
of Axent.
John H. Martinson has served as a director of the Company since 1988. Since
1986, Mr. Martinson has been a general partner of Edison Partners, L.P., which
is the general partner of Edison Venture Fund,
S-5
<PAGE> 6
L.P. ("Edison"), a venture capital partnership and a former substantial
shareholder of the Company. Mr. Martinson is a director of Dendrite
International, Inc. and nine private companies. He is also a director and
Chairman of the National Venture Capital Association and a director of the New
Jersey Technology Council.
W. Frank King became a director of the Company in July 1998. From October
1992 through October 1998 he served as the President and Chief Executive Officer
of PSW Technologies, Inc. (formerly a division of Pencom, Inc.), a provider of
software related engineering, development, and support services. From 1988 to
1992, Dr. King served as Senior Vice President of Development for Lotus
Development Corporation, and from 1969 to 1988, Dr. King was employed by IBM
Corporation where his final position was as the Vice President of Development,
Entry System Division. Dr. King also serves as a director of Auspex Systems,
Inc., Cortelco Systems, Inc., Excaliber Technologies Corporation, Natural
Microsystems, Inc., PSW Technologies, Inc. and Perficient, Inc.
Officers of the Company serve at the pleasure of the Board of Directors.
ADDITIONAL INFORMATION CONCERNING THE BOARD OF DIRECTORS
There are no family relationships among any of the directors or executive
officers of the Company.
The Company's Board of Directors held four regular meetings and seven
special meetings in 1999. The Board has an Audit Committee, a Compensation
Committee and an Option Subcommittee of the Compensation Committee. During 1999,
no director attended less than 75% of the aggregate number of meetings of the
Board, and the committees of the Board, on which he served that were held during
the year.
Committees of the Board of Directors. The Compensation Committee of the
Board consists of Messrs. Petersen, Lefebvre and Martinson. Messrs. Lefebvre and
Martinson are both non-employee directors of the Company. The purpose of the
Compensation Committee is to establish remuneration levels for officers of the
Company and to establish and administer executive compensation programs. The
Compensation Committee held one meeting in 1999.
The Option Subcommittee of the Compensation Committee of the Board consists
of Mr. Lefebvre and Mr. Martinson. Messrs. Lefebvre and Martinson are both
non-employee directors of the Company. The purpose of the Option Subcommittee is
to administer the Company's 1997 Stock Incentive Plan and any other stock
benefit plans. The Option Subcommittee of the Compensation Committee held three
meetings in 1999.
The Audit Committee of the Board consists of Dr. Brinberg and Mr.
Martinson. Dr. Brinberg and Mr. Martinson are both non-employee directors of the
Company. The Audit Committee recommends to the Board the independent public
accountants to be selected to audit the Company's annual financial statements
and approves any special assignments given to such accountants. The Audit
Committee also reviews the planned scope of the annual audit, any changes in
accounting principles and the effectiveness and efficiency of the Company's
internal accounting staff. The Audit Committee held two meetings in 1999.
Director Compensation. As compensation for serving on the Board of
Directors, each director who is not employed by the Company or serving on the
Board as a representative of an institutional investor (an "outside director")
receives an annual retainer of $6,000, plus a fee of $2,000 for attendance at
each meeting of the full Board and $500 for each committee meeting. In addition,
each outside director elected or reelected after August 1997 receives an option
to purchase 22,500 shares of Common Stock under the Company's 1997 Director
Stock Option Plan at a per share exercise price equal to the fair market value
of the Common Stock on the date of grant, such option to vest in three equal
installments at each successive Annual Meeting. No director options were granted
during 1999 because no outside directors were elected or reelected.
S-6
<PAGE> 7
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and persons who own beneficially more than 10% of
the Company's Common Stock to file reports of ownership and changes in ownership
of such stock with the Securities and Exchange Commission. Directors, executive
officers and greater than 10% shareholders are required by Securities and
Exchange Commission regulations to furnish the Company with copies of all such
forms they file. To the Company's knowledge, based solely on a review of the
copies of such reports furnished to the Company and written representations that
no other reports were required, its directors, executive officers and greater
than 10% shareholders complied, through the end of fiscal 1999, with all
applicable Section 16(a) filing requirements.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information concerning (i) those persons
known by management of the Company to own beneficially more than 5% of the
Company's outstanding Common Stock, (ii) the directors of the Company, (iii) the
Named Executive Officers (as defined in the Summary Compensation Table included
elsewhere herein), and (iv) all current directors and executive officers of the
Company as a group. Except as otherwise indicated in the footnotes below, such
information is provided as of December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF
NAME OF BENEFICIAL OWNER SHARES(1) PERCENT
------------------------ --------- -------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS
James F. Petersen........................................... 298,806(2) 2.53%
Timothy A. Davenport........................................ 327,911(3) 2.73%
David N. Bosserman.......................................... 37,551(4) *
James F. Foster............................................. 80,989(5) *
Robert H. Skinner........................................... 58,432(6) *
Elvin Monteleone............................................ 27,000(7) *
John H. Martinson........................................... 262,639(8) 2.22%
Herbert R. Brinberg......................................... 19,375(9) *
Richard A. Lefebvre......................................... 18,300(10) *
W. Frank King............................................... 6,750(11) *
All current directors and executive officers as a group (13
persons).................................................... 1,297,598(12) 26.6%
OTHER 5% SHAREHOLDERS
Waddell & Reed Asset Management Company..................... 1,204,500(13) 10.19%
6300 Lamar Avenue
Overland Park, KS 66201-9217
Brown Capital Management, Inc............................... 1,091,200(14) 9.23%
809 Cathedral Street
Baltimore, MD 21201
Lord, Abbett & Co........................................... 857,140(15) 7.25%
General Motors Building
767 Fifth Ave., 11th Floor
New York, NY 10153
</TABLE>
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<PAGE> 8
<TABLE>
<CAPTION>
NUMBER OF
NAME OF BENEFICIAL OWNER SHARES(1) PERCENT
------------------------ --------- -------
<S> <C> <C>
Arbor Capital Management, LLC............................... 713,450(16) 6.04%
120 South Sixth Street, Suite 1000
Minneapolis, MN 55402
Chartwell Investment Partners............................... 652,700(17) 5.52%
1235 West Lakes Drive, Suite 330
Berwyn, PA 19312-2412
</TABLE>
- ---------------
* Less than one percent
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of Common Stock subject to options and warrants held by that person
that are exercisable, or will become exercisable within 60 days after
January 31, 2000, are deemed outstanding. Such shares, however, are not
deemed outstanding for purposes of computing the percentage ownership of
any other person. Unless otherwise indicated in the footnotes to this
table, the persons and entities named in the table have sole voting and
sole investment power with respect to all shares beneficially owned,
subject to community property laws where applicable. Unless otherwise
indicated, the address of each of the individuals listed in the table is:
c/o Best Software, Inc., 11413 Isaac Newton Square, Reston, VA 20190.
(2) Excludes 69,925 shares held by two irrevocable trusts established by Mr.
Petersen for the benefit of members of his family. Mr. Petersen is not a
trustee or beneficiary of either trust, and disclaims beneficial ownership
of these shares. Includes 100,136 shares held by a trust established by Mr.
Petersen for the benefit of Nancy Petersen and 198,670 shares held by the
James F. Petersen Charitable Remainder Unitrust. Mr. Petersen serves as a
trustee and has voting control of both trusts.
(3) Includes 195,000 shares issuable upon exercise of stock options that are
exercisable immediately, 10,000 shares issuable upon exercise of stock
options that are exercisable within 60 days after January 1, 2000, and 900
shares that are held in the names of his minor children.
(4) Includes 33,900 shares issuable upon exercise of stock options that are
exercisable immediately, and 200 shares that are held in the names of his
minor children.
(5) Includes 80,000 shares issuable upon exercise of stock options that are
exercisable immediately.
(6) Includes 51,000 shares issuable upon exercise of stock options that are
exercisable immediately, and 1,500 shares issuable upon exercise of stock
options that are exercisable within 60 days after January 1, 2000.
(7) Includes 15,000 shares issuable upon exercise of stock options that are
exercisable immediately, and 12,000 shares issuable upon exercise of stock
options that are exercisable within 60 days after January 1, 2000.
(8) Includes 15,900 shares issuable held in the names of his minor children.
(9) Includes 15,000 shares issuable upon exercise of stock options that are
exercisable immediately.
(10) Includes 11,100 shares issuable upon exercise of stock options that are
exercisable immediately, and 3,600 shares issuable upon exercise of stock
options that are exercisable within 60 days after January 1, 2000.
(11) Includes 6,250 shares issuable upon exercise of stock options that are
exercisable immediately.
(12) Includes 444,450 shares issuable upon exercise of stock options that are
exercisable immediately, and 27,100 shares issuable upon exercise of stock
options that are exercisable within 60 days after January 1, 2000.
(13) Share amounts as of November 30, 1999, as reported in Schedule 13G filed
with the Securities Exchange Commission on December 9, 1999.
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<PAGE> 9
(14) Share amounts as of September 30, 1999, as reported in Schedule 13F filed
with the Securities Exchange Commission on November 10, 1999.
(15) Share amounts as of September 30, 1999, as reported in Schedule 13F filed
with the Securities Exchange Commission on October 28, 1999.
(16) Share amounts as of September 30, 1999, as reported in Schedule 13F filed
with the Securities Exchange Commission on October 29, 1999.
(17) Share amounts as of September 30, 1999, as reported in Schedule 13F filed
with the Securities Exchange Commission on October 29, 1999.
S-9
<PAGE> 10
EXECUTIVE COMPENSATION
Pursuant to Securities and Exchange Commission rules for proxy statement
disclosure of executive compensation, the Compensation Committee ("Committee")
of the Board of Directors has prepared the following report on Executive
Compensation. The Committee considers this report to clearly describe the
current executive compensation program of the Company, including the underlying
philosophy of the program and the specific performance criteria on which
executive compensation is based. This report also discusses in detail the
compensation paid to the Company's Chief Executive Officer, Timothy A.
Davenport, for the fiscal year ended December 31, 1999 ("fiscal 1999").
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report by the Compensation Committee of the Board discusses the
Committee's compensation objectives and policies applicable to the Company's
executive officers. The report reviews the Committee's policy generally with
respect to the compensation of all executive officers as a group for fiscal 1999
and specifically reviews the compensation established for the Company's Chief
Executive Officer as reported in the Summary Compensation Table. The Committee
is composed of two non-employee directors (Messrs. Martinson and Lefebvre) of
the Company and one employee director (Mr. Petersen).
COMPENSATION PHILOSOPHY
The Company's executive compensation program is designed to reward
executives based on the business performance of the Company, both short and
long-term, thereby aligning the interests of executive officers with the
interests of the Company's shareholders. The Company's executive compensation
program also is aimed at attracting and retaining productive executives by
providing competitive total compensation packages. To achieve these objectives,
the Compensation Committee utilizes a combination of base salary, short-term
incentive compensation in the form of a cash bonus, and long-term incentive
compensation in the form of stock options.
COMPENSATION PLAN
Each year, the Committee reviews the Company's executive compensation
program. In this review, the Committee assesses the competitiveness of the
Company's executive compensation, studies the compensation packages for
executives in comparable roles performing at comparable levels at other public
companies in the same or related industries, and analyzes the Company's
financial performance for the previous fiscal year and other factors that the
Committee believes are relevant. The Committee's primary goal is to provide for
a reasonable base salary component while also providing for higher short-term
and long-term incentive rewards and bonuses based on the Company's performance.
Each element of the Company's executive compensation program is discussed
below.
Base Salaries
Base annual salaries for executive officers are initially determined by
evaluating the responsibilities of the position, the experience and knowledge of
the individual, and the competitive marketplace for executive talent with
comparable ability and experience, including a comparison to base annual
salaries for comparable positions derived from compensation information
available in certain widely-known surveys and databases.
The Committee annually reviews the base salaries of the Company's executive
officers. Annual salary adjustments are determined by evaluating the performance
of each executive officer, taking into account new responsibilities. Individual
performance ratings consider such factors as achievement of the Company's
strategic plan and attainment of specific individual objectives.
The Committee has not yet awarded Mr. Davenport a base salary adjustment
for 2000 in consideration of his performance during fiscal 1999. The Committee
will base such a determination upon an evaluation of base salaries of chief
executive officers of peer companies, the Company's performance in 1999 and the
assessment by the Committee of Mr. Davenport's individual performance.
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<PAGE> 11
As is typical of most corporations, the actual payment of base salary is
not strictly conditioned upon the achievement of any predetermined performance
targets.
Incentive Compensation
During 1999, the Company maintained a short-term incentive plan for
executive officers, the Management Incentive Plan (the "MIP"). This plan
provides for the award of cash bonuses to participants based on fiscal 1999
performance. The targeted incentive compensation for executive officers under
the MIP, excluding Mr. Davenport, ranged from 25% to 45% of base salary.
The MIP is designed to recognize, reward and promote the individual and
group performances that are key to the Company's success. Under the MIP,
executives may receive awards based on the achievement of Company revenue and
profitability goals and on individual performance. All awards are dependent on
the attainment of revenue and profitability goals for the consolidated company.
In addition, for those individuals whose performance is deemed to impact a
particular division, a portion of their award will also depend on that
division's performance. Individual performance is measured by the achievement of
defined objectives.
The Committee has not yet determined Mr. Davenport's 1999 short-term
incentive compensation. It will be based on the Company's overall revenue and
earnings performance. Mr. Davenport currently has an annual incentive award
target of 50% of base salary. The award will be based upon the Company's 1999
earnings and revenue and the Board's overall assessment of Mr. Davenport's and
the Company's performance.
Long-Term Incentive Compensation
The Company's long-term incentive compensation plan for its executive
officers is based upon the Company's 1997 Stock Incentive Plan. The Company
historically has provided long-term incentive compensation to attract, motivate
and retain executive officers through grants of stock options. The Company
believes that placing a portion of its executives' total compensation in the
form of stock options aligns the interests of the Company's executives directly
with those of the Company's shareholders, gives executives a significant
long-term interest in the Company's success, and helps the Company retain key
executives. On an annual basis, the Option Subcommittee of the Compensation
Committee designates the employees who shall be granted options and the amount
and terms of options granted. The number of stock options granted to each
individual is based on his or her salary range, position, level of
responsibility, and performance during the relevant fiscal year. Each option
grant allows the optionee to acquire shares of the Company's Common Stock at a
fixed price per share (the market price on the grant date) over a specified
period of time, contingent upon continued employment with the Company.
Accordingly, the option grants may provide a return to an executive officer only
if he or she remains in the Company's employ, and then only if the market price
of the Company's Common Stock appreciates during the option term.
The Compensation Committee has not yet granted Mr. Davenport an option to
purchase any shares in consideration of his performance in 1999.
OTHER NAMED OFFICER COMPENSATION
The Committee has not yet awarded salary increases to the other four Named
Executive Officers for 2000 based on consideration of each such officer's
performance during fiscal 1999. Prior to 1999, executive officer salary
increases became effective in October. In 1999, the Company decided that such
salary increases would become effective in January based on the executive
officer's performance in the prior fiscal year. During 1999, these executive
officers received stock option grants ranging from 5,000 to 100,000 shares of
the Company's Common Stock. The Committee has not yet awarded annual incentive
awards for 1999. The criteria used to determine salaries and other compensation
are as described above under "Compensation Philosophy" and "Compensation Plan."
Overall, the Company offers its executives a compensation program that is
market competitive, is based on Company performance, and strongly aligns the
interests of management and shareholders.
S-11
<PAGE> 12
BENEFITS
The Company believes that it must offer a competitive benefits program to
attract and retain all of its full-time employees. Accordingly, the Company
provides the same medical and other benefits to its executive officers that are
generally available to its other full-time employees.
$1 MILLION COMPENSATION LIMIT ON DEDUCTIBILITY
Section 162(m) of the Internal Revenue Code prohibits the Company from
deducting executive compensation in excess of $1 million, unless certain
standards are met, to its Chief Executive Officer or to any of the other four
executive officers named in the Summary Compensation Table. The Committee has
determined that it will make every reasonable effort, consistent with sound
executive compensation principles and the needs of the Company, to ensure that
all amounts paid to the Company's Chief Executive Officer or to any of the other
named executive officers are deductible by the Company.
Submitted by: THE COMPENSATION COMMITTEE
James F. Petersen
Richard A. Lefebvre
John H. Martinson
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
James F. Petersen, who served as Chairman of the Board until April 1999,
serves on the Compensation Committee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
James F. Petersen, a Company director, is a member of the Board of
Directors of Janus Technologies, Inc. and owns an interest in Janus, with which
the Company has entered into a Software Distribution and Private Labeling
Agreement dated December 1, 1999 concerning the private labeling and
distribution of the Company's Best! Imperativ Active Planner product. In
addition thereto, John H. Martinson, a Company director, is a general partner of
Edison Venture Fund IV L.P., which in turn owns an interest in Janus. Another
general partner of Edison Venture Fund IV L.P. is a member of Janus' board of
directors.
The Company has adopted a policy that transactions between the Company and
its executive officers, directors and affiliates must (i) be on terms no less
favorable to the Company than could be obtained from unaffiliated third parties
and (ii) be approved by a majority of the members of the Company's Board of
Directors and by a majority of the disinterested members of the Company's Board
of Directors.
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<PAGE> 13
EXECUTIVE OFFICER COMPENSATION
TABLE I -- SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth the compensation paid
or accrued by the Company with respect to services rendered during the past
three fiscal years (including a transition period described below) by the
Company's Chief Executive Officer and the four other most highly compensated
executive officers (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
------------------------ -------------
NUMBER
OF SECURITIES
NAME AND UNDERLYING ALL OTHER
PRINCIPAL POSITION FISCAL YEAR(1) SALARY BONUS OPTIONS COMPENSATION
------------------ -------------- -------- ------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Timothy A. Davenport............ 1999 $240,750 (2) 50,000 5,176(3)
Chairman of the 1998 225,000 112,500 -- 24,474(4)
Board, Chief Transition 166,652 90,000 50,000
Executive Officer and Period
President
David N. Bosserman.............. 1999 160,000 (2) 5,000 5,211(3)
Chief Financial Officer 1998 145,000 32,625 12,500 7,742(4)
Transition 107,911 42,188 67,500
Period
James F. Foster................. 1999 170,000 (2) 10,000 6,945(3)
Executive Vice 1998 163,077 34,000 5,000 8,482(4)
President of Product Transition 114,217 28,125 2,500
Strategy and Period
Technology
Robert H. Skinner............... 1999 206,060(5) (2) 5,000 7,084(3)
Executive Vice 1998 221,884(6) 25,988 7,500 17,228(4)
President of Business Transition 134,553(7) 21,656 15,000
Development Period
Elvin Monteleone................ 1999 164,548 (2) 100,000 1,455(3)
Executive Vice 1998 -- -- -- --(4)
President of Sales, Transition -- -- -- --
Marketing and Period
Services
</TABLE>
- ---------------
(1) Fiscal year 1999 figures are for the period from January 1, 1999 through
December 31, 1999. Fiscal year 1998 figures are for the period from January
1, 1998 through December 31, 1998. The figures for the Transition Period are
for the nine-month transition period from April 1, 1997 to December 31,
1997, which occurred as a result of a change in the Company's fiscal year
end from March 31 to December 31.
(2) Bonuses for the period January 1, 1999, through December 31, 1999, will be
paid during the first six weeks of 2000. The maximum bonuses are as follows:
<TABLE>
<S> <C>
Mr. Davenport $120,375
Mr. Bosserman 70,000
Mr. Foster 60,000
Mr. Skinner 35,000
Mr. Monteleone 72,000
</TABLE>
(3) Represents matching contributions to the Company's 401(k) Plan made by the
Company on behalf of each of the Named Executive Officers, an additional
profit sharing contribution of $1,500 for each
S-13
<PAGE> 14
Named Executive Officer (except for Mr. Monteleone, whose contribution was
$250), the tax benefit of participating in the Company's Employee Stock
Purchase Plan and imputed income from excess group term life insurance.
(4) Represents matching contributions to the Company's 401(k) Plan made by the
Company on behalf of each of the Named Executive Officers, and additional
profit sharing contribution of $2,000 for each Named Executive Officer, the
tax benefit of participating in the Company's Employee Stock Purchase Plan
and imputed income from excess group term life insurance.
(5) Includes $83,060 in sales commissions.
(6) Includes $106,384 in sales commissions.
(7) Includes $47,965 in sales commissions.
TABLE II -- OPTION GRANTS IN THE LAST FISCAL YEAR
This table presents information regarding stock options granted to the
Company's Named Executive Officers during the stated period to purchase shares
of the Company's Common Stock. The Company has no stock appreciation rights
("SARs") outstanding and granted no SARs during the stated period.
<TABLE>
<CAPTION>
INDIVIDUAL GRANT
-------------------------------------------------------------------------------
% OF TOTAL
OPTIONS
NUMBER OF GRANTED TO EXERCISE
SECURITIES EMPLOYEES IN OR
UNDERLYING THE LAST FISCAL BASE PRICE EXPIRATION GRANT DATE
NAME GRANTED(2) YEAR PER SHARE DATE PRESENT VALUE(1)
---- ---------- --------------- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Timothy A. Davenport........... 50,000 9.59% $19.6250(3) 1/28/08 $ 773,000.00
David N. Bosserman............. 5,000 0.96 11.5625(3) 4/19/08 45,450.00
James F. Foster................ 10,000 1.92 11.5625(3) 4/19/08 90,900.00
Robert H. Skinner.............. 5,000 0.96 11.5625(3) 4/19/08 45,450.00
Elvin Monteleone............... 75,000 14.38 19.6250(3) 1/28/08 1,159,500.00
25,000 4.79 11.5625(3) 4/19/08 227,250.00
</TABLE>
- ---------------
(1) Grant date present value is based on the Black-Scholes option valuation
model with the following material assumptions: an expected stock-price
volatility factor of 75%; a risk-free rate of return of (a) 4.35% for the
1/28/99 grant and, (b) 4.2% for the 4/19/99 grants; a dividend yield of 0%;
and the maximum exercise period at the time of the grant which was nine
years. Actual gains, if any, on stock option exercises are dependent on
future performance of the Common Stock.
(2) All options vest 20% per year beginning on the first anniversary of the date
of grant.
(3) The exercise price per share equaled the fair market value of the Common
Stock on the date of grant, as reported on the Nasdaq Stock Market.
S-14
<PAGE> 15
TABLE III -- OPTION EXERCISES IN THE LAST FISCAL YEAR, AND OPTION VALUES AT
DECEMBER 31, 1999
The following table sets forth information regarding the exercise of stock
options during the last fiscal year, and the value of options held as of
December 31, 1999 by the Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF SHARES SUBJECT VALUE OF UNEXERCISED
NUMBER OF TO UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1999 DECEMBER 31, 1999(1)
ACQUIRED VALUE --------------------------- ---------------------------
NAME UPON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Timothy A. Davenport... -- -- 195,000 140,000 $5,080,828 $2,681,248
David N. Bosserman..... -- -- 33,900 60,600 $ 746,384 $1,243,088
James F. Foster........ -- -- 80,000 35,000 $2,137,751 $ 751,378
Robert H. Skinner...... 5,000 $52,500 51,000 42,500 $1,267,626 $ 903,938
Elvin Monteleone....... -- -- 15,000 85,000 $ 148,125 $1,040,938
</TABLE>
- ---------------
(1) The dollar values have been calculated by determining the difference between
(i) the fair market value of the securities underlying the options at the
exercise date, in the case of "value realized," or December 31, 1999, in the
case of "value of unexercised in-the-money options" and (ii) the aggregate
exercise price of the options. Prior to the Company's initial public
offering on September 30, 1997, the Common Stock was not publicly traded.
Consequently, the Board, in connection with grants of stock options it made
from time to time prior to the Company's initial public offering, determined
the fair market value of the Common Stock as of the date of grant.
EMPLOYMENT AGREEMENTS
Pursuant to an Employment Agreement between James F. Petersen and the
Company dated May 17, 1995, the Company agreed to employ Mr. Petersen as
Chairman of the Company until March 30, 2000, with an annual salary of $170,280,
subject to adjustment. Pursuant to an amendment to the Employment Agreement, Mr.
Petersen's annual salary was adjusted in 1999 to $120,000 and his
responsibilities to the Company were reduced. Mr. Petersen is entitled to
payment of his salary through March 30, 2000 should his employment be terminated
by the Board other than for cause. Mr. Petersen has agreed not to compete
against the Company during the term of his employment and for one year
thereafter.
In connection with the May 1995 hiring of Timothy A. Davenport, President
and Chief Executive Officer of the Company, the Company agreed to pay Mr.
Davenport an annual base salary of $200,000. In addition, the Company issued to
Mr. Davenport, pursuant to its 1992 Stock Option Plan, options to purchase
375,000 shares of Common Stock at an exercise price of $2.67 per share, 300,000
shares of which vest equally over a five-year period and 75,000 shares of which
vested in full immediately upon the closing of the initial public offering. Mr.
Davenport is entitled to six months of base salary as severance pay should his
employment be terminated other than for cause, except in the case of
constructive termination due to a change in control, in which case he will
continue to receive his salary for 12 months and his stock option vesting will
be accelerated by 24 months. The Company also reimbursed Mr. Davenport for
certain relocation expenses and agreed to appoint him to the Board of Directors.
S-15
<PAGE> 16
SHAREHOLDER RETURN PERFORMANCE GRAPH
The graph and table below compare the cumulative total shareholder return
on the Company's Common Stock during the period commencing with the Company's
initial public offering on September 30, 1997 through December 31, 1999, with
the cumulative total returns for the CRSP Total Return Index for The Nasdaq
Stock Market (US) and the Hambrecht & Quist Computer Software Index (the "H&Q
Computer Software Index"). The comparison assumes $100 was invested on September
30, 1997 in the Company's Common Stock at the $14.625 closing price on that date
and in each of the foregoing indices and assumes reinvestment of dividends, if
any.
Before September 30, 1997, the Company's Common Stock was not publicly
traded. Comparative data is provided only for the period beginning on that date.
This chart is not "soliciting material," is not deemed filed with the Securities
and Exchange Commission and is not to be incorporated by reference in any
filings of the Company under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, whether made before or after the
date hereof and irrespective of any general incorporation language in such
filing.
The stock price performance shown on the graph and table is not necessarily
indicative of future price performance. Certain information used in this graph
was obtained from the Nasdaq Stock Market. The Nasdaq Stock Market (US) was
prepared for Nasdaq by the Center for Research in Security Prices (CRSP) at the
University of Chicago and the H&Q Computer Software Index was prepared by
Hambrecht & Quist LLC. Such sources are believed to be reliable, although the
Company is not responsible for any errors or omissions in such information.
COMPARISON OF TOTAL RETURN
[COMPARISON GRAPH]
<TABLE>
<CAPTION>
H&Q COMPUTER SOFTWARE
BEST SOFTWARE, INC. NASDAQ COMPOSITE INDEX INDEX
------------------- ---------------------- ---------------------
<S> <C> <C> <C>
9/30/97 100 100 100
12/31/97 63.25 93.16 93.04
12/31/98 162.39 130.08 121.54
12/31/99 201.71 241.40 276.54
</TABLE>
S-16
<PAGE> 1
EXHIBIT 3
ARTICLE 5 OF THE COMPANY'S ARTICLES OF INCORPORATION
5. Indemnification and Exculpation.
A. In this Article 5:
"applicant" means the person seeking indemnification pursuant to this
Article 5.
"expenses" includes counsel fees.
"liability" means the obligation to pay a judgment, settlement,
penalty, fine, including any excise tax assessed with respect to an
employee benefit plan, or reasonable expenses incurred with respect to
a proceeding.
"party" includes an individual who was, is, or is threatened to be made
a named defendant or respondent in a proceeding.
"proceeding" means any threatened, pending, or completed action, suit,
or proceeding, whether civil, criminal, administrative or investigative
and whether formal or informal.
B. In any proceeding brought by or in the right of the Corporation or brought by
or on behalf of shareholders of the Corporation, no director or officer of the
Corporation shall be liable to the Corporation or its shareholders for monetary
damages with respect to any transaction, occurrence or course of conduct, except
for liability resulting from such person's having engaged in willful misconduct
or a knowing violation of the criminal law or any federal or state securities
law.
C. The Corporation shall indemnify (1) any person who was or is a party to any
proceeding, including a proceeding brought by a shareholder in the right of the
Corporation or brought by or on behalf of shareholders of the Corporation, by
reason of the fact that he is or was a director, or officer, employee or agent
of the Corporation, or (2) any director or officer who is or was serving at the
request of the Corporation as a director, trustee, partner, employee, agent or
officer of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, against any liability incurred by him in
connection with such proceeding unless he engaged in willful misconduct or a
knowing violation of the criminal law. A person is considered to be serving an
employee benefit plan at the Corporation's request if his duties to the
Corporation also impose duties on, or otherwise involve services by, him to the
plan or to participants in or beneficiaries of the plan. The Board of Directors
is hereby empowered, by a majority vote of a quorum of disinterested directors,
to enter into a contract to indemnify any director or officer in respect of any
proceedings arising from any act or omission, whether occurring before or after
the execution of such contract.
D. The provisions of this Article 5 shall be applicable to all proceedings
commenced after the adoption hereof by the shareholders of the Corporation,
arising from any act or omission, whether occurring before or after such
adoption. No amendment or repeal of this Article 5 shall have any effect on the
rights provided under this Article 5 with respect to any act or omission
occurring prior to such amendment or repeal. The Corporation shall promptly take
all such actions, and make all such determinations, as shall be necessary or
appropriate to comply with its obligation to make any indemnity under this
Article 5 and shall promptly pay or reimburse all reasonable expenses, including
attorneys' fees, incurred by any such director, officer, employee or agent in
connection with such actions and determinations or proceedings of any kind
arising therefrom.
<PAGE> 2
E. The termination of any proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not of itself create
a presumption that the applicant did not meet the standard of conduct described
in Section B or C of this Article 5.
F. Any indemnification under Section C of this Article 5 (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the applicant is permissible in the
circumstances because he has met the applicable standard of conduct set forth in
Section C of this Article 5.
The determination shall be made:
(1) By the Board of Directors by a majority vote of a quorum consisting
of directors not at the time parties to the proceeding;
(2) If a quorum cannot be obtained under subsection (1) of this Section
F, by majority vote of a committee duly designated by the Board of
Directors (in which designation directors who are parties may
participate), consisting solely of two or more directors not at the
time parties to the proceeding;
(3) By special legal counsel:
(a) Selected by the Board of Directors or its
committee in the manner prescribed in subsection (1) or (2) of
this Section F; or
(b) If a quorum of the Board of Directors cannot be
obtained under subsection (1) of this Section F and a
committee cannot be designated under subsection (2) of this
Section F, selected by majority vote of the full Board of
Directors, in which selection directors who are parties may
participate; or
(4) By the shareholders, but shares owned by or voted under the control
of directors who are at the time parties to the proceeding may not be
voted on the determination.
Any evaluation as to reasonableness of expenses shall be made in the
same manner as the determination that indemnification is appropriate, except
that if the determination is made by special legal counsel, such evaluation as
to reasonableness of expenses shall be made by those entitled under subsection
(3) of this Section F of this Article 5 to select counsel.
Notwithstanding the foregoing, in the event there has been a change in
the composition of a majority of the Board of Directors after the date of the
alleged act or omission with respect to which indemnification is claimed, any
determination as to indemnification and advancement of expenses with respect to
any claim for indemnification made pursuant to this Article 5 shall be made by
special legal counsel agreed upon by the Board of Directors and the applicant.
If the Board of Directors and the applicant are unable to agree upon such
special legal counsel, the Board of Directors and the applicant each shall
select a nominee, and the nominees shall select such special legal counsel.
G.
(1) The Corporation shall pay for or reimburse the reasonable expenses
incurred by any applicant who is a party to a proceeding in advance of
final disposition of the proceeding or the making of any determination
under Section C of this Article 5 if the applicant furnishes the
Corporation:
(a) a written statement of his good faith belief that he has
met the standard of conduct described in Section C of this
Article 5; and
<PAGE> 3
(b) a written undertaking, executed personally or on his
behalf, to repay the advance if it is ultimately determined
that he did not meet such standard of conduct.
(2) The undertaking required by paragraph (b) of subsection(1) of this
Section shall be an unlimited general obligation of the applicant but
need not be secured and may be accepted without reference to financial
ability to make repayment.
(3) Authorizations of payments under this section shall be made by the
persons specified in Section F of this Article 5 upon a determination
that the facts then known to those making the determination would not
preclude indemnification under this Article 5.
H. The Corporation may purchase and maintain insurance to indemnify it against
the whole or any portion of the liability assumed by it in accordance with this
Article 5 and may also procure insurance, in such amounts as the Board of
Directors may determine, on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against any liability asserted against or incurred by him in any
such capacity or arising from his status as such, whether or not the Corporation
would have power to indemnify him against such liability under the provisions of
this Article 5.
I. Every reference herein to directors, officers, employees or agents shall
include former directors, officers, employees and agents and their respective
heirs, executors and administrators. The indemnification hereby provided and
provided hereafter pursuant to the power hereby conferred by this Article 5 on
the Board of Directors shall not be exclusive of any other rights to which any
person may be entitled, including any right under policies of insurance that may
be purchased and maintained by the Corporation or others, with respect to
claims, issues or matters in relation to which the Corporation would not have
the power to indemnify such person under the provisions of this Article 5. Such
rights shall not prevent or restrict the power of the Corporation to make or
provide for any further indemnity, or provisions for determining entitlement to
indemnity, pursuant to one or more indemnification agreements, bylaws, or other
arrangements (including, without limitation, creation of trust funds or security
interests funded by letters of credit or other means) approved by the Board of
Directors (whether or not any of the directors of the Corporation shall be a
party to or beneficiary of any such agreements, bylaws or arrangements);
provided, however, that any provision of such agreements, bylaws or other
arrangements shall not be effective if and to the extent that it is determined
to be contrary to this Article or applicable laws of the Commonwealth of
Virginia.
J. Each provision of this Article 5 shall be severable, and an adverse
determination as to any such provision shall in no way affect the validity of
any other provision.
<PAGE> 1
EXHIBIT 4
ARTICLE III, SECTION 14 OF THE COMPANY'S BYLAWS
Article III - Board Of Directors
Section 14 - Indemnification and Exculpation:
(a) In this Section:
"applicant" means the person seeking indemnification pursuant to this
Section.
"expenses" includes counsel fees.
"liability" means the obligation to pay a judgment, settlement,
penalty, fine, including any excise tax assessed with respect to an employee
benefit plan, or reasonable expenses incurred with respect to a proceeding.
"party" includes an individual who was, is, or is threatened to be made
a named defendant or respondent in a proceeding.
"proceeding" means any threatened, pending, or completed action, suit,
or proceeding, whether civil, criminal, administrative or investigative and
whether formal or informal.
(b) In any proceeding brought by or in the right of the Corporation or brought
by or on behalf of shareholders of the Corporation, no director or officer of
the Corporation shall be liable to the Corporation or its shareholders for
monetary damages with respect to any transaction, occurrence or course of
conduct, except for liability resulting from such person's having engaged in
willful misconduct or a knowing violation of the criminal law or any federal or
state securities law.
(c) The Corporation shall indemnify (1) any person who was or is a party to any
proceeding, including a proceeding brought by a shareholder in the right of the
Corporation or brought by or on behalf of shareholders of the Corporation, by
reason of the fact that he is or was a director, or officer, employee or agent
of the Corporation, or (2) any director or officer who is or was serving at the
request of the Corporation as a director, trustee, partner employee, agent or
officer of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, against any liability incurred by him in
connection with such proceeding unless he engaged in willful misconduct or a
knowing violation of the criminal law. A person is considered to be serving an
employee benefit plan at the Corporation's request if his duties to the
Corporation also impose duties on, or otherwise involve services by, him to the
plan or to participants in or beneficiaries of the plan. The Board of Directors
is hereby empowered, by a majority vote of a quorum of disinterested directors,
to enter into a contract to indemnify any director or officer in respect of any
proceedings arising from any act or omission, whether occurring before or after
the execution of such contract.
(d) The provisions of this Section shall be applicable to all proceedings
commenced after the adoption hereof by the shareholders of the Corporation,
arising from any act or omission, whether occurring before or after such
adoption. No amendment or repeal of this Section shall have any effect on the
rights provided under this Section with respect to any act or omission occurring
prior to such amendment or repeal. The Corporation shall promptly take all such
actions, and make all such determinations, as shall be necessary or appropriate
to comply with its obligation to make any indemnity under this Section and shall
promptly pay or reimburse all reasonable expenses, including attorneys' fees,
incurred by any such director, officer, employee or agent in connection with
such actions and determinations or proceedings of any kind arising therefrom.
<PAGE> 2
(e) The termination of any proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not of
itself create a presumption that the applicant did not meet the standard of
conduct described in subsection (b) or (c) of this Section.
(f) Any indemnification under subsection (c) of this Section (unless ordered by
a court) shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the applicant is permissible
in the circumstances because he has met the applicable standard of conduct set
forth in subsection (c).
The determination shall be made:
(1) By the Board of Directors by a majority vote of a quorum consisting
of directors not at the time parties to the proceeding;
(2) If a quorum cannot be obtained under subsection (1) of this
subsection (f), by majority vote of a committee duly designated by the Board of
Directors (in which designation directors who are parties may participate),
consisting solely of two or more directors not at the time parties to the
proceeding;
(3) By special legal counsel:
(i) Selected by the Board of Directors or its committee in the
manner prescribed in subsection (1) or (2) of this subsection (f); or
(ii) If a quorum of the Board of Directors cannot be obtained
under subsection (1) of this subsection (f) and a committee cannot be designated
under subsection (2) of this subsection (f), selected by majority vote of the
full Board of Directors, in which selection directors who are parties may
participate; or
(4) By the shareholders, but shares owned by or voted under the control
of Directors who are at the time parties to the proceeding may not be voted on
the determination.
Any evaluation as to reasonableness of expenses shall be made in the
same manner as the determination that indemnification is appropriate, except
that if the determination is made by special legal counsel, such evaluation as
to reasonableness of expenses shall be made by those entitled under subsection
(3) of this subsection (f) to select counsel.
Notwithstanding the foregoing, in the event there has been a change in
the composition of a majority of the Board of Directors after the date of the
alleged act or omission with respect to which indemnification is claimed, any
determination as to indemnification and advancement of expenses with respect to
any claim for indemnification made pursuant to this Section shall be made by
special legal counsel agreed upon by the Board of Directors and the applicant.
If the Board of Directors and the applicant are unable to agree upon such
special legal counsel the Board of Directors and the applicant each shall select
a nominee, and the nominees shall select such special legal counsel.
(g)
(1) The Corporation shall pay for or reimburse the reasonable expenses
incurred by any applicant who is a party to a proceeding in advance of final
disposition of the proceeding or the making of any determination under
subsection (c) if the applicant furnishes the Corporation:
(i) a written statement of his good faith belief that he has
met the standard of conduct described in subsection (c); and
(ii) a written undertaking, executed personally or on his
behalf, to repay the advance if it is ultimately determined that he did not meet
such standard of conduct.
<PAGE> 3
(2) The undertaking required by paragraph (ii) of subsection (1) of
this subsection (g) shall be an unlimited general obligation of the applicant
but need not be secured and may be accepted without reference to financial
ability to make repayment.
(3) Authorizations of payments under this subsection (g) shall be made
by the persons specified in subsection (f) upon a determination that the facts
then known to those making the determination would not preclude indemnification
under this Article.
(h) The Corporation may purchase and maintain insurance to indemnify it against
the whole or any portion of the liability assumed by it in accordance with this
Section and may also procure insurance, in such amounts as the Board of
Directors may determine, on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against any liability asserted against or incurred by him in any
such capacity or arising from his status as such, whether or not the Corporation
would have power to indemnify him against such liability under the provisions of
this Section.
(i) Every reference herein to directors, officers, employees or agents shall
include former directors, officers, employees and agent and their respective
heirs, executors and administrators. The indemnification hereby provided and
provided hereafter pursuant to the power hereby conferred by this Section on the
Board of Directors shall not be exclusive of any other rights to which any
person may be entitled, including any right under policies of insurance that may
be purchased and maintained by the Corporation or others, with respect to
claims, issues or matters in relation to which the Corporation would not have
the power to indemnify such person under the provisions of this Section. Such
rights shall not prevent or restrict the power of the Corporation to make or
provide for any further indemnity, or provisions for determining entitlement to
indemnity, pursuant to one or more indemnification agreements, bylaws, or other
arrangements (including, without limitation, creation of trust funds or security
interests funded by letters of credit or other means) approved by the Board of
Directors (whether or not any of the directors of the Corporation shall be a
party to or beneficiary of any such agreements, bylaws or arrangements);
provided, however, that any provision of such agreements, bylaws or other
arrangements shall not be effective if and to the extent that it is determined
to be contrary to this Section, the Corporation's Articles of Incorporation or
applicable laws of the Commonwealth of Virginia.
(j) Each provision of this Section shall be severable, and an adverse
determination as to any such provision shall in no way affect the validity of
any other provision.
<PAGE> 1
EXHIBIT 5
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
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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,
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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
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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
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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
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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.
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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.
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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
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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
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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.
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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.
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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
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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]
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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 6
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)
3
<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
7
<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.
8
<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.
11
<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 7
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 8
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
<PAGE> 1
EXHIBIT 9
ONE BUSH STREET
SAN FRANCISCO, CA 94104
(415) 459-3318
PAUL B. CLEVELAND
MANAGING DIRECTOR
January 12, 2000
Confidential
The Board of Directors
Best Software, Inc.
11413 Isaac Newton Square
Reston, Virginia 20190
Gentlemen:
You have requested our opinion as to the fairness from a financial point of view
to the holders of the outstanding shares of common stock (the "Common Stock") of
Best Software, Inc. ("Best" or the "Company") of the consideration to be
received by such shareholders in connection with the proposed tender offer by
Bobcat Acquisition Corp. ("Merger Sub"), a wholly owned subsidiary of Sage Group
plc. ("Sage") for all outstanding shares of common stock and the subsequent
merger of Merger Sub with and into Best (the "Proposed Transaction") pursuant to
the Agreement and Plan of Merger (the "Merger Agreement") dated as of January
12, 2000, among Sage, Merger Sub, and Best. In connection with the Merger
Agreement, two related agreements were entered into, the Option Agreement, dated
January 12, 2000 and the Shareholders Agreement, dated January 12, 2000
(collectively, the "Agreements").
We understand that the terms of the Merger Agreement provide, among other
things, that each issued and outstanding share of Common Stock shall be
purchased by Sage for $35.00 per share, as more fully set forth in the Merger
Agreement.
Hambrecht & Quist LLC ("Hambrecht & Quist"), as part of its investment
banking services, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, strategic transactions,
corporate restructurings, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes. We have acted as a financial advisor to the Board of
Directors of Best in connection with the Proposed Transaction, and we will
receive a fee for our services, which include the rendering of this opinion.
In the past, we have provided investment banking and other financial
advisory services to Best and have received fees for rendering these services.
In the ordinary course of business, Hambrecht & Quist acts as a market maker and
broker in the publicly traded securities of Best and receives customary
compensation in connection therewith, and also provides research coverage for
Best. In the ordinary course of business, Hambrecht & Quist actively trades in
the equity and derivative securities of Best for its own account and for the
accounts of its customers and, accordingly, may at any time hold a long or short
position in such securities. Hambrecht & Quist may in the future provide
additional investment banking or other financial advisory services to Best.
- ---------------
SAN FRANCISCO - NEW YORK - BOSTON
MEMBERS NEW YORK STOCK EXCHANGE - AMERICAN STOCK EXCHANGE - PACIFIC STOCK
EXCHANGE
<PAGE> 2
In connection with our review of the Proposed Transaction, and in arriving
at our opinion, we have, among other things:
(i) reviewed the financial statements of Best for recent years and
interim periods to date and certain other relevant financial and operating
data of Best made available to us from published sources and from the
internal records of Best;
(ii) reviewed certain internal financial and operating information,
including certain projections, relating to Best prepared by the senior
management of Best;
(iii) discussed the business, financial condition and prospects of
Best with certain members of senior management;
(iv) reviewed the recent reported prices and trading activity for the
common stock of Best and compared such information and certain financial
information for Best with similar information for certain other companies
engaged in businesses we consider comparable;
(v) reviewed certain publicly available information about Sage;
(vi) reviewed the financial terms, to the extent publicly available,
of certain comparable merger and acquisition transactions;
(vii) reviewed the Agreements; and
(viii) performed such other analyses and examinations and considered
such other information, financial studies, analyses and investigations and
financial, economic and market data as we deemed relevant.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of all of the information concerning Sage or Best considered in
connection with our review of the Proposed Transaction, and we have not assumed
any responsibility for independent verification of such information. We have not
prepared any independent valuation or appraisal of any of the assets or
liabilities of Sage or Best, nor have we conducted a physical inspection of the
properties and facilities of either company. With respect to the financial
forecasts and projections made available to us and used in our analysis, we have
assumed that they reflect the best currently available estimates and judgments
of the expected future financial performance of Sage and Best.
For purposes of this opinion, we have assumed that neither Sage nor Best is
a party to any pending transactions, including external financings,
recapitalizations or material merger discussions, other than the Proposed
Transaction and those activities undertaken in the ordinary course of conducting
their respective businesses. Our opinion is necessarily based upon market,
economic, financial and other conditions as they exist and can be evaluated as
of the date of this letter and any change in such conditions would require a
reevaluation of this opinion. In rendering this opinion, we have assumed that
the proposed tender offer and merger will be consummated substantially on the
terms discussed in the Agreement, without any waiver of any material terms or
conditions by any party thereto.
It is understood that this letter is for the information of the Board of
Directors only and may not be used for any other purpose without our prior
written consent; provided, however, that this letter may be reproduced in full
in the Schedule 14D-9 and the Proxy Statement relating to the Proposed
Transaction. This letter does not constitute a recommendation to any stockholder
as to whether such stockholder should tender shares into the tender offer or how
such stockholder should vote on the Proposed Transaction.
Based upon and subject to the foregoing and after considering such other
matters as we deem relevant, we are of the opinion that as of the date hereof
the consideration to be received by the holders of the Common Stock in the
Proposed Transaction is fair to such holders from a financial point of view. We
<PAGE> 3
express no opinion, however, as to the adequacy of any consideration received in
the Proposed Transaction by Sage or any of its affiliates.
Very truly yours,
HAMBRECHT & QUIST LLC
By /s/ PAUL B. CLEVELAND
------------------------------------
Paul B. Cleveland
Managing Director
<PAGE> 1
EXHIBIT 10
WEDNESDAY JANUARY 12, 3:44 AM EASTERN TIME
COMPANY PRESS RELEASE
BEST SOFTWARE ANNOUNCES DEFINITIVE MERGER AGREEMENT WITH SAGE GROUP PLC
DEAL PAIRS BEST-OF-BREED ENTERPRISE SOLUTIONS PROVIDERS TO CREATE GLOBAL
POWERHOUSE
RESTON, Va.--(BUSINESS WIRE)--Jan. 12, 2000--Best Software, Inc. (Nasdaq:Best -
news), a leading provider of human resources, payroll, fixed asset and planning
solutions, today announced a definitive merger agreement with The Sage Group
plc, a leading worldwide supplier of accounting solutions. The all-cash deal, at
$35 per share of Best Software, is valued at approximately $445 million and is
expected to close in the first quarter of 2000. Best Software will become a
wholly-owned subsidiary of Sage Group and will operate as part of Sage US, Inc.
"We're pleased to join forces with one of the world's largest and most
successful software companies," said Tim Davenport, president, CEO and chairman
of the board of Best Software, Inc. "Together, Best Software and Sage will
provide an unparalleled suite of complementary applications in key markets
around the world."
Best Software, founded in 1982 and headquartered in Reston, Virginia, develops
solutions which enable organizations to transform the way they manage their
people, assets and planning processes. Its award-winning products include Abra
Suite(R) for HR and payroll management and the FAS family of fixed asset
management solutions, in addition to Best! Imperativ Asset Accounting(TM),
Web-native, award-winning Best! Imperativ HRMS(TM) and new Best! Imperativ
Active Planner(TM) for strategic financial planning and budgeting.
"Best Software's leadership position and large installed customer base, combined
with their exciting new Imperativ product line, makes them an ideal addition to
the Sage family and should make our expanded portfolio of PC accounting and
payroll products even more attractive to our channel partners and current and
prospective customers alike," said Paul Walker, chief executive for Sage Group
plc. "Our respective reputations for customer support and the strength of the
Sage and Best software brands provides us with an ideal platform upon which to
jointly build our business in the evolving e-commerce world."
Sage Group plc creates accounting software and related services for small and
medium-sized businesses. Its integrated and modular accounting products range
from packages for small businesses through to applications for medium-sized and
larger organizations. The Sage product line is based on 18 years of continuous
development in both DOS and Windows environments and is backed by comprehensive
support services.
About Sage
The Sage Group plc is the largest supplier of mainstream PC accounting software
to small and mid-market companies in the world. Formed in 1981, The Sage Group
plc now employs over 2,500 people worldwide in its market-leading companies in
the UK, France and Germany and the US.
About Best Software
Best Software, with more than 50,000 customers worldwide and offices in the US,
Canada and Europe, develops solutions which enable organizations to transform
their HR, fixed asset and planning and
<PAGE> 2
budgeting processes. Its scalable, cost-effective solutions complement core
financial management systems and support the full spectrum of Microsoft(R)
platforms, including Windows(R) 95, Windows(R) 98, Windows NT(R) and
BackOffice(R). For further information, call 800/368-2499, send an email to
[email protected] or access our web site at www.bestsoftware.com.
Note to Editors: Tim Davenport, president, CEO and chairman, Best Software, Inc.
and Dave Hanna, president and CEO, Sage US, will host a live teleconference
today at 1:00 pm EST to announce details of their definitive merger agreement.
To listen to the event, call 1-800-811-0667 in the US or 913/981-4901 for
international calls and ask for the Best Software conference call (code 874074).
The call will also be accessible over the Internet through Investor Broadcast
Network's Vcall, located at http://www.vcall.com. Listeners should go to the
website at least fifteen minutes before the call to register, download, and
install any necessary audio software. For those unable to attend the live event,
a replay will be available beginning approximately one hour after the call at no
charge.
Sage is a trademark of The Sage Group plc. MAS 90, BusinessWorks, DacEasy, and
Acuity are registered trademarks of Sage Software, Inc. Peachtree is a
registered trademark of Peachtree Software, Inc. Best Software, Abra Suite and
the Best logo are registered trademarks and Best! Imperativ Active Planner,
Best! Imperativ Asset Accounting, Best! Imperativ HRMS and FAS are trademarks of
Best Software. Microsoft, Windows, Windows 95, Windows 98, Windows NT, and
BackOffice are registered trademarks and SQL Server is a trademark of Microsoft
Corporation.
Forward-looking statements in this release, including statements regarding the
delivery and integration of new products and services and expectations for
revenue and earnings, are based on information available to the Company as of
the date hereof. Such forward looking statements are made only as of the date
hereof. The Company's actual results could differ materially from those stated
or implied by such forward looking statements due to risks and uncertainties
associated with fluctuations in the Company's quarterly operating results,
concentration of the Company's product offerings, development risks involved
with new products and technologies, competition, and other risk factors
disclosed in the Company's filings with the Securities and Exchange Commission.
Contact:
Best Software, Inc.
Brian Muys, 703/709-5200, x3829 (Public Relations)
Brian [email protected]
or
David Crum, 703/709-5200, x3202 (Investor Relations)
[email protected]
or
Duffey Communications
Mike Neumeier, 404/266-2600
[email protected]
<PAGE> 1
EXHIBIT 11
[BEST LOGO]
January 14, 2000
Dear Shareholder:
We are pleased to report that Best Software, Inc. (the "Company") has
entered into an agreement and plan of merger with The Sage Group plc, a
corporation organized under the laws of England ("Parent"), and its wholly owned
subsidiary Bobcat Acquisition Corp., a Virginia corporation ("Purchaser"), that
provides for the acquisition of the Company by Parent at a price of $35.00 per
share in cash. Under the terms of the proposed transaction, Purchaser is today
commencing a cash tender offer for all outstanding shares of the Company's
common stock at $35.00 per share. Following the successful completion of the
tender offer, Purchaser will be merged with and into the Company and all shares
not purchased by Purchaser in the tender offer will be converted into the right
to receive $35.00 per share in cash in the merger.
YOUR BOARD OF DIRECTORS HAS APPROVED THE TENDER OFFER AND DETERMINED THAT
THE TERMS OF THE TENDER OFFER AND THE MERGER, TAKEN TOGETHER, ARE FAIR TO, AND
IN THE BEST INTERESTS OF, THE COMPANY AND ITS SHAREHOLDERS. ACCORDINGLY, THE
BOARD OF DIRECTORS RECOMMENDS ACCEPTANCE OF THE TENDER OFFER AND APPROVAL AND
ADOPTION OF THE AGREEMENT AND PLAN OF MERGER BY THE SHAREHOLDERS OF THE COMPANY.
In arriving at its recommendations, the Board of Directors gave careful
consideration to a number of factors. These factors included the opinion dated
January 12, 2000 of Hambrecht & Quist LLC ("Chase H&Q"), financial advisor to
the Company, to the effect that, as of such date and based upon and subject to
certain matters stated in such opinion, the cash consideration of $35.00 per
share to be received by Company shareholders (other than Parent, Purchaser and
their affiliates) in the offer and the merger was fair from a financial point of
view to such shareholders.
Accompanying this letter is a copy of the Company's
Solicitation/Recommendation Statement on Schedule 14D-9. Also enclosed is
Parent's Offer to Purchase and related materials, including a Letter of
Transmittal for use in tendering shares. We urge you to read carefully the
enclosed materials, including Chase H&Q's opinion, which is attached to the
Schedule 14D-9.
The management and directors of Best Software, Inc. thank you for the
support you have given the Company.
Sincerely,
/S/ Timothy A Davenport
Timothy A. Davenport
Chairman of the Board, President
and Chief Executive Officer
