<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 12, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SECURITY FIRST TECHNOLOGIES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7379 58-2395199
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NO.)
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SECURITY FIRST TECHNOLOGIES CORPORATION
3390 PEACHTREE ROAD, NE, SUITE 1700
ATLANTA, GA 30326
(404) 812-6200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
ROBERT F. STOCKWELL
CHIEF FINANCIAL OFFICER
SECURITY FIRST TECHNOLOGIES CORPORATION
3390 PEACHTREE ROAD, NE, SUITE 1700
ATLANTA, GA 30326
(404) 812-6200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
STUART G. STEIN, ESQ. GORDON K. DAVIDSON, ESQ.
JAMES E. SHOWEN, ESQ. KATHERINE TALLMAN SCHUDA, ESQ.
KEVIN L. VOLD, ESQ. DOUGLAS N. COGEN, ESQ.
HOGAN & HARTSON L.L.P. PHYLLIS E. ANDES, ESQ.
555 THIRTEENTH STREET, NW FENWICK & WEST LLP
WASHINGTON, DC 20004 TWO PALO ALTO SQUARE
(202) 637-5600 PALO ALTO, CA 94306
(650) 494-0600
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: Upon
consummation of the Edify Transaction described herein.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement number for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
AGGREGATE PRICE AGGREGATE AMOUNT OF
TITLE OF CLASS OF AMOUNT TO BE PER COMMON OFFERING REGISTRATION
SECURITIES BEING REGISTERED REGISTERED (1) SHARE(2) PRICE (1)(2) FEE(1)(2)
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Common Stock, $0.01 par value per share..... 7,619,277 $13.2815 $101,195,427 $28,132
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(1) Based upon the maximum number of shares of common stock, par value $0.01 per
share, of Security First Technologies Corporation that may be issued
pursuant to the acquisition of Edify Corporation.
(2) Computed pursuant to Rules 457(f)(1) and (c) under the Securities Act based
on the average of the high and low per share prices of common stock, par
value $0.001 per share, of Edify Corporation on the Nasdaq National Market
on July 2, 1999.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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[S1 LOGO]
To Our Stockholders:
You are cordially invited to attend a special meeting of stockholders of
Security First Technologies Corporation, or S1, to be held at on
, 1999 at , Eastern time.
At the meeting, you will be asked to approve the issuance by S1 of common
stock in two proposed transactions. In the proposed transactions, a subsidiary
of S1 will acquire FICS Group N.V., and another subsidiary of S1 will merge with
Edify Corporation. After the transactions, FICS and Edify will both become
wholly owned subsidiaries of S1. Please review the proposed transactions, which
are described in detail in the attached notice of special meeting of
stockholders and prospectus/proxy statement.
After careful consideration, your board of directors has approved our
acquisitions of FICS and Edify and determined both of the transactions to be
fair to and in the best interests of S1 and its stockholders. S1's board of
directors has approved the issuances of shares of S1 common stock in these
transactions and recommends that you vote in favor as well.
You will also be asked to approve a name change for the new company from
"Security First Technologies Corporation" to "S1 Corporation." Your board of
directors has determined that this name change will also be in the best
interests of S1 and its stockholders and recommends that you vote in favor of
this proposal as well.
It is important that you use this opportunity to take part in the affairs
of S1 by voting on the business to come before this meeting. WHETHER OR NOT YOU
EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND PROMPTLY RETURN
THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO THAT YOUR SHARES
MAY BE REPRESENTED AT THE MEETING. YOUR VOTE IS VERY IMPORTANT. Returning the
proxy does not deprive you of your right to attend the meeting and to vote your
shares in person.
PLEASE READ THE SECTION ENTITLED "RISK FACTORS" ON PAGE BEFORE COMPLETING
YOUR PROXY CARD.
Sincerely,
------------------------------------------
James S. Mahan III
Chairman of the Board,
President and
Chief Executive Officer
Neither the Securities and Exchange Commission nor any state securities
regulators have approved the S1 stock to be issued under this prospectus/proxy
statement or determined if this prospectus/proxy statement is accurate or
adequate. Any representation to the contrary is a criminal offense.
S1's common stock is listed on the Nasdaq National Market under the ticker
symbol "SONE."
This prospectus/proxy statement is dated , 1999 and was
first mailed to stockholders on or about , 1999.
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[S1 LOGO]
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held , 1999 at Eastern time
To Our Stockholders:
Notice is hereby given that a special meeting of stockholders of Security
First Technologies Corporation, or S1, will be held at on
, 1999 at Eastern time, for the following purposes:
1. To consider the issuance of shares of S1 common stock in S1's
acquisition of 100% of the capital stock of FICS Group N.V., a Belgian
corporation. In the FICS transaction, S1 will issue, or grant options to
purchase, a total of 20,000,000 shares of S1 common stock for all outstanding
shares of FICS common stock. The FICS transaction is discussed in more detail in
the sections of the attached prospectus/proxy statement entitled "The FICS
Transaction" and "The FICS Agreements."
2. To consider the issuance of shares of S1 common stock in S1's
acquisition by merger of Edify Corporation. The merger agreement providing for
S1's acquisition of Edify is included as Annex A to the attached
prospectus/proxy statement. If you approve the issuance and Edify's stockholders
approve the merger, S1 will issue 0.330969 shares of S1 common stock for each
share of outstanding Edify common stock, or a total of approximately
shares of S1 common stock. The Edify transaction is discussed in more detail in
the sections of the attached prospectus/proxy statement entitled "The Edify
Transaction" and "The Edify Agreements."
3. To consider changing the name of S1 from "Security First Technologies
Corporation" to "S1 Corporation."
Neither transaction can be completed unless the holders of a majority of
the shares of S1 common stock represented in person or by proxy at the S1
meeting approve the issuance of common stock for each transaction. The vote
required for each of the issuances is set forth in the section of the
prospectus/proxy statement entitled "The S1 Meeting." Similarly, the name change
cannot be approved unless the holders of a majority of the shares of S1 common
stock represented in person or by proxy at the S1 meeting approve the change of
name.
Only stockholders of record at the close of business on
, 1999, the record date, are entitled to notice of and to vote at the
meeting or any adjournment of the meeting.
By Order of the Board of Directors
of Security First Technologies Corporation
------------------------------------------
Nancy Kenley
Secretary and Corporate Counsel
Atlanta, Georgia
, 1999
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE AND
RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED SELF-ADDRESSED STAMPED ENVELOPE.
<PAGE> 4
[EDIFY LOGO]
Edify Corporation
2840 San Tomas Expressway
Santa Clara, California 95051
, 1999
Dear Stockholders:
We will hold a special meeting of our stockholders at Edify's headquarters
located at 2840 San Tomas Expressway, Santa Clara, California, on ,
1999 at , Pacific time.
At the meeting, you will be asked to consider and vote to approve and adopt
a merger agreement with Security First Technologies Corporation, or S1, that
will cause Edify to become a wholly owned subsidiary of S1. Based on the
capitalization of Edify and S1 as of June 30, 1999, after the merger, Edify
stockholders will own approximately 18.3% of the outstanding S1 common stock. If
S1's proposed acquisition of FICS Group N.V. is also completed, Edify
stockholders will own approximately 11.7% of the outstanding S1 common stock.
You will be entitled to receive in the merger 0.330969 shares of S1's
common stock for each share of Edify common stock you own.
AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS UNANIMOUSLY APPROVED
THIS TRANSACTION AND CONCLUDED THAT IT IS IN THE BEST INTERESTS OF EDIFY AND ITS
STOCKHOLDERS. YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
THIS TRANSACTION.
Attached is a notice of a special meeting of stockholders and a
prospectus/proxy statement relating to the merger. This document describes the
merger in detail. We encourage you to read it carefully.
THE MERGER AND AN INVESTMENT IN SHARES OF S1 STOCK INVOLVES RISKS. YOU
SHOULD CAREFULLY CONSIDER THE DISCUSSION IN THE SECTION ENTITLED "RISK FACTORS"
ON PAGE OF THIS PROSPECTUS/PROXY STATEMENT.
We cordially invite you to attend the meeting. However, whether or not you
plan to attend the meeting, please complete, sign and date the enclosed proxy
and return it to us in the enclosed envelope. If you attend the meeting, you may
vote in person if you wish, even though you have previously returned your proxy.
YOUR VOTE IS VERY IMPORTANT.
PLEASE DO NOT SEND YOUR STOCK CERTIFICATES AT THIS TIME.
Sincerely,
------------------------------------------
Jeffrey Crowe
President and
Chief Executive Officer
Neither the Securities and Exchange Commission nor any state securities
regulators have approved the S1 stock to be issued under this prospectus/proxy
statement or determined if this prospectus/proxy statement is accurate or
adequate. Any representation to the contrary is a criminal offense.
S1's common stock is listed on the Nasdaq National Market under the ticker
symbol "SONE."
This prospectus/proxy statement is dated , 1999 and was
first mailed to stockholders on or about , 1999.
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[EDIFY LOGO]
Edify Corporation
2840 San Tomas Expressway
Santa Clara, California 95051
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
------------------------
To Our Stockholders:
A special meeting of stockholders of Edify Corporation will be held at
, Pacific time, on , 1999, at Edify's headquarters
located at 2840 San Tomas Expressway, Santa Clara, California, to consider and
vote on a proposal to approve and adopt a merger agreement with Security First
Technologies Corporation, or S1, and approve a merger that will cause Edify to
become a wholly owned subsidiary of S1.
No other business will be considered at the meeting.
These proposals are more fully described in the prospectus/proxy statement
that accompanies this notice, which you should read carefully.
We have fixed the close of business on , 1999 as the
record date for the determination of our stockholders entitled to vote at this
meeting. A complete list of stockholders entitled to vote at this meeting will
be available for examination by any stockholder for any purpose relevant to the
meeting, at Edify's offices at 2840 San Tomas Expressway, Santa Clara,
California, during Edify's ordinary business hours for 10 days before the
meeting.
By Order of the Board of Directors
of Edify Corporation
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
Santa Clara, California
, 1999
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE POSTAGE-PAID ENVELOPE
PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. YOU CAN REVOKE YOUR
PROXY AT ANY TIME BEFORE IT IS VOTED.
<PAGE> 6
TABLE OF CONTENTS
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QUESTIONS AND ANSWERS ABOUT THE TRANSACTIONS................ 1
SUMMARY OF THE PROSPECTUS/PROXY STATEMENT................... 6
The Companies............................................. 6
Summary of the Transactions............................... 7
S1's Management Following the Transactions................ 7
Benefits of the Transactions.............................. 8
The FICS Transaction...................................... 8
What FICS Stockholders Will Receive.................... 8
Conditions to Completion of the FICS Transaction....... 8
Votes Required For Approval of the FICS Transaction.... 9
Termination of the FICS Transaction.................... 10
No Breakup Fee for the FICS Transaction................ 10
No Other Negotiations Involving FICS................... 10
The S1 Stockholders' FICS Voting Agreement............. 11
Opinion of S1's Financial Advisor...................... 11
Accounting Treatment of the FICS Transaction........... 11
Antitrust and Competition Filings and Approvals
Required to Complete the FICS Transaction............. 11
Restrictions on the Ability to Sell S1 Stock........... 11
The Edify Transaction..................................... 12
What Edify Stockholders Will Receive................... 12
Conditions to Completion of the Edify Transaction...... 12
Votes Required for Approval of the Edify Transaction... 13
Termination of the Edify Transaction................... 13
Breakup Fee for the Edify Transaction.................. 14
No Other Negotiations Involving Edify.................. 14
The Stock Option Agreement............................. 15
The Voting Agreements.................................. 15
Opinions of Financial Advisors......................... 16
Accounting Treatment of the Edify Transaction.......... 16
Interests of Certain Persons in the Edify
Transaction........................................... 17
Antitrust and Competition Filings or Approvals Required
to Complete the Edify Transaction..................... 17
Restrictions on the Ability to Sell S1 Stock........... 17
Comparative Per Share Market Price Information......... 17
Selected Consolidated Financial Information............... 18
RISK FACTORS................................................ 22
Risks Related to the Transactions......................... 22
Edify stockholders will receive a fixed ratio of
0.330969 shares of S1 common stock for each Edify
share they own even if there are changes in the
comparative values of Edify common stock and S1 common
stock before the closing of the Edify Transaction..... 22
S1 will face technical, operational and strategic
challenges that may prevent S1 from successfully
integrating FICS and Edify with S1.................... 22
Because the transactions are not conditioned on each
other, if S1 fails to close one or both of the
transactions the value of the S1 common stock could
decline............................................... 22
Officers and directors of S1 and Edify have different
interests from yours, and could exert their influence
over the Edify Transaction in a way that may not
benefit you........................................... 23
Risks Related to the Combined Company's Business.......... 23
We do not expect to achieve profitable operations for
the foreseeable future, and this may negatively impact
the value of your S1 common stock..................... 23
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The combined company's quarterly operating results may
fluctuate, and any fluctuations could adversely affect
the price of your S1 common stock..................... 24
The combined company will have three primary product
lines and if demand for these products declines our
revenues will decline................................. 24
System failures or performance problems with the
combined company's products could cause demand for
these products to decrease, require the combined
company to make significant capital expenditures or
impair client relations............................... 25
The combined company depends on a limited number of
clients for most of its revenue and, if any of those
clients terminate their contracts, the combined
company's revenues and financial performance would
decline............................................... 25
The transactions could harm key third party
relationships......................................... 26
The combined company's failure to develop and expand
its distribution channels would impede revenue
growth................................................ 26
The combined company's market is highly competitive and
if it is unable to keep pace with evolving technology,
its revenue and future prospects may decline.......... 26
A significant portion of the combined company's clients
are in the financial services industry which is
subject to economic changes and is rapidly
consolidating, which could reduce demand for the
combined company's products and services.............. 27
Infringement of the combined company's proprietary
technology could adversely affect our competitive
position and income potential......................... 27
The combined company may become involved in litigation
over proprietary rights, which may be costly and time
consuming............................................. 27
If the combined company is unable to attract and retain
technical employees, it may not be able to compete.... 28
If the combined company is unable to effectively manage
our expected growth, it will not be able to
successfully implement our business plan.............. 28
If the combined company fails to adequately address the
year 2000 issue, it may lose revenue or incur
significant additional costs.......................... 28
The combined company depends on external sources of
capital for future growth............................. 29
Future sales of the combined company's common stock in
the public market could adversely affect our stock
price and our ability to raise funds in new stock
offerings............................................. 29
Ownership of common stock by the combined company's
officers, directors and principal stockholders may
prevent a change in control........................... 30
Market volatility may cause the price of your stock to
decline............................................... 30
International operations and currency exchange rate
fluctuations may adversely affect the combined
company............................................... 30
FORWARD LOOKING STATEMENTS IN THIS PROSPECTUS/PROXY
STATEMENT................................................. 30
THE COMPANIES............................................... 32
Security First Technologies Corporation................... 32
FICS Group N.V............................................ 32
Edify Corporation......................................... 33
THE S1 MEETING.............................................. 33
Date, Time, Place and Purpose of S1's Meeting............. 33
Record Date and Outstanding Shares........................ 34
Vote and Quorum Required.................................. 34
Abstentions; Broker Non-Votes............................. 34
Stock Ownership of Management and Principal
Stockholders........................................... 34
Expenses of Proxy Solicitation............................ 34
Voting of Proxies......................................... 35
No Appraisal Rights....................................... 35
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THE EDIFY MEETING........................................... 35
Date, Time, Place and Purpose of Edify's Meeting.......... 35
Record Date and Outstanding Shares........................ 35
Vote Required............................................. 36
Abstentions; Broker Non-Votes............................. 36
Stock Ownership of Management and Principal
Stockholders........................................... 36
Expenses of Proxy Solicitation............................ 36
Voting of Proxies......................................... 36
No Appraisal Rights....................................... 37
BACKGROUND OF THE TRANSACTIONS.............................. 37
INFORMATION ABOUT FICS GROUP N.V............................ 40
Description of FICS's Business............................ 40
The FICS Solution...................................... 41
Products and Services.................................. 42
Professional Services.................................. 45
FICS Customers......................................... 46
Case Studies........................................... 46
Sales and Marketing.................................... 47
Research and Development............................... 47
Competition............................................ 48
Proprietary Rights..................................... 48
Employees.............................................. 49
Facilities............................................. 49
Legal Proceedings...................................... 50
Presentation of Financial and Other Information........... 50
Exchange Rates............................................ 50
FICS Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 51
Overview............................................... 51
Currency and Exchange Rates............................ 53
Results of Operations.................................. 54
Years Ended December 31, 1997 and 1998................. 55
Years Ended December 31, 1996 and 1997................. 58
Three Months Ended March 31, 1998 and 1999............. 59
FICS Quarterly Results of Operations................... 61
Liquidity and Capital Resources........................ 62
Year 2000 Considerations............................... 63
THE FICS TRANSACTION........................................ 65
S1's Reasons for the FICS Transaction..................... 65
Recommendation of S1's Board of Directors................. 66
Opinion of S1's Financial Advisor......................... 66
Completion and Effectiveness of the FICS Transaction...... 73
Structure of the FICS Transaction and Conversion of FICS
Common Stock........................................... 74
United States Federal Income Tax Consequences of the FICS
Transaction............................................ 74
Accounting Treatment of the FICS Transaction.............. 75
Regulatory Filings and Approvals Required to Complete the
FICS Transaction....................................... 75
Restrictions on Sales of Shares by Affiliates of FICS and
S1..................................................... 76
Listing on the Nasdaq National Market of S1 Common Stock
to be Issued in the FICS Transaction................... 76
Operations after the FICS Transaction..................... 76
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THE FICS AGREEMENTS......................................... 76
Representations and Warranties............................ 76
FICS's Conduct of Business before Completion of the FICS
Transaction............................................ 77
FICS Stockholders' Conduct of Business before Completion
of the FICS Transaction................................ 78
S1's Conduct of Business before Completion of the FICS
Transaction............................................ 78
Conditions to Completion of the FICS Transaction.......... 78
Termination of the FICS Agreements........................ 79
Expenses; No Breakup Fee.................................. 80
Extension, Waiver and Amendment of the FICS Agreements.... 80
Related FICS Agreements................................... 80
The Pledge Agreement................................... 80
S1 Stockholder Voting Agreements....................... 80
The Loan Agreement and Promissory Note................. 81
THE EDIFY TRANSACTION....................................... 81
S1's Reasons for the Edify Transaction.................... 81
Recommendation of S1's Board of Directors................. 82
Edify's Reasons for the Edify Transaction................. 83
Recommendation of Edify's Board of Directors.............. 84
Opinion of S1's Financial Advisor......................... 84
Opinion of Edify's Financial Advisor...................... 93
Interests of Certain Persons in the Edify Transaction..... 100
Completion and Effectiveness of the Edify Transaction..... 100
Structure of the Edify Transaction and Conversion of Edify
Common Stock........................................... 100
Exchange of Edify Stock Certificates for S1 Stock
Certificates........................................... 101
Material United States Federal Income Tax Consequences of
the Edify Transaction.................................. 101
Accounting Treatment of the Edify Transaction............. 103
Regulatory Filings and Approvals Required to Complete the
Edify Transaction...................................... 103
Restrictions on Sales of Shares by Affiliates of Edify and
S1..................................................... 103
Listing on the Nasdaq National Market of S1 Common Stock
to be Issued in the Edify Transaction.................. 103
Delisting and Deregistration of Edify Common Stock after
the Edify Transaction.................................. 104
Operations after the Edify Transaction.................... 104
THE EDIFY AGREEMENTS........................................ 104
The Merger Agreement...................................... 104
Representations and Warranties......................... 104
Edify's Conduct of Business before Completion of the
Edify Transaction..................................... 105
S1's Conduct of Business before Completion of the Edify
Transaction........................................... 106
Edify's Employee Benefit Plans......................... 106
Treatment of Edify Stock Options and Warrants; Grant of
S1 Stock Options...................................... 106
Conditions to Completion of the Edify Transaction...... 107
Termination of the Merger Agreement.................... 108
Expenses; Breakup Fee.................................. 109
Extension, Waiver and Amendment of the Merger
Agreement............................................. 109
Related Agreements........................................ 110
The Stock Option Agreement............................. 110
Edify Stockholders' Voting Agreements.................. 111
S1 Stockholder Voting Agreements....................... 111
COMPARATIVE PER SHARE MARKET PRICE DATA..................... 113
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS....... 114
Notes to the Unaudited Pro Forma Consolidated Financial
Statements............................................. 119
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COMPARISON OF RIGHTS OF HOLDERS OF S1 COMMON STOCK AND EDIFY
COMMON STOCK.............................................. 131
Directors................................................. 131
Indemnification and Limitation of Liability of
Directors.............................................. 132
Call of Special Stockholder Meetings...................... 132
Stockholder Action without a Meeting...................... 132
Quorum for Stockholder Meetings........................... 133
General Vote.............................................. 133
Authorized and Outstanding Common Stock................... 133
Authorized and Outstanding Preferred Stock................ 133
Stockholder Rights Plan................................... 134
SHARE OWNERSHIP BY PRINCIPAL STOCKHOLDERS, MANAGEMENT AND
DIRECTORS OF S1........................................... 134
ADDITIONAL MATTERS BEING SUBMITTED TO A VOTE OF ONLY S1
STOCKHOLDERS.............................................. 135
Proposal No. 1 -- Change of Corporate Name................ 135
LEGAL OPINION............................................... 135
EXPERTS..................................................... 135
DOCUMENTS INCORPORATED BY REFERENCE IN THIS PROSPECTUS/PROXY
STATEMENT................................................. 136
WHERE YOU CAN FIND MORE INFORMATION......................... 137
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS.................. F-1
PROSPECTUS/PROXY STATEMENT
ANNEX A -- AGREEMENT AND PLAN OF MERGER..................... A-1
ANNEX B -- OPINION OF BANCBOSTON ROBERTSON STEPHENS INC. ... B-1
ANNEX C -- OPINION OF BANCBOSTON ROBERTSON STEPHENS INC. ... C-1
ANNEX D -- OPINION OF GOLDMAN, SACHS & CO................... D-1
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QUESTIONS AND ANSWERS ABOUT THE TRANSACTIONS
Q: I UNDERSTAND THAT SECURITY FIRST TECHNOLOGIES CORPORATION HAS AGREED TO
MAKE TWO STRATEGIC ACQUISITIONS. CAN YOU TELL ME MORE ABOUT S1'S PROPOSED
DEALS?
A: S1 has agreed that its Belgian subsidiary will acquire all of the
outstanding capital stock of FICS Group N.V. FICS is a Belgium-based
software company that develops remote electronic banking and regulatory
financial reporting software products. FICS has operations in 10 countries:
Belgium, Luxembourg, the Netherlands, France, the United Kingdom, Spain,
Portugal, the United States, Australia and Singapore. FICS concentrates on
two core activities: Electronic Services Delivery and Financial Reporting
Systems. Electronic Services Delivery products provide solutions for
electronic banking, both retail and corporate, running on Microsoft Windows
operating systems and via the internet, as well as solutions for electronic
commerce. Electronic Services Delivery products offer end-to-end
functionality for account reporting, cash management, payments, custody,
trade finance and netting, and embrace all forms of electronic banking,
from conventional "electronic delivery systems" to internet, telephone,
fax, hand-held computing and mobile phone services. Financial Reporting
Systems offer banks, insurance companies, pension funds, mutual investment
funds and brokers an international solution for legal, financial and
management reporting. We refer to the transactions involved in this
acquisition as the "FICS Transaction."
In addition, on the same day that it entered into the FICS Transaction, S1
agreed that an S1 subsidiary will merge with Edify Corporation. As a
result, Edify will become a wholly owned subsidiary of S1. Edify provides
enterprise self service software products that enable organizations to
automate, integrate and personalize interactions with customers through
multiple channels, including the internet, corporate intranets and the
telephone, yielding stronger, more profitable relationships. Edify's
products enable organizations to develop more and better service to
customers and employees while containing costs, capitalizing on emerging
interactive media and leveraging existing investments. Edify's products are
designed to support both the telephone-based self service features found in
traditional, standalone interactive voice response, or "IVR," systems, and
the broad range of interactive services that can be provided through the
internet or an enterprise intranet. We refer to this merger as the "Edify
Transaction."
Q: DO I GET TO VOTE ON THE FICS TRANSACTION OR THE EDIFY TRANSACTION?
A: If you held common stock in S1 at the close of business on
, 1999, you may vote on S1's proposed issuances of
common stock in each of the two proposed transactions.
If you held Edify common stock at the close of business on
, 1999, you may vote on Edify's approval and adoption
of the merger agreement and approval of the Edify Transaction. Edify's
stockholders will not vote on the FICS Transaction.
Q: IF STOCKHOLDERS OF S1 APPROVE THE ISSUANCES OF S1 COMMON STOCK IN BOTH THE
FICS TRANSACTION AND THE EDIFY TRANSACTION, AND EDIFY STOCKHOLDERS APPROVE
THE EDIFY TRANSACTION, WHAT WILL HAPPEN?
A: If the FICS Transaction is approved, FICS will become a wholly owned
subsidiary of a Belgian subsidiary of S1. If the Edify Transaction is
approved, Edify will become a wholly owned subsidiary of S1.
Q: ARE THE FICS TRANSACTION AND THE EDIFY TRANSACTION CONDITIONED ON EACH
OTHER?
A: No. If S1's stockholders approve the issuance of S1 common stock in the
FICS Transaction, S1 will proceed to close that transaction, whether or not
S1's stockholders approve the issuance of S1 common stock in the Edify
Transaction. Similarly, if S1's stockholders approve the issuance
1
<PAGE> 12
of S1 common stock in the Edify Transaction and the Edify stockholders also
approve the Edify Transaction, S1 and Edify will proceed to close that
transaction, whether or not S1's stockholders approve the issuance of S1
common stock in the FICS Transaction.
Q: IF THE TRANSACTIONS CLOSE, WHAT PERCENTAGE OF THE COMBINED COMPANY WILL OUR
COMPANY'S EXISTING STOCKHOLDERS OWN?
A: Based on the capitalization of S1, FICS and Edify as of June 30, 1999, the
existing S1 stockholders, the former stockholders of FICS and the former
stockholders of Edify will own the following percentages of S1's common
stock if one or both of the transactions close:
<TABLE>
<CAPTION>
S1 FICS EDIFY
TRANSACTION COMPLETED STOCKHOLDERS STOCKHOLDERS STOCKHOLDERS
--------------------- ------------ ------------ ------------
<S> <C> <C> <C>
Both............................................ 52.4% 35.9% 11.7%
FICS Only....................................... 59.3% 40.7% N/A
Edify Only...................................... 81.7% N/A 18.3%
</TABLE>
For a more complete description of the transactions, see the sections
entitled "The FICS Transaction" on page and "The Edify Transaction" on
page .
Q: WHAT WILL EDIFY STOCKHOLDERS RECEIVE IN THE EDIFY TRANSACTION?
A: Edify stockholders will receive 0.330969 shares of S1 common stock for each
share of Edify common stock they own. S1 will not issue fractional shares
of stock. Edify stockholders will receive cash based on the market price of
S1 common stock instead of any fractional shares.
For example, a holder of 100 shares of Edify common stock will receive 33
shares of S1 common stock and an amount of cash equal to .0969 times the
market price of S1 common stock, calculated as of the effective time of the
Edify Transaction.
Holders of options or warrants to purchase shares of Edify common stock
will hold options or warrants as appropriate to purchase shares of S1
common stock after completion of the Edify Transaction.
The number of shares of S1 common stock to be issued for each share of
Edify common stock is fixed and will not be adjusted based upon changes in
the value of these shares. As a result, the value of the shares Edify
stockholders will receive in the Edify Transaction will not be known prior
to the closing time of the Edify Transaction and will go up or down as the
market price of S1 common stock goes up or down. Edify may not terminate
its obligations to complete the Edify Transaction or resolicit the vote of
its stockholders based solely on changes in the value of S1 common stock.
Since S1 reorganized in September 1998, S1's stock price has been volatile.
The following table sets forth, as of the last trading day of the last
seven calendar months, the closing sale price per share of S1 common stock
on the Nasdaq National Market. This table also reflects the value to be
received in the Edify Transaction for each share of Edify common stock,
calculated by multiplying the closing price per share of S1 common stock by
the exchange
2
<PAGE> 13
ratio. These numbers have been adjusted to give effect to a two-for-one
split of S1's common stock that was paid on May 7, 1999.
<TABLE>
<CAPTION>
CLOSING SALE PRICE VALUE PER SHARE
PER SHARE OF OF EDIFY
DATE S1 COMMON STOCK COMMON STOCK
---- ------------------ ---------------
<S> <C> <C>
June 30, 1999....................... $45.13 $14.93
May 28, 1999........................ 38.38 12.70
April 30, 1999...................... 59.53 19.70
March 31, 1999...................... 36.75 12.16
February 26, 1999................... 32.81 10.86
January 29, 1999.................... 16.50 5.46
December 31, 1998................... 15.25 5.05
</TABLE>
For a more complete description of what you will receive in the Edify
Transaction, see the section entitled "The Edify Transaction -- Structure
of the Edify Transaction and Conversion of Edify Common Stock" on page .
Q: DOES THE S1 BOARD OF DIRECTORS RECOMMEND VOTING IN FAVOR OF THE ISSUANCES
OF S1 COMMON STOCK IN THE TWO TRANSACTIONS?
A: Yes. After careful consideration, the S1 board of directors unanimously
recommends that its stockholders vote in favor of the issuances of S1
common stock in the two transactions. For a more complete description of
the recommendation of the S1 board of directors, see the sections entitled
"The FICS Transaction -- S1's Reasons for the FICS Transaction" on page ,
"The Edify Transaction -- S1's Reasons for the Edify Transaction" on page
and "The FICS Transaction -- Recommendation of S1's Board of Directors"
on page and "The Edify Transaction -- Recommendation of S1's Board of
Directors" on page .
Q: DOES THE EDIFY BOARD OF DIRECTORS RECOMMEND VOTING IN FAVOR OF THE EDIFY
TRANSACTION?
A: Yes. After careful consideration, Edify's board of directors unanimously
recommends that its stockholders vote in favor of the merger agreement and
the Edify Transaction. For a more complete description of the
recommendation of the Edify board of directors, see the sections entitled
"The Edify Transaction -- Edify's Reasons for the Edify Transaction" on
page and "The Edify Transaction -- Recommendation of Edify's Board of
Directors" on page .
Q: ARE THERE RISKS I SHOULD CONSIDER IN MAKING MY VOTE?
A: Yes. For example, the number of shares of S1 common stock that Edify
stockholders will receive will not change even if the market price of S1
common stock increases or decreases before the completion of the Edify
Transaction. WE URGE YOU TO OBTAIN CURRENT MARKET QUOTATIONS OF S1 COMMON
STOCK AND EDIFY COMMON STOCK.
In evaluating the transactions, you should carefully consider these and
other factors discussed in the section entitled "Risk Factors" on page .
Q: WHAT DO I NEED TO DO NOW?
A: Mail your signed proxy card in the enclosed return envelope as soon as
possible so that your shares may be represented at your meeting. If you do
not include instructions on how to vote your properly signed proxy, your
shares will be voted "FOR" approval of the proposals on which you are
entitled to vote.
3
<PAGE> 14
For a more complete description of voting at your company's meeting, see
the sections entitled "The S1 Meeting -- Voting of Proxies" on page and
"The Edify Transaction -- Voting of Proxies" on page .
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE?
A: If you want to change your vote, send the secretary of Edify or S1, as
appropriate, a later-dated, signed proxy card before your meeting or attend
your meeting in person. You may also revoke your proxy by sending written
notice to the secretary of Edify or S1, as appropriate, before your
meeting.
For a more complete description of how to change your vote, S1 stockholders
should see the section entitled "The S1 Meeting -- Voting of Proxies" on
page and Edify stockholders should see the section entitled "The Edify
Transaction -- Voting of Proxies" on page .
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions on how
to vote by following the information provided to you by your broker.
For a more complete description of voting shares held in "street name," see
the section entitled "The S1 Meeting -- Voting of Proxies" on page and
"The Edify Meeting -- Voting of Proxies" on page .
Q: SHOULD I SEND IN MY EDIFY STOCK CERTIFICATES NOW?
A: No. After the transaction is completed, we will send you written
instructions for exchanging your Edify stock certificates for S1 stock
certificates.
Q: WHEN DO YOU EXPECT THE TRANSACTIONS TO BE COMPLETED?
A: We are working toward completing the transactions as quickly as possible.
Although the FICS Transaction and the Edify Transaction are independent of
one another, we hope to complete both transactions simultaneously during
the fourth quarter of 1999.
For a more complete description of the conditions to the transactions, see
the sections entitled "The FICS Agreements -- Conditions to Completion of
the FICS Transaction" on page and "The Edify Agreements -- The Merger
Agreement -- Conditions to Completion of the Edify Transaction" on page .
Q: WILL I RECOGNIZE A GAIN OR A LOSS ON THE EDIFY TRANSACTION?
A: You will not recognize gain or loss for federal income tax purposes if you
receive shares of S1 common stock in exchange for shares of Edify common
stock in the Edify Transaction, except to the extent you receive cash
instead of fractional shares. However, different tax consequences may apply
to you because of your individual circumstances or because special tax
rules apply to you. For example, different tax consequences may apply if
you:
- are a tax-exempt organization;
- are a dealer in securities;
- are a financial institution;
- are an insurance company;
- are a non-United States person;
- acquired your shares of Edify common stock from the exercise of options
or otherwise as compensation or through a qualified retirement plan; or
- hold shares of Edify common stock as part of a straddle, hedge, or
conversion transaction.
4
<PAGE> 15
For a more complete description of the tax consequences, see the section
entitled "The Edify Transaction -- Material United States Federal Income
Tax Consequences of the Edify Transaction" on page .
Q: AM I ENTITLED TO DISSENTERS' OR APPRAISAL RIGHTS?
A: Under Delaware law, holders of S1 common stock and holders of Edify common
stock are not entitled to dissenters' or appraisal rights in the
transactions.
Q: WHOM SHOULD I CALL WITH QUESTIONS?
A: S1 stockholders should call S1 Investor Relations at 404-812-6200 with any
questions about the transactions. Edify stockholders should call Edify
Investor Relations at 408-982-4000 with any questions about the
transactions.
You may also obtain additional information about S1 and Edify from
documents each of our companies files with the Securities and Exchange
Commission by following the instructions in the section entitled "Where You
Can Find More Information" on page .
5
<PAGE> 16
SUMMARY OF THE PROSPECTUS/PROXY STATEMENT
This summary may not contain all of the information that is important to
you. You should read carefully this entire document, including the Annexes and
the other documents we refer to for a more complete understanding of the
transactions.
In addition, we incorporate important business and financial information
about S1 and Edify into this prospectus/proxy statement by reference. See
"Documents Incorporated by Reference in This Prospectus/Proxy Statement" on page
. You may obtain the information incorporated into this prospectus/proxy
statement by reference without charge by following the instructions in the
section entitled "Where You Can Find More Information" on page .
THE COMPANIES
[S1 LOGO]
SECURITY FIRST TECHNOLOGIES CORPORATION
3390 Peachtree Road, NE, Suite 1700
Atlanta, GA 30326
404-812-6200
http://www.s1.com
S1 develops integrated, brandable internet applications that enable
financial services companies to create their own financial portals. S1's Virtual
Financial Manager suite of software applications integrates banking, investment,
loan and credit card accounts at an institution, with content such as news,
weather and sports personalized by the end-user. We license our Virtual
Financial Manager software, provide installation and integration services and
offer outsourced internet transaction processing through our data center. We
target organizations that view providing their products and services on the
internet as a strategic competitive advantage and an integral component of their
business.
[FICS LOGO]
FICS GROUP N.V.
Excelsiorlaan 87
1930 Zaventem, Belgium
(011) 32-2-714-4211
FICS is a leading software provider for the global financial services
industry. FICS designs, develops, markets and supports software products that
enable banks and financial institutions to interact electronically with their
customers. The FICS Electronic Services Delivery products include both corporate
and retail banking solutions. FICS's corporate banking products enable banks and
financial institutions to offer cash management, trade finance, custody and
other corporate banking services over the internet and/or through a direct
connection to the bank or financial institution. FICS's retail banking products
enable banks and financial institutions to offer checking, savings, portfolio
management and other retail banking services over the internet. FICS's Financial
Reporting Systems products enable banks and financial institutions to meet
regulatory reporting requirements and perform internal information management
and consolidation activities in 22 countries.
6
<PAGE> 17
[EDIFY LOGO]
EDIFY CORPORATION
2840 San Tomas Expressway
Santa Clara, CA 95051
(408) 982-2000
http://www.edify.com
Edify Corporation provides enterprise self service software products that
enable organizations to automate, integrate and personalize interactions with
customers through multiple channels, including the internet, corporate intranets
and the telephone. Over the past seven years, Edify has licensed its Electronic
Workforce application development and runtime platform to over 1,250 customers
for custom development of internet and telephone self service applications such
as bank account inquiries. In the last three years, Edify has licensed its
software application product, the Electronic Banking System, which offers
financial institutions the means to deploy a suite of automated banking services
over the internet.
SUMMARY OF THE TRANSACTIONS
In the FICS Transaction, a Belgian subsidiary of S1 will purchase all of
the outstanding capital stock of FICS. In acquiring FICS, S1 expects to issue to
the former FICS stockholders approximately 18,000,000 shares of S1 common stock
and to assume options of FICS which will convert into options to purchase
approximately 2,000,000 additional shares of S1 common stock. As a result of the
FICS Transaction, FICS indirectly will become a wholly owned subsidiary of S1.
In the Edify Transaction, Edify and a wholly owned subsidiary of S1 will
merge. As a result, Edify will become a wholly owned subsidiary of S1.
The merger agreement for the Edify Transaction is attached to this
prospectus/proxy statement as Annex A. We encourage you to read the merger
agreement carefully. The merger agreement is more fully discussed beginning on
page .
S1'S MANAGEMENT FOLLOWING THE TRANSACTIONS
If the FICS Transaction closes, S1 has agreed to increase the size of its
board of directors by at least four members and to appoint four individuals
designated by Michel Akkermans, the Chairman of the Board and Chief Executive
Officer of FICS, to serve for three-year terms. In addition, the parties have
agreed that two incumbent S1 directors will tender their resignations effective
within two years from the closing of the FICS Transaction, to be replaced by two
individuals selected jointly by Mr. Akkermans and James S. Mahan III, the Chief
Executive Officer of S1. Mr. Akkermans has agreed to become the President and
Chairman of the Board of Directors of S1 if the FICS Transaction closes. Mr.
Mahan will continue as Chief Executive Officer of S1.
If the Edify Transaction closes, Jeffrey M. Crowe, the President and Chief
Executive Officer of Edify, will be appointed to serve for a three-year term on
the S1 board of directors. Mr. Crowe has also agreed to serve as Vice Chairman
of the Board of Directors of S1 if the Edify Transaction closes.
7
<PAGE> 18
BENEFITS OF THE TRANSACTIONS
We believe the two transactions will provide the combined company with the
opportunity to realize several benefits, including:
- combining our operations into a single company that is well positioned to
take advantage of potential growth in online financial services
- enhancing S1's products to span the full range of a financial
institution's enterprise, from
- consumer banking, brokerage and insurance applications, to
- small business and corporate electronic banking products, to
- financial reporting solutions
- expanding delivery of S1's solutions across additional delivery channels
like the internet, wireless communication devices and interactive voice
response systems
- adding sales and marketing personnel
- growing the number of bank relationships to 26 of the 50 top banks in the
United States, and 35 of the 100 top financial institutions worldwide
- increasing the total number of employees to approximately 1,500
There are potential detriments to the two transactions, including:
- technical, operational and strategic challenges to the integration of S1,
FICS and Edify
- the effect of the transactions on key third party relationships
- the effect of the transactions on key customer relationships
The potential benefits of the transactions may not be achieved. See the
sections entitled "Risk Factors" on page , "The FICS Transaction -- S1's
Reasons for the FICS Transaction" on page , "The Edify Transaction -- S1's
Reasons for the Edify Transaction" on page and "The Edify
Transaction -- Edify's Reasons for the Edify Transaction" on page .
THE FICS TRANSACTION
What FICS Stockholders Will Receive
In acquiring FICS, S1 expects to issue approximately 18,000,000 shares of
S1 common stock to the former FICS stockholders, if S1's stockholders approve
this issuance. S1 has also agreed to assume options of FICS which will convert
into options to purchase approximately 2,000,000 additional shares of S1 common
stock.
Conditions to Completion of the FICS Transaction
The obligations of S1 and the FICS stockholders to complete the FICS
Transaction require the prior satisfaction or waiver of a number of conditions.
The conditions that must be satisfied or waived before the completion of the
FICS Transaction include the following, with some customary exceptions and
qualifications:
- the issuance of S1 common stock in the FICS Transaction must be approved
by S1 stockholders
- the waiting periods, if any, under applicable antitrust and competition
laws must expire or be terminated
8
<PAGE> 19
- no order or injunction or governmental action or proceeding preventing
the completion of the FICS Transaction may be in effect
- the parties' representations and warranties in the stock purchase
agreements comprising the FICS Transaction must be true and correct
- the parties must have complied in all material respects with their
agreements in the stock purchase agreements
- the shares of S1 common stock to be issued in the FICS Transaction must
have been approved for listing on the Nasdaq National Market
- a registration statement covering the resale of some of the shares of S1
common stock received by Michel Akkermans, the FICS chief executive
officer, must be ready to be declared effective by the SEC
- an underwriting agreement in reasonable and customary form must be
available for use upon execution by Mr. Akkermans in connection with the
offering described in his resale registration statement
- S1 must have received letters of resignation from two of its incumbent
directors, to take effect before the second anniversary of the FICS
Transaction
- all required regulatory approvals needed to complete the FICS Transaction
must have been obtained and must be in effect
- S1's Belgian subsidiary must have received necessary financing for its
purchase of the FICS stock
- no material adverse change shall have occurred with respect to FICS or S1
- the five majority FICS stockholders must have received an opinion as to
the tax-free nature of the FICS Transaction
- all required consents of third parties must be obtained
If any party to the FICS Transaction waives any conditions, S1 will
consider the facts and circumstances at that time and make a determination as to
whether a resolicitation of proxies from S1's stockholders is appropriate.
For a more complete description of the conditions to completion of the FICS
Transaction, see the section entitled "The FICS Agreements -- Conditions to
Completion of the FICS Transaction" on page .
Votes Required For Approval of the FICS Transaction
The holders of a majority of the outstanding shares of S1 common stock
represented in person or by proxy at the S1 meeting must approve the issuance of
S1 common stock in the FICS transaction. S1 stockholders are entitled to cast
one vote per share of S1 common stock.
The directors and executive officers of S1, who hold % of the
outstanding S1 common stock as of the record date, have agreed to vote in favor
of the FICS Transaction.
All FICS stockholders have previously approved the FICS Transaction. No
vote of the Edify stockholders is required to approve the FICS Transaction.
For a more complete description of the vote required for approval of the
FICS Transaction see the sections entitled "The S1 Meeting -- Vote and Quorum
Required" on page .
9
<PAGE> 20
Termination of the FICS Transaction
The stock purchase agreements making up the FICS Transaction may be
terminated under some circumstances at any time before the completion of the
FICS Transaction, as summarized below.
The stock purchase agreements may be terminated by the mutual consent of
the parties.
The stock purchase agreements may also be terminated by a party if, with
some qualifications, the conditions to completion of the FICS Transaction would
not be satisfied (1) because of a material breach of an agreement in the
agreements by the other or (2) subject to a materiality qualification, because a
representation or warranty of the other in the agreements becomes untrue.
In addition, with some qualifications, the stock purchase agreements may be
terminated by a party under any of the following circumstances:
- if the FICS Transaction is not completed by March 31, 2000
- if a final court order prohibiting the FICS Transaction is issued and is
not appealable
- if the S1 stockholders do not approve the issuance of shares in the FICS
Transaction at the S1 meeting
The stock purchase agreements may be terminated by the five majority
holders of FICS stock if, without the consent of these "majority holders," S1
engages in an extraordinary transaction, such as (1) the sale, issuance or
delivery of more than 50% of S1's outstanding voting capital stock, (2) the
acquisition or purchase by a third party of more than 50% of any class or series
of S1's capital stock or S1's assets, (3) any lease or sale of more than 50% of
S1's assets, or (4) any liquidation or dissolution of S1.
The five majority FICS stockholders may terminate the FICS Transaction if
S1 fails to provide Michel Akkermans with a resale registration statement and an
underwriting agreement in reasonable and customary form for his use in reselling
18% of the S1 shares he will receive in the FICS Transaction.
For a more complete description of the manner in which the stock purchase
agreements may be terminated, see the section entitled "The FICS
Agreements -- Termination of the FICS Agreements" on page .
No Breakup Fee for the FICS Transaction
No breakup fee will be paid by any of the parties if the FICS Transaction
is not closed.
No Other Negotiations Involving FICS
Until the FICS Transaction is completed or the merger agreement is
terminated, the FICS stockholders have agreed not to solicit, initiate or
encourage submission of proposals or offers from other persons, either directly
or through the corporate officers, directors or employees, relating to (1)
mergers, (2) consolidations or (3) purchases of all or substantially all of the
assets or equity of FICS. FICS has agreed to promptly inform S1 as to any
proposal, offer or inquiry to this effect, and has agreed to inform S1 of the
status and details of the terms of any proposal, offer or inquiry received.
For a more complete description of these limitations, see the section
entitled "The FICS Agreements -- FICS's Conduct of Business before Completion of
the FICS Transaction" and "The FICS Agreements -- FICS Stockholders' Conduct of
Business before Completion of the FICS Transaction" on page of this
prospectus/proxy statement and the corresponding sections of the stock purchase
agreements.
10
<PAGE> 21
The S1 Stockholders' FICS Voting Agreement
All FICS stockholders have agreed to the FICS Transaction and executed the
stock purchase agreements.
In addition, S1 stockholders James S. Mahan III, Robert F. Stockwell,
Daniel H. Drechsel, Robert W. Copelan, D.V.M., Dorsey R. Gardner, Joseph S.
McCall and Howard J. Runnion, Jr. entered into a voting agreement with the FICS
stockholders. The voting agreement requires these S1 stockholders to vote all
shares of S1 common stock which they may vote in favor of the issuance of shares
of common stock of S1 in the FICS Transaction. These S1 stockholders were not
paid additional consideration in connection with the voting agreements.
The S1 stockholders who entered into this voting agreement held
approximately % of the outstanding S1 common stock as of the record date.
For a more complete description of S1 stockholder voting agreements see the
section entitled "The FICS Transaction -- S1 Stockholders' FICS Voting
Agreement" on page .
Opinion of S1's Financial Advisor
In deciding to approve the FICS Transaction, S1's board of directors
considered an opinion from its financial advisor, BancBoston Robertson Stephens
Inc. On May 16, 1999, BancBoston Robertson Stephens delivered its oral opinion
to the board of directors of S1, which was subsequently confirmed in writing,
that, as of such date, the exchange consideration in the FICS Transaction was
fair from a financial point of view to S1. The opinion of BancBoston Robertson
Stephens does not constitute a recommendation as to how any S1 stockholder
should vote with respect to the FICS Transaction. The full text of the written
opinion of BancBoston Robertson Stephens, dated May 16, 1999, which sets forth
assumptions made, matters considered and limitations on the review undertaken in
connection with the opinion, is attached as Annex B. S1 stockholders should read
this opinion in its entirety. A more detailed summary of the opinion is included
in the section entitled "The FICS Transaction -- Opinion of S1's Financial
Advisor" on page .
Accounting Treatment of the FICS Transaction
S1 intends to account for the FICS Transaction as a "purchase" for
financial accounting purposes, in accordance with generally accepted accounting
principles.
For a more complete description of the accounting treatment of the
transactions see the section entitled "The FICS Transaction -- Accounting
Treatment of the FICS Transaction" on page .
Antitrust and Competition Filings and Approvals Required to Complete the FICS
Transaction
The issuance of S1 common stock to the three largest FICS stockholders is
subject to antitrust and competition laws, including merger notification laws.
S1 made the required filings with the Antitrust Division of the Department of
Justice and the Federal Trade Commission. The Antitrust Division or the FTC, as
well as a state or private person, may challenge the issuance of S1 common stock
to these FICS stockholders before or after completion of the FICS Transaction.
For a more complete description of the antitrust and competition
notifications required in connection with the FICS Transaction see the section
entitled "The FICS Transaction -- Regulatory Filings and Approvals Required to
Complete the FICS Transaction" on page .
Restrictions on the Ability to Sell S1 Stock
All shares of S1 common stock received by FICS stockholders in connection
with the FICS Transaction will constitute "restricted securities" under the
Securities Act and will not be freely
11
<PAGE> 22
transferable. S1 has agreed to prepare and file a registration statement
covering the resale by all former FICS stockholders of all of the shares of S1
common stock received by them in the FICS Transaction, including shares of S1
common stock issuable upon exercise of FICS options assumed by S1, promptly
following the closing of the FICS Transaction. This is in addition to the
requirement that S1 provide an effective registration statement for Michel
Akkermans' use immediately after closing.
For a more complete description of transfer restrictions applicable to
former FICS stockholders see the section entitled "The FICS
Transaction -- Restrictions on Sales of Shares by Affiliates of FICS and S1" on
page .
THE EDIFY TRANSACTION
What Edify Stockholders Will Receive
Holders of outstanding Edify common stock will receive 0.330969 shares of
S1 common stock for each Edify share they own. S1 will not issue fractional
shares of stock. Edify stockholders will receive cash based on the market price
of S1 common stock instead of any fractional shares. For example, a holder of
100 shares of Edify common stock will receive 33 shares of S1 common stock and
an amount of cash equal to .0969 times the average daily closing price of S1
common stock for the twenty trading days ending three days before closing.
Holders of options or warrants to purchase shares of Edify common stock
will hold options or warrants as appropriate to purchase shares of S1 common
stock after completion of the Edify Transaction.
The number of shares of S1 common stock to be issued for each share of
Edify common stock is fixed and will not be adjusted based upon changes in the
value of these shares. As a result, the value of the shares Edify stockholders
will receive in the Edify Transaction will not be known prior to the closing
time of the Edify Transaction and will go up or down as the market price of S1
common stock goes up or down. Edify may not terminate its obligations to
complete the Edify Transaction or resolicit the vote of its stockholders based
solely on changes in the value of S1 common stock.
Conditions to Completion of the Edify Transaction
Our respective obligations to complete the Edify Transaction require the
prior satisfaction or waiver of a number of conditions. The conditions that must
be satisfied or waived before the completion of the Edify Transaction include
the following, with some customary exceptions and qualifications:
- the merger agreement must be approved and adopted and the Edify
Transaction must be approved by Edify stockholders
- the issuance of shares of S1 common stock in the Edify Transaction must
be approved by S1 stockholders
- the waiting periods, if any, under applicable antitrust and competition
laws must expire or be terminated
- no injunction or order preventing the completion of the Edify Transaction
may be in effect
- subject to a materiality standard, the parties' representations and
warranties in the merger agreement must be in all material respects true
and correct
- no material adverse effect shall have occurred with respect to S1 or
Edify
12
<PAGE> 23
- subject to a materiality standard, we must have complied in all material
respects with our agreements in the merger agreement
- S1 and Edify must each receive an opinion from Hogan & Hartson L.L.P.,
S1's special counsel, substantially to the effect that the Edify
Transaction will qualify as a reorganization for federal income tax
purposes
- the shares of S1 common stock to be issued to Edify stockholders in the
Edify Transaction must have been approved for listing on the Nasdaq
National Market
- the registration statement by which S1 has registered the shares of S1
common stock to be issued in the Edify Transaction must have been
declared effective by the SEC, and this prospectus/proxy statement must
be available for use by S1 and Edify.
If either S1 or Edify waives any conditions, we will each consider the
facts and circumstances at that time and make a determination as to whether a
resolicitation of proxies from stockholders is appropriate.
For a more complete description of the conditions to completion of the
Edify Transaction, see the section entitled "The Edify Agreements -- The Merger
Agreement -- Conditions to Completion of the Edify Transaction" on page .
Votes Required for Approval of the Edify Transaction
The holders of a majority of the shares of S1 common stock represented in
person or by proxy at the S1 meeting must approve the issuance of S1 common
stock in the Edify Transaction. S1 stockholders are entitled to cast one vote
per share of S1 common stock.
The directors and executive officers of S1, who hold % of the
outstanding S1 common stock as of the record date, have agreed to vote in favor
of the Edify Transaction.
The holders of a majority of the outstanding shares of Edify common stock
must approve and adopt the merger agreement and approve the Edify Transaction.
Edify stockholders are entitled to cast one vote per share of Edify common stock
owned as of , 1999, the record date.
Edify stockholders holding % of Edify common stock outstanding as of
the record date have agreed to vote in favor of the Edify Transaction. Directors
and executive officers of Edify collectively beneficially owned approximately
% of the outstanding Edify common stock as of the record date.
For a more complete description of the votes required for approval of the
transactions see the sections entitled "The S1 Meeting -- Vote and Quorum
Required" on page and "The Edify Meeting -- Vote Required" on page .
Termination of the Edify Transaction
The merger agreement may be terminated under some circumstances at any time
before the completion of the Edify Transaction, as summarized below.
The merger agreement may be terminated by the mutual consent of the
parties.
The merger agreement may also be terminated by either S1 or Edify if,
subject to qualifications, the conditions to completion of the Edify Transaction
would not be satisfied (1) because of a material breach of an agreement in the
merger agreement by the other or (2) subject to a materiality qualification,
because a representation or warranty of the other in the merger agreement
becomes untrue.
13
<PAGE> 24
In addition, subject to qualifications, the merger agreement may be
terminated by either of us under any of the following circumstances:
- if the Edify Transaction is not completed by March 31, 2000
- if a final court order prohibiting the Edify Transaction is issued and is
not appealable
- if the Edify stockholders do not approve and adopt the merger agreement
and approve the Edify Transaction at the Edify special meeting
- if the S1 stockholders do not approve the issuance of shares in the Edify
Transaction.
The merger agreement may be terminated by S1 if the Edify board either:
- fails to recommend that Edify stockholders approve and adopt the merger
agreement
- makes any recommendation or approval of certain "extraordinary
transactions" involving Edify and a party other than S1, such as a merger
or a sale of 20% or more of Edify's assets or stock
The merger agreement may be terminated by Edify if:
- the S1 board fails to recommend that S1 stockholders approve the issuance
of shares in the Edify transaction
- on or after December 1, 1999, Edify's board authorizes Edify to enter
into an extraordinary transaction, such as a merger or a sale of 20% or
more of Edify's assets or stock, with a party other than S1 that the
Edify board determines is more favorable to Edify's stockholders than the
Edify Transaction, and S1 does not, upon notice of such decision, meet or
exceed the competing proposal.
For a more complete description of the manner in which the merger agreement
may be terminated, see the section entitled "The Edify Agreements -- The Merger
Agreement -- Termination of the Merger Agreement" on page .
Breakup Fee for the Edify Transaction
If the merger agreement is terminated because either the S1 stockholders or
the Edify stockholders do not approve and adopt the merger agreement and approve
the Edify Transaction, the party that did not approve the merger agreement will
pay the other $1 million in addition to up to $500,000 in costs and expenses. If
the merger agreement is terminated (1) because of a material breach of an
agreement in the merger agreement by the other, (2) subject to a materiality
qualification, because a representation or warranty of the other in the merger
agreement becomes untrue, or (3) because the board of directors of one party
fails to recommend to its stockholders to approve and adopt the merger
agreement, the party in breach will pay the other $5 million in addition to up
to $500,000 in costs and expenses. If Edify terminates the merger agreement
because its board of directors has authorized entering into an extraordinary
transaction of the nature specified in the merger agreement, such as a merger or
sale of assets to a party other than S1, Edify will pay S1 $5 million in
addition to up to $500,000 in costs and expenses.
For a more complete description of the payment of the termination fee, see
the section entitled "The Edify Agreements -- The Merger Agreement -- Expenses;
Breakup Fee" on page .
No Other Negotiations Involving Edify
Until the Edify Transaction is completed or the merger agreement is
terminated, Edify has agreed, with limited exceptions, not to directly or
indirectly take any action with respect to an
14
<PAGE> 25
extraordinary transaction such as a merger with or a sale of 20% or more of
Edify's assets or stock to someone other than S1.
Edify may, however, enter into negotiations regarding an extraordinary
transaction with someone other than S1 if Edify's board determines in the
exercise of its fiduciary duties that it should do so.
Edify has agreed to promptly inform S1 as to any proposals for an
extraordinary transaction, request for non-public information or inquiry which
Edify believes would lead to a proposal for an extraordinary transaction. Edify
has also agreed to inform S1 of the status and details of any proposal.
For a more complete description of these limitations on Edify's actions
with respect to an Acquisition Proposal, see the sections entitled "The Edify
Agreements -- The Merger Agreement -- Termination of the Merger Agreement," on
page , "The Edify Agreements -- The Merger Agreement -- Expenses; Breakup Fee"
on page and "The Edify Agreements -- The Merger Agreement -- Edify's Conduct
of Business before Completion of the Edify Transaction" on page of this
prospectus/proxy statement and the corresponding sections of the merger
agreement.
The Stock Option Agreement
Edify entered into a stock option agreement with S1 which grants S1 the
option, under certain conditions, to buy up to a number of shares of Edify
common stock equal to 19.9% of the issued and outstanding shares of Edify common
stock as of the first date, if any, upon which the option may be exercised. The
exercise price of the option is $17.87 per share.
The option is not currently exercisable and S1 may only exercise the option
under the following circumstances:
- if Edify's board of directors takes or fails to take certain actions
inconsistent with its recommendation in favor of the adoption and
approval of the merger agreement and approval of the Edify Transaction
- upon the acquisition by any person or group of 20% or more of the
outstanding voting securities of Edify
- upon termination of the merger agreement:
- by S1 due to an intentional, material breach by Edify of a
representation, warranty or covenant made by Edify in the merger
agreement
- by Edify after Edify's board authorizes Edify to enter into an
extraordinary transaction, such as a merger or a sale of significant
assets, with someone other than S1.
S1 required Edify to grant the option as a prerequisite to entering into
the merger agreement. The option may discourage third parties who are interested
in acquiring a significant stake in Edify and is intended by S1 to increase the
likelihood that the Edify Transaction will be completed.
For a more complete description of the stock option agreement see the
section entitled "The Edify Agreements -- The Stock Option Agreement" on page
.
The Voting Agreements
Edify stockholders Alvin S. Begun, Joseph G. Brown, Jeffrey M. Crowe,
Charles H. Jolissant, Steven S. Pollock, William A. Soward, Jimmy A. Sutton,
Patricia A. Tomlinson, Stephen M. Berkley, Kelly D. Conway, Tench Coxe, Donald
R. Hollis and Stewart A. Schuster entered into voting agreements with S1. The
voting agreements require these Edify stockholders to vote in favor of the
merger agreement and approval of the Edify Transaction. These Edify stockholders
were not paid additional consideration in connection with the voting agreements.
15
<PAGE> 26
The Edify stockholders who entered into the voting agreements collectively
held approximately % of the outstanding Edify common stock as of the record
date.
For a more complete description of the Edify stockholders' voting
agreements see the section entitled "The Edify Agreements -- Edify Stockholders'
Voting Agreements" on page .
In addition, S1 stockholders James S. Mahan III, Robert F. Stockwell,
Daniel H. Drechsel, Robert W. Copelan, D.V.M., Dorsey R. Gardner, Joseph S.
McCall and Howard J. Runnion, Jr. entered into voting agreements with Edify. The
voting agreements require these S1 stockholders to vote all shares of S1 common
stock they may vote in favor of the issuance of shares of common stock of S1 in
the Edify Transaction. These S1 stockholders were not paid additional
consideration in connection with the voting agreements.
The S1 stockholders who entered into the voting agreements held
approximately % of the outstanding S1 common stock as of the record date.
For a more complete description of S1 stockholder voting agreements see the
section entitled "The Edify Agreements -- S1 Stockholders' Voting Agreements" on
page .
Opinions of Financial Advisors
In deciding to approve the Edify Transaction, our boards of directors
considered opinions from our respective financial advisors. On May 16, 1999,
BancBoston Robertson Stephens delivered its oral opinion (subsequently confirmed
in writing) to the board of directors of S1 that, as of such date, the exchange
ratio in the Edify Transaction is fair from a financial point of view to S1. On
May 16, 1999, Goldman, Sachs & Co. delivered its oral opinion (subsequently
confirmed in writing) to the board of directors of Edify, that, as of such date,
the exchange ratio in the Edify Transaction was fair from a financial point of
view to holders of Edify common stock. The opinions of BancBoston Robertson
Stephens and Goldman, Sachs & Co. do not constitute recommendations as to how
any S1 or Edify stockholder should vote with respect to the Edify Transaction.
The full texts of the written opinions of BancBoston Robertson Stephens and
Goldman, Sachs & Co., dated May 16, 1999, in connection with such opinions, are
attached as Annex C and Annex D. These opinions set forth assumptions made,
matters considered and limitations on the review undertaken by the financial
advisors. S1 stockholders should read the BancBoston Robertson Stephens opinion
in its entirety and Edify stockholders should read the Goldman, Sachs & Co.
opinion in its entirety. More detailed summaries of the opinions are included in
the sections entitled "The Edify Transaction -- Opinion of S1's Financial
Advisor" on page and "The Edify Transaction -- Opinion of Edify's Financial
Advisor" on page .
Accounting Treatment of the Edify Transaction
We intend to account for the Edify Transaction as a "purchase" for
financial accounting purposes, in accordance with generally accepted accounting
principles.
For a more complete description of the accounting treatment of the
transactions see the section entitled "The Edify Transaction -- Accounting
Treatment of the Edify Transaction" on page .
16
<PAGE> 27
Interests of Certain Persons in the Edify Transaction
When considering the recommendations of S1's and Edify's boards of
directors, you should be aware that certain S1 and Edify directors and officers
have interests in the Edify Transaction that are different from, or are in
addition to, yours. These interests include:
- Jeffrey M. Crowe, the President and Chief Executive Officer of Edify,
will become Vice Chairman and a member of the S1 board of directors and
an executive officer of S1 after the Edify Transaction.
- Some of the other executives of Edify will become executive officers of
S1.
- As of the S1 record date, directors and executive officers of S1 and
their affiliates beneficially owned approximately % of the
outstanding shares of S1 common stock, and, as of the Edify record date,
directors and executive officers of Edify and their affiliates
beneficially owned approximately % of the outstanding shares of
Edify common stock.
- Some Edify executives have recently been granted stock options that will,
if the Edify Transaction closes, be assumed by S1. In addition, S1 has
agreed, if the Edify Transaction closes, to grant additional options to
purchase S1 common stock to some Edify executives.
- Some Edify executives will be paid substantial severance packages if the
Edify Transaction closes and their employment is terminated.
For a more complete description of the interests of persons in the
transactions, see the section entitled "The Edify Transaction -- Interests of
Certain Persons in the Edify Transaction" on page .
Antitrust and Competition Filings or Approvals Required to Complete the Edify
Transaction
The Edify Transaction is subject to antitrust and competition laws,
including merger notification laws. S1 made the required filings with the
Antitrust Division and the FTC as well as foreign regulatory agencies. However,
the Antitrust Division or the FTC, as well as a state or private person, may
challenge the Edify Transaction at any time before or after its completion.
For a more complete description of the antitrust and competition
notifications required in connection with the Edify Transaction see the section
entitled "The Edify Transaction -- Regulatory Filings and Approvals Required to
Complete the Edify Transaction" on page .
Restrictions on the Ability to Sell S1 Stock
All shares of S1 common stock received by Edify stockholders in connection
with the Edify Transaction will be freely transferable unless the holder is
considered an affiliate of either of us under the Securities Act or the holder
is an officer of Edify who has signed a voting agreement with S1 providing for
limitations on the transfer of that person's S1 common stock.
For a more complete description of transfer restrictions applicable to our
affiliates see the section entitled "The Edify Transaction -- Restrictions on
Sales of Shares by Affiliates of Edify and S1" on page .
Comparative Per Share Market Price Information
Shares of both S1 common stock and Edify common stock are listed on the
Nasdaq National Market. On May 14, 1999, the last full trading day prior to the
public announcement of the proposed transactions, S1's common stock closed at
$54.00 per share, and Edify's common stock closed at $15.56 per share. On
, 1999, S1's common stock closed at $ per share,
and Edify's common stock closed at $ per share. We urge you to obtain
current market quotations.
17
<PAGE> 28
For a more complete description of market price information see the section
entitled "Comparative Per Share Market Price Data" on page .
SELECTED CONSOLIDATED FINANCIAL INFORMATION
Shown on the following pages are:
- selected historical financial and other data of S1, FICS and Edify,
- selected unaudited pro forma financial information of S1 after giving
effect to the FICS Transaction and the Edify Transaction,
- selected unaudited pro forma financial information of S1 after giving
effect to the FICS Transaction, assuming the Edify Transaction is not
consummated, and
- selected unaudited pro forma financial information for S1 after giving
effect to the Edify Transaction, assuming the FICS Transaction is not
consummated.
The selected historical financial data should be read in conjunction with
the historical audited and unaudited financial statements of S1 and Edify and
notes thereto that are incorporated into this proxy statement/prospectus by
reference and the historical audited financial statements of FICS which are
included elsewhere in this proxy statement/prospectus. The selected unaudited
pro forma data should be read in conjunction with the "Pro Forma Consolidated
Financial Statements" appearing elsewhere in this proxy statement/prospectus.
The selected consolidated financial information presented below for, and as
of the end of, each of the years in the three-year period ended December 31,
1998 are derived from audited consolidated financial statements of S1, FICS and
Edify. The selected consolidated financial information for FICS for, and as of
the end of, each of the years in the two-year period ended December 31, 1995 are
derived from FICS's unaudited consolidated financial statements, which have been
prepared by FICS's management on the same basis as FICS's audited consolidated
financial statements. The selected consolidated financial information for Edify
for, and as of the end of, each of the years in the two-year period ended
December 31, 1995 are derived from audited consolidated financial statements of
Edify. The selected consolidated financial information for, and as of the end
of, the three-month periods ended March 31, 1998 and 1999 are derived from the
unaudited interim consolidated financial statements of S1, FICS and Edify, which
have been prepared by management on the same basis as the audited consolidated
financial statements. In the opinion of S1's management, the unaudited
consolidated financial statements include all adjustments, consisting only of
normal recurring adjustments, which S1's management considers necessary for a
fair presentation of the financial position and results of operations for these
unaudited periods. Results of operations of interim periods are not necessarily
indicative of the results to be expected for the final year.
Amounts for FICS have been restated from the prior reporting currency,
Belgian Francs (BEF) to euro (E), using the fixed exchange rate of BEF 40.3399
to E1.00.
18
<PAGE> 29
SECURITY FIRST TECHNOLOGIES CORPORATION
SELECTED HISTORICAL FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
----------------- -------------------------------------
1999 1998 1998 1997 1996 1995
------- ------- -------- -------- -------- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues........................................... $12,000 $ 3,428 $ 24,180 $ 10,830 $ 1,267 $ --
Loss from continuing operations.................... (3,258) (8,113) (28,558) (27,302) (17,823) 55
Basic net loss per common share from continuing
operations....................................... (0.13) (0.39) (1.30) (1.53) (1.52) --
Diluted net loss per common share from continuing
operations....................................... (0.13) (0.39) (1.30) (1.53) (1.52) --
Cash dividends declared............................ -- -- -- -- 3,000 300
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ------------------------------------
1999 1998 1997 1996 1995
--------- ------- ------- ------- ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................................................ $50,226 $48,293 $36,192 $45,941 $3,948
Capital lease obligation, excluding current portion......... 107 159 -- -- --
Book value per common share................................. 0.24 0.22 1.07 2.35 0.72
</TABLE>
FICS GROUP N.V.
SELECTED HISTORICAL FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- --------- -------- ------- ------- ------- -------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenues............................ E13,259 E11,347 E 49,753 E35,681 E23,706 E16,372 E11,976
Income (loss) from continuing
operations........................ (2,697) (2,565) (10,076) (3,495) (3,653) (902) 1,294
Basic net income (loss) per common
share from continuing
operations........................ (18.40) (18.81) (73.44) (26.61) (29.17) (8.33) 12.94
Diluted net income (loss) per common
share from continuing
operations........................ (18.40) (18.81) (73.44) (26.61) (29.17) (8.33) 12.94
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -----------------------------------------------
1999 1998 1997 1996 1995 1994
--------- -------- ------- ------- ------- ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets.................................... E 34,614 E 34,611 E16,701 E14,032 E17,657 E8,053
Short-term debt, current portion of long-term
debt and capital lease obligations............ 10,095 7,682 3,322 1,515 759 218
Long-term debt and capital lease obligations,
net of current portion........................ 1,180 710 488 639 1,961 1,270
Book value per common share..................... (163.30) (134.20) (48.74) (21.70) 13.89 17.82
</TABLE>
19
<PAGE> 30
EDIFY CORPORATION
SELECTED HISTORICAL FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------------------- -----------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- --------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenues............................... $15,965 $13,758 $70,886 $57,052 $33,017 $16,003 $ 8,363
Income (loss) from continuing
operations........................... (6,368) (1,542) (6,675) 3,952 (755) (104) (1,744)
Basic net income (loss) per common
share from continuing operations..... (0.36) (0.09) (0.39) 0.24 (0.07) (0.05) --
Diluted net income (loss) per common
share from continuing operations..... (0.36) (0.09) (0.39) 0.22 (0.07) (0.05) --
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ------------------------------------------------
1999 1998 1997 1996 1995 1994
--------- --------- ------- ------- ------- ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets..................................... $63,033 $67,004 $68,480 $60,721 $15,372 $6,214
Capital lease obligation, excluding current
portion........................................ 5 20 277 674 510 148
Book value per common share...................... 2.63 2.98 3.36 3.05 (5.64) (6.07)
</TABLE>
SELECTED UNAUDITED PRO FORMA FINANCIAL INFORMATION -- S1, EDIFY, FICS
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 1999 DECEMBER 31, 1998
------------------ -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues.................................................. $ 38,572 $ 131,090
Loss from continuing operations before amortization of
intangible assets and acquisition charges............... (14,532) (55,338)
Loss from continuing operations........................... (126,913) (508,609)
Basic and diluted loss per common share from continuing
operations before amortization of intangible assets and
acquisition charges..................................... (0.30) (1.21)
Basic and diluted loss per common share from continuing
operations.............................................. (2.61) (11.09)
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
1999
----------
<S> <C>
BALANCE SHEET DATA:
Total assets................................................ $1,484,527
Short-term debt, current portion of long-term debt and
capital lease obligations................................. 11,429
Capital lease obligation, excluding current portion......... 1,379
</TABLE>
20
<PAGE> 31
SELECTED UNAUDITED PRO FORMA FINANCIAL INFORMATION -- S1, FICS
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 1999 DECEMBER 31, 1998
------------------ -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues.................................................. $ 26,878 $ 82,235
Loss from continuing operations before amortization of
intangible assets and acquisition charges............... 6,033 (35,568)
Loss from continuing operations........................... (90,598) (377,575)
Basic and diluted loss per common share from continuing
operations before amortization of intangible assets and
acquisition charges..................................... (0.14) (0.89)
Basic and diluted loss per common share from continuing
operations.............................................. (2.12) (9.43)
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
1999
----------
<S> <C>
BALANCE SHEET DATA:
Total assets................................................ $1,094,126
Short-term debt, current portion of long-term debt and
capital lease obligations................................. 11,249
Capital lease obligation, excluding current portion......... 1,374
</TABLE>
SELECTED UNAUDITED PRO FORMA FINANCIAL INFORMATION -- S1, EDIFY
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 1999 DECEMBER 31, 1998
------------------ -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues.................................................. $ 23,694 $ 73,035
Loss from continuing operations before amortization of
intangible assets and acquisition charges............... (11,654) (43,944)
Loss from continuing operations........................... (39,582) (159,628)
Basic and diluted loss per common share from continuing
operations before amortization of intangible assets and
acquisition charges..................................... (0.38) (1.58)
Basic and diluted loss per common share from continuing
operations.............................................. (1.30) (5.73)
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
1999
---------
<S> <C>
BALANCE SHEET DATA:
Total assets................................................ $440,627
Short-term debt, current portion of long-term debt and
capital lease obligations................................. 593
Capital lease obligation, excluding current portion......... 112
</TABLE>
21
<PAGE> 32
RISK FACTORS
The transactions involve a high degree of risk. Also, by voting in favor of
the Edify Transaction, Edify stockholders will be choosing to invest in S1
common stock. An investment in S1 common stock involves a high degree of risk.
In addition to the other information contained or incorporated by reference in
this prospectus/proxy statement, Edify and S1 stockholders should carefully
consider the following risk factors in deciding whether to vote for the
proposals to be presented at their respective special meetings.
RISKS RELATED TO THE TRANSACTIONS
Edify stockholders will receive a fixed ratio of 0.330969 shares of S1 common
stock for each Edify share they own even if there are changes in the
comparative values of Edify common stock and S1 common stock before the
closing of the Edify Transaction
There will be no adjustment to this exchange ratio if the market price of
either Edify common stock or S1 common stock fluctuates. The specific dollar
value of S1 common stock that Edify stockholders will receive upon completion of
the transaction will depend on the market value of S1 common stock at the time
of completion of the Edify Transaction. The share prices of both Edify common
stock and S1 common stock are subject to price fluctuations in the market for
publicly traded equity securities and have each experienced significant
volatility. We cannot predict the market prices for either Edify common stock or
S1 common stock at any time before the completion of the transaction or the
market price for S1 common stock after the completion of the transaction. We
encourage you to obtain current market quotations of S1 common stock and Edify
common stock before making your decision on the Edify Transaction.
S1 will face technical, operational and strategic challenges that may prevent
S1 from successfully integrating FICS and Edify with S1
The transactions involve risks related to the integration and management of
acquired technology, operations and personnel. S1's integration of FICS and
Edify will be a complex, time consuming and expensive process and may disrupt
S1's business if not completed in a timely and efficient manner. Following the
transactions, S1 must operate as a combined organization utilizing common
information and communication systems, operating procedures, financial controls
and human resources practices. S1 may encounter substantial difficulties, costs
and delays involved in integrating the FICS and Edify operations with S1's own,
including:
- potential incompatibility of business cultures;
- potential difficulties in coordinating geographically separated
organizations, with FICS's operations primarily abroad, Edify's
operations in Silicon Valley and S1's own operations headquartered in
Atlanta;
- perceived adverse changes in business focus;
- potential conflicts in third-party relationships; and
- the loss of key employees and diversion of the attention of management
from other ongoing business concerns.
Because the transactions are not conditioned on each other, if S1 fails to
close one or both of the transactions the value of the S1 common stock could
decline
S1 stockholders may not approve each issuance in the proposed transactions,
and Edify stockholders may not approve the merger agreement or the Edify
Transaction. Moreover, regulatory approvals may not be obtained for one or both
transactions. As a result, one of the transactions may
22
<PAGE> 33
close, even though the other does not. If S1 fails to close one or both
transactions, this failure could be perceived negatively by the market, which in
turn could adversely affect S1, its future prospects or the price of the S1
common stock.
Officers and directors of S1 and Edify have different interests from yours,
and could exert their influence over the Edify Transaction in a way that may
not benefit you
The directors and officers of S1 and Edify have interests in the Edify
Transaction and may participate in arrangements that are different from, or are
in addition to, those of S1 and Edify stockholders generally. These include:
- Jeffrey M. Crowe, the President and Chief Executive Officer of Edify will
become Vice Chairman and a member of the S1 board of directors and an
executive officer of S1 upon closing of the Edify Transaction. In
addition, some other executive officers of Edify will become executive
officers of S1.
- Edify has recently granted options to some of its key executives. Some
holders of stock options granted under Edify's Stock Option Plans,
including these executives, will have the benefit of accelerated vesting
if the Edify Transaction closes. As of , 1999,
shares of Edify common stock are subject to unvested options
granted under this plan, which vesting could accelerate if holders of
those options are not retained by S1 after closing of the Edify
Transaction. In addition, S1 has agreed to grant additional options to
purchase S1 common stock to some Edify executives if the Edify
Transaction closes.
- Some Edify executives will receive substantial severance packages if the
Edify Transaction closes and their employment is terminated.
- Edify and S1 officers and directors have continuing indemnification
against specified liabilities.
As a result, these executive officers and directors could be more likely to
vote to approve the merger agreement and the Edify Transaction than if they did
not have these interests.
RISKS RELATED TO THE COMBINED COMPANY'S BUSINESS
We do not expect to achieve profitable operations for the foreseeable future,
and this may negatively impact the value of your S1 common stock
Each of S1, FICS and Edify incurred operating losses in 1998. In addition,
as a result of the transactions, S1 expects to incur approximately $ of
goodwill and other non-cash charges. Therefore, we expect amortization of this
goodwill and other non-cash charges to range from $ to $
annually for years. Moreover, we expect that the combined company's
expenses associated with sales, marketing, research and development, customer
support and executive offices will continue to increase over the near term, even
though its revenues may not keep pace with these expenses. As a result, we
expect to continue to incur net losses for the foreseeable future.
The combined company's future operating results will depend on many
factors, including:
- the demand for our products,
- our success in attracting and retaining motivated and qualified
personnel, and
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- the amount of price and product competition we face as a result of the
growth of financial services activity on the internet.
The combined company's quarterly operating results may fluctuate, and any
fluctuations could adversely affect the price of your S1 common stock
The quarterly operating results of S1, FICS and Edify have each fluctuated
significantly to date. If the combined company fails to meet the expectations of
securities analysts or investors as a result of any future fluctuations in our
quarterly operating results, the market price of the S1 common stock would
likely decrease. We expect that the combined company may experience fluctuations
in the future because:
- We cannot accurately predict the number and timing of contracts we will
sign, in part because the budget constraints and internal review
processes of existing and potential clients are not within our control.
- Our clients' orders tend to be relatively large and in any given period a
substantial portion of our revenues may be attributable to a few clients.
- If we fail to introduce new or enhanced products, or if our competitors
introduce new or enhanced products, sales of our products and services
may not achieve expected levels and may even decline.
- Our ability to expand the mix of distribution channels through which our
products are sold may be limited.
- Our sales may be constrained by the timing of releases of third party
software that works with our products.
- A significant percentage of our expenses is relatively fixed and we may
be unable to reduce expenses if revenues decrease.
The combined company will have three primary product lines and if demand for
these products declines our revenues will decline
Prior to the transactions, S1 derived substantially all of its revenue from
licenses of its Virtual Financial Manager software suite and fees for services
related to those licenses. We expect these licenses and the related service fees
to account for a substantial portion of the combined company's total revenue for
the foreseeable future. After the transactions, we will also derive substantial
portions of our total revenue from FICS's Financial Reporting Systems and
Corporate Internet Banking products and services and Edify's IVR and Electronic
Banking System products and services. A decline in demand for, or a failure to
achieve broad market acceptance of, Virtual Financial Manager or the other
products offered by the combined company would negatively impact our revenue.
The combined company's product demand also relies on continued internet
expansion. Factors which will impact acceptance, improvement and growth in use
of the internet are:
- the development or adoption of technical standards and protocols designed
to support increased activity;
- the development and availability of high speed access to the internet
through broadband mediums such as cable television;
- consumer and business concerns regarding the performance and reliability
of the internet, especially in light of highly publicized outages and
temporary down-times recently experienced by large internet brokerage
firms;
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- consumer and business concerns about privacy and the ability of products
like those offered by the combined company to develop and maintain
individual profiles based on activity over the internet;
- consumer and business concerns about internet security, especially as it
relates to providing a secure and confidential way for people to take
care of their personal financial needs;
- government regulation of the internet and internet banking, particularly
the possibility that new laws or regulations could decrease acceptance of
the internet as a communications and commercial medium, or require us to
modify our products and services or incur other compliance costs; and
- the cost of internet access, including any access fees which may in the
future be imposed by the FCC.
If any of these or other factors adversely impact development of the
internet or demand for financial services on the internet, demand for Virtual
Financial Manager and S1's data center services, as well as the other
internet-related products and services offered by the combined company, will
likely decline.
System failures or performance problems with the combined company's products
could cause demand for these products to decrease, require the combined
company to make significant capital expenditures or impair client relations
There are many factors which could adversely affect the performance,
quality and desirability of the combined company's products and could delay or
prevent the combined company's products from gaining market acceptance. These
factors include:
- Extraordinary end-user volumes or other events could cause systems to
fail or to operate at an unacceptably low speed, causing transaction
delays for end-users.
- The combined company's products could contain errors, or "bugs," which
could impair the services the combined company provides.
- Despite the combined company's security measures, its software products
may be vulnerable to break-ins and similar disruptive problems which
could compromise the security of information stored in or transmitted
through the computer systems of its clients.
- During the initial implementation of some products, S1, FICS and Edify
each experienced significant delays integrating software and bringing
banks online, and the combined company may experience similar
difficulties or delays in connection with future implementations and
upgrades to new versions.
- Many of the combined company's products require integration with
third-party products and systems, and we may not be able to integrate
these products with new or existing products.
The occurrence of any of these problems could reduce product demand from
potential customers and cause existing customers to terminate their license or
data center contracts with the combined company. These problems could also
require us to spend significant capital to remedy any failure and could subject
the combined company to costly litigation with clients or their end-users.
The combined company will depend on a limited number of clients for most of
its revenue and, if any of those clients terminate their contracts, the
combined company's revenues and financial performance would decline
The combined company's business success depends on its relationships with a
limited number of large clients. On a pro forma basis, assuming consummation of
both transactions, the combined
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company's largest revenue contributing clients in 1998 accounted for
%, % and % of revenue for that year, and accounted for %,
% and % of revenue for the six months ended June 30, 1999. On a pro
forma basis assuming consummation of both transactions, the ten largest clients
combined accounted for % of revenue in 1998, and accounted for % of
revenue for the six months ended June 30, 1999. We expect that a significant
portion of the combined company's revenue will remain similarly concentrated in
the near future.
The combined company's clients may terminate their contracts for any reason
at any time. Early termination of a contract by a significant client would
likely cause the combined company's revenue to decrease.
The transactions could harm key third party relationships
The present and potential future relationships of the combined company with
customers, resellers and third party product and service providers may be harmed
if the combined company decides to discontinue products or services the three
companies currently provide. As a result, customers, resellers and product and
service providers which currently have relationships with S1, FICS and Edify may
alter or terminate their relationships with the combined company. Any changes in
these relationships could harm the combined company's business following the
closing of the transactions.
The combined company's failure to develop and expand its distribution channels
would impede revenue growth
An integral part of the combined company's strategy is to develop multiple
distribution channels, including a field sales force, value added resellers and
original equipment manufacturers. The combined company intends to continue to
expend resources to develop the reseller channel. Value added resellers and
original equipment manufacturers are not, however, subject to any minimum
purchase or resale requirements and could cease marketing the combined company's
products at any time. Many of them also offer competing products that they
produce or that are produced by third parties. The combined company's existing
resellers could cease to provide an acceptable level of services and technical
support to the combined company's customers, could fail to transition smoothly
to sales of new products or enhancements of existing products, or could
emphasize their own or third-party products to the detriment of the combined
company's products. The loss of resellers, their failure to perform under
agreements with the combined company, or the inability of the combined company
to attract and retain new resellers with the technical, industry and application
expertise required to market the combined company's products successfully in the
future could harm the combined company's business. To the extent that the
combined company is successful in increasing its sales through resellers, those
sales will be at discounted rates, and revenue to the combined company for each
sale will be less than if the combined company had licensed the same products to
the customer directly.
Expansion of the combined company's direct distribution channel depends
upon the increased productivity of existing field sales forces and the combined
company's ability to integrate and train new sales personnel. The cost of these
efforts could exceed the revenue generated and the combined company's sales and
marketing organization may not be able to compete successfully against the
significantly more extensive and well-funded sales and marketing operations of
many of the combined company's current or potential competitors.
The combined company's market is highly competitive and if it is unable to
keep pace with evolving technology, its revenue and future prospects may
decline
The market for the combined company's products and services is
characterized by rapidly changing technology, intense competition and evolving
industry standards. The combined company
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has many competitors who offer various components of its suite of applications
or who use a different technology platform to accomplish similar tasks. In some
cases the combined company's existing clients also use some of its competitors'
products. The combined company's future success will depend on its ability to
develop, sell and support enhancements of current products and new software
products in response to changing client needs. For example, S1 believes that
some potential clients may not license the combined company's products until it
completes the next major version of its software. If the completion of the next
version of any of the combined company's products is delayed, its revenue and
future prospects could be harmed. In addition, competitors may develop products
or technologies that the industry considers more attractive than those offered
by the combined company or that render the combined company's technology
obsolete.
A significant portion of the combined company's clients are in the financial
services industry which is subject to economic changes and is rapidly
consolidating, which could reduce demand for the combined company's products
and services
For the foreseeable future, the combined company expects to derive most of
its revenue from products and services it provides to the banking industry and
other financial services firms such as insurance companies. Changes in economic
conditions and unforeseen events, like recession or inflation, could occur and
reduce consumers' use of bank services. Any event of this kind, or
implementation for any reason by banks of cost reduction measures, could result
in significant decreases in demand for the combined company's products and
services.
Mergers and acquisitions are pervasive in today's banking industry. The
combined company's existing clients may be acquired by or merged into other
financial institutions which already have their own financial internet software
solution or which decide to terminate their relationships with the combined
company for other reasons. As a result, the combined company's sales could
decline if an existing client is merged into or acquired by another company.
Infringement of the combined company's proprietary technology could adversely
affect our competitive position and income potential
The combined company's success depends upon its proprietary technology and
information. It relies on a combination of copyright, trademark and trade secret
laws and confidentiality procedures to protect its proprietary technology and
information. Because it is difficult to police unauthorized use of software, the
steps we have taken to protect our services and products may not prevent
misappropriation of the combined company's technology. Any misappropriation of
the combined company's proprietary technology or information could reduce any
competitive advantages it may have as a result of ownership of its technology or
result in costly litigation if necessary to protect its technology.
The combined company will also have a significant international presence.
The laws of some foreign countries, including the laws of Belgium, where FICS is
headquartered, may not protect the combined company's proprietary technology to
the extent of the laws of the United States. The combined company's means of
protecting our proprietary technology abroad may not be adequate and our
competitors may independently develop comparable or superior technologies.
The combined company may become involved in litigation over proprietary
rights, which may be costly and time consuming
In the past, Edify has received communications from other parties asserting
that Edify's products, trademarks or other proprietary rights require a license
of intellectual property rights or infringe, or may infringe, on their property
rights. Edify may receive additional communications of this nature in the
future. S1 expects software to be increasingly subject to third-party
infringement
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claims as the number of competitors grows and the functionality of products in
different industry segments overlaps. Third parties may have, or may eventually
be issued, patents that would be infringed by the combined company's products or
technology. Any of these third parties could make a claim of infringement
against the combined company with respect to its products or technology.
Any claims, with or without merit, could be time consuming, result in
costly litigation, cause product shipment delays or require the combined company
to enter into royalty or licensing agreements. Royalty or licensing agreements,
if required, may not be available on terms acceptable to the combined company,
or at all, which could harm the combined company's business, financial condition
and results of operations. Litigation to determine the validity of any claims
could result in significant expense to the combined company and divert the
efforts of the combined company's technical and management personnel from
productive tasks, whether or not the litigation is determined in favor of the
combined company. In the event of an adverse ruling, the combined company may be
required to pay substantial damages, discontinue the use and sale of infringing
products, expend significant resources to develop non-infringing technology, or
obtain licenses to infringing technology. The failure of the combined company to
develop or license a substitute technology could significantly harm the combined
company's business, financial condition and results of operations.
If the combined company is unable to attract and retain technical employees,
it may not be able to compete
Based on the significant growth in operations the three companies have
experienced, we believe that the combined company's future success will depend
in large part on the combined company's ability to attract and retain highly
skilled technical personnel. Because the development of the combined company's
software requires knowledge of computer hardware as well as a variety of
software applications, we need to attract and retain technical personnel who are
proficient in all these disciplines. There is substantial competition for
employees with the technical skills we require. If we cannot hire and retain
talented technical personnel, this failure could adversely affect the combined
company's growth prospects and future success.
If the combined company is unable to effectively manage its expected growth,
it will not be able to successfully implement its business plan
S1 expects the combined company to grow rapidly. The combined company's
growth will place additional demands on its management, operational capacity and
financial resources, including its ability to recruit non-technical personnel
for management, sales, marketing and delivery positions. In addition, the
combined company's systems, procedures, controls and resources, particularly its
client service resources, may not be adequate to support continued expansion of
our operations. Because many of its implementation and service engagements are
large in scale, the combined company must maintain numerous teams of qualified
technical personnel to serve its clients efficiently. The combined company's
failure to manage its growth effectively could have a material adverse effect on
its ability to successfully implement its business plan.
If the combined company fails to adequately address the year 2000 issue, we
may lose revenue or incur significant additional costs
The year 2000 problem relates to the inability of computer hardware and
software that use only the last two digits of a year to recognize and correctly
process date data for years beginning after December 31, 1999. If not corrected,
the year 2000 problem could materially and adversely affect the combined
company's business, financial condition and results of operations.
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The failure of the combined company's software on or after January 1, 2000
would reduce its revenue and could subject it to litigation and damage its
reputation in the market. Also, the need to address the year 2000 problem will
require a significant portion of the combined company's implementation
resources, thereby adversely impacting its ability to service new clients.
The combined company depends on external sources of capital for future growth
Following the closing of the transactions, the combined company may require
additional financing to support its continued operations and for general
corporate purposes. The combined company may not be able to fund all of its
future capital needs from income from operations. The combined company therefore
may have to rely on third party sources of capital which may not be available to
it on favorable terms, if at all. The combined company's access to third party
sources of capital depends on a number of factors, including the market's
perception of its growth potential and its present and future revenue. It may
also pursue equity investments from strategic partners in the future. If it
pursues additional equity offerings, its existing stockholders' interests will
be diluted. Debt financing, should the combined company elect to pursue it, may
subject it to onerous limits on its range of operations.
Future sales of the combined company's common stock in the public market could
adversely affect our stock price and our ability to raise funds in new stock
offerings
If the combined company's stockholders sell substantial amounts of S1
common stock, including shares issued upon the exercise of options and warrants
or upon the conversion of shares of our preferred stock into common stock, in
the public market following this offering, the market price of the S1 common
stock could fall. These sales also might make it more difficult for the combined
company to sell equity or equity-related securities in the future at a time and
price that it deems appropriate. As a condition to completing the FICS
Transaction, S1 has agreed to register the resale of S1 common stock received by
Michel Akkermans. Mr. Akkermans intends to sell approximately 18% of the S1
common stock he receives in the FICS Transaction, plus an additional $15 million
worth of S1 common stock. In addition, S1 has agreed to register the resales of
S1 common stock to be issued to other FICS stockholders, including shares of S1
common stock issuable upon exercise of FICS options assumed by S1, promptly
following the closing of the FICS Transaction.
Including S1 common stock issued in the transactions, after the closing of
the transactions, the combined company will have shares of common
stock outstanding, assuming no exercise of outstanding options or warrants.
of these shares constitute "restricted securities" within the meaning
of Rule 144 under the Securities Act of 1933, and may be sold in compliance with
Rule 144.
As of the date of this prospectus, holders of of these shares have
rights to require the combined company to register their shares with the SEC. By
exercising their registration rights and causing a large number of shares to be
sold in the public market, these stockholders could cause the market price of
the S1 common stock to fall. In addition, if these stockholders demand to
include their shares in one of S1's registration statements, the combined
company's ability to raise needed capital could be adversely affected.
As of , 1999, there were outstanding options to purchase
shares of S1 common stock, warrants to acquire shares of S1
common stock, and shares of preferred stock convertible into an
aggregate of shares of S1 common stock. The common stock issuable upon
exercise of these options and warrants and upon conversion of this preferred
stock will be eligible for sale in the public market from time to time upon
vesting. The options and warrants generally have exercise prices significantly
below the current market price of the S1 common
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stock. The possible sale of a significant number of these shares may cause the
market price of the S1 common stock to fall.
Ownership of common stock by the combined company's officers, directors and
principal stockholders may prevent a change in control
After the closings of the transactions described by this prospectus/proxy
statement, the combined company's directors, executive officers, principal
stockholders and their affiliates will beneficially own a total of approximately
% of the outstanding S1 common stock on a fully diluted basis. This
concentration of ownership may delay, defer or prevent a change in control,
impede a merger, consolidation, takeover or other business combination or
discourage a potential acquirer from making a tender offer or otherwise
attempting to obtain control, and may cause the market price of the combined
company's common stock to fall.
Market volatility may cause the price of your stock to decline
The stock market in general, and the market for technology and
internet-related stocks in particular, have experienced extreme volatility that
often has been unrelated to the operating performance of particular companies.
These broad market and industry fluctuations may adversely affect the trading
price or the combined company's common stock regardless of the combined
company's actual operating performance.
International operations and currency exchange rate fluctuations may adversely
affect the combined company
The combined company will conduct its business worldwide and may be
affected by changes in demand resulting from:
- fluctuations in currency exchange rates;
- governmental currency controls; and
- other risks associated with international sales, including:
- changes in various regulatory requirements;
- political and economic changes and disruptions;
- export/import controls;
- tariff regulations;
- difficulties in staffing and managing foreign sales and support
operations;
- greater difficulties in trade accounts receivable collection; and
- possible adverse tax consequences.
In addition, the combined company will maintain a set of international
executive offices and a significant portion of its maintenance, consulting, and
research and development operations in Belgium. Therefore, the combined
company's operations may also be affected by economic conditions in Belgium.
These risks associated with international operations may harm the combined
company's business.
FORWARD LOOKING STATEMENTS IN THIS PROSPECTUS/PROXY STATEMENT
This prospectus/proxy statement and the documents incorporated into this
prospectus/proxy statement by reference contain forward-looking statements
within the safe harbor provisions of the
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Private Securities Litigation Reform Act. These statements include statements
with respect to S1's, FICS's and Edify's financial condition, results of
operations and business and on the expected impact of the FICS Transaction and
the Edify Transaction on S1's financial performance. Words such as anticipates,
expects, intends, plans, believes, seeks, estimates and similar expressions
identify forward-looking statements.
These forward-looking statements are not guarantees of future performance
and are subject to certain risks and uncertainties that could cause actual
results to differ materially from the results contemplated by the
forward-looking statements. These risks and uncertainties include:
- the possibility that the value of the S1 common stock to be issued to
Edify stockholders in the Edify Transaction will increase or decrease
prior to completion of the Edify Transaction;
- the possibility that the FICS Transaction or the Edify Transaction will
not be consummated;
- the possibility that the anticipated benefits from the FICS Transaction
or the Edify Transaction will not be fully realized;
- the possibility that costs or difficulties related to the integration of
our businesses will be greater than expected;
- our dependence on the timely development, introduction and customer
acceptance of new internet services;
- rapidly changing technology and shifting demand requirements and internet
usage patterns;
- other risks and uncertainties, including the impact of competitive
services, products and prices, the unsettled conditions in the internet
and other high-technology industries and the ability to attract and
retain key personnel; and
- other risk factors as may be detailed from time to time in Edify's and
S1's public announcements and filings with the SEC.
In evaluating the transactions, you should carefully consider the
discussion of these and other factors in the section entitled "Risk Factors" on
page .
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THE COMPANIES
SECURITY FIRST TECHNOLOGIES CORPORATION
S1 develops integrated, brandable internet applications that enable
financial services companies to create their own financial portals. S1's Virtual
Financial Manager suite of software applications integrates banking, investment,
loan and credit card accounts at an institution, with content such as news,
weather and sports personalized by the end-user. S1 licenses its Virtual
Financial Manager software, provides installation and integration services and
offers outsourced internet transaction processing through our data center. S1
targets organizations that view providing their products and services on the
internet as a strategic competitive advantage and an integral component of their
business.
In recent years, as use of the internet has grown, internet commerce,
including banking, insurance and securities trading, has increased in
popularity. An April 1998 report by the U.S. Department of Commerce estimated
that approximately 4.5 million households were banking online in 1997 and
projected that number to increase to between 10 and 16 million households by
2000. To capitalize on this trend, S1 believes financial institutions need an
integrated internet solution that satisfies the service demands of their
customers while providing the financial institutions with a channel to market
additional products and services directly to their customers. Because of the
technological challenges, development times and risks associated with building
internet solutions internally, many financial institutions are seeking
third-party software providers to implement internet solutions.
S1's Virtual Financial Manager addresses the requirements of both financial
institutions and end-users by integrating multiple financial applications in one
comprehensive product suite that can also include personalized information.
Virtual Financial Manager creates a powerful financial portal through which
end-users can conduct many of their daily financial, commercial and personal
activities online. At the same time, Virtual Financial Manager allows S1's
clients to perform one-to-one marketing to their customers through a branded,
secure internet solution.
S1's principal executive offices are located at 3390 Peachtree Road, NE,
Suite 1700, Atlanta, Georgia 30326, and its telephone number is (404) 812-6200.
S1's web site is www.s1.com. That web site is not a part of this
prospectus/proxy statement.
FICS GROUP N.V.
FICS is a leading software solutions provider for the global financial
services industry. FICS designs, develops, markets and supports corporate and
retail banking solutions that enable banks and financial institutions to
interact electronically with their customers. FICS believes that its products
are among the most technologically advanced electronic banking solutions
available. FICS sells these products as pre-packaged solutions and also
customizes these solutions to specific customer requirements.
The FICS Electronic Services Delivery products include both corporate and
retail banking solutions. FICS's corporate banking products enable banks and
financial institutions to offer cash management, trade finance, custody and
other corporate banking services over the internet and/or through a direct
connection to the bank or financial institution. FICS's retail banking products
enable banks and financial institutions to offer checking, savings, portfolio
management and other retail banking services over the internet. FICS's Financial
Reporting Systems products enable banks and financial institutions to meet
regulatory reporting requirements and perform internal information management
and consolidation activities in 22 countries.
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FICS was founded in 1989 and until 1995 provided primarily software
services for banks and financial institutions. In 1995, FICS began developing
its Electronic Services Delivery products, and in 1998, introduced its
internet-enabled Electronic Services Delivery products. As of March 31, 1999,
FICS had sold Electronic Services Delivery products and services to
approximately 50 customers and had sold Financial Reporting Systems products to
more than 600 customers in more than 20 countries, including many of the world's
largest financial institutions.
EDIFY CORPORATION
Edify Corporation provides enterprise self service software products that
enable organizations to automate, integrate and personalize interactions with
customers through multiple channels, including the internet, corporate intranets
and the telephone, yielding stronger, more profitable relationships. Originally,
Edify's self service solutions enabled organizations to contain costs, to
capitalize on emerging interactive media, and to leverage investments in
enterprise systems and communications infrastructure. Over the past seven years,
Edify has licensed its Electronic Workforce application development and runtime
platform to over 1,250 customers for custom development of internet and
telephone self service applications such as bank account inquiries and employee
benefit enrollments. In the last three years, Edify has licensed its software
application product, the Electronic Banking System, as part of its strategy to
establish leadership in the market for self service applications in the
financial services market segment.
Edify's Electronic Workforce is a full-featured, scalable and flexible
application development and runtime system that enables organizations to create
and deploy custom self service applications through which users can conveniently
and easily obtain access to a broad range of valuable information and services.
Electronic Workforce's object-oriented architecture allows the incorporation of
multiple media, enabling service applications through internet browsers,
telephones, facsimiles, electronic mail and alphanumeric pagers. It also
facilitates interaction with information content assembled from a variety of
sources, including mainframe and client/server applications and relational
databases. Electronic Workforce also includes a "visual" development environment
that enables rapid development and adaptation of self service applications
without writing lines of code.
Edify's Electronic Banking System is a software application product which
offers financial institutions the means to deploy a suite of automated banking
services via the internet. The Electronic Banking System offers a fully
integrated application suite, multiple access options including the internet and
telephone and visual customization tools for rapid customization and integration
with a wide range of back-office systems. The Electronic Banking System is built
on Edify's Electronic Workforce and utilizes internet browser, Java and other
technologies that address the customization requirements necessary for the
application products market.
THE S1 MEETING
DATE, TIME, PLACE AND PURPOSE OF S1'S MEETING
The special meeting of stockholders of S1 will be held at ,
Eastern time, on , 1999 at . At the meeting,
stockholders at the close of business on , 1999 will be
asked:
1. To approve the issuance of shares of S1 common stock in the FICS
Transaction.
2. To approve the issuance of shares of S1 common stock in the Edify
Transaction. The merger agreement is attached as Annex A to this
prospectus/proxy statement.
3. To approve changing the corporate name of S1 from "Security First
Technologies Corporation" to "S1 Corporation."
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RECORD DATE AND OUTSTANDING SHARES
Only holders of record of S1 common stock at the close of business on the
record date are entitled to notice of and to vote at the meeting. As of the
close of business on the record date, there were shares of S1 common stock
outstanding and entitled to vote, held of record by approximately
stockholders, although S1 has been informed that there are in excess of
beneficial owners.
VOTE AND QUORUM REQUIRED
Holders of S1's common stock are entitled to one vote for each share held
as of the record date. S1's bylaws require a quorum of one-third of the
outstanding shares of S1 stock eligible to vote be present, either in person or
by proxy, at any stockholder meeting.
Approval of the FICS Transaction requires the affirmative vote of a
majority of the shares of S1 common stock eligible to vote and present, either
in person or by proxy, at the stockholder meeting.
Approval of the Edify Transaction requires the affirmative vote of a
majority of the shares of S1 common stock eligible to vote and present, either
in person or by proxy, at the stockholder meeting.
Approval of the name change requires the affirmative vote of the majority
of the shares of S1 common stock eligible to vote and present, either in person
or by proxy, at the stockholder meeting.
ABSTENTIONS; BROKER NON-VOTES
Abstentions will be included in determining the number of shares present
and voting at the meeting and will have the same effect as votes against the
Edify Transaction. If a broker, bank, custodian, nominee or other record holder
of S1 common stock indicates on a proxy that it does not have discretionary
authority to vote certain shares on a particular matter, which we call a "broker
non-vote," those shares will not be considered for purposes of determining the
number of shares entitled to vote with respect to a particular proposal on which
the broker has expressly not voted, but will be counted for purposes of
determining the presence or absence of a quorum for the transaction of business.
STOCK OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
On the record date, directors, executive officers and affiliates of S1 as a
group beneficially owned shares of S1 common stock. These shares
constituted approximately % of all of the outstanding S1 common stock and
approximately % of the voting power of S1's common stock, as of the record
date. These S1 stockholders have executed voting agreements in which they have
agreed to vote all shares of S1 common stock owned by them in favor of the
proposals.
EXPENSES OF PROXY SOLICITATION
S1 will pay the expenses of soliciting proxies to be voted at the S1
meeting. Following the original mailing of the proxies and other soliciting
materials, S1 and its agents also may solicit proxies by mail, telephone,
telegraph or in person. S1 has retained a proxy solicitation firm,
, to aid it in the solicitation process. S1 will pay
that firm a fee equal to $ plus an additional amount for each
stockholder contacted by , plus expenses. Following the original
mailing of the proxies and other soliciting materials, S1 will request brokers,
custodians, nominees and other record holders of S1 common stock to forward
copies of the proxy and other soliciting materials to persons for whom they hold
shares of S1 common stock and to request authority for the exercise of proxies.
In these cases, S1 upon the request of the record holders, will reimburse them
for their reasonable expenses.
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<PAGE> 45
VOTING OF PROXIES
The proxy accompanying this prospectus/proxy statement is solicited on
behalf of the S1 board of directors for use at the meeting. Please complete,
date and sign the accompanying proxy and promptly return it in the enclosed
envelope or otherwise mail it to S1. All properly signed proxies that S1
receives prior to the vote at the meeting and that are not revoked will be voted
at the meeting according to the instructions indicated on the proxies or, if no
direction is indicated, to approve the issuances of S1 common stock in the two
transactions and in favor of the name change. You may revoke it at any time
before it is exercised at the meeting by taking any of the following actions:
- delivering to the secretary of S1, by any means, including facsimile, a
written notice, bearing a date later than the date of the proxy, stating
that the proxy is revoked,
- signing and delivering a proxy relating to the same shares and bearing a
later date prior to the vote at the meeting, or
- attending the meeting and voting in person, although attendance at the
meeting will not, by itself, revoke a proxy.
Please note, however, that if your shares are held of record by a broker,
bank or other nominee and that stockholder wishes to vote at the meeting, the
stockholder must bring to the meeting a letter from the broker, bank or other
nominee confirming your beneficial ownership of the shares.
S1's board of directors does not know of any matter that is not referred to
in this prospectus/ proxy statement to be presented for action at the meeting.
If any other matters are properly brought before the meeting, the persons named
in the proxies will have discretion to vote on such matters in accordance with
their best judgment.
NO APPRAISAL RIGHTS
Holders of S1 common stock are not entitled to dissenters' rights or
appraisal rights with respect to the transactions to be considered at the
meeting.
THE EDIFY MEETING
DATE, TIME, PLACE AND PURPOSE OF EDIFY'S MEETING
The special meeting of stockholders of Edify will be held at ,
Pacific time, on , 1999 at Edify's headquarters located at
2840 San Tomas Expressway, Santa Clara, CA 95051. At the meeting, stockholders
at the close of business on , 1999 will be asked to approve
and adopt the merger agreement and approve the Edify Transaction.
The merger agreement is attached to this prospectus/proxy statement as
Annex A.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of Edify common stock at the close of business on
the record date are entitled to notice of and to vote at the meeting. As of the
close of business on the record date, there were shares of Edify common
stock outstanding and entitled to vote, held of record by approximately
stockholders, although Edify has been informed that there are in excess of
beneficial owners. Each stockholder is entitled to one vote for each share of
Edify common stock held as of the record date. A majority of the shares
outstanding on the record date will constitute a quorum for the transaction of
business at the meeting.
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<PAGE> 46
VOTE REQUIRED
The affirmative vote of a majority of the outstanding shares of Edify
common stock is required to approve and adopt the merger agreement and to
approve the Edify Transaction.
ABSTENTIONS; BROKER NON-VOTES
Abstentions will be included in determining the number of shares present
and voting at the meeting and will have the same effect as votes against the
Edify Transaction. Broker non-votes will have the same effect as votes against
the Edify Transaction.
STOCK OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
On the record date, directors, executive officers and affiliates of Edify
as a group beneficially owned shares of Edify common stock. These shares
constituted approximately % of the outstanding shares of Edify common stock
on that date. Directors, executive officers and their affiliates beneficially
owning shares of Edify common stock, or approximately % of the
outstanding shares on the record date, have executed voting agreements with S1,
under which these persons have agreed to vote their shares in favor of the Edify
Transaction. See "The Edify Agreements -- Edify Stockholders' Voting Agreements"
on page .
EXPENSES OF PROXY SOLICITATION
S1 has agreed to pay the expenses of soliciting proxies to be voted at the
Edify meeting. S1 has retained a proxy solicitation firm, ,
to aid it in the solicitation process. S1 will pay that firm a fee equal to
$ plus an additional amount for each stockholder contacted by
, plus expenses. Following the original mailing of the proxies
and other soliciting materials, Edify will request brokers, custodians, nominees
and other record holders of Edify common stock to forward copies of the proxy
and other soliciting materials to persons for whom they hold shares of Edify
common stock and to request authority for the exercise of proxies. In these
cases, S1 upon the request of the record holders, will reimburse them for their
reasonable expenses.
VOTING OF PROXIES
The proxy accompanying this prospectus/proxy statement is solicited on
behalf of the Edify board of directors for use at the meeting. Please complete,
date and sign the accompanying proxy and promptly return it in the enclosed
envelope or otherwise mail it to Edify. All properly signed proxies that Edify
receives before the vote at the meeting and that are not revoked will be voted
at the meeting according to the instructions indicated on the proxies or, if no
direction is indicated, to approve the Edify Transaction. You may revoke your
proxy at any time before it is exercised at the meeting, by taking any of the
following actions:
- delivering to the secretary of Edify, by any means, including facsimile,
a written notice, bearing a date later than the date of the proxy,
stating that the proxy is revoked,
- signing and delivering a proxy relating to the same shares and bearing a
later date prior to the vote at the meeting, or
- attending the meeting and voting in person, although attendance at the
meeting will not, by itself, revoke a proxy.
Please note, however, that if your shares are held of record by a broker,
bank or other nominee and that stockholder wishes to vote at the meeting, the
stockholder must bring to the meeting a letter from the broker, bank or other
nominee confirming your beneficial ownership of the shares.
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<PAGE> 47
NO APPRAISAL RIGHTS
Holders of Edify common stock are not entitled to dissenters' rights or
appraisal rights with respect to the Edify Transaction.
HOLDERS OF EDIFY COMMON STOCK SHOULD NOT SEND ANY CERTIFICATES REPRESENTING
EDIFY COMMON STOCK. FOLLOWING THE EFFECTIVE TIME OF THE EDIFY TRANSACTION,
HOLDERS OF EDIFY COMMON STOCK WILL RECEIVE INSTRUCTIONS FOR THE SURRENDER AND
EXCHANGE OF THEIR STOCK CERTIFICATES.
BACKGROUND OF THE TRANSACTIONS
Since S1 began its operations in 1996, it has consistently looked to
strategic alliances and equity agreements to solidify its market presence and
acquire resources for operations. On March 25, 1999, Frederick Dumas, the head
of FICS's United States subsidiary, met with James S. Mahan III, President and
Chief Executive Officer of S1, to discuss possible strategic alliances,
including joint marketing and product development efforts. As those discussions
progressed, Mr. Mahan suggested that a better strategy might be for the
companies to consider a merger.
Following the March 25, 1999 meeting, Mr. Mahan contacted Michel Akkermans,
President and Chief Executive Officer of FICS to discuss whether S1 and FICS
should consider a merger transaction. Separately, and without discussing the
possibility of the FICS transaction, Mr. Mahan also contacted Jeffrey M. Crowe,
President and Chief Executive Officer of Edify, regarding the possibility of a
business combination between S1 and Edify. Based on the call to Mr. Akkermans, a
meeting of S1 personnel and FICS personnel was arranged for the following week
in Brussels.
On March 30, 1999, Mr. Mahan, along with Dan Dreschel, Chief Operating
Officer of S1, and Jeffrey Lunsford, Senior Vice President of S1, went to
Brussels to meet with Mr. Akkermans and other executives of FICS. At that time,
FICS was in the process of preparing for an initial public offering of capital
stock. As a result of those preliminary discussions, the parties determined to
further explore a possible merger transaction. On March 31, 1999, FICS and S1
executed a confidentiality agreement, providing for the confidential treatment
by each party of the other's non-public information. Nonetheless, FICS continued
to work toward its initial public offering. S1 also contacted its investment
advisor, BancBoston Robertson Stephens, to assist in analyzing a possible
transaction, as well as to assist in S1's corporate diligence of FICS.
On April 1 and 2, 1999, Mr. Mahan and Mr. Crowe continued to have
discussions regarding the possibility of exploring a business combination.
On April 2, 1999, the S1 board met to discuss and review in detail the
various strategic alternatives being pursued by management.
At a meeting of the Edify board held on April 4, 1999, Mr. Crowe reported
on his discussions with Mr. Mahan and the Edify board instructed Mr. Crowe to
pursue further discussions with S1. Mr. Crowe informed Mr. Mahan that Edify was
interested in pursuing merger discussions.
This decision of the Edify board was consistent with previous actions of
the Edify board, which in the Spring of 1999 had begun to review potential
strategic alternatives involving Edify, including a potential business
combination transaction. On March 19, 1999, Edify engaged Goldman, Sachs & Co.
as its exclusive financial advisor to assist the Edify board and management in
evaluating strategic alternatives. In late March and early April 1999, Mr. Crowe
held a series of meetings with executives of another company interested in
acquiring Edify's server-based applications and potentially entering into a
business combination with Edify. These preliminary discussions continued through
April 16, 1999, when they were discontinued by the parties due to valuation
issues.
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<PAGE> 48
On April 6, 1999, Messrs. Mahan and Drechsel, along with Robert F.
Stockwell, Chief Financial Officer of S1, went to Brussels for further meetings
with and investigation of FICS. Following those meetings, Mr. Akkermans, along
with Steven Sipowicz, Chief Financial Officer of FICS, and representatives of
FICS's investment advisor, Credit Suisse First Boston, went to Atlanta, Georgia
to meet with S1 executives and to begin FICS's corporate investigation of S1.
Also following his return from Brussels, on April 10, 1999, Mr. Mahan
called Mr. Crowe to discuss further a merger transaction. For the first time,
Mr. Mahan also discussed with Mr. Crowe the possibility of a transaction with
FICS.
From April 11 through April 13, 1999, Mr. Crowe, William A. Soward, Vice
President of Business Development of Edify, and Charles H. Jolissaint, Vice
President and Chief Technology Officer of Edify, as well as Messrs. Akkermans
and Sipowicz, met extensively with the officers of S1. These meetings also were
attended by various legal, financial and other advisors of the parties.
Preliminary financial and other terms of transactions with each of Edify and
FICS were discussed.
The Edify board, at a meeting held on April 11, reviewed with Messrs.
Crowe, Soward and Jolissaint the issues raised by these discussions and
encouraged Edify's management to continue to evaluate such a transaction. On
April 12, 1999, Edify and S1 executed a confidentiality agreement providing for
the confidential treatment by each party of the other's non-public information.
The S1 board, at a meeting held on April 14, reviewed the discussions to
date and the possible transactions with S1's management team, along with
counsel, financial and other advisors. The S1 board also met with Mr. Akkermans.
The board, after an extensive review of various transaction scenarios,
authorized management to proceed with discussions on the basis of terms and
conditions discussed by the board at that meeting. The board also gave direction
on a broad diligence review of FICS and Edify.
On April 14 and 15, 1999, the Edify board held meetings to review the
status of discussions with S1, as well as with the other party interested in
pursuing a business combination with Edify. The board also discussed extensively
the pursuit of an independent business strategy for Edify and the potential
execution risks and stockholder values associated with each course.
On April 16, the S1 board met to review the status of discussions and
possible deal terms. The board also reviewed extensively the potential risks to
S1 and potential stockholder values associated with each transaction.
Messrs. Crowe and Soward met with Messrs. Mahan and Lunsford in Menlo Park,
California on April 19, 1999, to discuss issues relating to the transaction,
including Edify's valuation and the integration of the companies. Messrs. Crowe
and Mahan had numerous telephone conversations regarding various issues over the
following few days.
On April 22, 1999, the Edify board held a meeting to discuss the status of
the S1 transaction. Goldman, Sachs & Co. made an extensive presentation
regarding a business combination of S1 and Edify. Following discussion, the
Edify board authorized management to continue discussions with S1.
From April 26 to April 28, 1999, Mr. Soward and representatives of Edify's
legal counsel and financial advisors met with Messrs. Mahan, Stockwell, Drechsel
and Lunsford of S1, and representatives of S1's legal counsel and financial
advisors at S1's headquarters in Atlanta, to discuss various issues in a
business combination between the companies, and to perform due diligence reviews
of the other party. From April 29 to May 1, representatives of Edify's financial
advisors conducted a due diligence review of FICS at its headquarters in
Belgium. Also during late April and early May of 1999, special Belgian counsel
to Edify conducted a legal due diligence investigation of FICS.
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<PAGE> 49
Commencing May 1, 1999, under the direction of Messrs. Drechsel and
Stockwell, a team of financial and technology officers of S1 went to Brussels
and other FICS locations to complete due diligence. They were joined by S1's
legal counsel, including Belgian counsel, and financial advisors.
On April 30, 1999, S1's legal counsel sent to FICS's and Edify's legal
counsels draft acquisition agreements and ancillary agreements. The terms of
these agreements were negotiated by the parties and their counsel over the
course of the next two weeks.
On May 2, 1999, the Edify board held a meeting to review the ongoing
negotiations regarding the terms of the Edify Transaction, as well as the
results to date of the due diligence investigation of S1 and FICS.
From May 3 through May 5, 1999, Edify executives and technical staff met
with S1 executives and technical staff at S1's headquarters in Atlanta to review
financial, business and technical issues related to the proposed transactions.
On May 5 and 6, 1999, Edify technical staff performed a due diligence review of
FICS's technology at FICS's facilities in Belgium. The Edify board met on May 7,
1999, to review with Edify management and legal and financial advisors the
status of the open issues in the transaction agreements and the business,
operational and technical issues involved in integrating the companies.
Also during that first week of May 1999, under the direction of Messrs.
Lunsford and Michael Karlin, a team of financial and technology officers of S1
went to Edify's offices to complete due diligence. They were joined by S1's
legal counsel and financial advisors.
On May 4 and 5, 1999, S1 legal counsel met with FICS's legal counsel to
negotiate terms of the transaction documents.
On May 6, 1999, the S1 board met and held extensive discussions regarding
the financial terms and conditions of the proposed transactions. They also
discussed integration and execution issues. There was extensive review by
management of the status of the due diligence investigations of Edify and FICS.
On May 7, 1999, the FICS board met in North Carolina to discuss the
possible transaction. Mr. Mahan attended part of the meeting to discuss S1's
proposal.
From May 10 through May 12, 1999, S1 executives and their legal counsel met
with Edify executives and their legal counsel in Menlo Park to negotiate terms
of the transaction documents and discuss issues regarding the integration of the
companies. On May 14, Messrs. Crowe and Soward met with S1 executives in Atlanta
to discuss aspects of the proposed transaction.
At a meeting of the Edify board held on May 14, 1999, the board reviewed
the results of legal counsels' due diligence investigation of S1 and FICS. Legal
counsel reviewed in detail the principal terms of the draft merger agreement,
stock option agreement and related agreements. Representatives of Goldman, Sachs
& Co. presented to the board a detailed financial analysis of the proposed
transactions.
Throughout May 14, 15 and 16, 1999, legal and financial advisers to FICS
and S1 continued to negotiate the terms and structure of the FICS Transaction.
The structure of the FICS Transaction was agreed upon late on May 15, 1999, and
the parties continued to negotiate the final terms and conditions though May 16,
1999.
At a meeting of the S1 board held on May 14, 1999, the S1 board reviewed
the results of the legal and business due diligence investigation of Edify and
FICS. Legal counsel reviewed in detail the principal terms of the draft
transaction and related agreements. Representatives of BancBoston Robertson
Stephens presented to the board a detailed financial analysis of the proposed
transactions.
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Mr. Mahan and other S1 executives met with Mr. Crowe and Edify's executives
on May 15 and 16, 1999, in Menlo Park to negotiate the remaining unresolved
issues in the transaction. The parties and their legal counsel finalized all of
the transaction documents during the evening of May 16, 1999.
The Edify board held a meeting on the evening of May 16, 1999.
Representatives of Goldman, Sachs & Co. rendered its oral opinion to the Edify
board, subsequently confirmed in writing, that the exchange ratio to be received
by Edify stockholders in the Edify Transaction was fair from a financial point
of view to the holders of Edify common stock. Following a discussion, the Edify
board of directors unanimously resolved that the Edify Transaction was fair to,
and in the best interests of, Edify's stockholders, approved the final terms of
the merger agreement, stock option agreement and related agreements and
transactions, and determined to recommend that the merger agreement be approved
and adopted and the Edify Transaction be approved by Edify's stockholders.
The S1 board also held a meeting on the evening of May 16, 1999. Legal
counsel reviewed in detail the final forms of agreements and understandings of
the parties. BancBoston Robertson Stephens delivered its oral opinions to the S1
board of directors, which it subsequently confirmed in writing, that, as of such
date and based on the assumptions made, matters considered and limits on the
review undertaken as set forth in its opinions, (i) the exchange consideration
in the FICS Transaction was fair from a financial point of view to S1 and (ii)
the exchange ratio in the Edify Transaction was fair from a financial point of
view to S1. Following a discussion, the S1 board of directors unanimously
resolved that the transactions were fair to, and in the best interests of, S1's
stockholders, approved the final terms of the various agreements and
transactions, and determined to recommend that the issuance of S1 common stock
in the transactions be approved by S1's stockholders.
The parties, including each of the FICS stockholders, executed the
transaction agreements late in the evening of May 16, 1999 and in the early
morning hours of May 17, 1999. The parties publicly announced the transactions
on May 17, 1999.
INFORMATION ABOUT FICS GROUP N.V.
DESCRIPTION OF FICS'S BUSINESS
FICS is a leading software solutions provider for the global financial
services industry. FICS designs, develops, markets and supports corporate and
retail banking solutions that enable banks and financial institutions to
interact electronically with their customers. FICS sells its products as pre-
packaged solutions and also customizes these solutions to specific customer
requirements.
The FICS Electronic Services Delivery products include both corporate and
retail banking solutions. FICS's corporate banking products enable banks and
financial institutions to offer cash management, trade finance, custody and
other corporate banking services over the internet and/or through a direct
connection to the bank or financial institution. The FICS retail banking
products enable banks and financial institutions to offer checking, savings,
portfolio management and other retail banking services over the internet. FICS's
Financial Reporting Systems products enable financial institutions to meet
regulatory reporting requirements and perform internal information management
and consolidation activities in 22 countries.
FICS was founded in 1989 and until 1995 provided primarily software
services for banks and financial institutions. In 1995, FICS began developing
its Electronic Services Delivery products, and in 1996 FICS recorded its first
Electronic Services Delivery product revenues. In 1998, FICS introduced its
internet-enabled Electronic Services Delivery products. As of March 31, 1999,
FICS had sold its Electronic Services Delivery products and services to
approximately 50 customers and had sold its Financial Reporting Systems products
to more than 600 customers in more than 20
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countries. FICS's total revenues were E49.8 million in 1998, compared to E35.7
million in 1997. In 1998, the FICS Electronic Services Delivery products and
services generated approximately 76% of FICS's total revenues. FICS's customers
include ABN AMRO Bank, Bankers Trust, Bank One, Banque National de Paris, Bank
of America, Citibank, Commonwealth Bank of Australia, CIBC and United Overseas
Bank.
The FICS Solution
FICS believes that its solution provides the following key advantages:
Comprehensive product and services offering
FICS believes that its product offering is one of the broadest and most
comprehensive in the financial services industry. In addition, the FICS
customization, enhancement, maintenance, consulting and training
services enable its customers to effectively implement its product
offering. The FICS Electronic Services Delivery products provide a wide
range of electronic banking solutions for both corporate and retail
customers, such as transaction processing, payment authentication,
account reporting, cash management, portfolio management, custody and
trade finance. FICS's Electronic Delivery Server links a bank's or
financial institution's back office through multiple delivery channels,
including the internet, to a range of front-end communication devices,
such as personal computers, hand-held computing devices and telephones.
FICS's experience in the banking industry has enabled it to design
global products which support multiple languages, currencies and
messaging protocols.
Expertise in the financial services industry
Since its inception, FICS has developed software solutions exclusively
for banks and other financial institutions. In addition, the majority of
FICS's senior management team previously worked in the financial
services industry and FICS hires its sales and marketing staff
principally from that industry. This expertise has enabled FICS to
develop leading-edge products which comprehensively address the needs of
the financial services industry for electronic banking. Moreover, FICS
incorporates its financial regulatory experience in the design and
customization of its Financial Reporting Systems products for numerous
local markets.
Products tailored for leading-edge technologies
FICS uses advanced technologies to develop products that interface with
its customers' existing systems. In addition, FICS has successfully
recognized emerging technologies, such as Java, before their widespread
acceptance and has developed components when available technologies have
not been acceptable. FICS's relationships with strategic banking and
financial organizations, such as S.W.I.F.T., enable FICS to remain a
leader in technological innovation in the financial services industry.
Scalability
FICS designs its products with a scalable architecture that allows them
to meet the needs of growing banks and financial institutions and to be
implemented in banks and financial institutions of various sizes. In
addition, as its customers expand their operations, FICS's products
accommodate increases in the number of end-users, the addition of users
at multiple sites and increases in the number of transactions, without
requiring significant modification of the underlying software.
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Global reach
FICS has sold its products and services to banks and financial
institutions throughout the world. FICS has offices in Europe, the
United States and Asia/Pacific to support its customers as they grow
globally. FICS's Electronic Services Delivery products support multiple
languages and currencies and its Financial Reporting Systems products
support the regulatory schemes in 22 countries.
Products and Services
FICS's Electronic Services Delivery products enable banks to provide
corporate and retail electronic banking products and services over the internet.
These products also provide solutions for connecting a bank's back office to its
customers through multiple delivery channels to a range of front-end
communications devices, such as personal computers, hand-held computing devices
and telephones. FICS's Financial Reporting Systems products assist banks and
financial institutions to efficiently satisfy regulatory reporting requirements
and to perform internal information management and consolidation activities.
The FICS solution includes the following products:
<TABLE>
<CAPTION>
PRODUCT DESCRIPTION BENEFITS
<S> <C> <C>
ELECTRONIC SERVICES DELIVERY
- - Corporate Internet Banking - Enables secure browser-based - Reduces the cost of delivery and
(Latest version: Release 1.2, corporate banking over the internet maintenance
January 1999) - Provides database support, - Extends reach to customers and
Modules: broadcast messages, user profiling enhances range of services
Core administration services and billing - Supports multiple currencies and
Balance and transaction - Provides account balances, languages
reporting intra-day reporting, transaction - Enables users to download modules
Payments searching and account as Java applets
reconciliation - Enhances customer branding
- Supports cross-border and local - Common administration interface
payment processing and transaction with Retail Internet Banking
initiation - Highly scalable
- - Retail Internet Banking - Enables secure browser-based - Reduces the cost of delivery and
(Latest version: Release 2.1, retail banking over the internet maintenance
March 1999) - Provides cash and portfolio - Extends reach to customers and
Modules: management with a unified enhances range of services
Cash management presentation - Supports multiple currencies and
Portfolio management - Provides account balances and cash languages
and payment transactions (including - Enables users to download modules
salary and international payments) as Java applets
- Supports purchases and sales of - Enhances customer branding
securities, transaction - Common administrative interface
simulations and analysis of with Corporate Internet Banking
multiple portfolio performance - Highly scalable
</TABLE>
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<PAGE> 53
<TABLE>
<CAPTION>
PRODUCT DESCRIPTION BENEFITS
<S> <C> <C>
- - Corporate Banking for Windows - Enables secure client/server-based - Permits data to be shared across a
(Latest version: Release 4.1, corporate banking from remote corporate intranet
April 1999) locations - Requires only a PC and modem
Modules: - Provides cash management, trade - Reduces the cost of delivery and
Balance and transaction finance and custody business maintenance
reporting functions with a unified - Extends reach to customers and
Payments presentation enhances range of services
Trade finance - Provides database support, user - Supports multiple currencies and
Custody profiling, receiving and sending languages
e-mail, file import and export, - Enhances customer branding
task scheduling and billing - Highly scalable
- Supports cross-border payment
processing, import and export
letters of credit, documentary
collections, bonds and guarantees,
and purchase orders
- - Electronic Services Delivery - Manages transaction processing, - Enables multiple client channels
Server security, audit trails, customer to use a single point of connection
(Latest versions: Release Unix profiling, disaster recovery, to the bank 24 hours per day/7
4.3, March 1999, and NT 3.0, administration and maintenance days per week
April 1999)
FINANCIAL REPORTING SYSTEMS
- - ABACUS - Enables automated regulatory - Supports regulatory reporting in
(Latest version: Release 2.4, reporting, internal reporting, 22 countries
June 1998) management reporting and - Automatically validates reports
consolidation in either a - Delivers reports electronically to
client/server or stand-alone regulator
environment - Supports report audits
- Provides integrated risk
measurement capabilities
</TABLE>
Electronic Services Delivery Products
The FICS Electronic Services Delivery products enable banks to provide
corporate and retail electronic banking products and services over the internet
or through a direct connection. FICS's products provide solutions for connecting
a bank's back office via multiple communication channels to its customers
through a variety of front-end mechanisms, such as personal computers, hand-held
computing devices and telephones.
Corporate Internet Banking
Corporate Internet Banking is FICS's latest generation remote electronic
banking product. FICS developed Corporate Internet Banking using Java and CORBA
technology, which enables browser-based corporate banking through a variety of
front-end mechanisms. FICS's customers may configure the Corporate Internet
Banking product to deliver banking services through a thin, fat or hybrid
architecture, enhancing the delivery of financial services through existing and
emerging front-end devices, which may include mobile telephones and interactive
television. End-users of FICS's Corporate Internet Banking product can log on to
their bank's internet website and conduct financial transactions from different
physical locations because the product uses "applets," which are small Java
programs that may be incorporated in a web page and downloaded quickly to the
user's PC. Corporate Internet Banking is designed to permit end-users to process
transactions offline before beginning a communication session with their bank.
Corporate Internet Banking also provides a suite of business application
modules that banks may tailor to their needs as well as to those of their
customers. The modules may be downloaded as Java applets with a standard
internet browser. Corporate Internet Banking is available in multiple languages
and currencies.
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<PAGE> 54
Retail Internet Banking
Retail Internet Banking is a browser-based product designed to deliver core
financial services to residential and small office end-users over the internet.
Because the product has been developed using Java, it is supported by all
leading browsers and may be downloaded (together with any updates) from the
internet.
FICS's Retail Internet Banking product allows end-users to conduct
day-to-day banking operations and to obtain reporting for multiple accounts and
in multiple currencies. Retail Internet Banking supports various payment
transactions including standing orders, one-time payments, recurrent payments
and inter-account transfers. Retail Internet Banking offers services such as
buying and selling of securities, simulations of potential transactions, daily
reports of security closing prices, transactions and holdings, and graphical
portfolio analysis. A bank may promote its own additional products or those of a
third party, such as investment services, pension funds, online ticket purchases
or home shopping. Customers can e-mail inquiries or requests directly to the
bank. In addition, end-users can log on to their bank's internet web site and
conduct financial transactions from different physical locations. The bank may
also provide information services, including exchange rates, interest rates,
marketing materials, mailings and announcements.
Because of its modular design, banks may tailor the FICS Retail Internet
Banking product to their needs as well as those of their customers and may also
easily add services or features after their initial purchase of the product. The
product is available in multiple languages and currencies.
Corporate Banking for Windows
Corporate Banking for Windows is a client/server-based remote electronic
banking product. End-users of Corporate Banking for Windows product can log on
to their bank's communication server through a direct connection using a
personal computer and a modem to conduct financial transactions.
As with FICS's Corporate Internet Banking and Retail Internet Banking
products, Corporate Banking for Windows is a modular system that banks may
tailor to their needs and to the needs of their customers by adding modules as
their systems grow. It is also available in multiple languages and currencies.
Electronic Services Delivery Server
The Electronic Services Delivery Server acts as the middleware and the
control center for communication and interaction between a bank's back office
and its customers. The server manages security, load balancing, audit trails,
customer profiling, disaster recovery, administration and maintenance.
The Electronic Services Delivery Server acts as a repository for end-user
customer data to reduce workload on legacy systems, provide additional business
functions and permit greater operational availability. The Electronic Services
Delivery Server supports a range of industry standard messaging protocols. The
Electronic Services Delivery Server also operates under IBM-AIX, Sun Solaris and
Microsoft Windows NT platforms and offers a Java administration interface, which
permits bank staff to monitor electronic services with the latest generation
browsers.
Although the Electronic Services Delivery Server is not required for the
implementation of FICS's Corporate Internet Banking, Retail Internet Banking or
Corporate Banking for Windows products, FICS generally licenses the Electronic
Services Delivery Server with its other products.
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<PAGE> 55
Financial Reporting Systems Products
FICS's primary Financial Reporting Systems product is ABACUS, a software
product that permits banks and financial institutions to automate and fulfill
their regulatory reporting requirements to central banks and regulators, head
offices and internal departments. ABACUS is a Microsoft Windows-based product
that runs both in a client/server and stand-alone environment, integrating (if
required) UNIX-based data processing functions under Sun Microsystems, Hewlett
Packard, DEC and IBM platforms. It also manages data from different types of
relational databases, such as Oracle, Sybase and Microsoft SQL Server. In
addition, ABACUS is able to link to different networks, including local area
networks, the internet and intranets. FICS intends to introduce a new Financial
Reporting Systems product, FiRE, in the fourth quarter of 1999 to replace its
ABACUS product.
ABACUS incorporates a risk measurement tool that provides mathematically
generated information for risk-related reports. It calculates complex cash
flows, market values, net present values and the sensitivities of financial
instruments, such as duration and modified duration for options. The calculator
permits financial institutions to generate their own risk measurement models for
regulatory reports.
FICS has developed country-specific modules which satisfy the regulatory
requirements in 22 countries. Each module is tailored to the rules and
parameters for producing legal financial reports for the local regulator or
central bank. FICS develops and maintains these modules in conjunction with
specialists in local regulatory reporting.
Professional Services
In addition to the products described above, FICS provides the following
customization, enhancement, maintenance, consulting and training services:
Consulting
FICS offers its customers high-quality consulting services, including
industry-specific systems integration, configuration, installation and
project development and management services. FICS works closely with
customers to identify their unique business needs and to tailor its
solution to these needs in an efficient, cost-effective manner. FICS
provides ongoing business consulting to help its customers optimize the
use of FICS solutions over time.
Support
FICS has implemented a comprehensive customer support program to assist
its customers to use FICS's products and to identify, analyze and solve
any problems that may occur. To provide responsive local service
support, FICS maintains service representatives at each of its
international offices. To support their efforts, FICS maintains help
desks at its offices to address customer issues and inquiries. FICS
provides 24 hours per day/7 days per week customer support for its
Electronic Services Delivery products.
Training
FICS offers a number of educational classes in conjunction with its
products, including end-user training and in-depth technical training
regarding the implementation and administration of FICS's solutions.
FICS prices its consulting and customization services based on the time
spent and resources used. Maintenance contracts typically run for a year, and
are priced at a fixed price of approximately 18% of the underlying list price of
the software licensed. Customers of FICS's maintenance services
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<PAGE> 56
are entitled to receive regularly scheduled maintenance releases, product
upgrades and updates. FICS prices training services on a per-class basis.
FICS Customers
FICS has sold its products and provided services to over 600 banks and
financial institutions. FICS has approximately 50 Electronic Services Delivery
customers. Representative Electronic Services Delivery customers who have
purchased at least $250,000 of FICS's products and services in the two years
ended March 31, 1999, include:
<TABLE>
<CAPTION>
NORTH AMERICA EUROPE, MIDDLE EAST & AFRICA ASIA/PACIFIC
<S> <C> <C>
- - BancBoston (U.S.) - ABN AMRO Bank (The Netherlands) - Bank Central Asia (Singapore)
- - Bank One (U.S.) - ABSA (South Africa) - Bank of East Asia (Hong Kong)
- - CIBC (Canada) - Arab National Bank (Saudi Arabia) - Commonwealth Bank of Australia
- - Firstar (U.S.) - Artesia Bank (Belgium) (Australia)
- - Fleet Bank (U.S.) - Banco Espirito Santo (Portugal) - National Australia Bank (Australia)
- Banksys (Belgium) - United Overseas Bank (Singapore)
- Banque Nationale de Paris (France) - Westpac (Australia)
- Coutts & Co. (U.K.)
- Credit Commercial de France (France)
- Girobank (U.K.)
- Robeco Bank Luxembourg
(Luxembourg)
- SNS Bank (Netherlands)
- Standard Chartered Bank (U.K.)
- Yapi Kredi Bank (Turkey)
</TABLE>
Representative Financial Reporting Systems customers who have purchased at
least $50,000 of FICS's products in the two years ended March 31, 1999, include
BancBoston (U.S.), Bank of America (U.S.), Bankers Trust (U.S.), Banque
Nationale de Paris (France), Citibank (U.S.), Commerzbank (Germany), J.P. Morgan
(U.S.), KBC Bank (Belgium), Lloyds Bank (U.K.), Rabobank (Netherlands) and Royal
Bank of Scotland (U.K.).
In 1998 and the first three months of 1999, sales to ABN AMRO Bank
represented approximately 29% and 11%, respectively, of FICS's total revenues.
No other single customer accounted for more than 10% of FICS's revenues in these
periods.
Case Studies
The following case studies describe how certain FICS customers have adopted
and are implementing FICS's products. Each of these customers has implemented
electronic banking solutions to extend customer reach, improve operational
efficiency, reduce costs and enhance their customer services. In each case, the
customer selected FICS's Electronic Services Delivery products after a
competitive evaluation. There can be no assurance that new or existing customers
will achieve any of the potential benefits described below.
BankOne Corporation, based in Chicago, Illinois, was looking for a
browser-based solution to enable it to offer its corporate banking customers
comprehensive cash and treasury management services via the internet. Bank One
needed a solution that would enable it to bring new features and functions to
market quickly and cost-effectively. The bank also needed a solution that gave
them flexibility as their customer base continues to expand internationally,
including extensive international capabilities such as global payments and
multiple language and currency support. In November 1998, they chose FICS's
Corporate Internet Banking product.
National Australia Bank, based in Melbourne, Australia, needed a secure
medium through which to offer global internet-based banking services to its
customers. In 1997, the bank chose two of
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<PAGE> 57
FICS's products as the underlying architecture for the project: FICS's
Electronic Services Delivery Server, running under an AIX platform, and a
customized version of FICS's Retail Internet Banking product. FICS customized
the product to reflect certain local features, including BPAY payments (the
Australian standard for electronic bill payments) and Australian accounting
standards. FICS plans to add direct payroll payments, conforming with Australian
Payments Clearing Association standards, in the future.
ABN AMRO Bank, one of the world's largest banks, based in the Netherlands,
has been a FICS customer since 1991. FICS has developed an extensive range of
international electronic banking solutions for them, including corporate and
retail banking products used in 28 countries and trade finance products. FICS
has a dedicated development team of 48 people focusing on updating and
maintaining the bank's electronic banking products and services. The development
team includes personnel with a wide range of expertise that work closely with
the bank's IT staff to provide the most up-to-date and complete range of
solutions available.
Sales and Marketing
FICS markets and licenses its products to banks and other financial
institutions using a combination of direct and indirect distribution channels,
including a direct salesforce, distributors, and strategic partners. Because the
sale of Electronic Services Delivery products is highly technical and requires
customization, the sales cycle can be as long as six to eighteen months, varying
by product and customer.
FICS's distributors are systems integrators, value-added resellers or
agents. Systems integrators principally distribute Electronic Services Delivery
products. Value-added resellers and agents distribute Financial Reporting
Systems products. FICS's distributors serve as an integral part of FICS's
marketing and service network worldwide. They have contributed significantly to
FICS's growth through cross-selling FICS products to their existing client base
and extensive marketing and promotion of FICS's name and brands. FICS's
distributors include IBM, Compaq and Sun Microsystems, as software integrators
of Electronic Services Delivery products, and KPMG and Sungard Data Systems, as
value-added resellers of Financial Reporting Systems products. Most of FICS's
sales and marketing staff promote sales of Electronic Services Delivery
products.
FICS's backlog consists of work FICS has not yet completed under contracts,
in accordance with its revenue recognition policy. Customers generally license
FICS's software products and contract for customization, enhancement,
maintenance and training services at the same time. FICS typically commences
customization and enhancement services on such contracts within 30 days of
executing the contract. Contracts for customization and enhancement are
typically on a time and materials basis and for maintenance and training
services are typically fixed price. Because certain customers may cancel
contracts with FICS on short notice with limited penalties, FICS's backlog as of
any particular date may not be indicative of its total revenues in any future
period.
Research and Development
FICS has designed its existing products after extensive consultation with
potential customers to assess their needs. FICS also supplements its research
and development efforts by reviewing customer feedback on existing products and
working with customers and potential customers to anticipate future
functionality needs. As of March 31, 1999, FICS's research and development
department consisted of 115 employees and subcontractors, of which 87 were
located in Brussels, Belgium at FICS's research and development headquarters.
The goal of FICS's research and development team is to develop practical
applications of both mature and emerging electronic banking and reporting
technologies. FICS's engineering, marketing, operations and management teams
have developed close relationships with many of their customer
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<PAGE> 58
counterparts and use these relationships to identify market demands and target
FICS's research and development efforts to meet those demands.
FICS's current Electronic Services Delivery research and development
projects include:
- mobile delivery channels for portfolio management and asset management,
including personal digital assistants and mobile telephones;
- security technologies; and
- smart card and electronic purse applications.
FICS's research and development expenditures were E6.3 million, E6.3
million and E12.7 million for 1996, 1997 and 1998, respectively.
Competition
FICS faces competition in providing electronic banking solutions primarily
from:
- corporate banking solutions providers such as Credo Group (Ireland), ICM
Electronic Banking Services (U.S.), Pulitzer & Haney (U.S.), and Omikron
Systems (Germany); and
- retail banking solutions providers such as Brokat (Germany).
Many of FICS's competitors in providing electronic banking solutions have
substantially greater resources than FICS does, which could adversely affect
FICS's ability to compete successfully.
Providing financial reporting systems is also highly competitive. FICS
faces competition for financial reporting systems on a global level primarily
from SOPRA (France) and CMG (U.K.). FICS also faces competition from regional
software providers such as Financial Architects (Belgium) as well as competitors
that restrict their sales to a single country or a limited group of countries.
In addition to FICS competing with third parties, FICS's customers and potential
customers may develop, implement and maintain applications rather than
purchasing FICS's software products and services.
Proprietary Rights
FICS relies upon a combination of contractual rights, trade secrets,
copyrights, technical measures, non-disclosure agreements and trademarks to
establish and protect its proprietary rights in products and technologies. FICS
has no registered patents or pending patent applications. FICS cannot assure
that the steps it takes to protect its proprietary rights will be adequate to
prevent misappropriation of its technology or independent development or sale by
others of software products with features based upon, or otherwise similar to,
those of FICS products.
FICS presently enters into invention assignment and confidentiality
agreements with its employees and independent contractors and confidentiality
agreements with certain of its customers. FICS also limits access to the source
codes for its software and other proprietary information. Due to the rapid pace
of innovation within the software industry, FICS believes that the following
factors are
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<PAGE> 59
more important in establishing and maintaining a technological advantage than
the various legal protections available for its technology:
- the technological and creative expertise of FICS personnel;
- the quality of FICS's solutions, technical support and training services;
and
- the frequency of releases of technology enhancements.
FICS is not aware that it is infringing any proprietary rights of third
parties. FICS relies upon certain software that it licenses from third parties,
including software that is integrated with FICS's internally developed software
and used in its solutions to perform key functions.
Employees
As of March 31, 1999, FICS had 605 employees. The following table sets out
the distribution of its employees:
<TABLE>
<CAPTION>
EUROPE U.S. ASIA/PACIFIC TOTAL
------ ---- ------------ -----
<S> <C> <C> <C> <C>
Maintenance and Consulting Services.............. 323 36 26 385
Research and Development......................... 94 1 3 98
General and Administration....................... 68 8 7 83
Sales and Marketing.............................. 32 4 3 39
--- -- -- ---
Total....................................... 517 49 39 605
=== == == ===
</TABLE>
As of December 31, 1996, 1997 and 1998, FICS had approximately 366, 454 and
587 employees, respectively.
Every industry sector in Belgium has its own Joint Labor Committee in which
employee and employer representatives on a national level negotiate certain
terms and conditions of employment in the sector, including minimum wages,
working hours and work rules. The collective bargaining agreements concluded by
the Joint Labor Committee applicable to FICS's industry sector apply to FICS and
its employees in Belgium. Moreover, Belgian law requires companies employing a
weighted average of 100 or more employees to periodically organize elections
with a view to setting up a workers' council, composed of representatives of the
company's employees and management. Workers' councils have an advisory function,
are entitled to certain corporate, financial, commercial and personnel
information, and are involved in cases of collective dismissal procedures.
The number of employees for purposes of setting up a workers' council is
determined based on a one-year period preceding the quarter in which the
election procedure must be initiated. FICS does not presently have a workers'
council due to the absence of candidates for election.
In addition, Belgian employment law imposes substantial minimum terms of
notice in connection with the termination of employment agreements. The actual
length of such terms depends on the age, seniority and salary level of the
employee, and in certain instances may exceed one year. In the event that FICS
terminates an employee, FICS must pay the employee an amount equal to the salary
(including bonuses, vacation and year-end pay and computed by reference to the
salary and bonuses that were paid to the relevant employee in the twelve months
preceding the termination of his contract) that otherwise would have been
payable during the term of notice.
Facilities
FICS's principal administrative, sales, marketing, support and research and
development facilities are located in approximately 44,600 square feet of space
in Zaventem, Belgium. FICS's principal lease expires on January 31, 2000. FICS
plans to relocate those facilities to a new location in
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<PAGE> 60
Zaventem, Belgium with approximately 58,300 square feet, pursuant to a nine-year
lease that will expire in 2008. The lease for the new location provides for an
option to lease an additional 18,000 square feet. FICS leases approximately
26,200 square feet of space for its United States headquarters in Charlotte,
North Carolina under a lease that expires in 2004. FICS currently leases other
sales and support offices in Australia, Belgium, France, the Netherlands,
Singapore, Spain and the United Kingdom.
Legal Proceedings
FICS is not a party to any material legal proceedings. From time to time,
FICS may become involved in litigation relating to claims arising out of its
operations in the normal course of business.
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
FICS prepares its consolidated financial statements in euro in accordance
with U.S. GAAP. In this prospectus/proxy statement, including the FICS financial
statements and notes which accompany them, references to "euro" or "E" are to
euro, references to "Belgian francs" and "BEF" are to Belgian francs and
references to "U.S. dollars" or "$" are to United States dollars. The
translations of Belgian francs into euro have been made at the fixed exchange
rate of BEF 40.3399 to 1.00. These translations should not be construed as a
representation that the Belgian franc amounts represent such euro amounts or
could be converted into euros at the rate indicated.
EXCHANGE RATES
FICS publishes its financial statements in euro. FICS published its
financial statements prior to 1999 in Belgian francs. A significant portion of
FICS's revenues are denominated in U.S. dollars and the majority of its expenses
and debt are denominated in euro.
The Treaty Establishing the European Community, as amended by the Treaty on
European Union, commonly referred to as the "Maastricht Treaty," to which the
Kingdom of Belgium is a signatory, provided that on January 1, 1999, the euro
became legal tender in those member states of the European Economic and Monetary
Union that satisfied the convergence criteria set forth in the Maastricht
Treaty, including Belgium. The conversion rate between the Belgian franc, which
continues to be legal tender through a transition period ending June 30, 2002,
at the latest, and the euro was fixed by the Council of the European Union at
BEF 40.3399.
The following tables set forth, for the periods indicated, certain
information concerning the noon buying rates expressed in BEF per $1.00. The
Average Rate set forth below is the average of the noon buying rates on the last
business day of each month during the year. FICS does not use these rates in the
preparation of its consolidated financial statements.
<TABLE>
<CAPTION>
AVERAGE END OF
YEAR HIGH LOW RATE PERIOD
---- ----- ----- ------- ------
(BEF PER U.S. DOLLAR)
<S> <C> <C> <C> <C>
1994............................................... 36.53 30.73 33.17 31.85
1995............................................... 32.14 27.94 29.28 29.43
1996............................................... 32.27 29.50 31.02 31.71
1997............................................... 38.82 31.76 35.90 37.08
1998............................................... 38.50 33.19 36.29 34.36
</TABLE>
The following table sets forth, for the period indicated, certain
information concerning the noon buying rate expressed in dollars per euro. The
Average Rate set forth below is the average of the
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<PAGE> 61
noon buying rates on each business day of the month. FICS does not use these
rates in the preparation of its consolidated financial statements.
<TABLE>
<CAPTION>
AVERAGE END OF
MONTH HIGH LOW RATE PERIOD
----- ---- --- ------- ------
(U.S. DOLLARS PER EURO)
<S> <C> <C> <C> <C>
January 1999................................................ 1.18 1.14 1.16 1.14
February 1999............................................... 1.13 1.10 1.12 1.10
March 1999.................................................. 1.10 1.07 1.09 1.08
</TABLE>
FICS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion of FICS's financial condition and results of
operations should be read in conjunction with its consolidated financial
statements and the related notes, and the other financial information included
in this prospectus/proxy statement. FICS's consolidated financial statements and
its quarterly financial results included in this discussion have been prepared
in accordance with U.S. GAAP.
On January 1, 1999, the euro was introduced as the common legal currency of
eleven member states of the European Economic and Monetary Union, including
Belgium. FICS has adopted the euro as its reporting currency in its consolidated
financial statements and translated all Belgian franc amounts at the fixed
exchange rate for Belgian francs to euro. Although these statements depict the
same trends as would have been shown had FICS presented them in Belgian francs,
you should be aware that they may not be directly comparable to the financial
statements of other companies that have also been restated in euro. Prior to the
adoption of the euro, the currencies of other countries fluctuated against the
Belgian franc, but because the euro did not exist prior to January 1, 1999,
historical exchange rates for euro are not available. A comparison of FICS's
financial statements and those of another company that had historically used a
reporting currency other than the Belgian franc that takes into account actual
fluctuations in exchange rates could give you a much different impression than a
comparison of FICS's financial statements and those of another company as
translated into euro. Note 2 of Notes to FICS's consolidated financial
statements explains how the amounts in these statements were translated.
Overview
FICS is a leading software solutions provider for the global banking and
financial services industry. FICS designs, develops, markets and supports
corporate and retail banking solutions that enable banks and financial
institutions to interact electronically with their customers.
FICS was founded in 1989. In its first five years of operation, FICS
focused primarily on developing custom software for banks and financial
institutions, using fax-based and phone-based banking and DOS-based and
Windows-based banking software for PCs. In 1991, FICS formed a joint venture to
develop financial reporting systems products and in late 1994, FICS acquired its
joint venture partner. Beginning in late 1995, FICS substantially expanded its
operations to capitalize on the opportunity within the rapidly emerging market
for electronic banking solutions. At that time, FICS invested in its research
and development, marketing, domestic and international sales channels and
professional services relating to its Electronic Services Delivery products.
FICS released its first Electronic Services Delivery products in the third
quarter of 1996 and its first internet-enabled versions of those products in the
third quarter of 1998. In January 1999, FICS released the latest version of its
Corporate Internet Banking product. In addition, the first version of its
Financial Reporting Systems product, which supported one country, was introduced
in 1993. In December 1998, FICS released the latest version of ABACUS, which
currently supports 22 countries.
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<PAGE> 62
The following table illustrates FICS's software license revenues and
services revenues for its Electronic Services Delivery products and Financial
Reporting Systems products and as a percentage of total revenues for 1996, 1997
and 1998:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
PRODUCTS 1996 1997 1998
-------- ------------------ ------------------ ------------------
(IN THOUSANDS, PERCENTAGES OF TOTAL REVENUES)
<S> <C> <C> <C> <C> <C> <C>
Electronic Services Delivery Products
Software licenses................... E 3,099 13.1% E 3,123 8.8% E 6,759 13.6%
Services............................ 13,384 56.4 23,836 66.8 30,956 62.2
------- ---- ------- ---- ------- ----
Total............................ 16,483 69.5 26,959 75.6 37,715 75.8
Financial Reporting Systems Products
Software licenses................... 3,168 13.4 3,036 8.5 4,242 8.5
Services............................ 4,055 17.1 5,686 15.9 7,796 15.7
------- ---- ------- ---- ------- ----
Total............................ E 7,223 30.5% E 8,722 24.4% E12,038 24.2%
======= ==== ======= ==== ======= ====
</TABLE>
FICS derives its revenues exclusively from software licenses and services.
FICS receives software license revenues from licensing its products directly to
its customers and indirectly through resellers. Its license fees are based
generally on user count and, in the case of its Electronic Services Delivery
products, size and location of the licensee and the number of modules
incorporated. During 1998, license fees from its Electronic Services Delivery
products ranged from E100,000 to E4.3 million per customer and license fees from
its Financial Reporting Systems products averaged approximately E20,000 per
customer. FICS receives service revenues from customization and enhancement
services, maintenance services, and consulting and training services that FICS
performs for customers that license its products either directly from FICS or
indirectly through resellers.
FICS generally recognizes revenues from services and from the licensing of
software with significant customization or modification as work is performed
under the percentage of completion method, with progress being measured using
costs incurred to date compared to total estimated costs to be incurred. This
revenue generally includes licensing of software and services (1) which are
essential to the functionality of the software, or (2) which include significant
customization or modification of the software. FICS recognizes time and
materials based revenue as fees are earned, based on hours incurred and
expenditures made. FICS generally recognizes revenues from the licensing of
software having no significant ongoing obligations upon delivery of the product,
provided that FICS has persuasive evidence of an agreement, the fee is fixed and
determinable and collectability is probable. Revenues from maintenance services
are recognized over the contract term, typically one year. FICS recognizes
losses on contracts in the period in which the liability is identified.
FICS enters into reseller arrangements that typically provide for
sublicense fees payable to it based on a percentage of its list price. FICS
recognizes sublicense fees as they are reported by the reseller when it
re-licenses its products to their customers.
Capitalization of software development costs begins upon establishment of
technological feasibility and ends upon general release of the software to the
public. FICS has defined technological feasibility as the completion of a
working model. Its time between completion of a working model and general
release of the software to the public is short. As a result, its costs
qualifying for capitalization are not material and have been expensed.
In December 1998, FICS acquired HAL5 S.A., a French company, for E2.0
million in cash. At the same time, FICS also acquired Open Systems
Interconnection Ingenierie S.A., a French company, for E915,000 in cash. Both
companies sell server products to the financial services industry
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<PAGE> 63
in France. These acquisitions have been accounted for under the purchase method
of accounting, and, accordingly, the results of operations of both companies
will be included in FICS's consolidated financial statements in the period
beginning on January 1, 1999, since the amounts between the date of acquisition
and the year end were not significant. In connection with these acquisitions,
FICS acquired assets with an estimated fair market value of E84,000. The
difference between the net asset value and the purchase price has been recorded
as intangible assets in the amount of E2.8 million, of which E302,000 has been
written off in its 1998 statement of operations. The remaining amount is to be
amortized over an estimated useful life of five years.
FICS accounts for deferred income taxes using the liability method, which
requires deferred taxes to be recognized for all temporary differences between
the book and tax basis of assets and liabilities. FICS evaluates deferred tax
assets for probable recoverability on the basis of whether it is more likely
than not that sufficient taxable income will be generated in the foreseeable
future. FICS provides a valuation allowance against any assets which are not
likely to be recovered on that basis. As of December 31, 1998, FICS had
accumulated tax losses in Belgium and the United Kingdom of approximately E8.0
million, which FICS is permitted to carry forward to future years. A valuation
allowance has been established to offset the deferred tax assets for its
accumulated tax losses due to uncertainty surrounding the ultimate use of such
losses.
In 1991, ABN AMRO Bank became one of FICS's customers. ABN AMRO Bank
accounted for 22.8% of its revenues in 1996, 19.6% of its revenues in 1997, and
28.8% of its revenues in 1998. The substantial majority of these revenues
resulted from customization, enhancement and maintenance services.
FICS has expanded its operations in all major geographic areas, with a
significant portion of its revenue growth occurring in North America and Europe.
The following table illustrates its revenues for 1996, 1997 and 1998 by customer
location.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1996 1997 1998
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Europe, Middle East and Africa.............................. E21,469 E30,523 E39,782
North America............................................... 1,023 3,344 6,770
Asia/Pacific................................................ 1,214 1,814 3,201
------- ------- -------
Total.................................................. E23,706 E35,681 E49,753
======= ======= =======
</TABLE>
As of December 31, 1998, FICS had an accumulated deficit of E16.5 million.
Currency and Exchange Rates
As a result of its multinational operations, FICS's operating results are
subject to significant fluctuations based upon changes in the exchange rates of
certain currencies, particularly the euro in relation to the U.S. dollar. Its
operations in Europe generate revenues denominated primarily in euro. Revenues
in North America and in the Asia/Pacific region are denominated to a large
extent in U.S. dollars. Fluctuations in the value of the U.S. dollar relative to
the euro could harm FICS's business.
The majority of its expenses are denominated in euro. Some of FICS's
subsidiaries use a functional currency other than euro, namely the currency of
the country in which the subsidiary is located. FICS's consolidated financial
statements reflect a translation from the functional currencies of such
operating subsidiaries into euro, its reporting currency, using the current rate
method. Accordingly, monetary assets and liabilities are translated at exchange
rates in effect at the end of the reporting period, and revenues and expenses
are translated at the average exchange rate during the period. The adjustment
resulting from translating the financial statements of such subsidiaries is
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<PAGE> 64
reflected as a separate component of stockholders' equity. Transaction gains or
losses are reported in results of operations. Fluctuations in the U.S. dollar
and other currencies relative to the euro will affect period-to-period
comparisons of its reported results of operations.
FICS entered into option contracts during 1996 and 1997 to manage its
foreign currency exposure, principally resulting from exchange rate fluctuations
of the U.S. dollar compared to the Belgian franc. Since 1997, FICS has not
entered into any other hedging transactions. FICS may, however, enter into
hedging contracts in the future. Its decision not to enter into hedging
transactions has been primarily attributable to:
- its perception of the strength of the U.S. dollar compared to the euro;
and
- its receipt of substantial sums of Belgian francs (and currencies which
are historically stable against the Belgian franc) from revenues
particularly under its agreements with ABN AMRO Bank (which paid us in
Dutch guilders) and Banksys (which paid us in Belgian francs).
Exchange rate fluctuations may harm its business, whether or not FICS
enters into hedging transactions.
Results of Operations
The following table presents certain consolidated statement of operations
data:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
---------------------------- -------------------
1996 1997 1998 1998 1999
------- ------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenues
Software licenses...................... E 6,267 E 6,159 E 11,001 E 1,749 E 3,610
Services............................... 17,439 29,522 38,752 9,598 9,649
------- ------- -------- ------- -------
Total revenues...................... 23,706 35,681 49,753 11,347 13,259
------- ------- -------- ------- -------
Cost of revenues
Software licenses...................... 407 397 398 64 34
Services............................... 15,651 22,268 32,038 7,771 8,179
------- ------- -------- ------- -------
Total cost of revenues.............. 16,058 22,665 32,436 7,835 8,213
------- ------- -------- ------- -------
Gross profit........................ 7,648 13,016 17,317 3,512 5,046
Operating expenses:
Sales and marketing.................... 1,603 3,762 5,401 936 2,210
Research and development............... 6,314 6,325 12,659 2,800 3,453
General and administrative............. 3,491 5,012 7,829 2,015 1,587
Stock-based compensation............... -- -- 1,241 281 153
Amortization of intangibles............ 294 890 310 1 131
------- ------- -------- ------- -------
Total operating expenses............ 11,702 15,989 27,440 6,033 7,534
------- ------- -------- ------- -------
Loss from operations..................... (4,054) (2,973) (10,123) (2,521) (2,488)
Interest and other income (expense)...... 412 (460) 109 (28) (208)
------- ------- -------- ------- -------
Loss before income taxes................. (3,642) (3,433) (10,014) (2,549) (2,696)
Income tax provision..................... 11 62 62 16 1
------- ------- -------- ------- -------
Net loss................................. E(3,653) E(3,495) E(10,076) E(2,565) E(2,697)
======= ======= ======== ======= =======
</TABLE>
54
<PAGE> 65
The following table presents certain items in FICS's consolidated statement
of operations reflected as a percentage of total revenues:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
----------------------------- -----------------
1996 1997 1998 1998 1999
----- ----- ----- ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues
Software licenses......................... 26.4% 17.3% 22.1% 15.4% 27.2%
Services.................................. 73.6 82.7 77.9 84.6 72.8
----- ----- ----- ----- -----
Total revenues......................... 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- -----
Cost of revenues Software licenses.......... 1.7 1.1 0.8 0.6 0.3
Services.................................. 66.0 62.4 64.4 68.5 61.7
----- ----- ----- ----- -----
Total cost of revenues................. 67.7 63.5 65.2 69.1 62.0
----- ----- ----- ----- -----
Gross profit........................... 32.3 36.5 34.8 30.9 38.0
Operating expenses:
Sales and marketing....................... 6.8 10.5 10.9 8.2 16.7
Research and development.................. 26.6 17.7 25.4 24.7 26.0
General and administrative................ 14.7 14.0 15.7 17.8 12.0
Stock-based compensation.................. -- -- 2.5 2.5 1.1
Amortization of intangibles............... 1.2 2.5 0.6 0.0 1.0
----- ----- ----- ----- -----
Total operating expenses............... 49.3 44.7 55.1 53.2 56.8
----- ----- ----- ----- -----
Loss from operations........................ (17.1) (8.2) (20.3) (22.3) (18.8)
Interest and other income (expense)......... 1.7 (1.3) 0.2 (0.2) (1.5)
----- ----- ----- ----- -----
Loss before income taxes.................... (15.4) (9.5) (20.1) (22.5) (20.3)
Income tax provision........................ 0.0 (0.2) (0.1) (0.1) 0
----- ----- ----- ----- -----
Net loss.................................... (15.4)% (9.7)% (20.2)% (22.6)% (20.3)%
===== ===== ===== ===== =====
</TABLE>
YEARS ENDED DECEMBER 31, 1997 AND 1998
Revenues
Total revenues, which consist of software license and service revenues,
increased 39.5%, from E35.7 million in 1997 to E49.8 million in 1998. Total
revenues for Electronic Services Delivery products increased 39.6%, from E27.0
million in 1997 to E37.7 million in 1998, and total revenues for Financial
Reporting Systems products increased 37.9%, from E8.7 million in 1997 to E12.0
million in 1998. ABN AMRO Bank accounted for 19.6% of its total revenues in 1997
and 28.8% of its total revenues in 1998. No other single customer accounted for
more than 10% of FICS's revenues in 1997 or 1998.
Software license revenues consist of license revenues of Electronic
Services Delivery products and Financial Reporting Systems products. Software
license revenues increased 77.4%, from E6.2 million in 1997 to E11.0 million in
1998. The increase in software license revenues was primarily attributable to
the introduction of FICS's Corporate Internet Banking product and new versions
of its other products. Software license revenues from its Electronic Services
Delivery products increased from E3.1 million in 1997 to E6.8 million in 1998
and increased as a percentage of total revenues from 8.8% in 1997 to 13.6% in
1998.
55
<PAGE> 66
Service revenues consist of customization, enhancement, maintenance,
consulting and training services. Service revenues increased 31.5%, from E29.5
million in 1997 to E38.8 million in 1998. Of this increase, E7.1 million was due
to increases in services related to its Electronic Services Delivery products
and E2.1 million was due to increases in services related to its Financial
Reporting Systems products. The increase in service revenues in absolute terms,
but decrease as a percentage of total revenues, reflects an increase in its
software license revenues and the overall growth of its installed base of
customers during these periods. Service revenues from Electronic Services
Delivery products increased from E23.8 million in 1997 to E31.0 million in 1998
and decreased as a percentage of total revenues from 66.8% in 1997 to 62.2% in
1998. Service revenues in 1998 include E2.0 million in non-recurring revenues
related to the sub-license of third party software.
Revenues outside of Europe, the Middle East and Africa increased 92.3% from
E5.2 million in 1997 to E10.0 million in 1998. Revenues in North America
increased from E3.3 million in 1997 to E6.8 million in 1998. The increase in
non-European revenues resulted from its investment in direct sales channels,
primarily in North America, Australia and Singapore, in 1998.
Cost of Revenues
Cost of license revenues
Cost of license revenues consists primarily of the cost of product media,
duplication and manuals. Cost of license revenues remained essentially the same,
E397,000 in 1997 and E398,000 in 1998. Cost of license revenues as a percentage
of total revenues was negligible in both 1997 and 1998.
Cost of service revenues
Cost of service revenues consists of personnel and third-party service
provider costs related to customization, enhancement, maintenance, consulting
and training. Cost of service revenues increased 43.5%, from E22.3 million in
1997 to E32.0 million in 1998. This increase resulted primarily from the cost of
hiring, training and compensating personnel to support its growing customer
base. Cost of service revenues as a percentage of total revenues was 62.4% in
1997 and 64.4% in 1998. The cost of service revenues as a percentage of total
revenues may vary between periods for two reasons: (a) the services FICS
provides (customization, enhancement, maintenance, consulting and training
services) have different cost and pricing structures, and (b) the resources FICS
uses to deliver these services (internal versus third parties). The increase in
cost of service revenues as a percentage of service revenues reflected the
execution of low-margin service contracts to extend or strengthen present
customer relationships, provisions to cover potential losses on certain existing
contracts, and the early termination of a contract to customize third-party
software. In addition, cost of service revenues in 1998 includes E1.8 million in
non-recurring fees related to the sub-license of third-party software.
Operating Expenses
Sales and marketing
Sales and marketing expenses consist primarily of salaries, commissions and
bonuses earned by sales and marketing personnel, travel and promotional expenses
and facility and communication costs for direct sales offices. Sales and
marketing expenses increased 42.1%, from E3.8 million in 1997 to E5.4 million in
1998. This increase was attributable to salaries and benefits for additional
sales and marketing personnel and salary increases for existing personnel, and
other costs associated with the expansion of its worldwide sales and marketing
organization.
Sales and marketing expenses represented 10.5% of its total revenues in
1997 and 10.9% in 1998.
56
<PAGE> 67
Research and development
FICS's research and development expenses consist primarily of salaries,
benefits and equipment for software developers, quality assurance personnel,
program managers and technical writers and payments to outside contractors.
Research and development expenses increased from E6.3 million in 1997 to E12.7
million in 1998. This increase was due to an increase in the number of
development personnel, salary increases for existing personnel and an increase
in the use of outside contractors to support its product development and testing
activities. Research and development costs represented 17.7% of its total
revenues in 1997 and 25.4% in 1998. The increase in research and development
expenses as a percentage of total revenues reflects primarily the increased
investment in its research and development activities necessary to complete its
internet-enabled Electronic Services Delivery products.
General and administrative
FICS's general and administrative expenses consist primarily of salaries,
benefits and related costs for executive, finance, human resources,
administrative and information services personnel and professional services
fees. General and administrative expenses increased 56.0%, from E5.0 million in
1997 to E7.8 million in 1998. The increase primarily resulted from the opening
of new offices in the United Kingdom, Singapore and Australia. The remaining
increase resulted from the addition of finance, executive and administrative
personnel to support the growth of its business, salary increases for existing
personnel, an increase in professional services fees and other administrative
expenses. General and administrative costs represented 14.0% of its total
revenues in 1997 and 15.7% in 1998.
Stock-based compensation
FICS recorded deferred stock-based compensation of E2.2 million in 1998,
representing the difference between the exercise prices of options granted to
acquire shares of common stock during 1998 and the deemed fair market value for
financial reporting purposes of its common stock on the grant dates. FICS
amortized stock-based compensation expense of E1.2 million during 1998. Deferred
stock-based compensation is amortized over the vesting periods of the options.
Amortization of the deferred stock-based compensation balance of E987,000 at
December 31, 1998 will be approximately E611,000, E280,000 and E63,000 for 1999,
2000 and 2001, respectively.
Amortization of intangibles
Amortization of intangibles decreased 65.2% from E890,000 in 1997 to
E310,000 in 1998. In 1997, FICS incurred a charge of E590,000 to reflect a
write-down of intangible assets associated with acquisitions made in prior
years. In 1998, FICS incurred a charge of E302,000 to reflect a write-down in
intangible assets associated with the acquisition of HAL5 S.A. and Open Systems
Interconnection Ingenierie S.A. in December 1998. FICS periodically evaluates
intangibles to assess recoverability and any permanent impairments are charged
to operating results.
Interest and other income (expense)
FICS had interest and other expense of E460,000 in 1997 and interest and
other income of E109,000 in 1998. The change from an expense position to an
income position resulted primarily from E528,000 in other income related to
foreign currency exchange gain not fully offset by E509,000 in interest expense
associated with increased average borrowings to fund operations.
Income tax provision
FICS incurred operating losses in 1997 and 1998 and therefore did not incur
any income tax obligations in Belgium for such periods. Its income tax
provisions of E62,000 in each of 1997 and
57
<PAGE> 68
1998 resulted principally from its foreign operations and withholding tax on
interest income. See note 9 of notes to FICS's consolidated financial
statements.
YEARS ENDED DECEMBER 31, 1996 AND 1997
Revenues
Total revenues increased 50.6%, from E23.7 million in 1996 to E35.7 million
in 1997. Total revenues from Electronic Services Delivery products increased
63.6%, from E16.5 million in 1996 to E27.0 million in 1997 and total revenues
from Financial Reporting Systems products increased 20.8%, from E7.2 million in
1996 to E8.7 million in 1997. ABN AMRO Bank accounted for 22.8% of total
revenues in 1996 and 19.6% of total revenues in 1997. No other single customer
accounted for more than 10% of total revenues in 1996 or 1997.
Software license revenues decreased 1.6%, from E6.3 million in 1996 to E6.2
million in 1997. Software license revenues from Electronic Services Delivery
products were E3.1 million in 1996 and 1997 and decreased as a percentage of
total revenues from 13.1% in 1996 to 8.8% in 1997. This decrease primarily
resulted from higher service revenues as a result of services performed on
customer specified projects in 1997 that did not generate software license
revenues and its preparation in 1997 for future product releases, including the
release of its internet-enabled products in 1998.
Service revenues increased 69.5%, from E17.4 million in 1996 to E29.5
million in 1997. The increase in service revenues reflects an increase in its
software application sales and the overall growth of its installed base of
customers during these periods. Service revenues represented 73.6% of its total
revenues in 1996 and 82.7% in 1997.
Revenues outside of Europe, the Middle East and Africa totaled E2.2 million
in 1996 and E5.2 million in 1997. Revenues in North America increased from E1.0
million in 1996 to E3.3 million in 1997. Principally, this increase resulted
from its commencement of marketing of its Electronic Services Delivery products
in mid-1996. The increase in non-European revenues resulted from its investment
in direct and indirect sales channels, primarily in North America, Australia and
Singapore, in 1997.
Cost of Revenues
Cost of license revenues
Cost of license revenues decreased 2.5%, from E407,000 in 1996 to E397,000
in 1997. Cost of license revenues as a percentage of total revenues was
negligible in both 1996 and 1997.
Cost of service revenues
Cost of service revenues increased 42.0%, from E15.7 million in 1996 to
E22.3 million in 1997. The increase was the result of additional costs
associated with hiring and training consulting, support and training personnel
to support its growing customer base and salary increases for existing
personnel. Cost of service revenues as a percentage of total revenues was 66.0%
in 1996 and 62.4% in 1997. The decrease in cost of service revenues as a
percentage of total revenues reflected increased levels of higher-margin
maintenance revenues and higher-margin consulting services.
Operating Expenses
Sales and marketing
Sales and marketing expenses increased from E1.6 million in 1996 to E3.8
million in 1997. This increase was attributable to the expansion of its
worldwide sales and marketing organization, including increased salaries and
benefits for additional sales and marketing personnel and salary increases for
58
<PAGE> 69
existing personnel, higher sales commissions and bonuses associated with
increased revenues, additional facility and communication costs associated with
opening and expanding offices domestically and internationally, and increased
marketing and promotional activities. Sales and marketing expenses represented
6.8% of its total revenues in 1996 and 10.5% in 1997. The increase in sales and
marketing expenses in absolute terms and as a percentage of total revenues
reflects primarily the significant investment in its sales and marketing
infrastructure compared to the growth of its revenues.
Research and development
Research and development expenses were E6.3 million in 1996 and 1997.
Research and development costs represented 26.6% of its total revenues in 1996
and 17.7% in 1997. The decrease in research and development expenses as a
percentage of total revenues reflects significant research and development
expenses in 1996 associated with the development and introduction of initial
versions of the Corporate Banking for Windows products, including consulting
charges of third-party consultants, and the decline in 1997 of third-party
consulting charges as FICS replaced third-party consultants with its employees.
General and administrative
General and administrative expenses increased 42.9%, from E3.5 million in
1996 to E5.0 million in 1997. This increase resulted from the addition of
finance, executive and administrative personnel to support the growth of its
business during these periods. General and administrative costs represented
14.7% of its total revenues in 1996 and 14.0% in 1997.
Amortization of intangibles
Amortization of intangibles increased from E294,000 in 1996 to E890,000 in
1997. The increase resulted primarily from a charge of E590,000 in 1997 to
reflect a write-down of intangible assets associated with acquisitions made in
prior years.
Interest and other income (expense)
FICS had interest and other income of E412,000 in 1996 and interest and
other expense of E460,000 in 1997. The decrease resulted primarily from foreign
currency exchange losses.
Income tax provision
FICS incurred operating losses in 1996 and 1997 and therefore did not incur
any income tax obligations in Belgium for such periods. Its income tax provision
of E11,000 in 1996 and E62,000 in 1997 resulted principally from its foreign
operations and withholding tax on interest income. See note 9 of notes to FICS's
consolidated financial statements.
THREE MONTHS ENDED MARCH 31, 1998 AND 1999
Revenues
Total revenues increased by 17% over the prior year period. Software
license revenues increased by 106% over the prior year period as a result of the
introduction of FICS's Corporate Internet Banking product and new versions of
its other products. Service revenues increased slightly over the prior year
period as a result of increases in services related to its products. Total
revenues from Electric Services Delivery products increased 15% from E8.5
million in the first quarter of 1998 compared to E9.8 million in the first
quarter of 1999. This was due to a significant increase in software license
revenue of 246% over the prior year period. Services revenue from Electronic
59
<PAGE> 70
Services Delivery products declined by 7% against the prior year period. The
first quarter of 1999 included no non-recurring revenues related to the sale of
third-party software, compared to E2.0 million for the prior year period. Total
revenues from Financial Reporting Systems increased 22% due to growth in
services revenues for maintenance and implementation services. Software license
revenue from Financial Reporting Systems increased by 3% over the prior year
quarter to E1.0 million for the quarter ended March 31, 1999.
Cost of Revenues
Cost of license revenues
FICS's cost of license revenues were higher in the first quarter of 1999
compared to 1998 as a result of increased costs of product media, duplication
and manuals attributable to the introduction of its Corporate Internet Banking
product and new versions of its other products.
Cost of service revenues
FICS's cost of service revenues increased in the first quarter of 1998 as a
result of increased hiring, training and compensating personnel to support
FICS's growing customer base. These rapid increases, coupled with slower growth
in net revenues from the first to second quarters in 1998, caused its total cost
of revenues to peak at 71.5% of total revenues in the second quarter of 1998.
Thereafter, the increase in software license revenues in the third quarter of
1998 and the partially fixed nature of certain components of total cost of
revenues caused total cost of revenues to decline to 62% in the first quarter of
1999.
Operating Expenses
Sales and marketing
Sales and marketing expenses have generally been increasing over the
quarters presented as a result of salaries and benefits for additional sales and
marketing personnel, and other costs associated with the expansions of its
worldwide sales and marketing organization. Sales and marketing expenses for the
first quarter of 1999 increased by E1.3 million (136%) over the prior year
quarter due to continuing expansion.
Research and development
Research and development expenses have generally increased each quarter,
due primarily to an increase in the number of development personnel, salary
increases for existing personnel and an increase in the use of outside
contractors to support product development and testing activities. Research and
development expenses for the first quarter of 1999 increased by E0.7 million
(23%) over the prior year period due to increased development.
General and administrative
General and administrative expenses decreased in absolute terms and as a
percentage of total revenues from the first quarter of 1999 compared to 1998.
The decrease primarily resulted from the effect of costs of opening new offices
in the United Kingdom, Singapore and Australia in the first quarter of 1998.
Stock-based compensation
FICS recorded stock-based compensation in each quarter from the first
quarter of 1998 through the first quarter of 1999 in connection with the grant
of certain stock options in the first quarter of 1998.
60
<PAGE> 71
Amortization of intangibles
Amortization of intangibles in the first quarter of 1999 reflected the
amortization of intangible assets associated with the acquisitions of HAL5 S.A.
and Open Systems Interconnection Ingenierie S.A. in December 1998.
Interest and other income (expense)
FICS had interest expense in both the first quarter of 1999 and 1998
amounting to E95,000 and E28,000, respectively. FICS's other income (expense)
fluctuates as a result of gains or losses relating to changes in foreign
currency exchange rates.
Income tax provision
FICS incurred operating losses in 1997 and 1998 and therefore did not incur
any income tax obligations in Belgium for such periods. FICS's income tax
provision in the quarters presented resulted principally from its foreign
operations and withholding tax on interest income.
FICS Quarterly Results of Operations
The following table presents FICS's unaudited quarterly results of
operations for the nine quarters ended March 31, 1999. You should read the
following table in conjunction with FICS's consolidated financial statements and
related notes thereto included elsewhere in this prospectus/ proxy statement.
FICS has prepared this unaudited information on the same basis as its audited
consolidated financial statements. This table includes all adjustments,
consisting only of normal recurring adjustments, that FICS considers necessary
for a fair presentation of its financial position and operating results for the
quarters presented.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1997 1997 1997 1997 1998 1998 1998 1998 1999
-------- -------- --------- -------- -------- -------- --------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues
Software licenses........ E1,365 E1,768 E1,646 E 1,380 E 1,749 E 1,607 E 3,665 E 3,980 E 3,610
Services................. 6,042 7,257 7,901 8,322 9,598 9,952 9,621 9,581 9,649
------ ------ ------ ------- ------- ------- ------- ------- -------
Total revenues......... 7,407 9,025 9,547 9,702 11,347 11,559 13,286 13,561 13,259
------ ------ ------ ------- ------- ------- ------- ------- -------
Cost of revenues
Software licenses........ 88 114 106 89 64 60 131 143 34
Services................. 5,095 5,808 5,568 5,797 7,771 8,210 8,081 7,976 8,179
------ ------ ------ ------- ------- ------- ------- ------- -------
Total cost of
revenues............. 5,183 5,922 5,674 5,886 7,835 8,270 8,212 8,119 8,213
------ ------ ------ ------- ------- ------- ------- ------- -------
Gross profit............... 2,224 3,103 3,873 3,816 3,512 3,289 5,074 5,442 5,046
Operating expenses:
Sales and marketing...... 702 709 1,057 1,294 936 1,366 1,311 1,788 2,210
Research and
development............ 961 1,263 1,941 2,160 2,800 3,220 3,425 3,214 3,453
General and
administrative......... 892 1,158 1,290 1,672 2,015 2,053 2,000 1,761 1,587
Stock-based
compensation........... -- -- -- -- 281 281 281 398 153
Amortization of
intangibles............ 224 226 226 214 1 2 2 305 131
------ ------ ------ ------- ------- ------- ------- ------- -------
Total operating
expenses............. 2,779 3,356 4,514 5,340 6,033 6,922 7,019 7,466 7,534
------ ------ ------ ------- ------- ------- ------- ------- -------
Loss from operations....... (555) (253) (641) (1,524) (2,521) (3,633) (1,945) (2,024) (2,488)
Interest and other income
(expense), net........... (168) (88) (89) (115) (28) (101) (26) 264 (208)
------ ------ ------ ------- ------- ------- ------- ------- -------
Loss before income taxes... (723) (341) (730) (1,639) (2,549) (3,734) (1,971) (1,760) (2,696)
Income tax provision....... 13 6 13 30 16 24 24 (2) 1
------ ------ ------ ------- ------- ------- ------- ------- -------
Net loss............... E (736) E (347) E (743) E(1,669) E(2,565) E(3,758) E(1,995) E(1,758) E(2,697)
====== ====== ====== ======= ======= ======= ======= ======= =======
</TABLE>
61
<PAGE> 72
The following table sets forth unaudited quarterly results of operations as
a percentage of revenues for the nine quarters ended March 31, 1999.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1997 1997 1997 1997 1998 1998 1998 1998 1999
-------- -------- --------- -------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues
Software licenses.......... 18.4% 19.6% 17.2% 14.2% 15.4% 13.9% 27.6% 29.3% 27.2%
Services................... 81.6 80.4 82.8 85.8 84.6 86.1 72.4 70.7 72.8
----- ----- ----- ----- ----- ----- ----- ----- -----
Total revenues........... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- ----- ----- ----- ----- -----
Cost of revenues
Software licenses.......... 1.2 1.3 1.1 0.9 0.6 0.5 1.0 1.1 0.3
Services................... 68.8 64.4 58.3 59.8 68.5 71.0 60.8 58.8 61.7
----- ----- ----- ----- ----- ----- ----- ----- -----
Total cost of revenues... 70.0 65.7 59.4 60.7 69.1 71.5 61.8 59.9 62.0
----- ----- ----- ----- ----- ----- ----- ----- -----
Gross margin................. 30.0 34.3 40.6 39.3 30.9 28.5 38.2 40.1 38.0
Operating expenses:
Sales and marketing........ 9.5 7.9 11.1 13.3 8.2 11.8 9.9 13.2 16.7
Research and development... 13.0 14.0 20.3 22.3 24.7 27.9 25.8 23.7 26.0
General and
administrative........... 12.0 12.8 13.5 17.2 17.8 17.8 15.1 13.0 12.0
Stock-based compensation... -- -- -- -- 2.5 2.4 2.1 2.9 1.1
Amortization of
intangibles.............. 3.0 2.5 2.4 2.2 0.0 0.0 0.0 2.2 1.0
----- ----- ----- ----- ----- ----- ----- ----- -----
Total operating
expenses............... 37.5 37.2 47.3 55.0 53.2 59.9 52.9 55.0 56.8
----- ----- ----- ----- ----- ----- ----- ----- -----
Loss from operations......... (7.5) (2.9) (6.7) (15.7) (22.3) (31.4) (14.6) (14.9) (18.8)
Interest and other income
(expense).................. (2.3) (0.9) (0.9) (1.2) (0.2) (0.9) (0.2) 1.9 (1.5)
----- ----- ----- ----- ----- ----- ----- ----- -----
Loss before income taxes..... (9.8) (3.8) (7.6) (16.9) (22.5) (32.3) (14.8) (13.0) (20.3)
Income tax provision......... (0.2) (0.1) (0.1) (0.3) (0.1) (0.2) (0.2) -- 0
----- ----- ----- ----- ----- ----- ----- ----- -----
Net loss................. (10.0)% (3.9)% (7.7)% (17.2)% (22.6)% (32.5)% (15.0)% (13.0)% (20.3)%
===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
The trends discussed in the annual comparisons of operating results from
1996 to 1997 and from 1997 to 1998 generally apply to the comparison of results
of operations for the nine quarters ended March 31, 1999.
FICS has experienced limited seasonality with respect to revenues. Revenues
from services and from the licensing of software with related services is
recognized as work is performed. Consequently, a significant portion of license
revenues is not recognized upon delivery of the product even though there may be
a seasonal impact on order intake.
Liquidity and Capital Resources
Since its inception, FICS has primarily financed its operations through
private placements of its common and preferred stock and bank borrowings.
Through December 31, 1998, net proceeds from private placements of common and
preferred stock totaled E20.2 million. To a lesser extent, FICS has financed its
operations through equipment financing and traditional financing arrangements.
As of December 31, 1998, FICS had cash and cash equivalents of E3.0 million, a
decrease of E1.2 million from cash and cash equivalents held as of December 31,
1997. Its working capital at December 31, 1998 was a deficit of E721,000,
compared to working capital of E1.5 million at December 31, 1997. At March 31,
1999, FICS had cash and cash equivalents of E2.8 million and its working capital
was a deficit of E2.9 million.
FICS has a credit facility with KBC Bank of E12.7 million that is secured
by substantially all of its assets. Under the credit facility, FICS may borrow
up to E7.9 million on a short-term basis at an interest rate equal to the bank's
daily short-term interest rate, which was 3.5% as of March 31, 1999. The amount
FICS can borrow on a short-term basis will be reduced to E2.0 million on June
30,
62
<PAGE> 73
1999. As of March 31, 1999, FICS had borrowed E2.5 million on a short-term basis
under the credit facility. Under the credit facility, FICS may convert amounts
FICS have borrowed on a short-term basis to notes payable. The notes payable
bear interest at EONIA (European Overnight Interest Average) plus 0.5%, which
was 3.6% as of March 31, 1999. As of March 31, 1999, FICS had E7.3 million
outstanding in notes payable. All interest and principal outstanding under the
credit facility is due on June 30, 2002. The credit facility requires FICS to
maintain certain financial covenants, including a requirement that FICS
maintains certain financial ratios. FICS was in compliance with all financial
covenants of the credit facility at March 31, 1999.
FICS's operating activities resulted in net cash outflows of E566,000 in
1996, E2.2 million in 1997 and E10.9 million in 1998. During the three months
ended March 31, 1999, its operating activities resulted in net cash outflows of
E2.3 million. The operating cash outflows resulted primarily from operating
losses due to significant investments in sales, marketing and product
development and increases in accounts receivable due to increased revenues.
These cash outflows were partially offset by increases in accounts payable,
accrued liabilities and deferred revenues.
Average days' sales outstanding, represented by the ratio of accounts
receivable, net of deferred revenue, to total revenues, increased from 72 days
at December 31, 1997 to 110 days at December 31, 1998. This increase was due to
increased sales activity. At March 31, 1999, average days outstanding was 106
days.
Investing activities used cash of E953,000 in 1996 and E982,000 in 1997,
primarily for the purchase of capital equipment, and E3.2 million in 1998,
primarily for the purchase of capital equipment and the acquisition of HAL5 S.A.
and Open Systems Interconnection Ingenierie S.A. During the three months ended
March 31, 1999, investing activities used cash of E740,000, primarily for the
purchase of capital equipment.
Financing activities in 1996 used cash of E442,000 primarily due to the
repayment of long-term indebtedness. Financing activities provided cash of E5.1
million in 1997 and E12.8 million in 1998, primarily through the issuance of
capital stock and increased borrowings under its credit facility. During the
three months ended March 31, 1999, financing activities provided cash of E2.9
million, primarily as a result of increased borrowings under its credit
facility.
Year 2000 Considerations
The year 2000 issue is the potential for system and processing failure of
date-related data as the result of computer-controlled systems using two digits
rather than four to define the applicable year. For example, computer programs
that have time-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in system failure or
miscalculations. Such failures or miscalculations could disrupt its operations,
and, among other things, cause FICS to be temporarily unable to process
transactions, send invoices or engage in similar normal business activities.
FICS may be affected by year 2000 issues related to non-compliant
information technology systems or non-information technology systems FICS uses
internally. The computer software and hardware FICS operates represent the
primary internal elements subject to year 2000 risk. Computer software and
hardware include networking, operating and applications software that FICS
currently uses, as well as those that FICS plans to install prior to the year
2000, and the hardware platforms upon which the operating and software
applications operate.
Other internal elements subject to risk include fax machines, security
systems, heating and air conditioning systems, telephone and other
telecommunications systems, copiers and sprinklers.
FICS's plan to minimize year 2000 risks includes three phases: inventory,
assessment and implementation.
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In the inventory phase, FICS planned to identify the items within each of
the above-referenced elements. In the assessment phase, FICS plans to determine
which elements are not year 2000 compliant. FICS intends to work with a third
party consultant to test the relevant internal elements for compliance. FICS
expects to complete the assessment phase by September 30, 1999. In the
implementation phase, FICS plans to replace or repair elements that are not year
2000 compliant. FICS intends to complete this phase by the year 2000. FICS
cannot guarantee that the plan will identify or remediate its material
noncompliant systems on a timely basis, if at all. FICS's failure to
successfully execute its plan could harm its business.
FICS has substantially completed its assessment of the products FICS sells
to customers. FICS is not currently aware of any year 2000 problems relating to
products FICS sells that would have a material effect on its business, results
of operations or financial condition. However, FICS cannot assure that FICS will
not in the future identify material non-compliant products. Furthermore, if FICS
does identify any material non-compliant products, FICS cannot assure that the
steps that FICS takes will be sufficient to make such products compliant.
FICS believes that FICS has taken reasonable steps to confirm that all
third party equipment and software that FICS incorporates into its products and
software is year 2000 compliant. These steps include verbal or written
confirmation with the relevant third parties and, in some cases, internal
testing of software or products. However, FICS cannot assure that FICS will
identify material non-compliant systems operated by third parties. Furthermore,
if FICS does identify any such material non-compliant systems, FICS cannot
assure that the steps, if any, that such third parties take will be sufficient
to make such systems compliant.
Its products and software are often sold to be integrated into or interface
with third party products or software. FICS has not taken, and does not plan to
take, steps to contact customers or other third parties with whose products its
products and software may be integrated or interfaced regarding year 2000
issues.
Even if third parties such as its suppliers, service providers and
customers are year 2000 compliant, they could experience difficulties resulting
from year 2000 issues affecting other third parties with whom they do business.
Because the cost and timing of year 2000 compliance by third parties is not
within its control, FICS cannot give any assurance with respect to such efforts
or any potential adverse effects to us of any failure by third parties to
achieve year 2000 compliance. As a result, although FICS does not currently
anticipate that FICS will experience any material shipment delays from its
material product suppliers or any material sales delays from its major customers
due to year 2000 issues, such third parties may directly or indirectly
experience year 2000 problems. Any such problems may harm FICS's business.
As FICS can give no assurance as to the readiness or compliance of third
parties with respect to the year 2000, FICS has completed a contingency plan to
address operating issues in the event that any of its material suppliers,
service providers or customers fails to perform as a result of the year 2000.
Its failure to successfully implement the contingency plan could harm its
business.
FICS has not incurred in the past, and does not expect to incur in the
future, material expenses in connection with the year 2000 issue. FICS may,
however, be incorrect in its assessment of the year 2000 impact upon its
business. In the case of an incorrect assessment, FICS may incur material
expenses in connection with the year 2000 issue in the future.
To the extent that FICS fails to identify material noncompliant information
technology systems or non-information technology systems that FICS operates or
that third parties operate, the most reasonably likely worst case year 2000
scenario is a systemic failure beyond its control. A systemic failure could take
the form of a prolonged telecommunications or electrical failure, or a general
disruption in global business activities.
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FICS believes that the primary business risks, in the event of such failure
or other disruption, would include, but not be limited to:
- loss of customers or orders;
- increased operating costs;
- disruptions in product and services deliveries; and
- other business interruptions of a material nature such as claims of
mismanagement, misrepresentation, or breach of contract.
Any of these business risks could harm FICS's business.
THE FICS TRANSACTION
This section of the prospectus/proxy statement describes certain aspects of
the proposed transaction with FICS. While we believe that the description covers
the material terms of the transaction and the related transactions, this summary
may not contain all of the information that is important to you. You should read
this entire document and the other documents we refer to carefully for a more
complete understanding of the transaction. In addition, we incorporate important
business and financial information about each of us into this prospectus/proxy
statement by reference. See "Documents Incorporated by Reference in This
Prospectus/Proxy Statement" on page . You may obtain the information
incorporated by reference into this prospectus/proxy statement without charge by
following the instructions in the section entitled "Where You Can Find More
Information" on page .
S1'S REASONS FOR THE FICS TRANSACTION
At a meeting held on May 16, 1999, the board of directors of S1 concluded
that the FICS Transaction was in the best interests of S1 and its stockholders
and determined to recommend that the stockholders approve the stockholder
proposals relating to the FICS Transaction.
In its evaluation of the FICS Transaction, the S1 board reviewed several
factors. The material factors are summarized as follows:
- historical information concerning S1's and FICS's respective businesses,
financial performance and condition, operations, technology and
management, including reports concerning results of operations during the
most recent fiscal year and fiscal quarter for each company filed with
the SEC;
- S1 management's view of the financial condition, results of operations
and businesses of S1 and FICS before and after giving effect to the FICS
Transaction and the S1 board's determination of the FICS Transaction's
effect on stockholder value;
- current financial market conditions and historical market prices,
volatility and trading information;
- the consideration FICS stockholders will receive in the FICS Transaction
in light of comparable transactions;
- the opinion of BancBoston Robertson Stephens that, as of the date of its
opinion and subject to the considerations described in the opinion, the
exchange consideration in the FICS Transaction is fair from a financial
point of view to S1;
- S1 management's belief that the terms of the stock purchase agreements
are reasonable;
- the impact of the FICS Transaction on S1's customers and employees;
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- reports from management, legal, financial and accounting advisors as to
the results of the due diligence investigation of FICS; and
- the expectation that the FICS Transaction will be accounted for as a
purchase.
The S1 board also identified and considered a number of potentially
negative factors in its deliberations concerning the FICS Transaction including
the following:
- the risk that the potential benefits of the FICS Transaction may not be
realized;
- the possibility that the FICS Transaction may not be consummated, even if
approved by S1's stockholders;
- the effect of the public announcement of the FICS Transaction on FICS's
current and potential business;
- the risk of management and employee disruption associated with the FICS
Transaction, including the risk that despite the efforts of the combined
company, key technical, sales and management personnel might not remain
employed by the combined company;
- the risk that the FICS Transaction could adversely affect S1's
relationship with certain of its customers and strategic partners; and
- other applicable risks described in this prospectus/proxy statement under
"Risk Factors."
The board concluded however, that, on balance, the potential benefits to S1
and its stockholders of the FICS Transaction outweighed the risks associated
with the FICS Transaction.
The discussion of the information and factors considered by the S1 board is
not intended to be exhaustive. In view of the variety of factors considered in
connection with its evaluation of the FICS Transaction, the S1 board did not
find it practicable to, and did not quantify or otherwise assign relative weight
to, the specific factors considered in reaching its determination.
RECOMMENDATION OF S1'S BOARD OF DIRECTORS
AFTER CAREFUL CONSIDERATION, THE S1 BOARD OF DIRECTORS HAS DETERMINED THE
FICS AGREEMENTS AND THE FICS TRANSACTION TO BE FAIR TO AND IN THE BEST INTERESTS
OF THE S1 STOCKHOLDERS. IN CONNECTION WITH THE FICS TRANSACTION, S1'S BOARD OF
DIRECTORS RECOMMENDS APPROVAL OF THE ISSUANCE OF SHARES OF S1 COMMON STOCK IN
THE FICS TRANSACTION AS DESCRIBED IN THIS PROSPECTUS/PROXY STATEMENT.
In considering the recommendation of the S1 board of directors with respect
to the FICS Transaction, you should be aware that certain directors and officers
of S1 have certain interests in the FICS Transaction that are different from, or
are in addition to, the interests of S1 stockholders generally. Please see the
section entitled "The FICS Transaction -- Interests of Certain Persons in the
FICS Transaction" on page .
OPINION OF S1'S FINANCIAL ADVISOR
Pursuant to an engagement letter dated February 24, 1999, as amended on May
28, 1999, S1 engaged BancBoston Robertson Stephens Inc. to, among other things,
render an opinion as to the fairness of the exchange consideration in the FICS
Transaction, from a financial point of view, to S1. For purposes of the
BancBoston Robertson Stephens opinion and the summary of the opinion set in this
section, the exchange consideration in the FICS Transaction refers to the number
of shares of S1 common stock to be issued in the FICS Transaction. Based upon
the closing price of shares of S1 common stock on May 14, 1999, BancBoston
Robertson Stephens noted that the exchange consideration in the FICS Transaction
implied an equity valuation for FICS of approximately $1,080 million and an
exchange ratio per FICS share of approximately 126.709.
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On May 16, 1999 at a meeting of the S1 board held to evaluate the proposed
FICS Transaction, BancBoston Robertson Stephens delivered to the S1 board its
oral opinion, which was subsequently confirmed as a written opinion dated May
16, 1999, that, as of the date of such opinion and based on the assumptions
made, the matters considered and the limitations on the review undertaken
described in the opinion, the exchange consideration in the FICS Transaction was
fair to S1 from a financial point of view. No limitations were imposed by the S1
board on BancBoston Robertson Stephens with respect to the investigations made
or procedures followed by it in furnishing its opinion. The exchange
consideration in the FICS Transaction was determined through negotiations
between the respective managements of S1 and FICS. Although BancBoston Robertson
Stephens did assist the management of S1 in those negotiations, it was not asked
by, and did not recommend to, S1 that any specific exchange consideration
constituted the appropriate exchange consideration for the FICS Transaction.
BancBoston Robertson Stephens also assisted S1's management in the negotiations
leading to an agreement on principal structural terms of the transaction.
THE FULL TEXT OF THE BANCBOSTON ROBERTSON STEPHENS OPINION, WHICH SETS
FORTH, AMONG OTHER THINGS, ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS
ON THE REVIEW UNDERTAKEN, IS ATTACHED AS ANNEX B AND IS INCORPORATED IN THIS
PROSPECTUS/PROXY STATEMENT BY REFERENCE. STOCKHOLDERS OF S1 ARE URGED TO READ
THE BANCBOSTON ROBERTSON STEPHENS OPINION IN ITS ENTIRETY. THE BANCBOSTON
ROBERTSON STEPHENS OPINION WAS PREPARED FOR THE BENEFIT AND USE OF THE S1 BOARD
IN ITS CONSIDERATION OF THE FICS TRANSACTION AND DOES NOT CONSTITUTE A
RECOMMENDATION TO STOCKHOLDERS OF S1 AS TO HOW THEY SHOULD VOTE UPON, OR TAKE
ANY OTHER ACTION WITH RESPECT TO, THE FICS TRANSACTION. THE BANCBOSTON ROBERTSON
STEPHENS OPINION DOES NOT ADDRESS:
- THE RELATIVE MERITS OF THE FICS TRANSACTION AND THE OTHER BUSINESS
STRATEGIES THAT THE S1 BOARD HAS CONSIDERED OR MAY BE CONSIDERING; OR
- THE UNDERLYING BUSINESS DECISION OF THE S1 BOARD TO PROCEED WITH THE FICS
TRANSACTION.
THE SUMMARY OF THE BANCBOSTON ROBERTSON STEPHENS OPINION SET FORTH IN THIS
PROSPECTUS/PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXT OF THE BANCBOSTON ROBERTSON STEPHENS OPINION.
In connection with the preparation of the BancBoston Robertson Stephens
opinion, BancBoston Robertson Stephens, among other things:
- reviewed certain publicly available financial statements and other
business and financial information of S1;
- reviewed certain internal financial statements and other financial and
operating data concerning S1 and FICS, including information relating to
certain strategic, financial and operational benefits anticipated from
the FICS Transaction, prepared by the managements of S1 and FICS;
- reviewed certain financial forecasts and other forward looking financial
information prepared by the managements of S1 and FICS, respectively;
- held discussions with the respective managements of S1 and FICS
concerning the businesses, past and current operations, financial
condition and future prospects of S1 and FICS, independently and
combined, including discussions with the managements of S1 and FICS
concerning cost savings and other synergies that are expected to result
from the FICS Transaction, as well as their views regarding the strategic
rationale for the transaction;
- reviewed the financial terms and conditions set forth in the FICS
transaction agreements;
- reviewed the stock price and trading history of S1 common stock;
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- compared the financial performance of S1 and FICS and the prices and
trading activity of S1 common stock with that of certain other publicly
traded companies comparable with S1 and FICS, respectively;
- compared the financial terms of the FICS Transaction with the financial
terms, to the extent publicly available, of other transactions BancBoston
Robertson Stephens deemed relevant;
- reviewed the pro forma impact of the transaction on S1's earnings per
share;
- reviewed and considered in the analysis information prepared by members
of management of S1 and FICS relating to the relative contributions of S1
and FICS to the combined company;
- prepared a discounted cash flow analysis of FICS;
- participated in discussions and negotiations among representatives of S1
and FICS and their financial and legal advisors; and
- made such other studies and inquiries, and reviewed such other data and
performed such other analyses, as BancBoston Robertson Stephens deemed
relevant.
In its review and analysis, and in arriving at its opinion, BancBoston
Robertson Stephens considered that S1 was also entering into the Edify merger
agreement providing for the Edify Transaction. S1 informed BancBoston Robertson
Stephens that the Edify Transaction could occur at approximately the same time
as the FICS Transaction, but that neither the FICS Transaction nor the Edify
Transaction was contingent upon the other occurring. As a result, BancBoston
Robertson Stephens conducted certain pro forma analyses as if the FICS
Transaction and the Edify Transaction were both consummated, based upon the
information that was provided to BancBoston Robertson Stephens and reviewed by
it related to Edify, and also as if the FICS Transaction was consummated and the
Edify Transaction was not consummated.
In its review and analysis, and in arriving at its opinion, BancBoston
Robertson Stephens assumed and relied upon the accuracy and completeness of all
of the financial and other information provided to it, including information
furnished to it orally or otherwise discussed with it by management of S1, FICS
and Edify, or publicly available and neither attempted to verify, nor assumed
responsibility for verifying, any of such information. BancBoston Robertson
Stephens relied upon the assurances of management of S1, FICS and Edify that
they were not aware of any facts that would make such information inaccurate or
misleading. Furthermore, BancBoston Robertson Stephens did not obtain or make,
or assume any responsibility for obtaining or making, any independent evaluation
or appraisal of the properties, assets or liabilities, contingent or otherwise,
of S1, FICS or Edify, nor was BancBoston Robertson Stephens furnished with any
such evaluation or appraisal.
With respect to the financial forecasts and projections, and the
assumptions and the bases therefor, for each of S1, FICS and Edify that
BancBoston Robertson Stephens reviewed, upon the advice of the managements of
S1, FICS and Edify, BancBoston Robertson Stephens assumed that such forecasts
and projections:
- had been reasonably prepared in good faith on the basis of reasonable
assumptions;
- reflected the best available estimates and judgments as to the future
financial condition and performance of S1, FICS and Edify, respectively;
and
- will be realized in the amounts and in the time periods currently
estimated by the respective managements of S1, FICS and Edify.
In this regard, BancBoston Robertson Stephens noted that each of S1, FICS
and Edify face exposure to the Year 2000 problem. BancBoston Robertson Stephens
did not undertake any
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independent analysis to evaluate the reliability or accuracy of the assumptions
made by the managements of S1, FICS and Edify with respect to the potential
effect that the Year 2000 problem might have on their respective forecasts.
In addition, BancBoston Robertson Stephens assumed that:
- the FICS Transaction will be consummated in accordance with the terms set
forth in the FICS transaction agreements, including, among other things,
that the FICS Transaction will be accounted for as a "purchase" business
combination in accordance with U.S. generally accepted accounting
principles, or "GAAP;"
- the Edify Transaction will be consummated in accordance with the terms
set forth in the Edify merger agreement, including that the Edify
Transaction will be accounted for as a "purchase" business combination in
accordance with GAAP;
- each of the FICS Transaction and the Edify Transaction will be treated as
a tax-free reorganization pursuant to the Internal Revenue Code of 1986,
as amended; and
- the historical financial statements of each of S1, FICS and Edify
reviewed by it have been prepared and fairly presented in accordance with
GAAP consistently applied.
BancBoston Robertson Stephens relied as to all legal matters relevant to
rendering its opinion on the advice of counsel.
Although developments following the date of the BancBoston Robertson
Stephens opinion may affect the opinion, BancBoston Robertson Stephens assumed
no obligation to update, revise or reaffirm its opinion. The BancBoston
Robertson Stephens opinion is necessarily based upon financial, market, economic
and other conditions as in effect on, and information made available to
BancBoston Robertson Stephens as of, the date of the BancBoston Robertson
Stephens opinion. It should be understood that subsequent developments may
affect the conclusion expressed in the BancBoston Robertson Stephens opinion and
that BancBoston Robertson Stephens disclaims any undertaking or obligation to
advise any person of any change in any matter affecting the opinion which may
come or be brought to its attention after the date of the opinion. The
BancBoston Robertson Stephens opinion is limited to the fairness, from a
financial point of view and as of the date thereof, of the exchange
consideration to S1. BancBoston Robertson Stephens does not express any opinion
as to:
- the value of any employee agreements or other employee arrangements
entered into in connection with the FICS Transaction;
- any tax or other consequences that might result from the FICS
Transaction; or
- what the value of S1 common stock will be when issued to FICS'
stockholders pursuant to the FICS Transaction or the price at which the
shares of S1 common stock that are issued pursuant to the FICS
Transaction may be traded in the future.
The following is a summary of the material financial analyses performed by
BancBoston Robertson Stephens in connection with rendering the BancBoston
Robertson Stephens opinion. The following summary of the financial analyses is
not a complete description of all of the analyses performed by BancBoston
Robertson Stephens. Certain of the information in this section is presented in a
tabular form. IN ORDER TO BETTER UNDERSTAND THE FINANCIAL ANALYSIS PERFORMED BY
BANCBOSTON ROBERTSON STEPHENS, THESE TABLES MUST BE READ TOGETHER WITH THE TEXT
OF EACH SUMMARY. THE BANCBOSTON ROBERTSON STEPHENS OPINION IS BASED UPON THE
TOTALITY OF THE VARIOUS ANALYSES PERFORMED BY BANCBOSTON ROBERTSON STEPHENS AND
NO PARTICULAR PORTION OF THE ANALYSES HAS ANY MERIT STANDING ALONE.
CONTRIBUTION ANALYSIS. Based upon S1 management estimates for S1 and FICS
management estimates for FICS, BancBoston Robertson Stephens analyzed the
respective contributions of S1 and
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FICS to the estimated revenues of the combined company for fiscal years 1999,
2000 and 2001, without giving effect to the Edify Transaction. The table below
sets forth the approximate relative contributions of S1 and FICS:
<TABLE>
<CAPTION>
S1 FICS
---- ----
<S> <C> <C>
Revenues:
1999........................................................ 44.0% 56.0%
2000........................................................ 48.1% 51.9%
2001........................................................ 56.4% 43.6%
</TABLE>
Based on the closing price of S1 common stock on May 14, 1999 of $54.00,
this analysis indicated:
- implied equity valuations for FICS ranging from approximately $1,535
million to $2,538 million; and
- implied exchange ratios per FICS share ranging from approximately 180.059
to 297.793.
In considering this analysis, BancBoston Robertson Stephens noted that FICS
stockholders would own approximately 34.7% of the shares of S1 common stock to
be outstanding after consummation of the FICS Transaction, without giving effect
to the Edify Transaction.
COMPARABLE COMPANIES ANALYSIS. Using publicly available information,
BancBoston Robertson Stephens analyzed, among other things, the market values
plus net debt, or "total capitalization," and trading multiples of FICS and
selected publicly traded companies that have similar business and operating
profiles, including:
- Brokat AG
- Broadvision, Inc.
- Fundtech LTD.
- Transaction System Architects, Inc.
Multiples compared by BancBoston Robertson Stephens included total
capitalization to revenues or estimated revenues for calendar years 1998, 1999
and 2000, total capitalization to earnings before interest and taxes, or "EBIT,"
or estimated EBIT for calendar years 1998, 1999 and 2000, price/earnings
multiples for calendar years 1998, 1999 and 2000 and price/earnings to growth
rate multiples for calendar year 1998 and 1999. All multiples were based on
closing stock prices as of May 14, 1999.
Using FICS management estimates and ranges of multiples derived by
BancBoston Robertson Stephens from the comparable companies of 14.0x - 18.0x for
the estimated 1999 revenues of FICS and 9.0x - 11.0x for the estimated 2000
revenues of FICS, the following equity values for FICS and exchange ratios per
FICS share are implied:
<TABLE>
<CAPTION>
IMPLIED EXCHANGE RATIO PER
IMPLIED FICS EQUITY VALUE FICS SHARE
------------------------- --------------------------
<S> <C> <C>
1999 estimated revenues................... $970 - $1,250 million 113.751- 146.602
2000 estimated revenues................... $ 807 - $ 988 million 94.625 - 115.925
</TABLE>
PRECEDENT TRANSACTION ANALYSIS. Using publicly available information,
BancBoston Robertson Stephens analyzed the consideration offered plus net debt
assumed, or debt less cash on hand, and implied transaction value multiples paid
or proposed to be paid in 27 selected acquisition transactions in the internet
content and services industry since November 1995.
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In analyzing these "precedent transactions," BancBoston Robertson Stephens
compared, among other things, the total consideration in such transactions as a
multiple of the preceding twelve months ("LTM") revenues and next twelve months
("NTM") revenues.
All multiples for the precedent transactions were based on public
information available at the time of the announcement. Based on this
information, FICS management estimates and other publicly available information,
the following tables illustrate implied equity valuations for FICS and implied
exchange ratios per FICS share derived from applying a range of multiples from
the precedent transactions of LTM revenues and of NTM revenues:
<TABLE>
<CAPTION>
IMPLIED EXCHANGE
RATIO PER FICS
MULTIPLE RANGE IMPLIED FICS EQUITY VALUATION SHARE
-------------- ----------------------------- -----------------
<S> <C> <C> <C>
Multiples of LTM revenues.... 20.0x - 25.0x $1,128 - $1,412 million 132.305 - 165.687
Multiples of NTM revenues.... 17.0x - 21.0x $1,254 - $1,552 million 147.143 - 182.053
</TABLE>
No company, business or transaction compared in the comparable companies
analysis or precedent transaction analysis is identical to S1 or FICS.
Accordingly, an analysis of the results of the foregoing is not entirely
mathematical; rather it involves complex considerations and judgments concerning
differences in financial and operating characteristics and other factors that
could affect the acquisition, public trading and other values of the comparable
companies, precedent transactions or the business segment, company or
transactions to which they are being compared.
DISCOUNTED CASH FLOW ANALYSIS. BancBoston Robertson Stephens performed a
discounted cash flow analysis of FICS management estimates of the after-tax free
cash flows of FICS using a range of earnings estimates for FICS for the calendar
years 1999 through 2003. BancBoston Robertson Stephens first discounted the
projected, after-tax free cash flows through December 31, 2003 using discount
rates ranging from 14% to 18%. FICS free cash-flows were calculated as the
after-tax operating earnings of FICS adjusted to add back non-cash expenses and
deduct uses of cash not reflected in the income statement. BancBoston Robertson
Stephens then added to the present value of the cash flows the terminal value of
FICS at December 31, 2003, discounted back at the same discount rate to
represent a present value. The terminal value was computed by multiplying the
projected EBIT for FICS in fiscal 2003 by terminal multiples ranging from 35.0x
to 40.0x. The range of terminal multiples selected reflect BancBoston Robertson
Stephens' judgment as to an appropriate range of multiples at the end of the
referenced period. The following tables summarize the resulting implied equity
valuations and exchange ratios per FICS share:
<TABLE>
<CAPTION>
IMPLIED EXCHANGE RATIO PER
DISCOUNT RATES IMPLIED FICS EQUITY VALUATION FICS SHARE
-------------- ----------------------------- -------------------------------
<S> <C> <C>
14% - 18%.......................... $839 - $1,112 million 98.397 - 130.482
</TABLE>
PRO FORMA ANALYSES. BancBoston Robertson Stephens analyzed certain pro
forma effects resulting from each of (i) the FICS Transaction considered on a
stand-alone basis and (ii) the FICS Transaction and the Edify Transaction
considered together, including, among other things, the impact of such
transactions on the projected revenues per share and projected cash earnings per
share of the combined company for fiscal years 2000 and 2001.
Pro Forma Analysis - Without Giving Effect to the Edify Transaction.
BancBoston Robertson Stephens analyzed certain pro forma effects resulting from
the FICS Transaction without giving effect to the Edify Transaction, including,
among other things, the impact of the FICS Transaction on the projected revenues
per share of the resulting combined company for fiscal years 2000 and 2001. The
following tables summarize the results of such analysis, based on management
estimates:
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Pro Forma Analysis - Without Giving Effect to the Edify Transaction
<TABLE>
<S> <C>
Fiscal year 2000 revenue per share accretion................ 37.1%
Fiscal year 2001 revenue per share accretion................ 17.1%
</TABLE>
The actual results achieved by the combined company may vary from projected
results and the variations may be material.
Pro Forma Analysis - Giving Effect to the Edify Transaction. BancBoston
Robertson Stephens also analyzed certain pro forma effects resulting from the
FICS Transaction and the Edify Transaction considered together, including, among
other things, the impact of such transactions on the projected revenues per
share and projected cash earnings per share of the resulting combined company
for fiscal years 2000 and 2001. The following tables summarize the results of
such analysis:
<TABLE>
<S> <C>
Pro Forma Analysis -- Giving Effect to the Edify Transaction
(based upon management estimates)
Fiscal year 2000 revenue per share accretion................ 78.1%
Fiscal year 2001 revenue per share accretion................ 45.6%
</TABLE>
<TABLE>
<S> <C>
Pro Forma Analysis -- Giving Effect to the Edify Transaction
(based upon street estimates)
Fiscal year 2000 revenue per share accretion................ 87.2%
Fiscal year 2000 cash earnings per share
accretion/(dilution)...................................... (5.5)%
Fiscal year 2001 revenue per share accretion................ 76.8%
Fiscal year 2001 cash earnings per share accretion.......... 26.4%
</TABLE>
The actual results achieved by the combined company may vary from projected
results and the variations may be material.
OTHER FACTORS AND COMPARATIVE ANALYSES. In rendering its opinion,
BancBoston Robertson Stephens considered certain other factors and conducted
certain other comparative analyses, including, among other things, a review of
the history of trading prices and volume for S1 common stock, for the period
from May 14, 1998 to May 14, 1999.
While the foregoing summary describes certain analyses and factors that
BancBoston Robertson Stephens deemed material in its presentation to the S1
board, it is not a comprehensive description of all analyses and factors
considered by BancBoston Robertson Stephens. The preparation of a fairness
opinion is a complex process that involves various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
these methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to summary description. BancBoston Robertson Stephens
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and of the factors considered by it, without
considering all analyses and factors, would create an incomplete view of the
evaluation process underlying the BancBoston Robertson Stephens opinion. Several
analytical methodologies were employed and no one method of analysis should be
regarded as critical to the overall conclusion reached by BancBoston Robertson
Stephens. Each analytical technique has inherent strengths and weaknesses, and
the nature of the available information may further affect the value of
particular techniques. The conclusions reached by BancBoston Robertson Stephens
are based on all analyses and factors taken as a whole and also on application
of BancBoston Robertson Stephens' own experience and judgment. Such conclusions
may involve significant elements of subjective judgment and qualitative
analysis. BancBoston Robertson Stephens therefore gives no opinion as to the
value or merit standing alone of any one or more parts of the analysis it
performed. In performing its analyses, BancBoston Robertson Stephens considered
general economic, market and financial conditions and other matters, many of
which are beyond the control of S1 and FICS. The analyses performed by
BancBoston Robertson Stephens are
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not necessarily indicative of actual values or future results, which may be
significantly more or less favorable than those suggested by such analyses.
Accordingly, analyses relating to the value of a business do not purport to be
appraisals or to reflect the prices at which the business actually may be
purchased. Furthermore, no opinion is being expressed as to the prices at which
shares of S1 common stock may be traded at any future time. None of the parties
makes any representations or warranties that the assumptions used by BancBoston
Robertson Stephens were or are correct.
The engagement letter between S1 and BancBoston Robertson Stephens provides
that, for its services, BancBoston Robertson Stephens is entitled to receive,
contingent upon consummation of the FICS Transaction, a transaction fee of
$4,500,000 and a $500,000 fee payable in respect of the delivery of the
BancBoston Robertson Stephens opinion. S1 has also agreed to reimburse
BancBoston Robertson Stephens for certain of its out-of-pocket expenses,
including legal fees, and to indemnify and hold harmless BancBoston Robertson
Stephens and its affiliates and any director, employee or agent of BancBoston
Robertson Stephens or any of its affiliates, or any person controlling
BancBoston Robertson Stephens or its affiliates for certain losses, claims,
damages, expenses and liabilities relating to or arising out of services
provided by BancBoston Robertson Stephens as financial advisor to S1. The terms
of the fee arrangement with BancBoston Robertson Stephens, which S1 and
BancBoston Robertson Stephens believe are customary in transactions of this
nature, were negotiated at arm's length between S1 and BancBoston Robertson
Stephens, and the S1 board was aware of such fee arrangements, including the
fact that a significant portion of the fees payable to BancBoston Robertson
Stephens is contingent upon completion of the FICS Transaction. BancBoston
Robertson Stephens has provided certain investment banking services to S1 for
which it has been or will be paid fees, including delivering an opinion to S1 in
connection with the Edify Transaction and acting as S1's exclusive financial
advisor in connection with an investment in S1 by Intuit, Inc. BancBoston
Robertson Stephens has also provided certain investment banking services to FICS
in the past, including acting as co-managing underwriter in connection with a
potential initial public offering of FICS in the first half of this year.
BancBoston Robertson Stephens was retained based on BancBoston Robertson
Stephens' experience as a financial advisor in connection with mergers and
acquisitions and in securities valuations generally, as well as BancBoston
Robertson Stephens' investment banking relationship and familiarity with S1.
BancBoston Robertson Stephens is an internationally recognized investment
banking firm. As part of its investment banking business, BancBoston Robertson
Stephens is frequently engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of securities, private placements and
other purposes. In the ordinary course of its business, BancBoston Robertson
Stephens may actively trade the debt and equity securities of S1 and Edify for
its own account and for the account of its customers and, accordingly, may at
any time hold a long or short position in such securities.
COMPLETION AND EFFECTIVENESS OF THE FICS TRANSACTION
The FICS Transaction will be completed when all of the conditions to
completion of the FICS Transaction are satisfied or waived, including approval
of the issuance of shares of S1 common stock by the S1 stockholders. Completion
of the FICS Transaction also requires S1 to file one registration statement
registering the resale of 18% of the shares of S1 common stock Michel Akkermans
will receive in the FICS Transaction plus a further $15 million worth of shares
of S1 common stock to be acquired by Michel Akkermans in the FICS Transaction.
After closing S1 has agreed to file a second registration statement for the
remaining shares of S1 common stock to be issued in the FICS Transaction.
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STRUCTURE OF THE FICS TRANSACTION AND CONVERSION OF FICS COMMON STOCK
The FICS Transaction consists of two separate but interrelated stock
purchase agreements. Pursuant to the first stock purchase agreement, S1 Holdings
N.V., a newly formed and wholly owned Belgian subsidiary of S1, will purchase
for cash all capital shares of FICS from the current FICS stockholders. Pursuant
to the second stock purchase agreement, these selling FICS stockholders will use
the proceeds of the sale of the FICS shares to purchase S1 common stock. As a
result of the FICS Transaction, FICS will become a wholly owned subsidiary of S1
Holdings. S1, in connection with the FICS Transaction, expects to issue the
former FICS stockholders approximately 18,000,000 shares of S1 common stock and
to assume options to purchase approximately 2,000,000 additional shares of S1
common stock.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE FICS TRANSACTION
The following summary discusses the United States federal income tax
consequences of the FICS Transaction. The summary is based on the Internal
Revenue Code of 1986, as amended, referred to in this section as the Code,
applicable U.S. Treasury regulations under the Code, administrative foregoing
authorities are subject to change and any change could affect the continuing
validity of this summary. This summary does not address any consequences arising
under the tax laws of any state, locality, or foreign jurisdiction.
One of the conditions for the FICS Transaction to take place is that S1 and
FICS must receive an opinion from KPMG LLP, that the FICS Transaction will be
treated for federal income tax purposes as a tax-free reorganization within the
meaning of Section 368(a) of the Code. The opinion must be reasonably
satisfactory to S1. The opinion of KPMG LLP will be based on the Code, the U.S.
Treasury regulations promulgated under the Code and related administrative
interpretations and judicial decisions, all as in effect as of the effective
time of the merger, on the assumption that the FICS Transaction takes place as
described in the merger agreement, and on factual representations to be provided
to KPMG LLP by S1 that relate to the satisfaction of specific requirements to a
reorganization within the meaning of Section 368(a) of the Code.
The opinion will be based, in part, upon the understanding that:
(1) All of the FICS shareholders will have a legally binding obligation
to purchase a predetermined number of voting shares of S1 for the same dollar
amount that S1 Holdings N.V. purchased the FICS securities;
(2) The purchase of the S1 common stock by the FICS stockholders will
occur within two days of the acquisition;
(3) Any interest earned on the funds before being used to extinguish the
debt belongs to S1 or its subsidiary and not the FICS shareholders;
(4) S1 will be legally bound to immediately contribute the cash received
from FICS shareholders to S1 Holdings N.V.; and,
(5) There are no agreements limiting the voting rights associated with
the S1 voting stock distributed in the FICS Transaction.
Unlike a ruling from the Internal Revenue Service, an opinion of counsel is
not binding on the Internal Revenue Service and there can be no assurance that
the Internal Revenue Service will not take a position contrary to one or more of
the positions reflected in the opinion or that these positions will be upheld by
the courts if challenged by the Internal Revenue Service. If, as concluded in
the
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opinion of KPMG LLP, the FICS Transaction qualifies as a reorganization within
the meaning of Section 368(a) of the Code, then:
(1) The form and substance of the exchange will constitute a
reorganization for U.S. federal income tax purposes and that no gain or loss
will be recognized for U.S. federal income tax purposes by the shareholders of
FICS on their receipt of shares of S1 common stock and,
(2) No gain or loss should be recognized for U.S. federal income tax
purposes by S1, S1 Holdings N.V., S1's newly formed Belgian subsidiary used to
consummate the exchange, or FICS, as parties to the reorganization.
The determination that the FICS Transaction qualifies as a tax-free
reorganization is primarily relevant only to certain FICS shareholders. Whether
the FICS Transaction constitutes a tax-free reorganization for U.S. tax
purposes, S1, S1 Holdings N.V., or shareholders of S1 should recognize no gain
or loss for U.S. federal income tax purposes.
This discussion is only a general summary of the United States federal
income tax consequences of the FICS Transaction. The tax consequences of the
FICS Transaction to the shareholders of FICS may be different from those
summarized above, based on your individual situation.
ACCOUNTING TREATMENT OF THE FICS TRANSACTION
We intend to account for the FICS Transaction as a purchase for financial
reporting and accounting purposes, under generally accepted accounting
principles. After the FICS Transaction, the results of operations of FICS will
be included in the consolidated financial statements of S1. The purchase price,
i.e., the aggregate transaction consideration, will be allocated based on the
fair values of the assets acquired and the liabilities assumed. Any excess of
cost over fair value of the net tangible assets of FICS acquired will be
recorded as goodwill and other intangible assets and will be amortized by
charges to operations under generally accepted accounting principles. These
allocations will be made based upon valuations and other studies that have not
yet been finalized.
REGULATORY FILINGS AND APPROVALS REQUIRED TO COMPLETE THE FICS TRANSACTION
S1's sale of S1 common stock to three of the FICS stockholders is subject
to the requirements of the Hart-Scott-Rodino Antitrust Improvements Act. The HSR
Act prevents certain transactions from being completed until required
information and materials are furnished to the Antitrust Division of the
Department of Justice and the Federal Trade Commission, and the applicable
waiting periods end or expire. S1 has filed the required information and
materials with the Antitrust Division and the FTC, but the applicable waiting
periods have not yet expired or been terminated. The notification under the HSR
Act remains effective and permits closing of the FICS Transaction within one
year from the expiration or termination of the waiting period.
The Antitrust Division or the FTC may challenge the FICS Transaction on
antitrust grounds either before or after expiration of the waiting period.
Accordingly, before or after the completion of the FICS Transaction either the
Antitrust Division or the FTC, or any private person, could take action under
the antitrust laws, including seeking to enjoin the FICS Transaction. In
addition, before or after the completion of the FICS Transaction, whether or not
the waiting period has ended or expired, one or more states could take action
under the antitrust laws. We may not prevail if a challenge is made.
Neither S1 nor FICS is aware of any other material governmental or
regulatory approval required for completion of the FICS Transaction, other than
the effectiveness of the registration statement of which this prospectus/proxy
statement is a part, and compliance with applicable corporate law of Delaware
and Belgium.
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RESTRICTIONS ON SALES OF SHARES BY AFFILIATES OF FICS AND S1
The shares of S1 common stock to be issued in the FICS Transaction, and the
shares of S1 common stock issuable upon exercise of FICS options assumed by S1
in the FICS Transaction will be registered for resale under the Securities Act
immediately following closing. These shares will be freely transferable under
the Securities Act, except for shares of S1 common stock issued to any person
who is an affiliate of either of us. Persons who may be deemed to be affiliates
include individuals or entities that control, are controlled by, or are under
common control of either of us and may include some of our officers and
directors, as well as our principal stockholders. Affiliates may not sell their
shares of S1 common stock acquired in the FICS Transaction except pursuant to
(1) an effective registration statement under the Securities Act covering the
resale of those shares, (2) an exemption under paragraph (d) of Rule 145 under
the Securities Act or (3) any other applicable exemption under the Securities
Act. The five majority FICS stockholders will also be subject to a six-month
lock-up beginning on the closing of the FICS Transaction.
LISTING ON THE NASDAQ NATIONAL MARKET OF S1 COMMON STOCK TO BE ISSUED IN THE
FICS TRANSACTION
It is a condition to the closing of the FICS Transaction that the shares of
S1 common stock to be issued in the FICS Transaction be approved for listing on
the Nasdaq National Market, subject to official notice of issuance.
OPERATIONS AFTER THE FICS TRANSACTION
Following the FICS Transaction, FICS will continue its operations as a
wholly owned subsidiary of S1 Holdings, in turn a wholly owned subsidiary of S1.
The stockholders of FICS will become stockholders of S1, and their rights as
stockholders will be governed by the S1 amended and restated certificate of
incorporation, the S1 amended and restated bylaws and the laws of the State of
Delaware.
THE FICS AGREEMENTS
This section of the prospectus/proxy statement describes the agreements
related to the FICS Transaction. The FICS Transaction consists of a share
purchase agreement in which S1 Holdings, a Belgian subsidiary of S1, will
purchase all outstanding capital shares of FICS from the FICS stockholders, and
a stock purchase agreement in which all of the FICS stockholders will use the
proceeds from the sale of their FICS shares, pursuant to the share purchase
agreement to purchase approximately 18,000,000 shares of S1 common stock from
S1. S1 has also agreed to assume options of FICS which will convert into options
to purchase approximately 2,000,000 additional shares of S1 common stock. Upon
completion of the FICS Transaction, FICS will be a wholly owned subsidiary of
S1's Belgian subsidiary, and the current FICS stockholders will be S1
stockholders. S1 stockholders are being asked to vote on the issuance of S1
common stock in the FICS Transaction.
While we believe that the description covers the material terms of the
agreements, this summary may not contain all of the information that is
important to you. The share purchase agreement and the stock purchase agreement
are incorporated by reference into this document, and we urge you to read them
both carefully.
REPRESENTATIONS AND WARRANTIES
S1, S1 Holdings, FICS and the FICS stockholders each made a number of
representations and warranties in the agreements regarding aspects of their
respective businesses, financial condition, structure and other facts pertinent
to the FICS Transaction. The representations and warranties of
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S1, on the one hand, and FICS and the FICS stockholders on the other, address
the same topics, which include the following:
- corporate organization and qualification to do business and
identification of affiliates
- certificate of incorporation and bylaws
- capitalization
- financial statements
- taxes, employee benefit plans and insurance policies
- material contracts
- title to properties owned and leased
- liabilities and litigation
- changes in business since December 31, 1998
- compliance with industrial regulatory requirements and environmental laws
- securities, antitrust and other commercial regulatory approvals
- filings and reports with the Securities and Exchange Commission
- compliance with applicable laws
In addition, S1 made representations and warranties to FICS and the FICS
stockholders regarding authorization of the various agreements and approval of
the FICS Transaction by the S1 board of directors pending stockholder approval.
FICS and the FICS stockholders also made representations and warranties to
S1 regarding FICS's intellectual property, and information supplied by FICS in
this prospectus/proxy statement and the related registration statement to be
filed by S1.
FICS'S CONDUCT OF BUSINESS BEFORE COMPLETION OF THE FICS TRANSACTION
The stockholders of FICS agreed that, until the completion of the FICS
Transaction or unless S1 consents in writing, they will cause FICS and its
subsidiaries to use their commercially reasonable efforts consistent with past
practices and policies to:
- preserve intact their present business organization
- keep available the services of their present employees
- preserve their relationships with customers and others with which they
have business dealings
The stockholders of FICS also agreed that, until the completion of the FICS
Transaction or unless S1 consents in writing, FICS and its subsidiaries would
conduct their business in compliance with certain specific restrictions relating
to the following:
- the issuance of dividends or other distributions
- the issuance and redemption of securities
- modification of FICS's certificate of incorporation and bylaws
- the liquidation or restructuring of, or merger involving FICS
- capital expenditures
- entrance into or modification of contracts
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- the acquisition of assets or other entities
- actions affecting the representations and warranties in the FICS
Transaction
- accounting policies and procedures
- employees and employee benefits
- the incurrence of indebtedness
- sale, purchase, lease or relocation of any office
- investments and other dispositions of FICS's assets or real estate
- changes in FICS's options or restricted purchase plans
- FICS's intellectual property
- changes in FICS's stockholders rights agreement, or poison pill
The agreements related to the conduct of FICS's business in the stock
purchase agreements are complicated and not easily summarized. You are urged to
carefully read the sections of the share purchase agreement entitled "Covenants
relating to FICS."
FICS STOCKHOLDERS' CONDUCT OF BUSINESS BEFORE COMPLETION OF THE FICS TRANSACTION
FICS's stockholders agreed that they would not, directly or indirectly,
solicit, initiate or encourage submissions of proposals for competing offers,
and waived all existing rights to receive or purchase additional shares of FICS.
S1'S CONDUCT OF BUSINESS BEFORE COMPLETION OF THE FICS TRANSACTION
S1 has incorporated its Belgian subsidiary, S1 Holdings N.V. and has agreed
to take all actions for S1 Holdings to ratify and comply with the FICS
Transaction. S1 has also agreed for three years from the date of closing not to
sell, transfer or assign the FICS stock from S1 Holdings and to maintain S1
Holdings as an operating subsidiary of S1.
CONDITIONS TO COMPLETION OF THE FICS TRANSACTION
The obligations of S1, S1 Holdings and the FICS stockholders to complete
the FICS Transaction and the other transactions contemplated by the agreements
are subject to the satisfaction or waiver of each of the following conditions
before completion of the FICS Transaction:
- the issuance of shares of S1 common stock must be approved by a majority
of S1 common stock represented in person or by proxy at the S1
stockholder meeting
- the shares of S1 common stock to be issued must be authorized for listing
on the Nasdaq Stock Market, subject to notice of issuance
- S1 must prepare and file a registration statement providing for, among
other things, the resale by Michel Akkermans of a number of shares of S1
common stock worth (1) 18% of the value of the S1 common stock he will
receive in the FICS Transaction, plus (2) $15 million
- S1 has agreed to use reasonable efforts (1) to cause the Akkermans
registration statement to be declared effective simultaneously with the
closing of the FICS Transaction, (2) to keep the Akkermans registration
statement effective for 30 days after closing and (3) to produce an
underwriting agreement in reasonable and customary form for use in the
resale of these shares by Mr. Akkermans
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- an underwriting agreement in reasonable and customary form for use in the
resale of the shares being sold by Mr. Akkermans must have been prepared
and executed by S1 and the lead underwriter for such offering
- S1 must file a second registration statement registering the resale of
all shares issued in the FICS Transaction, except those registered under
the first registration statement and shares issuable upon exercise of the
options for S1 common stock issued in the FICS Transaction, and use
reasonable efforts to keep the registration statement effective for at
least one year after closing
- both registration statements must be effective and no stop order
suspending their effectiveness can be in effect and no proceedings for
suspension of their effectiveness will be pending before or threatened by
the Securities and Exchange Commission
- all applicable waiting periods, if any, under applicable antitrust and
competition laws must have expired or been terminated
- no law, regulation or order must be enacted or issued which has the
effect of making the FICS Transaction illegal or otherwise prohibiting
completion of the FICS Transaction substantially on the terms
contemplated by the agreements
- the FICS stockholders shall deliver to S1 Holdings a "comfort letter"
from FICS's independent public accountants, PricewaterhouseCoopers & Co.
Bedrijfsrevisoren
- the five majority FICS stockholders shall have received an opinion as to
the tax-free nature of the FICS Transaction
- S1 Holdings must obtain, no later than August 15, 1999, evidence that
financing is available to it to purchase all of the outstanding FICS
shares to complete the FICS Transaction
The parties also agreed that our obligations to complete the FICS
Transaction and the other transactions contemplated by the agreements are
subject to the satisfaction or waiver of each of the following additional
conditions by the other party before completion of the FICS Transaction:
- the other party's representations and warranties must have been true and
correct as of May 16, 1999 and at and as of the date the FICS Transaction
is to be completed as if made at and as of such time except to the extent
the representations and warranties address matters only as of a
particular date, in which case they must be true and correct as of that
date
- the other party must perform or comply in all material respects with all
of its agreements and covenants required by the agreements to be
performed or complied with by it at or before completion of the FICS
Transaction
TERMINATION OF THE FICS AGREEMENTS
Any party may terminate the agreements if any representation or warranty is
materially incorrect or for failure to fulfill any condition or agreement set
forth in the agreements. In addition, the five FICS majority stockholders may
terminate the agreements if S1 engages in certain extraordinary transactions in
which 50% or more of its common stock or assets are acquired by a third party.
The five FICS majority stockholders may also terminate the agreement if there is
any breach of the representations and warranties that cannot be cured within 30
days and that has or is likely to have a material adverse effect on S1.
A material adverse effect is a condition, event, change or occurrence that
is or is reasonably likely to be materially adverse to the ability of S1, S1
Holdings, the FICS stockholders or FICS to perform its obligations under the
relevant agreement or materially adverse to the business, customers, assets
(including intangible assets), capitalization, financial condition or results of
operations of an
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entity taken as a whole with its subsidiaries, except to the extent that any
such change, event, violation, inaccuracy, circumstance or effect directly and
primarily results from the following:
- the direct effect of the public announcement, pendency or consummation of
the FICS Transaction
- changes in general economic conditions or changes affecting the industry
generally in which such entity operates
- changes in trading prices for such entity's capital stock
EXPENSES; NO BREAKUP FEE
Each party will bear its own expenses. No breakup fee will be paid by any
of the parties if the FICS Transaction is not closed. S1 Holdings has agreed to
indemnify the FICS stockholders for all liability due to a breach by S1
Holdings. In addition, Michel Akkermans has agreed to indemnify FICS, S1
Holdings, and all of the respective officers and directors of the two companies
for any liability in excess of $3 million up to a limit of $50 million, due to a
breach by FICS or the FICS stockholders, or under certain other circumstances
such as for continuing obligations to pay employees or independent contractors.
EXTENSION, WAIVER AND AMENDMENT OF THE FICS AGREEMENTS
S1, S1 Holdings, FICS and FICS stockholders may amend the agreements before
completion of the FICS Transaction provided all comply with applicable state law
in so doing.
Any of the parties may, in writing, extend the other's time for the
performance of any of the obligations or other acts under the agreements, waive
any inaccuracies in the other's representations and warranties and waive
compliance by the other with any of the agreements or conditions contained in
the agreements.
RELATED FICS AGREEMENTS
The Pledge Agreement
At closing, Mr. Akkermans will pledge 925,925 shares of S1 common stock to
S1 Holdings as collateral to secure the payment and performance of all of his
obligations relating to the sale of his shares of FICS common stock under the
share purchase agreement. Mr. Akkermans may still exercise his voting rights and
receive dividends relating to these shares, but all dividends and distributions
will be held by S1 Holdings as additional collateral. The collateral will be
held for one year or until all indemnification claims under the share purchase
agreement have been resolved, and then it will be returned to Mr. Akkermans.
S1 Stockholder Voting Agreements
The FICS stockholders required S1 stockholders James S. Mahan III, Robert
F. Stockwell, Daniel H. Drechsel, Robert W. Copelan, D.V.M., Dorsey R. Gardner,
Joseph S. McCall and Howard J. Runnion, Jr. to enter into voting agreements. The
S1 stockholder voting agreements require these S1 stockholders to vote all of
their shares of S1 common stock in favor of the FICS Transaction.
As of the record date, these S1 stockholders beneficially owned
shares of S1 common stock, which represented approximately %
of the outstanding S1 common stock. These S1 stockholders were not paid
additional consideration in connection with their respective voting agreements.
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Under the S1 stockholder voting agreements, until the termination of the
voting agreement or the record date, these S1 stockholders agreed not to
transfer any shares of S1 stock unless the person to whom such shares or options
are to be transferred agrees to be bound by the terms of the S1 stockholder
voting agreements.
The S1 stockholder voting agreements will terminate upon the earliest to
occur of:
- the termination of the agreements in accordance with their terms
- the completion of the FICS Transaction
The Loan Agreement and Promissory Note
S1 has agreed to extend a line of credit to FICS in the amount of $10
million. Of that $10 million, $5 million was advanced in cash upon execution of
the stock purchase agreements in May 1999. As of July 7, 1999, FICS had borrowed
$6.0 million under this credit facility. FICS may continue to draw down the line
in the future up to the $10 million limit in amounts not to exceed $1 million
per month. The parties intend that the amounts drawn on the line be used to
provide FICS with working capital until the FICS Transaction closes. Interest on
the account will accrue at a fixed rate determined by the London Interbank
Offered Rate on May 16, 1999 plus 2% per year. If the FICS Transaction does not
close, the line of credit will mature on the earlier of (1) September 26, 2000
or (2) the date of FICS's initial public offering. At maturity, FICS may pay
this loan either in cash or in a number of shares of its common stock equal to
the amount of indebtedness divided by $6,000.
THE EDIFY TRANSACTION
This section of the prospectus/proxy statement describes certain aspects of
the Edify Transaction, including the merger agreement and the stock option
agreement. While we believe that the description covers the material terms of
the Edify Transaction and the related transactions, this summary may not contain
all of the information that is important to you. You should read this entire
document and the other documents we refer to carefully for a more complete
understanding of the Edify Transaction. In addition, we incorporate important
business and financial information about each of us into this prospectus/proxy
statement by reference. See "Documents Incorporated by Reference in This
Prospectus/Proxy Statement" on page . You may obtain the information
incorporated by reference into this prospectus/proxy statement without charge by
following the instructions in the section entitled "Where You Can Find More
Information" on page .
S1'S REASONS FOR THE EDIFY TRANSACTION
At a meeting held on May 16, 1999, the board of directors of S1 concluded
that the Edify Transaction was in the best interests of S1 and its stockholders
and determined to recommend that the stockholders approve the stockholder
proposals relating to the Edify Transaction.
In its evaluation of the Edify Transaction, the S1 board reviewed several
factors, including, but not limited to, the following:
- historical information concerning S1's and Edify's respective businesses,
financial performance and condition, operations, technology and
management, including reports concerning results of operations during the
most recent fiscal year and fiscal quarter for each company filed with
the SEC
- S1 management's view of the financial condition, results of operations
and businesses of S1 and Edify before and after giving effect to the
Edify Transaction and the S1 board's determination of the Edify
Transaction's effect on stockholder value
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- current financial market conditions and historical market prices,
volatility and trading information
- the consideration Edify stockholders will receive in the Edify
Transaction in light of comparable transactions
- the opinion of BancBoston Robertson Stephens that, as of the date of its
opinion and subject to the considerations described in the opinion, the
exchange ratio in the Edify Transaction is fair from a financial point of
view to S1
- the belief that the terms of the merger agreement and the stock option
agreement are reasonable
- the impact of the Edify Transaction on S1's customers and employees
- reports from management, legal, financial and accounting advisors as to
the results of the due diligence investigation of Edify
- the expectation that the Edify Transaction will be accounted for as a
purchase
The S1 board also identified and considered a number of potentially
negative factors in its deliberations concerning the Edify Transaction including
the following:
- the risk that the potential benefits of the Edify Transaction may not be
realized
- the possibility that the Edify Transaction may not be consummated, even
if approved by S1's and Edify's stockholders
- the effect of the public announcement of the Edify Transaction on Edify's
sales
- the risk of management and employee disruption associated with the Edify
Transaction, including the risk that despite the efforts of the combined
company, key technical, sales and management personnel might not remain
employed by the combined company
- the risk that the Edify Transaction could adversely affect S1's
relationship with certain of its customers and strategic partners
- other applicable risks described in this prospectus/proxy statement under
"Risk Factors"
The board concluded however, that, on balance, the potential benefits to S1
and its stockholders of the Edify Transaction outweighed the risks associated
with the Edify Transaction.
The discussion of the information and factors considered by the S1 board is
not intended to be exhaustive. In view of the variety of factors considered in
connection with its evaluation of the Edify Transaction, the S1 board did not
find it practicable to, and did not quantify or otherwise assign relative weight
to, the specific factors considered in reaching its determination.
RECOMMENDATION OF S1'S BOARD OF DIRECTORS
AFTER CAREFUL CONSIDERATION, THE S1 BOARD OF DIRECTORS HAS DETERMINED THE
MERGER AGREEMENT AND THE EDIFY TRANSACTION TO BE FAIR TO AND IN THE BEST
INTERESTS OF THE S1 STOCKHOLDERS. IN CONNECTION WITH THE EDIFY TRANSACTION, S1'S
BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THE ISSUANCE OF SHARES OF S1 COMMON
STOCK IN THE EDIFY TRANSACTION AS DESCRIBED IN THIS PROSPECTUS/PROXY STATEMENT.
In considering the recommendation of the S1 board of directors with respect
to the Edify Transaction, you should be aware that certain directors and
officers of S1 have certain interests in the Edify Transaction that are
different from, or are in addition to the interests of S1 stockholders
generally. Please see the section entitled "The Edify Transaction -- Interests
of Certain Persons in the Edify Transaction" on page .
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<PAGE> 93
EDIFY'S REASONS FOR THE EDIFY TRANSACTION
At a meeting held on May 16, 1999, the board of directors of Edify
concluded that the Edify Transaction is fair to, and in the best interests of,
the stockholders of Edify, and authorized Edify to enter into the merger
agreement, the stock option agreement and related transactions. The Edify board
recommends that Edify stockholders approve and adopt the merger agreement and
approve the Edify Transaction. The Edify board's decision was the result of its
careful consideration of the factors, both positive and negative, related to the
Edify Transaction, as well as its consideration of alternatives, including the
pursuit of a long-term independent business strategy for Edify.
The Edify Board believes that the Edify Transaction represents the best
strategic alternative for Edify and the best transaction available to Edify
stockholders. In reaching its determination, the Edify board considered the
premium represented by the exchange ratio and historical business, financial and
operating information regarding S1. The Edify board concluded that the exchange
ratio and the price per Edify share implied by it compare favorably according to
a number of applicable valuation methodologies, including an analysis of
companies comparable to Edify and transactions comparable to the Edify
Transaction. The Edify board considered the volatility of S1 common stock, and
the potential for S1 common stock to appreciate in the near- and long-term, in
agreeing to a fixed exchange ratio in the merger agreement. The Edify board also
reviewed the regulatory approvals required to consummate the Edify transaction,
and the likelihood of obtaining such approvals on a timely basis.
The Edify board believes that the Edify Transaction, and, if also
consummated, the FICS Transaction combined with the Edify Transaction, will
create a company with a compelling suite of product and service offerings to
financial institutions and other businesses. The Edify board believes that S1's
internet banking products and data center management services and Edify's
automated self service software applications will complement each other and
allow the combined company to cross-market a range of services in various media
to its customers.
In making its determination, the Edify board considered a number of
factors, including:
- the consideration to be received by Edify stockholders in the Edify
Transaction
- Edify's and S1's financial and operating performance over historical
periods, and the expected synergies and benefits to be obtained by the
Edify Transaction versus the pursuit of an independent business strategy
for Edify
- Edify management's view of the industry in which Edify competes, and its
analysis of Edify's business, operations and financial results on a
stand-alone basis and after giving effect to the Edify Transaction
- the results of the due diligence review conducted by Edify's management,
and Edify's legal and financial advisors, regarding S1's, and FICS's,
business, technologies, operations, financial results and competitive
position
- the opinion of Goldman, Sachs & Co., delivered on May 16, 1999, that, as
of the date of such opinion, the exchange ratio in the Edify Transaction
is fair from a financial point of view to holders of Edify common stock
- the terms of the merger agreement and stock option agreement, and, in
particular, the limitations on the ability of Edify to negotiate with
other companies regarding an alternative transaction, the provisions
regarding the ability of Edify to terminate the merger agreement in
certain events, the payment of a termination fee by Edify in certain
events, and the terms of the stock option granted to S1, and the
potential that these features would discourage other transactions which
could be superior to the Edify transaction. Because the Edify board and
its financial advisor conducted an extensive review of those companies
which the board and its
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financial advisor believed could potentially be interested in pursuing a
business combination with Edify, including contacting a number of such
companies regarding a transaction, and because S1 required these
provisions in order to enter into the merger agreement, the Edify board
determined that the value for Edify stockholders represented by the Edify
transaction justified these requirements.
The Edify board also considered a number of negative factors related to the
Edify transaction, including:
- the risk that because the exchange ratio will not be adjusted for changes
in the market price of S1 common stock or Edify common stock, the per
share value of the consideration to be received by Edify stockholders
might be significantly less than the price per share implied by the
exchange ratio immediately prior to the announcement of the Edify
Transaction
- the risk that the Edify Transaction may not be consummated, even if
approved by Edify's stockholders
- the risk that the benefits sought to be achieved by the Edify transaction
will not be realized
- the potential loss of revenues and business opportunities for Edify as a
result of confusion in the marketplace as a result of the announcement of
the Edify transaction, and the exploitation of that confusion by Edify's
competitors
- the difficulties in integrating the operations of Edify and S1, and
potentially, FICS as well, and the potential loss of management personnel
or focus during the integration period
- the other applicable risks described in this prospectus/proxy statement
under "Risk Factors"
RECOMMENDATION OF EDIFY'S BOARD OF DIRECTORS
AFTER CAREFULLY EVALUATING THESE FACTORS, BOTH POSITIVE AND NEGATIVE, THE
BOARD OF DIRECTORS OF EDIFY HAS DETERMINED THAT THE EDIFY TRANSACTION IS IN THE
BEST INTERESTS OF EDIFY AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT
EDIFY STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND
APPROVAL OF THE EDIFY TRANSACTION.
In considering the recommendation of the Edify board of directors with
respect to the Edify Transaction, you should be aware that certain directors and
officers of Edify have certain interests in the Edify Transaction that are
different from, or are in addition to the interests of Edify stockholders
generally. Please see the section entitled "The Edify Transaction -- Interests
of Certain Persons in the Edify Transaction" on page .
OPINION OF S1'S FINANCIAL ADVISOR
Pursuant to an engagement letter dated February 24, 1999, as amended on May
28, 1999, S1 engaged BancBoston Robertson Stephens Inc. to render an opinion as
to the fairness of the exchange ratio in the Edify Transaction, from a financial
point of view, to S1.
On May 16, 1999 at a meeting of the S1 board held to evaluate the proposed
Edify Transaction, BancBoston Robertson Stephens delivered to the S1 board its
oral opinion, which was subsequently confirmed as a written opinion dated May
16, 1999, that, as of the date of such opinion and based on the assumptions
made, the matters considered and the limitations on the review undertaken
described in the opinion, the exchange ratio in the Edify Transaction of
0.330969 shares of S1 common stock for each share of Edify common stock was fair
from a financial point of view to S1. No limitations were imposed by the S1
board on BancBoston Robertson Stephens with respect to the investigations made
or procedures followed by it in furnishing its opinion. The exchange ratio in
the Edify Transaction was determined through negotiations between the respective
managements of S1 and
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<PAGE> 95
Edify. BancBoston Robertson Stephens was not asked by, and did not recommend to,
S1 that any specific exchange ratio constituted the appropriate exchange ratio
for the Edify Transaction. BancBoston Robertson Stephens was engaged by S1
solely to render an opinion to the S1 board in connection with the Edify
Transaction. BancBoston Robertson Stephens was not engaged to assist S1's
management in the negotiations of, or the structuring of, the Edify Transaction.
THE FULL TEXT OF THE BANCBOSTON ROBERTSON STEPHENS OPINION, WHICH SETS
FORTH, AMONG OTHER THINGS, ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS
ON THE REVIEW UNDERTAKEN, IS ATTACHED AS ANNEX C AND IS INCORPORATED IN THIS
PROSPECTUS/PROXY STATEMENT BY REFERENCE. STOCKHOLDERS OF S1 ARE URGED TO READ
THE BANCBOSTON ROBERTSON STEPHENS OPINION IN ITS ENTIRETY. THE BANCBOSTON
ROBERTSON STEPHENS OPINION WAS PREPARED FOR THE BENEFIT AND USE OF THE S1 BOARD
IN ITS CONSIDERATION OF THE EDIFY TRANSACTION AND DOES NOT CONSTITUTE A
RECOMMENDATION TO STOCKHOLDERS OF S1 AS TO HOW THEY SHOULD VOTE UPON, OR TAKE
ANY OTHER ACTION WITH RESPECT TO, THE EDIFY TRANSACTION. THE BANCBOSTON
ROBERTSON STEPHENS OPINION DOES NOT ADDRESS:
- THE RELATIVE MERITS OF THE EDIFY TRANSACTION AND THE OTHER BUSINESS
STRATEGIES THAT THE S1 BOARD HAS CONSIDERED OR MAY BE CONSIDERING; OR
- THE UNDERLYING BUSINESS DECISION OF THE S1 BOARD TO PROCEED WITH THE
EDIFY TRANSACTION.
THE SUMMARY OF THE BANCBOSTON ROBERTSON STEPHENS OPINION SET FORTH IN THIS
PROSPECTUS/PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXT OF THE BANCBOSTON ROBERTSON STEPHENS OPINION.
In connection with the preparation of the BancBoston Robertson Stephens
opinion, BancBoston Robertson Stephens, among other things:
- reviewed certain publicly available financial statements and other
business and financial information of S1 and Edify, respectively;
- reviewed certain internal financial statements and other financial and
operating data concerning S1 and Edify, including information relating to
certain strategic, financial and operational benefits anticipated from
the Edify Transaction, prepared by the managements of S1 and Edify;
- reviewed certain financial forecasts and other forward looking financial
information prepared by the managements of S1 and Edify, respectively;
- held discussions with the respective managements of S1 and Edify
concerning the businesses, past and current operations, financial
condition and future prospects of S1 and Edify, independently and
combined, including discussions with the managements of S1 and Edify
concerning cost savings and other synergies that are expected to result
from the Edify Transaction, as well as their views regarding the
strategic rationale for the Edify Transaction;
- reviewed the financial terms and conditions set forth in the merger
agreement;
- reviewed the stock price and trading history of S1 common stock and Edify
common stock;
- compared the financial performance of S1 and Edify and the prices and
trading activity of S1 common stock and Edify common stock with that of
certain other publicly traded companies comparable with S1 and Edify,
respectively;
- compared the financial terms of the Edify Transaction with the financial
terms, to the extent publicly available, of other transactions it deemed
relevant;
- reviewed the pro forma impact of the Edify Transaction on S1's earnings
per share;
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<PAGE> 96
- reviewed and considered in the analysis information prepared by members
of management of S1 and Edify relating to the relative contributions of
S1 and Edify to the combined company;
- prepared a discounted cash flow analysis of Edify;
- participated in discussions and negotiations among representatives of S1
and Edify and their financial and legal advisors; and
- made such other studies and inquiries, and reviewed such other data and
performed such other analyses, as BancBoston Robertson Stephens deemed
relevant.
In its review and analysis, and in arriving at its opinion, BancBoston
Robertson Stephens considered that S1 or affiliates of S1 were also entering
into agreements providing for the FICS Transaction. S1 informed BancBoston
Robertson Stephens that the FICS Transaction could occur at approximately the
same time as the Edify Transaction, but that neither the Edify Transaction nor
the FICS Transaction was contingent upon the other occurring. As a result,
BancBoston Robertson Stephens conducted certain pro forma analyses as if the
Edify Transaction and the FICS Transaction were both consummated, based upon the
information that was provided to BancBoston Robertson Stephens and reviewed by
it related to FICS, and also as if the Edify Transaction was consummated and the
FICS Transaction was not consummated.
In its review and analysis, and in arriving at its opinion, BancBoston
Robertson Stephens assumed and relied upon the accuracy and completeness of all
of the financial and other information provided to it, including information
furnished to it orally or otherwise discussed with it by management of S1, Edify
or FICS, or publicly available and neither attempted to verify, nor assumed
responsibility for verifying, any of such information. BancBoston Robertson
Stephens relied upon the assurances of management of S1, Edify and FICS that
they were not aware of any facts that would make such information inaccurate or
misleading. Furthermore, BancBoston Robertson Stephens did not obtain or make,
or assume any responsibility for obtaining or making, any independent evaluation
or appraisal of the properties, assets or liabilities, contingent or otherwise,
of S1, Edify or FICS, nor was BancBoston Robertson Stephens furnished with any
such evaluation or appraisal.
With respect to the financial forecasts and projections, and the
assumptions and bases therefor, for each of S1, Edify and FICS that BancBoston
Robertson Stephens reviewed, upon the advice of the managements of S1, Edify and
FICS, BancBoston Robertson Stephens assumed that such forecasts and projections:
- had been reasonably prepared in good faith on the basis of reasonable
assumptions;
- reflected the best available estimates and judgments as to the future
financial condition and performance of S1, Edify and FICS; and
- will be realized in the amounts and in the time periods estimated.
In this regard, BancBoston Robertson Stephens noted that each of S1, Edify and
FICS face exposure to the Year 2000 problem. BancBoston Robertson Stephens did
not undertake any independent analysis to evaluate the reliability or accuracy
of the assumptions made by the managements of S1, Edify and FICS with respect to
the potential effect that the Year 2000 problem might have on their respective
forecasts.
In addition, BancBoston Robertson Stephens assumed that:
- the Edify Transaction will be consummated in accordance with the terms
set forth in the Edify merger agreement, including, among other things,
that the Edify Transaction will be accounted for as a "purchase" business
combination in accordance with GAAP;
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<PAGE> 97
- the FICS Transaction will be consummated in accordance with the terms set
forth in the FICS transaction agreements, including, among other things,
that the FICS Transaction will be accounted for as a "purchase" business
combination in accordance with GAAP;
- each of the Edify Transaction and the FICS Transaction will be treated as
a tax-free reorganization pursuant to the Internal Revenue Code of 1986,
as amended; and
- the historical financial statements of each of S1, Edify and FICS
reviewed by it have been prepared and fairly presented in accordance with
GAAP consistently applied.
BancBoston Robertson Stephens relied as to all legal matters relevant to
rendering its opinion on the advice of counsel.
Although developments following the date of the BancBoston Robertson
Stephens opinion may affect the opinion, BancBoston Robertson Stephens assumed
no obligation to update, revise or reaffirm its opinion. The BancBoston
Robertson Stephens opinion is necessarily based upon financial, market, economic
and other conditions as in effect on, and information made available to
BancBoston Robertson Stephens as of, the date of the BancBoston Robertson
Stephens opinion. It should be understood that subsequent developments may
affect the conclusion expressed in the BancBoston Robertson Stephens opinion and
that BancBoston Robertson Stephens disclaims any undertaking or obligation to
advise any person of any change in any matter affecting the opinion which may
come or be brought to its attention after the date of the opinion. The
BancBoston Robertson Stephens opinion is limited to the fairness, from a
financial point of view and as of the date thereof, of the exchange ratio to S1.
BancBoston Robertson Stephens does not express any opinion as to:
- the value of any employee agreements or other employee arrangements
entered into in connection with the Edify Transaction;
- any tax or other consequences that might result from the Edify
Transaction; or
- what the value of S1 common stock will be when issued to Edify's
stockholders pursuant to the Edify Transaction or the price at which the
shares of S1 common stock that are issued pursuant to the Edify
Transaction may be traded in the future.
The following is a summary of the material financial analyses performed by
BancBoston Robertson Stephens in connection with rendering the BancBoston
Robertson Stephens opinion. The summary of the financial analyses is not a
complete description of all of the analyses performed by BancBoston Robertson
Stephens. Certain of the information in this section is presented in a tabular
form. IN ORDER TO BETTER UNDERSTAND THE FINANCIAL ANALYSES PERFORMED BY
BANCBOSTON ROBERTSON STEPHENS, THESE TABLES MUST BE READ TOGETHER WITH THE TEXT
OF EACH SUMMARY. THE BANCBOSTON ROBERTSON STEPHENS OPINION IS BASED UPON THE
TOTALITY OF THE VARIOUS ANALYSES PERFORMED BY BANCBOSTON ROBERTSON STEPHENS AND
NO PARTICULAR PORTION OF THE ANALYSES HAS ANY MERIT STANDING ALONE.
EXCHANGE RATIO ANALYSIS. BancBoston Robertson Stephens reviewed the
historical ratios of the price of Edify common stock to the price of S1 common
stock over various periods ending May 14,
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1999. The following table sets forth the average ratios of closing prices of
Edify common stock to S1 common stock for the various periods ending May 14,
1999:
<TABLE>
<CAPTION>
RATIO OF CLOSING PRICES OF EDIFY
PERIOD ENDING MAY 14, 1999 COMMON STOCK TO S1 COMMON STOCK
- -------------------------- --------------------------------
<S> <C>
10 days 0.243x
20 days 0.199x
30 days 0.171x
60 days 0.176x
90 days 0.281x
253 days 0.765x
</TABLE>
CONTRIBUTION ANALYSIS. Based upon S1 management estimates for S1 and Edify
management estimates for Edify, BancBoston Robertson Stephens analyzed the
respective contributions of S1 and Edify to the revenues and estimated revenues
of the combined company for fiscal years 1998, 1999, 2000 and 2001, without
giving effect to the FICS Transaction. The table below sets forth the
approximate relative contributions of S1 and Edify:
<TABLE>
<CAPTION>
RELATIVE CONTRIBUTIONS OF S1 AND EDIFY
--------------------------------------
S1 EDIFY
-- -----
<S> <C> <C>
Revenues:
1998...................................................... 28.4% 71.6%
1999...................................................... 47.8% 52.2%
2000...................................................... 52.8% 47.2%
2001...................................................... 60.8% 39.2%
</TABLE>
Based on the closing price of S1 common stock on May 14, 1999 of $54.00,
this analysis indicated:
- implied equity valuations for Edify ranging from approximately $1,325
million to $5,076 million;
- an implied Edify share price ranging from $67.23 to $257.52; and
- implied exchange ratios ranging from approximately 1.245 to 4.769.
BancBoston Robertson Stephens also analyzed the respective contributions of
S1 and Edify to the revenues and estimated revenues of the combined company,
without giving effect to the FICS Transaction, for fiscal years 1998, 1999, 2000
and 2001 and to the earnings before interest and taxes and net income of the
combined company, without giving effect to the FICS Transaction, for fiscal
years 2000 and 2001, based upon financial analyst estimates, or "street
estimates," for S1 and Edify. The table below sets forth the approximate
relative contributions of S1 and Edify on this basis:
<TABLE>
<CAPTION>
RELATIVE CONTRIBUTIONS OF S1 AND EDIFY
--------------------------------------
S1 EDIFY
-- -----
<S> <C> <C>
Revenues:
1998...................................................... 28.4% 71.6%
1999...................................................... 42.6% 57.4%
2000...................................................... 51.6% 48.4%
2001...................................................... 55.2% 44.8%
</TABLE>
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<TABLE>
<CAPTION>
RELATIVE CONTRIBUTIONS OF S1 AND EDIFY
--------------------------------------
S1 EDIFY
-- -----
<S> <C> <C>
Earnings Before Interest and Taxes:
2000...................................................... 84.3% 15.7%
2001...................................................... 86.1% 13.9%
Net Income:
2000...................................................... 80.3% 19.7%
2001...................................................... 82.5% 17.5%
</TABLE>
Based on the closing price of S1 common stock on May 14, 1999 of $54.00,
this analysis indicated:
- implied equity valuations for Edify ranging from approximately $356
million to $5,076 million;
- an implied Edify equity value per share ranging from $18.09 to $257.52;
and
- implied exchange ratios ranging from approximately 0.335 to 4.769.
In considering these analyses, BancBoston Robertson Stephens noted that
Edify stockholders would own approximately 14.7% of the shares of S1 common
stock to be outstanding after consummation of the Edify Transaction, without
giving effect to the FICS Transaction.
COMPARABLE COMPANIES ANALYSIS. Using publicly available information,
BancBoston Robertson Stephens analyzed, among other things, the market values
plus net debt, or "total capitalization," and trading multiples of Edify and
selected publicly traded companies that have similar business and operating
profiles, including:
- Bottomline Technologies, Inc.
- Broadvision, Inc.
- Fundtech LTD.
- Sanchez Computer Associates, Inc.
- Transaction System Architects, Inc.
Multiples compared by BancBoston Robertson Stephens included total
capitalization to revenues or estimated revenues for calendar years 1998, 1999
and 2000, total capitalization to earnings before interest and taxes, or "EBIT,"
or estimated EBIT for calendar years 1998, 1999 and 2000, price/earnings
multiples for calendar years 1998, 1999 and 2000 and price/earnings to growth
rate multiples for calendar year 1998 and 1999. All multiples were based on
closing stock prices as of May 14, 1999.
Using Edify management estimates and ranges of multiples derived by
BancBoston Robertson Stephens from the comparable companies of 10.0x - 15.0x for
1998 revenues, 7.5x - 12.5x for estimated 1999 revenues and 5.0x - 10.0x for
estimated 2000 revenues, the following Edify equity values, Edify values per
share and exchange ratios are implied:
<TABLE>
<CAPTION>
IMPLIED EDIFY EQUITY IMPLIED EXCHANGE
IMPLIED EDIFY EQUITY VALUE VALUE PER SHARE RATIO
-------------------------- -------------------- ----------------
<S> <C> <C> <C>
1998 revenues................... $642 - $946 million $33 - $48 0.603 - 0.889
1999 estimated revenues......... $596 - $971 million $30 - $49 0.560 - 0.912
2000 estimated revenues......... $533 - $1,033 million $27 - $52 0.501 - 0.971
</TABLE>
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Using street estimates for Edify, the same ranges of multiples of 1998,
1999 and 2000 revenues and ranges of multiples of 40.0x-90.0x for estimated 2000
EBIT and 60.0x-100.0x for estimated 2000 net income, the following Edify equity
values, Edify values per share and exchange ratios are implied:
<TABLE>
<CAPTION>
IMPLIED EDIFY
EQUITY VALUE PER IMPLIED EXCHANGE
IMPLIED EDIFY EQUITY VALUE SHARE RATIO
-------------------------- ---------------- ----------------
<S> <C> <C> <C>
1998 revenues................... $642 - $946 million $33 - $48 0.603 - 0.889
1999 estimated revenues......... $527 - $856 million $27 - $43 0.495 - 0.805
2000 estimated revenues......... $442 - $851 million $22 - $43 0.415 - 0.800
2000 estimated EBIT............. $150 - $296 million $8 - $15 0.141 - 0.279
2000 estimated net income....... $150 - $250 million $8 - $13 0.141 - 0.235
</TABLE>
PRECEDENT TRANSACTION ANALYSIS. Using publicly available information,
BancBoston Robertson Stephens analyzed the consideration offered plus net debt
assumed, or debt less cash on hand, and implied transaction value multiples paid
or proposed to be paid in 27 selected acquisition transactions in the internet
content and services industry since November 1995 and 51 selected acquisition
transactions in the enterprise application software industry since January 1998.
In analyzing these "precedent transactions," BancBoston Robertson Stephens
compared, among other things, the total consideration in such transactions as a
multiple of the preceding twelve months ("LTM") revenues and next twelve months
("NTM") revenues.
All multiples for the precedent transactions were based on public
information available at the time of the announcement. Based on this information
and other publicly available information, the following tables illustrate
implied Edify equity valuations, Edify equity valuations per share and exchange
ratios derived from applying a range of multiples derived from the precedent
transactions of LTM revenues and of NTM revenues:
IMPLIED EDIFY EQUITY VALUATION
(BASED UPON EDIFY MANAGEMENT ESTIMATES)
<TABLE>
<CAPTION>
IMPLIED EDIFY
IMPLIED EDIFY EQUITY VALUE IMPLIED
MULTIPLE RANGE EQUITY VALUATION PER SHARE EXCHANGE RATIO
-------------- ---------------- ------------- --------------
<S> <C> <C> <C> <C>
Internet Content and Services
Industry:
Multiples of LTM revenues..... 11.0x - 13.0x $727 - $853 million $37 - $43 0.683 - 0.802
Multiples of NTM revenues..... 17.0x - 21.0x $1,308 - $1,608 million $66 - $82 1.229 - 1.511
Enterprise Applications
Industry:
Multiples of LTM revenues..... 5.0x - 6.0x $349 - $412 million $18 - $21 0.328 - 0.387
Multiples of NTM revenues..... 3.0x - 4.0x $258 - $333 million $13 - $17 0.243 - 0.313
</TABLE>
IMPLIED EDIFY EQUITY VALUATION
(BASED UPON STREET ESTIMATES FOR EDIFY)
<TABLE>
<CAPTION>
IMPLIED EDIFY
IMPLIED EDIFY EQUITY VALUE IMPLIED
MULTIPLE RANGE EQUITY VALUATION PER SHARE EXCHANGE RATIO
-------------- ---------------- ------------- --------------
<S> <C> <C> <C> <C>
Internet Content and Services
Industry:
Multiples of LTM revenues..... 11.0x - 13.0x $727 - $853 million $37 - $43 0.683 - 0.802
Multiples of NTM revenues..... 17.0x - 21.0x $1,228 - $1,509 million $62 - $77 1.154 - 1.418
Enterprise Applications
Industry:
Multiples of LTM revenues..... 5.0x - 6.0x $349 - $412 million $18 - $21 0.328 - 0.387
Multiples of NTM revenues..... 3.0x - 4.0x $244 - $314 million $12 - $16 0.229 - 0.295
</TABLE>
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No company, business or transaction compared in the comparable companies
analysis or precedent transaction analysis is identical to S1 or Edify.
Accordingly, an analysis of the results of the foregoing is not entirely
mathematical; rather it involves complex considerations and judgments concerning
differences in financial and operating characteristics and other factors that
could affect the acquisition, public trading and other values of the comparable
companies, precedent transactions or the business segment, company or
transactions to which they are being compared.
DISCOUNTED CASH FLOW ANALYSIS. BancBoston Robertson Stephens performed a
discounted cash flow analysis of the after-tax free cash flows of Edify using a
range of earnings estimates for Edify for calendar years 1999 through 2004.
BancBoston Robertson Stephens first discounted the projected, after-tax free
cash flows through December 31, 2004 using discount rates ranging from 14% to
16%. Edify after-tax free cash-flows were calculated as the after-tax operating
earnings of Edify adjusted to add back non-cash expenses and deduct uses of cash
not reflected in the income statement. BancBoston Robertson Stephens then added
to the present value of the cash flows the terminal value of Edify at December
31, 2004, discounted back at the same discount rate to represent a present
value. The terminal value was computed by multiplying the projected EBIT for
Edify in calendar year 2004 by terminal multiples ranging from 15.0x to 17.0x.
The range of terminal multiples selected reflect BancBoston Robertson Stephens'
judgment as to an appropriate range of multiples at the end of the reference
period. The following table summarizes the resulting implied Edify equity
valuations, implied Edify equity values per share and implied exchange ratios:
<TABLE>
<CAPTION>
IMPLIED EDIFY IMPLIED EDIFY EQUITY
DISCOUNT RATES EQUITY VALUATION VALUE PER SHARE IMPLIED EXCHANGE RATIO
-------------- ------------------- -------------------- ----------------------
<S> <C> <C> <C>
14% - 16%............................ $356 - $434 million $18 - $22 0.334 - 0.408
</TABLE>
PRO FORMA ANALYSES. BancBoston Robertson Stephens analyzed certain pro
forma effects resulting from each of (i) the Edify Transaction considered on a
stand-alone basis and (ii) the Edify Transaction and the FICS Transaction
considered together, including, among other things, the impact of such
transactions on the projected revenues per share and projected cash earnings per
share of the combined company for fiscal years 2000 and 2001.
Pro Forma Analysis -- Without Giving Effect to the FICS Transaction.
BancBoston Robertson Stephens analyzed certain pro forma effects resulting from
the Edify Transaction without giving effect to the FICS Transaction, including,
among other things, the impact of the Edify Transaction on the projected
revenues per share and projected cash earnings per share of the resulting
combined company for fiscal years 2000 and 2001. The following tables summarize
the results of such analysis:
<TABLE>
<S> <C>
Pro Forma Analysis -- Without Giving Effect to the FICS
Transaction
(based upon management estimates)
Fiscal year 2000 revenue per share accretion................ 62.0%
Fiscal year 2001 revenue per share accretion................ 41.0%
</TABLE>
<TABLE>
<S> <C>
Pro Forma Analysis -- Without Giving Effect to the FICS
Transaction
(based upon street estimates)
Fiscal year 2000 revenue per share accretion................ 65.8%
Fiscal year 2000 cash earnings per share accretion.......... 4.9%
Fiscal year 2001 revenue per share accretion................ 55.4%
Fiscal year 2001 cash earnings per share accretion.......... 2.8%
</TABLE>
The actual results achieved by the combined company may vary from projected
results and the variations may be material.
Pro Forma Analysis -- Giving Effect to the FICS Transaction. BancBoston
Robertson Stephens analyzed certain pro forma effects resulting from the Edify
Transaction and the FICS Transaction
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considered together, including, among other things, the impact of such
transactions on the projected revenues per share and projected cash earnings per
share of the resulting combined company for fiscal years 2000 and 2001. The
following tables summarize the results of such analysis:
<TABLE>
<S> <C>
Pro Forma Analysis -- Giving Effect to the FICS Transaction
(based upon management estimates)
Fiscal year 2000 revenue per share accretion................ 78.1%
Fiscal year 2001 revenue per share accretion................ 45.6%
</TABLE>
<TABLE>
<S> <C>
Pro Forma Analysis -- Giving Effect to the FICS Transaction
(based upon street estimates)
Fiscal year 2000 revenue per share accretion................ 87.2%
Fiscal year 2000 cash earnings per share accretion.......... (5.5)%
Fiscal year 2001 revenue per share accretion................ 76.8%
Fiscal year 2001 cash earnings per share accretion.......... 26.4%
</TABLE>
The actual results achieved by the combined company may vary from projected
results and the variations may be material.
OTHER FACTORS AND COMPARATIVE ANALYSES. In rendering its opinion,
BancBoston Robertson Stephens considered certain other factors and conducted
certain other comparative analyses, including, among other things, a review of:
- the history of trading prices and volume for S1 common stock and Edify
common stock, for the period from May 14, 1998 to May 14, 1999; and
- selected published analysts' reports on S1 and Edify.
While the foregoing summary describes certain analyses and factors that
BancBoston Robertson Stephens deemed material in its presentation to the S1
board, it is not a comprehensive description of all analyses and factors
considered by BancBoston Robertson Stephens. The preparation of a fairness
opinion is a complex process that involves various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
these methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to summary description. BancBoston Robertson Stephens
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and of the factors considered by it, without
considering all analyses and factors, would create an incomplete view of the
evaluation process underlying the BancBoston Robertson Stephens opinion. Several
analytical methodologies were employed and no one method of analysis should be
regarded as critical to the overall conclusion reached by BancBoston Robertson
Stephens. Each analytical technique has inherent strengths and weaknesses, and
the nature of the available information may further affect the value of
particular techniques. The conclusions reached by BancBoston Robertson Stephens
are based on all analyses and factors taken as a whole and also on application
of BancBoston Robertson Stephens' own experience and judgment. Such conclusions
may involve significant elements of subjective judgment and qualitative
analysis. BancBoston Robertson Stephens therefore gives no opinion as to the
value or merit standing alone of any one or more parts of the analysis it
performed. In performing its analyses, BancBoston Robertson Stephens considered
general economic, market and financial conditions and other matters, many of
which are beyond the control of S1 and Edify. The analyses performed by
BancBoston Robertson Stephens are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than those
suggested by such analyses. Accordingly, analyses relating to the value of a
business do not purport to be appraisals or to reflect the prices at which the
business actually may be purchased. Furthermore, no opinion is being expressed
as to the prices at which shares of Edify common stock or S1 common stock may be
traded at any future time. None of the parties makes any
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<PAGE> 103
representations or warranties that the assumptions used by BancBoston Robertson
Stephens were or are correct.
The engagement letter between BancBoston Robertson Stephens and S1 provides
that, for its services, BancBoston Robertson Stephens is entitled to receive a
$500,000 fee payable upon delivery of its opinion. In a separate agreement,
BancBoston Robertson Stephens agreed to allow S1 to defer the payment of the
opinion fee until the closing of the Edify Transaction. S1 has also agreed to
reimburse BancBoston Robertson Stephens for certain of its out-of-pocket
expenses, including legal fees, and to indemnify and hold harmless BancBoston
Robertson Stephens and its affiliates and any director, employee or agent of
BancBoston Robertson Stephens or any of its affiliates, or any person
controlling BancBoston Robertson Stephens or its affiliates for certain losses,
claims, damages, expenses and liabilities relating to or arising out of services
provided by BancBoston Robertson Stephens as financial advisor to S1. The terms
of the fee arrangement with BancBoston Robertson Stephens, which S1 and
BancBoston Robertson Stephens believe are customary in transactions of this
nature, were negotiated at arm's length between S1 and BancBoston Robertson
Stephens, and the S1 board was aware of such fee arrangements. BancBoston
Robertson Stephens has provided certain investment banking services to S1 for
which it has been or will be paid fees, including acting as S1's exclusive
financial advisor in connection with the FICS Transaction and an investment in
S1 by Intuit, Inc. BancBoston Robertson Stephens has also provided certain
investment banking services to FICS in the past, including acting as co-managing
underwriter in connection with a potential initial public offering of FICS in
the first half of this year.
BancBoston Robertson Stephens was retained based on BancBoston Robertson
Stephens' experience as a financial advisor in connection with mergers and
acquisitions and in securities valuations generally, as well as BancBoston
Robertson Stephens' investment banking relationship and familiarity with S1.
BancBoston Robertson Stephens is an internationally recognized investment
banking firm. As part of its investment banking business, BancBoston Robertson
Stephens is frequently engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of securities, private placements and
other purposes. In the ordinary course of its business, BancBoston Robertson
Stephens may actively trade the debt and equity securities of S1 and Edify for
its own account and for the account of its customers and, accordingly, may at
any time hold a long or short position in such securities.
OPINION OF EDIFY'S FINANCIAL ADVISOR
Goldman, Sachs & Co. has acted as financial advisor to Edify in connection
with the Edify Transaction. On May 16, 1999, Goldman Sachs delivered its
opinion, subsequently confirmed in writing, to the Edify board of directors
that, as of the date of such opinion, the exchange ratio of 0.330969 pursuant to
the merger agreement was fair from a financial point of view to the holders of
Edify common stock.
THE FULL TEXT OF THE GOLDMAN SACHS OPINION IS ATTACHED AS ANNEX D TO THIS
PROXY STATEMENT/ PROSPECTUS AND IS INCORPORATED INTO THIS PROXY
STATEMENT/PROSPECTUS BY REFERENCE. STOCKHOLDERS OF EDIFY ARE URGED TO, AND
SHOULD, READ SUCH OPINION IN ITS ENTIRETY.
In connection with its opinion, Goldman Sachs reviewed:
- the merger agreement;
- the share purchase agreement and the stock purchase agreement;
- the annual reports to stockholders and Annual Reports on Form 10-K of
Edify for the three years ended December 31, 1998 and S1 for the two
years ended December 31, 1998;
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<PAGE> 104
- certain interim reports to stockholders and Quarterly Reports on Form
10-Q of Edify and S1;
- audited historical financial statements of FICS for the two years ended
December 31, 1998;
- certain other communications from Edify and S1 to their respective
stockholders;
- certain internal financial analyses and forecasts for Edify, S1 and FICS
prepared by their respective managements; and
- certain pro forma combined financial analyses and forecasts for Edify, S1
and FICS prepared by the managements of Edify, S1 and FICS, including
certain cost savings and operating synergies projected by the managements
of Edify, S1 and FICS to result from the Edify Transaction and the FICS
Transaction.
Goldman Sachs also held discussions with members of the senior management
of Edify, S1 and FICS regarding the strategic rationale for, and the potential
benefits of, the Edify Transaction and the FICS Transaction and the past and
current business operations, financial condition and future prospects of their
respective companies. In addition, Goldman Sachs reviewed the reported price and
trading activity for the Edify common stock and the S1 common stock, compared
certain financial and stock market information for Edify and S1 with similar
information for certain other companies the securities of which are publicly
traded, reviewed the financial terms of certain recent business combinations in
the software industry and performed such other studies and analyses as it
considered appropriate.
Goldman Sachs assumed the accuracy and completeness of all of the financial
and other information reviewed by it for purposes of rendering its opinion.
Goldman Sachs assumed, with the consent of the Edify board, that the financial
forecasts, including the pro forma combined financial analyses and forecasts for
Edify, S1 and FICS, referred to above have been reasonably prepared on a basis
reflecting the best currently available estimates and judgments of Edify, S1 and
FICS, as the case may be. Goldman Sachs also assumed, with the consent of the
Edify board, that (1) if the FICS Transaction is consummated, the pro forma
analyses and forecasts referenced in the immediately preceding sentence will be
realized in the amounts and time periods contemplated thereby and (2) if the
FICS Transaction is not consummated, the forecasts for S1 prepared by its
management will be realized in the amounts and time periods contemplated
thereby. In addition, Goldman Sachs did not make an independent evaluation or
appraisal of the assets and liabilities of Edify, S1 or FICS or any of their
respective subsidiaries and Goldman Sachs was not furnished with any such
evaluation or appraisal. The Goldman Sachs opinion was provided for the
information and assistance of the Edify board in connection with its
consideration of the transactions contemplated by the merger agreement. The
Goldman Sachs opinion does not constitute a recommendation as to how any holder
of Edify common stock should vote with respect to such transaction.
The following is a summary of the material financial analyses presented by
Goldman Sachs to the Edify board on May 16, 1999. Goldman Sachs utilized
substantially the same type of financial analyses in connection with providing
the written opinion attached to this proxy statement/prospectus as Annex D. SOME
OF THE SUMMARIES OF THE FINANCIAL ANALYSES INCLUDE INFORMATION PRESENTED IN
TABULAR FORMAT. THE TABLES MUST BE READ TOGETHER WITH THE TEXT ACCOMPANYING EACH
SUMMARY.
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<PAGE> 105
Historical Stock Trading Analysis. Goldman Sachs reviewed the historical
trading prices and volumes for the Edify common stock and the S1 common stock.
Such analysis indicated the following historical average closing prices for the
specified period prior to May 14, 1999:
<TABLE>
<CAPTION>
PERIOD EDIFY S1
- ------ ------ ------
<S> <C> <C>
One Year................................................ $ 7.70 $17.56
6 Months................................................ 7.66 27.92
3 Months................................................ 7.35 41.66
20 Days................................................. 10.42 53.23
10 Days................................................. 12.45 51.47
May 14, 1999............................................ 15.56 54.00
</TABLE>
Selected Companies Analysis. Goldman Sachs compared certain financial
information of Edify and S1 with publicly-available information of a group of
companies in the following industries:
<TABLE>
<CAPTION>
FINANCIAL SERVICES -- COMMUNICATIONS/TELECOM
FOCUSED COMPANIES SOFTWARE COMPANIES
- ------------------------------------ ---------------------------------------------
<S> <C>
Advent Software, Inc. Aspect Telecommunications Corporation
Brokat AG Genesys Telecommunications Laboratories, Inc.
Checkfree Corporation GeoTel Communications Corporation
Intuit, Inc. InterVoice, Inc.
Pegasystems, Inc. Periphonics Corporation
Towne Services, Inc.
Transaction Systems Architects, Inc.
INTERNET RELATED
SOFTWARE COMPANIES INSURANCE PROCESSORS COMPANIES
- ------------------------------------ ---------------------------------------------
BroadVision, Inc. Fiserv, Inc.
Check Point Software Technologies, The BISYS Group, Inc.
Ltd.
Concur Technologies, Inc. Policy Management Systems
Inktomi Corporation
VeriSign, Inc.
FINANCIAL OUTSOURCING COMPANIES
- ------------------------------------
Paychex, Inc.
Equifax, Inc.
Ceridian Corporation
HNC Software Inc.
Fair, Isaac and Company,
Incorporated
</TABLE>
The following table presents projected year 1999 and 2000 revenue as a
multiple of equity capitalization, stock price to projected year 1999 and 2000
earnings per share ("EPS") multiples, stock price to projected year 2000 EPS as
a multiple of 1999-2000 year over year EPS growth and stock price to projected
year 2000 EPS as a multiple of projected five year EPS growth. The analysis was
performed using stock prices on May 14, 1999. EPS and EPS growth rate
information for the selected companies and the five year projected EPS growth
rates for Edify and S1 are from estimates provided by Institutional Brokers
Estimate System ("IBES"). Revenue information for the selected companies are
from the latest research reports with respect to such companies. EPS, 1999-2000
EPS
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growth rate and revenue information for Edify and S1 are from estimates provided
by their respective managements. "P/E" refers to stock price dividend by EPS.
<TABLE>
<CAPTION>
YEAR 2000 YEAR 2000
P/E TO P/E TO
GROWTH GROWTH
1999 REVENUE 2000 REVENUE AS A MULTIPLE AS A MULTIPLE
AS A MULTIPLE AS A MULTIPLE STOCK PRICE STOCK PRICE OF YEAR OVER OF IBES
OF EQUITY OF EQUITY AS A MULTIPLE AS A MULTIPLE YEAR EPS 5-YEAR
CAPITALIZATION CAPITALIZATION OF 1999 EPS OF 2000 EPS GROWTH GROWTH RATE
-------------- -------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Edify........................... 3.9x 2.6x * 194.5x (1.7)x 7.1x
Edify-implied transaction price
(based on exchange ratio of
0.33097)...................... 4.6 3.0 * 223.4 (2.0) 8.1
S1.............................. 33.2 18.2 * 385.7 * 7.7
Financial services -- focused
software companies (median)... 6.5 4.8 54.7x 29.8 0.9 0.9
Communications/Telecom software
companies (median)............ 2.5 1.4 19.4 16.2 0.6 1.4
Internet related software
companies (median)............ 18.6 10.1 * 153.9 2.6 1.8
Insurance processor companies
(median)...................... 2.7 2.3 23.6 20.5 1.4 1.0
Financial outsourcing companies
(median)...................... 3.4 2.8 27.5 21.3 1.2 1.1
</TABLE>
- -------------------------
* Not meaningful
It should be noted that no company utilized in the analysis above is
identical to either Edify or S1. In evaluating the selected companies, Goldman
Sachs made judgments and assumptions with regard to industry performance,
general business, economic, market and financial conditions and other matters,
many of which are beyond the control of Edify or S1, such as the impact of
competition on the business of Edify or S1 and the industry generally, industry
growth and the absence of any material change in the financial condition and
prospects of Edify or S1 or the industry or in the financial markets in general.
Mathematical analysis (such as determining the average or median) is not in
itself a meaningful method of using selected company data.
Discounted Equity Value. Goldman Sachs performed an analysis of the
present value per share of Edify on a standalone basis based on a range of P/E
multiples and discount rates. Goldman Sachs observed that utilizing projections
of year 2000 earnings provided by management of Edify and based on forward year
2000 estimated P/E ratios ranging from 20x to 45x and discount rates ranging
from 30.0% to 50.0%, the present value per share of Edify common stock on a
standalone basis ranged from $6.20 to $15.52.
Goldman Sachs also performed an analysis of the pro forma present equity
value of the combined company after giving effect to the completion of the Edify
Transaction and the FICS Transaction. Goldman Sachs observed that based on pro
forma revenue for the calendar years 2000 and 2001 projected by management of
Edify and S1 with input from FICS for the combined company, forward revenue
multiples ranging from 12x to 22x and discount rates ranging from 25.0% to
45.0%, the present equity value of the combined company ranged from $2,584
million to $5,295 million using the calendar year 2000 revenue estimates and
$2,718 million to $6,461 million using the calendar year 2001 revenue estimates.
Based on pro forma ownership of Edify stockholders of the combined company of
approximately 10.7%, the present value per share of the combined company common
stock to be received by Edify stockholders in the transaction ranged from $14.02
to $28.73 using the calendar year 2000 revenue estimates and from $14.75 to
$35.06 using the calendar year 2001 revenue estimates.
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In addition, Goldman Sachs observed that based on pro forma net income for
the calendar year 2001 projected by management of Edify and S1 with input from
FICS for the combined company, forward P/E multiples ranging from 50x to 75x and
discount rates ranging from 25.0% to 45.0%, the present equity value of the
combined company ranged from $1,538 million to $2,991 million. Based on pro
forma ownership of Edify stockholders of the combined company of approximately
10.7%, the present value per share of the combined company common stock to each
Edify stockholder ranged from $8.35 to $16.23.
Finally, Goldman Sachs also performed an analysis of the pro forma present
equity value of the combined company after giving effect to the completion of
only the Edify Transaction. Goldman Sachs observed that based on pro forma
revenue for the calendar year 2000 projected by management of Edify and S1 for
the combined company, revenue multiples ranging from 12x to 22x and discount
rates ranging from 25.0% to 45.0%, the present equity value of the combined
company ranged from $2,105 million to $4,314 million. Based on pro forma
ownership of Edify stockholders of the combined company of approximately 15.1%,
the present value per share of the combined company common stock to each Edify
stockholder in the transaction ranged from $16.12 to $33.03.
Exchange Ratio History. Goldman Sachs reviewed the implied market exchange
ratio for shares of Edify common stock and S1 common stock on a weekly basis for
the period from May 24, 1996 to May 14, 1999, determined by dividing the weekly
average closing price for Edify common stock by the weekly average closing price
for S1 common stock for each week during the period. The weekly implied market
exchange ratio over this period ranged from approximately 5.50 to 0.18 with a
three month weekly implied average exchange ratio of 0.18, a 20-day weekly
implied average exchange ratio of 0.20 and a 10-day weekly implied average
exchange ratio of 0.24.
Transaction Premium Analysis. Goldman Sachs compared the historical stock
prices of Edify common stock and S1 common stock on the basis of the respective
closing prices per share on March 14, 1999, and the respective closing stock
prices and period averages for the prior five days, 10 days, 20 days, 30 days
and 60 days. The following table presents the premiums over Edify common stock
prices (at a point in time and an average of such prices for each of the periods
covered) implied by the exchange ratio of the Edify Transaction and the S1
common stock price as of May 14, 1999:
<TABLE>
<CAPTION>
PREMIUM PAID (BASED PREMIUM PAID (BASED
ON CLOSING PRICE AT ON AVERAGE CLOSING
PERIOD POINT IN TIME) PRICE OVER PERIOD)
- ------ ------------------- -------------------
<S> <C> <C>
May 14, 1999...................... 14.8% 14.8%
5 day............................ 20.2 23.3
10 day............................ 76.5 43.6
20 day............................ 120.0 71.6
30 day............................ 225.0 100.9
60 day............................ 186.0 142.7
</TABLE>
The following table presents the premiums over Edify common stock implied
by the exchange ratio of the Edify Transaction and based on (1) the implied
exchange ratio between the closing stock price of Edify common stock and S1
common stock at a point in time for each of the periods covered
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<PAGE> 108
and (2) the implied exchange ratio between the average closing stock price of
Edify common stock and S1 common stock for each of the periods covered:
<TABLE>
<CAPTION>
IMPLIED
EXCHANGE RATIO PREMIUM PAID PREMIUM PAID PREMIUM PAID
(BASED ON (BASED ON (BASED ON (BASED ON
CLOSING PRICES CLOSING PRICES AVERAGE CLOSING AVERAGE CLOSING
PERIOD AT POINT IN TIME) AT POINT IN TIME) PRICES DURING PERIOD) PRICES DURING PERIOD)
- ------ ----------------- ----------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
May 14, 1999......... 0.2882x 14.8% 0.2882x 14.8%
5 day............... 0.3043 8.7 0.2739 20.9
10 day............... 0.1802 83.7 0.2418 36.9
20 day............... 0.1776 86.4 0.1950 69.1
30 day............... 0.1217 171.9 0.1692 95.6
60 day............... 0.2584 28.1 0.1727 91.6
</TABLE>
Comparable Transaction Premium Analysis. Goldman Sachs analyzed certain
information relating to 105 selected transactions. The transactions were chosen
because they involved software companies since 1991. The following table
presents the ranges and the mean of the premiums paid in the transactions in
relation to the closing price of the target the day before the transaction was
announced and the 52-week high closing price of the target prior to the
announcement. The premium was calculated based on the equity consideration paid
for the target by the acquiror in the transactions.
<TABLE>
<CAPTION>
SELECTED TRANSACTIONS
------------------------
RANGE MEDIAN
---------------- ------
<S> <C> <C>
Premium to day prior closing price............ (13.0)% - 196.2% 23.8%
Premium to 52-week high....................... (74.6) - 52.5 (2.9)
</TABLE>
Those comparable transactions also provided the following range and median
for consideration paid as a trailing multiple of latest 12 month sales, earnings
before interest and taxes ("EBIT") and net income:
<TABLE>
<CAPTION>
SELECTED TRANSACTIONS
---------------------------------------
RANGE MEDIAN
------------------------------ ------
<S> <C> <C> <C> <C>
Multiple of LTM sales............................. 0.6x - 29.8x 4.7x
Multiple of LTM EBIT.............................. 12.2 - 210.9 39.7
Multiple of LTM net income........................ 9.5 - 194.6 58.9
</TABLE>
Based in part on Edify management projections of revenues, EBIT and net
income for the years 1999 and 2000, which projections are based on a
"stand-alone" model for Edify, the Edify Transaction provides the following
ratios of equity consideration to latest 12 month revenues, EBIT and net income
as well as projected 1999 and 2000 revenues, EBIT and net income:
<TABLE>
<CAPTION>
MULTIPLE
--------
<S> <C>
LTM revenues................................................ 4.5x
Projected 1999 revenues..................................... 4.1
Projected 2000 revenues..................................... 2.7
Projected 1999 EBIT......................................... *
Projected 2000 EBIT......................................... 46.7
Projected 1999 net income................................... *
Projected 2000 net income................................... 42.9
</TABLE>
- -------------------------
* Not meaningful
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The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses. No company or
transaction used in the above analyses as a comparison is directly comparable to
Edify, S1 or FICS or the Edify Transaction or the Edify Transaction together
with the FICS Transaction. The analyses were prepared solely for purposes of
Goldman Sachs' providing its opinion to the Edify board as to the fairness from
a financial point of view of the exchange ratio pursuant to the merger agreement
to the holders of Edify common stock. The analyses do not purport to be
appraisals or necessarily reflect the prices at which the business or securities
actually may be sold. Analyses based upon forecasts of future results and
assumptions with respect to industry performance, business and economic
conditions and other matters, which are inherently subject to uncertainty and
are beyond the control of Edify, S1, FICS and Goldman Sachs, are not necessarily
indicative of actual future results, which may be significantly more or less
favorable than suggested by such analyses. None of the parties makes any
representations as to the assumptions employed by Goldman Sachs in its analyses.
As described above, Goldman Sachs' opinion to the Edify board was one of many
factors taken into consideration by the Edify board in making its determination
to approve the merger agreement. The foregoing summary describes material
financial analyses used by Goldman Sachs in connection with providing its
opinion to Edify's board of directors on May 16, 1999, but does not purport to
be a complete description of the analysis performed by Goldman Sachs in
connection with such opinion and is qualified by reference to the written
opinion of Goldman Sachs set forth in Annex D.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. Edify selected Goldman
Sachs as its financial advisor because it is a nationally recognized investment
banking firm that has substantial experience in transactions similar to the
Edify Transaction.
Goldman Sachs is familiar with Edify having provided certain investment
banking services to Edify from time to time, including having acted as lead
managing underwriter of the initial public offering of 2,875,000 shares of Edify
common stock in May 1996, and having acted as its financial advisor in
connection with, and having participated in certain of the negotiations leading
to, the merger agreement.
Goldman Sachs provides a full range of financial, advisory and brokerage
services and in the course of its normal trading activities may from time to
time effect transactions and hold positions in the securities or options on
securities of Edify or S1 for its own account and for the account of customers.
As of May 16, 1999, Goldman Sachs had a long position of 1,017,956 shares of
Edify common stock.
Pursuant to a letter agreement dated March 19, 1999, Edify engaged Goldman
Sachs to act as its financial advisor in connection with a potential transaction
involving S1 or a third party. Edify has agreed to pay Goldman Sachs a
transaction fee equal to $2.5 million and 2% of the aggregate consideration paid
in the Edify Transaction in excess of $150 million upon consummation of the
Edify Transaction. Edify has agreed to reimburse Goldman Sachs for its
reasonable out-of-pocket expenses, including attorney's fees, and to indemnify
Goldman Sachs against certain liabilities, including certain liabilities under
the federal securities laws.
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INTERESTS OF CERTAIN PERSONS IN THE EDIFY TRANSACTION
When considering the recommendations of S1's and Edify's boards of
directors, you should be aware that the directors and officers of S1 and Edify
have certain interests in the Edify Transaction and have certain arrangements
that are different from, or are in addition to those of S1 and Edify
stockholders generally. These include:
- Employment. Jeffrey M. Crowe, the President and Chief Executive Officer
of Edify will become Vice Chairman and a member of the S1 board of
directors after the Edify Transaction. In addition, some other executive
officers of Edify will become executive officers of S1.
- Indemnification. S1 and Edify officers and directors have customary
rights to indemnification against specified liabilities.
- Options. Some Edify executives have recently been granted stock options.
Some holders of Edify stock options, including these executives, will
benefit from the accelerated vesting of their options if the Edify
Transaction closes. As of , 1999, shares of Edify
common stock are subject to unvested options granted under Edify's option
plans. Vesting of these options could accelerate if holders of these
options are not retained by S1 after the closing of the Edify
Transaction. S1 will assume these Edify options if the Edify Transaction
closes. In addition, S1 has agreed, if the Edify Transaction closes, to
grant additional options to purchase S1 common stock to some Edify
executives.
- Severance. Some Edify executives will be paid substantial severance
packages if the Edify Transaction closes and their employment with S1 or
Edify is terminated.
As a result, these directors could be more likely to vote to approve the
merger agreement and the Edify Transaction than if they did not hold these
interests.
COMPLETION AND EFFECTIVENESS OF THE EDIFY TRANSACTION
The Edify Transaction will be completed when all of the conditions to
completion of the Edify Transaction are satisfied or waived, including approval
and adoption of the merger agreement and approval of the Edify Transaction by
the stockholders of Edify and approval of the issuance of shares of S1 common
stock by the S1 stockholders. The Edify Transaction will become effective upon
the filing of a certificate of merger with the State of Delaware.
STRUCTURE OF THE EDIFY TRANSACTION AND CONVERSION OF EDIFY COMMON STOCK
Sahara Strategy Corp., a newly formed and wholly owned subsidiary of S1,
will be merged with and into Edify. As a result of the Edify Transaction, the
separate corporate existence of Sahara will cease and Edify will survive the
Edify Transaction as a wholly owned subsidiary of S1.
Upon completion of the Edify Transaction, each outstanding share of Edify
common stock, other than shares held by Edify and its subsidiaries, together
with each associated Edify preferred stock purchase right, will be converted
into the right to receive 0.330969 shares of fully paid and nonassessable S1
common stock. The number of shares of S1 common stock issuable in the Edify
Transaction will be proportionately adjusted for any stock split, stock dividend
or similar event with respect to Edify common stock or S1 common stock effected
between the date of the merger agreement and the completion of the Edify
Transaction.
No certificate or scrip representing fractional shares of S1 common stock
will be issued in connection with the Edify Transaction. Instead Edify
stockholders will receive cash, without interest, in lieu of a fraction of a
share of S1 common stock.
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EXCHANGE OF EDIFY STOCK CERTIFICATES FOR S1 STOCK CERTIFICATES
When the Edify Transaction is completed, S1's exchange agent will mail to
Edify stockholders a letter of transmittal and instructions for use in
surrendering Edify stock certificates in exchange for S1 stock certificates.
When you deliver your Edify stock certificates to the exchange agent along with
an executed letter of transmittal and any other required documents, your Edify
stock certificates will be canceled and you will receive S1 stock certificates
representing the number of full shares of S1 common stock to which you are
entitled under the merger agreement. Edify stockholders will receive payment in
cash, without interest, in lieu of any fractional shares of S1 common stock
which would have been otherwise issuable to you in the Edify Transaction.
YOU SHOULD NOT SUBMIT YOUR EDIFY STOCK CERTIFICATES FOR EXCHANGE UNLESS AND
UNTIL YOU RECEIVE THE TRANSMITTAL INSTRUCTIONS AND A FORM OF LETTER OF
TRANSMITTAL FROM THE EXCHANGE AGENT.
Edify stockholders are not entitled to receive any dividends or other
distributions on S1 common stock until the Edify Transaction is completed and
they have surrendered their Edify stock certificates in exchange for S1 stock
certificates.
Subject to the effect of applicable laws, promptly following surrender of
Edify stock certificates and the issuance of the corresponding S1 certificates,
Edify stockholders will be paid the amount of dividends or other distributions,
without interest, with a record date after the completion of the Edify
Transaction which were previously paid with respect to their whole shares of S1
common stock. At the appropriate payment date, Edify stockholders will also
receive the amount of dividends or other distributions, without interest, with a
record date after the completion of the Edify Transaction and a payment date
after they exchange their Edify stock certificates for S1 stock certificates.
S1 will only issue Edify stockholders an S1 stock certificate or a check in
lieu of a fractional share in a name in which the surrendered Edify stock
certificate is registered. If you wish to have your certificate issued in
another name you must present the exchange agent with all documents required to
show and effect the unrecorded transfer of ownership and show that you paid any
applicable stock transfer taxes.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE EDIFY TRANSACTION
The following summary discusses the material federal income tax
consequences of the Edify Transaction. The summary is based on the Internal
Revenue Code of 1986, as amended, referred to in this section as the Code,
applicable U.S. Treasury regulations under the Code, administrative rulings and
judicial authority, all as of the date of this proxy statement/prospectus. All
of the foregoing authorities are subject to change, and any change could affect
the continuing validity of this summary. The summary assumes that the holders of
shares of Edify common stock hold their shares as a capital asset. The summary
does not address the tax consequences that may be applicable to particular Edify
stockholders in light of their individual circumstances or to Edify stockholders
who are subject to special tax rules, like tax-exempt organizations, dealers in
securities, financial institutions, insurance companies, non-United States
persons, stockholders who acquired shares of Edify common stock from the
exercise of options or otherwise as compensation or through a qualified
retirement plan and stockholders who hold shares of Edify common stock as part
of a straddle, hedge, or conversion transaction. This summary also does not
address any consequences arising under the tax laws of any state, locality, or
foreign jurisdiction.
One of the conditions for the Edify Transaction to take place is that S1
and Edify must receive an opinion from Hogan & Hartson L.L.P., S1's special
counsel, that the Edify Transaction will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code.
The opinion must be reasonably satisfactory to S1 and Edify. The opinion of
Hogan & Hartson L.L.P. will be based on the Code, the U.S. Treasury regulations
promulgated under the
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Code and related administrative interpretations and judicial decisions, all as
in effect as of the effective time of the merger, on the assumption that the
Edify Transaction takes place as described in the merger agreement, and on
factual representations to be provided to Hogan & Hartson L.L.P. by S1 and Edify
that relate to the satisfaction of specific requirements to a reorganization
within the meaning of Section 368(a) of the Code, including limitations on
repurchases by S1 of shares of S1 common stock to be issued upon the merger. If
Hogan & Hartson L.L.P. does not render this opinion, this condition in the
merger agreement may be satisfied if Fenwick & West L.L.P., Edify's counsel,
renders this opinion, relying upon the same representations. Unlike a ruling
from the Internal Revenue Service, an opinion of counsel is not binding on the
Internal Revenue Service and there can be no assurance that the Internal Revenue
Service will not take a position contrary to one or more of the positions
reflected in the opinion or that these positions will be upheld by the courts if
challenged by the Internal Revenue Service. If this opinion is not received, or
if the material tax consequences described in the opinion materially differ from
the consequences stated below, Edify will not waive this condition and the Edify
Transaction will not occur unless Edify resolicits its stockholders.
If, as concluded in the opinion of counsel, the Edify Transaction qualifies
as a tax-free reorganization within the meaning of Section 368(a) of the Code,
then:
(1) Except as discussed in (4) below regarding cash received instead
of a fractional share of S1 common stock, an Edify stockholder
will recognize no gain or loss upon the exchange of Edify common
stock for S1 common stock in the merger.
(2) The tax basis of S1 common stock received by an Edify stockholder
in the merger will be the same as the stockholder's aggregate tax
basis in Edify common stock surrendered in exchange therefor.
(3) The holding period of S1 common stock received by a Edify
stockholder in the merger will include the holding period of Edify
common stock surrendered in exchange therefor, assuming Edify
common stock was held as a capital asset.
(4) The receipt by an Edify stockholder of cash instead of fractional
shares of S1 common stock will be treated as if the fractional
shares were distributed as part of the Edify Transaction and then
were redeemed by S1. These cash payments will be treated as
distributions in full payment in exchange for the stock redeemed,
subject to the conditions and limitations of Section 302(a) of the
Code.
(5) Neither S1 nor Edify will recognize any gain or loss as a result
of the Edify Transaction.
THIS DISCUSSION IS ONLY A GENERAL SUMMARY OF THE MATERIAL FEDERAL INCOME
TAX CONSEQUENCES OF THE EDIFY TRANSACTION. THE TAX CONSEQUENCES OF THE EDIFY
TRANSACTION TO YOU MAY BE DIFFERENT FROM THOSE SUMMARIZED ABOVE, BASED ON YOUR
INDIVIDUAL SITUATION. THE STOCKHOLDERS OF EDIFY ARE STRONGLY URGED TO CONSULT
THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE EDIFY
TRANSACTION, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE APPLICABILITY AND
EFFECT OF FEDERAL, STATE, LOCAL AND OTHER APPLICABLE TAX LAWS, AND THE EFFECT OF
ANY PROPOSED CHANGES IN THE TAX LAWS.
Holders of options to purchase Edify common stock that are outstanding at
the effective time of the Edify Transaction will have their Edify options
converted into options to purchase shares of S1 common stock. See "The Edify
Agreements -- The Merger Agreement -- Treatment of Edify Stock Options and
Warrants; Grant of S1 Stock Options" on page . The assumption of the options
by S1 should not be a taxable event and former holders of Edify options who hold
options to purchase S1 common stock after the Edify Transaction should be
subject to the same federal income tax treatment upon exercise of those options
as would have applied if they had exercised their Edify options.
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HOLDERS OF EDIFY OPTIONS ARE STRONGLY URGED TO CONSULT THEIR OWN TAX
ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING
TAX RETURN REPORTING REQUIREMENTS, AVAILABLE ELECTIONS, THE APPLICABILITY AND
EFFECT OF FEDERAL, STATE, LOCAL AND OTHER APPLICABLE TAX LAWS, AND THE EFFECT OF
ANY PROPOSED CHANGES IN THE TAX LAWS.
ACCOUNTING TREATMENT OF THE EDIFY TRANSACTION
We intend to account for the Edify Transaction as a purchase for financial
reporting and accounting purposes, under generally accepted accounting
principles. After the Edify Transaction, the results of operations of Edify will
be included in the consolidated financial statements of S1. The purchase price,
i.e., the aggregate transaction consideration, will be allocated based on the
fair values of the assets acquired and the liabilities assumed. Any excess of
cost over fair value of the net tangible assets of Edify acquired will be
recorded as goodwill and other intangible assets and will be amortized by
charges to operations under generally accepted accounting principles. These
allocations will be made based upon valuations and other studies that have not
yet been finalized.
REGULATORY FILINGS AND APPROVALS REQUIRED TO COMPLETE THE EDIFY TRANSACTION
The Edify Transaction is subject to the requirements of the HSR Act. S1
filed the required information and materials with the Antitrust Division and the
FTC. The notification under the HSR Act remains effective and permits closing of
the Edify Transaction within one year from the expiration or termination of the
waiting period.
The Antitrust Division or the FTC may challenge the Edify Transaction on
antitrust grounds either before or after expiration of the waiting period.
Accordingly, before or after the completion of the Edify Transaction, either the
Antitrust Division or the FTC, or private persons, could take action under the
antitrust laws, including seeking to enjoin the Edify Transaction. In addition,
before or after the completion of the Edify Transaction, whether or not the
waiting period expired or ended, one or more states could take action under the
antitrust laws. We may not prevail if a challenge is made.
Neither S1 nor Edify is aware of any other material governmental or
regulatory approval required for completion of the Edify Transaction, other than
the effectiveness of the registration statement of which this prospectus/proxy
statement is a part, and compliance with applicable corporate law of Delaware.
RESTRICTIONS ON SALES OF SHARES BY AFFILIATES OF EDIFY AND S1
The shares of S1 common stock to be issued in the Edify Transaction will be
registered under the Securities Act. These shares will be freely transferable
under the Securities Act, except for shares of S1 common stock issued to any
person who is an affiliate of either of us. Persons who may be deemed to be
affiliates include individuals or entities that control, are controlled by, or
are under common control of either of us and may include some of our officers
and directors, as well as our principal stockholders. Affiliates may not sell
their shares of S1 common stock acquired in the Edify Transaction except
pursuant to (1) an effective registration statement under the Securities Act
covering the resale of those shares, (2) an exemption under paragraph (d) of
Rule 145 under the Securities Act or (3) any other applicable exemption under
the Securities Act.
LISTING ON THE NASDAQ NATIONAL MARKET OF S1 COMMON STOCK TO BE ISSUED IN THE
EDIFY TRANSACTION
It is a condition to the closing of the Edify Transaction that the shares
of S1 common stock to be issued in the Edify Transaction be approved for listing
on the Nasdaq National Market, subject to official notice of issuance.
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DELISTING AND DEREGISTRATION OF EDIFY COMMON STOCK AFTER THE EDIFY TRANSACTION
If the Edify Transaction is completed, Edify common stock will be delisted
from the Nasdaq National Market and will be deregistered under the Securities
Exchange Act.
OPERATIONS AFTER THE EDIFY TRANSACTION
Following the Edify Transaction, Edify will continue its operations as a
wholly owned subsidiary of S1. The stockholders of Edify will become
stockholders of S1, and their rights as stockholders will be governed by the S1
amended and restated certificate of incorporation, the S1 amended and restated
bylaws and the laws of the State of Delaware. See "Comparison of Rights of
Holders of S1 Common Stock and Edify Common Stock" on page .
THE EDIFY AGREEMENTS
THE MERGER AGREEMENT
This section of the prospectus/proxy statement describes the Edify merger
agreement. While we believe that the description covers the material terms of
the merger agreement, this summary may not contain all of the information that
is important to you. The merger agreement is attached to this prospectus/proxy
statement as Annex A and we urge you to read it carefully.
Representations and Warranties
Each company made a number of representations and warranties in the merger
agreement regarding aspects of their respective businesses, financial condition,
structure and other facts pertinent to the Edify Transaction. Representations
and warranties of both companies address the same topics, which include the
following:
- corporate organization and qualification to do business and
identification of affiliates
- certificate of incorporation and bylaws
- capitalization
- authorization of the various agreements, approval of the Edify
Transaction by the board of directors and pending stockholder approval
- financial statements
- taxes, employee benefit plans and insurance policies
- material contracts
- title to properties owned and leased
- intellectual property
- liabilities and litigation
- changes in business since December 31, 1998
- compliance with regulatory requirements and environmental laws
- securities, antitrust and other commercial regulatory approvals
- filings and reports with the Securities and Exchange Commission
- compliance with applicable laws
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- the fairness opinion received by each party from its financial advisor
- information supplied by each party in this prospectus/proxy statement and
the related registration statement filed by S1
Edify also made representations and warranties to S1 regarding the
following:
- Edify's ownership of S1 stock
- payments, if any, required to be made by Edify to employees and directors
on account of the Edify Transaction
- the inapplicability of the relevant Delaware takeover statute
- the inapplicability of Edify's stockholders rights agreement, or poison
pill, to the Edify Transaction
The representations and warranties in the merger agreement are complicated
and not easily summarized. You are urged to carefully read the articles of the
merger agreement entitled "Representations and Warranties of Edify" and
"Representations and Warranties of S1."
Edify's Conduct of Business before Completion of the Edify Transaction
Edify agreed that until the completion of the Edify Transaction or unless
S1 consents in writing, Edify and its subsidiaries will use their commercially
reasonable efforts consistent with past practices and policies to:
- preserve intact their present business organization
- keep available the services of their present employees
- preserve their relationships with customers and others with which they
have business dealings
Edify also agreed that until the completion of the Edify Transaction or
unless S1 consents in writing, Edify and its subsidiaries would conduct their
business in compliance with certain specific restrictions relating to the
following:
- the payment of dividends or other distributions
- the issuance and redemption of securities
- modification of Edify's certificate of incorporation and bylaws
- capital expenditures
- entrance into or modification of contracts
- the acquisition of assets or other entities
- actions affecting the representations and warranties in the Edify
Transaction
- accounting policies and procedures
- employees and employee benefits
- the incurrence of indebtedness
- sale, purchase, lease or relocation of any office
- investments and other dispositions of Edify's assets or real estate
- changes in Edify's options or restricted purchase plans
- Edify's intellectual property
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- changes in Edify's stockholders rights agreement, or poison pill
- solicitation or negotiation of a business combination or similar
transaction involving Edify and a party other than S1 (although Edify may
enter into negotiations regarding a business combination transaction with
a party other than S1 if Edify's board determines in the exercise of its
fiduciary duties that it should do so)
The agreements related to the conduct of Edify's business in the merger
agreement are complicated and not easily summarized. You are urged to carefully
read the sections of the merger agreement entitled "Covenants of Edify."
S1's Conduct of Business before Completion of the Edify Transaction
S1 agreed that until the completion of the Edify Transaction or unless
Edify consents in writing, S1 and its subsidiaries will not take any action to
affect their ability to complete, or which would materially delay completion of,
the Edify Transaction or take any action that would be expected to violate the
representations and warranties made in the merger agreement.
The agreements related to the conduct of S1's business in the merger
agreement are complicated and not easily summarized. You are urged to carefully
read the section of the merger agreement entitled "Covenants of S1."
Edify's Employee Benefit Plans
Individuals who are employed by Edify when the Edify Transaction is
completed will become employees of S1 or one of S1's subsidiaries, although S1
may terminate these employees at any time. S1 and Edify will work together to
agree upon mutually acceptable employee benefit, compensation, severance,
separation and retention arrangements so as to provide benefits to Edify
employees generally equivalent to those provided to these employees prior to the
Edify Transaction.
Treatment of Edify Stock Options and Warrants; Grant of S1 Stock Options
Upon completion of the Edify Transaction, each outstanding option to
purchase Edify common stock shall be converted automatically into an option to
purchase the number of shares of S1 common stock equal to 0.330969 times the
number of shares of Edify common stock subject to the option, rounded down to
the nearest share. The exercise price will be equal to the exercise price per
share of Edify common stock subject to the option before conversion divided by
0.330969, rounded up to the nearest cent.
The other terms of each option and the Edify option plans referred to above
under which the options were issued will continue to apply in accordance with
their terms, including any provisions providing for acceleration. Upon
completion of the Edify Transaction, each outstanding award, including
restricted stock, stock equivalents and stock units, under any employee
incentive or benefit plans, programs or arrangements maintained by Edify which
provide for grants of equity-based awards will be amended or converted into a
similar instrument of S1, with certain adjustments to preserve their value. The
other terms of each Edify award, and the plans or agreements under which they
were issued, will continue to apply in accordance with their terms, including
any provisions providing for acceleration.
S1 also agreed, upon completion of the Edify Transaction, to grant options
to purchase S1 common stock to some senior executives of Edify.
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Conditions to Completion of the Edify Transaction
The respective obligations of S1 and Edify to complete the Edify
Transaction and the other transactions contemplated by the merger agreement are
subject to the satisfaction or waiver of each of the following conditions:
- the issuance of shares of S1 common stock must be approved by a majority
of the shares of S1 common stock represented in person or by proxy at the
S1 stockholder meeting
- the merger agreement and Edify Transaction must be approved and adopted
by a majority of the outstanding shares of Edify common stock
- the shares of S1 common stock to be issued must be authorized for listing
on Nasdaq, subject to notice of issuance
- S1's registration statement must be effective, no stop order suspending
its effectiveness will be in effect and no proceedings for suspension of
its effectiveness will be pending before or threatened by the Securities
and Exchange Commission
- no law, regulation or order must be enacted or issued which has the
effect of making the Edify Transaction illegal or otherwise prohibiting
completion of the Edify Transaction substantially on the terms
contemplated by the merger agreement
- all applicable waiting periods, if any, under applicable antitrust and
competition laws must have expired or been terminated
- S1 and Edify must each receive from Hogan & Hartson L.L.P., S1's special
counsel, an opinion to the effect that the Edify Transaction will
constitute a tax-free reorganization within the meaning of Section 368(a)
of the Internal Revenue Code. However, if Hogan & Hartson L.L.P. does not
render this opinion, this condition will be satisfied if Fenwick & West
LLP, Edify's counsel, renders the opinion.
We also agreed that our obligations to complete the Edify Transaction and
the other transactions contemplated by the merger agreement are subject to the
satisfaction or waiver of each of the following additional conditions by the
other party before completion of the Edify Transaction:
- the other party's representations and warranties must be true and correct
as of May 16, 1999 and at and as of the date the Edify Transaction is to
be completed as if made at and as of such time except to the extent the
representations and warranties address matters only as of a particular
date, they must be true and correct as of that date
- if any of these representations and warranties are not true and correct
but the effect in each case, or in the aggregate, of the inaccuracies of
these representations and breaches of these warranties, is not and does
not have a material adverse effect on the party making the
representations and warranties, then this condition will be deemed
satisfied
- the other party must perform or comply with all of its agreements and
covenants required by the merger agreement to be performed or complied
with by it at or before completion of the Edify Transaction, except where
the nonperformance does not or would not have a material adverse effect
on Edify (before or after the Edify Transaction) or S1
- no material adverse effect with respect to the other party, taken as a
whole with its subsidiaries, shall have occurred and be continuing.
A material adverse effect is a condition, event, change or occurrence that
has had or would have a material adverse effect on the ability of S1 or Edify to
perform its obligations under the merger agreement or on S1 or Edify, and its
respective subsidiaries, taken as a whole, taking into account the business,
customers, assets, capitalization, financial condition and results of operations
of the entity,
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except to the extent that the change, event, violation, inaccuracy, circumstance
or effect primarily results from the following:
- the direct effect of the public announcement, pendency or consummation of
the Edify Transaction
- changes in general economic conditions or changes affecting the industry
generally in which such entity operates
- changes in trading prices for such entity's capital stock
S1's obligation to complete the Edify transaction is also subject to the
satisfaction or waiver of each of the following conditions:
- any consent to the Edify Transaction of a third party arising under an
agreement between that party and Edify, which, if not obtained would have
a material adverse effect on Edify, must be obtained
- no governmental agency shall have started or threatened to start a
proceeding seeking an injunction to prevent completion of the merger
- S1 will have received letters from KPMG LLP, Edify's independent public
accountants, regarding the financial data regarding Edify contained in
this prospectus/proxy statement
Termination of the Merger Agreement
The merger agreement may be terminated at any time prior to completion of
the Edify Transaction, whether before or after approval and adoption of the
merger agreement and approval of the Edify Transaction by Edify stockholders or
approval of the issuance of shares of common stock by S1 stockholders:
- by mutual consent of S1 and Edify
- by S1 or Edify, if there is any final and nonappealable order of a court
or governmental authority having jurisdiction over either company
permanently enjoining, restraining or prohibiting the completion of the
Edify Transaction
- by S1 or Edify, if the Edify Transaction is not completed before March
31, 2000 except that this right to terminate the merger agreement is not
available to any party whose action or failure to act has resulted in the
failure of the Edify Transaction to occur on or before March 31, 2000
- by S1 or Edify, if the issuance of stock pursuant to the Edify
Transaction fails to receive the requisite vote for approval by the
stockholders of S1 at the S1 stockholder meeting
- by S1 or Edify, if the merger agreement and Edify Transaction fail to
receive the requisite vote for approval and adoption by the stockholders
of Edify at the Edify special meeting
- by S1 or Edify, if there has been a breach of the merger agreement by the
other party which breach has had or is reasonably likely to have a
material adverse effect on the breaching party, in the case of a breached
representation or warranty, or on any of Edify (before or after
completion of the Edify Transaction) or S1, in the case of a breached
agreement by a party in the merger agreement and the breach is not cured
within 30 days or cannot be cured within 30 days of notifying the
breaching party of the breach
- by S1, if Edify's board of directors (a) fails to call and hold an Edify
stockholder meeting within 45 days of registration of the shares to be
issued by S1 with the Securities and Exchange Commission, (b) withdraws
or amends or modifies in a manner adverse to S1 or
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fails to recommend approval of the merger agreement to its stockholders,
(c) approves an extraordinary transaction inconsistent with the merger
agreement, (d) fails to recommend rejection of a tender offer commenced
by another party not related to S1 within ten business days of the tender
offer, or (e) violates its agreement not to solicit or negotiate an
extraordinary transaction
- by Edify, if S1's board of directors (a) fails to call and hold the S1
stockholder meeting within 45 days of registration of the shares to be
issued by S1 with the Securities and Exchange Commission, or (b)
withdraws or amends or modifies in a manner adverse to S1 or fails to
recommend approval of the issuance of S1 common stock in the Edify
Transaction to its stockholders
- by Edify, if on or after December 1, 1999, Edify's board authorizes Edify
to enter into an extraordinary transaction, such as a merger or sale of
20% or more of Edify's assets or stock, with a party other than S1 which
the Edify board determines is more favorable to Edify's stockholders than
the Edify Transaction, and S1 does not, upon notice of such decision,
meet or exceed the other proposal
Expenses; Breakup Fee
The merger agreement generally provides for S1 and Edify to pay their own
expenses relating to the merger agreement, with S1 paying the filing and other
fees paid to the Securities and Exchange Commission. However, if the merger
agreement is terminated by S1 or Edify as a result of a material breach of a
representation, warranty, covenant or other agreement contained in the merger
agreement by the other party, or if either S1 or Edify terminates the merger
agreement because the other party (1) fails to hold its stockholder meeting on a
timely basis, (2) fails to recommend to its stockholders approval of the Edify
Transaction, or, in the case of a termination by S1, (3) fails to oppose any
third party proposal that is inconsistent with the merger agreement, or (4)
violates the merger agreement's restriction on discussions and negotiations with
third parties regarding extraordinary transactions, the merger agreement
provides for the non-terminating party to pay all reasonable expenses of the
terminating party up to $500,000, plus a fee of $5 million. If either party
fails to obtain the approval of its stockholders for the Edify Transaction, the
party failing to obtain approval will pay the other all reasonable expenses up
to $500,000, plus a fee of $1 million. If Edify terminates the merger agreement
because it has authorized entering into an extraordinary transaction with a
party other than S1, Edify will pay all reasonable expenses of S1 up to
$500,000, plus a fee of $5 million.
Some of the events described in this section that would permit a party to
terminate the merger agreement would constitute purchase events under the option
agreement. The option agreement provides that if S1 exercises the option for
shares of Edify common stock granted to S1 by Edify and sells the option or
shares acquired by exercise of the option, expenses and any fee paid by Edify to
S1 under the merger agreement could be refunded partially or fully to Edify. See
"The Edify Agreements -- Related Agreements -- Option Agreement."
Extension, Waiver and Amendment of the Merger Agreement
S1 and Edify may amend the merger agreement before completion of the Edify
Transaction provided both comply with applicable state law in so doing.
Either S1 or Edify may extend the other's time for the performance of any
of the obligations or other acts under the merger agreement, waive any
inaccuracies in the other's representations and warranties and waive compliance
by the other with any of the agreements or conditions contained in the merger
agreement.
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RELATED AGREEMENTS
This section of the prospectus/proxy statement describes agreements related
to the merger agreement including the stock option agreement, the Edify
stockholders' voting agreements, S1 stockholders' voting agreements. While we
believe that these descriptions cover the material terms of these agreements,
these summaries may not contain all of the information that is important to you.
The Stock Option Agreement
The stock option agreement grants S1 the option to buy up to a number of
shares of Edify common stock equal to 19.9% of the issued and outstanding shares
of Edify common stock as of the first date, if any, upon which the option is
exercisable, at an exercise price of $17.87 per share. The number of shares
issuable upon exercise of the option and the exercise price of the option are
subject to adjustment to prevent dilution. Based on the number of shares of
Edify common stock outstanding on , 1999, the option would be
exercisable for approximately shares of Edify common stock. S1
required Edify to grant this stock option as a prerequisite to entering into the
merger agreement.
The option is intended to increase the likelihood that the Edify
Transaction will be completed. Aspects of the stock option agreement may have
the effect of discouraging persons who might now or at any time be interested in
acquiring all or a significant interest in Edify or its assets before completion
of the Edify Transaction.
S1 may exercise the option, in whole or part, and from time to time, up to
12 months following the occurrence of any one of the following:
- Edify enters into a letter of intent or agreement or otherwise negotiates
or recommends to its stockholders a transaction that will either result
in the acquisition of 20% or more of the outstanding shares by a third
party, or results in an extraordinary transaction not involving S1, or a
third party acquires 20% or more of Edify's outstanding stock
- S1 terminates the merger agreement because of Edify's (a) failure to call
a timely stockholder meeting, (b) withdrawal in a manner adverse to S1 of
its recommendation of the Edify Transaction to Edify stockholders, (c)
approval of an extraordinary transaction inconsistent with the Edify
Transaction, (d) failure to recommend rejection of a third-party tender
offer under certain conditions, or (e) violation of its covenant
regarding the solicitation of, or negotiation with, an extraordinary
transaction with another buyer
- S1 terminates the merger agreement because of a willful or intentional
breach by Edify of the representations, warranties or covenants in the
merger agreement which would have a material adverse effect on Edify, in
the case of a representation or warranty, or Edify or S1, in the case of
a covenant
- Edify terminates the merger agreement because it has authorized entering
into an extraordinary transaction with a party other than S1
The option will terminate and not become exercisable upon the earliest of
any of the following:
- completion of the Edify Transaction
- the termination of the merger agreement by consent of both parties
- the termination of the merger agreement by either party due to a
governmental order, decree, ruling or other action
- the termination of the merger agreement by either party due to failure to
complete the Edify Transaction by March 31, 2000
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- the termination of the merger agreement by Edify because of S1's breach
of its representations, warranties or conditions, or S1's failure to
timely call the S1 stockholder meeting or support the Edify Transaction
- the termination by either party based on a failure to receive stockholder
approval for the merger agreement or the Edify Transaction except if,
prior to the Edify stockholders meeting, an event which would permit the
option to be exercised has occurred
- 12 months after a third party acquires 20% or more of Edify's outstanding
common stock, files a public offer for 20% or more of Edify's shares or
otherwise enters into an extraordinary transaction with Edify
- 12 months after termination of the merger agreement by S1 because of
Edify's willful and intentional breach of its representations, warranties
or conditions, or Edify's failure to call the Edify stockholder meeting
or support the Edify Transaction
The stock option agreement grants certain registration rights to S1 with
respect to the shares of Edify common stock represented by the option. If S1
receives proceeds in connection with any sales or other dispositions of the
option or Edify shares purchased pursuant to the option, and any dividends on
such shares, in excess of the price paid by S1 upon exercise of the option, plus
any breakup fee received by S1, which together exceed $18.2 million, S1 must
promptly remit to Edify in cash the excess of such amount.
Edify Stockholders' Voting Agreements
S1 required Edify stockholders Alvin S. Begun, Joseph G. Brown, Jeffrey M.
Crowe, Charles H. Jolissant, Steven S. Pollock, William A. Soward, Jimmy A.
Sutton, Patricia A. Tomlinson, Stephen M. Berkley, Kelly D. Conway, Tench Coxe,
Donald R. Hollis and Stewart A. Schuster to enter into voting agreements. These
voting agreements require these Edify stockholders to vote all of the shares of
Edify common stock beneficially owned by them in favor of the Edify Transaction.
As of the record date, the Edify stockholders who entered into voting
agreements collectively beneficially owned shares of Edify common
stock which represented approximately % of the outstanding Edify common
stock. None of the Edify stockholders who are parties to the voting agreements
were paid additional consideration in connection with them.
Each Edify stockholder who is a party to a voting agreement agreed not to
sell the Edify stock owned by that person until the completion of the Edify
Transaction, except that each stockholder may sell up to 25% of that person's
Edify shares before the completion of the Edify Transaction. In addition,
officers of Edify who are parties to the voting agreement agreed not to sell the
shares of S1 common stock received in the Edify transaction for their Edify
stock for six months following completion of the Edify Transaction, unless their
employment with Edify or S1 ends earlier than such time. They may also sell
their S1 stock during that period in a registered public offering to the extent
that S1's executive officers do so.
The Edify stockholders' voting agreements will terminate upon the
termination of the merger agreement in accordance with its terms.
S1 Stockholder Voting Agreements
Edify required S1 stockholders James S. Mahan III, Robert F. Stockwell,
Daniel H. Drechsel, Robert W. Copelan, D.V.M., Dorsey R. Gardner, Joseph S.
McCall and Howard J. Runnion, Jr. to enter into voting agreements. The S1
stockholder voting agreements require these S1 stockholders to vote all of the
shares of S1 common stock in favor of the issuance of shares of common stock in
the Edify Transaction.
111
<PAGE> 122
As of the record date, these S1 stockholders beneficially owned
shares of S1 common stock, which represented approximately % of the
outstanding S1 common stock. These S1 stockholders were not paid additional
consideration in connection with their respective voting agreements.
The S1 stockholder voting agreements will terminate upon the termination of
the merger agreement in accordance with its terms.
112
<PAGE> 123
COMPARATIVE PER SHARE MARKET PRICE DATA
S1 common stock has been traded on the Nasdaq National Market under the
symbol SONE since October 1998, the date of S1's reorganization into its current
technology operations. Edify common stock has been traded on the Nasdaq National
Market under the symbol EDFY since May 1996, the date of Edify's initial public
offering.
The following table sets forth, for the calendar quarters indicated, the
high and low sale prices per share of S1 common stock and Edify common stock as
reported on the Nasdaq National Market. These numbers have been adjusted to give
effect to a two-for-one split of S1's common stock that was paid on May 7, 1999.
<TABLE>
<CAPTION>
SECURITY FIRST
TECHNOLOGIES EDIFY
CORPORATION CORPORATION
--------------------- --------------
HIGH LOW HIGH LOW
------- ------- ---- ---
<S> <C> <C> <C> <C>
1997
- --------------------------------------------
First Quarter............................... $ 6.75 $ 4.00 $16 1/4 $10 1/8
Second Quarter.............................. 4.688 2.75 15 8 7/8
Third Quarter............................... 6.938 3.813 18 3/4 11 3/4
Fourth Quarter.............................. 5.688 2.875 22 1/8 14 1/8
1998
- --------------------------------------------
First Quarter............................... $ 6.813 $ 3.313 $20 7/8 $14 5/8
Second Quarter.............................. 7.469 3.75 20 3/16 8 1/16
Third Quarter............................... 13.188 5.875 11 5/8 4 7/8
Fourth Quarter.............................. 17.688 5.5 9 3/4 4 5/8
1999
- --------------------------------------------
First Quarter............................... $38 $14 1/2 $11 $ 4 7/8
Second Quarter.............................. 79 1/4 29 1/2 16 7/8 3 13/16
Third Quarter (through July 7).............. 50 1/4 43 14 7/16 12 7/16
</TABLE>
Edify and S1 believe that Edify common stock presently trades on the basis
of the value of the S1 common stock expected to be issued in exchange for the
Edify common stock in the Edify Transaction, discounted primarily for the
uncertainties associated with the Edify Transaction and the FICS Transaction.
Apart from the publicly disclosed information concerning S1 which is included
and incorporated by reference in this prospectus/proxy statement, S1 cannot
state with certainty what factors account for changes in the market price of the
S1 common stock.
The table below presents the per share closing prices of S1 common stock
and Edify common stock on the Nasdaq National Market and the pro forma
equivalent market value of S1 common stock to be issued for Edify common stock
in the Edify Transaction as of the dates specified. May 14, 1999 was the last
trading date before announcement of the Edify Transaction. Edify's pro forma
equivalent market value was determined by multiplying the closing prices of the
S1 common stock as
113
<PAGE> 124
of the specified dates by the exchange ratio of 0.330969. , 1999 was
the most recent practicable date before the date of this proxy
statement/prospectus.
<TABLE>
<CAPTION>
EDIFY COMMON
LAST REPORTED SALE PRICE STOCK
------------------------ PRO FORMA
S1 COMMON EDIFY COMMON EQUIVALENT
DATE STOCK STOCK VALUE
---- --------- ------------ ------------
<S> <C> <C> <C>
May 14, 1999............................. $54.00 $15.56 $17.87
, 1999............................ $ $ $
</TABLE>
Edify stockholders are advised to obtain current market quotations for S1
common stock and Edify common stock. No assurance can be given as to the market
prices of S1 common stock or Edify common stock at any time before the
consummation of the merger or as to the market price of S1 common stock at any
time after the merger. Because the exchange ratio is fixed, the exchange ratio
will not be adjusted to compensate Edify stockholders for decreases in the
market price of S1 common stock which could occur before the merger becomes
effective. In the event the market price of S1 common stock decreases or
increases prior to the consummation of the merger, the value of the S1 common
stock to be received in the merger in exchange for Edify common stock would
correspondingly decrease or increase.
S1 and Edify have never paid cash dividends on their respective shares of
capital stock. Pursuant to the merger agreement, each of S1 and Edify has agreed
not to pay cash dividends pending the consummation of the merger, without
written consent of the other. If the Edify Transaction is not consummated, the
Edify board presently intends that it would continue its policy of retaining all
earnings to finance the expansion of its business. The S1 board presently
intends to retain all earnings for use in its business and has no present
intention to pay cash dividends before or after the Edify Transaction.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following unaudited pro forma consolidated financial statements set
forth below as of March 31, 1999 and for the three-month period ended March 31,
1999 and the year ended December 31, 1998 give effect to the Edify and FICS
acquisitions as if they occurred on March 31, 1999 with respect to the unaudited
pro forma consolidated balance sheet and on January 1, 1999 and 1998 with
respect to the unaudited pro forma consolidated statements of operations for the
three-month period ended March 31, 1999 and the year ended December 31, 1998,
respectively. The pro forma information gives effect to the Edify and FICS
acquisitions under the purchase method of accounting and to the assumptions and
adjustments described in the accompanying notes to the unaudited pro forma
consolidated financial statements which appear under the columns "Pro Forma
Adjustments (Edify)," "Pro Forma Adjustments (FICS)," and "Pro Forma Adjustments
(Combined - Edify/FICS)."
If stockholders approve either the Edify acquisition or the FICS
acquisition but not both, S1 intends to proceed with the acquisition that is
approved. Accordingly, in addition to the accompanying unaudited pro forma
consolidated financial statements reflecting the Edify and FICS acquisitions,
stockholders are encouraged to read the accompanying unaudited pro forma
consolidated financial statements separately reflecting (i) the Edify
acquisition only, and (ii) the FICS acquisition only.
The unaudited pro forma consolidated financial statements should be read in
conjunction with the historical audited consolidated financial statements and
related notes thereto of S1, Edify, and FICS, included elsewhere or incorporated
by reference in this prospectus/proxy statement. These
114
<PAGE> 125
unaudited pro forma consolidated financial statements are presented for
informational purposes only, are based on preliminary estimates of purchase
price allocations and are not necessarily indicative of the results that would
actually have occurred had the transactions been consummated at the dates
indicated, nor are they necessarily indicative of future operating results or
financial position of S1.
The unaudited pro forma consolidated financial statements reflect only
results from continuing operations and thus do not include the operations of
Edify's Employee Relationship Management Group assets nor do they include the
gain on the sale of these assets.
115
<PAGE> 126
PRO FORMA CONSOLIDATED BALANCE SHEETS -- UNAUDITED
AS OF MARCH 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
------------------------------ ADJUSTMENTS CONSOLIDATED
S1 EDIFY FICS (EDIFY)/(FICS) (S1/EDIFY/FICS)
-------- -------- -------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash, cash equivalents, and
short-term investments........... $ 22,803 $ 33,394 $ 2,962 (19,500)(1) $ 39,659
Investment securities
available-for-sale............... 7,349 -- -- 7,349
Accounts receivable, net........... 7,593 18,739 25,665 51,997
Prepaid expenses and other current
assets........................... 3,498 2,036 1,309 6,843
-------- -------- -------- ---------- ----------
Total current assets............. 41,243 54,169 29,936 (19,500) 105,848
Premises and equipment, net........ 4,642 7,579 4,397 16,618
Intangible assets, net............. 3,075 -- 2,822 $1,353,613(1) 1,359,510
Other assets....................... 1,266 1,285 -- -- 2,551
-------- -------- -------- ---------- ----------
Total assets..................... $ 50,226 $ 63,033 $ 37,155 $1,334,113 $1,484,527
======== ======== ======== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................... $ 897 $ 3,461 $ 9,447 $ 13,805
Accrued expenses................... 5,744 7,218 3,709 16,671
Deferred revenues.................. 13,151 5,574 8,926 27,651
Borrowings under line of credit.... -- -- 10,574 10,574
Current portion of capital lease
obligation....................... 413 180 262 855
Other current liabilities.......... -- -- 136 136
-------- -------- -------- ----------
Total current liabilities........ 20,205 16,433 33,054 69,692
Deferred revenues.................. 11,753 -- -- 11,753
Deferred rent...................... -- 60 -- 60
Capital lease obligation, excluding
current portion.................. 107 5 1,267 1,379
-------- -------- -------- ----------
Total liabilities................ 32,065 16,498 34,321 82,884
-------- -------- -------- ----------
STOCKHOLDERS' EQUITY:
Preferred stock.................... 23,136 -- 19,723 $ (19,723)(1) 23,136
Common stock....................... 251 18 641 (421)(1) 489
Additional paid-in-capital......... 88,716 70,200 2,884 1,358,060(1) 1,519,860
Receivable from the sale of
stock............................ (11,065) -- -- -- (11,065)
Accumulated deficit................ (86,098) (23,683) (20,573) (3,644)(1) (133,998)
Accumulated other comprehensive
income........................... 3,221 -- 159 (159)(1) 3,221
-------- -------- -------- ---------- ----------
Total stockholders' equity....... 18,161 46,535 2,834 1,334,113 1,401,643
-------- -------- -------- ---------- ----------
Total liabilities and
stockholders' equity.......... $ 50,226 $ 63,033 $ 37,155 $1,334,113 $1,484,527
======== ======== ======== ========== ==========
</TABLE>
116
<PAGE> 127
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS -- UNAUDITED
THREE MONTHS ENDED MARCH 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
--------------------------- ADJUSTMENTS CONSOLIDATED
S1 EDIFY FICS (EDIFY/FICS) (S1/EDIFY/FICS)
------- ------- ------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses.............. $ 2,308 $ 7,034 $ 4,051 $ 13,393
Professional services.......... 8,145 4,660 10,827 23,632
Data center.................... 1,547 -- -- 1,547
------- ------- ------- ---------
Total revenues.............. 12,000 11,694 14,878 38,572
Direct costs:
Software licenses.............. 133 976 38 1,147
Professional services.......... 5,322 6,499 8,851 20,672
Data center.................... 1,687 -- -- 1,687
------- ------- ------- ---------
Total direct costs.......... 7,142 7,475 8,889 23,506
------- ------- ------- ---------
Gross margin................ 4,858 4,219 5,989 15,066
------- ------- ------- ---------
Operating expenses:
Selling and marketing.......... 1,079 7,795 2,465 11,339
Product development............ 4,375 2,681 3,566 10,622
General and administrative..... 1,592 1,179 1,745 4,516
Depreciation and
amortization................ 1,194 1,317 857 3,368
Amortization of intangible
assets and acquisition
charges..................... 103 -- 147 $ 112,131(2) 112,381
------- ------- ------- --------- ---------
Total operating expenses.... 8,343 12,972 8,780 112,131 142,226
------- ------- ------- --------- ---------
Operating loss.............. (3,485) (8,753) (2,791) (112,131) (127,160)
Interest income (expense), net... 227 350 (233) 344
------- ------- ------- --------- ---------
Loss from continuing operations
before income taxes......... (3,258) (8,403) (3,024) (112,131) (126,816)
------- ------- ------- --------- ---------
Provision for income taxes....... -- (96) (1) -- (97)
------- ------- ------- --------- ---------
Loss from continuing
operations................ $(3,258) $(8,499) $(3,025) $(112,131) $(126,913)
======= ======= ======= ========= =========
Basic and diluted loss per common
share from continuing
operations..................... $ (0.13) $ (0.48) $(31.51) $ (2.61)
======= ======= ======= =========
Weighted average common shares
outstanding.................... 24,698 17,577 96 48,543
======= ======= ======= =========
</TABLE>
117
<PAGE> 128
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS -- UNAUDITED
TWELVE MONTHS ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
------------------------------ ADJUSTMENTS CONSOLIDATED
S1 EDIFY FICS (EDIFY/FICS) (S1/EDIFY/FICS)
-------- -------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses........... $ 4,781 $ 28,684 $ 12,837 $ 46,302
Professional services....... 16,218 20,171 45,218 81,607
Data center................. 3,181 -- -- 3,181
-------- -------- -------- ---------
Total revenues........... 24,180 48,855 58,055 131,090
Direct costs:
Software licenses........... 503 1,241 464 2,208
Professional services....... 10,527 17,875 36,833 65,235
Data center................. 7,218 -- -- 7,218
-------- -------- -------- ---------
Total direct costs....... 18,248 19,116 37,297 74,661
-------- -------- -------- ---------
Gross margin............. 5,932 29,739 20,758 56,429
-------- -------- -------- ---------
Operating expenses:
Selling and marketing....... 4,723 27,551 6,194 38,468
Product development......... 14,625 10,266 14,247 39,138
General and
administrative........... 5,994 3,923 10,423 20,340
Intellectual property
settlement............... -- 5,000 -- 5,000
Depreciation and
amortization............. 5,347 4,449 1,343 11,139
Amortization of intangible
assets and acquisition
charges.................. 4,384 -- 363 $ 448,524(2) 453,271
-------- -------- -------- --------- ---------
Total operating
expenses............... 35,073 51,189 32,570 448,524 567,356
-------- -------- -------- --------- ---------
Operating loss........... (29,141) (21,450) (11,812) (448,524) (510,927)
Interest income, net.......... 583 1,805 127 -- 2,515
-------- -------- -------- --------- ---------
Loss from continuing
operations before income
taxes.................... (28,558) (19,645) (11,685) (448,524) (508,412)
-------- -------- -------- --------- ---------
Provision for income taxes.... -- (125) (72) -- (197)
-------- -------- -------- --------- ---------
Loss from continuing
operations............. $(28,558) $(19,770) $(11,757) $(448,524) $(508,609)
======== ======== ======== ========= =========
Basic and diluted loss per
common share from continuing
operations.................. $ (1.30) $ (1.16) $ (85.82) $ (11.09)
======== ======== ======== =========
Weighted average common shares
outstanding................. 22,036 17,090 137 45,882
======== ======== ======== =========
</TABLE>
118
<PAGE> 129
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
THE FOLLOWING ADJUSTMENTS ARE REFLECTED IN THE UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEETS AND UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF
OPERATIONS UNDER THE COLUMN HEADED "PRO FORMA ADJUSTMENTS (EDIFY)/(FICS)":
1. The pro forma acquisition cost of FICS and Edify are allocated as
follows:
<TABLE>
<CAPTION>
EDIFY FICS TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
Shares of Edify common stock outstanding at
March 31, 1999.............................. 17,660,652
Conversion ratio.............................. .330969
-----------
Shares of S1 stock to be issued............... 5,845,128 18,000,000 23,845,128
Estimated market value of S1 common stock
(A)......................................... $ 52.54 $ 52.54 $ 52.54
----------- ----------- -----------
Estimated market value of S1 common stock
issued...................................... $ 307,103 $ 945,720 $ 1,252,823
Fair value of options issued.................. 80,000 98,559 178,559
Estimated transaction costs................... 10,500 9,000 19,500
----------- ----------- -----------
Total purchase price..................... 397,603 1,053,279 1,450,882
----------- ----------- -----------
Less:
Book value of net assets acquired........ 46,535 2,834 49,369
Adjustment to book value for transaction
costs paid by Edify and FICS........... (6,800) (5,300) (12,100)
----------- ----------- -----------
Adjusted book value of net assets
acquired............................... 39,735 (2,466) 37,269
----------- ----------- -----------
Excess purchase price over net book value
of assets acquired..................... $ 357,868 $ 1,055,745 $ 1,413,613
----------- ----------- -----------
Allocated to:
In process research & development (B).... $ 20,000 $ 40,000 $ 60,000
Developed technology..................... $ 13,000 $ 30,000 $ 43,000
Assembled work force..................... 10,000 10,000 20,000
Customer list............................ 11,000 20,000 31,000
Fair value of options issued............. 80,000 98,559 178,559
Residual excess purchase cost
(goodwill)............................. 223,868 857,186 1,081,054
----------- ----------- -----------
Total intangible assets.................. $ 337,868 $ 1,015,745 $ 1,353,613
----------- ----------- -----------
</TABLE>
(A) The estimated market value of S1 common stock was based on the
average market price of the stock three days before and after the
acquisition was agreed to and announced.
(B) The amount allocated to in process research and development of
$60,000 has been reflected as a charge to the accumulated deficit
in the pro forma consolidated balance sheet and has been omitted
from the pro forma consolidated statements of operations.
119
<PAGE> 130
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. The pro forma adjustments reflect the effects of the increase in the
amortization expense due to the increase in intangible assets resulting from the
Edify and FICS acquisitions. The intangible assets are comprised of the
following assets and amortization periods:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL MONTHLY
INTANGIBLE ASSET AMOUNT LIFE AMORTIZATION 3 MONTHS 12 MONTHS
---------------- ---------- --------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Developed technology.......... $ 43,000 3 years $ 1,194 $ 3,582 $ 14,328
Assembled workforce........... 20,000 5 years 333 999 3,996
Customer list................. 31,000 3 years 861 2,583 10,332
Stock options................. 178,559 3 years 4,960 14,880 59,520
Goodwill...................... 1,081,054 3 years 30,029 90,087 360,348
---------- ------- -------- --------
Total.................... $1,353,613 $37,377 $112,131 $448,524
</TABLE>
3. The weighted average number of shares outstanding used in the
computation of pro forma net loss per share consists of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
MARCH 31, 1999 DECEMBER 31, 1998
------------------ -------------------
<S> <C> <C>
Weighted average number of shares of S1 common
stock outstanding............................... 24,698,334 22,036,652
Adjustment for S1 common stock issued in
connection with Edify merger.................... 5,845,128 5,845,128
Adjustment for S1 common stock issued in
connection with FICS merger..................... 18,000,000 18,000,000
---------- ----------
Average number of common shares outstanding (S1/
Edify/FICS)..................................... 48,543,462 45,881,780
</TABLE>
The unaudited pro forma consolidated statements of operations are presented as
if the acquisitions or transactions took place at the beginning of the periods
presented; thus, the stock issuances referred to above are considered
outstanding as of the beginning of the periods presented for purposes of per
share calculations.
4. Certain reclassifications were made to the Edify and FICS historical
information to conform with the S1 presentation.
5. The unaudited pro forma consolidated financial statements reflect only
results from continuing operations and thus do not include the operations of
Edify's Employee Relationship Management Group assets which Edify has agreed to
sell to Workscape, Inc. nor do they include the gain on the sale of these
assets.
6. On May 17, 1999, S1 and Intuit entered into a strategic relationship to
deliver online financial software and services to financial institutions through
cross-licensing various technologies for multi-year periods. In addition, Intuit
agreed to make a $50 million investment in S1 and received an option for
3,629,187 additional shares of S1 stock with an option price of $51.50 per share
which will become exercisable if S1 completes its planned acquisition of Edify.
In addition, the number of option shares will increase by 1,800,000 shares if S1
completes its acquisition of FICS. On May 27, Intuit completed its $50 million
investment in S1 by purchasing 970,813 shares of S1 common stock at a price of
$51.50 per share. S1 expects to record purchased technology for the fair value
of the option which will be measured on the closing of the Edify Transaction and
the FICS Transaction. The amount of the purchased technology is currently
estimated at approximately $230 million and will fluctuate as S1's stock price
changes. The Intuit transaction has not been reflected in the pro forma
presentation.
120
<PAGE> 131
PRO FORMA CONSOLIDATED BALANCE SHEETS -- UNAUDITED
AS OF MARCH 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
------------------- ADJUSTMENTS CONSOLIDATED
S1 FICS (FICS) (S1/FICS)
-------- -------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash, cash equivalents, and short-term
investments.......................... $ 22,803 $ 2,962 $ (9,000)(1) $ 16,765
Investment securities
available-for-sale................... 7,349 -- 7,349
Accounts receivable, net................ 7,593 25,665 33,258
Prepaid expenses and other current
assets............................... 3,498 1,309 4,807
-------- -------- ---------- ----------
Total current assets................. 41,243 29,936 (9,000) 62,179
Premises and equipment, net............. 4,642 4,397 9,039
Intangible assets, net.................. 3,075 2,822 1,015,745(1) 1,021,642
Other assets............................ 1,266 -- 1,266
-------- -------- ---------- ----------
Total assets......................... $ 50,226 $ 37,155 $1,006,745 $1,094,126
======== ======== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable........................ $ 897 $ 9,447 $ 10,344
Accrued expenses........................ 5,744 3,709 9,453
Deferred revenues....................... 13,151 8,926 22,077
Borrowings under line of credit......... -- 10,574 10,574
Current portion of capital lease
obligation........................... 413 262 675
Other current liabilities............... -- 136 136
-------- -------- ----------
Total current liabilities............ 20,205 33,054 53,259
Deferred revenues....................... 11,753 -- 11,753
Deferred rent........................... -- -- --
Capital lease obligation, excluding
current portion...................... 107 1,267 1,374
-------- -------- ----------
Total liabilities.................... 32,065 34,321 66,386
-------- -------- ----------
STOCKHOLDERS' EQUITY:
Preferred stock......................... 23,136 19,723 $ (19,723)(1) 23,136
Common stock............................ 251 641 (461)(1) 431
Additional paid-in-capital.............. 88,716 2,884 1,041,215(1) 1,132,815
Receivable from the sale of stock....... (11,065) -- -- (11,065)
Accumulated deficit..................... (86,098) (20,573) (14,127)(1) (120,798)
Accumulated other comprehensive
income............................... 3,221 159 (159)(1) 3,221
-------- -------- ---------- ----------
Total stockholders' equity........... 18,161 2,834 1,006,745 1,027,740
-------- -------- ---------- ----------
Total liabilities and stockholders'
equity............................. $ 50,226 $ 37,155 $1,006,745 $1,094,126
======== ======== ========== ==========
</TABLE>
121
<PAGE> 132
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS -- UNAUDITED
THREE MONTHS ENDED MARCH 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
----------------- ADJUSTMENTS CONSOLIDATED
S1 FICS (FICS) (S1/FICS)
------- ------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues:
Software licenses.......................... $ 2,308 $ 4,051 $ 6,359
Professional services...................... 8,145 10,827 18,972
Data center................................ 1,547 -- 1,547
------- ------- --------
Total revenues.......................... 12,000 14,878 26,878
Direct costs:
Software licenses.......................... 133 38 171
Professional services...................... 5,322 8,851 14,173
Data center................................ 1,687 -- 1,687
------- ------- --------
Total direct costs...................... 7,142 8,889 16,031
------- ------- --------
Gross margin............................ 4,858 5,989 10,847
------- ------- --------
Operating expenses:
Selling and marketing...................... 1,079 2,465 3,544
Product development........................ 4,375 3,566 7,941
General and administrative................. 1,592 1,745 3,337
Depreciation and amortization.............. 1,194 857 2,051
Amortization of intangible assets and
acquisition charges..................... 103 147 $ 84,315(2) 84,565
------- ------- -------- --------
Total operating expenses................ 8,343 8,780 84,315 101,438
------- ------- -------- --------
Operating loss.......................... (3,485) (2,791) (84,315) (90,591)
Interest income (expense), net............... 227 (233) -- (6)
------- ------- -------- --------
Loss from continuing operations before
income taxes............................ (3,258) (3,024) (84,315) (90,597)
------- ------- -------- --------
Provision for income taxes................... -- (1) -- (1)
------- ------- -------- --------
Loss from continuing operations......... $(3,258) $(3,025) $(84,315) $(90,598)
======= ======= ======== ========
Basic and diluted loss per common share from
continuing operations...................... $ (0.13) $(31.51) $ (2.12)
======= ======= ========
Weighted average common shares outstanding... 24,698 96 42,698
======= ======= ========
</TABLE>
122
<PAGE> 133
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS -- UNAUDITED
TWELVE MONTHS ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
------------------- ADJUSTMENTS CONSOLIDATED
S1 FICS (FICS) (S1/FICS)
-------- -------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues:
Software licenses....................... $ 4,781 $ 12,837 $ 17,618
Professional services................... 16,218 45,218 61,436
Data center fees........................ 3,181 -- 3,181
-------- -------- ---------
Total revenues....................... 24,180 58,055 82,235
Direct costs:
Software licenses....................... 503 464 967
Professional services................... 10,527 36,833 47,360
Data center............................. 7,218 -- 7,218
-------- -------- ---------
Total direct costs................... 18,248 37,297 55,545
-------- -------- ---------
Gross margin......................... 5,932 20,758 26,690
-------- -------- ---------
Operating expenses:
Selling and marketing................... 4,723 6,194 10,917
Product development..................... 14,625 14,247 28,872
General and administrative.............. 5,994 10,423 16,417
Intellectual property settlement........ -- -- --
Depreciation and amortization........... 5,347 1,343 6,690
Amortization of intangible assets and
acquisition charges.................. 4,384 363 $ 337,260(2) 342,007
-------- -------- --------- ---------
Total operating expenses............. 35,073 32,570 337,260 404,903
-------- -------- --------- ---------
Operating loss....................... (29,141) (11,812) (337,260) (378,213)
Interest income, net...................... 583 127 -- 710
-------- -------- --------- ---------
Loss from continuing operations before
income taxes......................... (28,558) (11,685) (337,260) (377,503)
-------- -------- --------- ---------
Provision for income taxes................ -- (72) -- (72)
-------- -------- --------- ---------
Loss from continuing operations...... $(28,558) $(11,757) $(337,260) $(377,575)
======== ======== ========= =========
Basic and diluted loss per common share
from continuing operations.............. $ (1.30) $ (85.82) (9.43)
======== ======== =========
Weighted average common shares
outstanding............................. 22,036 137 40,037
======== ======== =========
</TABLE>
123
<PAGE> 134
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
THE FOLLOWING ADJUSTMENTS ARE REFLECTED IN THE UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEETS AND UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF
OPERATIONS UNDER THE COLUMN HEADED "PRO FORMA ADJUSTMENTS (FICS)":
1. The pro forma acquisition cost of FICS is allocated as follows:
<TABLE>
<S> <C>
Shares of S1 stock to be issued (A)......................... 18,000,000
Estimated market value of S1 common stock (B)............... $ 52.54
----------
Estimated market value of S1 common stock issued............ $ 945,720
Fair value of options issued................................ 98,559
Estimated transaction costs................................. 9,000
----------
Total purchase price................................... 1,053,279
----------
Less:
Book value of net assets acquired...................... 2,834
----------
Adjustment to book value for transaction costs paid by
FICS.................................................. (5,300)
----------
Adjusted book value of net assets acquired............. (2,466)
----------
Excess purchase price over net book value of assets
acquired.............................................. $1,055,745
----------
Allocated to:
In process research & development...................... $ 40,000
Developed technology................................... 30,000
Assembled work force................................... 10,000
Customer list.......................................... 20,000
Fair value of options issued........................... 98,559
Residual excess purchase cost (goodwill)............... 857,186
----------
Total intangible assets................................ $1,015,745
----------
</TABLE>
--------------------
(A) The estimated market value of S1 common stock was based on the
average market price of the stock three days before and after the
acquisition was agreed to and announced.
(B) The amount allocated to in process research and development of
$40,000 has been reflected as a charge to the accumulated deficit
in the pro forma consolidated balance sheet and has been omitted
from the pro forma consolidated statements of operations.
2. The pro forma adjustments reflect the effects of the increase in the
amortization expense due to the increase in intangible assets resulting from the
acquisition. The intangible assets are comprised of the following assets and
amortization periods:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL MONTHLY
INTANGIBLE ASSET AMOUNT LIFE AMORTIZATION 3 MONTHS 12 MONTHS
---------------- ---------- --------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Developed technology........... $ 30,000 3 years $ 833 $ 2,499 $ 9,996
Assembled workforce............ 10,000 5 years 167 501 2,004
Customer list.................. 20,000 3 years 556 1,668 6,672
Stock options.................. 98,559 3 years 2,738 8,214 32,856
Goodwill....................... 857,186 3 years 23,811 71,433 285,732
---------- ------- ------- --------
Total..................... 1,015,145 28,105 84,315 337,260
</TABLE>
124
<PAGE> 135
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. The weighted average number of shares outstanding used in the
computation of pro forma net loss per share consists of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
MARCH 31, 1999 DECEMBER 31, 1998
------------------ -------------------
<S> <C> <C>
Weighted average number of shares of S1 common
stock outstanding............................... 24,698,334 22,036,652
Adjustment for S1 common stock issued in
connection with FICS merger..................... 18,000,000 18,000,000
---------- ----------
Average number of common shares outstanding (S1/
FICS)........................................... 42,698,334 40,036,652
</TABLE>
The unaudited pro forma consolidated statements of operations are presented as
if the acquisition took place at the beginning of the periods presented; thus,
the stock issuances referred to above are considered outstanding as of the
beginning of the periods presented for purposes of per share calculations.
4. Certain reclassifications were made to the FICS historical information
to conform with the S1 presentation.
5. On May 17, 1999, S1 and Intuit entered into a strategic relationship to
deliver online financial software and services to financial institutions through
cross-licensing various technologies for multi-year periods. In addition, Intuit
agreed to make a $50 million investment in S1 and received an option for
3,629,187 additional shares of S1 stock with an option price of $51.50 per share
which will become exercisable if S1 completes its planned acquisition of Edify.
In addition, the number of option shares will increase by 1,800,000 shares if S1
completes its acquisition of FICS. On May 27, Intuit completed its $50 million
investment in S1 by purchasing 970,813 shares of S1 common stock at a price of
$51.50 per share. S1 expects to record purchased technology for the fair value
of the option which will be measured on the closing of the Edify Transaction and
the FICS Transaction. The amount of the purchased technology is currently
estimated at approximately $230 million and will fluctuate as S1's stock price
changes. The Intuit transaction has not been reflected in the pro forma
presentation.
125
<PAGE> 136
PRO FORMA CONSOLIDATED BALANCE SHEETS -- UNAUDITED
AS OF MARCH 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
------------------- ADJUSTMENTS CONSOLIDATED
S1 EDIFY (EDIFY) (S1/EDIFY)
-------- -------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash, cash equivalents, and short-term
investments........................... $ 22,803 $ 33,394 (10,500)(1) $ 45,697
Investment securities
available-for-sale.................... 7,349 -- 7,349
Accounts receivable, net................. 7,593 18,739 26,332
Prepaid expenses and other current
assets................................ 3,498 2,036 5,534
-------- -------- -------- --------
Total current assets.................. 41,243 54,169 (10,500) 84,912
Premises and equipment, net.............. 4,642 7,579 12,221
Intangible assets, net................... 3,075 -- $337,868(1) 340,943
Other assets............................. 1,266 1,285 -- 2,551
-------- -------- -------- --------
Total assets.......................... $ 50,226 $ 63,033 $327,368 $440,627
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable......................... $ 897 $ 3,461 $ 4,358
Accrued expenses......................... 5,744 7,218 12,962
Deferred revenues........................ 13,151 5,574 18,725
Current portion of capital lease
obligation............................ 413 180 593
-------- -------- --------
Total current liabilities............. 20,205 16,433 36,638
Deferred revenues........................ 11,753 -- 11,753
Deferred rent............................ -- 60 60
Capital lease obligation, excluding
current portion....................... 107 5 112
-------- -------- --------
Total liabilities..................... 32,065 16,498 48,563
-------- -------- --------
STOCKHOLDERS' EQUITY:
Preferred stock.......................... 23,136 -- 23,136
Common stock............................. 251 18 $ 40(1) 309
Additional paid-in-capital............... 88,716 70,200 316,845(1) 475,761
Receivable from the sale of stock........ (11,065) -- -- (11,065)
Accumulated deficit...................... (86,098) (23,683) 10,483(1) (99,298)
Accumulated other comprehensive income... 3,221 -- -- 3,221
-------- -------- -------- --------
Total stockholders' equity............ 18,161 46,535 327,368 392,064
-------- -------- -------- --------
Total liabilities and stockholders'
equity.............................. $ 50,226 $ 63,033 $327,368 $440,627
======== ======== ======== ========
</TABLE>
126
<PAGE> 137
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS -- UNAUDITED
THREE MONTHS ENDED MARCH 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
----------------- ADJUSTMENTS CONSOLIDATED
S1 EDIFY (EDIFY) (S1/EDIFY)
------- ------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues:
Software licenses............................ $ 2,308 $ 7,034 $ 9,342
Professional services........................ 8,145 4,660 12,805
Data center fees............................. 1,547 -- 1,547
------- ------- --------
Total revenues............................ 12,000 11,694 23,694
Direct costs:
Software licenses............................ 133 976 1,109
Professional services........................ 5,322 6,499 11,821
Data center.................................. 1,687 -- 1,687
------- ------- --------
Total direct costs........................ 7,142 7,475 14,617
------- ------- --------
Gross margin.............................. 4,858 4,219 9,077
------- ------- --------
Operating expenses:
Selling and marketing........................ 1,079 7,795 8,874
Product development.......................... 4,375 2,681 7,056
General and administrative................... 1,592 1,179 2,771
Depreciation and amortization................ 1,194 1,317 2,511
Amortization of intangible assets and
acquisition charges....................... 103 -- $ 27,825(2) 27,928
------- ------- -------- --------
Total operating expenses.................. 8,343 12,972 27,825 49,140
------- ------- -------- --------
Operating loss............................ (3,485) (8,753) (27,825) (40,063)
Interest income, net........................... 227 350 -- 577
------- ------- -------- --------
Loss from continuing operations before
income taxes............................ (3,258) (8,403) (27,825) (39,486)
------- ------- -------- --------
Provision for income taxes..................... -- (96) -- (96)
------- ------- -------- --------
Loss from continuing operations........... $(3,258) $(8,499) $(27,825) $(39,582)
======= ======= ======== ========
Basic and diluted loss per common share from
continuing operations........................ $ (0.13) $ (0.48) $ (1.30)
======= ======= ========
Weighted average common shares outstanding..... 24,698 17,577 30,543
======= ======= ========
</TABLE>
127
<PAGE> 138
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS -- UNAUDITED
TWELVE MONTHS ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
------------------- ADJUSTMENTS CONSOLIDATED
S1 EDIFY (EDIFY) (S1/EDIFY)
-------- -------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues:
Software licenses.......................... $ 4,781 $ 28,684 $ 33,465
Professional services...................... 16,218 20,171 36,389
Data center................................ 3,181 -- 3,181
-------- -------- ---------
Total revenues.......................... 24,180 48,855 73,035
Direct costs:
Software licenses.......................... 503 1,241 1,744
Professional services...................... 10,527 17,875 28,402
Data center................................ 7,218 -- 7,218
-------- -------- ---------
Total direct costs...................... 18,248 19,116 37,364
-------- -------- ---------
Gross margin............................ 5,932 29,739 35,671
-------- -------- ---------
Operating expenses:
Selling and marketing...................... 4,723 27,551 32,274
Product development........................ 14,625 10,266 24,891
General and administrative................. 5,994 3,923 9,917
Intellectual property settlement........... -- 5,000 5,000
Depreciation and amortization.............. 5,347 4,449 9,796
Amortization of intangible assets and
acquisition charges..................... 4,384 -- $ 111,300(2) 115,684
-------- -------- --------- ---------
Total operating expenses................ 35,073 51,189 111,300 197,562
-------- -------- --------- ---------
Operating loss.......................... (29,141) (21,450) (111,300) (161,891)
Interest income, net......................... 583 1,805 2,388
-------- -------- --------- ---------
Loss from continuing operations before
income taxes............................ (28,558) (19,645) (111,300) (159,503)
-------- -------- --------- ---------
Provision for income taxes................... -- (125) -- (125)
-------- -------- --------- ---------
Loss from continuing operations......... $(28,558) $(19,770) $(111,300) $(159,628)
======== ======== ========= =========
Basic and diluted loss per common share from
continuing operations...................... $ (1.30) $ (1.16) $ (5.73)
======== ======== =========
Weighted average common shares outstanding... 22,036 17,090 27,882
======== ======== =========
</TABLE>
128
<PAGE> 139
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
THE FOLLOWING ADJUSTMENTS ARE REFLECTED IN THE UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEETS AND UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF
OPERATIONS UNDER THE COLUMN HEADED "PRO FORMA ADJUSTMENTS (EDIFY)":
1. The pro forma acquisition cost of Edify is allocated as follows:
<TABLE>
<S> <C>
Shares of Edify common stock outstanding at March 31,
1999...................................................... 17,660,652
Conversion ratio............................................ .330969
-----------
Shares of S1 stock to be issued............................. 5,845,128
Estimated market value of S1 common stock (A)............... $ 52.54
-----------
Estimated market value of S1 common stock issued............ $ 307,103
Fair value of options issued................................ 80,000
Estimated transaction costs................................. 10,500
-----------
Total purchase price................................... 397,603
-----------
Less:
Book value of net assets acquired...................... 46,535
Adjustment to book value for transaction costs paid by
Edify................................................. (6,800)
-----------
Adjusted book value of net acquired assets.................. 39,735
-----------
Excess purchase price over net book value of assets
acquired.............................................. $ 357,868
-----------
Allocated to:
In process research & development (B).................. $ 20,000
Developed technology................................... 13,000
Assembled work force................................... 10,000
Customer list.......................................... 11,000
Fair value of options issued........................... 80,000
Residual excess purchase cost (goodwill)............... 223,868
-----------
Total intangible assets................................ $ 337,868
-----------
</TABLE>
--------------------
(A) The estimated market value of S1 common stock was based on the
average market price of the stock three days before and after the
acquisition was agreed to and announced.
(B) The amount allocated to in process research and development of
$20,000 has been reflected as a charge to the accumulated deficit
in the pro forma consolidated balance sheet and has been omitted
from the pro forma consolidated statements of operations.
129
<PAGE> 140
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. The pro forma adjustments reflect the effects of the increase in the
amortization expense due to the increase in intangible assets resulting from the
acquisition. The intangible assets are comprised of the following assets and
amortization periods:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL MONTHLY
INTANGIBLE ASSET AMOUNT LIFE AMORTIZATION 3 MONTHS 12 MONTHS
---------------- -------- --------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Developed technology............ $ 13,000 3 years $ 361 $ 1,083 $ 4,332
Assembled workforce............. 10,000 5 years 167 501 2,004
Customer list................... 11,000 3 years 306 918 3,672
Stock options................... 80,000 3 years 2,222 6,666 26,664
Goodwill........................ 223,868 3 years 6,219 18,657 74,628
-------- ------ ------- --------
Total...................... $337,868 $9,275 $27,825 $111,300
</TABLE>
3. The weighted average number of shares outstanding used in the
computation of pro forma net loss per share consists of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
MARCH 31, 1999 DECEMBER 31, 1998
------------------ -------------------
<S> <C> <C>
Weighted average number of shares of S1 common
stock outstanding............................... 24,698,334 22,036,652
Adjustment for S1 common stock issued in
connection with Edify merger.................... 5,845,128 5,845,128
---------- ----------
Average number of common shares outstanding (S1/
Edify).......................................... 30,543,462 27,881,780
</TABLE>
The unaudited pro forma consolidated statements of operations are presented as
if the acquisition took place at the beginning of the periods presented; thus,
the stock issuances referred to above are considered outstanding as of the
beginning of the periods presented for purposes of per share calculations.
4. Certain reclassifications were made to the Edify historical information
to conform with the S1 presentation.
5. The unaudited pro forma consolidated financial statements reflect only
results from continuing operations and thus do not include the operations of
Edify's Relationship Management Group assets which Edify has agreed to sell to
Workscape, Inc. nor do they include the gain on the sale of these assets.
6. On May 17, 1999, S1 and Intuit entered into a strategic relationship to
deliver online financial software and services to financial institutions through
cross-licensing various technologies for multi-year periods. In addition, Intuit
agreed to make a $50 million investment in S1 and received an option for
3,629,187 additional shares of S1 stock with an option price of $51.50 per share
which will become exercisable if S1 completes its planned acquisition of Edify.
In addition, the number of option shares will increase by 1,800,000 shares if S1
completes its acquisition of FICS. On May 27, Intuit completed its $50 million
investment in S1 by purchasing 970,813 shares of S1 common stock at a price of
$51.50 per share. S1 expects to record a purchased technology for the fair value
of the option which will be measured on the closing of the Edify Transaction and
the FICS Transaction. The amount of the purchased technology is currently
estimated at approximately $230 million and will fluctuate as S1's stock price
charges. The Intuit transaction has not been reflected in the pro forma
presentation.
130
<PAGE> 141
COMPARISON OF RIGHTS OF HOLDERS OF S1 COMMON STOCK
AND EDIFY COMMON STOCK
This section of the prospectus/proxy statement describes the material
differences between the rights of holders of S1 common stock and Edify common
stock. This summary may not contain all of the information that is important to
you. You should read carefully this entire document and the other documents we
refer to, including the charters and bylaws of each company, carefully for a
more complete understanding of the differences between the rights of holders of
S1 common stock and Edify common stock. You may obtain the information
incorporated by reference into this prospectus/ proxy statement without charge
by following the instructions in the section entitled "Where You Can Find More
Information" on page .
After the consummation of the Edify Transaction, the holders of Edify
common stock who receive S1 common stock will become stockholders of S1 and the
S1 certificate of incorporation, as amended and restated, and the S1 bylaws, as
amended and restated, will instead govern their rights. Because Edify and S1 are
both Delaware corporations, the Delaware General Corporation Law, or the DGCL,
will continue to govern the rights of Edify stockholders.
DIRECTORS
Some of the provisions of S1's certificate of incorporation and bylaws will
impede changes in majority control of S1's board of directors. The S1 bylaws
give S1's board of directors the power to set the size of the board of directors
anywhere between four and 15 members. S1's board of directors currently numbers
five directors. S1's certificate of incorporation provides that the board of
directors will be divided into three classes, with directors in each class
elected for three-year staggered terms. S1's certificate of incorporation
provides that a director may only be removed for cause by an affirmative vote of
two-thirds of the voting shares with 30-day notice to the director to be
removed. If there is a vacancy on the S1 board of directors because of the
addition of a new position, the S1 bylaws provide that the new position will be
filled by a majority of the stockholders or a majority of the board of directors
even if less than a quorum exists and the new director will serve for the
remainder of the full term of the class of directors for which the vacancy
existed. If there is a vacancy on the S1 board of directors because of the
resignation or removal of a director, a majority of the board of directors shall
designate a replacement and the term of the new director will expire at the next
election of directors.
In connection with the FICS Transaction, S1 has agreed that, at the closing
of the FICS Transaction, it will appoint four current directors of FICS to serve
for three-year terms in four newly created slots on S1's board. If any of those
four should resign or be removed from S1's board of directors, S1 has agreed
that their successors should be appointed by the remaining former FICS directors
still serving on the S1 board. Those four directors are presently expected to be
. Furthermore, if the FICS Transaction is consummated, S1 and FICS
intend that two of the current S1 directors will resign effective within two
years from the date of the closing of the FICS Transaction with their successors
to be mutually chosen by James S. Mahan III and Michel Akkermans.
In connection with the Edify Transaction, S1 has agreed that, at the
closing of the Edify Transaction, it will appoint Jeffrey M. Crowe, if Mr. Crowe
is then Chief Executive Officer of Edify and a member of Edify's board, to serve
for a three year term in an additional newly created slot on S1's board.
The Edify bylaws provide for one or more directors to be determined by
resolution of the board of directors. There are currently six members on Edify's
board of directors. Directors may resign at any time with written notice and be
removed at any time with or without cause by a majority vote of
131
<PAGE> 142
shares. If there is a vacancy of a director position for any reason including
addition of a new position, the new position will be filled by a majority of the
board of directors even if less than a quorum exists and the term of the new
director will expire at the next annual stockholder meeting.
INDEMNIFICATION AND LIMITATION OF LIABILITY OF DIRECTORS
S1's certificate of incorporation provides that no director shall be
personally liable to S1 or its stockholders for monetary damages for breach of
fiduciary duty as a director other than liability (a) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (b) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of the law, (c) for any payment of a dividend or approval of a
stock repurchase that is illegal under Section 174 of the DGCL, or (d) for any
transaction from which a director derived an improper personal benefit. S1's
certificate of incorporation further provides for indemnification for all
directors and officers of S1 to the extent permitted by law, and allows
indemnification for all employees and agents of S1 to the extent permitted by
law. S1's bylaws provide that S1 may purchase and maintain insurance on behalf
of any director, officer, employee or agent of S1 against any liability arising
from actions in their corporate capacity regardless of whether S1 has the power
to indemnify that person.
Edify's bylaws provide that any director or officer of Edify shall be
indemnified to the full extent permitted by law if that director or officer was
acting in accordance with a proceeding authorized by the board of directors.
Edify does not have to indemnify a person for settlement of a proceeding unless
Edify consents in writing to the settlement. The Edify board of directors is
authorized to enter into indemnification contracts with any director, officer,
employee or agent of Edify, even if those rights are broader than Edify's
indemnification power. Edify has entered into indemnification contracts with all
of its executive officers and directors.
CALL OF SPECIAL STOCKHOLDER MEETINGS
S1's certificate of incorporation provides that special meetings of
stockholders relating to changes in control of the corporation or amendments to
the certificate of incorporation can only be called by the board of directors.
S1's bylaws allow the Chairman, President, or a majority of the board of
directors to call a special meeting for any other reason unless prescribed
otherwise by law, and require the Chairman, President or Secretary to call a
special meeting upon written request of the holders of at least 10% of all
outstanding capital stock.
Edify's bylaws allow the Chairman, the Chief Executive Officer, the
President or a majority of the board of directors to call a special meeting of
stockholders for any purpose and at any time, subject to certain notice
requirements. No other person or persons may call a special meeting. Edify
stockholders may adjourn the meeting to reconvene at another date, time or place
without giving additional notice if the new date, time and place of the meeting
is announced at the adjournment of the meeting, the meeting reconvenes within 30
days and a new record date has not been set.
STOCKHOLDER ACTION WITHOUT A MEETING
S1's bylaws provide that stockholders may act without a meeting if the
action is taken by stockholders eligible to vote with at least the minimum
number of votes that would be needed at a meeting to discuss the same action.
The action must be consented to in writing and delivered to S1 within 60 days of
the earliest consent. Stockholders who do not participate in taking this action
must be notified with written notice in accordance with the DGCL.
Edify's certificate of incorporation prohibits stockholder action by
written consent.
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<PAGE> 143
QUORUM FOR STOCKHOLDER MEETINGS
S1's bylaws provide that the holders of one-third of the capital stock
issued and outstanding present in person or by proxy and entitled to vote at a
meeting constitutes a quorum, except as otherwise required by law or the S1
certificate of incorporation.
The bylaws of Edify provide that the holders of a majority of the stock
present in person or by proxy and entitled to vote at a meeting constitutes a
quorum, except as otherwise required by law. Shares of Edify held by Edify
either directly or indirectly cannot be used to determine if a quorum is
present.
GENERAL VOTE
S1's bylaws provide that any matter brought before a meeting of
stockholders will be decided in favor of a particular action if a quorum exists
and if the votes cast favoring the action exceed the votes cast opposing the
action except that directors shall be elected by a plurality of the votes cast
by the shares entitled to vote, unless otherwise required by law or S1's
certificate of incorporation.
Edify's bylaws provide that any matter brought before a meeting of
stockholders will be decided in favor of a particular action if a quorum exists
and if a majority of the stockholders present and voting for or against the
action approve the action, except that directors shall be elected by a plurality
of the votes cast by the shares entitled to vote, unless otherwise required by
law or Edify's certificate of incorporation or bylaws.
AUTHORIZED AND OUTSTANDING COMMON STOCK
The certificate of incorporation of S1 authorizes 60,000,000 shares of S1's
common stock, par value $0.01 per share, of which 25,428,778 shares were
outstanding as of May 10, 1999. In addition, as of May 10, 1999, 12,353,798
shares of S1's common stock were reserved for issuance for employee stock plans,
of which, options to purchase 9,607,750 shares were currently outstanding.
The certificate of incorporation of Edify authorizes 55,000,000 shares of
Edify's common stock, par value $0.001 per share, of which 17,696,952 shares
were outstanding as of May 16, 1999. In addition, as of May 16, 1999,
- 5,146,790 shares of Edify's common stock were reserved for issuance for
officer, director and employee stock plans, of which, options to purchase
5,027,283 shares were currently outstanding,
- 296,885 shares of Edify's common stock were reserved for the Edify 1996
employee stock purchase plan, and
- sufficient shares of Edify's common stock were reserved in order to
permit full exercise of the option granted to S1 in connection with the
Edify Transaction.
AUTHORIZED AND OUTSTANDING PREFERRED STOCK
The certificate of incorporation of S1 authorizes the S1 board of directors
to designate and issue preferred stock with the characteristics that the board
of directors deems necessary. The certificate of incorporation authorizes
5,000,000 shares of S1's preferred stock, par value $0.01 per share. As of May
10, 1999,
- 1,637,832 shares were designated Series A Convertible Preferred Stock of
which 466,450 were outstanding;
- 749,604 shares were designated Series B Redeemable Convertible Preferred
Stock, all of which were outstanding; and
133
<PAGE> 144
- 215,000 shares were designated Series C Redeemable Convertible Preferred
Stock, all of which were outstanding.
The certificate of incorporation of Edify authorizes the Edify board of
directors to designate and issue preferred stock with the characteristics that
the board of directors deems necessary. The certificate of incorporation
authorizes 5,000,000 shares of Edify's preferred stock, par value $0.001 per
share, of which no shares were outstanding as of May 16, 1999. Edify has
reserved an aggregate of 500,000 shares of its Series A Junior Participating
Preferred Stock which are issuable upon exercise of rights to preferred stock as
discussed in "Stockholder Rights Plan" below.
STOCKHOLDER RIGHTS PLAN
Edify's board of directors adopted a stockholder rights plan on August 10,
1998. S1 does not have a comparable plan, nor does it have any present intent to
adopt such a plan. Under Edify's stockholder rights plan, each holder of Edify
common stock received a dividend of one preferred share purchase right for each
share of common stock held by the stockholder. If exercisable, each right
entitles the stockholder to purchase shares of Series A Junior Participating
Preferred Stock, Edify common stock or the stock of an "acquiring person" under
specified circumstances. Those circumstances include if an "acquiring person,"
including a group, "triggers" the rights by acquiring 20% or more of the Edify's
common stock, or announcing an intention to make a tender offer for Edify's
common stock which would result in a person or group acquiring 20% or more of
Edify's common stock. The rights also will be triggered if Edify is acquired or
50 percent or more of its assets are sold. The S1 transaction will not trigger
the rights plan.
SHARE OWNERSHIP BY PRINCIPAL STOCKHOLDERS, MANAGEMENT AND DIRECTORS OF S1
The following table sets forth information concerning the beneficial
ownership of common stock of S1 as of , 1999, for the
following:
- each person or entity who is known by S1 to own beneficially more than 5%
of the outstanding shares of S1's common stock
- each of S1's current directors
- S1's Chief Executive Officer and each of S1's five other most highly
compensated executive officers during 1998
- all directors and executive officers of S1 as a group
Unless otherwise noted, the address of each named beneficial owner is that
of S1.
The pre-transaction percentage ownership is based on shares of S1
common stock outstanding as of , 1999. The post-transaction
percentage ownership gives effect to the approximately 18,000,000 shares of S1
common stock that would be issued to FICS stockholders and shares of
S1 common stock that would be issued to Edify stockholders based on
shares of Edify common stock outstanding as of , 1999. All
shares subject to options and warrants exercisable within 60 days after
, 1999 are deemed to be beneficially owned by the person or
entity holding such options or warrants and to be outstanding solely for
calculating such person's or entity's percentage ownership. Unless otherwise
indicated below, 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. This table includes percentage
ownership data reflecting ownership both before and after consummation of the
transactions.
134
<PAGE> 145
[TABLE TO BE INSERTED]
ADDITIONAL MATTERS BEING SUBMITTED TO A VOTE OF ONLY S1 STOCKHOLDERS
PROPOSAL NO. 1 -- CHANGE OF CORPORATE NAME
Stockholders will be asked to ratify and approve a proposal to amend S1's
charter to change the name of S1 from "Security First Technologies Corporation"
to "S1 Corporation." S1'S BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THIS
PROPOSAL.
LEGAL OPINION
The validity of the shares of S1 common stock offered by this
prospectus/proxy statement will be passed upon for S1 by Hogan & Hartson L.L.P.
Certain United States federal tax matters will be passed upon by Hogan & Hartson
L.L.P., Washington, D.C.
EXPERTS
The consolidated financial statements and schedule of Security First
Technologies Corporation as of December 31, 1998 and 1997, and for each of the
years in the three-year period ended December 31, 1998, have been incorporated
by reference in this Joint Prospectus/Proxy Statement and the related
Registration Statement in reliance upon the report of KPMG LLP, independent
auditors, and upon the authority of said firm as experts in accounting and
auditing.
The consolidated financial statements and schedule of Edify Corporation as
of December 31, 1998 and 1997, and for each of the years in the three-year
period ended December 31, 1998, have been incorporated by reference in this
Joint Prospectus/Proxy Statement and the related Registration Statement in
reliance upon the report of KPMG LLP, independent auditors, and upon the
authority of said firm as experts in accounting and auditing.
FICS's consolidated financial statements as of December 31, 1997 and 1998
and for each of the three years in the period ended December 31, 1998 included
in this prospectus have been so included in reliance on the report of
PricewaterhouseCoopers & Co Bedrijfsrevisoren, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
135
<PAGE> 146
DOCUMENTS INCORPORATED BY REFERENCE IN THIS
PROSPECTUS/PROXY STATEMENT
This Prospectus/Proxy statement incorporates documents by reference which
are not presented in or delivered with this document. You should rely only on
the information contained with this document or that we have referred you to. We
have not authorized anyone to provide you with any information which is
different.
The following documents, which have been filed by S1 with the Securities
and Exchange Commission, are incorporated by reference into this
prospectus/proxy statement:
- S1's Annual Report on Form 10-K for the fiscal year ended December 31,
1998, filed with the SEC on March 31, 1999, as amended on May 14, 1999
- S1's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1999, filed with the SEC on May 17, 1999
- S1's Current Reports on Form 8-K filed with the SEC on April 29, 1999 and
May 21, 1999
- S1's Registration Statement on Form 8-A filed with the SEC on September
30, 1998
The following documents which were filed by Edify with the Securities and
Exchange Commission, are incorporated by reference into this prospectus/proxy
statement:
- Edify's Annual Report on Form 10-K for the fiscal year ended December 31,
1998, filed with the SEC on March 31, 1999
- Edify's Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1999, filed with the SEC on May 14, 1999
- Edify's Current Report on Form 8-K filed with the SEC on May 20, 1999
All documents filed by either S1 or Edify under Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act, after the date hereof and before the date
of the S1 special meeting and the Edify special meeting are incorporated by
reference into and to be a part of this prospectus/proxy statement from the date
of filing of those documents.
Any statement contained in a document incorporated or deemed to be
incorporated in this document by reference will be deemed to be modified or
superseded for purposes of this prospectus/proxy statement to the extent that a
statement contained in this document or any other subsequently filed document
that is deemed to be incorporated in this document by reference modifies or
supersedes the statement. Any statement so modified or superseded will not be
deemed, except as so modified or superseded, to constitute a part of this
prospectus/proxy statement.
136
<PAGE> 147
WHERE YOU CAN FIND MORE INFORMATION
The documents incorporated by reference into this prospectus/proxy
statement are available from us upon request. We will provide a copy of any and
all of the information that is incorporated by reference in this
prospectus/proxy statement, except for exhibits to the information unless those
exhibits are specifically incorporated by reference into this prospectus/proxy
statement, to you, without charge, upon written or oral request. You should make
any request for documents no later than, , 1999 to ensure
timely delivery of the documents.
Direct your requests for documents relating to S1 to Sandy Mitchelson,
Security First Technologies Corporation, 3390 Peachtree Road, NE, Suite 1700,
Atlanta, GA 30326, (404) 812-6426. Direct your requests for documents relating
to Edify to Karen Boardman, Edify Corporation, 2840 San Tomas Expressway, Santa
Clara, CA 95051, (408) 982-2000.
We file reports, proxy statements and other information with the SEC. You
may read and copy any materials we file with the SEC at the SEC's Public
Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549. You may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. The SEC maintains a website that contains reports, proxy
statements and other information filed electronically by both S1 and Edify. The
address of the SEC website is http://www.sec.gov.
You may also inspect reports, proxy statements and other information
concerning S1 and Edify at The National Association of Securities Dealers, 1735
K Street, N.W., Washington, DC 20006.
S1 has filed a registration statement under the Securities Act with the SEC
with respect to S1's common stock to be issued to Edify stockholders in the
Edify Transaction. This prospectus/proxy statement constitutes the prospectus of
S1 filed as part of the registration statement. This prospectus/proxy statement
does not contain all of the information set forth in the registration statement
because certain parts of the registration statement are omitted as provided by
the rules and regulations of the SEC. You may inspect and copy the registration
statement at the Public Reference Room as described above.
If you have any questions about the transactions, please call S1's investor
relations group at (404) 812-6200. You may also call Edify's investor relations
group at (408) 982-4000.
This document does not constitute an offer to sell, or a solicitation of an
offer to purchase, the S1 common stock or the solicitation of a proxy, in any
jurisdiction to or from any person to whom or from whom it is unlawful to make
the offer, solicitation of an offer or proxy solicitation in that jurisdiction.
Neither the delivery of this prospectus/proxy statement nor any distribution of
securities means, under any circumstances, that there has been no change in the
information set forth or incorporated in this document by reference or in our
affairs since the date of this prospectus/proxy statement. The information
contained in this document with respect to S1 and its subsidiaries was provided
by S1. The information contained in this document with respect to FICS Group
N.V. and its subsidiaries was provided by FICS. The information contained in
this document with respect to Edify and its subsidiaries was provided by Edify.
137
<PAGE> 148
FICS GROUP N.V.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AUDITED FINANCIAL STATEMENTS
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets as of December 31, 1997 and
1998...................................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1996, 1997 and 1998.......................... F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1997 and 1998.......................... F-5
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1996, 1997 and 1998.............. F-6
Notes to Audited Consolidated Financial Statements.......... F-7
</TABLE>
F-1
<PAGE> 149
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
FICS Group N.V.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of cash flows and of stockholders' equity
present fairly, in all material respects, the financial position of FICS Group
N.V. and its subsidiaries at December 31, 1997 and 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998, all expressed in euro, in conformity with generally
accepted accounting principles in the United States of America. These financial
statements are the responsibility of FICS Group's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers & Co. Bedrijfsrevisoren
Brussels, Belgium
April 9, 1999, except for note 12,
which is as of July 7, 1999
F-2
<PAGE> 150
FICS GROUP N.V.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
(AMOUNTS HAVE BEEN RESTATED FROM THE PRIOR REPORTING CURRENCY, BELGIAN FRANCS,
TO EURO, USING THE JANUARY 1, 1999 EXCHANGE RATE)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1998
------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. E 4,178 E 2,968
Accounts receivable, net of allowance for doubtful
accounts of 423 in 1997 and 376 in 1998................. 6,301 22,529
Unbilled receivables...................................... 2,107 1,561
Other receivables......................................... 775 678
------- --------
Total current assets.................................... 13,361 27,736
------- --------
Property, plant, and equipment, net (Note 4)................ 3,238 4,120
Intangible assets, net...................................... 102 2,755
------- --------
Total assets............................................ E16,701 E 34,611
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings under line of credit (Note 5).................. E 2,665 E 7,094
Current portion of long-term debt (Note 6)................ 657 588
Accounts payable.......................................... 6,409 9,660
Accrued liabilities....................................... 1,431 3,457
Income taxes payable...................................... 54 98
Deferred revenue.......................................... 653 7,560
------- --------
Total current liabilities............................... 11,869 28,457
------- --------
Long-term debt (Note 6)..................................... 488 710
------- --------
Total liabilities....................................... 12,357 29,167
------- --------
Contingencies and commitments (Note 7)
Stockholders' equity:
Convertible preferred stock:
Series B1: 40,000 shares authorized, 25,000 and 40,000
shares issued and outstanding at December 31, 1997 and
1998, respectively.................................... 9,040 9,040
Series B2: 950 shares authorized, issued and outstanding
at December 31, 1998.................................. -- 863
Series C: 9,302 shares authorized, issued and
outstanding at December 31, 1998...................... -- 8,471
Common stock, 96,350 shares authorized, issued and
outstanding at December 31, 1997 and 1998,
respectively............................................ 597 597
Additional paid-in capital................................ 1,293 3,521
Deferred stock-based compensation......................... -- (987)
Accumulated deficit....................................... (6,393) (16,469)
Accumulated other comprehensive income (loss)............. (193) 408
------- --------
Total stockholders' equity.............................. 4,344 5,444
------- --------
Total liabilities and stockholders' equity.............. E16,701 E 34,611
======= ========
</TABLE>
See accompanying notes to the consolidated financial statements
F-3
<PAGE> 151
FICS GROUP N.V.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
(AMOUNTS HAVE BEEN RESTATED FROM THE PRIOR REPORTING CURRENCY, BELGIAN FRANCS,
TO EURO, USING THE JANUARY 1, 1999 EXCHANGE RATE)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Revenues
Software licenses....................................... E 6,267 E 6,159 E 11,001
Services................................................ 17,439 29,522 38,752
-------- -------- --------
Total revenues....................................... 23,706 35,681 49,753
-------- -------- --------
Cost of revenues
Software licenses....................................... 407 397 398
Services................................................ 15,651 22,268 32,038
-------- -------- --------
Total cost of revenues............................... 16,058 22,665 32,436
-------- -------- --------
Gross profit......................................... 7,648 13,016 17,317
Operating expenses
Sales and marketing..................................... 1,603 3,762 5,401
Research and development................................ 6,314 6,325 12,659
General and administrative.............................. 3,491 5,012 7,829
Stock-based compensation................................ -- -- 1,241
Amortization of intangibles............................. 294 890 310
-------- -------- --------
Total operating expenses............................. 11,702 15,989 27,440
-------- -------- --------
Loss from operations...................................... (4,054) (2,973) (10,123)
Interest income......................................... 112 137 90
Interest expense........................................ (191) (120) (509)
Other income (expense).................................. 491 (477) 528
-------- -------- --------
Loss before income taxes............................. (3,642) (3,433) (10,014)
Income tax provision...................................... 11 62 62
-------- -------- --------
Net loss............................................. E (3,653) E (3,495) E(10,076)
======== ======== ========
Basic and diluted net loss per share...................... E (29.17) E (26.61) E (73.44)
======== ======== ========
Weighted average shares outstanding....................... 125,210 131,365 137,205
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 152
FICS GROUP N.V.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(AMOUNTS HAVE BEEN RESTATED FROM THE PRIOR REPORTING CURRENCY, BELGIAN FRANCS,
TO EURO, USING THE JANUARY 1, 1999 EXCHANGE RATE)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss................................................. E(3,653) E(3,495) E(10,076)
Adjustments to reconcile net loss to net cash flow used
by operating activities:
Depreciation and amortization......................... 1,390 1,992 1,458
Amortization of stock-based compensation.............. -- -- 1,241
Decrease (increase) in accounts receivable............ 1,006 774 (15,089)
Decrease (increase) in unbilled receivables........... 154 (1,929) 621
(Decrease) increase in accounts payable............... (940) 2,307 2,344
Increase (decrease) in accrued liabilities and taxes
payable............................................. 1,920 (1,986) 1,552
Increase in deferred revenue.......................... 119 509 6,916
(Increase) decrease in other receivables.............. (562) (404) 97
------- ------- --------
Net cash used in operating activities............ (566) (2,232) (10,936)
------- ------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment................ (953) (982) (899)
Acquisition of businesses, net of cash acquired.......... -- -- (2,312)
------- ------- --------
Net cash used in investing activities............ (953) (982) (3,211)
------- ------- --------
Cash flows from financing activities:
Increase in borrowings under line of credit.............. 713 1,749 4,429
Repayment of long-term debt.............................. (936) (130) (456)
Proceeds from long-term debt............................. -- -- 935
Proceeds from issuance of shares, net of offering
costs................................................. 124 3,753 8,471
Repayment of obligations under capital leases............ (343) (264) (573)
------- ------- --------
Net cash flows provided by (used in) financing
activities.................................... (442) 5,108 12,806
------- ------- --------
Effect of exchange rate changes on cash and cash
equivalents.............................................. 7 (84) 131
(Decrease) increase in cash and cash equivalents........... (1,954) 1,810 (1,210)
------- ------- --------
Cash and cash equivalents at beginning of year............. 4,322 2,368 4,178
------- ------- --------
Cash and cash equivalents at end of year................... E 2,368 E 4,178 E 2,968
======= ======= ========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest................... E 191 E 120 E 509
Cash paid during the year for taxes...................... E 150 E 24 E 74
Supplemental disclosure of non-cash information:
Acquisition of property and equipment under capital
leases................................................ E 456 E 202 E 1,015
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 153
FICS GROUP N.V.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
(AMOUNTS HAVE BEEN RESTATED FROM THE PRIOR REPORTING CURRENCY, BELGIAN FRANCS,
TO EURO, USING THE JANUARY 1, 1999 EXCHANGE RATE)
<TABLE>
<CAPTION>
SERIES B1 SERIES B2 SERIES C
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL
--------------- --------------- --------------- ---------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
------ ------ ------ ------ ------ ------ ------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996.......... 25,000 E6,434 -- -- -- -- 100,000 E573 E 46
Issuance of common shares....... -- -- -- -- -- -- 2,500 16 108
Net loss........................ -- -- -- -- -- -- -- -- --
Foreign currency translation
adjustment.................... -- -- -- -- -- -- -- -- --
------ ------ --- ---- ----- ------ ------- ---- ------
Balance, December 31, 1996........ 25,000 6,434 -- -- -- -- 102,500 589 154
------ ------ --- ---- ----- ------ ------- ---- ------
Issuance of preferred
shares(1)..................... 15,000 2,606 -- -- -- -- (7,500) -- --
Issuance of common shares....... -- -- -- -- -- -- 1,350 8 1,139
Net loss........................ -- -- -- -- -- -- -- -- --
Foreign currency translation
adjustment.................... -- -- -- -- -- -- -- -- --
------ ------ --- ---- ----- ------ ------- ---- ------
Balance, December 31, 1997........ 40,000 9,040 -- -- -- -- 96,350 597 1,293
------ ------ --- ---- ----- ------ ------- ---- ------
Issuance of preferred shares and
Bonds 1 and 2, net of costs of
99(2)......................... -- -- 950 E863 9,302 E8,471 -- -- --
Deferred stock-based
compensation.................. -- -- -- -- -- -- -- -- 2,228
Net loss........................ -- -- -- -- -- -- -- -- --
Foreign currency translation
adjustment.................... -- -- -- -- -- -- -- -- --
------ ------ --- ---- ----- ------ ------- ---- ------
Balance, December 31, 1998........ 40,000 E9,040 950 E863 9,302 E8,471 96,350 E597 E3,521
====== ====== === ==== ===== ====== ======= ==== ======
<CAPTION>
RETAINED ACCUMULATED
EARNINGS/ OTHER TOTAL
DEFERRED (ACCUMULATED COMPREHENSIVE STOCKHOLDERS'
COMPENSATION DEFICIT) INCOME EQUITY
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Balance, January 1, 1996.......... -- E 756 E 14 E 7,823
Issuance of common shares....... -- -- -- 124
Net loss........................ -- (3,653) -- (3,653)
Foreign currency translation
adjustment.................... -- -- (84) (84)
----- -------- ----- --------
Balance, December 31, 1996........ -- (2,897) (70) 4,210
----- -------- ----- --------
Issuance of preferred
shares(1)..................... -- -- -- 2,606
Issuance of common shares....... -- -- -- 1,147
Net loss........................ -- (3,496) -- (3,496)
Foreign currency translation
adjustment.................... -- -- (123) (123)
----- -------- ----- --------
Balance, December 31, 1997........ -- (6,393) (193) 4,344
----- -------- ----- --------
Issuance of preferred shares and
Bonds 1 and 2, net of costs of
99(2)......................... -- -- -- 9,334
Deferred stock-based
compensation.................. E(987) -- -- 1,241
Net loss........................ -- (10,076) -- (10,076)
Foreign currency translation
adjustment.................... -- -- 601 601
----- -------- ----- --------
Balance, December 31, 1998........ E(987) E(16,469) E 408 E 5,444
===== ======== ===== ========
</TABLE>
- -------------------------
(1) Includes the issuance of 7,500 shares of Series B1 Preferred Stock and the
exchange of 7,500 shares of common stock for 7,500 shares of Series B1
Preferred Stock for net proceeds to FICS Group of E2,606.
(2) Includes the issuance of Bonds 1 and 2 as described in Note 8.
See accompanying notes to the consolidated financial statements
F-6
<PAGE> 154
FICS GROUP N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(BALANCES HAVE BEEN RESTATED FROM THE PRIOR REPORTING CURRENCY, BELGIAN FRANCS,
TO THE EURO, USING THE JANUARY 1, 1999 EXCHANGE RATE)
1. NATURE OF OPERATIONS
FICS Group N.V. ("FICS Group") provides software products for the global
banking and financial services industry. FICS Group designs, develops, markets
and supports corporate and retail banking products that enable banks and
financial institutions to interact electronically with their customers.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation and principles of consolidation
The consolidated financial statements are expressed in euro (E), and are
prepared in accordance with generally accepted accounting principles in the
United States (U.S. GAAP). They include the accounts of all the majority-owned
subsidiaries of the FICS Group. All significant intercompany balances and
transactions have been eliminated. FICS Group previously presented their
accounts in Belgian Francs (BEF). The January 1, 1999 exchange rate was
retroactively applied to restate prior-year balances. The exchange rate on such
date was BEF 40.3399 to E1.00. The comparative financial statements still
reflect the same trends as previously reported. These statements may not be
comparable to other companies that are reporting in the euro, if they restated
from a different prior reporting currency.
Revenue recognition
Revenue from services and from the licensing of software with significant
customization or modification is generally recognized as work is performed under
the percentage of completion method, with progress being measured using costs
incurred to date compared to total estimated costs to be incurred as performance
is, in effect, a continuous sale that occurs as the work progresses. Revenue
from the licensing of software having no significant ongoing obligations is
generally recognized upon delivery of the product. As long as persuasive
evidence of an arrangement exists, the fee is fixed and determinable and likely
to be collected. Software maintenance revenue is recognized over the contract
term, typically one year. Losses are recognized on contracts in the period in
which the liability is identified.
Revenue related to billings on contracts for which the earnings process is
not yet complete is deferred and recorded as deferred revenue. Service revenue
in 1998 included non-recurring third party license resales of approximately
E2,000,000. Cost of services relating to these resales was approximately
E1,800,000.
Concentration of credit risk
Financial instruments which potentially expose FICS Group to concentration
of credit risk include cash, cash equivalents and accounts receivable. FICS
Group primarily sells to a broad base of banks and other financial institutions
both domestically and internationally.
F-7
<PAGE> 155
FICS GROUP N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Fair value of financial instruments
FICS Group's financial instruments consist of cash, line of credit
borrowings and long-term debt. The carrying amounts of these instruments at
December 31, 1997 and 1998 approximate their fair values.
Cash and cash equivalents
Cash and cash equivalents consist of cash in banks and highly liquid
short-term deposits with a remaining maturity of 90 days or less at date of
acquisition.
Unbilled receivables
Unbilled receivables on fixed-price contracts arise as revenues are
recognized under the percentage-of-completion method. These amounts are billable
at specified dates, when deliverables are made or at contract completion, which
is expected to occur within one year.
Software development costs
Statement of Financial Accounting Standards No. 86 (SFAS 86) requires the
capitalization of certain software development costs once technological
feasibility is established. Such capitalized costs are reported at the lower of
cost or net realizable value, and are amortized on a product-by-product basis
over the estimated economic life of the product, or on the ratio of current
revenues to total projected product revenues, whichever is greater. FICS Group
determines technological feasibility based on the working model method. The
period between establishment of a working model and the general availability of
its software has historically been short and, accordingly, software development
costs qualifying for capitalization have been insignificant. As a result, FICS
Group has expensed all software development costs.
Stock-based compensation
FICS Group has adopted the provisions of Financial Accounting Standards
Statement No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), and has
elected to account for its employee stock options under Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees (APB No. 25).
Loss per share
FICS Group computes net loss per share in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128). Basic
loss per share is computed using the weighted average number of common shares
outstanding during the period. Diluted loss per share is computed using the
weighted average number of common shares and dilutive potential common shares
outstanding during the period. Dilutive potential shares include employee stock
options using the treasury stock method. For all years presented, there was no
difference between the basic and diluted net loss per share because all years
had a net loss and the effect of the assumed exercises of common stock
equivalents would have been anti-dilutive.
As of December 31, 1998, FICS Group had outstanding options to purchase
9,594 shares of common stock and 6,155 contingently issuable shares as described
in Note 8 which are not included in the calculation of diluted earnings per
share due to the anti-dilutive nature of these instruments.
F-8
<PAGE> 156
FICS GROUP N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Research and development costs
Costs incurred by FICS Group for research and development projects are
expensed as incurred.
Intangible assets
Intangible assets consist primarily of the cost in excess of the fair value
of net assets acquired in connection with business combinations accounted for
under the purchase method. Intangible assets are capitalized and amortized on a
straight-line basis over three to five years.
In the year ended December 31, 1997, a charge of E590,000 was made to
reflect a write-down of intangible assets associated with an acquisition in
prior years due to impairment of value and was included in amortization of
intangibles in the statement of operations.
Accounting for impairment of long-lived assets
In accordance with Statement of Financial Accounting Standard No. 121,
"Accounting for the Impairment of Long-Lived Assets to be Disposed of," FICS
Group records impairment losses on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. FICS
Group continually monitors conditions that may affect the carrying value of its
intangible assets and property, plant and equipment.
Foreign currency translation
Assets and liabilities of FICS Group's majority-owned foreign subsidiaries,
whose functional currency is the local currency, are translated into Belgian
Francs at exchange rates in effect at the balance sheet date. Income and expense
items are translated at average exchange rates for the period. The adjustment
resulting from translating the financial statements of such foreign subsidiaries
is reflected as a separate component of stockholders' equity. Transaction gains
or losses, which have not been material, are reported in results of operations.
Property, plant and equipment
Property, plant and equipment is recorded at cost. Depreciation is computed
on the straight-line method over the estimated useful lives of the respective
assets, ranging from three to ten years. Equipment held under capital leases is
amortized on a straight-line basis over the shorter of the asset life or the
lease term.
Income taxes
Deferred income taxes are accounted for using the liability method which
requires deferred taxes to be recognized for all temporary differences between
the book and tax bases of assets and liabilities. Deferred tax assets are
evaluated for probable recoverability on the basis of whether it is more likely
than not that sufficient taxable income will be generated in the foreseeable
future and a valuation allowance is provided against any assets which are not
likely to be recovered on that basis.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts
F-9
<PAGE> 157
FICS GROUP N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Significant estimates include the determination of allowances for
doubtful accounts, percentage of completion under long-term contracts, deferred
tax assets and useful lives for intangible assets.
Reclassifications
Certain reclassifications were made to prior year amounts to conform them
to the current year presentation.
3. SIGNIFICANT TRANSACTIONS
In December 1998, FICS Group acquired HAL5 S.A., a French company, for an
amount of E1,982,000 in cash. FICS Group also acquired Open Systems
Interconnection Ingenierie S.A., a French company, for an amount of E915,000 in
cash. Both companies sell server products to the financial services industry in
France. These acquisitions have been accounted for under the purchase method of
accounting, and, accordingly, the FICS GROUP N.V. results of operations of both
companies will be included in the consolidated financial statements beginning in
January 1, 1999 since the amounts between the date of acquisition and the year
end are not significant. In connection with the acquisitions, FICS Group
acquired net assets with an estimated fair value of E84,000. The difference
between the net asset fair value and the purchase price has been recorded as
intangible assets in the amount of E2,813,000 of which E302,000 has been written
off in the 1998 statement of operations. The remaining amount is to be amortized
over an estimated useful life of 5 years.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment included the following at December 31 (in
thousands):
<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
Computer equipment and software............................. E 3,849 E 4,898
Vehicles.................................................... 327 337
Leasehold improvements...................................... 405 811
Furniture and equipment..................................... 1,702 2,338
------- -------
6,283 8,384
Less: Accumulated depreciation.............................. (3,045) (4,264)
------- -------
Property, plant and equipment, net.......................... E 3,238 E 4,120
======= =======
</TABLE>
Included in the above is computer equipment held under capital leases at
December 31, 1997 and 1998 of E406,000 and E692,000, respectively, with related
accumulated depreciation of E283,000 and E156,000, respectively.
Depreciation expense was E1,097,000, E1,102,000 and E1,088,000 for the
years ended December 31, 1996, 1997 and 1998, respectively.
F-10
<PAGE> 158
FICS GROUP N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. CREDIT LINE
FICS Group had borrowings outstanding under a line of credit of E2,665,000
and E7,094,000 (E2,285,000 in short term borrowings and E4,809,000 in notes
payable) as of December 31, 1997 and 1998, respectively, from KBC Bank in
Belgium.
In February 1999, FICS Group renegotiated its credit facilities with KBC
Bank. Under these facilities, KBC Bank extended FICS Group a line of credit in
the amount of approximately E12,742,000 in the aggregate including a short-term
credit facility of E7,932,000 bearing interest at the bank's daily short-term
loans rate (3.66% at December 31, 1998). The amount FICS Group can borrow under
the short term credit facility will be reduced to E2,000,000 and borrowings in
excess of that amount must be repaid prior to June 30, 1999. FICS Group may
convert amounts under the credit facility to notes payable bearing interest at
BIBOR (Brussels Interbank Offered Rate) plus 0.50% (3.80% at December 31, 1998).
All interest and principal outstanding under the credit facility is due on June
30, 2002. FICS Group has pledged substantially all of its assets as collateral
for the facilities. The facility contains certain financial covenants including
the maintenance of a tangible net worth ratio. FICS Group was in compliance with
such financial covenants as of December 31, 1998.
6. LONG-TERM DEBT
Long-term debt consists of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1997 1998
------ ------
<S> <C> <C>
Amounts due related to acquisitions......................... E 456 --
Obligations under capital leases (Note 7)................... 689 E1,131
Other long-term debt........................................ -- 167
------ ------
Total long-term debt................................... 1,145 1,298
Less: current portion....................................... 657 588
------ ------
E 488 E 710
====== ======
</TABLE>
7. CONTINGENCIES AND COMMITMENTS
FICS Group has operating leases, primarily for office premises and
automobiles that expire over the next five years. Total rental expense for
operating leases for the years ended December 31, 1996, 1997 and 1998 amounted
to approximately E1,872,000, E2,479,000 and E3,768,000, respectively.
Obligations under operating leases are included in the table below.
F-11
<PAGE> 159
FICS GROUP N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future payments under capital and operating leases consist of the following
at December 31, 1998 (in thousands):
<TABLE>
<CAPTION>
CAPITAL LEASE OPERATING LEASE
YEAR ENDING DECEMBER 31, OBLIGATIONS OBLIGATIONS
------------------------ ------------- ---------------
<S> <C> <C>
1999................................................. E 566 E 4,309
2000................................................. 431 4,071
2001................................................. 151 3,245
2002................................................. 77 2,259
2003................................................. 31 3,925
Thereafter........................................... -- --
------ -------
Total minimum lease payments.................... E1,256 E17,809
============= ===============
Amount representing interest......................... E (125)
------
Present value of capital lease payments.............. 1,131
------
Current portion...................................... 506
------
Long-term portion.................................... E 625
======
</TABLE>
FICS Group has a contingency regarding potential compensation due to the
Belgian Banking Association for licensing of its ABACUS engine software product
outside of Belgium. In the opinion of management, the ultimate outcome of this
matter will not have a material adverse effect on FICS Group's financial
position or results of operations.
8. STOCKHOLDERS' EQUITY
FICS Group's authorized capital stock consists of 96,350 shares of common
stock and 50,252 shares of preferred stock.
During December 1997, FICS Group adopted the 1997 Stock Option Plan (the
"1997 Plan"). Under the 1997 Plan, FICS Group is authorized to issue options to
purchase up to 12,500 shares of common stock. During 1998, FICS Group issued
options for the purchase of 10,194 shares. During February 1999, FICS Group
increased the number of shares authorized under the 1997 Plan to 16,500.
The maximum term of options granted under the 1997 Plan is 10 years.
Options are granted under the 1997 Plan at prices as determined by the board of
directors. Options generally vest ratably over a 4 year term.
In accordance with APB No. 25, FICS Group has recorded a deferred
stock-based compensation charge of E2,228,000 with respect to options granted
during 1998. FICS Group recognized E1,241,000 of this amount as compensation
expense during 1998. FICS Group will recognize the balance of this deferred
stock-based compensation over the related vesting period of the options (which
is generally 48 months).
F-12
<PAGE> 160
FICS GROUP N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the changes in the number of shares subject
to options:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OPTION AVERAGE
OF SHARES PRICE OPTION PRICE
--------- ------ ------------
<S> <C> <C> <C>
Outstanding at December 31, 1997................. -- -- --
Granted.......................................... 10,194 E167 E167
Exercised........................................ -- --
Canceled or expired.............................. (600) 167 167
------
Outstanding at December 31, 1998................. 9,594 167 167
------
Available for grant at December 31, 1998......... 2,906
------
Exercisable at December 31, 1998................. 2,942 167
======
</TABLE>
The weighted average grant-date fair value of options granted during 1998
was E398 per share. The weighted average remaining contractual life of options
outstanding at December 31, 1998 was 9.04 years.
Pursuant to the requirements of SFAS No. 123, the following disclosures are
presented to reflect FICS Group's pro forma net loss and net loss per share, as
if FICS Group had elected to use the fair value method of accounting prescribed
by SFAS No. 123, rather than continuing to apply the provisions of APB No. 25.
In preparing these disclosures, FICS Group has determined the value of all
options granted using the average value method, as described in SFAS No. 123,
and based on an assumed dividend rate of 0%, a weighted average risk free rate
of 6% for 1998, and weighted average expected lives of approximately 4 years.
Volatility for 1998 was estimated at 40%.
Under SFAS No. 123 stock-based compensation costs would have increased the
pretax loss by E303,000 (or E2.21 per share) during 1998 if the fair values of
such compensation in that year had been recognized as compensation expense over
the vesting period of the grant. The pro forma effect on net loss in 1998 is not
representative of the pro forma effect on net income or loss in future periods
because options vest over several years and additional options are expected to
be granted.
Sale of Preferred Stock
During December 1998, FICS Group sold 9,300 shares of Series C Convertible
Preferred Stock ("Series C") and Convertible Preferred Bond 1 ("Bond 1") as
described below for E8,471,000. At the same date, FICS Group received E863,000
in the form of cancellation of a note payable which arose in 1998 by FICS Group
in exchange for 950 shares of Series B2 Preferred Stock ("Series B2") and
Convertible Preferred Bond 2 ("Bond 2") as described below. FICS Group recorded
no gain or loss on the cancellation of the note payable since the price per
share was equal to that paid by Series C purchasers.
Bond 1 and Bond 2 are not repayable in cash, and will convert to Series C
and Series B2, respectively. The number of shares that the Bond 1 and Bond 2
will convert into is based upon FICS Group's valuation in a potential initial
public offering, sale or merger, or certain performance goals if FICS Group does
not complete a public offering, sale or merger within two years from the date of
investment. Bond 1 will convert into a minimum of one share or up to a maximum
of 5,585 shares of Series C. Bond 2 will convert into one share or up to a
maximum of 570 shares of Series B2. Completion of the proposed merger described
in Note 12 will result in only the minimum number of
F-13
<PAGE> 161
FICS GROUP N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
shares being issued for Bond 1 and Bond 2. Since the bonds are convertible only
into additional preferred shares, FICS has considered this to be additional
equity and thus has aggregated the Series C and B2 and Bonds 1 and 2 sale in the
consolidated statement of stockholders' equity. Conversion of Bonds 1 and 2 into
preferred shares will result in additional Series C and B2 shares being issued
for no additional consideration.
Terms of Preferred Stock
The following is a summary of the principal rights, preferences and
privileges of the Preferred Stock.
Conversion: The shares of Preferred Stock are convertible into shares of
Common Stock on a one-for-one basis, subject to certain antidilution provisions.
Such conversion will occur automatically at the time of an initial public
offering.
Liquidation Preference: In the event of a winding up of FICS Group, the
available assets are distributed as follows: first, holders of Series B2 and
Series C Preferred Stock are paid, in parity, E546,000 and E5,357,000,
respectively; then, holders of Series B1 Preferred Stock are paid E9,040,000.
The balance would be distributed ratably among the holders of Preferred Stock
and Common Stock.
Dividend Preference: Holders of shares of Preferred Stock are entitled to
receive dividends payable prior and in preference to any payment of any dividend
on the Common Stock, when, as and if declared by the Board of Directors of FICS
Group. The right to such dividends on the Preferred Stock is not cumulative, and
no right will accrue to holders of the Preferred Stock by reason of the fact
that dividends on such shares are not declared or paid in any prior year.
9. INCOME TAXES
The components of the pretax loss are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1996 1997 1998
------ ------ -------
<S> <C> <C> <C>
Belgium............................................... E1,593 E3,108 E2,106
Rest of the world..................................... 2,049 325 7,908
------ ------ -------
Total pretax loss................................ E3,642 E3,433 E10,014
====== ====== =======
</TABLE>
Income tax expense, currently payable, consists of the following (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Belgium..................................................... E 2 E19 E11
Rest of the world........................................... 9 43 51
--- --- ---
E11 E62 E62
=== === ===
</TABLE>
F-14
<PAGE> 162
FICS GROUP N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The actual income tax expense differs from the "expected" tax computed by
applying the Belgian corporate income tax rate of 40.17% to loss before tax as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Computed "expected" tax benefit..................... E(1,463) E(1,381) E(4,023)
Permanent differences related to
Intangible asset amortization..................... 118 358 309
Stock-based compensation amortization............. -- -- 660
Change in deferred tax valuation allowance.......... 462 117 226
Unutilized tax losses............................... 883 905 2,836
Foreign taxes....................................... 9 44 51
Withholding tax on interest income.................. 2 19 3
------- ------- -------
Provision for income taxes.......................... E 11 E 62 E 62
======= ======= =======
</TABLE>
The components of the deferred tax assets and liabilities at December 31
(in thousands):
<TABLE>
<CAPTION>
1997 1998
----- -------
<S> <C> <C>
Deferred tax assets
Operating tax losses...................................... E 809 E 2,832
Less: Valuation allowance................................. (345) (2,142)
----- -------
Total deferred tax assets.............................. 464 690
----- -------
Deferred tax liabilities
Depreciation.............................................. 167 106
Foreign exchange.......................................... 297 584
----- -------
Total deferred tax liabilities......................... E 464 E 690
===== =======
</TABLE>
Under Belgian law, FICS Group is permitted to carry forward its taxable
losses for an indefinite period of time as long as there is no change in
ownership. In case of a change in ownership, FICS Group will have to justify the
economic and financial reasons for the change to be able to offset the loss in
future periods. At December 31, 1998, the total amount of available carry
forward losses was approximately E8,000,000.
10. SEGMENT INFORMATION AND MAJOR CUSTOMERS
FICS Group operates in one business segment providing software and related
services to the financial services industry. FICS Group attributes revenues from
external customers to individual countries based either upon the country in
which the software-related services are performed or the country in which the
customer is domiciled.
F-15
<PAGE> 163
FICS GROUP N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes financial information by geographic area (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
Revenues:
Belgium.......................................... E10,294 E13,942 E 12,129
The Netherlands.................................. 7,270 9,549 17,747
United Kingdom................................... 2,449 4,514 5,647
Rest of Europe, Middle East and Africa........... 1,456 2,518 4,259
------- ------- --------
Total Europe, Middle East and Africa.......... 21,469 30,523 39,782
------- ------- --------
United States.................................... 1,023 3,344 6,770
Asia/Pacific..................................... 1,214 1,814 3,201
------- ------- --------
E23,706 E35,681 E 49,753
======= ======= ========
Operating(loss)/income (in thousands of euro):
Belgium.......................................... E(2,631) E(1,091) E (176)
The Netherlands.................................. 25 19 67
United Kingdom................................... (220) (1,579) (7,670)
Rest of Europe, Middle East and Africa........... (148) 168 (1,600)
------- ------- --------
Total Europe, Middle East and Africa.......... (2,974) (2,483) (9,379)
------- ------- --------
United States.................................... (487) 107 403
Asia/Pacific..................................... (593) (598) (1,147)
------- ------- --------
E(4,054) E(2,974) E(10,123)
======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
1997 1998
---- -------
<S> <C> <C>
Identifiable assets (in thousands of euro):
Belgium................................................... E 8,917 E12,392
The Netherlands........................................... 2,995 5,222
United Kingdom............................................ 1,909 3,580
Rest of Europe, Middle East and Africa.................... 1,354 3,662
------- -------
Total Europe, Middle East and Africa................... 15,175 24,856
------- -------
United States............................................. 1,018 8,426
Asia/Pacific.............................................. 508 1,329
------- -------
E16,701 E34,611
======= =======
</TABLE>
There was one customer which accounted for more than 10% of total revenues
for each of the years presented. Revenue from this customer accounted for 29%,
20% and 23% of total revenues in 1998, 1997 and 1996, respectively.
11. RELATED PARTY TRANSACTIONS
FICS Group's Chief Executive Officer and Chairman of the board of directors
is also the principal stockholder of FICS Group, controls over 60% of the share
capital as of December 31, 1998.
F-16
<PAGE> 164
FICS GROUP N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In 1998, FICS Group granted a member of the board of directors 787 options
to purchase common stock in return for consulting services to be rendered to
FICS Group.
During 1998, FICS Group recorded software license revenues of approximately
E200,000 from a customer that was subsequently acquired by FICS Group as
described in Note 3.
12. SUBSEQUENT EVENT
On May 16, 1999, FICS Group entered into agreements to merge with Security
First Technologies Corporation, or S1, a U.S. company. Under the terms of the
agreements, S1 will, in effect, issue 20,000,000 shares in exchange for 100% of
the outstanding shares and options of FICS Group. In connection with the merger
agreements, FICS Group has entered into a loan agreement whereby S1 has made
available to FICS Group a $10,000,000 line of credit, of which $6,000,000 was
received by FICS Group through July 7, 1999. Amounts borrowed under the line
accrue interest at LIBOR plus 1/2% and are payable following the earlier of
September 26, 2000 or the date of the closing of an initial public offering of
the common stock of FICS Group. Payment of the amounts borrowed under the line
may be made, at the option of FICS Group, in cash or in shares of its common
stock. Consummation of the transaction is subject to certain conditions which,
among other items, include the approval of the stockholders of S1.
F-17
<PAGE> 165
INTRODUCTORY NOTE TO UNAUDITED INTERIM FINANCIAL STATEMENTS
The unaudited interim consolidated financial statements of FICS Group N.V.
(the "Company") include all adjustments of a normal recurring nature which, in
the opinion of management, are necessary for a fair presentation of financial
position as of March 31, 1999 and results of operations and cash flows for the
interim periods presented. The results of operations for the three months ended
March 31, 1999 are not necessarily indicative of the results to be expected for
the entire year. Certain information and footnotes required by generally
accepted accounting principles are not included herein. These interim financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto for the year ended December 31, 1998 included in
this prospectus.
The unaudited interim consolidated financial statements are expressed in
euro (E), and are prepared in accordance with generally accepted accounting
principles in the United States (U.S. GAAP). FICS Group previously presented
their accounts in Belgian Francs (BEF). The January 1, 1999 exchange rate was
retroactively applied to restate prior-period balances. The exchange rate on
such date and at March 31, 1999 was BEF 40.3399 to E1.00. The comparative
financial statements still reflect the same trends as previously reported. These
statements may not be comparable to other companies that are reporting in the
euro, if they restated from a different prior reporting currency.
F-18
<PAGE> 166
FICS GROUP N.V.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(AMOUNTS HAVE BEEN RESTATED FROM THE PRIOR REPORTING CURRENCY, BELGIAN FRANCS,
TO EURO)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999
------------ ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. E 2,968 E 2,759
Accounts receivable, net.................................. 22,529 21,963
Unbilled receivables...................................... 1,561 1,947
Other receivables......................................... 678 1,220
-------- --------
Total current assets................................... 27,736 27,889
-------- --------
Property, plant, and equipment, net......................... 4,120 4,096
Intangible assets, net...................................... 2,755 2,629
-------- --------
Total assets........................................... E 34,611 E 34,614
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings under line of credit........................... E 7,094 E 9,851
Current portion of long-term debt......................... 588 244
Accounts payable.......................................... 9,660 8,801
Accrued liabilities....................................... 3,457 3,455
Income taxes payable...................................... 98 127
Deferred revenue.......................................... 7,560 8,316
-------- --------
Total current liabilities.............................. 28,457 30,794
-------- --------
Long-term debt............................................ 710 1,180
-------- --------
Total liabilities...................................... 29,167 31,974
-------- --------
Stockholders' equity:
Convertible preferred stock:
Series B1: 40,000 shares authorized, 40,000 shares
issued and outstanding at March 31, 1999.............. 9,040 9,040
Series B2: 950 shares authorized, issued and
outstanding at March 31, 1999......................... 863 863
Series C: 9,302 shares authorized, issued and
outstanding at March 31, 1999......................... 8,471 8,471
Common stock, 96,350 shares authorized, issued and
outstanding at March 31, 1999.......................... 597 597
Additional paid-in capital................................ 3,521 3,521
Deferred stock-based compensation......................... (987) (834)
Accumulated deficit....................................... (16,469) (19,166)
Accumulated other comprehensive income (loss)............. 408 148
-------- --------
Total stockholders' equity............................. 5,444 2,640
-------- --------
Total liabilities and stockholders' equity............. E 34,611 E 34,614
======== ========
</TABLE>
F-19
<PAGE> 167
FICS GROUP N.V.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(AMOUNTS HAVE BEEN RESTATED FROM THE PRIOR REPORTING CURRENCY, BELGIAN FRANCS,
TO EURO)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Revenues
Software licenses......................................... E 1,749 E 3,610
Services.................................................. 9,598 9,649
------- -------
Total revenues......................................... 11,347 13,259
------- -------
Cost of revenues
Software licenses......................................... 64 34
Services.................................................. 7,771 8,179
------- -------
Total cost of revenues................................. 7,835 8,213
------- -------
Gross profit........................................... 3,512 5,046
Operating expenses
Sales and marketing....................................... 936 2,210
Research and development.................................. 2,800 3,453
General and administrative................................ 2,015 1,587
Stock-based compensation.................................. 281 153
Amortization of intangibles............................... 1 131
------- -------
Total operating expenses............................... 6,033 7,534
------- -------
Loss from operations........................................ (2,521) (2,488)
Interest income........................................... 5 12
Interest expense.......................................... (28) (95)
Other income (expense).................................... (5) (125)
------- -------
Loss before income taxes............................... (2,549) (2,696)
Income tax provision........................................ 16 1
------- -------
Net loss............................................... E(2,565) E(2,697)
======= =======
Basic and diluted net loss per share........................ E(18.81) E(18.40)
======= =======
Weighted average shares outstanding......................... 136 147
======= =======
</TABLE>
F-20
<PAGE> 168
FICS GROUP N.V.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
(AMOUNTS HAVE BEEN RESTATED FROM THE PRIOR REPORTING CURRENCY, BELGIAN FRANCS,
TO EURO)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. E(2,565) E(2,697)
Adjustments to reconcile net loss to net cash flow used by
operating activities:
Depreciation and amortization.......................... 646 895
Amortization of stock-based compensation............... 281 153
Decrease (increase) in accounts receivable............. (6,800) 506
Decrease (increase) in unbilled receivables............ (796) (386)
(Decrease) increase in accounts payable................ 2,490 (959)
Increase (decrease) in accrued liabilities and taxes
payable............................................... 1,286 27
Increase in deferred revenue........................... 1,410 706
(Increase) decrease in other receivables............... (101) (542)
------- -------
Net cash used in operating activities................ (4,149) (2,297)
------- -------
Cash flows from investing activities:
Purchase of property, plant and equipment................. (285) (740)
------- -------
Net cash used in investing activities................ (285) (740)
------- -------
Cash flows from financing activities:
Increase in borrowings under line of credit............... 2,422 2,757
Repayment of long-term debt............................... (296) --
Proceeds from long-term debt.............................. -- 245
Repayments of obligations under capital leases:........... (45) (119)
Net cash flows provided by (used in) financing
activities.......................................... 2,081 2,883
------- -------
Effect of exchange rate changes on cash and cash
equivalents............................................... -- (55)
(Decrease) increase in cash and cash equivalents............ (2,353) (209)
------- -------
Cash and cash equivalents at beginning of period............ 4,178 2,968
------- -------
Cash and cash equivalents at end of period.................. E 1,825 E 2,759
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for interest.................. 18 95
Cash paid during the period for taxes..................... 13 1
Supplemental disclosure of non-cash information:
Acquisition of property and equipment under capital
leases................................................. 36 31
</TABLE>
F-21
<PAGE> 169
ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SECURITY FIRST TECHNOLOGIES CORPORATION,
SAHARA STRATEGY CORPORATION
AND
EDIFY CORPORATION
DATED AS OF
MAY 16, 1999
A-1
<PAGE> 170
TABLE OF CONTENTS
<TABLE>
<S> <C>
PAGE
ARTICLE I THE MERGER........................................ A-5
1.1 The Merger........................................ A-5
1.2 Effective Time.................................... A-5
1.3 Effects of the Merger............................. A-5
1.4 Conversion of Edify Common Stock.................. A-6
1.5 Conversion of Merger Sub Common Stock............. A-7
1.6 Options........................................... A-7
1.7 Certificate of Incorporation...................... A-7
1.8 By-Laws........................................... A-7
1.9 Directors and Officers............................ A-8
1.10 Tax Consequences.................................. A-8
ARTICLE II EXCHANGE OF SHARES............................... A-8
2.1 S1 to Make Shares Available........................ A-8
2.2 Exchange of Shares................................. A-8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF EDIFY......... A-9
3.1 Corporate Organization............................ A-10
3.2 Capitalization.................................... A-10
3.3 Authority; No Violation........................... A-11
3.4 Consents and Approvals............................ A-12
3.5 Financial Statements; Exchange Act Filings; Books
and Records............................................ A-12
3.6 Broker's Fees..................................... A-13
3.7 Absence of Certain Changes or Events.............. A-13
3.8 Legal Proceedings................................. A-13
3.9 Taxes and Tax Returns............................. A-14
3.10 Employee Plans.................................... A-15
3.11 Certain Contracts................................. A-17
3.12 Agreements with Regulatory Agencies............... A-17
3.13 Certificate of Incorporation...................... A-18
3.14 Environmental Matters............................. A-18
3.15 Properties and Assets............................. A-18
3.16 Insurance......................................... A-19
3.17 Compliance with Applicable Laws................... A-19
3.18 Affiliates........................................ A-20
3.19 Ownership of S1 Common Stock...................... A-20
3.20 Fairness Opinion.................................. A-20
3.21 Change of Control Payments........................ A-20
3.22 Disclosure........................................ A-20
3.23 Board Approval.................................... A-21
3.24 Section 203 of the Delaware General Corporation
Law and Edify Rights Plan Not Applicable.......... A-21
3.25 Intellectual Property............................. A-21
3.26 Additional Information............................ A-23
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF S1............. A-23
4.1 Corporate Organization............................ A-24
4.2 Capitalization.................................... A-24
4.3 Authority; No Violation........................... A-25
</TABLE>
A-2
<PAGE> 171
<TABLE>
<S> <C>
4.4 Consents and Approvals............................ A-26
4.5 Financial Statements; Exchange Act Filings; Books
and Records............................................ A-26
4.6 Broker's Fees..................................... A-27
4.7 Absence of Certain Changes or Events.............. A-27
4.8 Legal Proceedings................................. A-27
4.9 Taxes and Tax Returns............................. A-28
4.10 Employee Plans.................................... A-28
4.11 Certain Contracts................................. A-30
4.12 Environmental Matters............................. A-31
4.13 Properties and Assets............................. A-31
4.14 Insurance......................................... A-32
4.15 Compliance with Applicable Laws................... A-32
4.16 S1 Information.................................... A-32
4.17 Intellectual Property............................. A-32
4.18 BBRS Fairness Opinion............................. A-34
4.19 Merger Sub Board Approval......................... A-35
4.20 S1 Board Approval................................. A-35
4.21 Agreements with Regulatory Agencies............... A-35
4.22 Certificate of Incorporation...................... A-35
4.23 Affiliates........................................ A-35
4.24 Additional Information............................ A-35
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS......... A-36
5.1 Covenants of Edify................................ A-36
5.2 Covenants of S1................................... A-38
5.3 Compliance with Antitrust Laws.................... A-38
ARTICLE VI ADDITIONAL AGREEMENTS............................ A-39
6.1 Regulatory Matters................................ A-39
6.2 Access to Information............................. A-40
6.3 Stockholder Meetings.............................. A-41
6.4 Legal Conditions to Merger........................ A-41
6.5 Stock Exchange Listing............................ A-41
6.6 Employees......................................... A-41
6.7 Indemnification................................... A-42
6.8 Subsequent Interim and Annual Financial
Statements............................................. A-43
6.9 Additional Agreements............................. A-43
6.10 Advice of Changes................................. A-43
6.11 Current Information............................... A-44
6.12 Transaction Expenses of Edify..................... A-44
6.13 Form S-8.......................................... A-44
6.14 Edify ESPP........................................ A-44
6.15 Board of Directors................................ A-45
6.16 Bylaws............................................ A-45
ARTICLE VII CONDITIONS PRECEDENT............................ A-45
7.1 Conditions to Each Party's Obligation To Effect
the Merger............................................. A-45
7.2 Conditions to Obligations of S1 and Merger Sub.... A-46
7.3 Conditions to Obligations of Edify................ A-47
</TABLE>
A-3
<PAGE> 172
<TABLE>
<S> <C>
ARTICLE VIII TERMINATION AND AMENDMENT...................... A-48
8.1 Termination....................................... A-48
8.2 Effect of Termination............................. A-49
8.3 Amendment......................................... A-49
8.4 Extension; Waiver................................. A-49
ARTICLE IX GENERAL PROVISIONS............................... A-50
9.1 Closing........................................... A-50
9.2 Nonsurvival of Representations, Warranties and
Agreements............................................. A-50
9.3 Expenses; Breakup Fee............................. A-50
9.4 Notices........................................... A-51
9.5 Interpretation.................................... A-51
9.6 Counterparts...................................... A-51
9.7 Entire Agreement.................................. A-52
9.8 Governing Law..................................... A-52
9.9 Enforcement of Agreement.......................... A-52
9.10 Severability...................................... A-52
9.11 Publicity......................................... A-52
9.12 Assignment; Limitation of Benefits................ A-52
9.13 Additional Definitions............................ A-53
EXHIBITS
A Option Agreement
B Certificate of Merger
C Edify Stockholder Agreement
D S1 Stockholder Agreement
</TABLE>
A-4
<PAGE> 173
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of May 16, 1999 (this
"Agreement"), is entered into by and among Security First Technologies
Corporation, a Delaware corporation ("S1"), Sahara Strategy Corporation, a
Delaware corporation and wholly owned subsidiary of S1 ("Merger Sub"), and Edify
Corporation, a Delaware corporation ("Edify").
WHEREAS, the Boards of Directors of S1, Merger Sub and Edify have
determined that it is in the best interests of their respective companies and
stockholders to consummate the business combination transaction provided for
herein in which Merger Sub will, subject to the terms and conditions set forth
herein, merge with and into Edify, with Edify being the Surviving Corporation
(as defined) and a wholly owned subsidiary of S1 (the "Merger");
WHEREAS, as an inducement to S1 to enter into this Agreement, Edify will
enter into an option agreement, in the form attached hereto as Exhibit A (the
"Option Agreement"), with S1 immediately following the execution of this
Agreement pursuant to which Edify will grant S1 an option to purchase, under
certain circumstances, newly issued shares of common stock, par value $0.001 per
share, of Edify (including the associated Rights (as defined in that certain
Rights Agreement (the "Edify Rights Plan") dated as of August 10, 1998 between
Edify and BankBoston, N.A.) ("Edify Common Stock"), representing up to 19.9% of
the issued and outstanding shares of Edify Common Stock as of the first date, if
any, that the option becomes exercisable, at an exercise price of $17.87 per
share, upon the terms and conditions therein contained, and
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the Merger and also to prescribe certain
conditions to the Merger;
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER.
Subject to the terms and conditions of this Agreement, in accordance with
the Delaware General Corporation Law (the "DGCL"), at the Effective Time (as
defined in Section 1.2 hereof), Merger Sub shall merge into Edify, with Edify
being the surviving corporation (hereinafter sometimes called the "Surviving
Corporation") in the Merger. Upon consummation of the Merger, the corporate
existence of Merger Sub shall cease and the Surviving Corporation shall continue
to exist as a Delaware corporation, and a wholly owned subsidiary of S1.
1.2 EFFECTIVE TIME.
The Merger shall become effective on the Closing Date (as defined in
Section 9.1 hereof), upon the filing of the certificate of merger (the
"Certificate of Merger") in the form attached as Exhibit B hereto with the
Secretary of State of the State of Delaware (or at such later time as may be
agreed by Edify and S1 in writing and specified in the Certificate of Merger).
The term "Effective Time" shall be the date and time when the Merger becomes
effective as set forth in the Certificate of Merger.
1.3 EFFECTS OF THE MERGER.
At and after the Effective Time, the Merger shall have the effects set
forth in Sections 259 and 261 of the DGCL.
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<PAGE> 174
1.4 CONVERSION OF EDIFY COMMON STOCK.
(a) At the Effective Time, subject to Section 1.4(b) hereof, each share
of Edify Common Stock issued and outstanding prior to the Effective Time shall,
by virtue of this Agreement and without any action on the part of the holder
thereof, be converted into the right to receive, and be exchangeable for,
0.330969 shares of S1 common stock, par value $0.01 per share ("S1 Common
Stock"). The number of shares of S1 Common Stock issuable with respect to each
share of Edify Common Stock, as determined and adjusted as set forth herein, is
called the "Exchange Ratio."
(b) At the Effective Time, all of the shares of Edify Common Stock
converted into S1 Common Stock pursuant to this Article I shall no longer be
outstanding and shall automatically be canceled and shall cease to exist, and
each certificate (each a "Certificate") previously representing any such shares
of Edify Common Stock shall thereafter represent the right to receive (i) the
number of whole shares of S1 Common Stock and (ii) cash in lieu of fractional
shares of S1 Common Stock into which the shares of Edify Common Stock
represented by such Certificate have been converted pursuant to Section 1.4(a)
hereof. Certificates previously representing shares of Edify Common Stock shall
be exchanged for certificates representing whole shares of S1 Common Stock and
cash in lieu of fractional shares issued in consideration therefor upon the
surrender of such Certificates in accordance with Section 2.2 hereof, without
any interest thereon. If prior to the Effective Time, S1 should split or combine
its common stock, or pay a dividend or other distribution in such common stock,
then the Exchange Ratio shall be appropriately adjusted to fully reflect such
split, combination, dividend or distribution.
(c) At the Effective Time, all shares of Edify Common Stock that are
owned by Edify as treasury stock and all shares of Edify Common Stock that are
owned directly or indirectly by S1 or Edify or any of their respective
Subsidiaries shall be canceled and shall cease to exist and no stock of S1 or
other consideration shall be delivered in exchange therefor. All shares of S1
Common Stock that are owned by Edify or any of its Subsidiaries shall become
treasury stock of S1.
(d) Certificates for fractions of shares of S1 Common Stock will not be
issued. In lieu of a fraction of a share of S1 Common Stock, each holder of
Edify Common Stock otherwise entitled to a fraction of a share of S1 Common
Stock shall be entitled to receive an amount of cash equal to (i) the fraction
of a share of the S1 Common Stock to which such holder would otherwise be
entitled, multiplied by (ii) the actual market value of the S1 Common Stock,
which shall be deemed to be the average of the daily closing prices per share
for S1 Common Stock for the twenty consecutive trading days on which shares of
S1 Common Stock are actually traded (as reported on the Nasdaq Stock Market
National Market System) ending on the third trading day preceding the Closing
Date. Following consummation of the Merger, no holder of Edify Common Stock
shall be entitled to dividends or any other rights in respect of any such
fraction.
(e) If any shares of Edify Common Stock outstanding immediately prior to
the Effective Time are subject to a repurchase option, risk of forfeiture or
other condition under any applicable restricted stock purchase agreement or
other agreement with Edify, then the shares of S1 Common Stock issued in
exchange for such shares of Edify Common Stock will also be unvested and subject
to the same repurchase option, risk of forfeiture or other condition, and the
certificates representing such shares of S1 Common Stock accordingly may be
marked with appropriate legends. Edify shall take all action that may be
necessary to ensure that, from and after the Effective Time, S1 is entitled to
exercise any such repurchase option or other right set forth in any such
restricted stock purchase agreement or other agreement.
A-6
<PAGE> 175
1.5 CONVERSION OF MERGER SUB COMMON STOCK.
Each of the shares of the common stock, par value $.01 per share, of Merger
Sub issued and outstanding immediately prior to the Effective Time shall become
shares of the Surviving Corporation after the Merger and shall thereupon
constitute all of the issued and outstanding shares of the Surviving
Corporation.
1.6 OPTIONS.
At the Effective Time, each option granted by Edify to purchase shares of
Edify Common Stock which is outstanding and unexercised immediately prior
thereto, whether or not vested, shall be converted automatically into an option
to purchase shares of S1 Common Stock in an amount and at an exercise price
determined as provided below (and otherwise subject to the terms of the 1996
Equity Incentive Plan (the "1996 Equity Plan"), the 1996 Directors Stock Option
Plan (the "Directors Plan"), or the 1990 Stock Option Plan (the "1990 Option
Plan"), as the case may be, (the 1996 Equity Plan, the Directors Plan and the
1990 Option Plan, collectively, the "Edify Stock Plans")):
(1) The number of shares of S1 Common Stock to be subject to the option
immediately after the Effective Time shall be equal to the product of
the number of shares of Edify Common Stock subject to the option
immediately before the Effective Time, multiplied by the Exchange Ratio,
provided that any fractional shares of S1 Common Stock resulting from
such multiplication shall be rounded down to the nearest share; and
(2) The exercise price per share of S1 Common Stock under the option
immediately after the Effective Time shall be equal to the exercise
price per share of Edify Common Stock under the option immediately
before the Effective Time divided by the Exchange Ratio, provided that
such exercise price shall be rounded up to the nearest cent.
The adjustment provided herein shall be and is intended to be effected in a
manner which is consistent with Section 424(a) of the Internal Revenue Code of
1986, as amended (the "Code"). The duration, vesting schedule, exercisability
and other terms of the option immediately after the Effective Time shall be the
same as the corresponding terms in effect immediately before the Effective Time,
except that all references to Edify in the Edify Stock Plans (and the
corresponding references in the option agreement documenting such option) shall
be deemed to be references to S1. Except as set forth in Section 1.6 of the
Edify Disclosure Schedule, vesting of stock options under the Edify stock plans
shall not be accelerated as a result of the Merger. Continuous employment with
Edify or its subsidiaries shall be credited to the optionee for purposes of
determining the vesting of all assumed Edify options after the Effective Time.
It is intended that Edify options assumed by S1 shall qualify following the
Effective Time as incentive stock options are defined in Section 422 of the Code
to the extent such options qualified as such prior to the Effective Time and the
provisions of this Section 1.6 shall be applied consistently with such intent.
As soon as reasonably practicable, but in no event more than 30 days after the
Effective Time, S1 will issue to each holder of an assumed option notice of the
foregoing assumption by S1 of such Edify option.
1.7 CERTIFICATE OF INCORPORATION.
At the Effective Time, the Certificate of Incorporation of Edify, as the
Surviving Corporation, shall be amended to be the same form of Certificate of
Incorporation as Merger Sub.
1.8 BY-LAWS.
At the Effective Time, the By-Laws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the By-Laws of the Surviving Corporation.
A-7
<PAGE> 176
1.9 DIRECTORS AND OFFICERS.
At the Effective Time, the directors and officers of Merger Sub immediately
prior to the Effective Time shall be the directors and officers of the Surviving
Corporation.
1.10 TAX CONSEQUENCES.
It is intended that the Merger shall constitute a reorganization within the
meaning of Section 368(a) of the Code, and that this Agreement shall constitute
a "plan of reorganization" for the purposes of the Code.
ARTICLE II
EXCHANGE OF SHARES
2.1 S1 TO MAKE SHARES AVAILABLE.
At or prior to the Effective Time, S1 shall deposit, or shall cause to be
deposited, with S1's transfer agent, American Stock Transfer & Trust Company, or
such other bank, trust company or transfer agent as S1 may select and is
reasonably acceptable to Edify (the "Exchange Agent"), for the benefit of the
holders of Certificates, for exchange in accordance with this Article II,
certificates representing the shares of S1 Common Stock, the cash in lieu of
fractional shares and any dividends or distributions pursuant to Section 2.2(b)
(such cash, dividends and certificates for shares of S1 Common Stock, being
hereinafter referred to as the "Exchange Fund") to be issued pursuant to Section
1.4 and paid pursuant to Section 2.2(a) hereof in exchange for outstanding
shares of Edify Common Stock.
2.2 EXCHANGE OF SHARES.
(a) As soon as practicable after the Effective Time, the Exchange Agent
shall mail to each holder of record of a Certificate or Certificates a form
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing the
shares of S1 Common Stock, the cash in lieu of fractional shares into which the
shares of Edify Common Stock represented by such Certificate or Certificates
shall have been converted and any dividends or distributions pursuant to Section
2.2(b) pursuant to this Agreement. Edify shall have the right to review both the
letter of transmittal and the instructions prior to such documents being
finalized. Upon surrender of a Certificate for exchange and cancellation to the
Exchange Agent, together with such letter of transmittal, duly executed, the
holder of such Certificate shall be entitled to receive in exchange therefor (x)
a certificate representing that number of whole shares of S1 Common Stock to
which such holder of Edify Common Stock shall have become entitled pursuant to
the provisions of Article I hereof (with such legends as may be required
pursuant to Section 1.4(e) hereof), (y) a check representing the amount of cash
in lieu of fractional shares, if any, which such holder has the right to receive
in respect of the Certificate surrendered pursuant to the provisions of this
Article II and any dividends or distributions pursuant to Section 2.2(b), and
the Certificate so surrendered shall forthwith be canceled. No interest will be
paid or accrued on the cash in lieu of fractional shares and unpaid dividends
and distributions, if any, payable to holders of Certificates.
(b) No dividends or other distributions declared after the Effective
Time with respect to S1 Common Stock and payable to the holders of record
thereof shall be paid to the holder of any unsurrendered Certificate until the
holder thereof shall surrender such Certificate in accordance with this Article
II. After the surrender of a Certificate in accordance with this Article II, the
record
A-8
<PAGE> 177
holder thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of S1 Common Stock represented by such
Certificate. No holder of an unsurrendered Certificate shall be entitled, until
the surrender of such Certificate, to vote the shares of S1 Common Stock into
which his Edify Common Stock shall have been converted.
(c) If any certificate representing shares of S1 Common Stock is to be
issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance thereof
that the Certificate so surrendered shall be properly endorsed (or accompanied
by an appropriate instrument of transfer) and otherwise in proper form for
transfer, and that the person requesting such exchange shall pay to the Exchange
Agent in advance any transfer or other taxes required by reason of the issuance
of a certificate representing shares of S1 Common Stock in any name other than
that of the registered holder of the Certificate surrendered, or shall establish
to the satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(d) After the close of business on the day immediately prior to the
Effective Time, there shall be no transfers on the stock transfer books of Edify
of the shares of Edify Common Stock which were issued and outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates representing such shares are presented for transfer to the Exchange
Agent, they shall be canceled and exchanged for certificates representing shares
of S1 Common Stock as provided in this Article II.
(e) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of Edify for six months after the Effective Time may be returned to
S1. Any stockholders of Edify who have not complied with this Article II prior
to such return shall thereafter look only to S1 for payment of their shares of
S1 Common Stock, cash in lieu of fractional shares and unpaid dividends and
distributions on S1 Common Stock deliverable in respect of each share of Edify
Common Stock such stockholder holds as determined pursuant to this Agreement, in
each case, without any interest thereon. Notwithstanding the foregoing, none of
S1, Edify, the Exchange Agent or any other person shall be liable to any former
holder of shares of Edify Common Stock for any amount properly delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
(f) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by S1, the
posting by such person of a bond in such amount as S1 may reasonably direct as
indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the shares of S1 Common Stock, cash in lieu of fractional
shares deliverable in respect thereof and any dividends or distributions
pursuant to Section 2.2(b) pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EDIFY
Edify hereby makes the following representations and warranties to S1 and
Merger Sub as set forth in this Article III, subject to the exceptions disclosed
in writing in the Edify Disclosure Schedule as of the date hereof, each of which
is being relied upon by S1 and Merger Sub as a material inducement to enter into
and perform this Agreement. All of the disclosure schedules of Edify referenced
below or otherwise required pursuant to this Agreement are referred to herein as
the "Edify Disclosure Schedule."
A-9
<PAGE> 178
3.1 CORPORATE ORGANIZATION.
(a) Edify is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Except as set forth in Section
3.1 of the Edify Disclosure Schedule, Edify has the corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as it is now being conducted, and is duly licensed or qualified to do
business in each jurisdiction in which the nature of any material business
conducted by it or the character or location of any material properties or
assets owned or leased by it makes such licensing or qualification necessary.
The Certificate of Incorporation and By-Laws of Edify, copies of which have
previously been made available to S1, are true, correct and complete copies of
such documents as in effect as of the date of this Agreement.
(b) No subsidiary of Edify is a "Significant Subsidiary" as such term is
defined in Regulation S-X promulgated by the Securities and Exchange Commission
(the "SEC"). Edify EMEA Ltd. and each other subsidiary of Edify (each, an "Edify
Subsidiary") has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted
and is duly licensed or qualified to do business in each jurisdiction in which
the nature of any material business conducted by it or the character or the
location of any material properties or assets owned or leased by it makes such
licensing or qualification necessary. The Certificate of Incorporation and
By-Laws or other corporate governance documents of each Edify Subsidiary, copies
of which have previously been made available to S1, are true, correct and
complete copies of such documents as in effect as of the date of this Agreement.
(c) Neither Edify nor any Edify Subsidiary has agreed or is obligated to
make, or is bound by any written, oral or other agreement, contract,
subcontract, lease, binding understanding, instrument, note, option, warranty,
purchase order, license, sublicense, insurance policy, benefit plan or legally
binding commitment or undertaking of any nature, as in effect as of the date
hereof or as may hereinafter be in effect (each, a "Contract") under which
Contract it may become obligated to make, any future investment in or capital
contribution to any other entity. Neither Edify nor any Edify Subsidiary has, at
any time, been a general partner of any general partnership, limited partnership
or other entity.
3.2 CAPITALIZATION.
(a) The authorized capital stock of Edify consists of 55,000,000 shares
of Edify Common Stock and 5,000,000 shares of preferred stock, $0.001 par value
per share (the "Edify Preferred Stock"). Except as set forth in Section 3.2(a)
of the Edify Disclosure Schedule, as of the date hereof, there are (x)
17,696,952 shares of Edify Common Stock issued and outstanding and no shares of
Edify Common Stock held in Edify's treasury, (y) no shares of Edify Common Stock
reserved for issuance upon exercise of outstanding stock options or otherwise,
except for 5,146,790 shares of Edify Common Stock reserved for issuance pursuant
to the Edify Stock Plans (of which options for 5,027,283 shares are currently
outstanding), (ii) the shares of Edify Common Stock reserved for issuance upon
exercise of the option to be issued to S1 pursuant to the Option Agreement, and
(iii) 296,885 shares of Edify Common Stock reserved for issuance pursuant to the
Edify 1996 Employee Stock Purchase Plan (the "Edify ESPP"), and (z) no shares of
Edify Preferred Stock issued or outstanding, held in Edify's treasury or
reserved for issuance upon exercise of outstanding stock options or otherwise,
other than 500,000 shares of Edify Preferred Stock designated as Series A Junior
Participating Preferred Stock pursuant to the Edify Rights Plan. Upon
consummation of the Merger, (A) the shares of S1 Common Stock issued in exchange
for any shares of Edify Common Stock that are subject to a Contract pursuant to
which Edify has the right to repurchase, redeem or otherwise reacquire any
shares of Edify Common Stock will, without any further act of S1, Edify or any
other person, become subject to the restrictions, conditions and other
provisions contained in such
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<PAGE> 179
Contract, and (B) S1 will automatically succeed to and become entitled to
exercise Edify's rights and remedies under any such Contract. All of the issued
and outstanding shares of Edify Common Stock have been duly authorized and
validly issued and are fully paid, nonassessable and free of preemptive rights,
with no personal liability attaching to the ownership thereof. Except for the
Option Agreement, the Edify Rights Plan, the Edify ESPP, the Edify Stock Plans
and as disclosed in Section 3.2 of the Edify Disclosure Schedule, Edify does not
have and is not bound by any outstanding subscriptions, options, warrants,
calls, commitments or agreements of any character calling for the purchase or
issuance of any shares of Edify Common Stock or Edify Preferred Stock or any
other equity security of Edify or any securities representing the right to
purchase or otherwise receive any shares of Edify Common Stock or any other
equity security of Edify. The names of the optionees, the date of each option to
purchase Edify Common Stock granted, the number of shares subject to each such
option, the expiration date of each such option, and the price at which each
such option may be exercised under the Edify Stock Plans are set forth in
Section 3.2(a) of the Edify Disclosure Schedule. Since December 31, 1998, Edify
has not issued any shares of its capital stock or any securities convertible
into or exercisable for any shares of its capital stock, other than (i) pursuant
to the exercise of director or employee stock options granted prior to December
31, 1998 under the Edify Stock Plans and (ii) pursuant to the Edify ESPP.
(b) Section 3.2(b) of the Edify Disclosure Schedule sets forth a true,
correct and complete list of all Subsidiaries of Edify and their respective
jurisdictions of incorporation or organization as of the date of this Agreement.
Except as set forth in Section 3.2(b) of the Edify Disclosure Schedule, Edify
owns, directly or indirectly, all of the issued and outstanding shares of
capital stock of each of its Subsidiaries, free and clear of all liens, charges,
encumbrances and security interests whatsoever, and all of such shares are duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. No Edify Subsidiary has or is bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character calling for
the purchase or issuance of any shares of capital stock or any other equity
security of such Subsidiary or any securities representing the right to purchase
or otherwise receive any shares of capital stock or any other equity security of
such Subsidiary.
3.3 AUTHORITY; NO VIOLATION.
(a) Edify has full corporate power and authority to execute and deliver
this Agreement and the Option Agreement and, subject to the adoption of this
Agreement by a majority of the outstanding shares of Edify Common Stock, to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Option Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly and validly approved
by the Board of Directors of Edify. The Board of Directors of Edify has declared
this Agreement advisable and directed that this Agreement and the transactions
contemplated hereby be submitted to Edify's stockholders for approval at a
special meeting of such stockholders and, except for the adoption of this
Agreement by the requisite vote of Edify's stockholders, no other corporate
proceedings on the part of Edify (except for matters related to setting the
date, time, place and record date for the special meeting) are necessary to
approve this Agreement or the Option Agreement or to consummate the transactions
contemplated hereby or thereby. This Agreement and the Option Agreement have
been duly and validly executed and delivered by Edify and (assuming due
authorization, execution and delivery by S1 and Merger Sub of this Agreement and
by S1 of the Option Agreement) constitute valid and binding obligations of
Edify, enforceable against Edify in accordance with their terms, except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
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(b) Except as set forth at Section 3.3(b) of the Edify Disclosure
Schedule, none of the execution and delivery of this Agreement and the Option
Agreement by Edify, the consummation by Edify of the transactions contemplated
hereby and thereby, or compliance by Edify with any of the terms or provisions
hereof and thereof, will (i) violate any provision of the Certificate of
Incorporation or By-Laws of Edify, or (ii) assuming that the consents and
approvals referred to in Sections 3.3(a) and 3.4 hereof are duly obtained, (x)
violate any Laws (as defined in Section 9.13) applicable to Edify or any of its
properties or assets, or (y) violate, conflict with, result in a breach of any
provision of or the loss of any benefit under, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under,
result in the termination of or a right of termination or cancellation under,
accelerate the performance required by, or result in the creation of any lien,
pledge, security interest, charge or other encumbrance upon any of the
properties or assets of Edify under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement
or other instrument or obligation to which Edify is a party, or by which it or
any of its properties or assets may be bound or affected, except, in each case,
where such violation, conflict, breach, loss, default, termination, cancellation
or acceleration would not have a Material Adverse Effect on Edify or the
Surviving Corporation.
3.4 CONSENTS AND APPROVALS.
(a) Except for (i) the effectiveness of a registration statement on Form
S-4 to register the shares of S1 Common Stock to be issued in connection with
the Merger (including the shares of S1 Common Stock that may be issued upon the
exercise of the options referred to in Section 1.6 hereof), and the filing of
the joint proxy statement/prospectus to be used in soliciting the approval of
Edify's and S1's stockholders at a special meeting to be held in connection with
this Agreement and the transactions contemplated hereby (the "Proxy
Statement/Prospectus"), (ii) the approval of this Agreement by the requisite
vote of the stockholders of Edify, (iii) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware pursuant to the DGCL, (iv)
such consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under applicable federal, foreign and state
securities (or related) laws and, if applicable, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the securities or
antitrust laws of any foreign country, and (v) such filings, authorizations or
approvals as may be set forth in Section 3.4 of the Edify Disclosure Schedule,
no consents or approvals of or filings or registrations with any court,
administrative agency or commission or other governmental authority or
instrumentality (each a "Governmental Entity"), or with any third party are
necessary in connection with (1) the execution and delivery by Edify of this
Agreement and the Option Agreement, (2) the consummation by Edify of the Merger
and the other transactions contemplated hereby, and (3) the consummation by
Edify of the Option Agreement and the transactions contemplated thereby, except,
in each case, for such consents, approvals or filings, the failure of which to
obtain will not have (x) a material adverse effect on the ability of S1 to
consummate the transactions contemplated hereby or (y) a Material Adverse Effect
on Edify, S1 or the Surviving Corporation following the Effective Time.
(b) Except as set forth in Section 3.4(b) of the Edify Disclosure
Schedule, Edify hereby represents to S1 that it has no knowledge of any reason
why approval or effectiveness of any of the applications, notices or filings
referred to in Section 3.4(a) cannot be obtained or granted on a timely basis.
3.5 FINANCIAL STATEMENTS; EXCHANGE ACT FILINGS; BOOKS AND RECORDS.
Edify has previously made available to S1 true, correct and complete copies
of the consolidated balance sheets of Edify and its Subsidiary as of December 31
for the fiscal years 1997 and 1998 and the related consolidated statements of
operations, stockholders' equity and cash flows for the fiscal
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years 1996 through 1998, inclusive, as reported in Edify's Annual Report on Form
10-K for the fiscal year ended December 31, 1998 filed with the SEC under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in each case
accompanied by the audit report of KPMG LLP, independent public accountants with
respect to Edify, and the interim financial statements of Edify as of and for
the three months ended March 31, 1998 and 1999, as included in the Edify
quarterly report on Form 10-Q for the period ended March 31, 1999 as filed with
the SEC. The financial statements referred to in this Section 3.5 (including the
related notes, where applicable) fairly present, and the financial statements
referred to in Section 6.8 hereof will fairly present (subject, in the case of
the unaudited statements, to recurring audit adjustments normal in nature and
amount), the results of the consolidated operations and consolidated financial
condition of Edify and its Subsidiary for the respective fiscal periods or as of
the respective dates therein set forth; each of such statements (including the
related notes, where applicable) comply, and the financial statements referred
to in Section 6.8 hereof will comply, with applicable accounting requirements
and with the published rules and regulations of the SEC with respect thereto and
each of such statements (including the related notes, where applicable) has
been, and the financial statements referred to in Section 6.8 hereof will be
prepared in accordance with generally accepted accounting principles ("GAAP")
consistently applied during the periods involved, except in each case as
indicated in such statements or in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q or any successor form. Edify's
Annual Report on Form 10-K for the fiscal year ended December 31, 1998 and all
reports filed under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act since
December 31, 1996 comply in all material respects with the appropriate
requirements for such reports under the Exchange Act, and Edify has previously
made available to S1 true, correct and complete copies of such reports. The
books and records of Edify have been, and are being, maintained in all material
respects in accordance with GAAP and any other applicable legal and accounting
requirements.
3.6 BROKER'S FEES.
Neither Edify nor any Edify Subsidiary nor any of their respective officers
or directors has employed any broker or finder or incurred any liability for any
broker's fees, commissions or finder's fees in connection with any of the
transactions contemplated by this Agreement or the Option Agreement, except that
Edify has engaged, and will pay a fee or commission to Goldman, Sachs & Co.
("Goldman") in accordance with the terms of a letter agreement between Goldman
and Edify, dated March 19, 1999, a true, complete and correct copy of which has
been previously delivered by Edify to S1.
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as disclosed in Edify's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998, or any other report filed since December
31, 1998 under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, true and
correct copies of which have been made available to S1, since December 31, 1998
(i) neither Edify nor any Edify Subsidiary has incurred any material liability,
except as contemplated by the Agreement or in the ordinary course of their
business consistent with their past practices, and (ii) no event has occurred
which has had, or would have, individually or in the aggregate, a Material
Adverse Effect (as defined in Section 9.13) on Edify.
(b) Since December 31, 1998, Edify and its Subsidiaries have carried on
their respective businesses in the ordinary and usual course consistent with
their past practices.
3.8 LEGAL PROCEEDINGS.
(a) Except as disclosed on Schedule 3.8 to the Edify Disclosure
Schedule, neither Edify nor any of its Subsidiaries is a party to any, and there
are no pending or threatened, legal,
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administrative, arbitration or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against Edify or any of
its Subsidiaries.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction imposed upon Edify, any of its Subsidiaries or the assets of Edify
or any of its Subsidiaries.
(c) No Governmental Entity has at any time challenged or questioned in a
writing delivered to Edify the legal right of Edify to design, manufacture,
offer or sell any of its products or services in the present manner or style
thereof. As of the date hereof, to the knowledge of Edify, no event has
occurred, and no claim, dispute or other condition or circumstance exists, that
will, or that would reasonably be expected to, cause or provide a bona fide
basis for a director or executive officer of Edify to seek indemnification from
Edify.
3.9 TAXES AND TAX RETURNS.
(a) For purposes of this Section 3.9, Edify shall include Edify and each
Edify Subsidiary and any other affiliated or related corporation or entity if
Edify or any Edify Subsidiary has or could have any material liability for the
Taxes of such corporation or entity. Edify has duly filed all Tax Returns
required to be filed by it on or before the date hereof (all such returns being
accurate and complete in all material respects) and has duly paid or made
provision in the financial statements referred to in Sections 3.5 and 6.8 hereof
in accordance with GAAP for the payment of all material Taxes that have been
incurred or are due or claimed to be due from it by Taxing Authorities on or
before the date hereof other than Taxes (a) that (x) are not yet delinquent or
(y) are being contested in good faith and set forth in Section 3.9 of the Edify
Disclosure Schedule and (b) that have not been finally determined. The charges,
accruals, and reserves with respect to Taxes in the financial statements
referred to in Sections 3.5 and 6.8 are adequate (determined in accordance with
GAAP) and are at least equal to its liability for Taxes. There exists no
proposed tax assessment against Edify except as disclosed in the financial
statements referred to in Sections 3.5 and 6.8 hereof in accordance with GAAP.
No consent to the application of Section 341(f)(2) of the Code has been filed
with respect to any property or assets held, acquired, or to be acquired by
Edify. All Taxes that Edify is or was required to withhold or collect have been
duly withheld or collected and, to the extent required, have been paid to the
proper Taxing Authority. All liability with respect to the Tax Returns of Edify
has been satisfied for all years to and including 1998. No Taxing Authority has
notified Edify of, or otherwise asserted, that there are any material
deficiencies with respect to the Tax Returns of Edify subsequent to 1994. There
are no material disputes pending, or claims asserted, for Taxes or assessments
of Edify, nor has Edify given or been requested to give any currently effective
waiver extending the statutory period of limitation applicable to any Tax
Return. In addition, Tax Returns that are accurate and complete in all material
respects have been filed by Edify for all periods for which returns were due
with respect to income and employment tax withholding with respect to wages and
other income and the amounts shown on such Tax Returns to be due and payable
have been paid in full or adequate provision therefor in accordance with GAAP
has been included by Edify in the financial statements referred to in Sections
3.5 and 6.8 hereto. All Edify Tax Returns have been examined by the relevant
Taxing Authorities, or closed without audit by applicable statutes of
limitations, and all deficiencies proposed as a result of such examinations have
been paid or settled, for all periods before and including the taxable year
ended December 31, 1994. Edify has provided or made available to S1 complete and
correct copies of its Tax Returns and all material correspondence and documents,
if any, relating directly or indirectly to Taxes for each taxable year or other
relevant period as to which the applicable statute of limitations has not run on
the date hereof. For this purpose, "correspondence and documents" include,
without limitation, amended Tax Returns, pending claims for refunds, notices
from Taxing Authorities of proposed changes or adjustments to Taxes or Tax
Returns that have not been finally resolved, consents to assessment or
collection of Taxes, acceptances of proposed adjustments, closing agreements,
rulings and determination letters and
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requests therefor, and all other written communications to or from Taxing
Authorities relating to any material Tax liability of Edify.
(b) For purposes of this Agreement:
"Tax" means any tax (including any income tax, capital gains tax,
value-added tax, sales tax, property tax, gift tax, or estate tax), levy,
assessment, tariff, duty (including any customs duty), deficiency, or other fee,
and any related charge or amount (including any fine, penalty, interest, or
addition to tax), imposed, assessed, or collected by or under the authority of
any Taxing Authority or payable pursuant to any tax-sharing agreement or any
other contract relating to the sharing or payment of any such tax, levy,
assessment, tariff, duty, deficiency, or fee.
"Tax Return" means any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Taxing Authority in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any law, regulation or other legal
requirement relating to any Tax.
"Taxing Authority" means any:
(a) nation, state, county, city, town, village, district, or
other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
3.10 EMPLOYEE PLANS.
(a) For purposes of this Section 3.10, Edify shall include each of its
Subsidiaries and any other entity that together with Edify would be deemed a
"single employer" for purposes of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") (determined without regard to whether such entity
conducts business in the United States). Section 3.10(a) of the Edify Disclosure
Schedule sets forth a true and complete list of each employee benefit plan
(within the meaning of sec. 3(3) of ERISA) ("ERISA Plan") and each other plan,
arrangement or agreement providing benefits to the current or former employees
of Edify that as of the date of this Agreement Edify maintains, to which Edify
contributes or under which Edify has any liability, or within the last six years
that Edify has maintained, to which Edify has contributed or under which Edify
has had any liability (collectively, the "Edify Plans"). Each Edify Plan that is
an ERISA Plan is referred to as a "Edify ERISA Plan."
(b) Edify has heretofore made available to S1 true, correct and complete
copies of each of the Edify Plans and all related documents, including but not
limited to (i) the actuarial report for such Edify Plan (if applicable) for each
of the last five years, (ii) the most recent determination letter from the
Internal Revenue Service ("IRS"), if applicable, for each Edify ERISA Plan,
(iii) the current summary plan description and any summaries of material
modification for each Edify ERISA Plan and any corresponding document for each
other Edify Plan which have not been incorporated into the current summary plan
description, (iv) all annual reports for each Edify ERISA Plan filed for the
preceding five plan years and any annual or other periodical financial
information concerning any other Edify Plan filed with any governmental agency,
(v) all agreements with
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fiduciaries and service providers relating to the Edify Plan, (vi) all
substantive correspondence relating to any such Edify Plan addressed to or
received from any governmental agency or authority, (vii) all personnel,
payroll, and employment manuals and policies, and (viii) a written description
of any Edify Plan that is not otherwise in writing.
(c) Edify has performed all of its obligations under all Edify Plans.
Edify has made appropriate entries in the financial statements referred to in
Sections 3.5 and 6.8 hereof in accordance with GAAP for all obligations and
liabilities under the Edify Plans. No statement, either written or oral, has
been made by Edify with regard to any Edify Plan that was not in accordance with
the Edify Plan and that could have a Material Adverse Effect on S1. Edify has no
liability to the IRS, the U.S. Pension Benefit Guaranty Corporation or to any
other governmental or quasi-governmental agency or authority with respect to any
Edify Plan. No Edify ERISA Plan is subject to title IV of ERISA.
(d) Except as set forth at Section 3.10(d) of the Edify Disclosure
Schedule, (i) each of the Edify Plans has been operated and administered in all
material respects in compliance with applicable Laws, including, but not
limited, in the case of each Edify ERISA Plan, to ERISA and the Code, (ii) each
of the Edify ERISA Plans intended to be "qualified" within the meaning of
Section 401 of the Code is so qualified and Edify has received a determination
letter or opinion letter from the IRS to such effect, which letter remains in
full force and effect, (iii) with respect to each Edify ERISA Plan that is
subject to the funding requirements of ERISA and the Code, the present value of
accrued benefits under such Edify Plan, based upon the actuarial assumptions
used for funding purposes in the most recent actuarial report prepared by such
Edify Plan's actuary with respect to such Edify Plan, did not, as of its latest
valuation date, exceed the then current value of the assets of such Edify Plan
allocable to such accrued benefits, (iv) no Edify Plan provides benefits,
including, without limitation, death or medical benefits (whether or not
insured), with respect to current or former employees of Edify beyond their
retirement or other termination of service, other than (a) coverage mandated by
applicable Law, (b) death benefits or retirement benefits under an Edify Plan
that also provides post-retirement income, annuity or pension benefits
(including an "employee pension plan" as that term is defined in ERISA), (c)
deferred compensation benefits under an Edify Plan that are accrued as
liabilities in the financial statements referred to in Sections 3.5 and 6.8
hereof in accordance with GAAP, or (d) benefits the full cost of which is borne
by the current or former employee (or his beneficiary), (v) no liability under
Title IV of ERISA has been incurred by Edify that has not been satisfied in
full, and no condition exists that presents a material risk of Edify incurring a
material liability thereunder, (vi) no Edify ERISA Plan is a "multiemployer
pension plan," as such term is defined in ERISA and no other Edify Plan is
maintained pursuant to any collective bargaining agreement or other agreement
with a labor union or other authorized representative of labor, (vii) all
contributions or other amounts payable by Edify with respect to each Edify Plan
and all other liabilities of each such entity with respect to each Edify Plan,
in respect of current or prior plan years have been paid or accrued in the
financial statements referred to in Sections 3.5 and 6.8 hereof in accordance
with GAAP and, in the case of an Edify ERISA Plan, ERISA and the Code, (viii)
Edify has not engaged in a "prohibited transaction" as defined in ERISA or the
Code in connection with which Edify could be subject to either any material
excise tax or civil penalty assessed pursuant to ERISA or the Code, (ix) to the
knowledge of Edify, there are no pending, threatened or anticipated claims
(other than routine claims for benefits) by, on behalf of or against any of the
Edify Plans or any trusts related thereto, (x) all Edify Plans could be
terminated as of the Closing without material liability in excess of the amount
accrued therefor in the financial statements referred to in Sections 3.5 and 6.8
hereof in accordance with GAAP; (xi) no Edify Plan, either individually or
collectively, provides for any material payment by Edify that would not be
deductible for U.S. federal income tax purposes; (xii) no "accumulated funding
deficiency" as defined in ERISA or the Code, whether or not waived, and no
"unfunded
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current liability" as determined under the Code exists with respect to any Edify
ERISA Plan; (xiii) no Edify ERISA Plan has experienced a "reportable event" (as
such term is defined in ERISA and regulations thereunder) that is not subject to
an administrative or statutory waiver from the reporting requirement.
3.11 CERTAIN CONTRACTS.
(a) Except as set forth at Section 3.11 of the Edify Disclosure
Schedule, neither Edify nor any of its Subsidiaries is a party to or bound by
any contract, arrangement or commitment (i) with respect to the employment of
any directors, officers, employees or consultants (other than standard offer
letters which provide for no more than at-will employment), (ii) which, upon
execution of this Agreement or the consummation of the transactions contemplated
by this Agreement, will (either alone or upon the occurrence of any additional
acts or events) result in any payment (whether of severance pay or otherwise)
becoming due from S1, Edify, the Surviving Corporation or any of their
respective Subsidiaries to any director, officer or employee thereof, (iii) with
or to a labor union or guild (including any collective bargaining agreement),
(iv) (including any stock option plan, stock appreciation rights plan,
restricted stock plan or stock purchase plan) any of the benefits of which will
be increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement, or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement, (v) containing any covenant
materially limiting the right of Edify or any of its Subsidiaries to engage in
any line of business or to compete with any person or granting any exclusive
distribution rights, (vi) relating to the disposition or acquisition by Edify or
any of its Subsidiaries after the date of this Agreement of a material amount of
assets not in the ordinary course of business or pursuant to which Edify or any
of its Subsidiaries has any material ownership interest in any corporation,
partnership, joint venture or other business enterprise other than Edify's
Subsidiaries that is material to Edify's business as currently conducted, or
(vii) to provide source code to any third party for any product or technology
that is material to Edify and its Subsidiaries taken as a whole. Edify has
previously made available to S1 true, correct and complete copies of all
employment, consulting and deferred compensation agreements to which Edify or
any of its Subsidiaries is a party. Section 3.11(a) of the Edify Disclosure
Schedule sets forth a list of all material contracts (as defined in Item
601(b)(10) of Regulation S-K) of Edify. Each contract, arrangement or commitment
of the type described in this Section 3.11(a), whether or not set forth in
Section 3.11(a) of the Edify Disclosure Schedule, is referred to herein as a
"Edify Contract," and neither Edify nor any of its Subsidiaries has received
written notice of, nor do any executive officers of such entities know of, any
violation of any Edify Contract.
(b) (i) Except as set forth in Section 3.11 of the Edify Disclosure
Schedule, each Edify Contract is valid and binding and in full force and effect
as to the obligations of Edify thereunder, and, to the knowledge of Edify, is
valid and binding and in full force and effect as to the obligations by the
third parties thereto, (ii) Edify and each of its Subsidiaries has, and to the
knowledge of Edify, each third party has, in all material respects performed all
obligations required to be performed by it to date under each Edify Contract,
and (iii) no event or condition exists which constitutes or, after notice or
lapse of time or both, would constitute, a material default on the part of Edify
or any of its Subsidiaries under any such Edify Contract or, to the knowledge of
Edify, any third party thereto.
3.12 AGREEMENTS WITH REGULATORY AGENCIES.
Edify (i) is not subject to any cease-and-desist or other order issued by,
(ii) is not a party to any written agreement, consent agreement or memorandum of
understanding with, and (iii) has not adopted any board resolutions at the
request of (each, whether or not set forth on Section 3.12 of the
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Edify Disclosure Schedule, a "Regulatory Agreement"), any Governmental Entity
that restricts the conduct of its business or that in any manner relates to its
management or its business, nor has Edify been advised by any Governmental
Entity that it is considering issuing or requesting any Regulatory Agreement.
3.13 CERTIFICATE OF INCORPORATION.
The Board of Directors of Edify has approved the offer of S1 to enter into
this Agreement and the Option Agreement, and has approved Edify's entering into
this Agreement and the Option Agreement, and the transactions contemplated
thereby, such that under Edify's Certificate of Incorporation the only vote of
Edify stockholders necessary to consummate the transactions contemplated hereby
(including the Merger and issuance under the Option Agreement) is the approval
of at least a majority of the outstanding shares of Edify Common Stock.
3.14 ENVIRONMENTAL MATTERS.
(a) Each of Edify and the Edify Subsidiaries is in compliance in all
material respects with all applicable federal and state laws and regulations
relating to pollution or protection of the environment (including without
limitation, laws and regulations relating to emissions, discharges, releases and
threatened releases of Hazardous Material (as hereinafter defined), or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials;
(b) There is no suit, claim, action, proceeding, investigation or notice
pending or to the knowledge of Edify's directors and executive officers
threatened (or past or present actions or events that could form the basis of
any such suit, claim, action, proceeding, investigation or notice), in which
Edify or any Edify Subsidiary has been or, with respect to threatened suits,
claims, actions, proceedings, investigations or notices may be, named as a
defendant (x) for alleged material noncompliance (including by any predecessor),
with any environmental law, rule or regulation or (y) relating to any material
release or threatened release into the environment of any Hazardous Material,
whether or not occurring at or on a site owned, leased or operated by Edify or
any Edify Subsidiary;
(c) To the knowledge of Edify's directors and executive officers, during
the period of Edify's or any Edify Subsidiary's ownership or operation of any of
its properties, there has not been any material release of Hazardous Materials
in, on, under or affecting any such property.
(d) For purposes of this Section 3.14, the term "Hazardous Material"
means any hazardous waste, petroleum product, polychlorinated biphenyl,
chemical, pollutant, contaminant, pesticide, radioactive substance, or other
toxic material, or other material or substance (in each such case, other than
small quantities of such substances in retail containers) regulated under any
applicable environmental or public health statute, law, ordinance, rule or
regulation.
3.15 PROPERTIES AND ASSETS.
Section 3.15 of the Edify Disclosure Schedule lists (i) all real property
owned by Edify and each Edify Subsidiary; (ii) each real property lease,
sublease or installment purchase arrangement to which Edify or any Edify
Subsidiary is a party; (iii) a description of each contract for the purchase,
sale, or development of real estate to which Edify or any Edify Subsidiary is a
party; and (iv) all items of Edify's or any Edify Subsidiary's tangible personal
property and equipment with a book value of $25,000 or more or having any annual
lease payment of $25,000 or more. Except for (a) items reflected in Edify's
consolidated financial statements as of December 31, 1998 referred to in Section
3.5 hereof, (b) exceptions to title that do not interfere materially with
Edify's or any Edify Subsidiary's use and enjoyment of owned or leased real
property, (c) liens for current real estate
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taxes not yet delinquent, or being contested in good faith, properly reserved
against (and reflected on the financial statements referred to in Section 3.5
above), (d) properties and assets sold or transferred in the ordinary course of
business consistent with past practices since December 31, 1998, and (e) items
listed in Section 3.15 of the Edify Disclosure Schedule, Edify and each Edify
Subsidiary have good and, as to owned real property, marketable and insurable
title to all their properties and assets, reflected in its consolidated
financial statements of Edify as of December 31, 1998, free and clear of all
liens, claims, charges and other encumbrances. Edify and each Edify Subsidiary,
as lessees, have the right under valid and subsisting leases to occupy, use and
possess all property leased by them, and there has not occurred under any such
lease any material breach, violation or default by Edify, and neither Edify nor
any Edify Subsidiary has experienced any material uninsured damage or
destruction with respect to such properties since December 31, 1998. All
properties and assets used by Edify and each Edify Subsidiary are in good
operating condition and repair (subject to ordinary wear and tear) and comply in
all material respects with all Laws relating thereto now in effect. Edify and
each Edify Subsidiary enjoy peaceful and undisturbed possession under all leases
for the use of all property under which they are the lessees, and all leases to
which Edify or any Edify Subsidiary is a party are valid and binding obligations
of Edify, and to the knowledge of Edify with respect to the respective third
parties thereto, enforceable, in accordance with the terms thereof. Neither
Edify nor any Edify Subsidiary is in material default with respect to any such
lease, and there has occurred no default by Edify or event which with the lapse
of time or the giving of notice, or both, would constitute a material default
under any such lease. There are no Laws, conditions of record, or other
impediments which interfere with the intended use by Edify or any Edify
Subsidiary of any of the property owned, leased, or occupied by them.
3.16 INSURANCE.
Section 3.16 of the Edify Disclosure Schedule contains a true, correct and
complete list of all insurance policies and bonds maintained by Edify and any
Edify Subsidiary, including the name of the insurer, the policy number, the type
of policy and any applicable deductibles, and all such insurance policies and
bonds (or other insurance policies and bonds that have, from time to time, in
respect of the nature of the risks insured against and amount of coverage
provided, been substantially similar in kind and amount to that customarily
carried by parties similarly situated who own properties and engage in
businesses substantially similar to that of Edify and any Edify Subsidiary) are
in full force and effect and have been in full force and effect. As of the date
hereof, neither Edify nor any Edify Subsidiary has received any notice of
cancellation or amendment of any such policy or bond or is in default under any
such policy or bond, no coverage thereunder is being disputed and all material
claims thereunder have been filed in a timely fashion. The existing insurance
carried by Edify and Edify Subsidiaries is, in respect of the nature of the
risks insured against and the amount of coverage provided, substantially similar
in kind and amount to that customarily carried by parties similarly situated who
own properties and engage in businesses substantially similar to that of Edify
and the Edify Subsidiaries, and is sufficient for compliance by Edify and the
Edify Subsidiaries with all requirements of Law and agreements to which Edify or
any of the Edify Subsidiaries is subject or is party. True, correct and complete
copies of all such policies and bonds reflected at Section 3.16 of the Edify
Disclosure Schedule, as in effect on the date hereof, have been made available
to S1.
3.17 COMPLIANCE WITH APPLICABLE LAWS.
Each of Edify and any Edify Subsidiary has complied in all material
respects with all Laws applicable to it or to the operation of its business.
Neither Edify nor any Edify Subsidiary has received any written notice or to
Edify's knowledge, any other notice, of any material alleged or threatened
claim, violation, or liability under any such Laws that has not heretofore been
cured and for which there is no remaining liability.
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3.18 AFFILIATES.
Each director, executive officer and other person who is an "affiliate"
(for purposes of Rule 145 under the Securities Act of 1933, as amended (the
"Securities Act")) of Edify is listed at Section 3.18 of the Edify Disclosure
Schedule, and except as indicated thereon, each such person has delivered to S1,
concurrently with the execution of this Agreement, a stockholder agreement in
the form of Exhibit C hereto (the "Edify Stockholder Agreement").
3.19 OWNERSHIP OF S1 COMMON STOCK.
Except as set forth at Section 3.19 of the Edify Disclosure Schedule,
neither Edify nor to Edify's knowledge any of its directors or officers (i)
beneficially own, directly or indirectly, or (ii) is a party to any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of, in each case, more than 1% of shares of the outstanding capital
stock of S1 (other than those agreements, arrangements or understandings
specifically contemplated hereby).
3.20 FAIRNESS OPINION.
Edify has received an opinion from Goldman to the effect that, in its
opinion, the consideration to be paid to stockholders of Edify hereunder is fair
to such stockholders from a financial point of view ("Fairness Opinion"), and,
except as set forth in Section 3.20 of the Edify Disclosure Schedule, Goldman
has consented to the inclusion of the Fairness Opinion in the Registration
Statement (defined below).
3.21 CHANGE OF CONTROL PAYMENTS.
Section 3.21 of the Edify Disclosure Schedule sets forth each plan or
agreement pursuant to which any amounts may become payable (whether currently or
in the future) to current or former employees and directors of Edify or any of
its Subsidiaries as a result of or in connection with the Merger.
3.22 DISCLOSURE.
None of the information supplied or to be supplied by or on behalf of Edify
for inclusion or incorporation by reference in the Registration Statement will,
at the time the Registration Statement becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading, except that no representation or warranty is made by Edify with
respect to statements made or incorporated by reference therein about S1 or
Merger Sub supplied by S1 for inclusion or incorporation by reference in the
Registration Statement. None of the information supplied or to be supplied by or
on behalf of Edify for inclusion or incorporation by reference in the Proxy
Statement/Prospectus will, at the time the Proxy Statement/Prospectus is mailed
to the stockholders of Edify or S1, at the time of Edify stockholders' meeting
or S1 stockholders' meeting or as of the Effective Time, 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 the
light of the circumstances under which they are made, not misleading. The Proxy
Statement/Prospectus will comply as to form in all material respects with the
provisions of the Securities Act and the Exchange Act and the rules and
regulations promulgated by the SEC thereunder, except that no representation or
warranty is made by Edify with respect to statements made or incorporated by
reference therein about S1 or Merger Sub supplied by S1 for inclusion or
incorporation by reference in the Proxy Statement/Prospectus.
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3.23 BOARD APPROVAL.
The Board of Directors of Edify (including any required committee or
subgroup of the Board of Directors of Edify) has, as of the date of this
Agreement, declared this Agreement advisable and determined (i) that the Merger
is fair to, and in the best interests of Edify and its stockholders, and (ii) to
recommend that the stockholders of Edify approve and adopt this Agreement and
approve the Merger.
3.24 SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW AND EDIFY RIGHTS
PLAN NOT APPLICABLE.
The Board of Directors of Edify has taken all actions so that (a) the
restrictions contained in Section 203 of the Delaware General Corporation Law
applicable to a "business combination" (as defined in such Section 203) will not
apply to the execution, delivery or performance of this Agreement or the Option
Agreement or to the consummation of the Merger or the other transactions
contemplated by this Agreement and the Option Agreement and (b) the execution,
delivery and performance of this Agreement and the Option Agreement and the
consummation of the Merger will not cause any change, effect or result under the
Edify Rights Plan which is adverse to the interests of S1. Without limiting the
generality of the foregoing, if necessary to accomplish the foregoing, the Edify
Rights Plan has been amended to (i) render the Edify Rights Plan inapplicable to
the Merger and the other transactions contemplated by this Agreement, (ii)
ensure that (x) none of S1 or its Subsidiaries is an Acquiring Person (as
defined in the Edify Rights Plan) pursuant to the Edify Rights Plan by virtue of
the execution of this Agreement or the Option Agreement or the consummation of
the Merger or the other transactions contemplated hereby and thereby and (y) a
Distribution Date or Shares Acquisition Date (as such terms are defined in the
Edify Rights Plan) does not occur by reason of the execution of this Agreement
or the Option Agreement, the consummation of the Merger, or the consummation of
the transactions contemplated hereby or thereby, and such amendment may not be
further amended by Edify without the prior consent of S1 in its sole discretion.
3.25 INTELLECTUAL PROPERTY.
Except, in each case, as set forth in Section 3.25 of the Edify Disclosure
Schedule:
(a) (i) Edify and each Edify Subsidiary owns, free and clear of liens,
orders and arbitration awards, or are licensed or otherwise possess valid and
enforceable rights to use all patents, trademarks, trade names, service marks,
copyrights and any applications therefor, schematics, technology, know-how,
trade secrets, ideas, algorithms, processes, Software (as defined below), and
tangible or intangible proprietary information or material ("Intellectual
Property") that are used in the business of Edify and the Edify Subsidiaries.
"Software" means any and all (i) computer programs and applications, including
any and all software implementations of algorithms, models and methodologies,
whether in source code or object code, (ii) databases and compilations,
including any and all data and collections of data, whether machine readable or
otherwise, (iii) descriptions, flow-charts and other work product used to
design, plan, organize and develop any of the foregoing, (iv) the technology
supporting any Internet site(s) operated by or on behalf of Edify or any Edify
Subsidiary, and (v) all documentation, including user manuals and training
materials, relating to any of the foregoing.
(ii) Except as would not be materially adverse to the business of
Edify or any Edify Subsidiary, Edify and the Edify Subsidiaries have taken
reasonable steps to protect their Intellectual Property. There is no litigation
pending or, to the knowledge of Edify and the Edify Subsidiaries, threatened or
any written claim from any person challenging the ownership, use, validity or
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enforceability of any Intellectual Property, nor is there any basis for the
assertion of any such claim or challenge.
(iii) No material patent, trademark, service mark, copyright, trade
secret, computer software or other intellectual property right other than the
Intellectual Property set forth on Schedule 3.25 is necessary to conduct the
businesses of Edify and its Subsidiaries as presently conducted.
(b) Schedule 3.25(b) lists all (i) patents, patent applications,
registered and unregistered trademarks, trade names and service marks, and
registered copyrights owned by Edify included in the Intellectual Property,
including the jurisdictions in which each such item of Intellectual Property
right has been issued or registered or in which any application for such
issuance and registration has been filed, (ii) Electronic Banking System
software licenses and value added reseller agreements, and (iii) licenses,
sublicenses and other agreements as to which Edify and any Edify Subsidiary are
a party and pursuant to which Edify and its Subsidiaries are authorized to use
any third party patents, trademarks or copyrights, including Software ("Third
Party Intellectual Property Rights") which are incorporated in, are or form a
part of any Edify or Edify Subsidiary product.
(c) (i) To the knowledge of Edify and the Edify Subsidiaries, there is
no unauthorized use, disclosure, infringement or misappropriation of any
Intellectual Property rights of Edify or any Edify Subsidiary, any trade secret
material to Edify or its Subsidiaries, or any Intellectual Property right of any
third party to the extent licensed by or through Edify or its Subsidiaries, by
any employee of Edify or any Edify subsidiary or third party for whom Edify is
responsible. Except as set forth in Schedule 3.25(c), there are no royalties,
fees or other payments payable by Edify or its Subsidiaries to any person by
reason of the ownership, use, sale or disposition of Intellectual Property.
(ii) To the knowledge of Edify and its Subsidiaries, there has been
no prior use of Edify's registered trademarks by any third party which would
confer upon said third party superior rights in such trademarks. Edify and its
Subsidiaries have taken reasonable steps to adequately police the trademarks
against third party infringement, and the material trademarks registered in the
United States and in other jurisdictions where Edify or its Subsidiaries are
doing business have been continuously used in the form appearing in, and in
connection with the goods and services listed in, their respective registration
certificates or any amendment, supplement or office action related thereto.
(d) Edify and its Subsidiaries are not, nor will they be as a result of
the execution and delivery of this Agreement or the performance of their
obligations under this Agreement, in breach of any material license, sublicense
or other agreement relating to the Intellectual Property or Third Party
Intellectual Property Rights, and the execution and delivery of this Agreement
or the performance of the obligations under this Agreement by Edify and its
Subsidiaries will not result in the loss or impairment of, or give rise to any
right of any third party to terminate, any of Edify's or any of its
Subsidiaries' rights to own any of its Intellectual Property or their respective
rights under any material license agreements, nor require the consent of any
Governmental Entity or third party in respect of any such Intellectual Property.
(e) Edify and its Subsidiaries (i) have no knowledge (including
knowledge of any litigation pending or threatened or any written claim from any
person) or reason to believe that the conduct of their businesses infringe any
patent, trademark, service mark, copyright, trade secret or other proprietary
right of any third party; and (ii) have not advised any third party that such
third party may be infringing any Intellectual Property or breaching any license
or agreement involving Intellectual Property and have not brought or threatened
any claim against such third party for such conduct.
(f) The Software owned or purported to be owned by Edify or any of its
Subsidiaries, was either (i) developed by employees of Edify or any of its
Subsidiaries within the scope of their
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employment; (ii) developed by independent contractors or consultants who have
assigned their rights to Edify or any of its Subsidiaries pursuant to written
agreements; or (iii) otherwise acquired by Edify or its Subsidiary from a third
party.
(g) All employees and independent contractors and consultants of Edify
and its Subsidiaries have executed and delivered to Edify or its Subsidiaries,
as the case may be, agreements regarding the protection of proprietary
information and the assignment to Edify or its Subsidiaries of any Intellectual
Property arising from services performed for Edify or its Subsidiaries by such
persons.
(h) Edify and its Subsidiaries have obtained or entered into written
agreements with their employees and with third parties, in transactions deemed
appropriate, in connection with the disclosure to or use or appropriation by,
employees and third parties, of trade secret or proprietary information owned by
Edify and its Subsidiaries and not otherwise protected by a patent, a patent
application, copyright, trademark, or other registration or legal scheme ("Edify
Confidential Information"), and do not know of any situation involving such
employee or third party use, disclosure or appropriation of Edify Confidential
Information where the lack of such a written agreement is likely to result in
any Material Adverse Effect. Except as set forth in Schedule 3.25(h), neither
Edify nor any of its Subsidiaries has furnished the source code of any of their
Software products to any third party, deposited any such source code in escrow
or otherwise provided access to such source code to any third party.
(i) Except as would not be materially adverse to the business of Edify
or its Subsidiaries, Edify and its Subsidiaries have taken reasonable steps with
the intent of ensuring that their products (including existing products and
technology and products and technology currently under development) will, when
used in accordance with associated documentation on a specified platform or
platforms, be capable upon installation of accurately processing, providing, and
receiving date data from, into, and between the twentieth and twenty-first
centuries, including the years 1999 and 2000, and making leap-year calculations,
provided that all other non-Edify or Edify Subsidiary products (e.g., hardware,
software and firmware) used in or in combination with Edify's or its
Subsidiaries' products, properly exchange data with Edify's and its Subsidiaries
products.
3.26 ADDITIONAL INFORMATION.
The information contained in Edify's registration statement on Form 8-A
relating to the Edify Common Stock, as filed with the SEC, and all other reports
filed subsequent thereto through the date hereof pursuant to Section 13(a) or
15(d) of the Exchange Act did not at the respective dates of filing with the SEC
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF S1
S1 hereby makes the following representations and warranties to Edify and
each Seller as set forth in this Article IV, subject to the exceptions disclosed
in writing in the S1 Disclosure Schedule as of the date hereof, each of which is
being relied upon by Edify as a material inducement to enter into and perform
this Agreement. All of the disclosure schedules of S1 referenced below or
otherwise required of S1 pursuant to this Agreement, which disclosure schedules
shall be cross-referenced to the specific sections and subsections of this
Agreement and delivered herewith, are referred to herein as the "S1 Disclosure
Schedule."
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4.1 CORPORATE ORGANIZATION.
(a) S1 is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. S1 has the corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as it is now being conducted, and is duly licensed or qualified to do
business in each jurisdiction in which the nature of the business conducted by
it or the character or location of the properties and assets owned or leased by
it makes such licensing or qualification necessary. The Amended and Restated
Certificate of Incorporation and Amended and Restated Bylaws of S1, copies of
which have previously been made available to Edify, are true, correct and
complete copies of such documents as in effect as of the date of this Agreement.
(b) Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Each Subsidiary of S1
(each, a "S1 Subsidiary") and the jurisdiction of its organization is set forth
at Section 4.1(b) of the S1 Disclosure Schedule. Each S1 Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization. Each S1 Subsidiary has the corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted, and is duly licensed or
qualified to do business in each jurisdiction in which the nature of any
material business conducted by it or the character or location of any material
properties or assets owned or leased by it makes such licensing or qualification
necessary. The chartering and other corporate governance documents of each S1
Subsidiary, copies of which have previously been made available to Edify, are
true, correct and complete copies of such documents as in effect as of the date
of this Agreement.
4.2 CAPITALIZATION.
(a) The authorized capital stock of S1 consists of (i) 60,000,000 shares
of S1 Common Stock, of which 25,428,778 shares were outstanding at May 10, 1999
and (ii) 5,000,000 shares of serial preferred stock, par value $.01 per share
("S1 Preferred Stock"), 1,637,832 shares of which were designated as "Series A
Convertible Preferred Stock," 749,604 of which were designated as "Series B
Redeemable Convertible Preferred Stock" and 215,000 shares of which were
designated as "Series C Redeemable Convertible Preferred Stock." At May 10,
1999, 466,450 shares of Series A Convertible Preferred Stock, 749,604 shares of
Series B Redeemable Convertible Preferred Stock and 215,000 shares of Series C
Redeemable Convertible Preferred Stock were outstanding. At such date, there
were 12,353,798 shares of S1 Common Stock reserved for issuance pursuant to
employee stock options (of which options for 9,607,750 shares are currently
outstanding). All of the issued and outstanding shares of S1 Common Stock have
been duly authorized and validly issued and are fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to the ownership
thereof, and upon issuance in accordance with the terms hereof, the shares of S1
Common Stock to be issued in the Merger (including, without limitation, upon
exercise of options to purchase Edify Common Stock) are duly authorized and upon
issuance in accordance with the terms hereof, will be validly issued, and fully
paid, nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. As of the date of this Agreement, except as
set forth above, S1 does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of S1 Common Stock
or S1 Preferred Stock or any other equity securities of S1 or any securities
presenting the right to purchase or otherwise receive any shares of S1 Common
Stock or S1 Preferred Stock, other than as set forth at Section 4.2(a) of the S1
Disclosure Schedule.
(b) Except as set forth at Section 4.2(b) of the S1 Disclosure Schedule,
S1 owns, directly or indirectly, all of the issued and outstanding shares of
capital stock of each of the S1 Subsidiaries, free and clear of all liens,
charges, encumbrances and security interests whatsoever, and all of such
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shares are duly authorized and validly issued and are fully paid, nonassessable
and free of preemptive rights, with no personal liability attaching to the
ownership thereof. No S1 Subsidiary has or is bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of capital stock or
any other equity security of such Subsidiary or any securities representing the
right to purchase or otherwise receive any shares of capital stock or any other
equity security of such Subsidiary.
4.3 AUTHORITY; NO VIOLATION.
(a) S1 has full corporate power and authority to execute and deliver
this Agreement, and, subject to approval by the holders of a majority of the
shares of S1 Common Stock represented in person or by proxy at the meeting of S1
stockholders at which the issuance of the shares of S1 Common Stock in the
Merger contemplated hereby (the "S1 Issuance") is considered, to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Option Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly and validly approved by the Board
of Directors of S1. The Board of Directors of S1 has declared the S1 Issuance
and this Agreement advisable and directed that S1 Issuance be submitted to S1's
stockholders for approval at a special meeting of such stockholders and, except
for the approval of such matters by the requisite vote of S1's stockholders, no
other corporate proceedings on the part of S1 (except for matters related to
setting the date, time, place and record date for the special meeting) are
necessary to approve this Agreement or to consummate the transactions
contemplated hereby. This Agreement and the Option Agreement have been duly and
validly executed and delivered by S1 and (assuming due authorization, execution
and delivery by Merger Sub and Edify) constitute valid and binding obligations
of S1, enforceable against S1 in accordance with their terms, except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar law
affecting creditors' rights and remedies generally.
(b) Merger Sub has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly approved by
the Board of Directors of Merger Sub. The Board of Directors of Merger Sub has
declared this Agreement advisable and directed that approval of this Agreement
and the Merger be submitted to Merger Sub's stockholder for approval by such
stockholder and, except for the approval of such matters by the required vote of
Merger Sub's stockholder, no other corporate proceedings on the part of Merger
Sub (except for matters related to setting the date, time, place and record date
for the special meeting, if applicable) are necessary to approve this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by Merger Sub and (assuming due
authorization, execution and delivery by S1 and Edify) constitutes valid and
binding obligations of Merger Sub, enforceable against Merger Sub in accordance
with its terms, except as enforcement may be limited by general principles of
equity whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar law affecting creditors' rights and remedies generally.
All of the outstanding shares of Merger Sub common stock, par value $.01 per
share, have been duly authorized, validly issued and are fully paid and
non-assessable and are owned by S1. Merger Sub was formed for the purpose of
consummating the Merger and has no material liabilities.
(c) Neither the execution and delivery of this Agreement by S1 or Merger
Sub nor the consummation by S1 or Merger Sub of the transactions contemplated
hereby or thereby, nor compliance by S1 or Merger Sub with any of the terms or
provisions hereof or thereof, will (i) violate any provision of (x) the Amended
and Restated Certificate of Incorporation or Amended and Restated Bylaws of S1
or (y) the Certificate of Incorporation or Bylaws of Merger Sub, or (ii)
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assuming that the consents and approvals referred to in Section 4.4 are duly
obtained, (x) violate any Laws applicable to S1 or Merger Sub or any of their
properties or assets, or (y) violate, conflict with, result in a breach of any
provision of or the loss of any benefit under, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under,
result in the termination of or a right of termination or cancellation under,
accelerate the performance required by, or result in the creation of any lien,
pledge, security interest, charge or other encumbrance upon any of the
respective properties or assets of S1 or Merger Sub under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which S1 or
Merger Sub is a party, or by which S1 or Merger Sub or any of their properties
or assets may be bound or affected, except, in each case, where such violation,
conflict, breach, loss, default, termination, cancellation or acceleration would
not have a Material Adverse Effect on S1.
4.4 CONSENTS AND APPROVALS.
(a) Except for (i) the effectiveness of the Registration Statement
containing the Proxy Statement/Prospectus in connection with obtaining
stockholder approval of the S1 Issuance by the requisite vote of stockholders of
S1, (ii) the approval of this Agreement and the issuance of S1 Common Stock in
the Merger by the requisite vote of the stockholders of S1 and Merger Sub,
respectively, (iii) the filing of the Certificate of Merger with the Secretary
of State of the State of Delaware, (iv) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal, foreign and state securities (or related) laws and, if
applicable, the HSR Act, and the securities or antitrust laws of any foreign
country, (v) such filings and approvals as are required to be made or obtained
with Nasdaq (or such other exchange as may be applicable) in connection with the
issuance of the shares of S1 Common Stock pursuant to this Agreement, and (vi)
such other consents and approvals as may be set forth in Section 4.4(a) of the
S1 Disclosure Schedule, no consents or approvals of or filings or registrations
with any Governmental Entity or with any third party are necessary in connection
with (1) the execution and delivery by S1 of this Agreement and the Option
Agreement, and (2) the consummation by S1 of the Merger and the other
transactions contemplated hereby, except for such consents, approvals or filings
the failure of which to obtain will not have (x) a material adverse effect on
the ability of S1 or Merger Sub to consummate the transactions contemplated
hereby or (y) a Material Adverse Effect on Edify, S1 or the Surviving
Corporation following the Effective Time.
(b) S1 hereby represents to Edify that it has no knowledge of any reason
why approval or effectiveness of any of the applications, notices or filings
referred to in Section 4.4(a) cannot be obtained or granted on a timely basis.
4.5 FINANCIAL STATEMENTS; EXCHANGE ACT FILINGS; BOOKS AND RECORDS.
S1 has previously made available to Edify true, correct and complete copies
of the consolidated balance sheets of S1 and its Subsidiaries as of December 31
for the fiscal years 1998 and 1997 and the related consolidated statements of
operations, stockholders' equity and cash flows for the fiscal years 1996
through 1998, inclusive, as reported in S1's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998, filed with the SEC under the Exchange Act,
in each case accompanied by the audit report of KPMG LLP, independent public
accountants with respect to S1, and the interim financial statements of S1 as of
and for the three months ended March 31, 1998 and 1997, as included in S1's
quarterly report on Form 10-Q for the quarter ended March 31, 1999, as filed
with the SEC. The financial statements referred to in this Section 4.5
(including the related notes, where applicable) fairly present, and the
financial statements referred to in Section 6.8 hereof will fairly present
(subject, in the case of the unaudited statements, to recurring audit
adjustments normal in nature and amount), the results of the consolidated
operations and consolidated financial
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condition of S1 and its Subsidiaries for the respective fiscal periods or as of
the respective dates therein set forth; each of such statements (including the
related notes, where applicable) comply, and the financial statements referred
to in Section 6.8 hereof will comply, with applicable accounting requirements
and with the published rules and regulations of the SEC with respect thereto;
and each of such statements (including the related notes, where applicable) has
been, and the financial statements referred to in Section 6.8 hereof will be,
prepared in accordance with GAAP consistently applied during the periods
involved, except as indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q or any successor form. S1's Annual Report
on Form 10-K for the fiscal year ended December 31, 1998 and all subsequently
filed reports under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
comply in all material respects with the appropriate requirements for such
reports under the Exchange Act, and S1 has previously made available to Edify
true, correct and complete copies of such reports. The books and records of S1
and its Subsidiaries have been, and are being, maintained in all material
respects in accordance with GAAP and any other applicable legal and accounting
requirements.
4.6 BROKER'S FEES.
Neither S1 nor any S1 Subsidiary nor any of their respective officers or
directors has employed any broker or finder or incurred any liability for any
broker's fees, commissions or finder's fees in connection with any of the
transactions contemplated by this Agreement or the Option Agreement, except that
S1 has engaged, and will pay a fee or commission to BancBoston Robertson
Stephens, Inc. ("BBRS") in accordance with the terms of a letter agreement
between BBRS and S1, dated April 9, 1999, a true, complete and correct copy of
which has been provided to Edify.
4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as disclosed in S1's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998, or any other report filed since December
31, 1998, under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, true,
correct and complete copies of which have previously been made available to
Edify, since December 31, 1998, (i) neither S1 nor any S1 Subsidiary has
incurred any material liability, except as contemplated by this Agreement, in
the ordinary course of their businesses consistent with their past practices, or
as contemplated by that certain share exchange agreement by and among S1, FICS
Group N.V. and the shareholders of FICS Group N.V., dated as of even date
herewith, and (ii) no event has occurred which has had, or would have,
individually or in the aggregate, a Material Adverse Effect on S1.
(b) Since December 31, 1998, S1 and each S1 Subsidiary has carried on
its respective businesses in the ordinary and usual course consistent with past
practices.
4.8 LEGAL PROCEEDINGS.
(a) Except as set forth at Section 4.8 of the S1 Disclosure Schedule,
neither S1 nor any of its Subsidiaries is a party to any, and there are no
pending or, to S1's knowledge, threatened, legal, administrative, arbitration or
other proceedings, claims, actions or governmental or regulatory investigations
of any nature against S1 or any of its Subsidiaries or which challenge the
validity or propriety of the transactions contemplated by this Agreement or the
Option Agreement as to which there is a reasonable probability of success.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction imposed upon S1, any of its Subsidiaries or the assets of S1 or any
of its Subsidiaries.
(c) No Governmental Entity has at any time challenged in a writing
delivered to S1 the legal right of S1 to design, manufacture, offer or sell any
of its products or services in the present manner or style thereof. As of the
date hereof, to the knowledge of S1, no event has occurred, and no
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claim, dispute or other condition or circumstance exists, that will, or that
would reasonably be expected to, cause or provide a bona fide basis for a
director or executive officer of S1 to seek indemnification from S1.
4.9 TAXES AND TAX RETURNS.
For purposes of this Section 4.9, S1 shall include S1 and each S1
Subsidiary and each other affiliated or related corporation or entity if S1 or
any S1 Subsidiary has or could have any material liability for the Taxes of such
corporation or entity. S1 has duly filed all Tax Returns required to be filed by
it on or before the date hereof (all such returns being accurate and complete in
all material respects) and has duly paid or made provision in the financial
statements referred to in Sections 4.5 and 6.8 hereof in accordance with GAAP
for the payment of all material Taxes that have been incurred or are due or
claimed to be due from it by Taxing Authorities on or before the date hereof
other than Taxes (a) that (x) are not yet delinquent or (y) are being contested
in good faith and set forth in Section 4.9 of the S1 Disclosure Schedule and (b)
that have not been finally determined. The charges, accruals, and reserves with
respect to Taxes in the financial statements referred to in Sections 4.5 and 6.8
are adequate (determined in accordance with GAAP) and are at least equal to its
liability for Taxes. There exists no proposed tax assessment against S1 except
as disclosed in the financial statements referred to in Sections 3.5 and 6.8
hereof in accordance with GAAP. No consent to the application of Section
341(f)(2) of the Code has been filed with respect to any property or assets
held, acquired, or to be acquired by S1. All Taxes that S1 is or was required to
withhold or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper Taxing Authority. All liability with
respect to the Tax Returns of S1 has been satisfied for all years to and
including 1998. No Taxing Authority has notified S1 of, or otherwise asserted,
that there are any material deficiencies with respect to the Tax Returns of S1
subsequent to 1994. There are no material disputes pending, or claims asserted
for, Taxes or assessments of S1, nor has S1 given or been requested to give any
currently effective waiver extending the statutory period of limitation
applicable to any Tax Return. In addition, Tax Returns that are accurate and
complete in all material respects have been filed by S1 for all periods for
which returns were due with respect to income and employment tax withholding
with respect to wages and other income and the amounts shown on such Tax Returns
to be due and payable have been paid in full or adequate provision therefor in
accordance with GAAP has been included by S1 in the financial statements
referred to in Sections 4.5 and 6.8 hereto. All S1 Tax Returns have been
examined by the relevant Taxing Authorities, or closed without audit by
applicable statutes of limitations, and all deficiencies proposed as a result of
such examinations have been paid or settled, for all periods before and
including the taxable year ended December 31, 1994. S1 has provided or made
available to Edify complete and correct copies of its Tax Returns and all
material correspondence and documents, if any, relating directly or indirectly
to Taxes for each taxable year or other relevant period as to which the
applicable statute of limitations has not run on the date hereof. For this
purpose, "correspondence and documents" include, without limitation, amended Tax
Returns, pending claims for refunds, notices from Taxing Authorities of proposed
changes or adjustments to Taxes or Tax Returns that have not been finally
resolved, consents to assessment or collection of Taxes, acceptances of proposed
adjustments, closing agreements, rulings and determination letters and requests
therefor, and all other written communications to or from Taxing Authorities
relating to any material Tax liability of S1.
4.10 EMPLOYEE PLANS.
(a) For purposes of this Section 4.10, S1 shall include each of its
Subsidiaries and any other entity that together with S1 would be deemed a
"single employer" for purposes of ERISA (determined without regard to whether
such entity conducts business in the United States). Section 4.10(a) of the S1
Disclosure Schedule sets forth a true and complete list of each ERISA
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Plan and each other plan, arrangement or agreement providing benefits to the
current or former employees of S1 that as of the date of this Agreement S1
maintains, to which S1 contributes or under which S1 has any liability, or
within the last six years that S1 has maintained, to which S1 has contributed or
under which S1 has had any liability (collectively, the "S1 Plans"). Each S1
Plan that is an ERISA Plan is referred to as a "S1 ERISA Plan."
(b) S1 has heretofore made available to S1 true, correct and complete
copies of each of the S1 Plans and all related documents, including but not
limited to (i) the actuarial report for such S1 Plan (if applicable) for each of
the last five years, (ii) the most recent determination letter from the IRS (if
applicable) for each S1 ERISA Plan, (iii) the current summary plan description
and any summaries of material modification for each S1 ERISA Plan and any
corresponding document for each other S1 Plan, (iv) all annual reports for each
S1 ERISA Plan filed for the preceding five plan years and any annual or other
periodical financial information concerning any other S1 Plan filed with any
governmental agency, (v) all agreements with fiduciaries and service providers
relating to the S1 Plan, (vi) all substantive correspondence relating to any
such S1 Plan addressed to or received from any governmental agency or authority,
(vii) all personnel, payroll, and employment manuals and policies, and (viii) a
written description of any S1 Plan that is not otherwise in writing.
(c) S1 has performed all of its obligations under all S1 Plans. S1 has
made appropriate entries in the financial statements referred to in Sections 4.5
and 6.8 hereof in accordance with GAAP for all obligations and liabilities under
the S1 Plans. No statement, either written or oral, has been made by S1 with
regard to any S1 Plan that was not in accordance with the S1 Plan and that could
have an Material Adverse Effect on S1. S1 has no liability to the IRS, the U.S.
Pension Benefit Guaranty Corporation or to any other governmental or
quasi-governmental agency or authority with respect to any S1 Plan. No S1 ERISA
Plan is subject to title IV of ERISA.
(d) Except as set forth at Section 4.10(d) of the S1 Disclosure
Schedule, (i) each of the S1 Plans has been operated and administered in all
material respects in compliance with applicable Laws, including, but not
limited, in the case of each S1 ERISA Plan, to ERISA and the Code, (ii) each of
the S1 ERISA Plans intended to be "qualified" within the meaning of Section 401
of the Code is so qualified and S1 has received a determination letter or
opinion letter from the IRS to such effect, which letter remains in full force
and effect, (iii) with respect to each S1 ERISA Plan that is subject to the
funding requirements of ERISA and the Code, the present value of accrued
benefits under such S1 Plan, based upon the actuarial assumptions used for
funding purposes in the most recent actuarial report prepared by such S1 Plan's
actuary with respect to such S1 Plan, did not, as of its latest valuation date,
exceed the then current value of the assets of such S1 Plan allocable to such
accrued benefits, (iv) no S1 Plan provides benefits, including, without
limitation, death or medical benefits (whether or not insured), with respect to
current or former employees of S1 beyond their retirement or other termination
of service, other than (a) coverage mandated by applicable Law, (b) death
benefits or retirement benefits under an S1 Plan that also provides
post-retirement income, annuity or pension benefits (including an "employee
pension plan" as that term is defined in ERISA), (c) deferred compensation
benefits under an S1 Plan that are accrued as liabilities in the financial
statements referred to in Sections 4.5 and 6.8 hereof in accordance with GAAP,
or (d) benefits the full cost of which is borne by the current or former
employee (or his beneficiary), (v) no liability under Title IV of ERISA has been
incurred by S1 that has not been satisfied in full, and no condition exists that
presents a material risk of S1 incurring a material liability thereunder, (vi)
no S1 ERISA Plan is a "multiemployer pension plan," as such term is defined in
ERISA and no other S1 Plan is maintained pursuant to any collective bargaining
agreement or other agreement with a labor union or other authorized
representative of labor, (vii) all contributions or other amounts payable by S1
with respect to each S1 Plan and all other liabilities of each such entity with
respect to each S1 Plan, in respect of current or prior plan years have been
paid or accrued in the financial statements referred to in Sections 4.5 and 6.8
hereof in accordance with GAAP and, in the case of a
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S1 ERISA Plan, ERISA and the Code, (viii) S1 has not engaged in a "prohibited
transaction" as defined in ERISA or the Code in connection with which S1 could
be subject to either any material excise tax or civil penalty assessed pursuant
to ERISA or the Code, (ix) to the knowledge of S1, there are no pending,
threatened or anticipated claims (other than routine claims for benefits) by, on
behalf of or against any of the S1 Plans or any trusts related thereto, (x) all
S1 Plans could be terminated as of the Closing without material liability in
excess of the amount accrued therefor in the financial statements referred to in
Sections 4.5 and 6.8 hereof in accordance with GAAP; (xi) except with respect to
nonqualified stock options granted to employees, no S1 Plan, either individually
or collectively, provides for any material payment by S1 that would not be
deductible for U.S. federal income tax purposes; (xii) no "accumulated funding
deficiency" as defined in ERISA or the Code, whether or not waived, and no
"unfunded current liability" as determined under the Code exists with respect to
any S1 ERISA Plan; (xiii) no S1 ERISA Plan has experienced a "reportable event"
(as such term is defined in ERISA and regulations thereunder) that is not
subject to an administrative or statutory waiver from the reporting requirement.
4.11 CERTAIN CONTRACTS.
(a) Except as set forth at Section 4.11 of the S1 Disclosure Schedule,
neither S1 nor any of its Subsidiaries is a party to or bound by any contract,
arrangement or commitment (i) with respect to the employment of any directors,
officers, employees or consultants (other than standard offer letters which
provide for not more than at-will employment), (ii) which, upon execution of
this Agreement or the consummation of the transactions contemplated by this
Agreement will (either alone or upon the occurrence of any additional acts or
events) result in any payment (whether of severance pay or otherwise) becoming
due from S1, Edify or any of their respective Subsidiaries to any director,
officer or employee thereof, (iii) with or to a labor union or guild (including
any collective bargaining agreement), (iv) except as set forth on Section
4.11(a)(iv) of the S1 Disclosure Schedule, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated by the
occurrence of any of the transactions contemplated by this Agreement, or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement (including as to this clause
(iv), any stock option plan, stock appreciation rights plan, restricted stock
plan or stock purchase plan), (v) containing any covenant materially limiting
the right of S1 or any of its Subsidiaries to engage in any line of business or
to compete with any person or granting any exclusive distribution rights, (vi)
relating to the disposition or acquisition by S1 or any of its Subsidiaries
after the date of this Agreement of a material amount of assets not in the
ordinary course of business or pursuant to which S1 or any of its Subsidiaries
has any material ownership interest in any corporation, partnership, joint
venture or other business enterprise other than S1's Subsidiaries that is
material to S1's business as currently conducted, or (vii) to provide source
code to any third party for any product or technology that is material to S1 and
its Subsidiaries taken as a whole. Except as set forth at Section 4.11 of the S1
Disclosure Schedule, there are no employment, consulting and deferred
compensation agreements to which S1 or any of its Subsidiaries is a party.
Section 4.11(a) of the S1 Disclosure Schedule sets forth a list of all material
contracts (as defined in Item 601(b)(10) of Regulation S-K) of S1 and its
Subsidiaries. Each contract, arrangement or commitment of the type described in
this Section 4.11(a), whether or not set forth in Section 4.11(a) of the S1
Disclosure Schedule, is referred to herein as a "S1 Contract," and neither S1
nor any of its Subsidiaries has received notice of, nor do any executive
officers of such entities know of, any violation of any S1 Contract.
(b) (i) Each S1 Contract is valid and binding and in full force and
effect as to the obligations of S1 thereunder, and to the knowledge of S1, is
valid and binding and in full force and effect as to the obligations by the
third parties thereto, (ii) S1 and each of its Subsidiaries has, and to the
knowledge of S1, each third party has, in all material respects performed all
obligations
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required to be performed by it to date under each S1 Contract, and (iii) no
event or condition exists which constitutes or, after notice or lapse of time or
both, would constitute, a material default on the part of S1 or any of its
Subsidiaries under any such S1 Contract or, to the knowledge of S1, any third
party thereto.
4.12 ENVIRONMENTAL MATTERS.
(a) Each of S1 and the S1 Subsidiaries is in compliance in all material
respects with all applicable laws and regulations relating to pollution or
protection of the environment (including without limitation, laws and
regulations relating to emissions, discharges, releases and threatened releases
of Hazardous Materials (as hereinafter defined), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials;
(b) There is no suit, claim, action, proceeding, investigation or notice
pending or, to the knowledge of S1 and its Subsidiaries threatened (or past or
present actions or events that could form the basis of any such suit, claim,
action, proceeding, investigation or notice), in which S1 or any S1 Subsidiary
has been or, with respect to threatened suits, claims, actions, proceedings,
investigations or notices may be, named as a defendant (x) for alleged material
noncompliance (including by any predecessor), with any environmental law, rule
or regulation or (y) relating to any material release or threatened release into
the environment of any Hazardous Material, occurring at or on a site owned,
leased or operated by S1 or any S1 Subsidiary, or to the knowledge of S1,
relating to any material release or threatened release into the environment of
any Hazardous Material, occurring at or on a site not owned, leased or operated
by S1 or any S1 Subsidiary;
(c) To the knowledge of S1 and its Subsidiaries, during the period of
S1's or any S1 Subsidiary's ownership or operation of any of its properties,
there has not been any material release of Hazardous Materials in, on, under or
affecting any such property.
(d) For purposes of this Section 4.12, the term "Hazardous Material"
means any hazardous waste, petroleum product, polychlorinated biphenyl,
chemical, pollutant, contaminant, pesticide, radioactive substance, or other
toxic material, or other material or substance (in each such case, other than
small quantities of such substances in retail containers) regulated under any
applicable environmental or public health statute, law, ordinance, rule or
regulation.
4.13 PROPERTIES AND ASSETS.
Except for (a) items reflected in S1's consolidated financial statements as
of December 31, 1998 referred to in Section 4.5 hereof, (b) exceptions to title
that do not interfere materially with S1's or any S1 Subsidiary's use and
enjoyment of owned or leased real property, (c) liens for current real estate
taxes not yet delinquent, or being contested in good faith, properly reserved
against (and reflected on the financial statements referred to in Section 4.5
above), (d) properties and assets sold or transferred in the ordinary course of
business consistent with past practices since December 31, 1998, and (e) items
listed in Section 4.13 of the S1 Disclosure Schedule, S1 and each S1 Subsidiary
have good and, as to owned real property, marketable and insurable title to all
their properties and assets, free and clear of all liens, claims, charges and
other encumbrances. S1 and each S1 Subsidiary, as lessees, have the right under
valid and subsisting leases to occupy, use and possess all property leased by
them, and neither S1 nor any S1 Subsidiary has experienced any material
uninsured damage or destruction with respect to such properties since December
31, 1998. All properties and assets used by S1 and each S1 Subsidiary are in
good operating condition and repair (subject to ordinary wear and tear) and
comply in all material respects with all Laws relating thereto now in effect or
scheduled to come into effect. S1 and each S1 Subsidiary enjoy peaceful and
undisturbed possession under all leases for the use of all property under which
they are the lessees,
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and all leases to which S1 or any S1 Subsidiary is a party are valid and binding
obligations of S1, and to the knowledge of S1, with respect to the respective
third parties thereto, enforceable in accordance with the terms thereof. Neither
S1 nor any S1 Subsidiary is in material default with respect to any such lease,
and there has occurred no default by S1 or any S1 Subsidiary or event which with
the lapse of time or the giving of notice, or both, would constitute a material
default under any such lease. There are no Laws, conditions of record, or other
impediments which interfere with the intended use by S1 or any S1 Subsidiary of
any of the property owned, leased, or occupied by them.
4.14 INSURANCE.
The existing insurance carried by S1 and S1 Subsidiaries is and will
continue to be, in respect of the nature of the risks insured against and the
amount of coverage provided, substantially similar in kind and amount to that
customarily carried by parties similarly situated who own properties and engage
in businesses substantially similar to that of S1 and the S1 Subsidiaries, and
is sufficient for compliance by S1 and the S1 Subsidiaries with all requirements
of Law and agreements to which S1 or any of the S1 Subsidiaries is subject or is
party.
4.15 COMPLIANCE WITH APPLICABLE LAWS.
Each of S1 and any S1 Subsidiary has complied in all material respects with
all Laws applicable to it or to the operation of its business. Neither S1 nor
any S1 Subsidiary has received any written notice of any material alleged or
threatened claim, violation, or liability under any such Laws that has not
heretofore been cured and for which there is no remaining liability.
4.16 S1 INFORMATION.
None of the information supplied or to be supplied by or on behalf of S1
for inclusion or incorporation by reference in the Registration Statement will,
at the time the Registration Statement becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading, except that no representation or warranty is made by S1 with
respect to statements made or incorporated by reference therein about Edify
supplied by Edify for inclusion or incorporation by reference in the
Registration Statement. None of the information supplied or to be supplied by or
on behalf of S1 for inclusion or incorporation by reference in the Proxy
Statement/Prospectus will, at the time the Proxy Statement/Prospectus is mailed
to the stockholders of Edify or S1, at the time of Edify stockholders' meeting
or S1 stockholders' meeting or as of the Effective Time, 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 the
light of the circumstances under which they are made, not misleading. The
Registration Statement and the Proxy Statement/Prospectus will comply as to form
in all material respects with the provisions of the Securities Act and the
Exchange Act and the rules and regulations promulgated by the SEC thereunder,
except that no representation or warranty is made by S1 with respect to
statements made or incorporated by reference therein about Edify supplied by
Edify for inclusion or incorporation by reference in the Proxy
Statement/Prospectus.
4.17 INTELLECTUAL PROPERTY.
Except, in each case, as set forth in Section 4.17 of the Edify Disclosure
Schedule:
(a) (i) S1 and its Subsidiaries own, free and clear of liens, orders and
arbitration awards, or are licensed or otherwise possess valid and enforceable
rights to use all patents, trademarks, trade names, service marks, copyrights
and any applications therefor, schematics, technology, know-how, trade secrets,
ideas, algorithms, processes, Software (as defined below), and tangible or
intangible
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proprietary information or material ("Intellectual Property") that are used in
the business of S1 and its Subsidiaries. "Software" means any and all (i)
computer programs and applications, including any and all software
implementations of algorithms, models and methodologies, whether in source code
or object code, (ii) databases and compilations, including any and all data and
collections of data, whether machine readable or otherwise, (iii) descriptions,
flow-charts and other work product used to design, plan, organize and develop
any of the foregoing, (iv) the technology supporting any Internet site(s)
operated by or on behalf of S1 or any of its Subsidiaries, and (v) all
documentation, including user manuals and training materials, relating to any of
the foregoing.
(ii) Except as would not be materially adverse to the business of S1
or its Subsidiaries, S1 and its Subsidiaries have taken reasonable steps to
protect their Intellectual Property. There is no litigation pending or, to the
knowledge of S1 and its Subsidiaries, threatened or any written claim from any
person challenging the ownership, use, validity or enforceability of any
Intellectual Property.
(iii) No material patent, trademark, service mark, copyright, trade
secret, computer software or other intellectual property right other than the
Intellectual Property set forth on Schedule 4.17 is necessary to conduct the
businesses of S1 and its Subsidiaries as presently conducted.
(b) Schedule 4.17 lists all (i) patents, patent applications, registered
and unregistered trademarks, trade names and service marks and registered
copyrights owned by S1 included in the Intellectual Property, including the
jurisdictions in which each such item of Intellectual Property right has been
issued or registered or in which any application for such issuance and
registration has been filed, (ii) material licenses, sublicenses and other
agreements as to which S1 and its Subsidiaries are a party and pursuant to which
any person is authorized to use any Intellectual Property, and (iii) licenses,
sublicenses and other agreements as to which S1 and its Subsidiaries are a party
and pursuant to which S1 and its Subsidiaries are authorized to use any third
party patents, trademarks or copyrights, including Software ("Third Party
Intellectual Property Rights") which are incorporated in, are or form a part of
any S1 or Subsidiary product.
(c) (i) To the knowledge of S1 and its Subsidiaries, there is no
unauthorized use, disclosure, infringement or misappropriation of any
Intellectual Property rights of S1 or its Subsidiaries, any trade secret
material to S1 or its Subsidiaries, or any Intellectual Property right of any
third party to the extent licensed by or through S1 or its Subsidiaries, by any
employee of S1 or S1 Subsidiary or third party for whom S1 is responsible.
Except as set forth in Schedule 4.17, there are no royalties, fees or other
payments payable by S1 or its Subsidiaries to any person by reason of the
ownership, use, sale or disposition of Intellectual Property.
(ii) To the knowledge of S1 and its Subsidiaries, there has been no
prior use of S1's registered trademarks by any third party which would confer
upon said third party superior rights in such trademarks. S1 and its
Subsidiaries have taken reasonable steps to adequately police the trademarks
against third party infringement, and the material trademarks registered in the
United States have been continuously used in the form appearing in, and in
connection with the goods and services listed in, their respective registration
certificates or any amendment, supplement or office action related thereto.
(d) S1 and its Subsidiaries are not, nor will they be as a result of the
execution and delivery of this Agreement or the performance of their obligations
under this Agreement, in breach of any material license, sublicense or other
agreement relating to the Intellectual Property or Third Party Intellectual
Property Rights, and the execution and delivery of this Agreement or the
performance of the obligations under this Agreement by S1 and its Subsidiaries
will not result in the loss or impairment of, or give rise to any right of any
third party to terminate, any of S1's or any of its Subsidiaries' rights to own
any of its Intellectual Property or their respective rights under any
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material license agreements, nor require the consent of any Governmental Entity
or third party in respect of any such Intellectual Property.
(e) S1 and its Subsidiaries (i) have no knowledge (including knowledge
of any litigation pending or threatened or any written claim from any person) or
reason to believe that the conduct of their businesses infringe any patent,
trademark, service mark, copyright, trade secret or other proprietary right of
any third party; and (ii) have not advised any third party that such third party
may be infringing any Intellectual Property or breaching any license or
agreement involving Intellectual Property and have not brought or threatened any
claim against such third party for such conduct.
(f) The Software owned or purported to be owned by S1 or any of its
Subsidiaries, was either (i) developed by employees of S1 or any of its
Subsidiaries within the scope of their employment; (ii) developed by independent
contractors or consultants who have assigned their rights to S1 or any of its
Subsidiaries pursuant to written agreements; or (iii) otherwise acquired by S1
or its Subsidiary from a third party.
(g) All employees and independent contractors and consultants of S1 and
its Subsidiaries have executed and delivered to S1 or its Subsidiaries, as the
case may be, agreements regarding the protection of proprietary information and
the assignment to S1 or its Subsidiaries of any Intellectual Property arising
from services performed for S1 or its Subsidiaries by such persons.
(h) S1 and its Subsidiaries have obtained or entered into written
agreements with their employees and with third parties, in transactions deemed
appropriate, in connection with the disclosure to, or use or appropriation by,
employees and third parties, of trade secret or proprietary information owned by
S1 and its Subsidiaries and not otherwise protected by a patent, a patent
application, copyright, trademark, or other registration or legal scheme ("S1
Confidential Information"), and do not know of any situation involving such
employee or third party use, disclosure or appropriation of S1 Confidential
Information where the lack of such a written agreement is likely to result in
any Material Adverse Effect. Except as set forth in Schedule 4.17, neither S1
nor any of its Subsidiaries have furnished the source code of any of their
Software products to any third party, deposited any such source code in escrow,
or otherwise provided access to such source code to any third party.
(i) Except as would not be materially adverse to the business of S1 or
its Subsidiaries, S1 and its Subsidiaries have taken reasonable steps with the
intent of ensuring that their products (including existing products and
technology and products and technology currently under development) will, when
used in accordance with associated documentation on a specified platform or
platforms, be capable upon installation of accurately processing, providing, and
receiving date data from, into, and between the twentieth and twenty-first
centuries, including the years 1999 and 2000, and making leap-year calculations,
provided that all other non-S1 or S1 Subsidiary products (e.g., hardware,
software and firmware) used in or in combination with S1's or its Subsidiaries'
products, properly exchange data with S1's and its Subsidiaries products.
4.18 BBRS FAIRNESS OPINION.
S1 has received an opinion from BancBoston Robertson Stephens, Inc. to the
effect that, in its opinion, the consideration to be paid to by S1 to the
stockholders of Edify hereunder is fair to such stockholders from a financial
point of view (the "BBRS Fairness Opinion"), and, except as set forth in
Schedule 4.18 of the S1 Disclosure Schedule, BancBoston Robertson Stephens, Inc.
has consented to the inclusion of the BBRS Fairness Opinion in the Registration
Statement.
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4.19 MERGER SUB BOARD APPROVAL.
The Board of Directors of Merger Sub (including any required committee or
subgroup of the Board of Directors of Merger Sub) has, as of the date of this
Agreement, determined (i) that the Merger is fair to, and in the best interests
of Merger Sub and its stockholders and (ii) to recommend that the stockholders
of Merger Sub approve and adopt this Agreement and approve the Merger.
4.20 S1 BOARD APPROVAL.
The Board of Directors of S1 (including any required committee or subgroup
of the Board of Directors of S1) has, as of the date of this Agreement,
determined that it is in the best interests of S1 and its stockholders to
approve the issuance of shares of S1 Common Stock in the Merger pursuant to the
terms and conditions of this Agreement.
4.21 AGREEMENTS WITH REGULATORY AGENCIES.
S1 (i) is not subject to any cease-and-desist or other order issued by,
(ii) is not a party to any Regulatory Agreement with, and (iii) has not adopted
any board resolutions at the request of, any Governmental Entity that restricts
the conduct of its business or that in any manner relates to its management or
its business, nor has S1 been advised by any Governmental Entity that it is
considering issuing or requesting any Regulatory Agreement.
4.22 CERTIFICATE OF INCORPORATION.
The Board of Directors of S1 has approved S1's entering into this Agreement
and the Option Agreement, and the transactions contemplated thereby, such that
under S1's Certificate of Incorporation the only vote of S1 stockholders
necessary to consummate the transactions contemplated hereby (including the
Merger and the S1 Issuance) is the approval of the S1 Issuance by the holders of
a majority of the shares of S1 Common Stock represented in person or by proxy at
a meeting of S1 stockholders held for such purpose.
4.23 AFFILIATES.
Each director, executive officer and other person who is an "affiliate"
(for purposes of Rule 145 under the Securities Act) of S1 is listed at Section
4.23 of the S1 Disclosure Schedule, and except as indicated thereon each such
person has delivered to S1, concurrently with the execution of this Agreement, a
stockholder agreement in the form of Exhibit D hereto (the "S1 Stockholder
Agreement").
4.24 ADDITIONAL INFORMATION.
The information contained in S1's registration statement on Form 8-A, as
filed with the SEC on September 30, 1998, and all other reports filed subsequent
thereto through the date hereof pursuant to Section 13(a) or 15(d) of the
Exchange Act, did not at the respective dates of filing with the SEC contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
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ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 COVENANTS OF EDIFY.
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time, except as
expressly contemplated or permitted by this Agreement or the Option Agreement or
with the prior written consent of S1, Edify and each Edify Subsidiary shall
carry on their respective businesses in the ordinary course consistent with past
practices. Edify will use its reasonable efforts to (x) preserve its business
organization and that of each Edify Subsidiary intact, (y) keep available to
itself and S1 the present services of the employees of Edify and each Edify
Subsidiary and (z) preserve for itself and S1 the goodwill of the customers of
Edify and each Edify Subsidiary and others with whom business relationships
exist. Without limiting the generality of the foregoing, and except as set forth
in the Edify Disclosure Schedule or as otherwise contemplated by this Agreement
or consented to by S1 in writing, Edify shall not, and shall not permit any
Edify Subsidiary to:
(a) declare or pay any dividends on, or make other distributions in
respect of, any of its capital stock;
(b) (i) split, combine or reclassify any shares of its capital stock or,
except as permitted by Section 5.1(c), issue, authorize or propose the issuance
of any other securities in respect of, in lieu of or in substitution for shares
of its capital stock except upon the exercise or fulfillment of rights or
options issued or existing pursuant to the Edify Stock Plans in accordance with
their present terms, all to the extent outstanding and in existence on the date
of this Agreement, or pursuant to the Option Agreement, or (ii) repurchase,
redeem or otherwise acquire (except repurchases of unvested shares at cost in
connection with the termination of the employee relationship with any employee
pursuant to stock option or purchase agreements in effect on the date of this
Agreement), any shares of the capital stock of Edify or any Edify Subsidiary, or
any securities convertible into or exercisable for any shares of the capital
stock of Edify or any Edify Subsidiary;
(c) issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or, except as provided in
Section 5.1(k)(ii) hereof, any securities convertible into or exercisable for,
or any rights, warrants or options to acquire, any such shares, or enter into
any agreement with respect to any of the foregoing, other than (i) the grant of
options under the 1996 Equity Plan, not to exceed 420,000 shares in the
aggregate, to purchase Edify Common Stock to newly hired employees in amounts
and on terms consistent with prior practice and at a price not less than the
market price on the date of the grant, (ii) the issuance of Edify Common Stock
pursuant to stock options or similar rights to acquire Edify Common Stock
granted pursuant to the Edify Stock Plans outstanding prior to the date of this
Agreement or granted under Section 5.1(c)(i) hereof and the Edify ESPP, in each
case in accordance with their present terms and (iii) pursuant to the Option
Agreement;
(d) amend its Certificate of Incorporation, By-Laws or other similar
governing documents;
(e) authorize or permit any of its officers, directors, employees or
agents to, directly or indirectly, solicit, initiate or knowingly encourage any
inquiries relating to, or the making of any proposal for, hold substantive
discussions or negotiations with, knowingly provide any information to, any
person, entity or group (other than S1) concerning any Acquisition Transaction
(as defined below), or approve, endorse or recommend any such proposal or enter
into any letter of intent or similar document or any contract, agreement or
commitment relating to any Acquisition Transaction. Notwithstanding the
foregoing, Edify may enter into discussions or negotiations or knowingly provide
information in connection with a possible Acquisition Transaction if the Board
of Directors of Edify,
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after consultation with counsel, reasonably determines in the exercise of its
fiduciary duty that such discussions or negotiations should be commenced or such
information should be furnished. Edify shall promptly advise S1 of any
discussions or negotiations concerning any Acquisition Transaction and
communicate to S1 the material terms of any proposal, whether written or oral,
which it may receive in respect of any such Acquisition Transaction and whether
it is having discussions or negotiations with a third party about an Acquisition
Transaction with or providing information in connection with, or which may lead
to, an Acquisition Transaction with a third party. Edify will promptly cease and
cause to be terminated any existing activities, discussions or negotiations
previously conducted with any parties other than S1 with respect to any of the
foregoing. As used in this Agreement, Acquisition Transaction shall mean any
offer, proposal or expression of interest relating to (i) any tender or exchange
offer, (ii) merger (other than the Merger), consolidation or other business
combination involving Edify or any Edify Subsidiary, or (iii) the acquisition in
any manner of a substantial equity interest in, or a substantial portion of the
assets of Edify other than the transactions contemplated or permitted by this
Agreement and the Option Agreement, involving or contemplating the acquisition
or purchase of more than 20%, in the case of any class or series of capital
stock or 20% in the case of the assets of Edify, as well as any lease or sale
transaction out of the ordinary course of business of more than 20% of the
assets of Edify or any liquidation or dissolution of Edify;
(f) make capital expenditures aggregating in excess of $75,000;
(g) enter into any new line of business or, except in the ordinary
course of business, (i) enter into any material contract (as defined in Item
601(b)(10) of Regulation S-K), or other contract requiring aggregate payments
exceeding $100,000, or (ii) modify, amend or transfer in any material respect,
or terminate, any material contract to which Edify or any of its Subsidiaries is
a party or waive, release, or assign any material rights thereunder;
(h) acquire or agree to acquire, by merging or consolidating with, or by
purchasing an equity interest in or a material amount of assets of, or by any
other manner, any business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire any material
amount of assets, other than in connection with foreclosures, settlements in
lieu of foreclosure or troubled loan or debt restructurings, or in the ordinary
course of business;
(i) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue or in any of the conditions to the Merger set forth in
Article VII not being satisfied, or in a violation of any provision of this
Agreement, except, in every case, as may be required by applicable law;
(j) change its methods of accounting in effect at December 31, 1998
except as required by changes in GAAP as concurred to by S1's independent
auditors;
(k) (i) except as required by applicable law or to maintain
qualification pursuant to the Code, adopt, amend, renew or terminate any Edify
Plan or any agreement, arrangement, plan or policy between Edify or any Edify
Subsidiary and one or more of its current or former directors or officers, (ii)
except as permitted by Section 5.1(c), increase in any manner the compensation
of any employee or director or pay any benefit not required by any plan or
agreement as in effect as of the date hereof (including, without limitation, the
granting of stock options, stock appreciation rights, restricted stock,
restricted stock units or performance units or shares), (iii) enter into, modify
or renew any contract, agreement, commitment or arrangement providing for the
payment to any director, officer or employee of compensation or benefits, other
than normal annual increases in pay, consistent with past practice, (iv) hire
any new employee at a level of director or above at an annual base salary
compensation in excess of $125,000, (v) pay expenses of any employees or
directors for attending conventions or similar meetings which conventions or
meetings are held after the date hereof, other than in the ordinary course of
business consistent with past practice, (vi) promote to a
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rank of director or more senior any employee, or (vii) pay any retention or
other bonuses to any employees;
(l) except for short-term borrowings with a maturity of one year or less
in the ordinary course of business consistent with past practices, incur any
indebtedness for borrowed money, assume, guarantee, endorse or otherwise as an
accommodation become responsible for the obligations of any other individual,
corporation or other entity;
(m) sell, purchase, enter into a lease, relocate, open or close any
office;
(n) make any equity investment or commitment to make such an investment
in any entity or real estate;
(o) make any investment, other than in the ordinary course of business
consistent with past practices;
(p) sell, purchase or lease any real property;
(q) waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of any options or restricted stock, or reprice options
granted under any employee, consultant, director or other stock plans or
authorize cash payments in exchange for any options granted under any of such
plans;
(r) transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights to material Intellectual
Property other than in the ordinary course of business, or enter into grants to
future patent rights, other than as may be required by applicable Laws;
(s) take any action (including any action by its Board of Directors) to
amend the terms of the Edify Rights Plan or otherwise to cause Edify's
representation set forth in Section 3.24 hereof to be untrue in any respect; or
(t) agree or commit to do any of the actions set forth in (a) - (s)
above.
The consent of S1 to any action by Edify or any Edify Subsidiary that is
not permitted by any of the preceding paragraphs shall be evidenced by a writing
signed by the President or any Executive Vice President of S1.
5.2 COVENANTS OF S1.
During the period from the date of this Agreement and continuing until the
Effective Time, except as expressly contemplated or permitted by this Agreement
or with Edify's prior written consent, S1 shall not (i) take any action that
would materially adversely affect S1's or Merger Sub's ability to consummate the
transactions contemplated by this Agreement or materially delay consummation of
the transaction contemplated by this Agreement or (ii) take any action that is
intended or may reasonably be expected to result in any of its representations
and warranties set forth in this Agreement being or becoming untrue or in any of
the conditions to the Merger set forth in Article VII not being satisfied, or in
a violation of any provision of this Agreement, except, in every case, as may be
required by applicable law.
5.3 COMPLIANCE WITH ANTITRUST LAWS.
Each of S1 and Edify shall use its reasonable best efforts to resolve
objections, if any, which may be asserted with respect to the Merger under
antitrust laws, including, without limitation and if applicable, the HSR Act. In
the event a suit is threatened or instituted challenging the Merger as violative
of antitrust laws, each of S1 and Edify shall use its reasonable best efforts to
avoid the filing of, or resist or resolve such suit. S1 and Edify shall use
their reasonable best efforts to take such
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action as may be required by: (a) the Antitrust Division of the Department of
Justice or the Federal Trade Commission in order to resolve such objections as
either of them may have to the Merger under antitrust laws, or (b) any federal
or state court of the United States, in any suit brought by a private party or
Governmental Entity challenging the Merger as violative of antitrust laws, in
order to avoid the entry of, or to effect the dissolution of, any injunction,
temporary restraining order, or other order which has the effect of preventing
the consummation of the Merger. Reasonable best efforts shall not include the
willingness of S1 to accept an order agreeing to the divestiture, or the holding
separate, of any assets of S1 or Edify which S1 reasonably determines to be
material to S1 or to benefits of the transaction for which it has bargained for
hereunder.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 REGULATORY MATTERS.
(a) Upon the execution and delivery of this Agreement, S1 and Edify (as
to information to be included therein pertaining to Edify) shall promptly cause
to be prepared and filed with the SEC a registration statement of S1 on Form
S-4, including the Proxy Statement/Prospectus (the "Registration Statement") for
the purpose of registering the S1 Common Stock to be issued in the Merger, and
for soliciting the approval of this Agreement and the Merger by the stockholders
of Edify and S1. S1 and Edify shall use their reasonable best efforts to have
the Registration Statement declared effective by the SEC as soon as possible
after the filing. The parties shall each promptly notify the other upon the
receipt of any comments from the SEC or its staff, or any other governmental
officials, supply each other with all such correspondence with any Governmental
Entity other than confidential information, and cooperate in responding to and
considering any questions or comments from the SEC staff regarding the
information contained in the Registration Statement. If at any time after the
Registration Statement is filed with the SEC, and prior to the Closing Date, any
event relating to S1 or Edify is discovered by such party which should be set
forth in an amendment of, or a supplement to, the Registration Statement,
including the Prospectus/Proxy Statement (including, without limitation, any
change in the Fairness Opinion), such party shall promptly inform the other, and
shall furnish all necessary information relating to such event whereupon the
appropriate party shall promptly cause an appropriate amendment to the
Registration Statement or supplement to the Prospectus/Proxy Statement to be
filed with the SEC. Upon the effectiveness of such amendment or supplement, the
parties (if prior to the meetings of stockholders pursuant to Section 6.3
hereof) will take all necessary action as promptly as practicable to permit an
appropriate amendment or supplement to be transmitted to their stockholders
entitled to vote at such meetings. S1 shall also use reasonable efforts to
obtain all necessary state securities law or "Blue Sky" permits and approvals
required to carry out the transactions contemplated by this Agreement. Each
party shall furnish all information as may be reasonably requested by the other
in connection with any such action.
(b) As promptly as practicable following the execution and delivery of
this Agreement, if applicable, each of Edify and S1 will prepare and file with
the United States Federal Trade Commission (the "FTC") and the Antitrust
Division of the United States Department of Justice (the "DOJ") Notification and
Report Forms relating to the transactions contemplated herein and by the Option
Agreement if and as required by the HSR Act, as well as comparable pre-merger
notification forms required by the merger notification or control laws and
regulations of any applicable jurisdiction, as agreed by the parties (the
"Antitrust Filings"). The parties will comply with any requests for additional
information relating to the Antitrust Filings and will use their reasonable best
efforts to secure all required approvals of the Antitrust Filings.
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(c) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings (which
shall include the Antitrust Filings), and to obtain as promptly as practicable
all permits, consents, approvals and authorizations of all third parties and
Governmental Entities which are necessary or advisable to consummate the
transactions contemplated by this Agreement (including without limitation the
Merger). Edify and S1 shall have the right to review in advance, and to the
extent practicable each will consult the other on, in each case subject to
applicable laws relating to the exchange of information, all the information
relating to Edify or S1 and Merger Sub, as the case may be, which appears in any
filing made with, or written materials submitted to, any third party or any
Governmental Entity in connection with the transactions contemplated by this
Agreement and will promptly notify each other of any communication with any
Governmental Entity and provide the other with an opportunity to participate in
any meetings with a Governmental Entity relating thereto; provided, however,
that nothing contained herein shall be deemed to provide either party with a
right to review any information provided to any Governmental Entity on a
confidential basis in connection with the transactions contemplated hereby. In
exercising the foregoing right, each of the parties hereto shall act reasonably
and as promptly as practicable. The parties hereto agree that they will consult
with each other with respect to the obtaining of all permits, consents,
approvals and authorizations of all third parties and Governmental Entities
necessary or advisable to consummate the transactions contemplated by this
Agreement and each party will keep the other apprised of the status of matters
relating to contemplation of the transactions contemplated herein.
(d) S1 and Edify shall promptly advise each other upon receiving any
communication from any Governmental Entity whose consent or approval is required
for consummation of the transactions contemplated by this Agreement which causes
such party to believe that there is a reasonable likelihood that any Requisite
Regulatory Approval (defined in Section 7.1(c) hereof) will not be obtained or
that the receipt of any such approval will be materially delayed.
6.2 ACCESS TO INFORMATION.
(a) Upon reasonable notice and subject to applicable Laws relating to
the exchange of information, Edify shall provide to the officers, employees,
accountants, counsel and other representatives of S1 and Merger Sub, access,
during normal business hours during the period prior to the Effective Time, to
all its properties, books, contracts, commitments and records and, during such
period, Edify shall make available to S1 (i) 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 or other federal
or state Laws and (ii) all other information concerning its business, properties
and personnel as S1 may reasonably request (except as to information which is
confidential or competitively sensitive ("Confidential Matters")). S1 will hold
all such information in confidence to the extent required by, and in accordance
with, the provisions of the Confidential Information and Non-disclosure
Agreement between the parties dated April 12, 1999 (the "Confidentiality
Agreement"). The parties agree and acknowledge that the Confidentiality
Agreement will continue in full force and effect in accordance with its terms.
(b) Upon reasonable notice and subject to applicable Laws relating to
the exchange of information, S1 shall, and shall cause Merger Sub to, provide to
the officers, employees, accountants, counsel and other representatives of
Edify, access, during normal business hours during the period prior to the
Effective Time, to such information regarding S1 (except as to Confidential
Matters), as shall be reasonably necessary for Edify to fulfill its obligations
pursuant to this Agreement or which may be reasonably necessary for Edify to
confirm that the representations and warranties of S1 contained herein are true
and correct and that the covenants of S1 contained herein have been performed in
all material respects. S1 also will provide a copy of each report, schedule,
registration statement and other document filed or received by it during such
period pursuant to the requirements
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of federal securities laws or other federal or state banking Laws and all other
information concerning its business as Edify may reasonably request (except
Confidential Matters). Edify will hold all such information in confidence to the
extent required by, and in accordance with, the provisions of the
Confidentiality Agreement.
(c) No investigation by either of the parties or their respective
representatives shall affect the representations and warranties of the other set
forth herein.
(d) Edify shall provide S1 with true, correct and complete copies of all
financial information provided to directors of Edify in connection with meetings
of its Boards of Directors or committees thereof, except as to Confidential
Matters.
6.3 STOCKHOLDER MEETINGS.
(a) Edify shall take all steps necessary to duly call, give notice of,
convene and hold a meeting of its stockholders within 45 days after the
Registration Statement becomes effective for the purpose of voting upon the
approval of this Agreement and the Merger (the "Edify Special Meeting"). The
Board of Directors of Edify shall recommend to Edify's stockholders approval of
this Agreement, including the Merger, and the transactions contemplated hereby,
together with any matters incident thereto, and shall oppose any third party
proposal or other action that is inconsistent with this Agreement or the
consummation of the transactions contemplated hereby, unless the Board of
Directors of Edify reasonably determines, following consultation with Edify's
legal counsel, that to withdraw such recommendation or opposition, as the case
may be, would be required in the exercise of its fiduciary duties.
(b) S1 shall take all steps necessary to duly call, give notice of,
convene and hold a meeting of its stockholders within 45 days after the
Registration Statement becomes effective for the purpose of voting upon the
approval of the S1 Issuance (the "S1 Special Meeting"). The Board of Directors
of S1 shall recommend to S1's stockholders approval of the S1 Issuance.
(c) Edify and S1 will coordinate and cooperate with respect to the
timing of, calling, mailing notice and convening the Edify Special Meeting and
the S1 Special Meeting.
6.4 LEGAL CONDITIONS TO MERGER.
Each of S1 and Edify shall use their reasonable best efforts (a) to take,
or cause to be taken, all actions necessary, proper or advisable to comply
promptly with all legal requirements which may be imposed on such party with
respect to the Merger and, subject to the conditions set forth in Article VII
hereof, to consummate the transactions contemplated by this Agreement and (b) to
obtain (and to cooperate with the other party to obtain) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity and any other third party which is required to be obtained by Edify or S1
in connection with the Merger and the other transactions contemplated by this
Agreement.
6.5 STOCK EXCHANGE LISTING.
S1 shall cause the shares of S1 Common Stock to be issued in the Merger and
pursuant to options referred to herein to be approved for quotation on the
Nasdaq Stock Market National Market System (or such other national securities
exchange on which the S1 Common Stock has become listed, or approved for
listing) prior to the Closing.
6.6 EMPLOYEES.
(a) S1 agrees that, at the Effective Time, it will grant options
pursuant to one or more of the S1 stock option plans existing as of the date
hereof to the individuals (provided, in each case,
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that such person is an officer of the rank of director or more senior at Edify
immediately prior to the Effective Time) at such price and in such amounts as
are specified in Section 6.6(a) of the Edify Disclosure Schedule. Such options
will vest no less than 25% per year, will have no performance criteria (other
than as to employment with S1 or any of its Subsidiaries) and otherwise be
subject to the terms and conditions of the S1 stock option plan under which they
are granted.
(b) S1 will have no obligation to retain any employee or group of
employees of Edify following the Effective Time. As soon as practicable after
the execution of this Agreement, Edify and S1 shall confer and work together in
good faith to agree upon mutually acceptable employee benefit and compensation
arrangements (and terminate Edify employee plans immediately prior to the
Effective Time, if appropriate) so as to provide benefits to Edify employees
initially upon the Merger which are generally equivalent to those being provided
to employees of Edify immediately preceding the Effective Time, as well as to
determine appropriate termination benefits for Edify employees generally and
certain members of Edify management in particular in addition to any and all
severance, separation, retention and salary continuation plans, programs or
arrangements disclosed on the Edify Disclosure Schedule. Continuous employment
with Edify or its subsidiaries shall be credited to Edify employees who become
S1 employees for all purposes of eligibility and vesting of benefits but not for
purposes of accrual of benefits.
6.7 INDEMNIFICATION.
(a) In the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether civil, criminal or administrative, in which
any person who is now, or has been at any time prior to the date of this
Agreement, or who becomes prior to the Effective Time, a director or officer or
employee of Edify (the "Indemnified Parties") is, or is threatened to be, made a
party based in whole or in part on, or arising in whole or in part out of, or
pertaining to (i) the fact that he is or was a director, officer or employee of
Edify or any of their respective predecessors or (ii) this Agreement or any of
the transactions contemplated hereby, whether in any case asserted or arising
before or after the Effective Time, the parties hereto agree to cooperate and
use their best efforts to defend against and respond thereto to the extent
permitted by applicable law and the Certificate of Incorporation and By-Laws of
Edify. It is understood and agreed that after the Effective Time, S1 shall
indemnify and hold harmless, as and to the fullest extent permitted by
applicable law and the Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws of S1 or the Certificate of Incorporation and Bylaws
of Merger Sub, as may be the case, each such Indemnified Party against any
losses, claims, damages, liabilities, costs, expenses (including reasonable
attorney's fees and expenses in advance of the final disposition of any claim,
suit, proceeding or investigation to each Indemnified Party to the fullest
extent permitted by law upon receipt of any undertaking required by applicable
law), judgments, fines and amounts paid in settlement in connection with any
such threatened or actual claim, action, suit, proceeding or investigation, and
in the event of any such threatened or actual claim, action, suit, proceeding or
investigation (whether asserted or arising before or after the Effective Time),
the Indemnified Parties may retain counsel reasonably satisfactory to S1;
provided, however, that (1) S1 shall have the right to assume the defense
thereof and upon such assumption S1 shall not be liable to any Indemnified Party
for any legal expenses of other counsel or any other expenses subsequently
incurred by any Indemnified Party in connection with the defense thereof, except
that if S1 elects not to assume such defense or counsel for the Indemnified
Parties reasonably advises the Indemnified Parties that there are issues which
raise conflicts of interest between S1 and the Indemnified Parties, the
Indemnified Parties may retain counsel reasonably satisfactory to S1, and S1
shall pay the reasonable fees and expenses of such counsel for the Indemnified
Parties, (2) S1 shall be obligated pursuant to this paragraph to pay for only
one firm of counsel for each Indemnified Party and one firm of local counsel,
and (3) S1 shall not be liable for any settlement effected without its prior
written consent (which consent shall not be unreasonably
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withheld or delayed). S1 shall have no obligation to advance expenses incurred
in connection with a threatened or pending action, suit or preceding in advance
of final disposition of such action, suit or proceeding, unless (i) S1 would be
permitted to advance such expenses pursuant to the DGCL and S1's Amended and
Restated Certificate of Incorporation or Amended and Restated Bylaws, and (ii)
S1 receives an undertaking by the Indemnified Party to repay such amount if it
is determined that such party is not entitled to be indemnified by S1 pursuant
to the DGCL and S1's Amended and Restated Certificate of Incorporation or
Amended and Restated Bylaws, Edify's Certificate of Incorporation or Bylaws, or
this Agreement. Any Indemnified Party wishing to claim indemnification under
this Section 6.7, upon learning of any such claim, action, suit, proceeding or
investigation, shall notify S1 thereof; provided, however, that the failure to
so notify shall not affect the obligations of S1 under this Sect ion 6.7 except
to the extent such failure to notify materially prejudices S1. S1's obligations
under this Section 6.7 continue in full force and effect for a period of six
years from the Effective Time; provided, however, that all rights to
indemnification in respect of any claim asserted or made within such period
shall continue until the final disposition of such claim.
(b) S1 shall use commercially reasonable efforts to cause the persons
serving as officers and directors of Edify immediately prior to the Effective
Time to be covered by a directors' and officers' liability insurance policy
("Tail Insurance") of substantially the same coverage and amounts containing
terms and conditions which are generally not less advantageous than Edify's
current policy with respect to acts or omissions occurring prior to the
Effective Time which were committed by such officers and directors in their
capacity as such for an aggregate premium cost for the Tail Insurance of not
more than 120% of premium for current coverage, and for a period not less than
two years.
(c) In the event S1 or any of its successors or assigns (i) consolidates
with or merges into any other person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger, or (ii)
transfers or conveys all or substantially all of its properties and assets to
any person, then, and in each such case, to the extent necessary, proper
provision shall be made so that the successors and assigns of S1 assume the
obligations set forth in this section.
6.8 SUBSEQUENT INTERIM AND ANNUAL FINANCIAL STATEMENTS.
As soon as reasonably available, but in no event more than 45 days after
the end of each fiscal quarter (other than the fourth fiscal quarter), S1 will
deliver to Edify and Edify will deliver to S1 their respective Quarterly Reports
on Form 10-Q, as filed with the SEC under the Exchange Act. Each party shall
deliver to the other any Current Reports on Form 8-K promptly after filing such
reports with the SEC.
6.9 ADDITIONAL AGREEMENTS.
In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, or to vest
the Surviving Corporation with full title to all properties, assets, rights,
approvals, immunities and franchises of any of the parties to the Merger, the
proper officers and directors of each party to this Agreement and S1's and
Edify's Subsidiaries shall take all such necessary action as may be reasonably
requested by either party or any such person. S1 shall cause Merger Sub to
perform all of its obligations under this Agreement and the transactions
contemplated hereby.
6.10 ADVICE OF CHANGES.
S1 and Edify shall promptly advise the other party of any change or event
that, individually or in the aggregate, has or would be reasonably likely to
have a Material Adverse Effect on it or to cause or constitute a material breach
of any of its representations, warranties or covenants contained herein. From
time to time prior to the Closing Date, each party will promptly supplement or
amend its
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disclosure schedule delivered in connection with the execution of this Agreement
to reflect any matter which, if existing, occurring or known at the date of this
Agreement, would have been required to be set forth or described in such
disclosure schedule or which is necessary to correct any information in such
disclosure schedule which has been rendered inaccurate thereby. No supplement or
amendment to such disclosure schedule shall have any effect for the purpose of
determining satisfaction of the conditions set forth in Sections 7.2(a) or
7.3(a) hereof, as the case may be, or the compliance by Edify or S1, as the case
may be, with the respective covenants set forth in Sections 5.1 and 5.2 hereof.
6.11 CURRENT INFORMATION.
Each party will promptly notify the other of any material change in the
normal course of its business or in the operation of its properties and of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the institution or the threat
of litigation involving it, and will keep the other fully informed of such
events.
6.12 TRANSACTION EXPENSES OF EDIFY.
(a) For planning purposes, Edify shall, within 15 days from the date
hereof, provide S1 with its estimated budget of transaction-related expenses
reasonably anticipated to be payable by Edify in connection with this
transaction, including the fees and expenses of counsel, accountants, investment
bankers and other professionals. Edify shall promptly notify S1 if or when it
determines that it will expect to exceed its budget.
(b) Promptly after the execution of this Agreement, Edify shall ask all
of its attorneys and other professionals to render current and correct invoices
for all unbilled time and disbursements. Edify shall accrue and/or pay all of
such amounts promptly thereafter.
(c) S1, in reasonable consultation with Edify, shall make all
arrangements with respect to the printing and mailing of the Joint Proxy
Statement/Prospectus. S1, if it deems necessary, also shall engage (at S1's
expense) a proxy solicitation firm to assist in the solicitation of proxies for
the special meetings of S1's and/or Edify's stockholders. Edify agrees to
cooperate as to such matters.
6.13 FORM S-8.
S1 agrees to file a registration statement on Form S-8 for the shares of S1
Common Stock issuable with respect to assumed Edify stock options, as described
in Section 1.6 of this Agreement as soon as reasonably practicable after the
Effective Time and shall maintain the effectiveness of such registration
statement thereafter for so long as any of such options or other rights remain
outstanding.
6.14 EDIFY ESPP.
At the Effective Time, each outstanding purchase right with respect to all
open Offering Periods under the Edify ESPP (each an "Assumed Purchase Right")
shall be assumed by S1. Each Assumed Purchase Right shall continue to have, and
be subject to, the terms and conditions set forth in the Edify ESPP and the
documents governing the Assumed Purchase Right, except that the purchase price
of such shares of S1 Common Stock for each respective Purchase Date under each
Assumed Purchase Right shall be the lower of (i) the quotient determined by
dividing eighty-five percent (85%) of the fair market value of Edify Common
Stock on the Offering Date of each assumed Offering Period by the Exchange Ratio
or (ii) eighty-five percent (85%) of the fair market value of the S1 Common
Stock on each Purchase Date of each assumed Offering Period occurring after the
Effective Time (with the number of shares rounded down to the nearest whole
share and the purchase price rounded up to the nearest whole cent). The Assumed
Purchase Rights shall be exercised at such times following the Effective Time as
set forth in the Edify ESPP, and each
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participant shall, accordingly, be issued shares of S1 Common Stock at such
times. The Edify ESPP shall terminate with the exercise of the last Assumed
Purchase Right, and no additional purchase rights shall be granted under the
Edify ESPP following the Effective Time. S1 agrees that from and after the
Effective Time, employees of Edify may participate in S1's employee stock
purchase plan, subject to the terms and conditions of such plan. Capitalized
terms in this Section 6.14 if not otherwise defined in this Agreement, have the
meanings ascribed to them in the Edify ESPP.
6.15 BOARD OF DIRECTORS.
Promptly following the Effective Time, the Board of Directors of S1 will
take all actions necessary in order for Jeffrey M. Crowe to be appointed
promptly to S1's Board of Directors for a three-year term; provided,
however,that S1 shall have no obligation to invite Mr. Crowe to serve on S1's
Board of Directors if Mr. Crowe is not both Chief Executive Officer and a member
in good standing of Edify's Board of Directors immediately prior to the
Effective Time.
6.16 BYLAWS.
Prior to the Effective Time, S1 shall amend its Bylaws to create an office
of Vice Chairman, the holder of which shall report directly to the Chief
Executive Officer of S1.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligation of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(A) STOCKHOLDER APPROVALS.
This Agreement, including the Certificate of Merger and the Merger shall
have been approved and adopted at the Edify Special Meeting by the affirmative
vote of the holders of at least a majority of the outstanding shares of Edify
Common Stock entitled to vote thereon. The S1 Issuance shall have been approved
by the holders of a majority of the outstanding Shares of S1 Common Stock
represented at the S1 Special Meeting in person or by proxy.
(B) STOCK EXCHANGE LISTING.
The shares of S1 Common Stock which shall be issued in the Merger
(including the S1 Common Stock that may be issued upon exercise of the options
referred to in Section 1.6 hereof) upon consummation of the Merger shall have
been authorized for quotation on the Nasdaq Stock Market National Market System
(or such other national securities exchange on which the S1 Common Stock may
become listed).
(C) REGISTRATION STATEMENT.
The Registration Statement shall have become effective under the
Securities Act, and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been initiated or threatened by the SEC.
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(D) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY; HSR ACT.
No order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition (an "Injunction")
preventing the consummation of the Merger or any of the other transactions
contemplated by this Agreement or the Certificate of Merger shall be in effect.
No statute, rule, regulation, order, injunction or decree shall have been
enacted, entered, promulgated or enforced by any Governmental Entity which
prohibits, restricts or makes illegal consummation of the Merger. All waiting
periods, if any, under the HSR Act or foreign merger notification requirements,
if applicable, relating to the transactions contemplated hereby will have
expired or been terminated early and all material foreign antitrust approvals
required to be obtained prior to the Merger in connection with the transactions
contemplated hereby shall have been obtained.
(E) FEDERAL TAX OPINION.
S1 and Edify shall each have received from Hogan & Hartson L.L.P., S1's
special counsel, an opinion to S1 and Edify, in form and substance reasonably
satisfactory to them, substantially to the effect that on the basis of facts,
representations, and assumptions set forth in such opinion which are consistent
with the state of facts existing at the time of such opinion, the Merger will be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code. In rendering such opinion, such counsel may
require and, to the extent such counsel deems necessary or appropriate, may rely
upon representations made in certificates of officers of Edify, S1, Merger Sub,
their respective affiliates and others. If Hogan & Hartson L.L.P. does not
render such opinion, this condition may be satisfied if Fenwick & West LLP
renders such opinion, relying upon such representations.
7.2 CONDITIONS TO OBLIGATIONS OF S1 AND MERGER SUB.
The obligation of S1 and Merger Sub to effect the Merger is also subject to
the satisfaction or waiver by S1 at or prior to the Effective Time of the
following conditions:
(A) REPRESENTATIONS AND WARRANTIES.
The representations and warranties of Edify set forth in this Agreement
shall be true and correct as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date; provided,
however, that for purposes of this paragraph, such representations and
warranties shall be deemed to be true and correct, unless the failure or
failures of such representations and warranties to be so true and correct,
individually or in the aggregate, would have a Material Adverse Effect on Edify.
Such determination of aggregate Material Adverse Effect shall be made as if
there were no materiality qualifications in such representations and warranties.
S1 shall have received a certificate signed on behalf of Edify by each of the
President and Chief Executive Officer and the Chief Financial Officer of Edify
to the foregoing effect.
(B) PERFORMANCE OF COVENANTS AND AGREEMENTS OF EDIFY.
Edify shall have performed in all material respects all covenants and
agreements required to be performed by it under this Agreement at or prior to
the Closing Date, except in each case where such nonperformance does not or
would not have a Material Adverse Effect on any of Edify, S1 or the Surviving
Corporation. S1 shall have received a certificate signed on behalf of Edify by
each of the President and Chief Executive Officer and the Chief Financial
Officer of Edify to such effect.
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(C) CONSENTS UNDER AGREEMENTS.
The consent, approval or waiver of each person whose consent or approval
shall be required in order to permit the succession by S1, to the extent
applicable, to any obligation, right or interest of Edify under any loan or
credit agreement, note, mortgage, indenture, lease, license or other agreement
or instrument shall have been obtained except for those, the failure of which to
obtain, will not result in a Material Adverse Effect on S1 or Edify.
(D) NO PENDING GOVERNMENTAL ACTIONS.
No proceeding initiated by any Governmental Entity seeking an Injunction
preventing consummation of the Merger shall be pending or shall have been
threatened in writing.
(E) NO MATERIAL ADVERSE CHANGE.
There shall have been no Material Adverse Effect with respect to Edify,
which is continuing.
(F) ACCOUNTANT'S COMFORT LETTER.
Edify shall have caused to be delivered on the respective dates thereof
to S1 "comfort letters" from KPMG LLP, Edify's independent public accountants,
dated the date on which the Registration Statement or last amendment thereto
shall become effective, and dated the date of the Closing (defined in Section
9.1 hereof), and addressed to S1 and Edify, with respect to Edify's financial
data presented in the Proxy Statement/Prospectus, which letters shall be based
upon Statements on Auditing Standards Nos. 72 and 76.
7.3 CONDITIONS TO OBLIGATIONS OF EDIFY.
The obligation of Edify to effect the Merger is also subject to the
satisfaction or waiver by Edify at or prior to the Effective Time of the
following conditions:
(A) REPRESENTATIONS AND WARRANTIES.
The representations and warranties of S1 and Merger Sub set forth in
this Agreement shall be true and correct as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an earlier
date) as of the Closing Date as though made on and as of the Closing Date;
provided, however, that for purposes of this paragraph, such representations and
warranties shall be deemed to be true and correct, unless the failure or
failures of such representations and warranties to be so true and correct,
individually or in the aggregate, would have a Material Adverse Effect on S1.
Such determination of aggregate Material Adverse Effect shall be made as if
there were no materiality qualifications in such representations and warranties.
Edify shall have received a certificate signed on behalf of S1 by each of the
President and Chief Executive Officer and the Chief Financial Officer of S1 to
the foregoing effect.
(B) PERFORMANCE OF COVENANTS AND AGREEMENTS OF S1.
S1 and Merger Sub shall have each performed in all material respects all
covenants and agreements required to be performed by it under this Agreement at
or prior to the Closing Date, except in each case where such nonperformance does
not or would not have a Material Adverse Effect on any of Edify, S1 or the
Surviving Corporation. Edify shall have received a certificate signed on behalf
of S1 by each of the President and Chief Executive Officer and the Chief
Financial Officer of S1 to such effect.
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(C) NO MATERIAL ADVERSE EFFECT.
There shall have been no Material Adverse Effect with respect to S1,
which is continuing.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 TERMINATION.
This Agreement may be terminated at any time prior to the Effective Time,
whether before or after approval of the matters presented in connection with the
Merger by the stockholders of Edify or S1, if applicable:
(a) by mutual consent of S1 and Edify in a written instrument, if the
Board of Directors of each so determines by a vote of a majority of the members
of its entire Board;
(b) by either S1 or Edify if a Governmental Entity shall have issued an
order, decree or ruling or taken any other action having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger, which
order, decree, ruling or other action is final and nonappealable;
(c) by either S1 or Edify if the Merger shall not have been consummated
on or before March 31, 2000, unless the failure of the Closing to occur by such
date shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe the covenants and agreements of such party set
forth herein;
(d) by either S1 or Edify (provided that the terminating party is not in
breach of its obligations under Section 6.3 hereof) if the approval of the
stockholders of either party required for the consummation of the Merger shall
not have been obtained by reason of the failure to obtain the required vote at a
duly held meeting of stockholders or at any adjournment or postponement thereof,
respectively;
(e) by either S1 or Edify (provided that the terminating party is not
then in breach of any representation, warranty, covenant or other agreement
contained herein that, individually or in the aggregate, would give the other
party the right to terminate this Agreement) if there shall have been a breach
of any of the representations or warranties set forth in this Agreement on the
part of the other party, if such breach, individually or in the aggregate, has
had or is reasonably likely to have a Material Adverse Effect on the breaching
party, and such breach shall not have been cured within 30 days following
receipt by the breaching party of written notice of such breach from the other
party hereto or such breach, by its nature, cannot be cured prior to the Closing
or within 30 days, whichever is longer;
(f) by either S1 or Edify (provided that the terminating party is not
then in breach of any representation, warranty, covenant or other agreement
contained herein that, individually or in the aggregate, would give the other
party the right to terminate this Agreement) if there shall have been a material
breach of any of the covenants or agreements set forth in this Agreement on the
part of the other party, and such breach shall not have been cured within 30
days following receipt by the breaching party of written notice of such breach
from the other party hereto or such breach, by its nature, cannot be cured prior
to the Closing or within 30 days, whichever is longer, except in each case where
such breach does not or would not have a Material Adverse Effect on any of
Edify, S1 or the Surviving Corporation;
(g) by S1, if Edify's Board of Directors, for any reason, (i) fails to
call and hold within 45 days of the effectiveness of the Registration Statement
a special meeting of Edify's stockholders to consider and approve this Agreement
and the transactions contemplated hereby, (ii) withdraws or
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amends or modifies in a manner adverse to S1 or fails to recommend to
stockholders the approval of this Agreement and the transactions contemplated
hereby, (iii) approves or recommends any third party proposal for an Acquisition
Transaction that is inconsistent with the transactions contemplated by this
Agreement, (iv) fails to recommend rejection of a tender or exchange offer
relating to Edify's securities which is commenced by a third party not
affiliated with S1, within ten business days from the date the tender or
exchange offer commenced, or (v) violates Section 5.1(e) of this Agreement;
(h) by Edify, if S1's Board of Directors, for any reason, (i) fails to
call and hold within 45 days of the effectiveness of the Registration Statement
a special meeting of S1's stockholders to consider and approve the issuance of
shares of S1 Common Stock in the Merger, or (ii) withdraws or amends or modifies
in a manner adverse to Edify or fails to recommend to stockholders the approval
of the issuance of shares of S1 Common Stock in the Merger; and
(i) by Edify, on or after December 1, 1999, if, (1) Edify's Board of
Directors authorizes Edify to enter into an agreement concerning an Acquisition
Transaction on terms that Edify's Board of Directors reasonably determines,
after consultation with its financial advisor, to be more favorable to Edify's
stockholders than the Merger (a "Superior Proposal") and Edify notifies S1 in
writing that it intends to enter into such an agreement, attaching the agreement
so authorized to such notice, (2) S1 does not make, within five business days
after receipt of such notice, a written offer that Edify's Board of Directors
reasonably determines, after consultation with its financial advisor, to be at
least as favorable to Edify's stockholders as the Superior Proposal, it being
understood that Edify may not enter into any such agreement during such five
business day period, and (3) Edify pays the applicable break-up fee under
Section 9.3 hereof.
8.2 EFFECT OF TERMINATION.
In the event of termination of this Agreement by either S1 or Edify as
provided in Section 8.1 hereof, this Agreement shall forthwith become void and
have no effect except (i) the last sentence of Sections 6.2(a) and Sections 8.2
and 9.3 hereof shall survive any termination of this Agreement, and (ii)
notwithstanding anything to the contrary contained in this Agreement, no party
shall be relieved or released from any liabilities or damages arising out of its
willful or intentional breach of any provision of this Agreement.
8.3 AMENDMENT.
Subject to compliance with applicable law, this Agreement may be amended by
the parties hereto, by action taken or authorized by their respective Board of
Directors, at any time before or after approval of the matters presented in
connection with the Merger by the stockholders of Edify or S1; provided,
however, that after any approval of the transactions contemplated by this
Agreement by Edify's stockholders, there may not be, without further approval of
such stockholders, any amendment of this Agreement which (i) alters or changes
the amount or kind of shares, securities, cash, property and/or rights to be
received in exchange for or on conversion of all or any of the shares of any
class or series thereof of Edify, (ii) alters or changes any term of the
Certificate of Incorporation of the Surviving Corporation to be effected by the
Merger, or (iii) alters or changes any of the terms and conditions of this
Agreement if such alteration or change would adversely affect the holders of any
class or series thereof of Edify. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
8.4 EXTENSION; WAIVER.
At any time prior to the Effective Time, the parties hereto, by action
taken or authorized by their respective Boards of Directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
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inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party, but such extension or waiver
or failure to insist on strict compliance with an obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
ARTICLE IX
GENERAL PROVISIONS
9.1 CLOSING.
Subject to the terms and conditions of this Agreement, the closing of the
Merger (the "Closing") will take place at 10:00 a.m. at the main offices of S1
on (i) the fifth business day following the receipt of the last Requisite
Regulatory Approval or stockholder approval after all applicable waiting periods
have expired or been terminated or (ii) such other date, place and time as the
parties may agree in writing (the "Closing Date").
9.2 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
None of the representations, warranties, covenants and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement (other than
pursuant to the Option Agreement, which shall terminate in accordance with its
terms) shall survive the Effective Time, except for those covenants and
agreements contained herein and therein which by their terms apply in whole or
in part after the Effective Time.
9.3 EXPENSES; BREAKUP FEE.
Except as provided below, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expense, provided that all filing and other fees paid
to the SEC shall be borne by S1. If this Agreement is terminated by S1 (1) under
Section 8.1(d) due to the failure of the Edify stockholders to give their
required approval at the Edify Special Meeting, or (2) under Sections 8.1(e) or
8.1(f) by reason of a breach of Edify's representations or warranties or failure
of Edify to perform its covenants under this Agreement, or (3) under Section
8.1(g), Edify shall pay all documented, reasonable costs and expenses up to
$500,000 incurred by S1 in connection with this Agreement and the transactions
contemplated hereby, plus a breakup fee of (x) $1,000,000, in the case of a
termination under clause (1) of this sentence, or (y) $5,000,000, in the case of
a termination under clause (2) or (3) of this sentence. If this Agreement is
terminated by Edify under Section 8.1(i), Edify shall pay all documented,
reasonable costs and expenses up to $500,000 incurred by S1 in connection with
this Agreement and the transactions contemplated hereby, plus a breakup fee of
$5,000,000. If this Agreement shall be terminated by Edify (1) under Section
8.1(d) due to the failure of S1 stockholders to give their required approval at
the S1 Special Meeting, (2) under Sections 8.1(e) or (f) by reason of a breach
of S1's representations or warranties or failure of S1 to perform its covenants
under this Agreement, or (3) under Section 8.1(h), S1 shall pay all documented,
reasonable costs and expenses up to $500,000 incurred by Edify in connection
with this Agreement and the transactions contemplated hereby, plus a breakup fee
of (x) $1,000,000, in the case of a termination under clause (1) of this
sentence, or (y) $5,000,000, in the case of a termination under clause (2) or
(3) of this sentence.
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9.4 NOTICES.
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, mailed by registered or certified
mail (return receipt requested) or delivered by an express courier (with
confirmation) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
<TABLE>
<S> <C>
(a) if to S1, to:
Security First Technologies Corporation
3390 Peachtree Road, NE
Suite 1700
Atlanta, GA 30326
Attn.: Robert F. Stockwell
Chief Financial Officer
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, DC 20004
Attn.: Stuart G. Stein, Esq.
and
(b) if to Edify, to:
Edify Corporation
2840 San Tomas Expressway
Santa Clara, CA 95051
Attn.: Jeffrey M. Crowe
President and Chief Executive Officer
with a copy (which shall not constitute notice) to:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
Attn.: Gordon K. Davidson, Esq.
</TABLE>
9.5 INTERPRETATION.
When a reference is made in this Agreement to Sections, Exhibits or
Schedules, such reference shall be to a Section of or an Exhibit or Schedule to
this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation."
9.6 COUNTERPARTS.
This Agreement may be executed in counterparts, all of which shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each of the parties and delivered to the other
parties, it being understood that all parties need not sign the same
counterpart.
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9.7 ENTIRE AGREEMENT.
This Agreement (including the disclosure schedules, documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, other than the
Confidentiality Agreement, the Certificate of Merger, the Option Agreement, the
Edify Stockholder Agreement and the S1 Stockholder Agreement.
9.8 GOVERNING LAW.
This Agreement shall be governed and construed in accordance with the laws
of the State of Delaware, without regard to any applicable conflicts of law
rules.
9.9 ENFORCEMENT OF AGREEMENT.
The parties hereto agree that irreparable damage would occur in the event
that the provisions of this Agreement were not performed in accordance with its
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions thereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
9.10 SEVERABILITY.
Any term or provision of this Agreement which is invalid or unenforceable
in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement or affecting
the validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.
9.11 PUBLICITY.
Except as otherwise required by law or the rules of The Nasdaq Stock Market
(or such other exchange on which the S1 Common Stock may become listed), so long
as this Agreement is in effect, neither S1 nor Edify shall, or shall permit any
of S1's or Edify's Subsidiaries to, issue or cause the publication of any press
release or other public announcement with respect to, or otherwise make any
public statement concerning, the transactions contemplated by this Agreement,
the Certificate of Merger, the Option Agreement, the Edify Stockholder Agreement
or the S1 Stockholder Agreement without the consent of the other party, which
consent shall not be unreasonably withheld. S1 and Edify agree that the joint
press release announcing the signing of this Agreement shall contain a statement
regarding the use of Edify's technology in such form and content as the parties
shall mutually agree in their sole and absolute discretion.
9.12 ASSIGNMENT; LIMITATION OF BENEFITS.
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.
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. Except as otherwise specifically provided in Section 6.7 hereof,
this Agreement (including the documents and instruments referred to herein) is
not intended to confer upon any person other than the parties hereto any rights
or remedies hereunder, and the covenants, undertakings and agreements
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set out herein shall be solely for the benefit of, and shall be enforceable only
by, the parties hereto and their permitted assigns.
9.13 ADDITIONAL DEFINITIONS.
In addition to any other definitions contained in this Agreement, the
following words, terms and phrases shall have the following meanings when used
in this Agreement.
"Affiliated Person": any director, officer or 5% or greater stockholder,
spouse or other person living in the same household of such director, officer or
stockholder, or any company, partnership or trust in which any of the foregoing
persons is an officer, 5% or greater stockholder, general partner or 5% or
greater trust beneficiary.
"knowledge" or "know" means with respect to a party hereto, with respect to
a matter in question, that the directors or any executive officer of such party
has actual knowledge of such matter.
"Laws": any and all statutes, laws, ordinances, rules, regulations, orders,
permits, judgments, injunctions, decrees, case law and other rules of law
enacted, promulgated or issued by any Governmental Entity.
"Material Adverse Effect": with respect to S1 or Edify, as the case may be,
means a condition, event, change or occurrence that has had or would have a
material adverse effect upon Edify and its Subsidiaries, taken as a whole, or S1
and its Subsidiaries, taken as a whole, as the case may be, taking into account
(A) the business, customers, assets, capitalization, financial condition and
results of operations of S1 or Edify and their respective Subsidiaries (in each
case, taken as a whole), other than as a result primarily of (i) the direct
effect of the public announcement, pendency or consummation of the Merger, (ii)
changes in general economic conditions or changes affecting the industry
generally in which such entity operates, or (iii) changes in the respective
trading prices for S1 Common Stock or Edify Common Stock, or (B) the ability of
S1 or Edify to perform its obligations under, and to consummate the transactions
contemplated by, this Agreement, the Certificate of Merger and, in the case of
Edify, the Option Agreement.
"Subsidiary": with respect to any party means any corporation, partnership
or other organization, whether incorporated or unincorporated, which is
consolidated with such party for financial reporting purposes.
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IN WITNESS WHEREOF, S1, Merger Sub and Edify have caused this Agreement to
be executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.
SECURITY FIRST TECHNOLOGIES CORPORATION
By: /s/ JAMES S. MAHAN III
-------------------------------------------
James S. Mahan III
Chairman and Chief Executive Officer
SAHARA STRATEGY CORPORATION
By: /s/ ROBERT F. STOCKWELL
-------------------------------------------
Robert F. Stockwell
President
EDIFY CORPORATION
By: /s/ JEFFREY M. CROWE
-------------------------------------------
Jeffrey M. Crowe
President and Chief Executive Officer
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ANNEX B
May 16, 1999
Board of Directors
Security First Technologies Corporation
3390 Peachtree Road, NE, Suite 1700
Atlanta, Georgia 30326
Members of the Board:
We understand that S1 Europe Holdings N.V., a Belgian entity in the process
of incorporation ("S1 Holdings") and represented by Security First Technololgies
Corporation (the "Company"), is proposing to enter into a Share Purchase
Agreement dated as of the date hereof (the "Share Purchase Agreement") with
stockholders and bondholders of FICS Group N.V., a Belgian corporation ("FICS")
and, for the limited purposes stated therein, the Company and FICS, and that the
Company is proposing to enter into a Stock Purchase Agreement dated as of the
date hereof (the "Stock Purchase Agreement" and, together with the Share
Purchase Agreement, the "FICS Transaction Agreements") with stockholders and
bondholders of FICS and, for the limited purposes stated therein, FICS, which
agreements will provide, among other things, for the purchase by S1 Holdings of
all of the issued and outstanding capital stock of FICS and all of the issued
and outstanding securities otherwise convertible into capital stock of FICS
(collectively, the "FICS Securities") from the stockholders and bondholders of
FICS, and the purchase by stockholders and bondholders of FICS of shares of
common stock of the Company, par value $.01 per share ("Company Common Stock")
(the transactions contemplated by the FICS Transaction Agreements being the
"FICS Transaction"). Under the terms set forth in the FICS Transaction
Agreements, at the closing of the FICS Transaction, among other things, S1
Holdings will purchase the FICS Securities for an aggregate purchase price (the
"Transaction Consideration") of the lower of either (i) $1,080,000,000 or (ii)
the product of (x) the stock price, as quoted on the Nasdaq Stock Market or such
other national exchange on which Company Common Stock, as of the close of
business on the third business day prior to the closing date is then traded, of
a share of Company Common Stock at the close of business on the date which is
three business days prior to the closing date multiplied by (y) 20,0000,000
(subject to adjustments), and stockholders and bondholders of FICS will purchase
an aggregate number of shares of Company Common Stock determined in accordance
with the FICS Transaction Agreements for an aggregate consideration of the
Transaction Consideration (the number of shares of Company Common Stock issued
by the Company in the FICS Transaction being the "Exchange Consideration"). The
terms and conditions of the FICS Transaction are set out more fully in the FICS
Transaction Agreements.
You have asked us whether, in our opinion, the Exchange Consideration is
fair, from a financial point of view and as of the date hereof, to the Company.
For purposes of this opinion we have, among other things:
(i) reviewed certain publicly available financial statements and other
business and financial information of the Company, respectively;
(ii) reviewed certain internal financial statements and other financial
and operating data concerning the Company and FICS, including
information relating to certain strategic, financial and operational
benefits anticipated from the FICS Transaction, prepared by the
managements of the Company and FICS;
(iii) reviewed certain financial forecasts and other forward looking
financial information prepared by the managements of the Company and
FICS, respectively;
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(iv) held discussions with the respective managements of the Company and
FICS concerning the businesses, past and current operations,
financial condition and future prospects of the Company and FICS,
independently and combined, including discussions with the
managements of the Company and FICS concerning cost savings and other
synergies that are expected to result from the FICS Transaction, as
well as their views regarding the strategic rationale for the FICS
Transaction;
(v) reviewed the financial terms and conditions set forth in the FICS
Transaction Agreements;
(vi) reviewed the stock price and trading history of Company Common Stock;
(vii) compared the financial performance of the Company and FICS and the
prices and trading activity of Company Common Stock with that of
certain other publicly traded companies comparable with the Company
and FICS, respectively;
(viii) compared the financial terms of the FICS Transaction with the
financial terms, to the extent publicly available, of other
transactions we deemed relevant;
(ix) reviewed the pro forma impact of the FICS Transaction on the
Company's earnings per share (the "Pro Forma Analysis");
(x) reviewed and considered in the analysis information prepared by
members of management of the Company and FICS relating to the
relative contributions of the Company and FICS to the combined
company;
(xi) prepared a discounted cash flow analysis of FICS;
(xii) participated in discussions and negotiations among representatives
of the Company and FICS and their financial and legal advisors; and
(xiii) made such other studies and inquiries, and reviewed such other data
and performed such other analyses, as we deemed relevant.
We understand that the Company is also proposing to enter into an Agreement
and Plan of Merger dated as of the date hereof (the "Edify Merger Agreement")
with Sahara Strategy Corporation (a wholly owned subsidiary of the Company,
"Merger Sub") and Edify Corporation ("Edify"), which agreement will provide,
among other things, for the merger (the "Edify Merger") of Merger Sub with and
into Edify. Upon consummation of the Edify Merger, Edify will become a wholly
owned subsidiary of the Company. The Company has informed us that the Edify
Merger could occur at approximately the same time as the FICS Transaction, but
neither the FICS Transaction nor the Edify Merger is contingent upon the other
occurring. As a result, we have conducted the Pro Forma Analysis as if the FICS
Transaction and the Edify Merger are both consummated (based upon the
information that has been provided to us and reviewed by us related to Edify)
and also as if the FICS Transaction is consummated and the Edify Merger is not
consummated.
In our review and analysis, and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided to us (including information furnished to us orally or
otherwise discussed with us by management of the Company, FICS and Edify) or
publicly available and have neither attempted to verify, nor assumed
responsibility for verifying, any of such information. We have relied upon the
assurances of management of the Company, FICS and Edify that they are not aware
of any facts that would make such information inaccurate or misleading.
Furthermore, we did not obtain or make, or assume any responsibility for
obtaining or making, any independent evaluation or appraisal of the properties,
assets or liabilities (contingent or otherwise) of the Company, FICS or Edify,
nor were we furnished with any such evaluation or appraisal. With respect to the
financial forecasts and projections (and the
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assumptions and bases therefor) for each of the Company, FICS and Edify that we
have reviewed, upon the advice of the managements of the Company, FICS and
Edify, we have assumed that such forecasts and projections have been reasonably
prepared in good faith on the basis of reasonable assumptions and reflect the
best available estimates and judgments as to the future financial condition and
performance of the Company, FICS and Edify, respectively, and we have further
assumed that such projections and forecasts will be realized in the amounts and
in the time periods currently estimated. In this regard, we note that each of
the Company, FICS and Edify face exposure to the Year 2000 problem. We have not
undertaken any independent analysis to evaluate the reliability or accuracy of
the assumptions made by the managements of the Company, FICS and Edify with
respect to the potential effect that the Year 2000 problem might have on their
respective forecasts. In addition, we have assumed that the FICS Transaction
will be consummated in accordance with the terms set forth in the FICS
Transaction Agreements, including that the FICS Transaction will be accounted
for as a "purchase" business combination in accordance with U.S. generally
accepted accounting principles ("GAAP") and that the Edify Merger will be
consummated in accordance with the terms set forth in the Edify Merger
Agreement, including that the Edify Merger will be accounted for as a "purchase"
business combination in accordance with GAAP. We have assumed that each of the
FICS Transaction and the Edify Merger will be treated as a tax-free
reorganization pursuant to the Internal Revenue Code of 1986, as amended. We
have assumed that the historical financial statements of each of the Company,
FICS and Edify reviewed by us have been prepared and fairly presented in
accordance with GAAP consistently applied. We have relied as to all legal
matters relevant to rendering our opinion on the advice of counsel.
This opinion is necessarily based upon financial, market, economic and
other conditions as in effect on, and information made available to us as of,
the date hereof. It should be understood that subsequent developments may affect
the conclusion expressed in this opinion and that we disclaim any undertaking or
obligation to advise any person of any change in any matter affecting this
opinion which may come or be brought to our attention after the date of this
opinion. Our opinion is limited to the fairness, from a financial point of view
and as to the date hereof, of the Exchange Consideration to the Company. We do
not express any opinion as to (i) the value of any employee agreements or other
employee arrangements entered into in connection with the FICS Transaction, (ii)
any tax or other consequences that might result from the FICS Transaction, (iii)
what the value of Company Common Stock will be when issued to FICS' stockholders
pursuant to the FICS Transaction or the price at which the shares of Company
Common Stock that are issued pursuant to the FICS Transaction may be traded in
the future or (iv) the fairness of the Edify Merger. Our opinion does not
address the relative merits of the FICS Transaction and the other business
strategies that the Board of Directors of the Company has considered or may be
considering, nor does it address the decision of the Board of Directors of the
Company to proceed with the FICS Transaction.
We have acted as financial advisor to the Company in connection with this
transaction and will receive (i) a fee contingent upon the delivery of this
opinion and (ii) an additional fee contingent upon the consummation of the FICS
Transaction. In addition, the Company has agreed to indemnify us for certain
liabilities that may arise out of such engagement. We are also delivering an
opinion to the Company in connection with the Edify Merger and will receive a
fee contingent upon the delivery of such opinion. The Company has also agreed to
indemnify us for certain liabilities that may arise out of such engagement. In
the past, we have provided certain investment banking services to the Company
for which we will be paid fees, including acting as the Company's exclusive
financial advisor in connection with an investment in the Company by Intuit,
Inc. We have also provided certain investment banking services to FICS in the
past, including acting as co-managing underwriter in connection with a potential
initial public offering for FICS in the first half of this year. We maintain a
market in the shares of common stock of Edify. In the ordinary course of our
business, we
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and our affiliates may actively trade the debt and equity securities of the
Company and Edify for our own accounts and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of the Company in connection with its
evaluation of the FICS Transaction. Our opinion is not intended to be and does
not constitute a recommendation to any stockholder of the Company or FICS as to
how such stockholder should vote, or take any other action, with respect to the
FICS Transaction. This opinion may not be summarized, described or referred to
or furnished to any party except with our express prior written consent.
Based upon and subject to the foregoing considerations, it is our opinion
that, as of the date hereof, the Exchange Consideration is fair to the Company
from a financial point of view.
Very truly yours,
BANCBOSTON ROBERTSON STEPHENS INC.
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ANNEX C
May 16, 1999
Board of Directors
Security First Technologies Corporation
3390 Peachtree Road, NE, Suite 1700
Atlanta, Georgia 30326
Members of the Board:
We understand that Security First Technologies Corporation (the "Company"),
Sahara Security Corporation (a wholly owned subsidiary of the Company, "Merger
Sub"), and Edify Corporation ("Edify") are proposing to enter into an Agreement
and Plan of Merger dated as of the date hereof (the "Agreement"), which will
provide, among other things, for the merger (the "Merger") of Merger Sub with
and into Edify. Upon the consummation of the Merger, Edify will become a wholly
owned subsidiary of the Company. Under the terms set forth in the Agreement, at
the effective time of the Merger, each share of common stock of Edify, par value
$0.001 per share ("Edify Common Stock"), issued and outstanding prior to the
effective time will be converted into the right to receive .330969 shares (the
"Exchange Ratio") of common stock of the Company, par value $0.01 per share
("Company Common Stock"). The terms and conditions of the Merger are set out
more fully in the Agreement.
You have asked us whether, in our opinion, the Exchange Ratio is fair, from
a financial point of view and as of the date hereof, to the Company.
For purposes of this opinion we have, among other things:
(i) reviewed certain publicly available financial statements and other
business and financial information of the Company and Edify,
respectively;
(ii) reviewed certain internal financial statements and other financial
and operating data concerning the Company and Edify, including
information relating to certain strategic, financial and operational
benefits anticipated from the Merger, prepared by the managements of
the Company and Edify;
(iii) reviewed certain financial forecasts and other forward looking
financial information prepared by the managements of the Company and
Edify, respectively;
(iv) held discussions with the respective managements of the Company and
Edify concerning the businesses, past and current operations,
financial condition and future prospects of the Company and Edify,
independently and combined, including discussions with the
managements of the Company and Edify concerning cost savings and
other synergies that are expected to result from the Merger, as well
as their views regarding the strategic rationale for the Merger;
(v) reviewed the financial terms and conditions set forth in the
Agreement;
(vi) reviewed the stock price and trading history of Company Common Stock
and Edify Common Stock;
(vii) compared the financial performance of the Company and Edify and the
prices and trading activity of Company Common Stock and Edify Common
Stock with that of certain other publicly traded companies
comparable with the Company and Edify, respectively;
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(viii) compared the financial terms of the Merger with the financial
terms, to the extent publicly available, of other transactions we
deemed relevant;
(ix) reviewed the pro forma impact of the Merger on the Company's earnings
per share (the "Pro Forma Analysis");
(x) reviewed and considered in the analysis information prepared by
members of management of the Company and Edify relating to the
relative contributions of the Company and Edify to the combined
company;
(xi) prepared a discounted cash flow analysis of Edify;
(xii) participated in discussions and negotiations among representatives
of the Company and Edify and their financial and legal advisors; and
(xiii) made such other studies and inquiries, and reviewed such other data
and performed such other analyses, as we deemed relevant.
We also understand that S1 Europe Holdings N.V., a Belgian entity in the
process of incorporation ("S1 Holdings") and represented by the Company, is
proposing to enter into a Share Purchase Agreement dated as of the date hereof
(the "Share Purchase Agreement") with stockholders and bondholders of FICS Group
N.V., a Belgian corporation ("FICS") and, for the limited purposes stated
therein, the Company and FICS, and that the Company is proposing to enter into a
Stock Purchase Agreement dated as of the date hereof (the "Stock Purchase
Agreement" and, together with the Share Purchase Agreement, the "FICS
Transaction Agreements") with stockholders and bondholders of FICS and, for the
limited purposes stated therein, FICS, which agreements will provide, among
other things, for the purchase by S1 Holdings of all of the issued and
outstanding capital stock of FICS and all of the issued and outstanding
securities otherwise convertible into capital stock of FICS (the transactions
contemplated by the FICS Transaction Agreements being the "FICS Transaction").
The Company has informed us that the FICS Transaction could occur at
approximately the same time as the Merger, but that neither the Merger nor the
FICS Transaction is contingent upon the other occurring. As a result, we have
conducted the Pro Forma Analysis as if the Merger and the FICS Transaction are
both consummated (based upon the information that has been provided to us and
reviewed by us related to FICS) and also as if the Merger is consummated and the
FICS Transaction is not consummated.
In our review and analysis, and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided to us (including information furnished to us orally or
otherwise discussed with us by management of the Company, Edify and FICS) or
publicly available and have neither attempted to verify, nor assumed
responsibility for verifying, any of such information. We have relied upon the
assurances of management of the Company, Edify and FICS that they are not aware
of any facts that would make such information inaccurate or misleading.
Furthermore, we did not obtain or make, or assume any responsibility for
obtaining or making, any independent evaluation or appraisal of the properties,
assets or liabilities (contingent or otherwise) of the Company, Edify or FICS,
nor were we furnished with any such evaluation or appraisal. With respect to the
financial forecasts and projections (and the assumptions and bases therefor) for
each of the Company, Edify and FICS that we have reviewed, upon the advice of
the managements of the Company, Edify and FICS, we have assumed that such
forecasts and projections have been reasonably prepared in good faith on the
basis of reasonable assumptions and reflect the best available estimates and
judgments as to the future financial condition and performance of the Company,
Edify and FICS, respectively, and we have further assumed that such projections
and forecasts will be realized in the amounts and in the time periods currently
estimated. In this regard, we note that each of the Company, Edify and FICS face
exposure to the Year 2000 problem. We have not undertaken any independent
analysis to evaluate the reliability or
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accuracy of the assumptions made by the managements of the Company, Edify and
FICS with respect to the potential effect that the Year 2000 problem might have
on their respective forecasts. In addition, we have assumed that the Merger will
be consummated in accordance with the terms set forth in the Agreement,
including that the Merger will be accounted for as a "purchase" business
combination in accordance with U.S. generally accepted accounting principles
("GAAP"), and that the FICS Transaction will be consummated in accordance with
the terms set forth in the FICS Transaction Agreements, including that the FICS
Transaction will be accounted for as a "purchase" business combination in
accordance with GAAP. We have assumed that each of the Merger and the FICS
Transaction will be treated as a tax-free reorganization pursuant to the
Internal Revenue Code of 1986, as amended. We have assumed that the historical
financial statements of each of the Company, Edify and FICS reviewed by us have
been prepared and fairly presented in accordance with GAAP consistently applied.
We have relied as to all legal matters relevant to rendering our opinion on the
advice of counsel.
This opinion is necessarily based upon financial, market, economic and
other conditions as in effect on, and information made available to us as of,
the date hereof. It should be understood that subsequent developments may affect
the conclusion expressed in this opinion and that we disclaim any undertaking or
obligation to advise any person of any change in any matter affecting this
opinion which may come or be brought to our attention after the date of this
opinion. Our opinion is limited to the fairness, from a financial point of view
and as to the date hereof, of the Exchange Ratio to the Company. We do not
express any opinion as to (i) the value of any employee agreements or other
employee arrangements entered into in connection with the Merger, (ii) any tax
or other consequences that might result from the Merger, (iii) what the value of
Company Common Stock will be when issued to Edify's stockholders pursuant to the
Merger or the price at which the shares of Company Common Stock that are issued
pursuant to the Merger may be traded in the future or (iv) the fairness of the
FICS Transaction. Our opinion does not address the relative merits of the Merger
and the other business strategies that the Board of Directors of the Company has
considered or may be considering, nor does it address the decision of the Board
of Directors of the Company to proceed with the Merger.
We have acted as financial advisor to the Board of Directors of the Company
in connection with this transaction and will receive a fee contingent upon the
delivery of this opinion. In addition, the Company has agreed to indemnify us
for certain liabilities that may arise out of such engagement. We are also
acting as financial advisor to the Company in connection with the FICS
Transaction and will receive a fee contingent upon the delivery of an opinion in
connection with such transaction and an additional fee contingent upon the
consummation of such transaction. The Company has also agreed to indemnify us
for certain liabilities that may arise out of such engagement. In the past, we
have provided certain investment banking services to the Company for which we
will be paid fees, including acting as the Company's exclusive financial advisor
in connection with an investment in the Company by Intuit, Inc. We have also
provided certain investment banking services to FICS in the past, including
acting as co-managing underwriter in connection with a potential initial public
offering for FICS in the first half of this year. We maintain a market in the
shares of Edify Common Stock. In the ordinary course of our business, we and our
affiliates may actively trade the debt and equity securities of the Company and
Edify for our own accounts and for the accounts of customers and, accordingly,
may at any time hold a long or short position in such securities.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of the Company in connection with its
evaluation of the Merger. Our opinion is not intended to be and does not
constitute a recommendation to any stockholder of the Company or Edify as to how
such stockholder should vote, or take any other action, with respect to the
Merger. This opinion may not be summarized, described or referred to or
furnished to any party except with our express prior written consent.
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Based upon and subject to the foregoing considerations, it is our opinion
that, as of the date hereof, the Exchange Ratio is fair to the Company from a
financial point of view.
Very truly yours,
BANCBOSTON ROBERTSON STEPHENS INC.
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PERSONAL AND CONFIDENTIAL
ANNEX D
May 16, 1999
Board of Directors
Edify Corporation
2840 San Tomas Expressway
Santa Clara, CA 95051
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, par value $0.001
per share (the "Shares"), of Edify Corporation ("Edify") of the exchange ratio
of 0.330969 of a share of Common Stock, par value $0.01 per share ("S1 Common
Stock"), of Security First Technologies Corporation ("S1") to be received for
each Share (the "Exchange Ratio") pursuant to the Agreement and Plan of Merger,
dated as of May 16, 1999, among S1, Sahara Strategy Corporation, a wholly-owned
subsidiary of S1 ("Merger Sub"), and Edify (the "Agreement"), providing for the
merger of Merger Sub with and into Edify (the "Merger"). We understand that S1
Europe Holdings N.V., a Belgian corporation in the process of incorporation and
a wholly-owned subsidiary of S1 ("S1 Europe Holdings"), has entered into a Share
Purchase Agreement, dated as of May 16, 1999 (the "Share Purchase Agreement"),
among S1 Europe Holdings, each of the stockholders and bondholders of FICS Group
N.V., a Belgian corporation ("FICS"), and, for certain limited purposes stated
therein, S1 and FICS pursuant to which S1 Europe Holdings will acquire all the
issued and outstanding capital stock of FICS and all the issued and outstanding
securities convertible into capital stock of FICS for an aggregate purchase
price equal to the Transaction Consideration (as defined in the Share Purchase
Agreement). We also understand that, concurrently with such acquisition of such
capital stock and convertible securities of FICS, pursuant to the Stock Purchase
Agreement, dated as of May 16, 1999 (the "Stock Purchase Agreement"), among S1,
certain individuals party thereto (the "Purchasers") and FICS (for certain
limited purposes), the Purchasers will subscribe for shares of S1 Common Stock
as provided therein in exchange for payment by the Purchasers to S1 of the
Transaction Consideration in cash. The transactions contemplated by the Share
Purchase Agreement and the Stock Purchase Agreement are collectively referred to
as the "FICS Transaction". We understand that, pursuant to the Agreement,
consummation of the Merger is not conditioned upon consummation of the FICS
Transaction.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with Edify, having provided certain investment banking services to
Edify from time to time, including having acted as lead managing underwriter of
the initial public offering of 2,875,000 Shares in May 1996, and having acted as
its financial advisor in connection with, and having participated in certain of
the negotiations leading to, the Agreement. Goldman, Sachs & Co. provides a full
range of financial advisory and securities services and, in the course of its
normal trading activities, may from time to time effect transactions and hold
securities, including derivative securities, of Edify or S1 for its own account
and for the accounts of customers. As of the date hereof, Goldman, Sachs & Co.
accumulated a long position of 1,017,956 Shares.
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In connection with this opinion, we have reviewed, among other things, the
Agreement; the Share Purchase Agreement; the Stock Purchase Agreement; Annual
Reports to Stockholders and Annual Reports on Form 10-K of Edify for the three
years ended December 31, 1998 and S1 for the two years ended December 31, 1998;
certain interim reports to stockholders and Quarterly Reports on Form 10-Q of
Edify and S1; audited historical financial statements of FICS for the two years
ended December 31, 1998; certain other communications from Edify and S1 to their
respective stockholders; certain internal financial analyses and forecasts for
Edify, S1 and FICS prepared by their respective managements; and certain pro
forma combined financial analyses and forecasts for Edify, S1 and FICS prepared
by the managements of Edify, S1 and FICS (the "Pro Forma Forecasts"), including
certain cost savings and operating synergies projected by the managements of
Edify, S1 and FICS to result from the Merger and the FICS Transaction. We also
have held discussions with members of the senior management of Edify, S1 and
FICS regarding the strategic rationale for, and the potential benefits of, the
Merger and the FICS Transaction and the past and current business operations,
financial condition and future prospects of their respective companies. In
addition, we have reviewed the reported price and trading activity for the
Shares and S1 Common Stock, compared certain financial and stock market
information for Edify and S1 with similar information for certain other
companies the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations in the software industry and
performed such other studies and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial
and other information reviewed by us and have assumed such accuracy and
completeness for purposes of rendering this opinion. In that regard, we have
assumed with your consent that the financial forecasts, including the Pro Forma
Forecasts, prepared by the managements of Edify, S1 and FICS have been
reasonably prepared on a basis reflecting the best currently available estimates
and judgments of Edify, S1 and FICS, as the case may be, and that (i) if the
FICS Transaction is consummated, the Pro Forma Forecasts will be realized in the
amounts and time periods contemplated thereby, and (ii) if the FICS transaction
is not consummated, the forecasts for S1 prepared by its management will be
realized in the amounts and time periods contemplated thereby. In addition, we
have not made an independent evaluation or appraisal of the assets and
liabilities of Edify, S1 or FICS or any of their subsidiaries and we have not
been furnished with any such evaluation or appraisal. Our advisory services and
the opinion expressed herein are provided for the information and assistance of
the Board of Directors of Edify in connection with its consideration of the
transactions contemplated by the Agreement and such opinion does not constitute
a recommendation as to how any holder of Shares should vote with respect to such
transaction.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the
Exchange Ratio is fair from a financial point of view to the holders of Shares.
Very truly yours,
D-2
<PAGE> 233
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware sets
forth certain circumstances under which directors, officers, employees and
agents may be indemnified against liability that they may incur in their
capacity as such.
Section 6 of S1's amended and restated certificate of incorporation
provides for indemnification of S1's directors, officers, employees and agents
under certain circumstances. Section 6 of S1's amended and restated certificate
of incorporation, which is filed as Exhibit 3.1 to this Registration Statement,
is incorporated into this document by reference.
S1 also has the power to purchase and maintain insurance on behalf of its
directors, officers, employees and agents and certain other persons. S1 has in
effect a policy of liability insurance covering its directors and officers, the
effect of which is to reimburse its directors and officers against certain
damages and expenses resulting from certain claims made against them caused by
their negligent act, error or omission.
The foregoing indemnity and insurance provisions have the effect of
reducing directors' and officers' exposure to personal liability for actions
taken in connection with their respective positions.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of S1
pursuant to the foregoing provisions, or otherwise, S1 has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by S1 of expenses incurred or paid by a
director, officer or controlling person of S1 in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, S1 will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S>
2.1 Share Purchase Agreement, dated as of May 16, 1999, by and
among S1 Holdings N.V. (a Belgian corporation in the process
of incorporation, represented by S1) and the stockholders of
FICS Group N.V., and for the limited purposes stated
therein, S1 and FICS Group N.V. (filed as Exhibit 2.1 to
S1's Current Report on Form 8-K filed with the SEC on May
21, 1999 and incorporated herein by reference).
2.2 Agreement and Plan of Merger, dated as of May 16, 1999, by
and among S1, Sahara Strategy Corporation and Edify
Corporation (filed as Exhibit 2.2 to S1's Current Report on
Form 8-K filed with the SEC on May 21, 1999 and incorporated
herein by reference).
2.3 Option Agreement, dated as of May 16, 1999, between Edify
Corporation and S1 (filed as Exhibit 2.3 to S1's Current
Report on Form 8-K filed with the SEC on May 21, 1999 and
incorporated herein by reference).
</TABLE>
II-1
<PAGE> 234
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of S1
(filed as Exhibit 1 to S1's Registration Statement on Form
8-A filed with the SEC on September 30, 1998 and
incorporated herein by reference).
3.2 Certificate of Amendment to Amended and Restated Certificate
of Incorporation of S1 (filed as Exhibit 4.2 to S1's
Registration Statement on Form S-8 (Reg. No. 333-82369) and
incorporated herein by reference).
3.3 Certificate of Designation for S1's Series B Redeemable
Convertible Preferred Stock (filed as Exhibit 2 to S1's
Registration Statement on Form 8-A filed with the SEC on
September 30, 1998 and incorporated herein by reference).
3.4 Certificate of Designation for S1's Series C Redeemable
Convertible Preferred Stock (filed as Exhibit 3 to S1's
Quarterly Report on Form 10-Q for the quarterly period
ending March 31, 1999 and incorporated herein by reference).
3.5 Amended and Restated Bylaws of S1 (filed as Exhibit 3 to
S1's Registration Statement on Form 8-A filed with the SEC
on September 30, 1998 and incorporated herein by reference).
4.1 Specimen certificate for S1's common stock (filed as Exhibit
4 to S1's Registration Statement on Form 8-A filed with the
SEC on September 30, 1998 and incorporated herein by
reference).
4.2 Specimen certificate for S1's Series A Convertible Preferred
Stock (filed as Exhibit 4.2 to S1's Annual Report on Form
10-K for the fiscal year ended December 31, 1998 and
incorporated herein by reference).
4.3 Specimen certificate for S1's Series B Convertible
Redeemable Preferred Stock (filed as Exhibit 4.3 to S1's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 and incorporated herein by reference).
4.4 Specimen certificate for S1's Series C Redeemable
Convertible Preferred Stock (filed as Exhibit 4 to S1's
Quarterly Report on Form 10-Q for the quarterly period
ending March 31, 1999 and incorporated herein by reference).
5.1* Opinion of Hogan & Hartson L.L.P. as to the validity of the
shares being registered.
8.1 Form of Opinion of Hogan & Hartson L.L.P. regarding tax
matters.
10.1 Second Amended and Restated Plan of Reorganization, dated as
of March 9, 1998, by and among Security First Network Bank
("SFNB"), S1 and New Security First Network Bank, as amended
on June 4, 1998 and September 25, 1998 (filed as Exhibit
10.2 to S1's Current Report on Form 8-K filed with the SEC
on October 14, 1998 and incorporated herein by reference).
10.2 Stock Purchase Agreement, dated as of March 9, 1998, by and
among Royal Bank of Canada, RBC Holdings (Delaware) Inc.,
SFNB and S1, as amended on June 5, 1998 (attached as
Appendix C to the Proxy Statement/Prospectus that formed a
part of S1's Registration Statement on Form S-4 (File No.
333-56181) filed with the SEC on June 5, 1998 and
incorporated herein by reference).
10.3 Common Stock Purchase and Option Agreement, dated as of
March 9, 1998, by and among SFNB, RBC Holdings (Delaware)
Inc. and S1, as amended on June 5, 1998 (filed as Exhibit
2.3 to S1's Registration Statement on Form S-4 (File No.
333-56181) filed with the SEC on June 5, 1998 and
incorporated herein by reference).
10.4 Registration Rights Agreement, dated as of February 25,
1999, by and among S1, Royal Bank of Canada and RBC Holdings
(Delaware) Inc. (filed as Exhibit 10.1 to S1's Quarterly
Report on Form 10-Q for the quarterly period ended March 31,
1999 and incorporated herein by reference).
10.5 Stock Purchase Agreement, dated as of June 29, 1998, by and
among SFNB, S1 and State Farm Mutual Automobile Insurance
Company (filed as Exhibit 10.4 to Pre-Effective Amendment
No. 2 to the S1's Registration Statement on Form S-4 (File
No. 333-56181) filed with the SEC on August 21, 1998 and
incorporated herein by reference).
</TABLE>
II-2
<PAGE> 235
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S>
10.6 Stock Purchase Agreement, dated as of February 19, 1999, by
and between S1 and Hewlett-Packard Company, as amended on
April 30, 1999 (filed as Exhibit 10.2 to S1's Quarterly
Report on Form 10-Q for the quarterly period ending March
31, 1999 and incorporated herein by reference).
10.7 Stock Purchase Agreement, dated as of February 19, 1999, by
and between S1 and AC II Technology (ACT II) B.V., as
amended on April 30, 1999 (filed as Exhibit 10.3 to S1's
Quarterly Report on Form 10-Q for the quarterly period
ending March 31, 1999 and incorporated herein by reference).
10.8 Warrant, dated February 19, 1999, issued by S1 to Andersen
Consulting LLP (filed as Exhibit 10.4 to S1's Quarterly
Report on Form 10-Q for the quarterly period ending March
31, 1999 and incorporated herein by reference).
10.9 Warrant, dated February 25, 1999, issued by S1 to Royal Bank
of Canada (filed as Exhibit 10.5 to S1's Quarterly Report on
Form 10-Q for the quarterly period ending March 31, 1999 and
incorporated herein by reference).
10.10 Stock Purchase and Option Agreement, dated as of May 16,
1999, by and between S1 and Intuit Inc. (filed as Exhibit
10.1 to S1's Current Report on Form 8-K filed with the SEC
on May 21, 1999 and incorporated herein by reference).
10.11 Stock Purchase Agreement, dated as of May 16, 1999, by and
among S1, the individuals identified on Schedule 1 thereto
and FICS Group N.V. (filed as Exhibit 10.2 to S1's Current
Report on Form 8-K filed with the SEC on May 21, 1999 and
incorporated herein by reference).
10.12 Security First Technologies Corporation Amended and Restated
1995 Stock Option Plan (filed as Appendix B to S1's
definitive proxy statement for S1's 1999 annual meeting of
stockholders and incorporated herein by reference).
10.13 Security First Network Bank Amended and Restated Directors'
Stock Option Plan (filed as Exhibit 10.2 to Pre-Effective
Amendment No. 2 to S1's Registration Statement on Form S-4
(File No. 333-56181) filed with the SEC on August 21, 1998
and incorporated herein by reference).
10.14 Security First Technologies Corporation 1998 Directors'
Stock Option Plan (filed as Exhibit 10.3 to Pre-Effective
Amendment No. 1 to S1's Registration Statement on Form S-4
(File No. 333-56181) filed with the SEC on July 30, 1998 and
incorporated herein by reference).
10.15 Loan Agreement, dated May 16, 1999, entered into by and
between S1 and FICS Group N.V.
23.1 Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1).
23.2 Consent of Hogan & Hartson L.L.P. (included in Exhibit 8.1).
23.3* Consent of BancBoston Robertson Stephens Inc.
23.4* Consent of Goldman, Sachs & Co.
23.5 Consent of KPMG LLP regarding S1 financial statements.
23.6 Consent of KPMG LLP regarding Edify Corporation financial
statements.
</TABLE>
II-3
<PAGE> 236
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S>
23.7 Consent of PricewaterhouseCoopers & Co. Bedrijfsrevisoren.
24.1 Power of Attorney (included at signature page to
Registration Statement).
99.1* Consent of Persons to be named as directors.
99.2 Proxy card of S1
99.3 Proxy card of Edify
</TABLE>
- ---------------
* To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES
(c) OPINIONS OF FINANCIAL ADVISORS (INCLUDED IN THE PROSPECTUS/PROXY
STATEMENT)
ITEM 22. UNDERTAKINGS.
(a) The registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) The registrant hereby undertakes as follows: that prior to any public
reoffering of the securities registered hereunder through use of a prospectus
which is a part of this registration statement, by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c), the registrant
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by the
other Items of the applicable form.
(c) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (b) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415 (sec. 230.415
of this chapter), will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(d) The undertaking concerning indemnification is included as part of the
response to Item 20.
(e) The registrant hereby undertakes to respond to requests for information
that is incorporated by reference into the prospectus pursuant to Items 4,
10(b), 11, or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(f) The registrant hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in the
Registration Statement when it became effective.
II-4
<PAGE> 237
(g) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(1) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(2) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in the volume of securities registered (if the total dollar value
of the securities offered would not exceed that which was registered) and
any deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20% change in the maximum aggregate offering
price set forth in the Calculation of Registration Fee table in the
effective registration statement; and
(3) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(h) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(i) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
II-5
<PAGE> 238
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Atlanta, State of Georgia
on July 9, 1999.
SECURITY FIRST TECHNOLOGIES CORPORATION
By: /s/ JAMES S. MAHAN III
---------------------------------------
JAMES S. MAHAN III
CHAIRMAN OF THE BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
We, the undersigned directors and officers of Security First Technologies
Corporation, do hereby constitute and appoint James S. Mahan III and Robert F.
Stockwell and each and either of them, our true and lawful attorneys-in-fact and
agents, to do any and all acts and things in our names and our behalf in our
capacities as directors and officers and to execute any and all instruments for
us and in our name in the capacities indicated below, which said attorneys and
agents, or either of them, may deem necessary or advisable to enable said
Corporation to comply with the Securities Act of 1933 and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
this registration statement, or any registration statement for this offering
that is to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933, including specifically, but without limitation, any and all
amendments (including post-effective amendments) hereto; and we hereby ratify
and confirm all that said attorneys and agents, or either of them, shall do or
cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on July 9, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ JAMES S. MAHAN, III Chairman, Chief Executive Officer, President
- --------------------------------------------------- and Director (Principal Executive Officer)
JAMES S. MAHAN III
/s/ ROBERT F. STOCKWELL Chief Financial Officer and Treasurer
- --------------------------------------------------- (Principal Financial Officer and Principal
ROBERT F. STOCKWELL Accounting Officer)
/s/ ROBERT W. COPELAN Director
- ---------------------------------------------------
ROBERT W. COPELAN
/s/ DORSEY R. GARDNER Director
- ---------------------------------------------------
DORSEY R. GARDNER
/s/ JOSEPH S. MCCALL Director
- ---------------------------------------------------
JOSEPH S. MCCALL
/s/ HOWARD J. RUNNION, JR. Director
- ---------------------------------------------------
HOWARD J. RUNNION, JR.
</TABLE>
II-6
<PAGE> 239
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S>
2.1 Share Purchase Agreement, dated as of May 16, 1999, by and
among S1 Holdings N.V. (a Belgian corporation in the process
of incorporation, represented by S1) and the stockholders of
FICS Group N.V., and for the limited purposes stated
therein, S1 and FICS Group N.V. (filed as Exhibit 2.1 to
S1's Current Report on Form 8-K filed with the SEC on May
21, 1999 and incorporated herein by reference).
2.2 Agreement and Plan of Merger, dated as of May 16, 1999, by
and among S1, Sahara Strategy Corporation and Edify
Corporation (filed as Exhibit 2.2 to S1's Current Report on
Form 8-K filed with the SEC on May 21, 1999 and incorporated
herein by reference).
2.3 Option Agreement, dated as of May 16, 1999, between Edify
Corporation and S1 (filed as Exhibit 2.3 to S1's Current
Report on Form 8-K filed with the SEC on May 21, 1999 and
incorporated herein by reference).
3.1 Amended and Restated Certificate of Incorporation of S1
(filed as Exhibit 1 to S1's Registration Statement on Form
8-A filed with the SEC on September 30, 1998 and
incorporated herein by reference).
3.2 Certificate of Amendment to Amended and Restated Certificate
of Incorporation of S1 (filed as Exhibit 4.2 to S1's
Registration Statement on Form S-8 (Reg. No. 333-82369) and
incorporated herein by reference).
3.3 Certificate of Designation for S1's Series B Redeemable
Convertible Preferred Stock (filed as Exhibit 2 to S1's
Registration Statement on Form 8-A filed with the SEC on
September 30, 1998 and incorporated herein by reference).
3.4 Certificate of Designation for S1's Series C Redeemable
Convertible Preferred Stock (filed as Exhibit 3 to S1's
Quarterly Report on Form 10-Q for the quarterly period
ending March 31, 1999 and incorporated herein by reference).
3.5 Amended and Restated Bylaws of S1 (filed as Exhibit 3 to
S1's Registration Statement on Form 8-A filed with the SEC
on September 30, 1998 and incorporated herein by reference).
4.1 Specimen certificate for S1's common stock (filed as Exhibit
4 to S1's Registration Statement on Form 8-A filed with the
SEC on September 30, 1998 and incorporated herein by
reference).
4.2 Specimen certificate for S1's Series A Convertible Preferred
Stock (filed as Exhibit 4.2 to S1's Annual Report on Form
10-K for the fiscal year ended December 31, 1998 and
incorporated herein by reference).
4.3 Specimen certificate for S1's Series B Convertible
Redeemable Preferred Stock (filed as Exhibit 4.3 to S1's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 and incorporated herein by reference).
4.4 Specimen certificate for S1's Series C Redeemable
Convertible Preferred Stock (filed as Exhibit 4 to S1's
Quarterly Report on Form 10-Q for the quarterly period
ending March 31, 1999 and incorporated herein by reference).
5.1* Opinion of Hogan & Hartson L.L.P. as to the validity of the
shares being registered.
8.1 Form of Opinion of Hogan & Hartson L.L.P. regarding tax
matters.
</TABLE>
II-7
<PAGE> 240
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S>
10.1 Second Amended and Restated Plan of Reorganization, dated as
of March 9, 1998, by and among Security First Network Bank
("SFNB"), S1 and New Security First Network Bank, as amended
on June 4, 1998 and September 25, 1998 (filed as Exhibit
10.2 to S1's Current Report on Form 8-K filed with the SEC
on October 14, 1998 and incorporated herein by reference).
10.2 Stock Purchase Agreement, dated as of March 9, 1998, by and
among Royal Bank of Canada, RBC Holdings (Delaware) Inc.,
SFNB and S1, as amended on June 5, 1998 (attached as
Appendix C to the Proxy Statement/Prospectus that formed a
part of S1's Registration Statement on Form S-4 (File No.
333-56181) filed with the SEC on June 5, 1998 and
incorporated herein by reference).
10.3 Common Stock Purchase and Option Agreement, dated as of
March 9, 1998, by and among SFNB, RBC Holdings (Delaware)
Inc. and S1, as amended on June 5, 1998 (filed as Exhibit
2.3 to S1's Registration Statement on Form S-4 (File No.
333-56181) filed with the SEC on June 5, 1998 and
incorporated herein by reference).
10.4 Registration Rights Agreement, dated as of February 25,
1999, by and among S1, Royal Bank of Canada and RBC Holdings
(Delaware) Inc. (filed as Exhibit 10.1 to S1's Quarterly
Report on Form 10-Q for the quarterly period ended March 31,
1999 and incorporated herein by reference).
10.5 Stock Purchase Agreement, dated as of June 29, 1998, by and
among SFNB, S1 and State Farm Mutual Automobile Insurance
Company (filed as Exhibit 10.4 to Pre-Effective Amendment
No. 2 to the S1's Registration Statement on Form S-4 (File
No. 333-56181) filed with the SEC on August 21, 1998 and
incorporated herein by reference).
10.6 Stock Purchase Agreement, dated as of February 19, 1999, by
and between S1 and Hewlett-Packard Company, as amended on
April 30, 1999 (filed as Exhibit 10.2 to S1's Quarterly
Report on Form 10-Q for the quarterly period ending March
31, 1999 and incorporated herein by reference).
10.7 Stock Purchase Agreement, dated as of February 19, 1999, by
and between S1 and AC II Technology (ACT II) B.V., as
amended on April 30, 1999 (filed as Exhibit 10.3 to S1's
Quarterly Report on Form 10-Q for the quarterly period
ending March 31, 1999 and incorporated herein by reference).
10.8 Warrant, dated February 19, 1999, issued by S1 to Andersen
Consulting LLP (filed as Exhibit 10.4 to S1's Quarterly
Report on Form 10-Q for the quarterly period ending March
31, 1999 and incorporated herein by reference).
10.9 Warrant, dated February 25, 1999, issued by S1 to Royal Bank
of Canada (filed as Exhibit 10.5 to S1's Quarterly Report on
Form 10-Q for the quarterly period ending March 31, 1999 and
incorporated herein by reference).
10.10 Stock Purchase and Option Agreement, dated as of May 16,
1999, by and between S1 and Intuit Inc. (filed as Exhibit
10.1 to S1's Current Report on Form 8-K filed with the SEC
on May 21, 1999 and incorporated herein by reference).
10.11 Stock Purchase Agreement, dated as of May 16, 1999, by and
among S1, the individuals identified on Schedule 1 thereto
and FICS Group N.V. (filed as Exhibit 10.2 to S1's Current
Report on Form 8-K filed with the SEC on May 21, 1999 and
incorporated herein by reference).
</TABLE>
II-8
<PAGE> 241
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S>
10.12 Security First Technologies Corporation Amended and Restated
1995 Stock Option Plan (filed as Appendix B to S1's
definitive proxy statement for S1's 1999 annual meeting of
stockholders and incorporated herein by reference).
10.13 Security First Network Bank Amended and Restated Directors'
Stock Option Plan (filed as Exhibit 10.2 to Pre-Effective
Amendment No. 2 to S1's Registration Statement on Form S-4
(File No. 333-56181) filed with the SEC on August 21, 1998
and incorporated herein by reference).
10.14 Security First Technologies Corporation 1998 Directors'
Stock Option Plan (filed as Exhibit 10.3 to Pre-Effective
Amendment No. 1 to S1's Registration Statement on Form S-4
(File No. 333-56181) filed with the SEC on July 30, 1998 and
incorporated herein by reference).
10.15 Loan Agreement, dated May 16, 1999, entered into by and
between S1 and FICS Group N.V.
23.1 Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1).
23.2 Consent of Hogan & Hartson L.L.P. (included in Exhibit 8.1).
23.3* Consent of BancBoston Robertson Stephens Inc.
23.4* Consent of Goldman, Sachs & Co.
23.5 Consent of KPMG LLP regarding S1 financial statements.
23.6 Consent of KPMG LLP regarding Edify Corporation financial
statements.
23.7 Consent of PricewaterhouseCoopers & Co. Bedrijfsrevisoren.
24.1 Power of Attorney (included at signature page to
Registration Statement).
99.1* Consent of Persons to be named as directors.
99.2 Proxy card of S1.
99.3 Proxy card of Edify.
</TABLE>
- ------------------
* To be filed by amendment.
II-9
<PAGE> 1
EXHIBIT 8.1
[Form of Tax Opinion]
________ __, 1999
Board of Directors
Security First Technologies Corporation
3390 Peachtree Road, NE
Suite 1700
Atlanta, GA 30326
Board of Directors
Edify Corporation
2840 San Tomas Expressway
Santa Clara, CA 95051
Gentlemen/Ladies:
This opinion is being delivered to you in accordance with Section
7.1(e) of the Agreement and Plan of Merger (the "Agreement"), dated as of May
16, 1999, by and among Security First Technologies Corporation ("S1"), a
Delaware corporation, Sahara Strategy Corporation ("Merger Sub"), a Delaware
corporation and wholly-owned subsidiary of S1, and Edify Corporation ("Edify"),
a Delaware corporation. Pursuant to the Agreement, Merger Sub will be merged
with and into Edify (the "Merger").
In connection with the preparation of this opinion, we have examined
and with your consent relied upon (without any independent investigation or
review thereof) the following documents (including all amendments, exhibits and
schedules thereto): (1) the Agreement; (2) the Registration Statement on Form
S-4 filed with the Securities and Exchange Commission (the "Registration
Statement") and/or the Proxy Statement/Prospectus of S1 and Edify; (3)
representations and certifications made to us by S1 and Edify as to matters of
fact; and (4) such other instruments and documents related to the formation,
organization and operation of S1, Merger Sub and Edify or to the consummation
of the Merger and the transactions contemplated thereby as we have deemed
necessary or appropriate. 1/
- --------
1/ All capitalized terms used herein and not otherwise defined shall have the
same meaning as they have in the Agreement. All section references, unless
otherwise indicated, are to the Internal Revenue Code of 1986, as amended (the
"Code").
<PAGE> 2
The Proposed Transaction
Based solely upon our review of the documents set forth above, and
upon such information as S1, Merger Sub and Edify have provided to us (which we
have not attempted to verify in any respect), and in reliance upon such
documents and information, we understand that the proposed transaction and the
relevant facts with respect thereto are as follows:
S1 is the owner of all of the outstanding stock of Merger Sub. S1
develops integrated, brandable internet applications that enable financial
services companies to create their own financial portals. Merger Sub was
organized solely for the purpose of accomplishing the merger described below.
In addition to the Merger, S1 has entered into agreements pursuant to which a
Belgian subsidiary of S1 will purchase all of the outstanding capital stock of
FICS Group N.V. ("FICS"), a Belgian-based software provider.
Edify provides enterprise self service software products that
enable organizations to automate, integrate and personalize interactions with
customers through multiple channels, including the internet, corporate
intranets and the telephone.
The parties believe that the combined operations of S1, Edify and
FICS will (1) be well positioned to take advantage of potential growth in
online financial services, (2) enhance S1's products to span the full range of
a financial institution's enterprise, (3) expand delivery of S1's solutions
across additional delivery channels like the internet, wireless communication
devices and interactive voice response systems, (4) add sales and marketing
personnel, and (5) grow S1's customer base. Thus, it is proposed that pursuant
to the Agreement and the laws of the State of Delaware, Merger Sub merge with
and into Edify. Merger Sub's separate corporate existence will cease and Edify
will be the surviving corporation (the "Surviving Corporation"). As the
Surviving Corporation, Edify will succeed to all of the assets and liabilities
of Merger Sub under Delaware corporate law.
<PAGE> 3
By virtue of the Merger, each share of Edify Common Stock issued and
outstanding prior to the Effective Time will be converted into the right to
receive .330969 shares of S1 Common Stock. Certificates for fractions of shares
of S1 Common Stock will not be issued. In lieu of a fraction of a share of S1
Common Stock, each holder of Edify Common Stock otherwise entitled to a fraction
of a share of S1 Common Stock will be entitled to receive an amount of cash
equal to (i) the fraction of a share of the S1 Common Stock to which such holder
would otherwise be entitled, multiplied by (ii) the actual market value of the
S1 Common Stock, which will be deemed to be the average of the daily closing
prices per share for S1 Common Stock for the 20 consecutive trading days on
which shares of S1 Common Stock are actually traded (as reported on the Nasdaq
Stock Market National Market System) ending on the third trading day preceding
the Closing Date. There will be no dissenters' rights in the Merger.
Assumptions and Representations
In connection with rendering this opinion, we have assumed or
obtained representations (and, with your consent, are relying thereon, without
any independent investigation or review thereof, although we are not aware of
any material facts or circumstances contrary to or inconsistent therewith) that:
1. All information contained in each of the documents we have
examined and relied upon in connection with the preparation of this opinion is
accurate and completely describes all material facts relevant to our opinion,
all copies are accurate and all signatures are genuine. We have also assumed
that there has been (or will be by the Effective Time of the Merger) due
execution and delivery of all documents where due execution and delivery are
prerequisites to the effectiveness thereof.
2. The Merger will be consummated in accordance with applicable
state law and will qualify as a statutory merger under applicable state law.
3. All factual representations made to us by S1 and Edify are true,
correct, and complete in all material respects. Any representation or statement
made "to the best of knowledge" or similarly qualified is correct without such
qualification.
<PAGE> 4
4. The Merger will be consummated in accordance with the Agreement
and as described in the Proxy Statement/Prospectus (including satisfaction of
all covenants and conditions to the obligations of the parties without amendment
or waiver thereof); each of S1, Merger Sub and Edify will comply with all
reporting obligations with respect to the Merger required under the Code and the
Treasury Regulations thereunder; and the Agreement and all other documents and
instruments referred to therein or in the Proxy Statement/Prospectus are valid
and binding in accordance with their terms.
Opinion - Federal Income Tax Consequences
Based upon and subject to the assumptions and qualifications set
forth herein, it is our opinion that for Federal income tax purposes the Merger
will qualify as a reorganization within the meaning of Section 368(a) of the
Code.
In addition to the assumptions set forth above, this opinion is
subject to the exceptions, limitations and qualifications set forth below:
1. This opinion represents and is based upon our best judgment
regarding the application of relevant current provisions of the Code and
interpretations of the foregoing as expressed in existing court decisions,
administrative determinations (including the practices and procedures of the
Internal Revenue Service (the "IRS") in issuing private letter rulings, which
are not binding on the IRS except with respect to the taxpayer that receives
such a ruling) and published rulings and procedures all as of the date hereof.
An opinion of counsel merely represents counsel's best judgment with respect to
the probable outcome on the merits and is not binding on the Internal Revenue
Service or the courts. There can be no assurance that positions contrary to our
opinions will not be taken by the IRS, or that a court considering the issues
would not hold contrary to such opinions. S1 has not requested a ruling from the
IRS (and no ruling will be sought) as to any of the federal income tax
consequences addressed in this opinion. Furthermore, no assurance can be given
that future legislative, judicial or administrative changes, on either a
prospective or retroactive basis, would not adversely affect the accuracy of the
opinion expressed herein. Nevertheless, we undertake no responsibility to advise
you of any new developments in the law or in the application or interpretation
of the federal income tax laws.
2. This letter addresses only the specific tax opinions set forth
above. This letter does not address any other federal, state, local or foreign
tax consequences that may result from the Merger or any other transaction
(including any transaction undertaken in connection with the Merger).
<PAGE> 5
3. We express no opinion regarding, among other things, the tax
consequences of the Merger (including the opinion set forth above) as applied to
specific stockholders of Edify that may be relevant to particular classes of
Edify shareholders, such as dealers in securities, corporate shareholders
subject to the alternative minimum tax, foreign persons, and holders of shares
acquired upon exercise of stock options or in other compensatory transactions.
4. Our opinion set forth herein is based upon the description of the
contemplated transactions as set forth above in the section captioned "The
Edify Transaction," the Agreement and the Proxy Statement/Prospectus. If the
actual facts relating to any aspect of the transactions differ from this
description in any material respect, our opinion may become inapplicable. No
opinion is expressed as to any transaction other than those set forth in the
section captioned "The Edify Transaction," the Agreement and the Proxy
Statement/Prospectus or to any transaction whatsoever, including the Merger, if
all the transactions described in the section captioned "The Edify
Transaction," the Agreement and the Proxy Statement/Prospectus are not
consummated in accordance with the terms of the section captioned "The Edify
Transaction," the Agreement and the Proxy Statement/Prospectus and without
waiver or breach of any material provision thereof or if all of the
representations, warranties, statements and assumptions upon which we relied are
not true and accurate at all relevant times. In the event any one of the
statements, representations, warranties or assumptions upon which we have relied
to issue this opinion is incorrect, our opinion might be adversely affected and
may not be relied upon.
This opinion is provided to S1 and Edify only, and without our prior
consent, may not be relied upon, used, circulated, quoted or otherwise referred
to in any manner by any person, firm, governmental authority or entity
whatsoever other than reliance thereon by the S1, Edify or the Edify
shareholders. Notwithstanding the prior sentence, we hereby consent to the use
of the opinion letter as an exhibit to the Registration Statement and to the use
of our name in the Registration Statement. In giving the consent, we do not
thereby admit that we are an "expert" within the meaning of the Securities Act
of 1933, as amended.
Sincerely yours,
<PAGE> 1
EXHIBIT 10.15
LOAN AGREEMENT
LOAN AGREEMENT dated as of May 16, 1999 entered into by and between
Security First Technologies Corporation, a Delaware corporation ("Lender"), and
FICS Group N.V., a Belgian corporation ("Borrower").
WHEREAS, Lender has entered into a Stock Purchase Agreement, dated the
date hereof (the "Purchase Agreement"), with Borrower and each shareholder of
Borrower, pursuant to which such shareholders have agreed to purchase certain
shares of Lender;
WHEREAS, Borrower has requested that Lender make available to Borrower a
line of credit in the amount of up to $10,000,000 to finance Borrower's working
capital needs; and
WHEREAS, Lender is willing to do so on the terms and subject to the
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower and Lender agree as
follows.
1. CERTAIN DEFINITIONS. As used herein the terms set forth below
shall have the meanings indicated:
"Commitment Period" means the period beginning on the date of this
Agreement and ending on the earlier to occur of: (i) September 26, 2000 or (ii)
the date of the closing of an initial public offering of the common stock of
Borrower on the Nasdaq National Market, EASDAQ or any other established
securities exchange.
"Event of Default" means any one or more of the following events:
(a) failure by Borrower to pay any principal, interest or other
amount due hereunder or on account of the Loan, within 15 days of the date
when due;
(b) failure by Borrower to perform or discharge, observe or comply
with any of its covenants or agreements set forth herein or in the Note
and such failure shall continue unremedied for a period of 15 days after
written notice thereof by Lender to Borrower;
(c) any representation or warranty of Borrower to Lender set forth
herein is found to have been false or misleading in any material respect
as of the time when made;
(d) Borrower's liquidation, termination, dissolution or ceasing to
carry on any substantial part of its current business;
(e) provided that the Purchase Agreement has then been terminated, a
change in control with respect to Borrower or consummation by Borrower of
a reorganization, merger or consolidation with any other person or entity,
transfer of all or substantially all of its assets or properties or
consummation of any other plan or arrangement involving a similar
extraordinary corporate transaction.
(f) commencement by Borrower of a voluntary proceeding seeking
relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law, or seeking appointment of a trustee,
receiver, liquidator or other similar official for it or any substantial
part of its assets; or its consent to any of the foregoing in an
involuntary
1
<PAGE> 2
proceeding against it; or Borrower shall generally not be paying its
debts as they become due or admit in writing its inability to do so; or
an assignment for the benefit of, or the offering to or entering into by
Borrower of any composition, extension, reorganization or other agreement
or arrangement with, its creditors; or
(g) commencement of an involuntary proceeding against Borrower
seeking relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law, or seeking appointment of a trustee,
receiver, liquidator or other similar official for it or any substantial
part of its assets, which proceeding is not dismissed or stayed within 60
days.
"Note" means the note executed and delivered by Borrower to Lender in the
form of Exhibit A hereto, made to evidence the Loan.
"Loan" has the meaning given in Section 2(a) hereof.
2. THE LOAN.
(a) On the date of this Agreement, Lender is making an advance to Borrower
in the amount of $5,000,000 pursuant to a Note substantially in the form of
Exhibit A hereto. Not later than five (5) business days following its receipt of
Borrower's written notice therefor, Lender shall make additional advances to
Borrower in an amount specified in such written notice; provided that such
additional advances shall not exceed $1,000,000 in any calendar month or,
together with the $5,000,000 being borrowed on the date of this Agreement,
$10,000,000 during the Commitment Period (such advances are referred to herein
collectively as the "Loan"). Borrower may re-borrow under the Loan at any time
during the Commitment Period notwithstanding any full or partial repayment of
the Loan by Borrower.
(b) The Loan shall be evidenced by a Note in the form of Exhibit A hereto
and shall be a general unsecured obligation of Borrower. The Loan shall be due
and payable and shall bear interest as set forth in the Note.
(c) Lender shall make the Loan available to Borrower by wire transfer or
otherwise as Borrower requests in its notices to advance the Loan (provided that
Borrower shall reimburse Lender for any administrative expense (wire transfer
fees and the like) incurred by Lender in connection with such advance methods,
except for an advance by bank or certified check).
3. REPRESENTATIONS AND WARRANTIES.
Borrower hereby represents and warrants to Lender that:
(a) Organization and Qualification. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all required corporate power and
authority to own its property, to carry on its business as presently conducted
and to carry out the transactions contemplated hereby.
(b) Authorization of Transaction. The execution, delivery and performance
of this Agreement and the Note have been duly authorized by all necessary
corporate or other action of Borrower. This Agreement and the Note each
represents a valid and binding obligation of Borrower, enforceable in accordance
with its terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors.
(c) Approvals; Compliance With Laws. The execution, delivery and
performance of this Agreement and the Note and the transactions contemplated
thereby (i) do not require any approval or consent of, or filing with, any
governmental agency or authority or otherwise which has not been
2
<PAGE> 3
obtained and which is not in full force and effect as of the date hereof, (ii)
will not conflict with or constitute a breach or violation of the Restated
Articles of Association (Statutes) of Borrower, and (iii) will not result in a
violation of or any law or regulation to which it is subject.
4. BORROWER'S AGREEMENTS. Borrower agrees as follows:
(a) Borrower will notify Lender, at least 30 days prior to any such event,
of any change in Borrower's exact legal name or any change in its principal
place of business or location as set forth in Section 7 of this Agreement.
(b) During the Commitment Period, Borrower will deliver to Lender, with
reasonable promptness, (i) such financial statements and other information as
Borrower regularly provides to any other lender to Borrower, and (ii) such other
financial data related to the business, affairs and financial condition of
Borrower as is available to Borrower and as from time to time Lender may
reasonably request; provided that Lender acknowledges that its receipt of any
such information from Borrower shall be subject to customary confidentiality and
non-disclosure provisions which Lender shall have agreed to in writing prior to
receipt of such information.
(c) Borrower shall incur no indebtedness that ranks senior in payment to
the indebtedness evidenced by the Note.
5. EVENTS OF DEFAULT; REMEDIES. Upon the occurrence and during the
continuance of an Event of Default (as defined in Section 1 above), (a) Borrower
shall have no further right to request advances under the Loan, and (b) the Loan
shall bear interest at the Default Rate of Interest, as defined in the Note.
6. EXPENSES. Borrower agrees to pay Lender on demand any and all
reasonable out-of-pocket costs and expenses of any nature (including without
limitation reasonable attorneys' fees and disbursements) which may be incurred
by Lender in connection with exercise of Lender's rights under this Note against
the Borrower after an Event of Default; any enforcement, collection or other
proceedings with respect to the Loan; or any bankruptcy, insolvency or other
similar proceedings of the Borrower.
6. CONDITIONS PRECEDENT.
Borrower acknowledges and agrees that Lender will not make advances under
the Loan, nor will Lender entertain any request from Borrower for advances under
the Loan, unless and until all of the following conditions have been satisfied
and remain satisfied as of the date of funding the Loan:
(a) Representations and Warranties. Borrower's representations and
warranties contained herein shall be correct and complete in all material
respects;
(b) Covenants. Borrower shall be in compliance in all material respects
with all covenants and agreements contained herein;
(c) No Events of Default. There shall exist no Event of Default or any
event which, with the passage of time or the giving of notice or both, would
constitute an Event of Default; and
(d) Delivery of Note. Borrower shall have delivered, or caused to be
delivered, to Lender the Note.
3
<PAGE> 4
7. MISCELLANEOUS PROVISIONS.
(a) Notices. Unless otherwise specified herein, all notices hereunder
shall be in writing directed to the addresses indicated below, and such notices
shall be effective and be deemed received on the day when delivered by hand or
by facsimile transmission; on the next business day, if by commercial overnight
courier; and on the third business day, if by registered or certified mail,
postage prepaid:
If to Lender, to:
Security First Technologies Corporation
3390 Peachtree Road, NE, Suite 1700
Atlanta, Georgia 30326
Attn: Robert F. Stockwell, Chief Financial Officer
with copies (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, DC 20004-1109
Attn: Stuart G. Stein, Esq.
and
Hogan & Hartson, L.L.P.
Avenue des Arts 41
1040 Brussels, Belgium
Attn: Claud v.S. Eley, Esq.
If to Borrower, to:
FICS Group N.V.
Excelsiorlaan 87
1930 Zaventem, Belgium
Attn: Steven Sipowicz, Chief Financial Officer
with a copy (which shall not constitute notice) to:
Brown Rudnick Freed & Gesmer
Stanmore House
29-30 St. James's Street
London SW1A 1HB, England
Attn: Lawrence A. Levy, Esq.
Colin Hugh Buckley, Esq.
(b) No Waiver. No failure to exercise and no delay in exercising, on the
part of Lender, any right or remedy 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 other right or remedy. Waiver by Lender
of any right or remedy on any one occasion shall not be construed as a bar to or
waiver thereof or of any other right or remedy on any future occasion. Lender's
rights and remedies hereunder, under any agreement or instrument supplemental
hereto or under any other
4
<PAGE> 5
agreement or instrument shall be cumulative, may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by law.
(c) Assignment. This Agreement shall be binding upon and shall inure to
the benefit of Borrower and Lender and their respective successors and assigns;
provided that Borrower may not assign or transfer any rights or obligations
hereunder without Lender's prior written consent.
(d) Governing Law; Jurisdiction. This Agreement shall be governed by the
laws of the State of Delaware (other than its laws relating to conflicts of
laws).
(e) Currency. All amounts set forth herein shall be denominated in
currency of the United States of America.
Duly executed as of the date set forth above.
FICS GROUP N.V.
By: /s/ STEVEN SIPOWICZ
-------------------------------------------
Name: Steven Sipowicz
Title: Chief Financial Officer
SECURITY FIRST TECHNOLOGIES CORPORATION
By: /s/ ROBERT F. STOCKWELL
-------------------------------------------
Name: Robert F. Stockwell
Title: Chief Financial Officer
5
<PAGE> 6
EXHIBIT A
PROMISSORY NOTE
$10,000,000.00 Washington, D.C.
May 16, 1999
FOR VALUE RECEIVED, FICS Group N.V., a Belgian corporation ("Maker"),
hereby promises to pay to the order of Security First Technologies Corporation,
a Delaware corporation, at its place of business at 3390 Peachtree Road, NE,
Suite 1700, Atlanta, Georgia 30326 ("Lender"), the sum of TEN MILLION DOLLARS
($10,000,000.00), or so much as may have been advanced to Maker as provided in
that certain Loan Agreement (the "Loan Agreement") dated as of the date hereof
between Maker and Lender, together with interest on the unpaid principal amount
from time to time outstanding prior to demand at a fixed rate per annum equal to
one-half percent (1/2%) over LIBOR (as defined below) as in effect from time to
time hereunder. All capitalized terms not otherwise defined in this Note shall
have the meanings provided in the Loan Agreement.
1. Payment. Other than as set forth in paragraph 3 hereof, all outstanding
principal and interest shall be due and payable in full 10 business days
immediately following expiration of the Commitment Period. All amounts due under
this Note are subject to prepayment in full or in part at any time without
premium or penalty.
After the occurrence and during the continuance of an Event of Default,
principal outstanding hereunder shall bear interest at a fixed rate equal to the
sum of LIBOR as then in effect plus two percent (2%) per annum (the "Default
Rate of Interest").
2. Interest. Interest and fees shall be calculated on the basis of a
360-day year times the actual number of days elapsed. "LIBOR," as used herein,
shall mean for any day the "London Interbank Offered Rate" for obligations of
one year published in The Wall Street Journal Europe under the heading "Money
Rates" on such day (or on the next day on which The Wall Street Journal Europe
is published). In no event shall interest payable hereunder exceed the highest
rate permitted by applicable law. To the extent any interest received by Lender
exceeds the maximum amount permitted, such payment shall be credited to
principal, and any excess remaining after full payment of principal shall be
refunded to Maker.
3. Forgiveness of Loan upon Lender Default. Reference is made to (i) the
certain Stock Purchase Agreement, dated the date hereof (the "BelCo Purchase
Agreement"), by and among Lender, Maker, the stockholders of Maker and S1 Europe
Holdings N.V., a Belgian corporation and wholly-owned subsidiary of Lender ("S1
Europe"), and (ii) the certain Stock Purchase Agreement, dated the date hereof
(the "Lender Purchase Agreement"), by and among Lender, Maker and the
stockholders of Maker. In the event that either (i) the BelCo Purchase Agreement
is terminated pursuant to Section 8.1 (e) thereof by any of the Majority Sellers
(as defined therein) (as a result of the willful or intentional breach on the
part of S1 Europe of a representation, warranty, covenant or other agreement) or
(ii) the Lender Purchase Agreement is terminated pursuant to Section 9.2 thereof
by any of the Majority Sellers (as defined therein) (as a result of any willful
or intentional breach on the part of Lender of a representation, warranty,
covenant or other agreement), all amounts due and outstanding under this Note
shall be immediately and automatically forgiven and this Note shall be of no
further effect. Lender and Maker agree that the provisions of this paragraph 3
are not intended to constitute liquidated damages and shall not preclude the
assertion of any other rights or the seeking of any other remedies, whether at
law or in equity, by any party hereto.
4. Payment in Kind. Maker may, at its choice, pay any or all of the
obligations due and payable under this Note in cash or in shares of its common
stock. In the event Maker elects to pay in shares of its common stock, the
number of shares to be tendered by the Maker in satisfaction of such obligations
shall equal (x) the amount of its outstanding obligations hereunder so being
paid
<PAGE> 7
divided by (y) $6,000.00. Such shares, when issued, will be duly authorized,
validly issued, fully paid and non-assessable, and free of any liens or
encumbrances, and will be issued in compliance with all applicable laws.
5. Waiver of Presentment. Maker and all guarantors and endorsers hereby
waive presentment, demand, notice, protest, and all other demands and notices in
connection with the delivery, acceptance, performance and enforcement of this
Note, and assent to extensions of the time of payment or forbearance or other
indulgence without notice. No delay or omission of Lender in exercising any
right or remedy hereunder shall constitute a waiver of any such right or remedy.
Acceptance by Lender of any payment after demand shall not be deemed a waiver of
such demand. A waiver on one occasion shall not operate as a bar to or waiver of
any such right or remedy on any future occasion.
6. Currency. All amounts set forth herein shall be payable in currency of
the United States of America.
[SIGNATURE PAGE FOLLOWS]
-2-
<PAGE> 8
Duly executed as of the date set forth above.
FICS GROUP N.V.
By:
--------------------------
Name:
Title:
-3-
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Security First Technologies Corporation:
We consent to incorporation by reference in the Joint Prospectus/Proxy Statement
and the Registration Statement on Form S-4 of our report dated February 4, 1999,
relating to the consolidated balance sheets of Security First Technologies
Corporation and subsidiary as of December 31, 1998 and 1997, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1998, and the
related schedule, which report appears in the December 31, 1998, annual report
on Form 10-K of Security First Technologies Corporation. We also consent to
the reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
Atlanta, Georgia
July 12, 1999
<PAGE> 1
EXHIBIT 23.6
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Edify Corporation:
We consent to incorporation by reference in the joint Prospectus/Proxy Statement
and the Registration Statement (No. 333-____) on Form S-4 of our report dated
January 25, 1999, relating to the consolidated balance sheets of Edify
Corporation and subsidiary as of December 31, 1998 and 1997, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1998, and the
related schedule, which report appears in the December 31, 1998, annual report
on Form 10-K of Edify Corporation. We also consent to the reference to our firm
under the heading "Experts" in the prospectus.
/s/ KPMG LLP
Mountain View, California
July 9, 1999
<PAGE> 1
EXHIBIT 23.7
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-4 of
Security First Technologies Corporation of our report dated April 9, 1999,
except for note 12, which is as of July 7, 1999, relating to the financial
statements of FICS Group N.V. which appear in such Registration Statement.
/s/PRICEWATERHOUSECOOPERS
- ----------------------------------------------
PricewaterhouseCoopers & Co. Bedrijfsrevisoren
Brussels, Belgium
July 7, 1999
<PAGE> 1
EXHIBIT 99.2
REVOCABLE PROXY
The undersigned shareholder of Security First Technologies Corporation
hereby appoints James S. Mahan, III or Robert F. Stockwell, or either of them,
with full power of substitution in each, as proxies to cast all votes which the
undersigned shareholder is entitled to cast at the special meeting of
shareholders to be held at ________, local time, on __________, _________, 1999,
at ________, and at any adjournments thereof, upon the following matters. The
undersigned shareholder hereby revokes any proxy or proxies for the special
meeting that were given before this proxy.
This proxy will be voted as directed by the undersigned shareholder.
UNLESS CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ISSUANCE
OF STOCK IN THE FICS TRANSACTION, FOR THE ISSUANCE OF STOCK IN THE EDIFY
TRANSACTION, AND FOR THE NAME CHANGE PROPOSED BELOW. The undersigned
shareholder may revoke this proxy at any time before it is voted by attending
the special meeting and voting in person, by delivering to our Secretary either
a written revocation of the proxy or a properly executed proxy bearing a later
date. The undersigned shareholder hereby acknowledges receipt of the Notice of
Special Meeting of Stockholders and Proxy Statement.
If you receive more than one proxy card, please sign and return all
cards in the accompanying envelope.
(CONTINUED AND TO BE DATED AND SIGNED ON THE REVERSE SIDE)
<PAGE> 2
(CONTINUED FROM OTHER SIDE)
1. To consider and vote upon a proposal to approve the issuance of shares
of S1 common stock in the transaction that will cause FICS Group N.V.
to become a wholly owned subsidiary of S1.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. To consider and vote upon a proposal to approve the issuance of shares
of S1 common stock in the transaction that will cause Edify Corporation
to become a wholly owned subsidiary of S1.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To consider and vote upon a proposal to change the name of S1 from
"Security First Technologies Corporation" to "S1 Corporation."
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Date:
------------------------------------
-----------------------------------------
-----------------------------------------
Signature(s) of Shareholder or
Authorized Representative
Please date and sign exactly
as your name appears on this
proxy card. Each executor,
administrator, trustee,
guardian, attorney-in-fact
and other fiduciary should
sign and indicate his or her
full title. When stock has
been issued in the name of
two or more persons, all
should sign.
<PAGE> 1
EXHIBIT 99.3
PROXY
EDIFY CORPORATION
2840 San Tomas Expressway
Santa Clara, California 95051
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Jeffrey M. Crowe and ____________, and
each of them, as proxies, each with full powers of substitution, and hereby
authorizes them to represent and to vote, as designated below, all shares of
Common Stock, $0.001 par value, of Edify Corporation held of record by the
undersigned on __________, 1999, at the special meeting of stockholders of
Edify Corporation to be held on ________________________, at _____________,
local time, and at any postponements or adjournments thereof.
The undersigned acknowledges receipt of the Notice of Special Meeting
of Stockholders and the Proxy Statement.
This proxy, when properly executed and returned in a timely manner,
will be voted at the meeting and any adjournments or postponements thereof as
directed. If no direction is indicated, the proxy will be voted FOR the
proposal and in accordance with the judgment of the persons named as proxies
herein on any other matters that may properly come before the meeting and any
postponement or adjournment of the meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND
PROMPTLY MAIL THIS PROXY CARD IN THE ENCLOSED RETURN ENVELOPE SO THAT YOUR
SHARES MAY BE REPRESENTED AT THE MEETING.
SEE RESERVE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED AND DATED ON REVERSE SIDE SIDE
<PAGE> 2
DETACH HERE
[X] Please mark
vote as in
this example.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL.
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<S> <C> <C> <C> <C>
1. To approve and adopt the Agreement and Plan of Merger dated as of May FOR AGAINST ABSTAIN
16, 1999, by and among Security First Technologies Corporation, Sahara [ ] [ ] [ ]
Strategy Corporation and Edify Corporation, and the merger of Sahara
with and into Edify.
2. To transact any other business that may properly come before the Edify FOR AGAINST ABSTAIN
special meeting or any postponement or adjournment of the special [ ] [ ] [ ]
meeting.
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Mark here for address change and note at left [ ]
Mark here if you plan to attend the meeting [ ]
Please sign exactly as your name appears on this proxy card. If more than one
name appears, all named persons should sign. Attorneys, executors,
administrators, trustees and guardians should indicate their capacities. If the
signer is a corporation, please print full corporate name and indicate capacity
of duly authorized officer executing on behalf of the corporation. If the
signer is a partnership, please print full partnership name and indicate
capacity of duly authorized person executing on behalf of the partnership.
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<S> <C> <C> <C> <C> <C>
Signature: Date: , 1999 Signature: Date: , 1999
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