<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 12, 1999
REGISTRATION NO. 333-82711
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
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 NO.)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
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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:
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STUART G. STEIN, ESQ. LAWRENCE M. LEVY, ESQ. GORDON K. DAVIDSON, ESQ. DAVID E. BROWN, JR.
STEVEN E. BALLEW, ESQ. COLIN HUGH BUCKLEY, ESQ. KATHERINE TALLMAN SCHUDA, ESQ. ALSTON & BIRD LLP
KEVIN L. VOLD, ESQ. BROWN, RUDNICK, FREED & GESMER DOUGLAS N. COGEN, ESQ. 601 PENNSYLVANIA AVENUE, NW
HOGAN & HARTSON L.L.P. STANMORE HOUSE PHYLLIS E. ANDES, ESQ. NORTH BUILDING, 11TH FLOOR
555 THIRTEENTH STREET, NW 29-30 ST. JAMES'S STREET FENWICK & WEST LLP WASHINGTON, DC 20004
WASHINGTON, DC 20004 LONDON SW1A 1HB, ENGLAND TWO PALO ALTO SQUARE (202) 756-3345
(202) 637-5600 (011) 44 171 925-1888 PALO ALTO, CA 94306
(650) 494-0600
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: Upon
consummation of the transactions 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 AMOUNT OF
TITLE OF CLASS OF AMOUNT TO BE AGGREGATE PRICE OFFERING REGISTRATION
SECURITIES BEING REGISTERED REGISTERED (1) PER COMMON SHARE PRICE (1)(2) FEE(1)(2)(3)
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Common Stock, $0.01 par value per share......... 32,330,682 $ (2) $ 97,330,265 $27,058
=======================================================================================================================
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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 acquisitions of Edify Corporation (7,481,844 shares), FICS
Group N.V. (18,500,000 shares) and VerticalOne Corporation (6,348,838
shares).
(2) Computed pursuant to Rules 457(f)(1) and (c) based on the average of the
high and low per share prices ($12.125) of shares of common stock, par value
$0.001 per share, of Edify Corporation on the Nasdaq National Market on
October 8, 1999; computed pursuant to Rule 457(f)(2) based on one-third of
the aggregate stated value per share ($.33) of outstanding securities of
FICS Group N.V. on June 30, 1999; and computed pursuant to Rule 457(f)(2)
based on the book value per share ($.08) of outstanding securities of
VerticalOne Corporation on June 30, 1999;
(3) A registration fee of $28,132, was previously paid in connection with the
original filing of this registration statement, therefore no additional fee
is required herewith.
------------------------
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 the Swissotel,
3391 Peachtree Road, NE, Atlanta, GA 30326, on November 10, 1999 at 8:00 a.m.,
Eastern time.
At the meeting, you will be asked to approve the issuance by S1 of common
stock in three proposed transactions. In the proposed transactions:
- a subsidiary of S1 will acquire FICS Group N.V.;
- another subsidiary of S1 will merge with Edify Corporation; and
- a third subsidiary of S1 will merge with VerticalOne Corporation.
After the transactions, FICS, Edify and VerticalOne will each become
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, S1's board of directors has approved S1's
acquisitions of FICS, Edify and VerticalOne and determined all three 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 of the issuances.
You will also be asked to approve a proposal to change the name of the
combined company from "Security First Technologies Corporation" to "S1
Corporation." Your board of directors has determined that this name change more
accurately reflects the vision and mission of the combined company 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 30 BEFORE
COMPLETING YOUR PROXY CARD.
Sincerely,
/s/ JAMES S. MAHAN
James S. Mahan, III
Chairman of the Board,
President and
Chief Executive Officer
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. 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 October 12, 1999 and was first mailed
to stockholders on or about October 13, 1999.
<PAGE> 3
[S1 LOGO]
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held November 10, 1999 at 8:00 a.m. 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 the Swissotel, 3391
Peachtree Road, NE, Atlanta, GA 30326, on November 10, 1999 at 8:00 a.m. Eastern
time, for the following purposes:
1. To consider the issuance of shares of S1 common stock in S1's
acquisition of FICS Group N.V., a Belgian corporation. If the S1 stockholders
approve the issuance, S1 will issue up to 10,000,000 shares of S1 common stock
for all or substantially all outstanding shares of FICS stock. In addition, if
the FICS transaction closes, S1 may issue up to 4,500,000 additional shares of
S1 common stock in an "earn-out" if FICS meets specified performance targets
while operating as an S1 subsidiary. S1 has also agreed to assume outstanding
options to purchase FICS common stock which will convert into options to
purchase approximately 1,200,000 shares of S1 common stock, and to grant
approximately 2,800,000 additional options to purchase S1 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. 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 5,941,901 shares of S1 common stock. S1 has also agreed to assume
outstanding options to purchase Edify common stock which will convert into
options to purchase approximately 1,539,943 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 the issuance of shares of S1 common stock in S1's
acquisition by merger of VerticalOne Corporation. If you approve the issuance
and VerticalOne's stockholders approve the merger, S1 will issue 0.2 shares of
S1 common stock for each outstanding share of VerticalOne stock, or a total of
approximately 3,860,000 shares of S1 common stock. S1 has also agreed to assume
outstanding options to purchase VerticalOne common stock which will convert into
options to purchase approximately 500,000 shares of S1 common stock, and to
grant approximately 2,000,000 additional options to employees of VerticalOne in
connection with the VerticalOne transaction. The VerticalOne transaction is
discussed in more detail in the sections of the attached prospectus/proxy
statement entitled "The VerticalOne Transaction" and "The VerticalOne
Agreements."
4. To consider a proposed amendment to S1's charter to change the name of
S1 from "Security First Technologies Corporation" to "S1 Corporation."
None of the proposed transactions can be completed unless the holders of a
majority of the votes cast, either in person or by proxy, at the S1 meeting
approve the issuance of common stock for that transaction. The proposed charter
amendment cannot be approved unless the holders of a majority of the shares of
S1 common stock eligible to vote at the S1 meeting approve it.
Only stockholders of record at the close of business on October 1, 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
/s/ NANCY K. KENLEY
Nancy Kenley
Secretary and Corporate Counsel
Atlanta, Georgia
October 12, 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
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 November 10,
1999 at 10:00 a.m., 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.
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 30 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,
/s/ JEFFREY M. CROWE
Jeffrey M. Crowe
President and
Chief Executive Officer
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. 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 October 12, 1999 and was first mailed
to stockholders on or about October 13, 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
10:00 a.m., Pacific time, on November 10, 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 October 1, 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
/s/ JEFFREY M. CROWE
Jeffrey M. Crowe
President and
Chief Executive Officer
Santa Clara, California
October 12, 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.
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[VERTICALONE LOGO]
VerticalOne Corporation
Two Concourse Parkway, Suite 700
Atlanta, Georgia 30328
Dear Stockholders:
We will hold a special meeting of our stockholders at VerticalOne's
headquarters, located at Two Concourse Parkway, Suite 700, Atlanta, Georgia, on
November 10, 1999 at 8:00 a.m., Eastern 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 VerticalOne to become a wholly owned subsidiary of S1.
The exchange ratio in the merger is 0.2 shares of S1's common stock for each
share of VerticalOne common stock you own or into which the shares of
VerticalOne preferred stock you own may be converted. Of such amount, at closing
each share of VerticalOne common stock you own will be converted into 0.1903
shares of S1 common stock. In addition, you may also receive up to 0.0097 shares
of S1's common stock for each share of VerticalOne common stock you own
approximately one year after the merger is completed if specified conditions are
met.
AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS UNANIMOUSLY APPROVED
THIS TRANSACTION AND CONCLUDED THAT IT IS IN THE BEST INTERESTS OF VERTICALONE
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. Please 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 30 OF THE 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,
/s/ GREGG S. FREISHTAT
Gregg S. Freishtat
Chairman and
Chief Executive Officer
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. 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 October 12, 1999 and was first mailed
to stockholders on or about October 13, 1999.
<PAGE> 7
[VERTICALONE LOGO]
VerticalOne Corporation
Two Concourse Parkway, Suite 700
Atlanta, Georgia 30328
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
------------------------
To Our Stockholders:
A special meeting of stockholders of VerticalOne Corporation will be held
at 8:00 a.m., Eastern time, on November 10, 1999, at our headquarters located at
Two Concourse Parkway, Suite 700, Atlanta, Georgia, to consider and vote on a
proposal to approve and adopt a merger agreement with Security First
Technologies Corporation, or S1, pursuant to which VerticalOne will merge with a
newly formed subsidiary of S1, and 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 October 8, 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
VerticalOne's offices at Two Concourse Parkway, Suite 700, Atlanta, Georgia
30328, during VerticalOne's ordinary business hours for 10 days before the
meeting.
By Order of the Board of Directors
of VerticalOne Corporation
/s/ J. STEPHEN HUFFORD
J. Stephen Hufford
Vice President and Secretary
Atlanta, Georgia
October 12, 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.
Stockholders of VerticalOne are entitled to dissenters' rights under
Section 262 of the Delaware General Corporation Law, a copy of which is attached
as Annex I to the prospectus/proxy statement.
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TABLE OF CONTENTS
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QUESTIONS AND ANSWERS ABOUT THE TRANSACTIONS................ 1
SUMMARY OF THE PROSPECTUS/PROXY STATEMENT................... 8
The Companies............................................. 8
Summary of the Transactions............................... 9
S1's Management Following the Transactions................ 10
Benefits of the Transactions.............................. 10
The FICS Transaction...................................... 11
What FICS Stockholders Will Receive.................... 11
Votes Required for Approval of the FICS Transaction.... 11
Termination of the FICS Transaction.................... 11
The S1 Stockholders' FICS Voting Agreement............. 12
Opinion of S1's Financial Advisor...................... 12
Accounting Treatment of the FICS Transaction........... 13
Interests of Certain Persons in the FICS Transaction... 13
The Edify Transaction..................................... 13
What Edify Stockholders Will Receive................... 13
Votes Required for Approval of the Edify Transaction... 13
Termination of the Edify Transaction................... 14
Breakup Fee for the Edify Transaction.................. 15
The Stock Option Agreement............................. 15
The Voting Agreements.................................. 15
Opinions of Financial Advisors......................... 16
Accounting Treatment of the Edify Transaction.......... 17
Interests of Certain Persons in the Edify
Transaction........................................... 17
Comparative Per Share Market Price Information......... 17
The VerticalOne Transaction............................... 17
What VerticalOne Stockholders Will Receive............. 17
Votes Required for Approval of the VerticalOne
Transaction........................................... 18
Termination of the VerticalOne Transaction............. 19
Strategic Marketing and Sales Agency Agreement......... 19
The Warrant Agreement.................................. 20
Series C Preferred Stock Purchase Agreement............ 20
The Share Retention Agreements......................... 20
Opinion of S1's Financial Advisor...................... 21
Accounting Treatment of the VerticalOne Transaction.... 21
Interests of Certain Persons in the VerticalOne
Transaction........................................... 21
Pro Forma Combined Comparative Per Share Data............. 22
Selected Consolidated Financial Data...................... 23
RISK FACTORS................................................ 30
Risks Related to the Transactions......................... 30
Because the number of shares of S1 common stock to be
issued in the proposed transactions is fixed, holders
of FICS, Edify and VerticalOne stock may receive less
value for their shares if the market price of the S1
common stock declines before the closings of the
proposed transactions................................. 30
S1 will face technical, operational and strategic
challenges that may prevent S1 from successfully
integrating FICS, Edify and VerticalOne with S1....... 30
Because the transactions are not conditioned on each
other, if S1 fails to close one or more of the
transactions the value of the S1 common stock could
decline............................................... 31
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Officers and directors of S1, FICS, Edify and
VerticalOne have different interests from yours, and
could exert their influence over the proposed
transactions in a way that may not benefit you........ 31
Risks Related to the Combined Company's Business.......... 32
We do not expect to achieve profitable operations for
the foreseeable future, and this may negatively impact
the value of your S1 common stock..................... 32
The combined company's quarterly operating results may
fluctuate, and any fluctuations could adversely affect
the price of your S1 common stock..................... 32
The combined company will have four primary product
lines and our revenues will depend on demand for these
products.............................................. 33
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............................... 34
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............................................... 34
The transactions could harm key third party
relationships......................................... 34
The combined company's failure to develop and expand
its distribution channels would impede revenue
growth................................................ 35
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.......... 35
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.............. 35
Infringement of the combined company's proprietary
technology could adversely affect its competitive
position and income potential......................... 36
The combined company may become involved in litigation
over proprietary rights, which may be costly and time
consuming............................................. 36
If the combined company is unable to attract and retain
technical employees, it may not be able to compete.... 36
If the combined company is unable to effectively manage
its expected growth, it will not be able to
successfully implement its business plan.............. 37
If the combined company fails to adequately address the
year 2000 issue, it may lose revenue or incur
significant additional costs.......................... 37
Internet-related laws could adversely affect our
business.............................................. 37
The combined company depends on external sources of
capital for future growth............................. 37
Future sales of the combined company's common stock in
the public market could adversely affect its stock
price and its ability to raise funds in new stock
offerings............................................. 38
Ownership of common stock by the combined company's
officers, directors and principal stockholders may
prevent a change in control........................... 38
Market volatility may cause the price of your stock to
decline............................................... 38
International operations and currency exchange rate
fluctuations may adversely affect the combined
company............................................... 39
FORWARD LOOKING STATEMENTS IN THIS PROSPECTUS/PROXY
STATEMENT................................................. 39
THE COMPANIES............................................... 41
Security First Technologies Corporation................... 41
FICS Group N.V............................................ 41
Edify Corporation......................................... 42
VerticalOne Corporation................................... 42
THE S1 MEETING.............................................. 43
Date, Time, Place and Purpose of S1's Meeting............. 43
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Record Date and Outstanding Shares........................ 43
Vote and Quorum Required.................................. 43
Abstentions; Broker Non-Votes............................. 43
Stock Ownership of Management and Principal
Stockholders........................................... 43
Expenses of Proxy Solicitation............................ 44
Voting of Proxies......................................... 44
No Appraisal Rights....................................... 44
PARTICIPATING IN THE FICS TRANSACTION....................... 44
THE EDIFY MEETING........................................... 45
Date, Time, Place and Purpose of Edify's Meeting.......... 45
Record Date and Outstanding Shares........................ 45
Vote Required............................................. 45
Abstentions; Broker Non-Votes............................. 45
Stock Ownership of Management and Principal
Stockholders........................................... 45
Expenses of Proxy Solicitation............................ 45
Voting of Proxies......................................... 46
No Appraisal Rights....................................... 46
THE VERTICALONE MEETING..................................... 46
Date, Time, Place and Purpose of VerticalOne's Meeting.... 46
Record Date and Outstanding Shares........................ 46
Vote and Quorum Required.................................. 47
Abstentions............................................... 47
Stock Ownership of Management and Principal
Stockholders........................................... 47
Voting of Proxies......................................... 47
Appraisal Rights.......................................... 48
BACKGROUND OF THE TRANSACTIONS.............................. 48
THE FICS TRANSACTION........................................ 54
S1's Reasons for the FICS Transaction..................... 54
Recommendation of S1's Board of Directors................. 55
Recommendation of FICS's Board of Directors............... 55
Opinion of S1's Financial Advisor......................... 55
Interests of Certain Persons in the FICS Transaction...... 62
Completion and Effectiveness of the FICS Transaction...... 62
Structure of the FICS Transaction and Conversion of FICS
Common Stock........................................... 63
The Earn-out.............................................. 63
Material United States Federal Income Tax Consequences of
the FICS Transaction................................... 64
Accounting Treatment of the FICS Transaction.............. 65
Regulatory Filings and Approvals Required to Complete the
FICS Transaction....................................... 65
Restrictions on Sales of Shares by Affiliates of FICS and
S1..................................................... 66
Listing on the Nasdaq National Market of S1 Common Stock
to be Issued in the FICS Transaction................... 66
Operations after the FICS Transaction..................... 66
THE FICS AGREEMENTS......................................... 66
Parties to the Agreements................................. 67
Representations and Warranties............................ 67
FICS's Conduct of Business before Completion of the FICS
Transaction............................................ 68
FICS Stockholders' Conduct of Business before Completion
of the FICS Transaction................................ 68
S1's Conduct of Business before Completion of the FICS
Transaction............................................ 68
Conditions to Completion of the FICS Transaction.......... 69
Termination of the FICS Agreements........................ 70
Expenses; No Breakup Fee.................................. 70
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iii
<PAGE> 11
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Extension, Waiver and Amendment of the FICS Agreements.... 70
Related FICS Agreements................................... 70
S1 Stockholder Voting Agreements....................... 70
The Loan Agreements and Promissory Notes............... 71
THE EDIFY TRANSACTION....................................... 71
S1's Reasons for the Edify Transaction.................... 72
Recommendation of S1's Board of Directors................. 73
Edify's Reasons for the Edify Transaction................. 73
Recommendation of Edify's Board of Directors.............. 74
Opinion of S1's Financial Advisor......................... 75
Opinion of Edify's Financial Advisor...................... 83
Interests of Certain Persons in the Edify Transaction..... 90
Completion and Effectiveness of the Edify Transaction..... 90
Structure of the Edify Transaction and Conversion of Edify
Common Stock........................................... 91
Exchange of Edify Stock Certificates for S1 Stock
Certificates........................................... 91
Material United States Federal Income Tax Consequences of
the Edify Transaction.................................. 91
Accounting Treatment of the Edify Transaction............. 93
Regulatory Filings and Approvals Required to Complete the
Edify Transaction...................................... 93
Restrictions on Sales of Shares by Affiliates of Edify and
S1..................................................... 94
Listing on the Nasdaq National Market of S1 Common Stock
to be Issued in the Edify Transaction.................. 94
Delisting and Deregistration of Edify Common Stock after
the Edify Transaction.................................. 94
Operations after the Edify Transaction.................... 94
THE EDIFY AGREEMENTS........................................ 94
The S1-Edify Merger Agreement............................. 94
Representations and Warranties......................... 94
Edify's Conduct of Business before Completion of the
Edify Transaction..................................... 95
S1's Conduct of Business before Completion of the Edify
Transaction........................................... 96
Edify's Employee Benefit Plans......................... 96
Treatment of Edify Stock Options and Warrants; Grant of
S1 Stock Options...................................... 96
Conditions to Completion of the Edify Transaction...... 97
Termination of the S1-Edify Merger Agreement........... 98
Expenses; Breakup Fee.................................. 99
Extension, Waiver and Amendment of the S1-Edify Merger
Agreement............................................. 99
Related Agreements........................................ 100
The Stock Option Agreement............................. 100
Edify Stockholders' Voting Agreements.................. 101
S1 Stockholders' Voting Agreements..................... 101
THE VERTICALONE TRANSACTION................................. 103
S1's Reasons for the VerticalOne Transaction.............. 103
Recommendation of S1's Board of Directors................. 104
VerticalOne's Reasons for the VerticalOne Transaction..... 104
Recommendation of VerticalOne's Board of Directors........ 106
Opinion of S1's Financial Advisor......................... 106
Interests of Certain Persons in the VerticalOne
Transaction............................................ 112
Completion and Effectiveness of the VerticalOne
Transaction............................................ 113
Structure of the VerticalOne Transaction and Conversion of
VerticalOne Common Stock and Preferred Stock........... 113
Exchange of VerticalOne Stock Certificates for S1 Stock
Certificates........................................... 113
Material United States Federal Income Tax Consequences of
the VerticalOne Transaction............................ 114
</TABLE>
iv
<PAGE> 12
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Certain Tax Consequences to Holders of Options............ 116
Accounting Treatment of the VerticalOne Transaction....... 116
Regulatory Filings and Approvals Required to Complete the
VerticalOne Transaction................................ 116
Restrictions on Sales of Shares by Affiliates of
VerticalOne and S1..................................... 116
Listing on the Nasdaq National Market of S1 Common Stock
to be Issued in the VerticalOne Transaction............ 117
Operations after the VerticalOne Transaction.............. 117
THE VERTICALONE AGREEMENTS.................................. 117
The S1-VerticalOne Merger Agreement....................... 117
Representations and Warranties......................... 117
VerticalOne's Conduct of Business before Completion of
the VerticalOne Transaction........................... 118
VerticalOne's Employee Benefit Plans................... 119
Treatment of VerticalOne Stock Options and Warrants;
Grant of S1 Stock Options............................. 119
Conditions to Completion of the VerticalOne
Transaction........................................... 119
Termination of the S1-VerticalOne Merger Agreement..... 121
Expenses............................................... 122
Extension, Waiver and Amendment of the S1-VerticalOne
Merger Agreement...................................... 122
Related Agreements........................................ 122
The Escrow Agreement................................... 122
Strategic Marketing and Sales Agency Agreement......... 123
Warrant Agreement...................................... 124
Series C Preferred Stock Purchase Agreement............ 124
VerticalOne Share Retention Agreements................. 125
COMPARATIVE PER SHARE MARKET PRICE DATA..................... 127
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS................. 128
COMPARISON OF STOCKHOLDER RIGHTS............................ 168
S1 Stockholder Rights..................................... 168
Directors.............................................. 168
Indemnification and Limitation of Liability of
Directors............................................. 168
Call of Special Stockholder Meetings................... 169
Stockholder Action without a Meeting................... 169
Quorum for Stockholder Meetings........................ 169
General Vote........................................... 169
Authorized and Outstanding Common Stock................ 169
Authorized and Outstanding Preferred Stock............. 169
FICS Stockholder Rights................................... 170
Directors.............................................. 170
Indemnification and Limitation of Liability of
Directors............................................. 170
Call of Special Stockholder Meetings................... 171
Stockholder Action without a Meeting................... 171
General Vote and Quorum Requirements for Stockholder
Meetings.............................................. 171
Authorized and Outstanding FICS Securities............. 171
Preferred Stockholder Rights........................... 172
Edify Stockholder Rights.................................. 172
Directors.............................................. 172
Indemnification and Limitation of Liability of
Directors............................................. 172
Call of Special Stockholder Meetings................... 173
Stockholder Action without a Meeting................... 173
Quorum for Stockholder Meetings........................ 173
General Vote........................................... 173
</TABLE>
v
<PAGE> 13
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Authorized and Outstanding Common Stock................ 173
Authorized and Outstanding Preferred Stock............. 173
Stockholder Rights Plan................................ 174
VerticalOne Stockholder Rights............................ 174
Directors.............................................. 174
Indemnification and Limitation of Liability of
Directors............................................. 174
Call of Special Stockholder Meetings................... 174
Stockholder Action without a Meeting................... 175
Quorum for Stockholder Meetings........................ 175
General Vote........................................... 175
Authorized and Outstanding Common Stock................ 175
Authorized and Outstanding Preferred Stock............. 175
Appraisal Rights....................................... 175
ADDITIONAL MATTERS BEING SUBMITTED TO A VOTE OF ONLY S1
STOCKHOLDERS.............................................. 176
Proposal No. 1 -- Change of Corporate Name................ 176
INFORMATION ABOUT FICS GROUP N.V............................ 176
Description of FICS's Business............................ 176
The FICS Solution...................................... 177
Products and Services.................................. 178
Professional Services.................................. 181
FICS Customers......................................... 182
Case Studies........................................... 182
Sales and Marketing.................................... 183
Research and Development............................... 183
Competition............................................ 184
Proprietary Rights..................................... 184
Employees.............................................. 185
Facilities............................................. 185
Legal Proceedings...................................... 186
Presentation of Financial and Other Information........... 186
Exchange Rates............................................ 186
FICS Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 187
Share Ownership by Principal Stockholders, Management and
Directors of FICS...................................... 203
New S1 Directors.......................................... 204
INFORMATION ABOUT VERTICALONE CORPORATION................... 204
Description of VerticalOne's Business..................... 204
The VerticalOne Solution.................................. 205
VerticalOne's Strategy.................................... 206
VerticalOne's Service..................................... 207
Revenue Model............................................. 208
Technology and Product Development........................ 208
Proprietary Rights........................................ 208
Employees................................................. 208
Facilities................................................ 209
Legal Proceedings......................................... 209
VerticalOne Management's Discussion and Analysis of
Financial Condition and Results of Operations.......... 209
Share Ownership by Principal Stockholders, Management and
Directors of VerticalOne............................... 212
New S1 Director........................................... 215
Related Party Transactions................................ 215
</TABLE>
vi
<PAGE> 14
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
LEGAL OPINIONS.............................................. 215
EXPERTS..................................................... 215
DOCUMENTS INCORPORATED BY REFERENCE IN THIS PROSPECTUS/PROXY
STATEMENT................................................. 216
WHERE YOU CAN FIND MORE INFORMATION......................... 217
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR INCLUSION
IN PROXY STATEMENT........................................ 217
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS.................. F-1
Annex A -- Share Purchase Agreement, as amended -- FICS
Transaction............................................... A-1
Annex B -- Stock Purchase Agreement, as amended -- FICS
Transaction............................................... B-1
Annex C -- Agreement and Plan of Merger -- Edify
Transaction............................................... C-1
Annex D -- Agreement and Plan of Merger -- VerticalOne
Transaction............................................... D-1
Annex E -- Opinion of BancBoston Robertson Stephens,
Financial Advisor to S1 -- FICS Transaction............... E-1
Annex F -- Opinion of BancBoston Robertson Stephens,
Financial Advisor to S1 -- Edify Transaction.............. F-1
Annex G -- Opinion of Goldman, Sachs & Co., Financial
Advisor to Edify -- Edify Transaction..................... G-1
Annex H -- Opinion of Goldman, Sachs & Co., Financial
Advisor to S1 -- VerticalOne Transaction.................. H-1
Annex I -- Section 262 of the Delaware General Corporation
Law -- Dissenters' Rights of Appraisal.................... I-1
</TABLE>
vii
<PAGE> 15
QUESTIONS AND ANSWERS ABOUT THE TRANSACTIONS
Q: I UNDERSTAND THAT SECURITY FIRST TECHNOLOGIES CORPORATION HAS AGREED TO
MAKE THREE STRATEGIC ACQUISITIONS. CAN YOU TELL ME MORE ABOUT S1'S PROPOSED
DEALS?
A: S1 has agreed that its Belgian subsidiary will acquire all or substantially
all of the issued and outstanding securities of FICS Group N.V. As a
result, FICS will become an indirect subsidiary of S1. 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. Electronic
Services Delivery products offer end-to-end functionality for account
reporting, cash management, custody and trade finance, 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 risk management reporting. We refer to
the transactions involved in this acquisition as the "FICS Transaction."
In addition, S1 has 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."
Finally, in the third proposed transaction, S1 has agreed that an S1
subsidiary will merge with VerticalOne Corporation. As a result,
VerticalOne will become a wholly owned subsidiary of S1. VerticalOne's
technology provides users confidential viewing and access to personal
account information like bank and investment information, credit card
balances, household bills, travel rewards programs, and e-mail. We refer to
this merger as the "VerticalOne Transaction."
Q: DO I GET TO VOTE ON THE FICS TRANSACTION, THE EDIFY TRANSACTION OR THE
VERTICALONE TRANSACTION?
A: If you held common stock in S1 at the close of business on October 1, 1999,
you may vote on S1's proposed issuances of common stock in each of the
three proposed transactions.
If you are a holder of any FICS securities, you may participate in the FICS
Transaction and receive shares of S1 common stock if you elect to sign the
share purchase agreement and the stock purchase agreement attached as Annex
A and Annex B. FICS stockholders will not vote on the Edify Transaction or
the VerticalOne Transaction.
If you held Edify common stock at the close of business on October 1, 1999,
you may vote on Edify's approval and adoption of the S1-Edify merger
agreement and approval of the Edify Transaction. Edify's stockholders will
not vote on the FICS Transaction or the VerticalOne Transaction.
1
<PAGE> 16
If you held VerticalOne common or preferred stock at the close of business
on October 8, 1999, you may vote for VerticalOne's approval and adoption of
the S1-VerticalOne merger agreement. VerticalOne stockholders will not vote
on the FICS Transaction or the Edify Transaction.
Q: IF STOCKHOLDERS OF S1 APPROVE THE ISSUANCES OF S1 COMMON STOCK IN EACH OF
THE THREE PROPOSED TRANSACTIONS, EDIFY STOCKHOLDERS APPROVE THE EDIFY
TRANSACTION AND VERTICALONE STOCKHOLDERS APPROVE THE VERTICALONE
TRANSACTION, WHAT WILL HAPPEN?
A: FICS will become a subsidiary of a Belgian subsidiary of S1, Edify will
become a wholly owned subsidiary of S1 and VerticalOne will become a wholly
owned subsidiary of S1. The combined company will continue to operate as
"S1."
Q: ARE THE FICS TRANSACTION, THE EDIFY TRANSACTION AND THE VERTICALONE
TRANSACTION CONDITIONED ON EACH OTHER?
A: No. None of the proposed transactions is conditioned on any other.
Q: IF THE TRANSACTIONS CLOSE, WHAT PERCENTAGE OF THE COMBINED COMPANY WILL S1,
FICS, EDIFY AND VERTICALONE STOCKHOLDERS OWN?
A: Based on the capitalization of S1, FICS, Edify and VerticalOne as of
September 30, 1999, the existing S1 stockholders, the former stockholders
of FICS, the former stockholders of Edify and the former stockholders of
VerticalOne will own the following percentages of S1 common stock,
calculated on a fully diluted basis, if one or more of the transactions
close:
<TABLE>
<CAPTION>
S1 FICS EDIFY VERTICALONE
TRANSACTION COMPLETED STOCKHOLDERS STOCKHOLDERS STOCKHOLDERS STOCKHOLDERS
--------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
All Three........................... 64% 18% 11% 7%
FICS and Edify Only................. 69% 20% 11% N/A
FICS and VerticalOne Only........... 71% 21% N/A 8%
Edify and VerticalOne Only.......... 78% N/A 13% 9%
FICS Only........................... 78% 22% N/A N/A
Edify Only.......................... 86% N/A 14% N/A
VerticalOne Only.................... 90% N/A N/A 10%
</TABLE>
For a more complete description of the transactions, see the sections
entitled "The FICS Transaction" on page 54, "The Edify Transaction" on page
71 and "The VerticalOne Transaction" on page 103.
Q: WHAT WILL FICS STOCKHOLDERS RECEIVE IN THE FICS TRANSACTION?
A: FICS stockholders participating in the FICS Transaction will receive a pro
rata portion of the 10,000,000 shares of S1 common stock to be issued in
the FICS Transaction, and a pro rata portion of up to 4,500,000 earn-out
shares that are issued, if any, in proportion to their current percentage
of ownership of FICS's issued and outstanding equity securities and
securities convertible into equity securities.
Holders of options to purchase shares of FICS securities will hold options
to purchase shares of S1 common stock after completion of the FICS
Transaction.
For a more complete description of what FICS stockholders will receive in
the FICS Transaction, see the section entitled "The FICS
Transaction -- Structure of the FICS Transaction and Conversion of FICS
Common Stock" on page 63 and "The FICS Transaction -- The Earn-out" on page
63.
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.
2
<PAGE> 17
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.
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 91.
Q: WHAT WILL VERTICALONE STOCKHOLDERS RECEIVE IN THE VERTICALONE TRANSACTION?
A: Holders of VerticalOne common stock will receive up to 0.2 shares of S1
common stock for each share of VerticalOne common stock they own. Of this
amount, at closing, each share of VerticalOne common stock will be
converted into 0.1903 shares of S1 common stock. In addition, holders of
VerticalOne common stock will have a contingent right to receive up to
0.0097 shares of S1 common stock to be placed in an escrow account and to
be used to offset any claims for indemnification made by S1 during the one
year following completion of the VerticalOne Transaction. After that time,
any amount remaining in escrow and not being contested will be distributed
to the former VerticalOne stockholders.
VerticalOne Series A and Series B preferred stock will be converted into
the number of shares of S1 common stock equal to the number of whole shares
of VerticalOne common stock into which their preferred stock could be
converted multiplied by 0.2 of which 0.1903 will be delivered at closing
and 0.0097 will be delivered into the escrow account. The conversion ratio
for conversion into shares of VerticalOne common stock for both the
VerticalOne Series A and Series B preferred stock is one-to-one. The shares
of VerticalOne Series C preferred stock outstanding are held by S1 and will
be cancelled in the transaction.
S1 will not issue fractional shares of stock. VerticalOne stockholders will
receive cash based on a per share price of S1 common stock of $40.41875.
Holders of options or warrants to purchase shares of VerticalOne common
stock will hold options or warrants as appropriate to purchase shares of S1
common stock after completion of the VerticalOne Transaction.
For a more complete description of what you will receive in the VerticalOne
Transaction, see the section entitled "The VerticalOne Transaction --
Structure of the VerticalOne Transaction and Conversion of VerticalOne
Common Stock and Preferred Stock" on page 113.
Q: WHAT WILL THE S1 COMMON STOCK BE WORTH WHEN THE TRANSACTIONS CLOSE?
A: The number of shares of S1 common stock to be issued in the FICS, Edify and
VerticalOne Transactions is fixed and will not be adjusted based upon
changes in the market value of S1 common stock. As a result, the value of
the shares received in the FICS, Edify and VerticalOne Transactions will
not be known prior to the closing of those transactions and will go up or
down as the market price of S1 common stock goes up or down.
Since S1 reorganized in September 1998, S1's stock price has been volatile.
The following table shows, as of the last trading day of the last ten
calendar months, the closing sale price per share of S1 common stock on the
Nasdaq National Market. This table also shows 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
ratio of 0.330969 shares of S1 common stock for each share of Edify common
stock. In addition, this table reflects the value to be received in the
VerticalOne Transaction for each share of VerticalOne common stock,
calculated by multiplying the closing price per share of S1 common stock by
an exchange ratio of 0.2 shares of S1 common stock for each share of
VerticalOne common stock.
3
<PAGE> 18
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 VALUE PER SHARE
PER SHARE OF OF EDIFY OF VERTICALONE
DATE S1 COMMON STOCK COMMON STOCK COMMON STOCK
---- ------------------ --------------- ---------------
<S> <C> <C> <C>
September 30, 1999.... $38.88 $12.87 $ 7.78
August 31, 1999....... 37.00 12.25 7.40
July 30, 1999......... 34.88 11.54 6.98
June 30, 1999......... 45.13 14.93 9.03
May 28, 1999.......... 38.38 12.70 7.68
April 30, 1999........ 59.53 19.70 11.91
March 31, 1999........ 36.75 12.16 7.35
February 26, 1999..... 32.81 10.86 6.56
January 29, 1999...... 16.50 5.46 3.30
December 31, 1998..... 15.25 5.05 3.05
</TABLE>
Q: DOES THE S1 BOARD OF DIRECTORS RECOMMEND VOTING IN FAVOR OF THE ISSUANCES
OF S1 COMMON STOCK IN THE THREE PROPOSED 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 three proposed 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 54, "The Edify Transaction -- S1's Reasons for the
Edify Transaction" on page 72, "The VerticalOne Transaction -- S1's Reasons
for the VerticalOne Transaction" on page 103, and "The FICS
Transaction -- Recommendation of S1's Board of Directors" on page 55, "The
Edify Transaction -- Recommendation of S1's Board of Directors" on page 73
and "The VerticalOne Transaction -- Recommendation of S1's Board of
Directors" on page 104.
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 S1-Edify 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 73 and "The Edify Transaction -- Recommendation of Edify's Board of
Directors" on page 74.
Q: DOES THE VERTICALONE BOARD OF DIRECTORS RECOMMEND VOTING IN FAVOR OF THE
VERTICALONE TRANSACTION?
A: Yes. After careful consideration, VerticalOne's board of directors
unanimously recommends that its stockholders vote in favor of the
S1-VerticalOne merger agreement. For a more complete description of the
recommendation of the VerticalOne board of directors, see the sections
entitled "The VerticalOne Transaction -- VerticalOne's Reasons for the
VerticalOne Transaction" on page 104 and "The VerticalOne
Transaction -- Recommendation of VerticalOne's Board of Directors" on page
106.
Q: ARE THERE RISKS I SHOULD CONSIDER IN MAKING MY VOTE?
A: Yes. For example, the number of shares of S1 common stock that you will
receive at closing will not change even if the market price of S1 common
stock increases or decreases before the completion of the proposed
transactions. WE URGE YOU TO OBTAIN CURRENT MARKET QUOTATIONS OF S1 COMMON
STOCK. EDIFY STOCKHOLDERS SHOULD ALSO OBTAIN CURRENT MARKET QUOTATIONS OF
EDIFY COMMON STOCK.
In evaluating the proposed transactions, you should carefully consider
these and other factors discussed in the section entitled "Risk Factors" on
page 30.
4
<PAGE> 19
Q: WHAT DO I NEED TO DO NOW?
A: If you are an S1, Edify or VerticalOne stockholder, 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.
For a more complete description of voting at your company's meeting, see
the sections entitled "The S1 Meeting -- Voting of Proxies" on page 44,
"The Edify Meeting -- Voting of Proxies" on page 46 and "The VerticalOne
Meeting -- Voting of Proxies" on page 47.
Q: HOW CAN FICS STOCKHOLDERS WHO ARE NOT PARTIES TO THE SHARE PURCHASE
AGREEMENT AND THE STOCK PURCHASE AGREEMENT PARTICIPATE IN THE FICS
TRANSACTION?
A: If you are a FICS stockholder and you wish to participate in the FICS
Transaction, indicate your acceptance of the share purchase agreement and
the stock purchase agreement by signing and mailing the enclosed signature
pages for the agreements in the enclosed return envelope so that they are
received by FICS on or before November 10, 1999. If you do not mail your
signed acceptances of the agreements, you will not be able to receive
shares of S1 common stock in the FICS Transaction, but will continue to
hold your FICS securities.
For a more complete description of how you can participate in the FICS
Transaction, FICS stockholders should see the section entitled
"Participating in the FICS Transaction" on page 44.
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE?
A: Stockholders of S1, Edify and VerticalOne may change their votes before or
at their company's meetings. If you want to change your vote, send the
secretary of your company 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 your company 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 44, Edify stockholders should see the section entitled "The Edify
Meeting -- Voting of Proxies" on page 46 and VerticalOne stockholders
should see the section entitled "The VerticalOne Meeting -- Voting of
Proxies" on page 47.
FICS will not be holding a meeting because the FICS stockholders
participating in the FICS Transaction are selling their securities directly
to S1's Belgian subsidiary. If you are a stockholder of FICS and would like
to participate in the FICS Transaction, you must sign the share purchase
agreement and stock purchase agreement. Once you have signed the
agreements, you will be obligated by the terms of the share purchase
agreement and the stock purchase agreement and may terminate those
agreements only as provided in the agreements.
We urge you to read in detail the share purchase agreement and the stock
purchase agreement attached as Annexes A and B. For a more complete
description of how you can participate in the FICS Transaction, FICS
stockholders should see the section entitled "Participating in the FICS
Transaction" on page 44.
Q: IF MY S1 OR EDIFY 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 44 and
"The Edify Meeting -- Voting of Proxies" on page 46.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the transaction is completed, we will send written instructions
to Edify and VerticalOne stockholders for exchanging your stock
certificates for S1 stock certificates. FICS securities holders will sell
their securities directly to S1's Belgian subsidiary. FICS
5
<PAGE> 20
common stock is uncertificated and the sale will be accomplished by noting
the transfer on FICS's share registry.
Q: WHEN DO YOU EXPECT THE TRANSACTIONS TO BE COMPLETED?
A: We are working toward completing the transactions as quickly as possible.
Although the proposed transactions are independent of one another, we hope
to complete them 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 69, "The Edify Agreements -- The S1-Edify
Merger Agreement -- Conditions to Completion of the Edify Transaction" on
page 97 and "The VerticalOne Agreements -- The S1-VerticalOne Merger
Agreement -- Conditions to Completion of the VerticalOne Transaction" on
page 119.
Q: WILL I RECOGNIZE A GAIN OR A LOSS ON THE FICS TRANSACTION?
A: As a general matter, United States individual stockholders should not
recognize a gain or a loss for United States federal income tax purposes.
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 non-United
States person.
For a more complete description of the tax consequences, see the section
entitled "The FICS Transaction -- Material United States Federal Income Tax
Consequences of the FICS Transaction" on page 64.
Q: WILL I RECOGNIZE A GAIN OR A LOSS ON THE EDIFY TRANSACTION OR THE
VERTICALONE TRANSACTION?
A: You will not recognize a gain or a 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 or shares of VerticalOne stock in the
VerticalOne Transaction, except to the extent you receive cash instead of
fractional shares or, for VerticalOne stockholders, if you dissent from the
VerticalOne Transaction and receive cash equal to the fair value of your
shares. Further, for Vertical One stockholders, you may recognize gain or
loss if the shares of S1 common stock you are otherwise entitled to receive
that are placed in escrow are used to satisfy any indemnification
obligations. 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 or VerticalOne stock from the
exercise of options or otherwise as compensation or through a qualified
retirement plan; or
- hold shares of Edify common stock or VerticalOne stock as part of a
straddle, hedge, or conversion transaction.
For a more complete description of the tax consequences of the Edify and
VerticalOne Transactions, see the sections entitled "The Edify
Transaction -- Material United States Federal Income Tax Consequences of
the Edify Transaction" on page 91 and "The VerticalOne Transaction --
Material United States Federal Income Tax Consequences of the VerticalOne
Transaction" on page 114.
Q: AM I ENTITLED TO APPRAISAL RIGHTS?
A: Under Delaware law, holders of S1 common stock and holders of Edify common
stock are not entitled to appraisal rights.
Under Delaware law, holders of VerticalOne stock are entitled to appraisal
rights in the VerticalOne Transaction. For more information regarding how
VerticalOne stockholders may exercise and perfect these rights, VerticalOne
stockholders should read the section of this
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prospectus/proxy statement captioned "The VerticalOne Meeting -- Appraisal
Rights" on page 48.
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. FICS stockholders should call Steven
Sipowicz at +32 2 714 4211 with any questions about the transactions. Edify
stockholders should call Edify Investor Relations at 408-982-4000 with any
questions about the transactions. VerticalOne stockholders should call
Steve Hufford at VerticalOne at 678-443-7900 with any questions about the
transactions.
You may also obtain additional information about S1 and Edify from
documents S1 and Edify file with the Securities and Exchange Commission by
following the instructions in the section entitled "Where You Can Find More
Information" on page 217.
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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
216. 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 217.
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
+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.
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[EDIFY LOGO]
EDIFY CORPORATION
2840 San Tomas Expressway
Santa Clara, CA 95051
(408) 982-2000
http://www.edify.com
Edify Corporation is a global provider of internet and voice electronic
commerce portal solutions that enable organizations to intelligently manage
customer relationships. The company's software offers organizations the means to
automate, integrate, and personalize interactions with customers through
multiple channels, 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 1,300 customers for custom development of automated internet
and telephone applications such as bank account inquiries and call center
applications. Since 1996, Edify has also licensed its software application
product, the Electronic Banking System, to enable financial institutions the
means to deploy a suite of automated banking services over the internet.
[VERTICALONE LOGO]
VERTICALONE CORPORATION
Two Concourse Parkway, Suite 700
Atlanta, GA 30328
(678) 443-7900
VerticalOne provides an internet-based service that consolidates, organizes
and presents consumers' personal account information in a single, easy-to-use
interface, saving them the inconvenience of having to log onto the web sites of
multiple account providers. VerticalOne's service enables users of internet
portals and other destination sites to allow access to a variety of personal
accounts at one location. Through a secure, reliable and private information
source, VerticalOne's service provides access to such personal account
information as bank and investment information, credit card balances, household
bills, travel rewards programs and e-mail.
SUMMARY OF THE TRANSACTIONS
In the FICS Transaction, a Belgian subsidiary of S1 will purchase all or
substantially all of the issued and outstanding securities of FICS from
participating FICS stockholders for cash. These FICS stockholders will then use
this cash to purchase up to 10,000,000 shares of S1 common stock. In addition,
the FICS stockholders participating in the transaction may be able to obtain up
to an additional 4,500,000 shares of S1 common stock in an "earn-out" if FICS
meets specified performance criteria while operating as an S1 subsidiary. S1 has
also agreed to assume current options to purchase FICS stock which will convert
into options to purchase approximately 1,200,000 shares of S1 common stock, and
to grant approximately 2,800,000 additional options to purchase S1
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common stock, for an aggregate total of 4,000,000 options to purchase S1 common
stock. As a result of the FICS Transaction, FICS will become an indirect
subsidiary of S1.
The agreements for the FICS Transaction are attached to this
prospectus/proxy statement as Annexes A and B. We encourage you to read these
agreements carefully. The FICS agreements are more fully discussed on page 66.
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 C. We encourage you to read the S1-Edify merger agreement
carefully. The S1-Edify merger agreement is more fully discussed on page 94.
In the VerticalOne Transaction, a subsidiary of S1 and VerticalOne will
merge. As a result, VerticalOne will become a wholly owned subsidiary of S1. The
merger agreement for the VerticalOne Transaction is attached to this
prospectus/proxy statement as Annex D. We encourage you to read the
S1-VerticalOne merger agreement carefully. The S1-VerticalOne merger agreement
is more fully discussed on page 117.
S1'S MANAGEMENT FOLLOWING THE TRANSACTIONS
If the FICS Transaction closes, Michel Akkermans, FICS's Chairman of the
Board and Chief Executive Officer, and one other individual designated by Mr.
Akkermans will be appointed to three-year terms on S1's Board of Directors. In
addition, Mr. Akkermans has agreed to become the President and Chairman of the
Board of Directors of S1 if the FICS Transaction closes. James S. Mahan III 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 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.
If the VerticalOne Transaction closes, Gregg S. Freishtat, the Chairman and
Chief Executive Officer of VerticalOne, will be appointed to a three-year term
on the S1 board of directors. Mr. Freishtat has also agreed to continue to serve
as chief executive officer of VerticalOne if the VerticalOne Transaction closes.
BENEFITS OF THE TRANSACTIONS
We believe the three 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
- increasing the appeal of online financial services to consumers by
permitting our customers to access consolidated, personalized information
from multiple accounts through a single web site
- expanding S1's international presence
- 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
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There are potential detriments to the three transactions, including:
- technical, operational and strategic challenges to the integration of S1,
FICS, Edify and VerticalOne
- the effect of the transactions on key third party relationships
- the effect of the transactions on key customer relationships
- pending the transactions, there could be disruption of the business of
S1, FICS, Edify or VerticalOne caused by employee uncertainty, customer
or supplier confusion or interruption of, or a loss of momentum in, the
activities of each of their businesses, which could cause quarterly
operating results to be lower than expected
The potential benefits of the transactions may not be achieved. See the
sections entitled "Risk Factors" on page 30, "The FICS Transaction -- S1's
Reasons for the FICS Transaction" on page 54, "The Edify Transaction -- S1's
Reasons for the Edify Transaction" on page 72, "The Edify Transaction -- Edify's
Reasons for the Edify Transaction" on page 73, "The VerticalOne
Transaction -- S1's Reasons for the VerticalOne Transaction" on page 103, and
"The VerticalOne Transaction -- VerticalOne's Reasons for the VerticalOne
Transaction" on page 104.
THE FICS TRANSACTION
What FICS Stockholders Will Receive
In acquiring FICS, S1 expects to issue up to 10,000,000 shares of S1 common
stock to the former FICS stockholders participating in the FICS Transaction, if
S1's stockholders approve this issuance. The former FICS stockholders may also
be able to obtain up to an additional 4,500,000 shares of S1 common stock over
approximately a two-year period if FICS meets specified criteria while operating
as a subsidiary of S1. S1 has also agreed to assume current options to purchase
FICS stock which will convert into options to purchase approximately 1,200,000
shares of S1 common stock, and to grant approximately 2,800,000 additional
options to purchase S1 common stock, for an aggregate total of 4,000,000 options
to purchase S1 common stock.
Votes Required for Approval of the FICS Transaction
Approval of the issuance of S1 common stock in the FICS Transaction
requires the affirmative vote of a majority of the votes cast, either in person
or by proxy, at the S1 meeting. S1 stockholders are entitled to cast one vote
per share of S1 common stock.
The directors and executive officers of S1, who held 7% of the outstanding
S1 common stock as of the record date, have agreed to vote in favor of the FICS
Transaction. The number of shares held does not include 72,800 shares
beneficially owned by Andersen Consulting LLP or its affiliate, AC II Technology
(ACT II) B.V. Jackson L. Wilson, Jr., a director of S1, is Managing
Partner -- Global Markets of Andersen Consulting.
No vote of the Edify stockholders or VerticalOne stockholders is required
to approve the FICS Transaction.
For a more complete description of the vote required for approval by S1
stockholders of the issuance of S1 common stock in the FICS Transaction see the
section entitled "The S1 Meeting -- Vote and Quorum Required" on page 43.
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.
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The stock purchase agreements may also be terminated by either the FICS
stockholders or S1 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 FICS stockholders
if, without the consent of the FICS stockholders, 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.
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 70.
The S1 Stockholders' FICS Voting Agreement
FICS stockholders holding 99.54% of the issued and outstanding FICS
securities have agreed to participate in the FICS Transaction and executed the
stock purchase agreements. The remaining FICS stockholders may choose to
participate in the FICS Transaction before its closing.
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, Howard J. Runnion, Jr. and Jackson L. Wilson, 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 7% of the outstanding S1 common stock as of the record date. The
number of shares held does not include 72,800 shares beneficially owned by
Andersen Consulting LLP or its affiliate, AC II Technology (ACT II) B.V. Jackson
L. Wilson, Jr., a director of S1, is Managing Partner -- Global Markets of
Andersen Consulting.
For a more complete description of S1 stockholder voting agreements see the
section entitled "The FICS Agreements -- Related FICS Agreements -- S1
Stockholder Voting Agreements" on page 70.
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. or "Robertson Stephens." On September 19, 1999 Robertson Stephens delivered
its oral opinion to the board of directors of S1, which was subsequently
confirmed in writing as of September 21, 1999, that as of that date the exchange
ratio in the FICS Transaction was fair from a financial point of view to S1. The
opinion of 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 Robertson Stephens, dated September 21, 1999, which
sets forth assumptions made, matters considered and limitations on
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the review undertaken in connection with the opinion, is attached as Annex E. 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 55.
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 FICS
Transaction see the section entitled "The FICS Transaction -- Accounting
Treatment of the FICS Transaction" on page 65.
Interests of Certain Persons in the FICS Transaction
You should be aware that certain FICS directors and officers have interests
in the FICS Transaction that are different from, or are in addition to, yours.
These interests include:
- Michel Akkermans, the Chairman and Chief Executive Officer of FICS, will
become Chairman and a member of the S1 board of directors and President
of S1 after the FICS Transaction.
- Some FICS executives have been granted stock options that will, if the
FICS Transaction closes, be assumed by S1. In addition, S1 has agreed, if
the FICS Transaction closes, to grant additional options to purchase S1
common stock to FICS employees.
For a more complete description of the interests of persons in the FICS
Transaction, see the section entitled "The FICS Transaction -- Interests of
Certain Persons in the FICS Transaction" on page 62.
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.
Votes Required for Approval of the Edify Transaction
Approval of the issuance of S1 common stock in the Edify Transaction
requires the affirmative vote of a majority of the votes cast, either in person
or by proxy, at the S1 meeting. S1 stockholders are entitled to cast one vote
per share of S1 common stock.
The directors and executive officers of S1, who held 7% of the outstanding
S1 common stock as of the record date, have agreed to vote in favor of the Edify
Transaction. The number of shares held
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does not include 72,800 shares beneficially owned by Andersen Consulting LLP or
its affiliate, AC II Technology (ACT II) B.V. Jackson L. Wilson, Jr., a director
of S1, is Managing Partner -- Global Markets of Andersen Consulting.
The holders of a majority of the outstanding shares of Edify common stock
must approve and adopt the S1-Edify merger agreement and approve the Edify
Transaction. Edify stockholders are entitled to cast one vote per share of Edify
common stock owned as of October 1, 1999, the record date.
Directors and executive officers of Edify and their affiliates, who held
approximately 5% of the outstanding Edify common stock as of the record date,
have agreed to vote in favor of the Edify Transaction.
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 43 and "The Edify Meeting -- Vote Required" on page 45.
Termination of the Edify Transaction
The S1-Edify merger agreement may be terminated under some circumstances at
any time before the completion of the Edify Transaction, as summarized below.
The S1-Edify merger agreement may be terminated by the mutual consent of
the parties.
The S1-Edify merger agreement may also be terminated by either S1 or Edify
if, with some qualifications, the conditions to completion of the Edify
Transaction would not be satisfied (1) because of a material breach of an
agreement in the S1-Edify merger agreement by the other or (2) subject to a
materiality qualification, because a representation or warranty of the other in
the S1-Edify merger agreement becomes untrue.
In addition, subject to qualifications, the S1-Edify 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 S1-Edify 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 S1-Edify merger agreement may be terminated by S1 if the Edify board
either:
- fails to recommend that Edify stockholders approve and adopt the S1-Edify
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 S1-Edify 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.
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For a more complete description of the manner in which the S1-Edify merger
agreement may be terminated, see the section entitled "The Edify
Agreements -- The S1-Edify Merger Agreement -- Termination of the S1-Edify
Merger Agreement" on page 98.
Breakup Fee for the Edify Transaction
If the S1-Edify merger agreement is terminated because either the S1
stockholders do not approve the issuance of S1 common stock in the Edify
Transaction or the Edify stockholders do not approve and adopt the S1-Edify
merger agreement and approve the Edify Transaction, the party that did not
approve the S1-Edify merger agreement will pay the other $1 million in addition
to up to $500,000 in costs and expenses. If the S1-Edify merger agreement is
terminated (1) because of a material breach of an agreement in the S1-Edify
merger agreement by the other, (2) subject to a materiality qualification,
because a representation or warranty of the other in the S1-Edify 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 S1-Edify 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 S1-Edify merger
agreement because its board of directors has authorized entering into an
extraordinary transaction of the nature specified in the S1-Edify 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 S1-Edify Merger
Agreement -- Expenses; Breakup Fee" on page 99.
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 specified actions
inconsistent with its recommendation in favor of the adoption and
approval of the S1-Edify 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 S1-Edify merger agreement:
- by S1 due to an intentional, material breach by Edify of a
representation, warranty or covenant made by Edify in the S1-Edify
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 S1-Edify 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 -- Related Agreements -- The Stock Option
Agreement" on page 100.
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.
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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 S1-Edify merger agreement and
approval of the Edify Transaction. These Edify stockholders were not paid
additional consideration in connection with the voting agreements.
The Edify stockholders who entered into the voting agreements collectively
held approximately 5% 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 -- Related
Agreements -- Edify Stockholders' Voting Agreements" on page 101.
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 7% of the outstanding S1 common stock as of the record date. The
number of shares held does not include 72,800 shares beneficially owned by
Andersen Consulting LLP or its affiliate, AC II Technology (ACT II) B.V. Jackson
L. Wilson, Jr., a director of S1, is Managing Partner -- Global Markets of
Andersen Consulting.
For a more complete description of S1 stockholder voting agreements see the
section entitled "The Edify Agreements -- Related Agreements -- S1 Stockholders'
Voting Agreements" on page 101.
Opinions of Financial Advisors
In deciding to approve the Edify Transaction, the S1 and Edify boards of
directors considered opinions from their financial advisors. On May 16, 1999,
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 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. Goldman, Sachs &
Co. has confirmed its May 16 opinion as of the date of this prospectus/proxy
statement by delivery of its written opinion to the Edify board, dated the date
of this prospectus/proxy statement. The full texts of the written opinion of
Robertson Stephens, dated May 16, 1999, and the written opinion of Goldman,
Sachs & Co. dated as of the date of this prospectus/proxy statement are attached
as Annex F and Annex G. These opinions set forth assumptions made, matters
considered and limitations on the review undertaken by Robertson Stephens and
Goldman, Sachs & Co. S1 stockholders should read the 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 75 and "The Edify Transaction -- Opinion of Edify's Financial
Advisor" on page 83.
Goldman, Sachs & Co. rendered a fairness opinion to the S1 board of
directors in connection with the VerticalOne Transaction. The opinion of
Goldman, Sachs & Co. does not constitute a recommendation as to how any S1
stockholder should vote with respect to the VerticalOne Transaction.
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Accounting Treatment of the Edify Transaction
S1 intends 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, please see the section entitled "The Edify
Transaction -- Accounting Treatment of the Edify Transaction" on page 93.
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 held approximately 7% of the outstanding shares of S1
common stock. The number of shares beneficially owned does not include
72,800 shares beneficially owned by Andersen Consulting LLP or its
affiliate, AC II Technology (ACT II) B.V. Jackson L. Wilson, Jr., a
director of S1, is Managing Partner -- Global Markets of Andersen
Consulting. As of the Edify record date, directors and executive officers
of Edify and their affiliates held approximately 5% 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 Edify
Transaction, see the section entitled "The Edify Transaction -- Interests of
Certain Persons in the Edify Transaction" on page 90.
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 Edify Transaction, S1's common stock closed
at $54.00 per share, and Edify's common stock closed at $15.56 per share. On
October 1, 1999, S1's common stock closed at $37.75 per share, and Edify's
common stock closed at $11.88 per share. We urge you to obtain current market
quotations.
For a more complete description of market price information see the section
entitled "Comparative Per Share Market Price Data" on page 127.
THE VERTICALONE TRANSACTION
What VerticalOne Stockholders Will Receive
Holders of VerticalOne common stock will receive up to 0.2 shares of S1
common stock for each share of VerticalOne common stock they own. Of this
amount, at closing, each share of VerticalOne common stock will be converted
into 0.1903 shares of S1 common stock. In addition, holders of VerticalOne
common stock will have a contingent right to receive up to 0.0097 shares of S1
common stock to be placed in an escrow account and to be used to offset any
claims for indemnification made
17
<PAGE> 32
by S1 during the one year following completion of the VerticalOne Transaction.
After that time, any amount remaining in escrow and not being contested will be
distributed to the former VerticalOne stockholders.
VerticalOne Series A and Series B preferred stock will be converted into
the number of shares of S1 common stock equal to the number of whole shares of
VerticalOne common stock into which their preferred stock could be converted
multiplied by 0.2, of which 0.1903 will be delivered at closing and 0.0097 will
be delivered into the escrow account. Both the Series A and Series B preferred
stock have a conversion ratio for conversion into shares of VerticalOne common
stock of one-to-one. The shares of VerticalOne Series C preferred stock
outstanding are held by S1 and will be cancelled in the transaction.
S1 will not issue fractional shares of stock. VerticalOne stockholders will
receive cash based on a per share price of S1 common stock of $40.41875.
Holders of options or warrants to purchase shares of VerticalOne common
stock will hold options or warrants as appropriate to purchase shares of S1
common stock after completion of the VerticalOne Transaction. The number of
shares of S1 common stock subject to an option or warrant will equal the number
of shares of VerticalOne common stock subject to the option or warrant
multiplied by 0.2.
Votes Required for Approval of the VerticalOne Transaction
Approval of the issuance of S1 common stock in the VerticalOne Transaction
requires the affirmative vote of a majority of the votes cast, in person or by
proxy, at the S1 meeting. S1 stockholders are entitled to cast one vote per
share of S1 common stock.
The directors and executive officers of S1, who held 7% of the outstanding
S1 common stock as of the record date, have indicated that they intend to vote
in favor of the issuance of S1 common stock in the VerticalOne Transaction. The
number of shares held does not include 72,800 shares beneficially owned by
Andersen Consulting LLP or its affiliate, AC II Technology (ACT II) B.V. Jackson
L. Wilson, Jr., a director of S1, is Managing Partner -- Global Markets of
Andersen Consulting.
The holders of a majority of the outstanding shares of VerticalOne common
stock, VerticalOne Series A preferred stock and VerticalOne Series B preferred
stock, voting together as a single class, and the holders of a majority of the
Series B preferred stock, voting as a separate class, must approve and adopt the
S1-VerticalOne merger agreement. VerticalOne stockholders are entitled to cast
one vote per share of VerticalOne common stock owned as of October 8, 1999, the
record date. Holders of VerticalOne Series A preferred stock and VerticalOne
Series B preferred stock owned as of the record date are entitled to cast one
vote for every share of VerticalOne common stock into which the preferred stock
is convertible as of the record date.
VerticalOne stockholders are entitled to perfect their dissenters' rights
under Section 262 of the Delaware General Corporation Law. If a holder of
VerticalOne common stock, VerticalOne Series A preferred stock or VerticalOne
Series B preferred stock perfects its dissenters' rights, VerticalOne will pay
that holder in accordance with Section 262 of the Delaware General Corporation
Law.
As of the record date, holders of approximately 89% of the VerticalOne
common stock, 51% of the VerticalOne Series A preferred stock and 79% of the
VerticalOne Series B preferred stock had agreed to vote in favor of the
VerticalOne Transaction.
For a more complete description of the votes required for approval of the
VerticalOne Transaction see the sections entitled "The S1 Meeting -- Vote and
Quorum Required" on page 43 and "The VerticalOne Meeting -- Vote and Quorum
Required" on page 47. For a more complete description of the dissenters' rights
available to VerticalOne stockholders, please see the section of
18
<PAGE> 33
this prospectus/proxy statement entitled "The VerticalOne Meeting -- Appraisal
Rights" on page 48, and Section 262 of the Delaware General Corporation Law,
attached as Annex I.
Termination of the VerticalOne Transaction
The S1-VerticalOne merger agreement may be terminated under some
circumstances at any time before the completion of the VerticalOne Transaction,
as summarized below.
The S1-VerticalOne merger agreement may be terminated by mutual consent of
the parties.
The S1-VerticalOne merger agreement may also be terminated by one of the
parties if, with some qualifications, the conditions to completion of the
VerticalOne Transaction would not be satisfied (1) because of a material breach
of any of the covenants or agreements in the S1-VerticalOne merger agreement by
the other party or (2) subject to a materiality qualification, because a
representation or warranty of the other party in the S1-VerticalOne merger
agreement becomes untrue.
In addition, subject to some qualifications, the S1-VerticalOne merger
agreement may be terminated under any of the following circumstances:
- if the VerticalOne Transaction is not completed by January 10, 2000,
unless extended up to March 1, 2000 because needed regulatory approvals
have not been received or S1 has entered into a further proposed
acquisition or business combination
- if a final court order or other governmental ruling prohibiting the
VerticalOne Transaction is issued and is not appealable
- if the VerticalOne stockholders do not approve and adopt the
S1-VerticalOne merger agreement and approve the VerticalOne Transaction
at the VerticalOne special meeting
- if the S1 stockholders do not approve the issuance of shares of S1 common
stock in the VerticalOne Transaction
The S1-VerticalOne merger agreement may be terminated by S1 if the
VerticalOne board either:
- fails to call and hold a special meeting of stockholders to vote on the
VerticalOne Transaction
- fails to recommend that VerticalOne stockholders approve and adopt the
S1-VerticalOne merger agreement
- makes any recommendation or approval of various "extraordinary
transactions" involving VerticalOne and a party other than S1, such as a
merger or a sale of 20% or more of VerticalOne's assets or stock
The S1-VerticalOne merger agreement may be terminated by VerticalOne if:
- the S1 board fails to call and hold a special meeting of stockholders to
vote on the issuance of shares in the VerticalOne Transaction
- the S1 board fails to recommend that S1 stockholders approve the issuance
of shares in the VerticalOne Transaction
For a more complete description of the manner in which the S1-VerticalOne
merger agreement may be terminated, see the section entitled "The VerticalOne
Agreements -- The S1-VerticalOne Merger Agreement -- Termination of the
S1-VerticalOne Merger Agreement" on page 121.
Strategic Marketing and Sales Agency Agreement
VerticalOne has also entered into a strategic marketing and sales agency
agreement with S1 effective September 23, 1999 for a term of three years. Except
under specified circumstances, S1 will act as a non-exclusive sales agent to
market, provide and support the VerticalOne services to existing S1 customers
and other financial institutions in the U.S.
19
<PAGE> 34
VerticalOne will compensate S1 with warrants described in the next section
and a share of the revenue from sales of VerticalOne services by S1. For a more
complete description of the marketing and sales agency agreement, see the
section entitled "The VerticalOne Agreements -- Related Agreements --
Strategic Marketing and Sales Agency Agreement" on page 123.
VerticalOne may continue to sell its services or authorize a third party to
furnish the VerticalOne services except that it may not provide the VerticalOne
services to a customer of S1 unless the customer purchased the services through
S1 or the customer declined S1's offer to buy the services. S1 will not solicit
any financial institutions that are not S1 customers unless S1 confirms that
VerticalOne has not been in contact with the institutions in the preceding six
months.
Until September 23, 2000, VerticalOne will be S1's sole provider of the
VerticalOne services as made available by VerticalOne. During this period, S1
may not offer to financial institutions any other products or technology with
functions and features similar to those of the VerticalOne services.
The Warrant Agreement
The warrant agreement between VerticalOne and S1 grants S1 the right to buy
up to 1,000,000 shares of VerticalOne common stock at an exercise price of $2.50
per share if those rights become exercisable as explained in the next paragraph.
The warrant is not currently exercisable and will only become exercisable
upon the termination of the S1-VerticalOne merger agreement. Should it become
exercisable, the warrant may be exercised in ten tranches: 100,000 shares for
every 100,000 new end-users of VerticalOne services brought to VerticalOne by S1
pursuant to the marketing and sales agency agreement discussed above. The
warrant may be exercised by S1, if at all, only up to September 23, 2001.
For a more complete description of the warrant agreement see the section
entitled "The VerticalOne Agreements -- Related Agreements -- Warrant Agreement"
on page 124.
Series C Preferred Stock Purchase Agreement
VerticalOne and S1 entered into a stock purchase agreement on September 23,
1999 whereby VerticalOne sold 2,608,242 shares of VerticalOne Series C preferred
stock to S1 at a purchase price of $5.751 per share or $15,000,000. The sale was
completed on September 24, 1999.
Unlike the S1-VerticalOne merger agreement, the stock purchase agreement
does not require stockholder approval. Although entered into at the same time as
the S1-VerticalOne merger agreement, it is an independent investment. S1 has the
right to have a representative attend meetings of VerticalOne's board of
directors and to receive information provided to board members. The Series C
preferred stock will be cancelled when the VerticalOne Transaction is completed.
If the VerticalOne Transaction is not completed, the holders of the
VerticalOne Series C preferred stock will have voting rights based on the number
of shares of common stock into which the Series C preferred stock may be
converted. The holders of the Series C preferred stock will vote together along
with the holders of the VerticalOne common stock, Series A preferred stock and
Series B preferred stock as one class. If the VerticalOne Transaction is not
completed, S1 will have the right to name one person to serve on the board of
directors of VerticalOne.
For a more complete description of the Series C preferred stock purchase
agreement see the section entitled "The VerticalOne Agreements -- Related
Agreements -- Series C Preferred Stock Purchase Agreement" on page 124.
The Share Retention Agreements
S1 entered into a series of share retention and voting agreements with
holders of VerticalOne common stock, VerticalOne Series A preferred stock and
VerticalOne Series B preferred stock by
20
<PAGE> 35
which these stockholders agreed to vote in favor of the VerticalOne Transaction.
The stockholders were not paid additional consideration in connection with the
voting agreements.
The VerticalOne stockholders who entered into the voting agreements
collectively held approximately 89% of the outstanding VerticalOne common stock,
51% of the outstanding VerticalOne Series A preferred stock and 79% of the
outstanding VerticalOne Series B preferred stock as of the record date.
Pursuant to the S1-VerticalOne merger agreement, the holders of the
VerticalOne Series A preferred stock and Series B preferred stock cannot sell
any shares of S1 common stock received in the VerticalOne Transaction for 180
days after the completion of the merger with some exceptions that would permit
them to sell earlier. In addition, VerticalOne has agreed to use its best
efforts to have holders of VerticalOne common stock, enter into an agreement
with S1 not to sell their S1 common stock received in the VerticalOne
Transaction for limited periods after the completion of the merger. The
stockholders will not be paid additional consideration in connection with the
share retention agreement.
For a more complete description of the VerticalOne share retention
agreements see the section of this prospectus/proxy statement entitled "The
VerticalOne Agreements -- Related Agreements -- VerticalOne Share Retention
Agreements" on page 125.
Opinion of S1's Financial Advisor
In deciding to approve the VerticalOne Transaction, the S1 board of
directors considered an opinion from its financial advisor. On September 23,
1999, Goldman, Sachs & Co. 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 VerticalOne Transaction is fair from a financial point of view to
S1. The opinion of Goldman, Sachs & Co. does not constitute a recommendation as
to how any S1 or VerticalOne stockholder should vote with respect to the
S1-VerticalOne merger agreement. The full text of the written opinion of
Goldman, Sachs & Co., dated September 23, 1999, is attached as Annex H. This
opinion sets forth assumptions made, matters considered and limitations on the
review undertaken by Goldman, Sachs & Co. S1 stockholders should read the
Goldman, Sachs & Co. opinion in its entirety. For a more detailed summary of the
opinion see the section entitled "The VerticalOne Transaction -- Opinion of S1's
Financial Advisor" on page 106.
Goldman, Sachs & Co. rendered a fairness opinion to the board of directors
of Edify in connection with the Edify Transaction.
Accounting Treatment of the VerticalOne Transaction
S1 intends to account for the VerticalOne 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 VerticalOne Transaction -- Accounting
Treatment of the VerticalOne Transaction" on page 116.
Interests of Certain Persons in the VerticalOne Transaction
When considering the recommendations of S1's and VerticalOne's boards of
directors, you should be aware that certain S1 and VerticalOne directors and
officers have interests in the VerticalOne Transaction that are different from,
or are in addition to, yours. These interests include:
- Gregg S. Freishtat, Chairman and Chief Executive Officer of VerticalOne,
will become a member of the S1 board of directors.
- The executive officers of VerticalOne are expected to remain the
executive officers of VerticalOne after completion of the VerticalOne
Transaction.
21
<PAGE> 36
- As of the S1 record date, directors and executive officers of S1 and
their affiliates held approximately 7% of the outstanding shares of S1
common stock. The number of shares held does not include 72,800 shares of
S1 common stock beneficially owned by AC II Technology (ACT II) B.V., an
affiliate of Andersen Consulting LLP. Jackson L. Wilson, Jr. is Managing
Partner -- Global Markets of Andersen Consulting. As of the VerticalOne
record date, directors and executive officers of VerticalOne and its
affiliates held approximately 99% of the outstanding shares of
VerticalOne common stock, 39% of the outstanding shares of VerticalOne
Series A preferred stock and 89% of the outstanding shares of VerticalOne
Series B preferred stock.
- Some VerticalOne officers and employees will be granted options to
acquire up to approximately 2.0 million shares of S1 common stock.
- Any employee of VerticalOne who is terminated during the two-year period
following the completion of the merger at the request of S1 but over the
objection of the current chairman and chief executive officer of
VerticalOne or his designee will be paid a one-time severance payment
equal to his or her then current salary for 90 days and any unvested
options that would vest in the following 12 month period shall vest.
For a more complete description of the interests of persons in the
VerticalOne Transaction see the section entitled "The VerticalOne
Transaction -- Interests of Certain Persons in the VerticalOne Transaction" on
page 112.
PRO FORMA COMBINED COMPARATIVE PER SHARE DATA
The table below presents comparative selected historical per share data of
S1, FICS, Edify and VerticalOne, pro forma combined per share data for S1, FICS,
Edify and VerticalOne and equivalent pro forma per share data for FICS, Edify
and VerticalOne. The financial data is based on, and should be read in
conjunction with, the historical consolidated financial statements and the notes
to those financial statements of S1, FICS, Edify and VerticalOne. The pro forma
combined data is not necessarily indicative of results which will be obtained on
a combined basis. FICS equivalent pro forma combined per share amounts are
calculated by multiplying the pro forma combined per share amounts by 68.211893.
Edify equivalent pro forma combined per share amounts are calculated by
multiplying the pro forma combined per share amounts by an exchange ratio of
0.330969. VerticalOne equivalent pro forma combined per share amounts are
calculated by multiplying the pro forma combined per share amounts by an
exchange ratio of 0.2.
None of S1, FICS, Edify or VerticalOne has ever paid cash dividends on its
capital stock, except that S1's predecessor paid distributions to its parent
holding company before its public spin-off in May 1996. Under the terms of the
proposed transactions, none of Edify, FICS or VerticalOne will pay cash
dividends pending the completion of the transactions without the written consent
of S1. The S1 board of directors intends to retain its earnings for use in its
business rather than to pay cash dividends following completion of the proposed
transactions.
<TABLE>
<CAPTION>
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1999
--------------------------------------------------------------------------
FICS EDIFY VERTICALONE PRO FORMA
S1 HISTORICAL HISTORICAL HISTORICAL HISTORICAL COMBINED
DATA DATA DATA DATA PER SHARE DATA
------------- ---------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Book value per common share....... $ 2.65 E(234.36) $ 2.48 $(0.32) $20.90
Basic and diluted net loss per
common share from continuing
operations...................... $(0.21) E (62.04) $(0.51) $(0.28) $(3.85)
</TABLE>
22
<PAGE> 37
<TABLE>
<CAPTION>
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1999
------------------------------------------------------------
EQUIVALENT
EQUIVALENT FICS PRO EQUIVALENT EDIFY PRO VERTICALONE PRO
FORMA COMBINED FORMA COMBINED FORMA COMBINED
------------------- -------------------- ---------------
<S> <C> <C> <C>
Book value per common share................. $1,425.63 $ 6.92 $ 4.18
Basic and diluted net loss per common share
from continuing operations................ $ (262.62) $(1.27) $(0.77)
</TABLE>
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1998
--------------------------------------------------------------------------
FICS EDIFY VERTICALONE PRO FORMA
S1 HISTORICAL HISTORICAL HISTORICAL HISTORICAL COMBINED
DATA DATA DATA DATA PER SHARE DATA
------------- ---------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Book value per common share...... $ 0.22 E(134.20) $ 2.98 $(0.02) $30.64
Basic and diluted net loss per
common share from continuing
operations..................... $(1.30) E (73.44) $(0.39) $(0.09) $(8.32)
</TABLE>
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1998
------------------------------------------------------------
EQUIVALENT
EQUIVALENT FICS PRO EQUIVALENT EDIFY PRO VERTICALONE PRO
FORMA COMBINED FORMA COMBINED FORMA COMBINED
------------------- -------------------- ---------------
<S> <C> <C> <C>
Book value per common share................. $2,090.01 $10.14 $ 6.13
Basic and diluted net loss per common share
from continuing operations................ $ (567.52) $(2.75) $(1.66)
</TABLE>
SELECTED CONSOLIDATED FINANCIAL DATA
Shown on the following pages are:
- selected historical financial data of S1, FICS, Edify and VerticalOne
- selected unaudited pro forma financial data of S1 after giving effect to
the FICS Transaction, the Edify Transaction and the VerticalOne
Transaction
- selected unaudited pro forma financial data of S1 after giving effect to
the FICS Transaction and the Edify Transaction, assuming the VerticalOne
Transaction is not consummated
- selected unaudited pro forma financial data of S1 after giving effect to
the FICS Transaction and the VerticalOne Transaction, assuming the Edify
Transaction is not consummated
- selected unaudited pro forma financial data of S1 after giving effect to
the Edify Transaction and the VerticalOne Transaction, assuming the FICS
Transaction is not consummated
- selected unaudited pro forma financial data of S1 after giving effect to
the FICS Transaction, assuming neither the Edify Transaction nor the
VerticalOne Transaction closes
- selected unaudited pro forma financial data of S1 after giving effect to
the Edify Transaction, assuming neither the FICS Transaction nor the
VerticalOne Transaction closes and
- selected unaudited pro forma financial data of S1 after giving effect to
the VerticalOne Transaction, assuming neither the FICS Transaction nor
the Edify Transaction closes
The selected historical financial data should be read in conjunction with
the historical audited and unaudited financial statements of S1 and Edify and
related notes that are incorporated into this proxy statement/prospectus by
reference and the historical audited and unaudited financial statements of FICS
and VerticalOne which are included elsewhere in this proxy statement/prospectus.
The selected unaudited pro forma data should be read in conjunction with the
section entitled "Pro Forma Consolidated Financial Statements" appearing
elsewhere in this prospectus/proxy statement.
The selected historical financial data of S1, FICS and Edify 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 historical financial data for
23
<PAGE> 38
VerticalOne as of December 31, 1998 and for the period from inception through
December 31, 1998 are derived from the audited financial statements of
VerticalOne. S1 financial data as of and for periods prior to September 30, 1998
reflect the historical financial data of S1's predecessor, Security First
Network Bank. The selected historical financial data 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 historical financial data 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 historical financial data of S1, FICS and Edify for, and as of the end
of, the six-month periods ended June 30, 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. For VerticalOne, the selected financial information for
and as of the six-month period ended June 30, 1999 is derived from unaudited
interim financial statements of VerticalOne which have been prepared by
management on the same basis as the audited financial statements. In the opinion
of management of each of the companies, the unaudited consolidated financial
statements include all adjustments, consisting only of normal recurring
adjustments, that 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. Translations of euro amounts into U.S. dollars have been made at the
rate of $1.0325 to E1.00 (the daily average rate on June 30, 1999) for amounts
at June 30, 1999 and at the rate of $1.08961 to E1.00 (the average of the daily
average rates for the six-month period ended June 30, 1999) for amounts for the
six-month period ended June 30, 1999.
SECURITY FIRST TECHNOLOGIES CORPORATION
SELECTED HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------ -------------------------------------
1999 1998 1998 1997 1996 1995
------- -------- -------- -------- -------- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.......................................... $27,675 $ 7,977 $ 24,180 $ 10,830 $ 1,267 $ --
Loss from continuing operations................... (5,420) (16,219) (28,558) (27,302) (17,823) 55
Basic net loss per common share from continuing
operations...................................... (0.21) (0.76) (1.30) (1.53) (1.52) --
Diluted net loss per common share from continuing
operations...................................... (0.21) (0.76) (1.30) (1.53) (1.52) --
Cash dividends declared........................... -- -- -- -- 3,000 300
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ------------------------------------
1999 1998 1997 1996 1995
-------- ------- ------- ------- ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................................................ $119,755 $48,293 $36,192 $45,941 $3,948
Capital lease obligations, excluding current portion........ 54 159 -- -- --
Book value per common share................................. 2.65 0.22 1.07 2.35 0.71
</TABLE>
24
<PAGE> 39
FICS GROUP N.V.
SELECTED HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 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>
STATEMENT OF OPERATIONS DATA:
Revenues............................ E 25,755 E 22,906 E 49,753 E35,681 E23,706 E16,372 E11,976
Income (loss) from continuing
operations........................ (9,120) (6,323) (10,076) (3,495) (3,653) (902) 1,294
Basic net income (loss) per common
share from continuing
operations........................ (62.04) (46.49) (73.44) (26.61) (29.17) (8.33) 12.94
Diluted net income (loss) per common
share from continuing
operations........................ (62.04) (46.49) (73.44) (26.61) (29.17) (8.33) 12.94
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, -----------------------------------------------
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 30,966 E 34,611 E16,701 E14,032 E17,657 E8,053
Short-term debt, current portion of long-term
debt and capital lease obligations............. 11,266 7,682 3,322 1,515 759 218
Long-term debt and capital lease obligations, net
of current portion............................. 6,628 710 488 639 1,961 1,270
Book value per common share...................... (234.36) (134.20) (48.74) (21.70) 13.89 17.82
</TABLE>
EDIFY CORPORATION
SELECTED HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 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>
STATEMENT OF OPERATIONS DATA:
Revenues............................... $36,137 $31,619 $70,886 $57,052 $33,017 $16,003 $ 8,363
Income (loss) from continuing
operations........................... (8,998) (1,837) (6,675) 3,952 (755) (104) (1,744)
Basic net income (loss) per common
share from continuing operations..... (0.51) (0.11) (0.39) 0.24 (0.07) (0.05) --
Diluted net income (loss) per common
share from continuing operations..... (0.51) (0.11) (0.39) 0.22 (0.07) (0.05) --
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ------------------------------------------------
1999 1998 1997 1996 1995 1994
-------- --------- ------- ------- ------- ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets....................................... $62,227 $67,004 $68,480 $60,721 $15,372 $6,214
Capital lease obligations, excluding current
portion.......................................... 1 20 277 674 510 148
Book value per common share........................ 2.48 2.98 3.36 3.05 (5.64) (6.07)
</TABLE>
25
<PAGE> 40
VERTICALONE CORPORATION
SELECTED HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION
(OCTOBER 8, 1998)
SIX MONTHS ENDED THROUGH
JUNE 30, 1999 DECEMBER 31, 1998
---------------- ---------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................................ $ -- $ --
Income (loss) from continuing operations................ (2,083) (167)
Basic net income (loss) per common share from continuing
operations............................................ (0.28) (0.09)
Diluted net income (loss) per common share from
continuing operations................................. (0.28) (0.09)
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998
------------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
BALANCE SHEET DATA:
Total assets................................................ $15,689 $ 209
Short-term debt, current portion of long-term debt and
capital lease obligations................................. -- 200
Long-term debt and capital lease obligations, net of current
portion................................................... 534 --
Book value per common share................................. (0.32) (0.02)
</TABLE>
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA -- S1, FICS, EDIFY, VERTICALONE
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
---------------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................................... $ 84,565 $ 131,091
Loss from continuing operations before amortization of
intangible assets and acquisition charges................. (26,435) (55,505)
Loss from continuing operations............................. (173,511) (347,604)
Basic and diluted loss per common share from continuing
operations before amortization of intangible assets and
acquisition charges....................................... (0.59) (1.33)
Basic and diluted loss per common share from continuing
operations................................................ (3.85) (8.32)
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
1999
----------
<S> <C>
BALANCE SHEET DATA:
Total assets................................................ $1,086,288
Short-term debt, current portion of long-term debt and
capital lease obligations................................. 12,190
Long-term debt and capital lease obligations, excluding
current portion........................................... 1,433
Book value per common share................................. 20.90
</TABLE>
26
<PAGE> 41
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA -- S1, FICS, EDIFY
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
---------------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................................... $ 84,565 $ 131,091
Loss from continuing operations before amortization of
intangible assets and acquisition charges................. (24,352) (55,338)
Loss from continuing operations............................. (146,984) (298,549)
Basic and diluted loss per common share from continuing
operations before amortization of intangible assets and
acquisition charges....................................... (0.59) (1.46)
Basic and diluted loss per common share from continuing
operations................................................ (3.56) (7.88)
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
1999
----------
<S> <C>
BALANCE SHEET DATA:
Total assets................................................ $ 927,432
Short-term debt, current portion of long-term debt and
capital lease obligations................................. 12,190
Long-term debt and capital lease obligations, excluding
current portion........................................... 899
Book value per common share................................. 19.14
</TABLE>
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA -- S1, FICS, VERTICALONE
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
---------------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................................... $ 55,738 $ 82,235
Loss from continuing operations before amortization of
intangible assets and acquisition charges................. (14,730) (35,735)
Loss from continuing operations............................. (108,466) (222,534)
Basic and diluted loss per common share from continuing
operations before amortization of intangible assets and
acquisition charges....................................... (0.38) (1.00)
Basic and diluted loss per common share from continuing
operations................................................ (2.76) (6.20)
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
1999
--------
<S> <C>
BALANCE SHEET DATA:
Total assets................................................ $698,829
Short-term debt, current portion of long-term debt and
capital lease obligations................................. 12,098
Long-term debt and capital lease obligations, excluding
current portion........................................... 1,432
Book value per common share................................. 14.97
</TABLE>
27
<PAGE> 42
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA -- S1, EDIFY, VERTICALONE
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
---------------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................................... $ 56,502 $ 73,036
Loss from continuing operations before amortization of
intangible assets and acquisition charges................. (18,752) (44,111)
Loss from continuing operations............................. (96,998) (202,695)
Basic and diluted loss per common share from continuing
operations before amortization of intangible assets and
acquisition charges....................................... (0.53) (1.39)
Basic and diluted loss per common share from continuing
operations................................................ (2.76) (6.38)
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
1999
--------
<S> <C>
BALANCE SHEET DATA:
Total assets................................................ $666,070
Short-term debt, current portion of long-term debt and
capital lease obligations................................. 558
Long-term debt and capital lease obligations, excluding
current portion........................................... 589
Book value per common share................................. 16.05
</TABLE>
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA -- S1, FICS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
---------------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................................... $ 55,738 $ 82,235
Loss from continuing operations before amortization of
intangible assets and acquisition charges................. (12,647) (35,568)
Loss from continuing operations............................. (81,933) (173,467)
Basic and diluted loss per common share from continuing
operations before amortization of intangible assets and
acquisition charges....................................... (0.36) (1.11)
Basic and diluted loss per common share from continuing
operations................................................ (2.32) (5.41)
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
1999
----------
<S> <C>
BALANCE SHEET DATA:
Total assets................................................ $ 539,973
Short-term debt, current portion of long-term debt and
capital lease obligations................................. 12,098
Long-term debt and capital lease obligations, excluding
current portion........................................... 898
Book value per common share................................. 12.32
</TABLE>
28
<PAGE> 43
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA -- S1, EDIFY
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
---------------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................................... $ 56,502 $ 73,036
Loss from continuing operations before amortization of
intangible assets and acquisition charges................. (16,669) (43,944)
Loss from continuing operations............................. (70,471) (153,640)
Basic and diluted loss per common share from continuing
operations before amortization of intangible assets and
acquisition charges....................................... (0.53) (1.57)
Basic and diluted loss per common share from continuing
operations................................................ (2.26) (5.51)
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
1999
--------
<S> <C>
BALANCE SHEET DATA:
Total assets................................................ $507,214
Short-term debt, current portion of long-term debt and
capital lease obligations................................. 558
Long-term debt and capital lease obligations, excluding
current portion........................................... 55
Book value per common share................................. 13.20
</TABLE>
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA -- S1, VERTICALONE
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
---------------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................................... $ 27,675 $ 24,180
Loss from continuing operations before amortization of
intangible assets and acquisition charges................. (7,047) (24,341)
Loss from continuing operations............................. (31,947) (77,613)
Basic and diluted loss per common share from continuing
operations before amortization of intangible assets and
acquisition charges....................................... (0.24) (0.94)
Basic and diluted loss per common share from continuing
operations................................................ (1.09) (3.00)
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
1999
--------
<S> <C>
BALANCE SHEET DATA:
Total assets................................................ $278,611
Short-term debt, current portion of long-term debt and
capital lease obligations................................. 466
Long-term debt and capital lease obligations, excluding
current portion........................................... 588
Book value per common share................................. 7.33
</TABLE>
29
<PAGE> 44
RISK FACTORS
The transactions involve a high degree of risk. By electing to participate
in, or voting in favor of, the proposed transactions, holders of FICS, Edify and
VerticalOne securities 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, you should carefully consider the following risk
factors in making your investment decision.
RISKS RELATED TO THE TRANSACTIONS
Because the number of shares of S1 common stock to be issued in the proposed
transactions is fixed, holders of FICS, Edify and VerticalOne stock may
receive less value for their shares if the market price of the S1 common stock
declines before the closings of the proposed transactions
Edify stockholders will receive a fixed ratio of 0.330969 shares of S1
common stock for each Edify share they own. VerticalOne stockholders will
receive a fixed ratio of up to 0.2 shares of S1 common stock for each share of
VerticalOne common stock they own or into which their shares of VerticalOne
preferred stock may be converted, of which 0.1903 shares of S1 common stock will
be delivered at closing and the remaining up to 0.0097 additional shares of S1
common stock to be delivered if specified conditions are met. FICS securities
holders will receive a pro rata portion of 10,000,000 shares, based on ownership
of FICS, and a pro rata portion of any earn-out shares. There will be no
adjustment to these exchange ratios, even if the value of the S1 common stock
declines. The specific dollar value of S1 common stock that FICS, Edify and
VerticalOne stockholders will receive upon completion of the particular
transaction will depend on the market value of S1 common stock at the time of
completion of the transaction. The share price of S1 common stock fluctuates in
the market and has experienced significant volatility. We cannot predict the
market prices for S1 common stock at any time before or after the completion of
the transactions. We encourage you to obtain current market quotations for S1
common stock before making your decision on the proposed transactions. Edify
stockholders should also obtain current market quotations for Edify common stock
before making their investment decision.
S1 will face technical, operational and strategic challenges that may prevent
S1 from successfully integrating FICS, Edify and VerticalOne with S1
The transactions involve risks related to the integration and management of
acquired technology, operations and personnel. S1's integration of FICS, Edify
and VerticalOne will involve strategic and operational challenges. 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 acquired 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 VerticalOne's 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.
In addition, pending the transactions, there could be disruption of the
business of S1, FICS, Edify or VerticalOne caused by employee uncertainty,
customer or supplier confusion or interruption
30
<PAGE> 45
of, or a loss of momentum in, the activities of each of their businesses. These
transitional issues could cause quarterly operating results to be lower than
expected.
Because the transactions are not conditioned on each other, if S1 fails to
close one or more of the transactions the value of the S1 common stock could
decline
Each of the transactions may not receive required stockholder approvals, or
some other condition may not be satisfied. None of the transactions is
conditioned on the other. As a result, one or more of the transactions may
close, even though the others do not. If S1 fails to close one or more
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, FICS, Edify and VerticalOne have different
interests from yours, and could exert their influence over the proposed
transactions in a way that may not benefit you
The directors and officers of S1, FICS, Edify and VerticalOne have
interests in the proposed transactions and may participate in arrangements that
are different from, or are in addition to, those of stockholders generally.
These include:
- Michel Akkermans, the Chairman of the Board and Chief Executive Officer
of FICS will become the President and Chairman of the Board of S1 upon
closing of the FICS Transaction. In addition, Mr. Akkermans will be able
to designate another person to serve for a three-year term on the S1
board of directors if the FICS Transaction closes.
- 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.
- Gregg S. Freishtat, the Chairman and Chief Executive Officer of
VerticalOne, will be appointed to serve for a three-year term on the S1
board of directors upon closing of the VerticalOne Transaction. Mr.
Freishtat has also agreed to continue to serve as chief executive officer
of VerticalOne after closing.
- The executive officers of VerticalOne are expected to remain the
executive officers of VerticalOne after completion of the merger.
- S1 has agreed to grant additional options to purchase S1 common stock if
the FICS Transaction closes.
- Edify has recently granted options to some of its key executives. As of
October 1, 1999, 648,594 shares of Edify common stock are subject to
unvested options which could vest if holders of those options are not
retained by S1 after closing of the Edify Transaction.
- Some officers and directors of VerticalOne hold options to purchase
VerticalOne common stock. If the VerticalOne Transaction is completed,
those options will be converted into options to purchase shares of S1
common stock.
- Some VerticalOne officers and employees will be granted options to
acquire up to approximately 2.0 million shares of S1 common stock if the
VerticalOne Transaction closes.
- As of the S1 record date, directors and executive officers of S1 and
their affiliates held approximately 7% of the outstanding shares of S1
common stock. The number of shares held does not include 72,800 shares
beneficially owned by Andersen Consulting LLP or its affiliate, AC II
Technology (ACT II) B.V. Jackson L. Wilson, Jr., a director of S1, is
Managing Partner -- Global Markets of Andersen Consulting.
- As of the Edify record date, directors and executive officers of Edify
and their affiliates held approximately 5% of the outstanding shares of
Edify common stock.
31
<PAGE> 46
- As of the VerticalOne record date, directors and executive officers of
VerticalOne and its affiliates held approximately 99% of the outstanding
shares of VerticalOne common stock, 39% of its Series A preferred stock
and 89% of its Series B preferred stock.
- Some Edify executives will receive severance packages if the Edify
Transaction closes and their employment is terminated.
- Any employee of VerticalOne who is terminated during the two-year period
following the completion of the S1-VerticalOne merger at the request of
S1 but over the objection of Gregg S. Freishtat, the current Chairman and
Chief Executive Officer of VerticalOne or his designee, will be paid a
one-time severance payment equal to his or her then current salary for 90
days and any unvested options that would vest in the following 12 month
period will vest.
- S1, FICS, Edify and VerticalOne 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 proposed transactions 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, Edify and VerticalOne incurred operating losses in 1998
and in the six months ended June 30, 1999. In addition, as a result of the
transactions, S1 expects to record approximately $870 million of goodwill and
other intangible assets. Therefore, we expect to record amortization expense of
approximately $287 million annually. 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
- 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, Edify and VerticalOne 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.
32
<PAGE> 47
- 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 four primary product lines and our revenues
will depend on demand for these products
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. VerticalOne has not generated any material
revenue from its service. 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 and our ability to grow
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
- 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
- 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.
33
<PAGE> 48
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
all three proposed transactions, the combined company had one client in 1998
which accounted for 13% of revenue for that year. On a pro forma basis, assuming
consummation of all three proposed transactions, the combined company had one
client which accounted for 15% of revenue for the six months ended June 30,
1999. We expect that a significant portion of the combined company's revenue
will depend on a limited number of clients in the 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 four
companies currently provide. As a result, customers, resellers and product and
service providers which currently have relationships with S1, FICS, Edify or
VerticalOne 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.
34
<PAGE> 49
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, under 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 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.
35
<PAGE> 50
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 its competitive position and income potential
The combined company's success depends upon its proprietary technology and
information. It relies on a combination of patent, 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 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 S1, FICS, Edify and
VerticalOne have experienced, we believe that the combined company's future
success will depend in large part on the
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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
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 impair its ability to
successfully implement its business plan.
If the combined company fails to adequately address the year 2000 issue, it
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. 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.
Internet-related laws could adversely affect our business
Laws and regulations which apply to communications and commerce over the
internet are becoming more prevalent. For example, a recent session of the
United States Congress resulted in internet laws regarding copyrights, taxation
and the transmission of certain types of material. The European Union recently
enacted its own privacy regulations, and is currently considering other
internet-related legislation. The law of the internet, however, remains largely
unsettled, even in areas where there has been some legislative action. It may
take years to determine whether and how existing laws such as those governing
intellectual property, privacy, libel and taxation apply to the internet. In
addition, the growth and development of the market for online financial
services, including online banking, may prompt calls for more stringent consumer
protection laws, both in the United States and abroad, that may impose
additional burdens on companies conducting business online. The adoption or
modification of laws or regulations relating to the internet, or interpretations
of existing law, could adversely affect the combined company's business.
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
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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 its stock price and its 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 facilitate the resale by Michel Akkermans of S1
common stock yielding net proceeds of at least (1) 18% of the value of the S1
common stock he will receive at closing of the FICS Transaction, plus (2) $15
million. Some executive officers and directors of S1 may also sell shares of S1
common stock in that sale.
Including S1 common stock issued in the transactions, after the closing of
the transactions, the combined company will have 47,405,755 shares of common
stock outstanding, assuming no exercise of outstanding options or warrants.
As of the date of this prospectus/proxy statement, holders of 2,029,106 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 September 30, 1999, there were outstanding options to purchase
13,234,708 shares of S1 common stock, warrants to acquire 1,000,000 shares of S1
common stock, and 1,356,054 shares of preferred stock convertible into an
aggregate of 2,282,990 shares of S1 common stock. The common stock issuable
after vesting and 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. The options and warrants generally have exercise
prices significantly below the current market price of the S1 common 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, the combined company's directors,
executive officers, principal stockholders and their affiliates will
beneficially own a significant percentage of the S1 common stock. 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.
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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
- 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
- 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 Private Securities Litigation Reform
Act. These statements include statements with respect to S1's, FICS's, Edify's
and VerticalOne's financial condition, results of operations and business and on
the expected impact of the FICS Transaction, the Edify Transaction and the
VerticalOne 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 in the
proposed transactions will increase or decrease prior to completion of
the proposed transactions
- the possibility that the proposed transactions will not be consummated
- the possibility that the anticipated benefits from the proposed
transactions will not be fully realized
- the possibility that costs or difficulties related to the integration of
our businesses will be greater than expected
- the possibility that, pending the transactions, there could be disruption
of the business of S1, FICS, Edify or VerticalOne caused by employee
uncertainty, customer or supplier confusion or interruption of, or a loss
of momentum in, the activities of each of their businesses, which could
cause quarterly operating results to be lower than expected
- our dependence on the timely development, introduction and customer
acceptance of new internet services
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- 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
- 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 30.
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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.
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
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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 is a global provider of internet and voice electronic
commerce portal solutions that enable organizations to intelligently manage
customer relationships. The company's software offers organizations the means to
automate, integrate, and personalize interactions with customers through
multiple channels, 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 1,300 customers for custom development of automated internet
and telephone applications such as bank account inquiries and call center
applications. Since 1996, Edify has also licensed its software application
product, the Electronic Banking System, to enable financial institutions the
means to deploy a suite of automated banking services over the internet.
Edify's Electronic Workforce is a full-featured, scalable and flexible
application development and runtime system that enables organizations to create
and deploy custom internet and voice electronic commerce 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 application 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 to both retail and small business customers. 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.
VERTICALONE CORPORATION
VerticalOne provides an internet-based service that consolidates, organizes
and presents consumers' personal account information in a single, easy-to-use
interface, saving them the inconvenience of having to log onto the web sites of
multiple account providers. VerticalOne's service enables users of internet
portals and other destination sites to allow access to various personal accounts
at one location. Through a secure, reliable and private information source,
VerticalOne's service provides access to such personal account information as
bank and investment information, credit card balances, household bills, travel
rewards programs, and e-mail.
VerticalOne was founded in October 1998, and its service was launched in
August 1999, with three internet destination sites offering the initial beta
release. Product development continued with the final release of version 1.0 in
October 1999. Version 2.0 is scheduled to be released in early 2000.
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THE S1 MEETING
DATE, TIME, PLACE AND PURPOSE OF S1'S MEETING
The special meeting of stockholders of S1 will be held at 8:00 a.m.,
Eastern time, on November 10, 1999 at the Swissotel, 3391 Peachtree Road, NE,
Atlanta, GA 30326. At the meeting, stockholders at the close of business on
October 1, 1999 will be asked:
1. To approve the issuance of shares of S1 common stock in the FICS
Transaction. The agreements for the FICS Transaction are attached
as Annexes A and B to this prospectus/proxy statement.
2. To approve the issuance of shares of S1 common stock in the Edify
Transaction. The S1-Edify merger agreement is attached as Annex C
to this prospectus/proxy statement.
3. To consider the issuance of shares of S1 common stock in S1's
acquisition by merger of VerticalOne corporation. The
S1-VerticalOne merger agreement is attached as Annex D to this
prospectus/proxy statement.
4. To approve a proposed amendment to S1's charter to change the
corporate name of S1 from "Security First Technologies Corporation"
to "S1 Corporation."
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 27,703,089 shares of S1 common
stock outstanding and entitled to vote, held of record by approximately 395
stockholders.
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 issuances of S1 common stock in the FICS, Edify and
VerticalOne Transactions requires the affirmative vote of a majority of the
votes cast, either in person or by proxy, at the S1 meeting.
Approval of the proposed amendment to S1's charter to change S1's name to
"S1 Corporation" requires the affirmative vote of the majority of the shares of
S1 common stock eligible to vote 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
proposals. 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 held approximately 7% of all of the outstanding S1 common stock, as of the
record date. The number of shares held does not include 72,800 shares
beneficially owned by Andersen Consulting LLP or its affiliate, AC II Technology
(ACT II) B.V. Jackson L. Wilson, Jr., a director of S1, is Managing
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Partner -- Global Markets of Andersen Consulting. At the time of executing the
agreements giving rise to the proposed transactions, executive officers and
directors then in office executed voting agreements in which they have agreed to
vote all shares of S1 common stock owned by them in favor of the FICS
Transaction, the Edify Transaction and the VerticalOne Transaction.
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. 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.
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.
PARTICIPATING IN THE FICS TRANSACTION
Only holders of securities issued by FICS may participate in the FICS
Transaction and join the stock purchase agreements. If you wish to participate
in the FICS Transaction, please read carefully this prospectus/proxy statement
including the Annexes, including the share purchase agreement and the stock
purchase agreement which are attached as Annex A and Annex B. If you agree to
the terms of these agreements, please indicate your acceptance by signing the
enclosed signature pages accompanying this prospectus/proxy statement and return
them in the enclosed envelope. If you wish
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to participate in the FICS Transaction, you must send to FICS your signed
signature pages for both the share purchase agreement and the stock purchase
agreements on or before November 10, 1999.
IF YOU WISH TO PARTICIPATE IN THE FICS TRANSACTION, YOU MUST RETURN YOUR
EXECUTED SIGNATURE PAGES TO FICS ON OR BEFORE NOVEMBER 10, 1999.
THE EDIFY MEETING
DATE, TIME, PLACE AND PURPOSE OF EDIFY'S MEETING
The special meeting of stockholders of Edify will be held at 10:00 a.m.,
Pacific time, on November 10, 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 October 1, 1999 will be asked to approve and adopt the
S1-Edify merger agreement and approve the Edify Transaction.
The S1-Edify merger agreement is attached to this prospectus/proxy
statement as Annex C.
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 17,953,043 shares of Edify
common stock outstanding and entitled to vote, held of record by approximately
275 stockholders. 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.
VOTE REQUIRED
The affirmative vote of a majority of the outstanding shares of Edify
common stock is required to approve and adopt the S1-Edify 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 held 873,410 shares of Edify common stock. These shares constituted
approximately 5% of the outstanding shares of Edify common stock on that date.
At the time of executing the agreement, giving rise to the Edify Transaction,
executive officers and directors executed voting agreements in which they agreed
to vote all shares of Edify common stock owned by them in favor of the Edify
Transaction. See the section entitled "The Edify Agreements -- Related
Agreements -- Edify Stockholders' Voting Agreements" on page 101.
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, Corporate Investor
Communications, Inc., to aid it in the solicitation process. S1 will pay that
firm a fee of $4,500 plus an additional amount for each stockholder contacted by
Corporate Investor Communications, Inc., 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.
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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.
Edify'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 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.
THE VERTICALONE MEETING
DATE, TIME, PLACE AND PURPOSE OF VERTICALONE'S MEETING
The special meeting of stockholders of VerticalOne will be held at 8:00
a.m., Eastern time, on November 10, 1999 at VerticalOne's headquarters located
at Two Concourse Parkway, Suite 700 Atlanta, Georgia 30328. At the meeting,
stockholders at the close of business on October 8, 1999, the record date, will
be asked to approve and adopt the S1-VerticalOne merger agreement.
The S1-VerticalOne merger agreement is attached to this prospectus/proxy
statement as Annex D.
RECORD DATE AND OUTSTANDING SHARES
Holders of record of VerticalOne common stock, Series A preferred stock and
Series B preferred 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 7,552,400 shares of VerticalOne common stock
outstanding and entitled to vote, held of record by approximately 17
stockholders. As of the close of business on the record date, there were
3,919,243 shares of VerticalOne Series A preferred stock outstanding and
entitled to vote held of record by approximately 71 stockholders. As of the
close of business on the record date, there were 7,716,050 shares of VerticalOne
Series B preferred stock outstanding and entitled to vote, held of record by
approximately 61 stockholders. Each holder
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of VerticalOne common stock is entitled to one vote for each share of
VerticalOne common stock held as of the record date. Holders of VerticalOne
Series A preferred stock and Series B preferred stock are entitled to cast one
vote for every share of VerticalOne common stock into which the preferred stock
is convertible as of the record date.
VOTE AND QUORUM REQUIRED
To constitute a quorum, a majority of the holders of VerticalOne common
stock, Series A preferred stock and Series B preferred stock, taken together,
and a majority of the holders of VerticalOne Series B preferred stock,
separately, must be present in person or by proxy at the VerticalOne meeting.
The holders of a majority of the outstanding shares of VerticalOne common stock,
VerticalOne Series A preferred stock and VerticalOne Series B preferred stock,
voting together as a single class, and the holders of a majority of the Series B
preferred stock, voting as a separate class, must approve and adopt the
S1-VerticalOne merger agreement. Holders of VerticalOne common stock are
entitled to cast one vote per share of VerticalOne common stock owned as of
October 8, 1999, the record date. Holders of VerticalOne preferred stock are
entitled to cast one vote for every share of VerticalOne common stock into which
the preferred stock may be converted on the record date. The conversion ratio
for both VerticalOne Series A and Series B preferred stock is one-to-one.
ABSTENTIONS
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
VerticalOne Transaction.
STOCK OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
As of the record date, holders of approximately 89% of the VerticalOne
common stock, 51% of the VerticalOne Series A preferred stock and 79% of the
VerticalOne Series B preferred stock had agreed to vote in favor of the
VerticalOne Transaction. See the section entitled "The VerticalOne
Agreements -- Related Agreements -- VerticalOne Share Retention Agreements" on
page 125.
VOTING OF PROXIES
The proxy accompanying this prospectus/proxy statement is solicited on
behalf of the VerticalOne 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 VerticalOne. All properly signed
proxies that VerticalOne 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 VerticalOne
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 VerticalOne, 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 bank or
other nominee and you wish to vote at the meeting, you must bring to the meeting
a letter from the bank or other nominee confirming your beneficial ownership of
the shares.
VerticalOne'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
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properly brought before the meeting, the persons named in the proxies will have
discretion to vote on such matters in accordance with their best judgement.
APPRAISAL RIGHTS
Under Section 262 of the Delaware General Corporation Law, a copy of which
is included as Annex I to this prospectus/proxy statement, each holder of
VerticalOne stock will be entitled to dissent and demand an appraisal of the
"fair value" of VerticalOne stock held by the holder if, before the vote at the
VerticalOne meeting, the holder files with VerticalOne a written demand for
appraisal. If you hold VerticalOne stock and wish to exercise your appraisal
rights, you should send your written demand for appraisal to VerticalOne at Two
Concourse Parkway, Suite 700, Atlanta, GA 30328. If you fail to comply with
these requirements, you will be bound by the terms of the S1-VerticalOne merger
agreement.
Within 10 days after the date on which the VerticalOne Transaction is
completed, VerticalOne shall notify each stockholder exercising appraisal rights
in compliance with Section 262 that the S1-VerticalOne merger has become
effective. At any time within 60 days after the effective date for the
S1-VerticalOne merger, any stockholder shall have the right to withdraw his or
her demand for appraisal and to accept the terms offered in the S1-VerticalOne
merger agreement.
Within 120 days after the effective date, VerticalOne or any VerticalOne
stockholder who has perfected his or her appraisal rights may file a petition in
the Delaware Court of Chancery demanding a determination of the value of the
stock of all dissenting stockholders. At the hearing on the petition, the
chancery court shall determine the VerticalOne stockholders who have complied
with Section 262 and who have become entitled to appraisal rights. The chancery
court may require the dissenting stockholders to submit their certificates of
stock, if any, to the Register in Chancery for notation of the pendency of the
appraisal proceedings. If any stockholder fails to comply with that direction,
the chancery court may dismiss the proceedings as to that stockholder.
After determining the VerticalOne stockholders entitled to an appraisal,
the chancery court shall appraise the shares as to their fair value. In
determining fair value, the chancery court shall take into account all relevant
factors. The chancery court shall direct the payment of the fair value of the
shares, together with interest, if any, by VerticalOne to the VerticalOne
stockholders entitled to payment. The costs of the proceeding may be determined
by the chancery court and assessed against either VerticalOne or the VerticalOne
stockholders, or both.
The foregoing constitutes a summary of the rights of VerticalOne
stockholders requesting appraisal. It contains material information relating to
the exercise of appraisal rights but does not purport to be a complete statement
of the procedures to be followed by VerticalOne stockholders desiring to
exercise their rights of appraisal. The preservation and exercise of appraisal
rights are conditioned on strict adherence to the applicable provisions of
Section 262 of the Delaware General Corporation Law. Each VerticalOne
stockholder desiring to exercise appraisal rights should refer to Section 262
for a complete statement of the VerticalOne stockholder's rights and the steps
which must be followed in connection with the exercise of those rights.
For further information relating to the exercise of appraisal rights,
please see Annex I to this prospectus/proxy statement.
HOLDERS OF VERTICALONE STOCK SHOULD NOT SEND ANY CERTIFICATES REPRESENTING
VERTICALONE STOCK. FOLLOWING THE EFFECTIVE TIME OF THE VERTICALONE TRANSACTION,
HOLDERS OF VERTICALONE 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,
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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 a transaction with FICS, 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, 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.
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.
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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.
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.
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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 the
FICS stockholders and S1 continued to negotiate the terms and structure of the
transaction with the FICS stockholders. The structure of the proposed
transaction was agreed upon late on May 15, 1999, and the parties continued to
negotiate the final terms and conditions through 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 Robertson Stephens
presented to the board a detailed financial analysis of the proposed
transactions.
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 Edify 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 S1-Edify merger agreement, stock option agreement and related agreements and
transactions, and determined to recommend that the S1-Edify 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. 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 then-agreed exchange
consideration in the proposed FICS acquisition was fair from a financial point
of view to S1 and (ii) the exchange ratio in the
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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.
In June 1999, VerticalOne decided to proceed with a strategic round of
private financing and began seeking new strategic alliances. In that regard, in
late June 1999, Gregg Freishtat, VerticalOne's Chairman and Chief Executive
Officer, met with Michael Karlin, a former officer and large stock and option
holder of S1, to discuss obtaining Mr. Karlin's assistance in obtaining
financing from S1 or certain other potential partners in the financial industry.
In early August 1999, VerticalOne finalized an arrangement with Mr. Karlin
pursuant to which he would earn warrants to purchase 90,000 shares of common
stock of VerticalOne in the event VerticalOne entered into a strategic
transaction, either a financing or a business combination, with a party
introduced by Mr. Karlin to VerticalOne.
In early August 1999, Mr. Karlin introduced Mr. Freishtat and Neal McEwen,
VerticalOne's President and Chief Financial Officer, to Mr. Lunsford. At this
meeting, Messrs. Freishtat and McEwen explained the VerticalOne service and
discussed the possibility of S1 investing in VerticalOne. The parties also
discussed a potential commercial relationship between VerticalOne and S1, the
terms of which would include warrants to purchase shares of VerticalOne common
stock that would become exercisable by S1 if it generated certain numbers of
users of the VerticalOne service.
On August 20, 1999, Messrs. Freishtat, McEwen and Marc Gorlin,
VerticalOne's Executive Vice President, met at the offices of S1 with Messrs.
Mahan and Lunsford. At this meeting, Messrs. Mahan and Lunsford broached the
subject of a possible acquisition of VerticalOne by S1. Discussions among
Messrs. Freishtat, Mahan and Lunsford continued over the next several days. On
August 24 and 25, 1999, representatives of one of S1's outside investment
banking firms and its outside legal counsel came to VerticalOne for purposes of
completing their due diligence. On August 24, 1999, S1 informed VerticalOne that
it was inclined to make an investment in the company rather than pursue an
acquisition, given the other strategic initiatives pending before S1.
Also in early August 1999, S1 received financial information from FICS with
respect to its operations through June 30, 1999. Messrs. Mahan, Stockwell and
Lunsford spent several days reviewing the FICS information and discussing S1's
operating plan and strategy with respect to both FICS and VerticalOne.
On August 18, 1999, the S1 board met to discuss and review in detail the
FICS financial reports. Based on their evaluation, the S1 board decided that
management should further investigate the financial performance of FICS in light
of the then-pending acquisition.
On August 28, 1999, Messrs. Mahan, Stockwell and Lunsford went to Brussels
and met with Mr. Akkermans and the rest of the FICS management team for several
days to review in detail FICS's operations. Following that meeting, S1
management began to formulate terms for discussions with FICS. Discussions among
Messrs. Mahan, Lunsford, Stockwell, Akkermans and Sipowicz continued via
telephone for several days.
While these discussions continued, Messrs. Mahan and Lunsford continued to
gather more information about VerticalOne. After further discussions with its
investment bankers and meetings with certain of S1's large banking customers
about VerticalOne, on or about September 3, 1999, Messrs. Freishtat and Mahan
resumed discussions concerning a business combination. In particular, Mr. Mahan
reported that the customers of S1 that had seen VerticalOne's account
aggregation
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system had been impressed by it and were prepared to use the service in S1's
data center if S1 were to offer the service in that manner.
On September 5 and 6, 1999, Messrs. Mahan and Stockwell and S1's legal
counsel, along with FICS's legal counsel and certain FICS stockholders held
discussions in which the parties began to negotiate terms for a new agreement
among S1 and the FICS stockholders. On September 6, 1999, the S1 Board of
Directors met to discuss the new terms, and on September 7, 1999, S1 announced
that it was in discussions regarding new terms of the FICS Transaction which
would involve reducing the aggregate number of shares of S1 common stock that
would be issued in the transaction as well as creating an earn-out for a
percentage of the shares. At that time, legal counsel for S1 and FICS began the
preparation of documents to reflect the new terms of the FICS Transaction.
Later that same day, Messrs. Mahan and Lunsford met with Messrs. Freishtat,
Gorlin and Steve Hufford, VerticalOne's Vice President of Strategic Development,
at the offices of Goldman, Sachs & Co., S1's investment banker for the
VerticalOne Transaction, to preview the VerticalOne service and discuss a
potential combination.
From September 7, 1999 until September 21, 1999, officers of FICS and S1,
and their respective legal counsel and investment banking representatives, met
by phone and in person to discuss the various aspects of the proposed new
transaction.
Meanwhile, on September 8, 1999, Messrs. Freishtat, McEwen and Hufford met
in Atlanta with several members of the management of S1, Edify and FICS. The
VerticalOne personnel later that day met with Messrs. Mahan, Lunsford and
Stockwell to further discuss a potential business combination. Mr. Mahan
reported that Goldman, Sachs & Co. was still reviewing the potential transaction
and VerticalOne's business model, but was likely to be supportive of the
transaction. At this meeting, Messrs. Freishtat and Mahan reviewed the key terms
of the transaction.
From September 9, 1999 until September 23, 1999, officers of VerticalOne
and S1, and their respective legal counsel and investment banking
representatives, met by phone and in person to discuss the various aspects of
the proposed business combination, as well as the terms of the preferred stock
investment and strategic marketing and sales agency arrangement.
The S1 board held a meeting on the evening of September 19, 1999. The S1
board reviewed the final forms of agreements and understandings of the parties
to the FICS Transaction and received the oral opinion of Robertson Stephens,
subsequently confirmed in writing as of September 21, 1999, that the exchange
ratio in the FICS Transaction was, as of that date, fair from a financial point
of view to S1. Following a discussion, the S1 board of directors unanimously
resolved that the transaction was fair to, and the best interests of, S1's
stockholders, and approved the termination of the May 16, 1999 agreements and
the final terms of the agreements for the new FICS Transaction, and determined
to recommend that the issuance of S1 common stock in the FICS Transaction be
approved by S1's stockholders. Final discussions among the parties were
concluded and the documents related to the FICS Transaction were finalized on
September 21, 1999, at which time the May 16, 1999 agreements were terminated
and the new stock purchase agreements and related documents were signed. The
termination of the May 16, 1999 agreements and the terms of the new FICS
Transaction were publicly announced the next morning.
On September 23, 1999, the VerticalOne board held a meeting at which they
considered the final forms of the agreements and the understandings of the
parties and voted unanimously to approve the VerticalOne Transaction.
On the afternoon of September 23, 1999, the S1 board of directors held
another meeting. Legal counsel reviewed in detail the final forms of agreements
and understandings of the parties to the VerticalOne Transaction. Goldman, Sachs
& Co. delivered its oral opinion 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 opinion,
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the exchange ratio in the VerticalOne Transaction was fair from a financial
point of view to S1. Following a discussion, the S1 board of directors
unanimously resolved that the VerticalOne Transaction was fair to, and in the
best interests of, S1's stockholders, approved the final terms of the
S1-VerticalOne merger agreement and the VerticalOne Transaction, and determined
to recommend that the issuance of S1 common stock in the VerticalOne Transaction
be approved by S1's stockholders. Final discussions were concluded and the
documents related to the VerticalOne Transaction were finalized at almost
midnight on September 23, 1999, at which time the S1-VerticalOne merger
agreement and related documents were signed. The VerticalOne Transaction was
publicly announced the next morning.
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 the section entitled "Documents Incorporated by
Reference in This Prospectus/Proxy Statement" on page 216. 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 217.
S1'S REASONS FOR THE FICS TRANSACTION
At a meeting held on September 19, 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 Robertson Stephens that, as of the date of its opinion and
subject to the considerations described in the opinion, the exchange
ratio 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;
- 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.
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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 62.
RECOMMENDATION OF FICS'S BOARD OF DIRECTORS
The FICS board of directors made no recommendation to FICS stockholders
regarding the FICS Transaction. Under Belgian law, the FICS board of directors
is not required to make any such determination. Nevertheless, each of the
directors or, in the case of directors who represent a FICS stockholder on the
board, the related FICS stockholder, has signed the share purchase agreement and
stock purchase agreement.
OPINION OF S1'S FINANCIAL ADVISOR
Pursuant to an engagement letter dated February 24, 1999, as amended on May
28, 1999, S1 engaged Robertson Stephens to, among other things, render an
opinion as to the fairness of the exchange ratio in the FICS Transaction, from a
financial point of view, to S1. For purposes of the Robertson Stephens opinion
and the summary of the opinion set forth in this section, the exchange ratio in
the FICS Transaction refers to the 68.21189342574 shares of S1 common stock to
be issued in exchange for each ordinary share of FICS, or equivalent thereof, at
the closing of the FICS Transaction, as such number may be adjusted to account
for the issuance, where applicable, of up to 4,500,000 additional shares of S1
common stock under the earn-out provisions included in the FICS Transaction. The
additional shares that may be issued under the earn-out provisions are sometimes
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<PAGE> 70
referred to as the earn-out shares. Based upon the closing price of shares of S1
common stock on September 21, 1999, Robertson Stephens noted that the exchange
ratio in the FICS Transaction implied an equity valuation for FICS of
approximately $382 million without regard to the earn-out shares.
On September 19, 1999 at a meeting of the S1 board held to evaluate the
proposed FICS Transaction, Robertson Stephens delivered to the S1 board its oral
opinion, which was subsequently confirmed as a written opinion dated September
21, 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 FICS Transaction was fair to
S1 from a financial point of view. No limitations were imposed by the S1 board
on 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 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. Robertson Stephens
also assisted S1's management in the negotiations leading to an agreement on
principal structural terms of the FICS Transaction.
THE FULL TEXT OF THE ROBERTSON STEPHENS OPINION, WHICH SETS FORTH, AMONG
OTHER THINGS, ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW
UNDERTAKEN, IS ATTACHED AS ANNEX E AND IS INCORPORATED IN THIS PROSPECTUS/PROXY
STATEMENT BY REFERENCE. STOCKHOLDERS OF S1 ARE URGED TO READ THE ROBERTSON
STEPHENS OPINION IN ITS ENTIRETY. THE 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 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 ROBERTSON STEPHENS OPINION SET FORTH IN THIS
PROSPECTUS/PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXT OF THE ROBERTSON STEPHENS OPINION.
In connection with the preparation of the Robertson Stephens opinion,
Robertson Stephens, among other things:
- reviewed certain publicly available financial statements and other
business and financial information of S1 and FICS;
- 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;
- held discussions with the 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 FICS Transaction;
- reviewed the financial terms and conditions set forth in the FICS stock
purchase agreements;
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<PAGE> 71
- reviewed the stock price and trading history of S1 common stock;
- 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;
- compared the financial terms of the FICS Transaction with the financial
terms, to the extent publicly available, of other transactions Robertson
Stephens deemed relevant;
- reviewed the pro forma impact of the FICS Transaction on S1's revenue per
share;
- reviewed and considered information prepared by members of the respective
managements 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 Robertson Stephens deemed relevant.
In its review and analysis, and in arriving at its opinion, Robertson
Stephens considered that S1 was also entering into the Edify merger agreement
providing for the Edify Transaction. S1 informed 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, 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 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.
Robertson Stephens did not consider any potential effects of the subsequently
announced VerticalOne Transaction.
In its review and analysis, and in arriving at its opinion, 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. 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, 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 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
Robertson Stephens reviewed, upon the advice of the managements of S1, FICS and
Edify, 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.
In this regard, Robertson Stephens noted that each of S1, FICS and Edify
face exposure to the Year 2000 problem. Robertson Stephens did not undertake any
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.
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In addition, 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.
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 Robertson Stephens opinion
may affect the opinion, Robertson Stephens assumed no obligation to update,
revise or reaffirm its opinion. The Robertson Stephens opinion is necessarily
based upon financial, market, economic and other conditions as in effect on, and
information made available to Robertson Stephens as of, the date of the
Robertson Stephens opinion. It should be understood that subsequent developments
may affect the conclusion expressed in the Robertson Stephens opinion and that
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 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. 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
Robertson Stephens in connection with rendering the Robertson Stephens opinion.
The following summary of the financial analyses is not a complete description of
all of the analyses performed by 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 ROBERTSON STEPHENS, THESE TABLES MUST BE
READ TOGETHER WITH THE TEXT OF EACH SUMMARY. THE ROBERTSON STEPHENS OPINION IS
BASED UPON THE TOTALITY OF THE VARIOUS ANALYSES PERFORMED BY 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, Robertson Stephens analyzed the respective
contributions of S1 and FICS to the estimated revenues of the combined company
for fiscal years 2000 and 2001, without giving effect to the Edify Transaction,
using for FICS both a base case of FICS management estimates (the "base case")
and estimates that would result in FICS meeting the revenue earnout targets for
fiscal year 2001 (the "earnout case").
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Based on the closing price of S1 common stock on September 21, 1999 of
$35.75, this analysis indicated:
For the base case:
- implied equity values for FICS ranging from approximately $966 million to
$1,138 million; and
- implied exchange ratios per FICS share ranging from approximately 172.3x
to 203.0x.
For the earnout case:
- implied equity values for FICS ranging from approximately $994 million to
$1,138 million; and
- implied exchange ratios per FICS share ranging from approximately 177.3x
to 203.0x.
COMPARABLE COMPANIES ANALYSIS. Using publicly available information,
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 Infosystems AG
- Broadvision, Inc.
- Fundtech LTD.
- Transaction System Architects, Inc.
Multiples compared by Robertson Stephens included total capitalization to
revenues or estimated revenues for calendar years 1999 and 2000. All multiples
were based on closing stock prices as of September 21, 1999.
Using FICS management estimates and ranges of multiples derived by
Robertson Stephens from the comparable companies of 14.0x - 18.0x for the
estimated 1999 revenues of FICS and 7.5x - 10.0x 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 173.0x - 223.0x
2000 estimated revenues................... $ 671 - $ 898 million 119.7x - 160.2x
</TABLE>
PRECEDENT TRANSACTION ANALYSIS. Using publicly available information,
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 18 selected acquisition transactions in the internet content and
service industry since August 1998.
In analyzing these "precedent transactions," 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 values for FICS and
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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 VALUE SHARE
-------------- ----------------------------- -----------------
<S> <C> <C> <C>
Multiples of LTM revenues.... 17.5x - 25.0x $1,081 - $1,548 million 192.9x - 276.3x
Multiples of NTM revenues.... 10.0x - 15.0x $ 846 - $1,274 million 150.9x - 227.3x
</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. Robertson Stephens performed a discounted
cash flow analysis of FICS management estimates of the after-tax free cash flows
of FICS in the earnout and base scenario using a range of earnings estimates for
FICS for the calendar years 1999 through 2003. 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.
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 20.0x to 25.0x. The range of terminal multiples selected reflect
Robertson Stephens' judgment as to an appropriate range of multiples at the end
of the referenced period. The following tables summarize the resulting implied
FICS equity valuations and exchange ratios per FICS share:
For the base case:
<TABLE>
<CAPTION>
IMPLIED EXCHANGE RATIO PER
DISCOUNT RATES IMPLIED FICS EQUITY VALUE FICS SHARE
-------------- ------------------------- -------------------------------
<S> <C> <C>
14% - 18%........................... $490 - $708 million 87.4x - 126.4x
</TABLE>
For the earnout case:
<TABLE>
<CAPTION>
IMPLIED EXCHANGE RATIO PER
DISCOUNT RATES IMPLIED FICS EQUITY VALUE FICS SHARE
-------------- ------------------------- -------------------------------
<S> <C> <C>
14% - 18%........................... $516 - $744 million 92.1x - 132.8x
</TABLE>
PRO FORMA ANALYSES. 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.
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:
Pro Forma Analysis-Base Case Without Giving Effect to the Edify Transaction
<TABLE>
<S> <C>
Fiscal Year 2000 revenue per share accretion................ 42.0%
Fiscal Year 2001 revenue per share accretion................ 31.8%
</TABLE>
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Pro Forma Analysis - Earnout Case Without Giving Effect to the Edify
Transaction
<TABLE>
<S> <C>
Fiscal year 2000 revenue per share accretion................ 36.0%
Fiscal year 2001 revenue per share accretion................ 27.8%
</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 Edify Transaction. 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:
Pro Forma Analysis -- Base Case Giving Effect to the Edify Transaction
<TABLE>
<S> <C>
Fiscal year 2000 revenue per share accretion................ 85.9%
Fiscal year 2001 revenue per share accretion................ 62.1%
</TABLE>
Pro Forma Analysis -- Earnout Case Giving Effect to the Edify Transaction
<TABLE>
<S> <C>
Fiscal year 2000 revenue per share accretion................ 78.9%
Fiscal year 2001 revenue per share accretion................ 57.3%
</TABLE>
The actual results achieved by the combined company may vary from projected
results and the variations may be material.
While the foregoing summary describes certain analyses and factors that
Robertson Stephens deemed material in its presentation to the S1 board, it is
not a comprehensive description of all analyses and factors considered by
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. 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 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 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 Robertson Stephens are based on all analyses and factors taken as a whole and
also on application of Robertson Stephens' own experience and judgment. Such
conclusions may involve significant elements of subjective judgment and
qualitative analysis. 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, 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 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 S1 common stock may be traded at any future time. None of the parties
makes any representations or warranties that the assumptions used by Robertson
Stephens were or are correct.
The engagement letter between S1 and Robertson Stephens provides that, for
its services, 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 Robertson
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Stephens opinion. S1 has also agreed to reimburse Robertson Stephens for certain
of its out-of-pocket expenses, including legal fees, and to indemnify and hold
harmless Robertson Stephens and its affiliates and any director, employee or
agent of Robertson Stephens or any of its affiliates, or any person controlling
Robertson Stephens or its affiliates for certain losses, claims, damages,
expenses and liabilities relating to or arising out of services provided by
Robertson Stephens as financial advisor to S1. The terms of the fee arrangement
with Robertson Stephens, which S1 and Robertson Stephens believe are customary
in transactions of this nature, were negotiated at arm's length between S1 and
Robertson Stephens, and the S1 board was aware of such fee arrangements,
including the fact that a significant portion of the fees payable to Robertson
Stephens is contingent upon completion of the FICS Transaction. 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. 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.
Robertson Stephens was retained based on Robertson Stephens' experience as
a financial advisor in connection with mergers and acquisitions and in
securities valuations generally, as well as Robertson Stephens' investment
banking relationship and familiarity with S1.
Robertson Stephens is an internationally recognized investment banking
firm. As part of its investment banking business, 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, 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.
INTERESTS OF CERTAIN PERSONS IN THE FICS TRANSACTION
You should be aware that the directors and officers of S1 and FICS have
certain interests in the FICS Transaction and have certain arrangements that are
different from, or are in addition to, those of S1 and FICS stockholders
generally. These include:
- Employment. Michel Akkermans, the Chairman and Chief Executive Officer
of FICS will become Chairman and a member of the S1 board of directors
after the FICS Transaction.
- Options. Some FICS executives have been granted stock options that will,
if the FICS Transaction closes, be assumed by S1. In addition, S1 has
agreed, if the FICS Transaction closes, to grant additional options to
purchase S1 common stock to some FICS employees.
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. One of the
conditions to completion of the FICS Transaction requires S1 to arrange for the
resale of a number of shares of S1 common stock that Michel Akkermans will
receive at the closing of the FICS Transaction yielding net proceeds of at least
(1) 18% of the market value of the shares Mr. Akkermans will receive plus (2)
$15 million, either:
- by filing a registration statement with the Securities and Exchange
Commission registering the resale shares and arranging for the resale to
occur through an underwritten transaction on reasonable and customary
terms; or
- by making arrangements for Michel Akkermans to sell the shares in a
private placement exempt from registration under the Securities Act of
1933 with a purchase agreement
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containing substantially similar terms to those he would have received
had he conducted the resale through an underwritten public offering.
Some executive officers and directors of S1 may also sell shares of S1
common stock in that sale.
STRUCTURE OF THE FICS TRANSACTION AND CONVERSION OF FICS COMMON STOCK
The FICS Transaction consists of two separate agreements. Under the terms
of the first agreement, S1 Europe Holdings N.V., a Belgian subsidiary of S1,
will purchase for cash all or substantially all of the issued and outstanding
securities of FICS from the FICS stockholders who elect to participate in the
FICS Transaction. Under the terms of the second agreement, the participating
FICS stockholders will use the proceeds of the sale of their FICS shares to
purchase S1 common stock. Under the terms of the earn-out, described in more
detail in the next section, the selling stockholders of FICS may also obtain a
certain amount of cash from S1 Europe Holdings to purchase additional shares of
S1 common stock.
As a result of the FICS Transaction, FICS will become a subsidiary of S1
Europe Holdings. S1, in connection with the FICS Transaction, expects to:
- issue the participating FICS stockholders up to 10,000,000 shares of S1
common stock at closing;
- issue up to 4,500,000 additional shares of S1 common stock if FICS meets
specified performance criteria while operating as an S1 subsidiary in
accordance with the terms of the earn-out;
- assume current options to purchase FICS stock which will convert into
options to purchase approximately 1,200,000 shares of S1 common stock;
and
- grant approximately 2,800,000 additional options to purchase S1 common
stock.
THE EARN-OUT
As part of the FICS Transaction, an additional 4,500,000 shares of S1
common stock, referred to as the "earn-out shares," are eligible to be obtained
by the former FICS stockholders. Earn-out shares can be obtained by FICS meeting
specified revenue targets and/or partially by signing contracts with specified
large banks and financial institutions during the earn-out period, which runs
from September 21, 1999 through the date 30 days after S1 files with the SEC its
annual report on Form 10-K for fiscal year ended December 31, 2001. In a typical
year, the earn-out period will end on approximately April 30.
In general, one half of the earn-out shares can be obtained by meeting the
revenue targets for each of 2000 and 2001. The revenue targets for fiscal years
2000 and 2001 are $89 million and $123 million, respectively. The revenue
targets may be adjusted based on FICS's fourth quarter 1999 revenues and other
factors related to ongoing business operations of FICS. For earn-out shares to
be obtained based on revenue targets, FICS must also adhere to expense budgets
and satisfy gross margin tests. At least 80% of the revenue targets must be
achieved for each fiscal year to obtain any earn-out shares based on revenue
targets. For 2000, if at least 80% of the revenue target is achieved, then a
number of earn-out shares will be obtained for that year and, if less than 100%
of the revenue target is achieved, the earn-out shares not so earned shall be
carried over to 2001. If less than 80% of the revenue target for 2000 is
achieved, then no earn-out shares will be obtained for that year and a number of
earn-out shares will be carried over to 2001.
Earn-out shares can be also be partially obtained by signing contracts with
certain large banks and financial institutions. If FICS enters into a contract
with a large bank or financial institution during the earn-out period, up to an
additional 225,000 earn-out shares can be obtained for each of up to ten
contracts with different large banks and financial institutions. Large banks and
financial institutions are generally limited to the top 200 largest banks
worldwide by asset size and the top 100
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world financial institutions by market capitalization, which do not already have
a contractual relationship with S1.
Any earn-out shares which are obtained will be issued in one of two
separate distributions, each no later than 30 calendar days following the filing
of S1's annual report on Form 10-K for each of fiscal years 2000 and 2001. The
earn-out shares may be obtained earlier if S1 is acquired by a third party or if
Mr. Akkermans is removed from his position as Chairman of the Board of Directors
of S1 without cause and without his consent. All disputes regarding the earn-out
that cannot be resolved by mutual agreement of the parties will be resolved by
binding arbitration.
The terms of the earn-out are complicated. You should read the above
summary together with the more detailed description of the earn-out in the share
purchase agreement attached at Annex A.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE FICS TRANSACTION
The following discussion sets forth the United States federal income tax
consequences of the FICS Transaction. The discussion 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 discussion 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
certain U.S. stockholders of FICS receive an opinion as to the tax free nature
of the FICS Transaction. The opinion must be reasonably satisfactory to such
FICS stockholders. S1, FICS and specified U.S. stockholders of FICS expect to
receive an opinion from KPMG LLP that the FICS Transaction should be treated for
federal income tax purposes as a tax-free reorganization within the meaning of
Section 368(a) of the Code. 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 FICS Transaction, and will assume that the FICS
Transaction takes place as described in the stock and share purchase agreements,
and on factual representations to be provided to KPMG LLP 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 Europe Holdings N.V. purchased the FICS securities;
(2) The purchase of the S1 common stock by the FICS stockholders will
occur on the date 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 Europe 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, the opinion of KPMG LLP
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
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in the 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 should constitute a
reorganization for U.S. federal income tax purposes and that no gain or loss
should 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 Europe 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 Europe Holdings N.V., or shareholders of S1 should recognize no
gain or loss for U.S. federal income tax purposes.
This section is only a general discussion 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.
This section also does not address the tax consequences to FICS
stockholders under the laws of any country other than the United States. In
particular, this section does not address the tax consequences to FICS
stockholders who are residents of Belgium for tax purposes, are organized under
Belgian law, or have a "permanent establishment" or a fixed base in Belgium.
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 are terminated or expire. S1 has filed the required information
and materials with the Antitrust Division and the FTC. The applicable waiting
periods were terminated early, effective July 26, 1999. The notifications under
the HSR Act remain effective and permit closing of the FICS Transaction within
one year from the expiration or termination of the waiting periods.
The Antitrust Division or the FTC may challenge the FICS Transaction on
antitrust grounds after expiration of the waiting periods. Accordingly, before
or after the completion of the FICS Transaction either the Antitrust Division or
the FTC, or private persons, 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 periods have
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
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statement of which this prospectus/proxy statement is a part, and compliance
with applicable corporate law of Delaware and Belgium.
RESTRICTIONS ON SALES OF SHARES BY AFFILIATES OF FICS AND S1
Affiliates of FICS and S1 will have restrictions on their ability to sell
shares of S1 common stock acquired in the FICS Transaction. Persons who may be
deemed to be affiliates of S1 include individuals or entities that control, are
controlled by, or are under common control of either S1 or FICS, and may include
some of the officers, directors and principal stockholders of S1 and FICS.
Affiliates may not sell their shares of S1 common stock received in the FICS
Transaction except pursuant to:
- an effective registration statement under the Securities Act covering the
resale of those shares; or
- an exemption under the Securities Act.
Five FICS stockholders holding approximately 88% of the issued and
outstanding FICS securities have agreed not to sell any of the shares of S1
common stock they receive at closing, except with respect to a specified number
of shares to be sold by Michel Akkermans, for 180 days following the closing of
the FICS Transaction. Some executive officers and directors of S1 may also sell
shares of S1 common stock in that sale.
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
subsidiary of S1 Europe Holdings, a 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, attached as Annex A, in which S1 Europe Holdings, a Belgian
subsidiary of S1, will purchase all or substantially all of the issued and
outstanding securities of FICS from the FICS stockholders who choose to
participate in the FICS Transaction, and a stock purchase agreement, attached as
Annex B, in which those selling FICS stockholders will use the proceeds from
their sale of the FICS securities to purchase up to 10,000,000 shares of S1
common stock at a price of $35.75 per share of S1 common stock.
In addition, the FICS stockholders participating in the FICS Transaction
may be able to obtain up to 4,500,000 additional shares of S1 common stock in an
earn-out if certain conditions, described more fully in the section entitled
"The FICS Transaction -- The Earn-out," on page 63, are fulfilled. S1 has also
agreed to assume current options to purchase FICS stock which will convert into
options to purchase approximately 1,200,000 shares of S1 common stock, and to
grant approximately 2,800,000 additional options to purchase S1 common stock to
individuals designated by Michel Akkermans, in consultation with S1, for a total
of 4,000,000 options to purchase S1 common stock. Upon completion of the FICS
Transaction, FICS will be a subsidiary of S1's Belgian subsidiary, and the
former FICS stockholders participating in the FICS Transaction will be S1
stockholders. S1 stockholders are being asked to vote on the issuance of S1
common stock in the FICS Transaction.
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While we believe that this 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 attached as Annex A and Annex B and we urge you to read them both carefully.
PARTIES TO THE AGREEMENTS
As of the date this prospectus/proxy statement is being sent out, the share
purchase agreement attached at Annex A has been signed by S1 Europe Holdings,
FICS stockholders who hold in the aggregate 99.54% of the FICS common stock,
and, for limited purposes, S1 and FICS, and the stock purchase agreement
attached at Annex B has been signed by S1, the same FICS stockholders and, for
limited purposes, FICS. The FICS Transaction has been structured so that any
other FICS stockholders may participate in the FICS Transaction by joining these
agreements before closing. For more information about participating in the FICS
Transaction, see the section entitled "Participating in the FICS Transaction" on
page 44.
REPRESENTATIONS AND WARRANTIES
S1, S1 Europe 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 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
- compliance with applicable laws
- intellectual property rights
In addition, S1 made representations and warranties to FICS and the FICS
stockholders regarding filings and reports with the Securities and Exchange
Commission, 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 information supplied by FICS in this prospectus/proxy statement and
the related registration statement to be filed by S1.
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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 would 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 governing documents
- the liquidation or restructuring of, or merger involving, FICS
- capital expenditures
- entrance into any new line of business
- entrance into or modification of contracts
- 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
- changes in FICS's options or restricted stock purchase plans
- the incurrence of indebtedness
- sale, purchase, lease or relocation of any office
- investments and other dispositions of FICS's assets or real estate
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 section of the share purchase agreement attached as Annex A
entitled "Covenants relating to FICS."
FICS STOCKHOLDERS' CONDUCT OF BUSINESS BEFORE COMPLETION OF THE FICS TRANSACTION
The participating FICS 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 FICS securities.
S1'S CONDUCT OF BUSINESS BEFORE COMPLETION OF THE FICS TRANSACTION
S1 has incorporated its Belgian subsidiary, S1 Europe Holdings N.V. and has
agreed to take all actions for S1 Europe Holdings to comply with the FICS
Transaction. S1 has also agreed for three years from the date of the last
payment, if any, under the earn-out not to sell, transfer or assign the FICS
stock from S1 Europe Holdings and to maintain S1 Europe Holdings as an operating
subsidiary of S1.
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CONDITIONS TO COMPLETION OF THE FICS TRANSACTION
The obligations of S1, S1 Europe 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
- the registration statement filed with the Securities and Exchange
Commission that contains this prospectus/proxy statement must have been
declared effective
- S1 must provide for the resale by Michel Akkermans of a number of shares
of S1 common stock yielding net proceeds of at least (1) 18% of the value
of the S1 common stock he will receive at the closing of the FICS
Transaction, plus (2) $15 million. Some executive officers and directors
of S1 may also sell shares of S1 common stock in that sale.
- Either S1 may arrange for these resale shares to be sold under an
exemption from the Securities Act, or S1 will prepare and file a
registration statement with the Securities and Exchange Commission for
the resale of these shares of S1 common stock and use its commercially
reasonable efforts to declare this registration statement effective, and
an underwriting agreement will have been prepared and executed by S1 and
the lead underwriter for this offering
- 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 Europe Holdings a "comfort
letter" from FICS's independent public accountants,
PricewaterhouseCoopers & Co. Bedrijfsrevisoren
- three FICS stockholders holding approximately 28% of the issued and
outstanding FICS securities will have received an opinion as to the
tax-free nature of the FICS Transaction
- S1 Europe Holdings must obtain, no later than October 15, 1999, evidence
that financing is available to it to purchase all or substantially all of
the issued and outstanding FICS securities to complete the FICS
Transaction
The parties also agreed that their 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 September 21, 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
- no material adverse effect must have occurred with respect to either S1
or FICS before the completion of the FICS Transaction
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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 FICS 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 FICS
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
Europe Holdings or the FICS stockholders 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 either S1 or FICS 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
In addition, a material adverse effect occurs with respect to FICS and the
FICS stockholders if, before closing the FICS Transaction, FICS's revenues for
the third fiscal quarter of 1999 are less than $10 million or FICS's revenues
for the fourth fiscal quarter of 1999 are less than $12 million.
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 Europe Holdings has
agreed to indemnify the FICS stockholders for all liability due to a breach by
S1 Europe Holdings.
EXTENSION, WAIVER AND AMENDMENT OF THE FICS AGREEMENTS
S1, S1 Europe Holdings, FICS and the participating FICS stockholders may
amend the agreements before completion of the FICS Transaction provided all
comply with applicable 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
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, Howard J. Runnion, Jr. and Jackson L. Wilson, 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 held approximately 7% of the
outstanding S1 common stock. The number of shares held does not include 72,800
shares beneficially owned by Andersen Consulting LLP or its affiliate, AC II
Technology (ACT II) B.V. Jackson L. Wilson, Jr., a director of S1, is Managing
Partner -- Global Markets of Andersen Consulting. These S1
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stockholders were not paid additional consideration in connection with their
respective voting agreements.
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 Agreements and Promissory Notes
As discussed in the section entitled "Background of the Transactions" on
page 48, each of the share purchase agreement and the stock purchase agreement
attached as Annex A and Annex B was signed on September 21, 1999. All agreements
related to the previously announced May 1999 transaction have been terminated,
with the exception of a loan that was previously made by S1 to FICS.
On May 16, 1999, S1 agreed to loan FICS up to $10 million. As of September
30, 1999, FICS had borrowed the full $10 million available under this loan.
Interest on the loan is accruing and will continue to accrue at a fixed rate
determined by the London Interbank Offered Rate on May 16, 1999 plus 1/2% per
year. The loan 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 its ordinary shares equal to the amount of the
indebtedness divided by $6,000. The parties to the May 1999 agreements intended
that this loan be used to provide FICS with working capital until that
transaction had closed.
In connection with the execution of the new agreements, on September 21,
1999, S1 agreed to extend a second loan in the amount of $15 million. In this
second loan, S1 advanced $6 million of the $15 million in cash upon execution of
the agreements in September 1999, and will advance another $2 million within 30
days of the first advance. FICS may continue to obtain advances thereafter up to
the $15 million limit in amounts not to exceed $1 million per month. Interest on
the loan will accrue at a fixed rate determined by the London Interbank Offered
Rate on September 21, 1999 plus 1/2% 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, if any. If either the share
purchase agreement or the stock purchase agreement is terminated, FICS must pay
this loan either in cash or by issuing to S1 a number of its ordinary shares
equal to the amount of the indebtedness divided by an exchange ratio of
$2,438.54. This exchange ratio will be adjusted if either the share purchase
agreement or the stock purchase agreement is terminated for any reason other
than default or breach by S1, and FICS raises equity capital within one year of
termination at a valuation of less than $2,438.54 per ordinary share of FICS
then outstanding.
THE EDIFY TRANSACTION
This section of the prospectus/proxy statement describes certain aspects of
the Edify Transaction, including the S1-Edify 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 216. You may obtain the
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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 217.
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
- 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 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 S1-Edify 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.
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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
S1-EDIFY MERGER AGREEMENT AND THE EDIFY TRANSACTION TO BE FAIR TO AND IN THE
BEST INTERESTS OF THE S1 STOCKHOLDERS. 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 90.
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 S1-Edify
merger agreement, the stock option agreement and related transactions. The Edify
board recommends that Edify stockholders approve and adopt the S1-Edify 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 S1-Edify 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 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
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- 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 S1-Edify 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 S1-Edify 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 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 S1-Edify
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 S1-EDIFY 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 90.
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<PAGE> 89
OPINION OF S1'S FINANCIAL ADVISOR
Pursuant to an engagement letter dated February 24, 1999, as amended on May
28, 1999, S1 engaged 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, 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 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
Edify. 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. Robertson Stephens was engaged by S1 solely to render an
opinion to the S1 board in connection with the Edify Transaction. 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 ROBERTSON STEPHENS OPINION, WHICH SETS FORTH, AMONG
OTHER THINGS, ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW
UNDERTAKEN, IS ATTACHED AS ANNEX F AND IS INCORPORATED IN THIS PROSPECTUS/PROXY
STATEMENT BY REFERENCE. STOCKHOLDERS OF S1 ARE URGED TO READ THE ROBERTSON
STEPHENS OPINION IN ITS ENTIRETY. THE 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 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 ROBERTSON STEPHENS OPINION SET FORTH IN THIS PROSPECTUS/PROXY
STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE
ROBERTSON STEPHENS OPINION.
In connection with the preparation of the Robertson Stephens opinion,
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;
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<PAGE> 90
- 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;
- 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 Robertson Stephens deemed relevant.
In its review and analysis, and in arriving at its opinion, Robertson
Stephens considered that S1 or affiliates of S1 were also entering into
agreements providing for the FICS Transaction on the terms agreed on May 16,
1999. S1 informed 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, Robertson Stephens conducted certain pro forma analyses as if the
Edify Transaction and the FICS Transaction (on the terms agreed on May 16, 1999)
were both consummated, based upon the information that was provided to Robertson
Stephens and reviewed by it related to FICS as of such date, and also as if the
Edify Transaction was consummated and the FICS Transaction was not consummated.
For purposes of its opinion related to the Edify Transaction, Robertson Stephens
did not consider any potential effects related to the subsequently amended terms
of the FICS Transaction of the subsequently announced VerticalOne Transaction.
In its review and analysis, and in arriving at its opinion, 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. 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, 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 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 Robertson
Stephens reviewed, upon the advice of the managements of S1, Edify and FICS,
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.
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<PAGE> 91
In this regard, Robertson Stephens noted that each of S1, Edify and FICS face
exposure to the Year 2000 problem. 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, 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;
- the FICS Transaction will be consummated in accordance with the terms set
forth in the FICS transaction agreements as of May 16, 1999, 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.
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 Robertson Stephens opinion
may affect the opinion, Robertson Stephens assumed no obligation to update,
revise or reaffirm its opinion. The Robertson Stephens opinion is necessarily
based upon financial, market, economic and other conditions as in effect on, and
information made available to Robertson Stephens as of, the date of the
Robertson Stephens opinion. It should be understood that subsequent developments
may affect the conclusion expressed in the Robertson Stephens opinion and that
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 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. 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
Robertson Stephens in connection with rendering the Robertson Stephens opinion.
The summary of the financial analyses is not a complete description of all of
the analyses performed by 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 ROBERTSON STEPHENS, THESE TABLES MUST BE READ
TOGETHER WITH THE TEXT OF EACH SUMMARY. THE ROBERTSON STEPHENS OPINION IS BASED
UPON THE TOTALITY OF THE VARIOUS ANALYSES PERFORMED BY ROBERTSON STEPHENS AND NO
PARTICULAR PORTION OF THE ANALYSES HAS ANY MERIT STANDING ALONE.
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<PAGE> 92
EXCHANGE RATIO ANALYSIS. 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, 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, 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.
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, 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,
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 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
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,
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," 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>
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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>
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. 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. 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 statement of operations. 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 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 valuation, implied Edify equity
value per share and implied exchange ratio:
<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. 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.
Robertson Stephens analyzed certain pro forma effects resulting from the Edify
Transaction without giving effect to the FICS Transaction (on the terms agreed
as of May 16, 1999 and based on the information that was provided to Robertson
Stephens as of such date), including, among other things, the impact of the
Edify Transaction on the projected revenues per share and projected cash
earnings per share of the
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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. Robertson
Stephens analyzed certain pro forma effects resulting from the Edify Transaction
and the FICS Transaction (on the terms agreed as of May 16, 1999 and based on
the information that was provided to Robertson Stephens as of such date)
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,
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
Robertson Stephens deemed material in its presentation to the S1 board, it is
not a comprehensive description of all analyses and factors considered by
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. Robertson Stephens believes that its
analyses must be considered as a whole and that selecting portions of its
analyses and
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<PAGE> 97
of the factors considered by it, without considering all analyses and factors,
would create an incomplete view of the evaluation process underlying the
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 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
Robertson Stephens are based on all analyses and factors taken as a whole and
also on application of Robertson Stephens' own experience and judgment. Such
conclusions may involve significant elements of subjective judgment and
qualitative analysis. 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, 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 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 representations or warranties that the
assumptions used by Robertson Stephens were or are correct.
The engagement letter between Robertson Stephens and S1 provides that, for
its services, Robertson Stephens is entitled to receive a $500,000 fee payable
upon delivery of its opinion. In a separate agreement, 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 Robertson Stephens for
certain of its out-of-pocket expenses, including legal fees, and to indemnify
and hold harmless Robertson Stephens and its affiliates and any director,
employee or agent of Robertson Stephens or any of its affiliates, or any person
controlling Robertson Stephens or its affiliates for certain losses, claims,
damages, expenses and liabilities relating to or arising out of services
provided by Robertson Stephens as financial advisor to S1. The terms of the fee
arrangement with Robertson Stephens, which S1 and Robertson Stephens believe are
customary in transactions of this nature, were negotiated at arm's length
between S1 and Robertson Stephens, and the S1 board was aware of such fee
arrangements. 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. 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.
Robertson Stephens was retained based on Robertson Stephens' experience as
a financial advisor in connection with mergers and acquisitions and in
securities valuations generally, as well as Robertson Stephens' investment
banking relationship and familiarity with S1.
Robertson Stephens is an internationally recognized investment banking
firm. As part of its investment banking business, 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, 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
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writing, to the Edify board of directors that, as of the date of such opinion,
the exchange ratio of 0.330969 pursuant to the S1-Edify merger agreement was
fair from a financial point of view to the holders of Edify common stock.
Goldman Sachs has confirmed its May 16 opinion as of the date of this
prospectus/proxy statement by delivery of its written opinion to the Edify
board, dated the date of this prospectus/proxy statement.
THE FULL TEXT OF THE GOLDMAN SACHS OPINION DATED THE DATE OF THIS
PROSPECTUS/PROXY STATEMENT IS ATTACHED AS ANNEX G TO THIS PROSPECTUS/PROXY
STATEMENT AND IS INCORPORATED INTO THIS PROSPECTUS/ PROXY STATEMENT BY
REFERENCE. STOCKHOLDERS OF EDIFY ARE URGED TO, AND SHOULD, READ SUCH OPINION IN
ITS ENTIRETY.
In connection with its opinion, Goldman Sachs reviewed, among other things:
- the S1-Edify merger agreement;
- the share purchase agreement and the stock purchase agreement;
- the S1-VerticalOne merger 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;
- 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 financial analyses
and forecasts for VerticalOne prepared by the management of S1; and
- certain pro forma combined financial analyses and forecasts for Edify,
S1, FICS and VerticalOne 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, the FICS Transaction and the VerticalOne Transaction.
Goldman Sachs also held discussions with members of the senior management
of Edify, S1 and FICS regarding past and current business operations, financial
condition and future prospects of their respective companies and the strategic
rationale for, and the potential benefits of, the Edify Transaction and the FICS
Transaction, and with members of the senior management of S1 and Edify regarding
the strategic rationale for, and the potential benefits of, the VerticalOne
Transaction. 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, FICS and VerticalOne, 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 and the VerticalOne
Transaction are 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 one or more of the FICS Transaction and
the VerticalOne Transaction are not consummated, the applicable forecasts for
S1, FICS and VerticalOne, as the case may be, 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
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assets and liabilities of Edify, S1, FICS or VerticalOne 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 S1-Edify 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 dated the date of this prospectus/proxy statement and
attached to this prospectus/proxy statement as Annex G. 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.
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 Infosystems 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>
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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 growth rate and revenue information for Edify and S1 are from estimates
provided by their respective managements. "P/E" refers to stock price divided 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
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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.
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> 102
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 IMPLIED
EXCHANGE RATIO PREMIUM PAID EXCHANGE RATIO 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 median 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>
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, 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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<PAGE> 103
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible of 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's 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 and the VerticalOne Transaction.
The analyses were prepared solely for purposes of Goldman Sachs's providing
its opinion to the Edify board as to the fairness from a financial point of view
of the exchange ratio pursuant to the S1-Edify 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's opinion to the Edify board was one of
many factors taken into consideration by the Edify board in making its
determination to approve the S1-Edify 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. Goldman
Sachs utilized substantially the same types of financial analyses in connection
with providing its opinion dated the date of this prospectus/proxy statement.
The foregoing summary does not purport to be a complete description of the
analyses performed by Goldman Sachs in connection with such opinions and is
qualified by reference to such opinions including the written opinion of Goldman
Sachs set forth in Annex G.
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 S1-Edify merger agreement. With the consent of the Edify board, Goldman
Sachs has acted as financial advisor to S1 in connection with the VerticalOne
Transaction and may provide investment banking services to S1 in the future.
Goldman Sachs 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 positions in the securities or options on
securities of Edify or S1 for its own account and for the accounts of customers.
As of October 12, 1999, Goldman Sachs had a long position of 963,882 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
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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.
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.
As of October 1, 1999, 4,652,831 shares of Edify common stock are subject
to unvested options granted under Edify's option plans. Of these options,
vesting of 648,594 shares would 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. The severance benefits and stock option acceleration
are provided in Edify's Retention and Severance Plan, which was adopted
by the Edify board on May 16, 1999. The benefits are due if the employee
is terminated by S1 or resigns for good reason within 12 months after the
Edify Transaction or, in the case of employees who are not officers or
directors of Edify, during the time starting 30 days before the Edify
Transaction and ending 12 months after the Edify Transaction. Good reason
means a decrease in compensation, relocation, or job duties that are not
functionally equivalent to the employee's job immediately after the Edify
Transaction or, in the case of Jeffery M. Crowe, the President and Chief
Executive Officer of Edify, and most of the vice presidents of Edify,
immediately before the Edify Transaction. Mr. Crowe is entitled to a
payment of two years of base salary, plus 100% of his target annual bonus
for the year of termination of employment, and full acceleration of the
vesting of his unvested options. All vice presidents of Edify that report
directly to Mr. Crowe are entitled to a payment of one year of base
salary, plus 50% of the target annual bonus for the year of termination
of employment, and 12 months acceleration of the vesting of unvested
options. All other vice presidents and directors of Edify are entitled to
a payment of six months of base salary, plus 25% of the target annual
bonus for the year of termination of employment, and six months
acceleration of the vesting of unvested options. All other employees of
Edify are entitled to a payment of three months base salary plus one week
of base salary for each year or partial year of the particular employee's
service to Edify.
As a result, these executive officers and directors could be more likely to
vote to approve the S1-Edify 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 S1-Edify merger
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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 S1-Edify 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.
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
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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 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
S1-Edify 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 S1-Edify 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.
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(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 section
entitled "The Edify Agreements -- The S1-Edify Merger Agreement -- Treatment of
Edify Stock Options and Warrants; Grant of S1 Stock Options" on page 96. 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.
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 applicable waiting period was terminated early, effective July 19,
1999. The notification under the HSR Act remains effective and permits closing
of the Edify Transaction within one year from the termination of the waiting
period.
The Antitrust Division or the FTC may challenge the Edify Transaction on
antitrust grounds 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, even though the waiting period has
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.
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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.
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 the section entitled
"Comparison of Stockholder Rights -- Edify Stockholder Rights" on page 172.
THE EDIFY AGREEMENTS
THE S1-EDIFY MERGER AGREEMENT
This section of the prospectus/proxy statement describes the S1-Edify
merger agreement. While we believe that the description covers the material
terms of the S1-Edify merger agreement, this summary may not contain all of the
information that is important to you. The S1-Edify 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
S1-Edify 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
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- 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
- 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 S1-Edify merger agreement are
complicated and not easily summarized. You are urged to carefully read the
articles of the S1-Edify 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 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 S1-Edify
merger agreement
- accounting policies and procedures
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- 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
- 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 S1-Edify
merger agreement are complicated and not easily summarized. You are urged to
carefully read the section of the S1-Edify 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 S1-Edify merger agreement.
The agreements related to the conduct of S1's business in the S1-Edify
merger agreement are complicated and not easily summarized. You are urged to
carefully read the section of the S1-Edify 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.
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S1 also agreed, upon completion of the Edify Transaction, to grant options
to purchase S1 common stock to some senior executives of Edify.
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 S1-Edify 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 S1-Edify 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 S1-Edify 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 S1-Edify 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 S1-Edify 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 S1-Edify merger agreement or on S1 or Edify,
and its respective subsidiaries, taken as a whole, taking into
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account the business, customers, assets, capitalization, financial condition and
results of operations of the entity, 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 S1-Edify Merger Agreement
The S1-Edify merger agreement may be terminated at any time prior to
completion of the Edify Transaction, whether before or after approval and
adoption of the S1-Edify 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 S1-Edify 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 S1-Edify 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 S1-Edify 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 representation or warranty, or on Edify or S1, in the case of a
covenant, 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 fails to recommend
approval of the S1-Edify merger agreement to its stockholders, (c)
approves an extraordinary transaction inconsistent with the S1-Edify
merger agreement,
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(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 S1-Edify merger agreement generally provides for S1 and Edify to pay
their own expenses relating to the S1-Edify merger agreement, with S1 paying the
filing and other fees paid to the Securities and Exchange Commission. However,
if the S1-Edify 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 S1-Edify merger agreement by the other party, or if either S1
or Edify terminates the S1-Edify 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 S1-Edify merger agreement, or (4) violates the S1-Edify
merger agreement's restriction on discussions and negotiations with third
parties regarding extraordinary transactions, the S1-Edify 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 S1-Edify 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 S1-Edify 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 S1-Edify merger agreement could be refunded partially
or fully to Edify. See the section entitled "The Edify Agreements -- Related
Agreements -- The Stock Option Agreement."
Extension, Waiver and Amendment of the S1-Edify Merger Agreement
S1 and Edify may amend the S1-Edify 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 S1-Edify 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 S1-Edify
merger agreement.
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RELATED AGREEMENTS
This section of the prospectus/proxy statement describes agreements related
to the S1-Edify merger agreement, including the stock option agreement, the
Edify stockholders' voting agreements and the 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 October 1, 1999, the option would be
exercisable for approximately 4,460,244 shares of Edify common stock. S1
required Edify to grant this stock option as a prerequisite to entering into the
S1-Edify 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 S1-Edify 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 S1-Edify merger agreement because of a willful or
intentional breach by Edify of the representations, warranties or
covenants in the S1-Edify 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 S1-Edify 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 S1-Edify merger agreement by consent of both
parties
- the termination of the S1-Edify merger agreement by either party due to a
governmental order, decree, ruling or other action
- the termination of the S1-Edify 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 S1-Edify 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 S1-Edify 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 S1-Edify 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 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 held shares of Edify common stock which represented
approximately 5% 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 S1-Edify merger agreement in accordance with its terms.
S1 Stockholders' 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 beneficially owned by them in favor of the issuance of
shares of common stock in the Edify Transaction.
As of the record date, these S1 stockholders held shares of S1 common stock
which represented approximately 7% of the outstanding S1 common stock. These S1
stockholders were not paid
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<PAGE> 116
additional consideration in connection with their respective voting agreements.
The number of shares held does not include 72,800 shares beneficially owned by
Andersen Consulting LLP or its affiliate, AC II Technology (ACT II) B.V. Jackson
L. Wilson, Jr., a director of S1, is Managing Partner -- Global Markets of
Andersen Consulting.
The S1 stockholder voting agreements will terminate upon the termination of
the S1-Edify merger agreement in accordance with its terms.
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<PAGE> 117
THE VERTICALONE TRANSACTION
This section of the prospectus/proxy statement describes certain aspects of
the VerticalOne Transaction, including the S1-VerticalOne merger agreement, the
escrow agreement, the strategic marketing and sales agency agreement, the
warrant agreement, the Series C preferred stock purchase agreement and the share
retention agreements. While we believe that the description covers the material
terms of the VerticalOne Transaction and the related agreements, 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 VerticalOne Transaction.
S1'S REASONS FOR THE VERTICALONE TRANSACTION
At a meeting held on September 23, 1999, the board of directors of S1
concluded that the VerticalOne Transaction was advisable and in the best
interests of S1 and its stockholders and determined to recommend that the
stockholders approve the proposals relating to the VerticalOne Transaction.
In its evaluation of the VerticalOne Transaction, the S1 board reviewed
several factors, including, but not limited to, the following:
- historical information concerning S1's and VerticalOne'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
- S1 management's view of the financial condition, results of operations
and businesses of S1 and VerticalOne before and after giving effect to
the VerticalOne Transaction and the S1 board's determination of the
VerticalOne Transaction's effect on stockholder value
- current financial market conditions and historical market prices,
volatility and trading information
- the consideration VerticalOne stockholders will receive in the
VerticalOne Transaction in light of comparable transactions
- the opinion of Goldman, Sachs & Co. that, as of the date of its opinion
and subject to the considerations described in the opinion, the exchange
ratio in the VerticalOne Transaction is fair from a financial point of
view to S1
- the belief that the terms of the S1-VerticalOne merger agreement are
reasonable
- the impact of the VerticalOne 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 VerticalOne
- the expectation that the VerticalOne 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 VerticalOne Transaction
including the following:
- the risk that the potential benefits of the VerticalOne Transaction may
not be realized
- the possibility that the VerticalOne Transaction may not be consummated,
even if approved by S1's and VerticalOne's stockholders
- the effect of the public announcement of the VerticalOne Transaction on
VerticalOne's sales
- the risk of management and employee disruption associated with the
VerticalOne 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
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<PAGE> 118
- the risk that the VerticalOne 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 VerticalOne Transaction outweighed the risks
associated with the VerticalOne 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 VerticalOne 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
S1-VerticalOne merger agreement and the VerticalOne Transaction to be fair to
and in the best interests of the S1 stockholders. S1's board of directors
recommends approval of the issuance of shares of S1 common stock in the
VerticalOne Transaction as described in this prospectus/proxy statement.
In considering the recommendation of the S1 board of directors with respect
to the VerticalOne Transaction, you should be aware that certain directors and
officers of S1 have certain interests in the VerticalOne Transaction that are
different from, or are in addition to the interests of S1 stockholders
generally. Please see the section entitled "The VerticalOne
Transaction -- Interests of Certain Persons in the VerticalOne Transaction" on
page 112.
VERTICALONE'S REASONS FOR THE VERTICALONE TRANSACTION
At a meeting held on September 23, 1999, the board of directors of
VerticalOne concluded that the VerticalOne Transaction was advisable and in the
best interests of the stockholders of VerticalOne, and authorized VerticalOne to
enter into the S1-VerticalOne merger agreement and related transactions. The
VerticalOne board recommends that VerticalOne stockholders approve and adopt the
S1-VerticalOne merger agreement. The VerticalOne board's decision was the result
of its careful consideration of the factors, both positive and negative, related
to the VerticalOne Transaction, as well as its consideration of alternatives,
including the pursuit of a long-term independent business strategy for
VerticalOne.
The VerticalOne board believes that the VerticalOne Transaction represents
the best strategic alternative for VerticalOne. In reaching its determination,
the VerticalOne board considered the stock value represented by the VerticalOne
exchange ratio and historical business, financial and operating information
regarding VerticalOne and S1, including taking into account effects of the FICS
Transaction and the Edify Transaction on S1. The VerticalOne 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 S1-VerticalOne merger agreement. The VerticalOne board also reviewed the
regulatory approvals required to consummate the VerticalOne Transaction, and the
likelihood of obtaining such approvals on a timely basis.
The VerticalOne board believes that the VerticalOne Transaction, and, if
also consummated, the FICS Transaction and the Edify Transaction combined with
the VerticalOne Transaction, will create a company with highly competitive
product and service offerings to financial institutions and other businesses.
The VerticalOne board believes that S1's internet banking products and data
center management services and VerticalOne's internet-based account aggregation
and presentation service will complement each other and allow the combined
company to cross-market a range of products and services in various media to its
customers.
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<PAGE> 119
In making its determination, the VerticalOne board considered a number of
factors. The VerticalOne board did not rank these factors in order of importance
or assign any particular weight to any particular factor. The material factors
considered by the VerticalOne board were the following:
- the consideration to be received by VerticalOne stockholders in the
VerticalOne Transaction
- the improved liquidity for VerticalOne stockholders, even given the
restrictions on the resale of S1 common stock described under the heading
"The VerticalOne Transaction -- Restrictions on Sales of Shares by
Affiliates of VerticalOne and S1" on page 116
- VerticalOne's and S1's financial and operating performance over
historical periods, and the expected synergies and benefits to be
obtained by the VerticalOne Transaction versus the pursuit of an
independent business strategy for VerticalOne
- VerticalOne management's view of the industry in which VerticalOne
competes, and its analysis of S1's business, operations and financial
results on a stand-alone basis and after giving effect to the VerticalOne
Transaction
- the results of the due diligence review conducted by VerticalOne's
management, and VerticalOne's legal and financial advisors, regarding
S1's, Edify's and FICS's business, technologies, operations, financial
results and competitive position
- the business benefits expected to be derived from the VerticalOne
Transaction, including:
Enhanced credibility with providers of account information. Banks and
other financial institutions are the sources of some of the most sensitive
and private individual account information of VerticalOne users. By
affiliating with S1, VerticalOne will be able to approach financial
institutions with the credibility already established by S1.
Complementary business models. Both S1's and VerticalOne's strategies
involve providing brandable content to web sites accessed by end users.
VerticalOne's service for aggregating many user accounts may be offered to
financial institutions as an extension of existing S1 products or as a
stand-alone product that can be easily adapted to a financial institution's
existing web site.
Access to capital. S1's position as a publicly traded company will
provide VerticalOne with enhanced access to capital for its ongoing capital
needs.
Added depth of resources. VerticalOne will benefit from the
established project management and technical resources of S1 when potential
customers desire to customize the VerticalOne service to specific
requirements.
Potential international expansion. VerticalOne may be able to work
with existing S1 customers or with S1 operations in foreign countries to
take advantage of international expansion opportunities.
The VerticalOne board also considered a number of negative factors related
to the VerticalOne Transaction, including:
- the risk that because the exchange ratio will not be adjusted for changes
in the market price of S1 common stock, the per share value of the
consideration to be received by VerticalOne stockholders might be
significantly less than the price per share implied by the exchange ratio
immediately prior to the announcement of the VerticalOne Transaction
- the risk that the portion of the consideration to be placed in escrow may
never be paid to VerticalOne stockholders
- the restrictions on resale of S1 common stock received by VerticalOne
stockholders and the risk that such shares may not be sold for an
extended period of time and that the price of S1 common stock may decline
during the period such restrictions are applicable
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<PAGE> 120
- the risk that the VerticalOne Transaction may not be consummated, even if
approved by VerticalOne's stockholders
- the risk that the benefits sought to be achieved by the VerticalOne
Transaction will not be realized
- the potential loss of revenues and business opportunities for VerticalOne
as a result of confusion in the marketplace as a result of the
announcement of the VerticalOne Transaction, and the exploitation of that
confusion by VerticalOne's competitors
- the potential difficulties in integrating the operations of VerticalOne
and S1, and S1's potential difficulties in integrating Edify and FICS as
well, and the potential loss of key personnel or focus during the
integration period
- the other applicable risks described in this prospectus/proxy statement
under "Risk Factors"
RECOMMENDATION OF VERTICALONE'S BOARD OF DIRECTORS
After carefully evaluating these factors, both positive and negative, the
board of directors of VerticalOne has determined that the VerticalOne
Transaction is advisable and in the best interests of VerticalOne and its
stockholders and unanimously recommends that VerticalOne stockholders vote for
approval and adoption of the S1-VerticalOne merger agreement. In considering the
recommendation of the VerticalOne board of directors with respect to the
VerticalOne Transaction, you should be aware that some directors and executive
officers of VerticalOne have some interests in the VerticalOne Transaction that
are different from, or are in addition to, the interests of VerticalOne
stockholders generally. Please see the section entitled "The VerticalOne
Transaction -- Interests of Certain Persons in the VerticalOne Transaction" on
page 112.
OPINION OF S1'S FINANCIAL ADVISOR
Goldman, Sachs & Co. has acted as financial advisor to S1 in connection
with the VerticalOne Transaction. On September 23, 1999, Goldman Sachs delivered
its opinion, subsequently confirmed in writing, to the S1 board of directors
that, as of the date of such opinion, the exchange ratio of 0.200 pursuant to
the S1-VerticalOne merger agreement, was fair from a financial point of view to
S1. Goldman Sachs understands that S1 also intends to consummate both the FICS
Transaction and the Edify Transaction.
THE FULL TEXT OF THE GOLDMAN SACHS OPINION IS ATTACHED AS ANNEX H TO THIS
PROSPECTUS/PROXY STATEMENT AND IS INCORPORATED INTO THIS PROSPECTUS/PROXY
STATEMENT BY REFERENCE. STOCKHOLDERS OF S1 ARE URGED TO, AND SHOULD, READ SUCH
OPINION IN ITS ENTIRETY.
In connection with its opinion, Goldman Sachs reviewed, among other things:
- the S1-VerticalOne merger agreement;
- Annual Reports to Stockholders and Annual Reports on Form 10-K of S1 for
the two years ended December 31, 1998 and of Edify for the three years
ended December 31, 1998;
- the form of Registration Statement on Form S-4 dated July 9, 1999, which
S1 informed Goldman Sachs was not yet effective;
- certain interim reports to stockholders and Quarterly Reports on Form
10-Q of S1 and Edify;
- certain other communications from S1 and Edify to their respective
stockholders;
- certain financial and other information of VerticalOne with respect to
its operations on and after November 1998, the date of its organization;
- audited historical financial statements of FICS for the two years ended
December 31, 1998;
- certain internal financial analyses and forecasts for S1 prepared by the
management of S1 on a pro forma basis for the Edify Transaction and the
FICS Transaction;
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<PAGE> 121
- certain internal financial analyses and forecasts for VerticalOne
prepared by the management of VerticalOne; and
- certain financial analyses and forecasts for VerticalOne prepared by the
management of S1, including certain cost savings and operating synergies
projected by the managements of S1 and VerticalOne to result from the
transaction contemplated by the S1-VerticalOne merger agreement.
Goldman Sachs also held discussions with members of the senior management
of S1 and VerticalOne regarding the strategic rationale for, and the potential
benefits of, the transaction contemplated by the S1-VerticalOne merger agreement
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 S1 shares, compared certain financial
and stock market information for S1 with similar information for certain other
companies the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations, and performed such other studies
and analyses as Goldman Sachs considered appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information reviewed by Goldman Sachs and assumed such
accuracy and completeness for purposes of rendering its opinion. In that regard,
Goldman Sachs assumed, with the consent of S1's board of directors, that the
internal financial analyses and forecasts prepared by the management of S1 were
reasonably prepared on a basis reflecting the best currently available estimates
and judgments of S1 and that such analyses and forecasts will be realized in the
amounts and time periods contemplated thereby. Goldman Sachs did not make an
independent evaluation or appraisal of the assets and liabilities of S1 or
VerticalOne or any of their respective subsidiaries and was not furnished with
any such evaluation or appraisal. The advisory services and opinion of Goldman
Sachs referred to in this prospectus/proxy statement with respect to the
VerticalOne Transaction were provided for the information and assistance of S1's
board of directors in connection with its consideration of the transaction
contemplated by the S1-VerticalOne merger agreement and that opinion does not
constitute a recommendation as to how any stockholder should vote with respect
to such transaction.
The following is a summary of the material financial analyses presented by
Goldman Sachs to the S1 board on September 23, 1999. Goldman Sachs utilized
substantially the same type of financial analyses in connection with providing
its written opinion attached to this prospectus/proxy statement as Annex H. The
following summaries of financial analyses include information presented in
tabular format. The tables must be read together with the text accompanying each
summary.
(1) Selected Companies Analysis -- S1
Goldman Sachs reviewed and compared selected financial information, ratios
and public market multiples relating to S1 to corresponding information for
fifteen other publicly traded companies providing financial services over the
Internet:
<TABLE>
<CAPTION>
ONLINE BROKERS ONLINE BANK ONLINE LENDER ONLINE INSURANCE OTHER E-FINANCIAL
- ----------------------- ----------- ------------- ---------------- -----------------------
<S> <C> <C> <C> <C>
Charles Schwab Telebanc NextCard InsWeb Intuit
E*TRADE Net.Bank E-LOAN QuoteSmith Knight Trimark
TD Waterhouse CheckFree
Ameritrade Wit Capital
DLJdirect
</TABLE>
Goldman Sachs's analysis for these selected companies compared the
following to the results of S1 using the closing price of the selected shares on
September 20, 1999:
- Market capitalization, which is the market value of common equity;
- Share price, as a percentage of the highest price over the preceding 52
weeks and as a multiple of earnings and pre-marketing earnings;
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<PAGE> 122
- Enterprise value as a multiple of revenues. "Enterprise value" is
defined as market capitalization plus net debt if net debt is greater
than zero; otherwise, enterprise value equals market capitalization; and
- Revenue Growth between 1998 and 1999 and between 1999 and 2000.
The results of this analysis are summarized below (throughout this section
of this document, entries in tables that are not meaningful are denoted with
"N.M."; estimated information is denoted with "E"; and annualized last quarter
information is denoted with "LQA"):
<TABLE>
<CAPTION>
PRICE/PRE-MKT. ENTERPRISE VALUE/NET
PRICE/EARNINGS EARNINGS(A) REVENUES
--------------- -------------- ---------------------
1999E 2000E 1999E 2000E LQA 1999E 2000E
------ ------ ------ ------ ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
S1(b).......................................... N.M. N.M. N.M. N.M. N.M. N.M. 8.0x
S1(c).......................................... N.M. N.M. N.M. N.M. 21.7x 22.4x 11.8
Median-Online Brokers.......................... 51.1x 52.3x 40.7x 27.4x 8.7 7.6 5.4
Median-Online Banks............................ N.M. 64.2 47.4 21.9 30.1 16.0 7.9
Median-Online Lenders.......................... N.M. N.M. N.M. N.M. 102.5 95.7 25.7
Median-Online Insurance........................ N.M. N.M. N.M. 13.1 36.9 43.9 18.2
</TABLE>
- ---------------
(a) Assumes a tax rate of 35.0%.
(b) Includes the pro forma impact of the Edify Transaction and the FICS
Transaction.
(c) Excludes the pro forma impact of the Edify Transaction and the FICS
Transaction.
(2) Selected Companies Analysis -- VerticalOne
Goldman Sachs reviewed and compared selected financial information and
ratios relating to VerticalOne to corresponding information for thirteen
publicly traded companies and S1 providing business-to-business e-commerce
services:
<TABLE>
<S> <C> <C>
Inktomi CheckFree pcOrder
Exodus Sterling Commerce Harbinger
Ariba Inc. VerticalNet RoweCom
Healtheon AboveNet Communications
Commerce One Inc. Chemdex
</TABLE>
Goldman Sachs's analysis for these selected companies compared the
following to the results of VerticalOne using the closing price of the selected
shares on September 20, 1999:
- Market capitalization;
- Share price, as a percentage of the highest price over the preceding 52
weeks;
- Enterprise value as a multiple of revenues; and
- Revenue Growth between 1998 and 1999 and between 1999 and 2000.
The results of this analysis are summarized below:
<TABLE>
<CAPTION>
ENTERPRISE VALUE/NET
REVENUES
--------------------
LQA 1999E 2000E
---- ----- -----
<S> <C> <C> <C>
S1(a)....................................................... N.M. N.M. 8.0x
S1(b)....................................................... 21.7x 22.4x 11.8
Median...................................................... 57.1 44.0 21.2
</TABLE>
- ---------------
(a) Includes the pro forma impact of the Edify Transaction and the FICS
Transaction.
(b) Excludes the pro forma impact of the Edify Transaction and the FICS
Transaction.
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(3) Transaction Multiple Analysis
Goldman Sachs calculated, for selected periods ended on September 20, 1999:
- the ratios of the price offered by S1 for VerticalOne shares on the basis
of a 0.200 exchange ratio to the average market price of S1 shares; and
- the average market price of S1 shares.
The results are shown below:
<TABLE>
<CAPTION>
AVERAGE
FIXED EXCHANGE MARKET PRICE OF
RATIO S1 SHARES
PERIOD -------------------- ---------------
<S> <C> <C>
1 Week...................................................... 0.201 $40.15
2 Weeks..................................................... 0.200 40.42
1 Month..................................................... 0.205 39.37
3 Months.................................................... 0.210 38.50
6 Months.................................................... 0.196 41.30
1 Year...................................................... 0.284 28.46
</TABLE>
The 0.200 exchange ratio also implied a market value of VerticalOne equal
to the following estimated multiples of VerticalOne revenues as of September 20,
1999:
<TABLE>
<CAPTION>
S1 MANAGEMENT PROJECTIONS VERTICALONE MANAGEMENT PROJECTIONS
------------------------- ----------------------------------
<S> <C> <C>
2000E 8.7x 10.0x
2001E 2.9 2.0
</TABLE>
(4) Analysis of the VerticalOne Transaction
Goldman Sachs performed an analysis of the accretion/dilution per share for
S1 common stock expected to result from the VerticalOne Transaction. Based on
such analysis, the VerticalOne Transaction would be accretive to S1 shareholders
in the year 2001 on each of the bases examined below.
On the basis of VerticalOne Projections both with and without adjustments
by S1 management, accretion/dilution in revenue, EBITDA and cash earnings per
share of S1 common stock for the years 2000 and 2001 was estimated as follows:
<TABLE>
<CAPTION>
VERTICALONE PROJECTIONS
WITH S1 MANAGEMENT ADJUSTMENTS VERTICALONE PROJECTIONS
------------------------------ -----------------------
CASH CASH
REVENUE EBITDA EARNINGS REVENUE EBITDA EARNINGS
PER SHARE PER SHARE PER SHARE PER SHARE PER SHARE PER SHARE
---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
2000E................................. (0.6)% (44.4)% N.M (1.5)% (70.4)% N.M.
2001E................................. 5.9 7.4 3.5% 12.3 41.5 43.0%
</TABLE>
Goldman Sachs also performed an analysis of the accretion/dilution per
share for S1 common stock that would result in the event that one or both of the
FICS Transaction and the Edify Transaction were not consummated. The range of
estimates that resulted from the set of potential alternative outcomes is as
follows:
<TABLE>
<CAPTION>
RANGE OF VERTICALONE PROJECTIONS WITH S1 MANAGEMENT ADJUSTMENTS
-----------------------------------------------------------------
REVENUE PER SHARE EBITDA PER SHARE CASH EARNINGS PER SHARE
------------------ ----------------- ------------------------
<S> <C> <C> <C>
2000E.................................. 4.1%-(0.6)% (25.8)%-(44.4)% (41.2)%-(118.2)%
2001E.................................. 18.7%-5.9% 10.5%-4.4% 6.0%-1.5%
</TABLE>
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(5) Review of Selected Transactions Involving Internet Companies
Goldman Sachs reviewed eighteen acquisitions (including six that are
currently pending) involving Internet-related companies since September 1998.
Goldman Sachs's analysis of these selected transactions included the following
information:
- equity consideration;
- target pro forma ownership percentage of acquirer;
- premium paid over the 5-day average of daily closing prices for 30 days
prior to announcement and over the highest price for the preceding 52
weeks; and
- latest twelve-month ("LTM") and next twelve-month ("NTM") multiples of
sales and gross margins.
The results of this analysis are summarized below:
<TABLE>
<CAPTION>
PREMIUM PREMIUM MULTIPLE OF
OVER OVER ---------------------
UNAFFECTED 52-WEEK LTM NTM
SHARE PRICE HIGH SALES SALES
------------ ------------ --------- ---------
<S> <C> <C> <C> <C>
Median............................................. 45.6% (13.2)% 23.9x 25.5x
Mean............................................... 59.3 (19.4) 61.0 44.7
High............................................... 195.5 38.1 243.7 143.6
Low................................................ 11.0 (79.3) 1.9 1.6
</TABLE>
(6) Contribution Analysis
Goldman Sachs reviewed S1 and VerticalOne management projections for 2000
and 2001 concerning S1, VerticalOne and the pro forma combined company. The
analysis indicated that holders of VerticalOne common stock would receive 6.8%
of the outstanding common equity of the combined company, while S1 stockholders
would retain 93.2% of the outstanding common equity of the combined company. The
analysis also indicated the following contributions by S1 and VerticalOne to the
combined company:
<TABLE>
<CAPTION>
VERTICALONE
S1 MANAGEMENT MANAGEMENT
PROJECTIONS PROJECTIONS
------------------ ------------------
S1 VERTICALONE S1 VERTICALONE
---- ----------- ---- -----------
<S> <C> <C> <C> <C>
Revenues
2000E.................................................... 93.7% 6.3% 94.5% 5.5%
2001E.................................................... 88.0 12.0 82.9 17.1
EBITDA
2001E.................................................... 86.7 13.3 65.7 34.3
Cash Earnings
2001E.................................................... 90.9 9.1 65.2 34.8
Pro Forma % Ownership...................................... 93.2 6.8 93.2 6.8
---- ---- ---- ----
</TABLE>
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Goldman Sachs also performed an analysis of the contributions that would
result in the event that one or both of the FICS Transaction and the Edify
Transaction were not consummated. The range of estimates that resulted from the
set of potential alternative outcomes is as follows:
<TABLE>
<CAPTION>
RANGE OF S1 MANAGEMENT PROJECTIONS
----------------------------------
S1 VERTICALONE
-------------- --------------
<S> <C> <C>
Revenues
2000E............................................... 93.7%-86.0% 14.0%-6.3%
2001E............................................... 88.0%-75.4% 24.6%-12.0%
EBITDA
2001E............................................... 87.9%-81.2% 22.1%-12.9%
Cash Earnings
2001E............................................... 92.3%-86.5% 13.5%-8.7%
Pro Forma % Ownership................................. 93.2%-89.6% 10.4%-6.8%
</TABLE>
(7) Discounted Cash Flow Analysis
Goldman Sachs performed a discounted cash flow analysis of S1 and
VerticalOne management projections for the calendar years 1999 through 2002.
Goldman Sachs first discounted the projected, after-tax free cash flows through
December 31, 2001 using discount rates ranging from 30% to 40%. VerticalOne free
cash-flows were calculated as the after-tax operating earnings of VerticalOne
adjusted to add back non-cash expenses and deduct uses of cash not reflected in
the income statement. Goldman Sachs then added to the present value of the cash
flows the terminal value of VerticalOne at December 31, 2001 discounted back at
the same discount rate to represent a present value. The terminal value was
computed by multiplying the projected revenue in fiscal 2002 by terminal
multiples ranging from 4.0x to 8.0x. The range of terminal multiples selected
reflect Goldman Sachs's judgment as to an appropriate range of multiples at the
end of the referenced period. The following table summarizes the resulting
implied VerticalOne equity valuations:
<TABLE>
<CAPTION>
VERTICALONE
S1 MANAGEMENT MANAGEMENT
PROJECTIONS PROJECTIONS
------------------- -------------------
<S> <C> <C>
Discount Rates............................... 30%-40% 30%-40%
Terminal Multiples........................... 4.0x-8.0x 4.0x-8.0x
Implied Equity Value......................... $210-$508 million $444-$1,033 million
</TABLE>
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible of 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's 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
S1 or VerticalOne or the VerticalOne Transaction.
The analyses were prepared solely for purposes of Goldman Sachs's providing
its opinion to the S1 board as to the fairness from a financial point of view of
the exchange ratio pursuant to the S1-VerticalOne merger agreement to S1. The
analyses do not purport to be appraisals or necessarily reflect the prices at
which businesses or securities actually may be sold. Analyses based upon
forecasts of future results 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 S1, VerticalOne
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.
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As described above, Goldman Sachs's opinion to the S1 board was one of many
factors taken into consideration by the S1 board in making its determination to
approve the S1-VerticalOne merger agreement. The foregoing summary describes
material financial analyses used by Goldman Sachs in connection with providing
its opinion to S1's board of directors on September 23, 1999, but does not
purport to be a complete description of the analyses 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 H.
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. S1 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
VerticalOne Transaction.
Goldman Sachs is familiar with S1, having acted as its financial advisor in
connection with, and having participated in certain of the negotiations leading
to, the S1-VerticalOne merger agreement. Goldman Sachs 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 positions
in the securities or options on securities of S1 or VerticalOne for its own
account and for the accounts of customers. Edify has retained Goldman Sachs as
its financial advisor in connection with the Edify Transaction. S1 has consented
to Goldman Sachs acting as financial advisor to Edify in connection with the
Edify Transaction and to Goldman Sachs acting as financial advisor to S1 in
connection with the VerticalOne Transaction.
Pursuant to a letter agreement dated September 13, 1999, S1 engaged Goldman
Sachs to act as its exclusive financial advisor in connection with a possible
purchase of all or a portion of VerticalOne. S1 has agreed to pay Goldman Sachs
a transaction fee which is based on the actual outcome of the VerticalOne
Transaction. If the VerticalOne Transaction is consummated, a transaction fee of
$2 million will be paid. If the VerticalOne Transaction is not consummated, a
mutually acceptable transaction fee will be paid. S1 has agreed to pay such
amount in cash upon consummation of the VerticalOne Transaction. S1 also has
agreed to reimburse Goldman Sachs for its reasonable out-of-pocket expenses,
including attorneys' fees, and to indemnify Goldman Sachs against certain
liabilities, including certain liabilities under the federal securities laws.
INTERESTS OF CERTAIN PERSONS IN THE VERTICALONE TRANSACTION
When considering the recommendations of S1's and VerticalOne's boards of
directors, you should be aware that the directors and officers of S1 and
VerticalOne have interests in the VerticalOne Transaction and have several
arrangements that are different from, or are in addition to, those of S1 and
VerticalOne stockholders generally. These include:
- Employment. Gregg S. Freishtat, Chairman and Chief Executive Officer of
VerticalOne will become a member of the S1 board of directors after the
VerticalOne Transaction. The executive officers of VerticalOne are
expected to remain the executive officers of VerticalOne after the
merger.
- Indemnification. S1 and VerticalOne officers and directors have
customary rights to indemnification against specified liabilities.
- Warrants and Options. As of September 23, 1999, 2,546,500 shares of
VerticalOne common stock were subject to unvested options granted under
VerticalOne's option plan and warrants. S1 will assume these VerticalOne
options and warrants if the VerticalOne Transaction closes. Outstanding
options under the VerticalOne option plan which terminate unexercised may
be regranted. Further, S1 has made available options to purchase 2.0
million shares for grant. In
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each such case, Mr. Freishtat, or an employee representative he
designates, shall select the optionee and the number of shares subject to
the option, subject to ratification by S1's board of directors, not to be
unreasonably withheld.
- Severance. Some VerticalOne employees may be paid severance packages if
the VerticalOne Transaction closes and their employment with S1 or
VerticalOne is terminated. If an employee is terminated over the
objections of Mr. Freishtat, the current Chairman and Chief Executive
Officer of VerticalOne or the employee representative, during the two
years following the closing, the employee will be paid a one-time
severance payment equal to his or her then current salary for 90 days. In
addition, any options granted to the employee which are unvested but will
vest within 12 months will automatically vest upon the termination.
As a result, these executive officers and directors could be more likely to
vote to approve the S1-VerticalOne merger agreement than if they did not hold
these interests.
COMPLETION AND EFFECTIVENESS OF THE VERTICALONE TRANSACTION
The VerticalOne Transaction will be completed when all of the conditions to
completion of the VerticalOne Transaction are satisfied or waived, including
approval and adoption of the S1-VerticalOne merger agreement by the stockholders
of VerticalOne and approval of the issuance of shares of S1 common stock by the
S1 stockholders. The VerticalOne Transaction will become effective upon the
filing of a certificate of merger with the State of Delaware.
STRUCTURE OF THE VERTICALONE TRANSACTION AND CONVERSION OF VERTICALONE COMMON
STOCK AND PREFERRED STOCK
VerticalOne Acquisition Corporation, a newly formed and wholly owned
subsidiary of S1, will be merged with and into VerticalOne. As a result of the
VerticalOne Transaction, the separate corporate existence of VerticalOne
Acquisition will cease and VerticalOne will survive the VerticalOne Transaction
as a wholly owned subsidiary of S1.
Holders of VerticalOne common stock will receive up to 0.2 shares of S1
common stock for each share of VerticalOne common stock they own. Of this
amount, at closing, each share of VerticalOne common stock will be converted
into 0.1903 shares of S1 common stock. In addition, holders of VerticalOne
common stock will have a contingent right to receive up to 0.0097 shares of S1
common stock to be placed in an escrow account and to be used to offset any
claims for indemnification made by S1 during the one year following completion
of the VerticalOne Transaction. After that time, any amount remaining in escrow
and not being contested will be distributed to the former VerticalOne
stockholders.
VerticalOne Series A and Series B preferred stock will be converted into
the number of shares of S1 common stock equal to the number of whole shares of
VerticalOne common stock into which their preferred stock could be converted
multiplied by 0.2, of which 0.1903 will be delivered at closing and 0.0097 will
be delivered into the escrow account. The conversion ratio for both the
VerticalOne Series A and Series B preferred stock for conversion into
VerticalOne common stock is one-to-one. The shares of VerticalOne Series C
preferred stock outstanding are held by S1 and will be cancelled in the
transaction.
S1 will not issue fractional shares of stock. In lieu of fractional shares,
VerticalOne stockholders will receive cash equal to the fraction of a share of
S1 common stock to which the VerticalOne stockholder would otherwise be entitled
multiplied by $40.41875.
EXCHANGE OF VERTICALONE STOCK CERTIFICATES FOR S1 STOCK CERTIFICATES
When the VerticalOne Transaction is completed, S1's exchange agent will
mail to VerticalOne stockholders a letter of transmittal and instructions for
use in surrendering VerticalOne stock certificates in exchange for S1 stock
certificates. When you deliver your VerticalOne stock certificates
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to the exchange agent along with an executed letter of transmittal and any other
required documents, your VerticalOne 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. VerticalOne
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 VerticalOne Transaction.
YOU SHOULD NOT SUBMIT YOUR VERTICALONE STOCK CERTIFICATES FOR EXCHANGE UNLESS
AND UNTIL YOU RECEIVE THE TRANSMITTAL INSTRUCTIONS AND A FORM OF LETTER OF
TRANSMITTAL FROM THE EXCHANGE AGENT.
VerticalOne stockholders are not entitled to receive any dividends or other
distributions on S1 common stock until the VerticalOne Transaction is completed
and they have surrendered their VerticalOne stock certificates in exchange for
S1 stock certificates.
Subject to the effect of applicable laws, promptly following surrender of
VerticalOne stock certificates and the issuance of the corresponding S1
certificates, VerticalOne stockholders will be paid the amount of dividends or
other distributions, without interest, with a record date after the completion
of the VerticalOne Transaction which were previously paid with respect to their
whole shares of S1 common stock. At the appropriate payment date, VerticalOne
stockholders will also receive the amount of dividends or other distributions,
without interest, with a record date after the completion of the VerticalOne
Transaction and a payment date after they exchange their VerticalOne stock
certificates for S1 stock certificates.
S1 will only issue VerticalOne stockholders a S1 stock certificate or a
check in lieu of a fractional share in a name in which the surrendered
VerticalOne 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 VERTICALONE
TRANSACTION
The following summary discusses the material federal income tax
consequences of the VerticalOne 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 prospectus/proxy
statement. All of the foregoing authorities are subject to change, and any
changes could affect the continuing validity of this summary. The summary
assumes that the holders of shares of VerticalOne common and preferred stock
hold their shares as a capital asset. The summary does not address the tax
consequences that may be applicable to particular VerticalOne stockholders in
light of their individual circumstances or to VerticalOne 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 VerticalOne stock from the exercise
of options or otherwise as compensation or through a qualified retirement plan
and stockholders who hold shares of VerticalOne 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.
Tax Opinion as to Certain Tax Consequences
One of the conditions for the VerticalOne Transaction to take place is that
S1 and VerticalOne must receive an opinion from Alston & Bird LLP, VerticalOne's
special counsel, that the VerticalOne 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 VerticalOne. The
opinion of Alston & Bird 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 VerticalOne Transaction takes
place as
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described in the merger agreement, and on factual representations to be provided
to Alston & Bird LLP by S1 and VerticalOne 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 Alston & Bird LLP does not render this
opinion, this condition in the merger agreement may be satisfied if Hogan &
Hartson L.L.P., VerticalOne'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,
VerticalOne will not waive this condition and the VerticalOne Transaction will
not occur unless VerticalOne resolicits its stockholders.
If, as concluded in the opinion of counsel, the VerticalOne 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, a VerticalOne stockholder will
recognize no gain or loss upon the exchange of VerticalOne common or
preferred stock for S1 common stock in the merger.
(2) The tax basis of S1 common stock received by a VerticalOne
stockholder in the merger will be the same as the stockholder's aggregate
tax basis in VerticalOne common and preferred stock surrendered in exchange
therefor.
(3) The holding period of S1 common stock received by a VerticalOne
stockholder in the merger will include the holding period of VerticalOne
common and preferred stock surrendered in exchange therefor, assuming
VerticalOne common and preferred stock was held as a capital asset.
(4) The receipt by a VerticalOne 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 VerticalOne 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 VerticalOne will recognize any gain or loss as a
result of the VerticalOne Transaction.
Limitations on Tax Opinion
Notwithstanding the foregoing, if the shares of stock placed in escrow are
used to satisfy any indemnification obligations, such an application of the
escrowed shares could result in gain or loss to the VerticalOne stockholders
otherwise entitled to receive such shares. The opinions described above do not
bind the Internal Revenue Service nor preclude it from adopting a contrary
position. These opinions are subject to qualifications, are conditioned upon
assumptions and are based upon factual representations made to Alston & Bird LLP
by the parties to the merger agreement. The opinions may not be relied upon if
these factual representations are incorrect or incomplete.
THIS DISCUSSION IS ONLY A GENERAL SUMMARY OF THE MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF THE VERTICALONE TRANSACTION. THE TAX CONSEQUENCES OF THE
VERTICALONE TRANSACTION TO YOU MAY BE DIFFERENT FROM THOSE SUMMARIZED ABOVE,
BASED ON YOUR INDIVIDUAL SITUATION. THE STOCKHOLDERS OF VERTICALONE ARE STRONGLY
URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO
THEM OF THE VERTICALONE 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.
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CERTAIN TAX CONSEQUENCES TO HOLDERS OF OPTIONS
Holders of options to purchase VerticalOne common stock that are
outstanding at the effective time of the VerticalOne Transaction will have their
VerticalOne options converted into options to purchase shares of S1 common
stock. See "The VerticalOne Agreements -- The S1-VerticalOne Merger
Agreement -- Treatment of VerticalOne Stock Options and Warrants; Grant of S1
Stock Options" on page 119. Assumption of the options by S1 should not be a
taxable event.
HOLDERS OF VERTICALONE 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 VERTICALONE TRANSACTION
We intend to account for the VerticalOne Transaction as a purchase for
financial reporting and accounting purposes, under generally accepted accounting
principles. After the VerticalOne Transaction, the results of operations of
VerticalOne 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 VerticalOne
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 VERTICALONE
TRANSACTION
The VerticalOne Transaction is subject to the requirements of the HSR Act.
S1 and VerticalOne intend to file the required information and materials with
the Antitrust Division and the FTC. The waiting period will expire 30 days after
both parties have filed acceptable notifications unless terminated earlier or
extended by issuance of a request for additional information. The notification
under the HSR Act will remain effective and will permit closing of the
VerticalOne Transaction within one year from the expiration or termination of
the waiting period.
The Antitrust Division or the FTC may challenge the VerticalOne Transaction
on antitrust grounds before or after expiration of the waiting period.
Accordingly, before or after the completion of the VerticalOne Transaction,
either the Antitrust Division or the FTC, or private persons, could take action
under the antitrust laws, including seeking to enjoin the VerticalOne
Transaction. In addition, before or after the completion of the VerticalOne
Transaction, even though the waiting period has ended, one or more states could
take action under the antitrust laws. We may not prevail if a challenge is made.
Neither S1 nor VerticalOne is aware of any other material governmental or
regulatory approval required for completion of the VerticalOne 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 VERTICALONE AND S1
The shares of S1 common stock to be issued in the VerticalOne 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 VerticalOne
Transaction except pursuant to (1) an effective registration statement under the
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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.
In addition, VerticalOne stockholders will be subject to additional
restrictions on the transfer of the S1 common stock they receive in the
VerticalOne Transaction. See the section entitled "The VerticalOne
Agreements -- Related Agreements -- VerticalOne Share Retention Agreements" on
page 125.
LISTING ON THE NASDAQ NATIONAL MARKET OF S1 COMMON STOCK TO BE ISSUED IN THE
VERTICALONE TRANSACTION
It is a condition to the closing of the VerticalOne Transaction that the
shares of S1 common stock to be issued in the VerticalOne Transaction be
approved for listing on the Nasdaq National Market, subject to official notice
of issuance.
OPERATIONS AFTER THE VERTICALONE TRANSACTION
Following the VerticalOne Transaction, VerticalOne will continue its
operations as a wholly owned subsidiary of S1. The board of directors of the new
VerticalOne subsidiary of S1 will consist of the current directors of S1 and
Gregg S. Freishtat, the current Chairman of VerticalOne's board of directors.
The officers of VerticalOne before the VerticalOne Transaction are expected to
continue as officers of the new VerticalOne subsidiary of S1. The stockholders
of VerticalOne 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
the section entitled "Comparison of Stockholder Rights" on page 168.
THE VERTICALONE AGREEMENTS
THE S1-VERTICALONE MERGER AGREEMENT
This section of the prospectus/proxy statement describes the S1-VerticalOne
merger agreement. While we believe that the description covers the material
terms of the S1-VerticalOne merger agreement, this summary may not contain all
of the information that is important to you. The S1-VerticalOne merger agreement
is attached to this prospectus/proxy statement as Annex D and we urge you to
read it carefully.
Representations and Warranties
Each company made a number of representations and warranties in the
S1-VerticalOne merger agreement regarding aspects of their respective
businesses, financial condition, structure and other facts pertinent to the
VerticalOne Transaction. Representations and warranties of both companies
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 VerticalOne
Transaction by the board of directors and pending stockholder approval
- non-contravention
- financial statements
- taxes
- liabilities and litigation
- changes in business since December 31, 1998
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- securities, antitrust and other commercial regulatory approvals
- compliance with applicable laws
VerticalOne also made representations and warranties to S1 regarding the
following:
- information supplied by each party in this prospectus/proxy statement and
the related registration statement filed by S1
- material contracts
- intellectual property
- title to properties owned or leased
- directors, officers and employees
- fees and expenses of brokers and others
- employee benefit plans
- books and records
S1 also made representations and warranties to VerticalOne regarding S1's
filings and reports with the Securities and Exchange Commission.
The representations and warranties in the merger agreement are complicated
and not easily summarized. You are urged to carefully read the articles of the
S1-VerticalOne merger agreement entitled "Representations and Warranties of
VerticalOne" and "Representations and Warranties of S1."
VerticalOne's Conduct of Business before Completion of the VerticalOne
Transaction
VerticalOne agreed that until the completion of the VerticalOne Transaction
or unless S1 consents in writing, VerticalOne 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
VerticalOne also agreed that until the completion of the VerticalOne
Transaction or unless S1 consents in writing, VerticalOne and its subsidiaries
would conduct their business in compliance with specific restrictions relating
to the following:
- the payment of dividends or other distributions
- the issuance and redemption of securities
- modification of VerticalOne's certificate of incorporation and bylaws
- capital expenditures
- entrance into or modification of material contracts
- the acquisition of a material amount of assets or other entities
- actions affecting the representations and warranties in the merger
agreement
- accounting policies and procedures
- employees and employee benefits
- the incurrence of indebtedness
- sale, purchase, lease or relocation of any office, except for an office
to be located in Northern California
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- investments and other dispositions of VerticalOne's assets or real estate
- changes in VerticalOne's options or restricted purchase plans
- VerticalOne's intellectual property
- solicitation or negotiation of a business combination or similar
transaction involving VerticalOne and a party other than S1
The agreements related to the conduct of VerticalOne's business in the
S1-VerticalOne merger agreement are complicated and not easily summarized. You
are urged to carefully read the section of the S1-VerticalOne merger agreement
entitled "Covenants of VerticalOne."
VerticalOne's Employee Benefit Plans
Individuals who are employed by VerticalOne when the VerticalOne
Transaction is completed are expected to remain employees of VerticalOne,
although S1 may terminate these employees at any time, subject to a severance
payment if Gregg S. Freishtat or the employee representative objects. S1 and
VerticalOne will work together to agree upon mutually acceptable employee
benefit, compensation, severance, separation and retention arrangements so as to
provide benefits to VerticalOne employees generally equivalent to those provided
to employees of S1 prior to the VerticalOne Transaction, as long as these
benefits are not materially less favorable than those available to the employees
of VerticalOne immediately before the VerticalOne Transaction.
Treatment of VerticalOne Stock Options and Warrants; Grant of S1 Stock Options
Upon completion of the VerticalOne Transaction, each outstanding option to
purchase VerticalOne common stock shall be converted automatically into an
option to purchase the number of shares of S1 common stock equal to 0.2 times
the number of shares of VerticalOne 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 VerticalOne common stock subject to the option before
conversion divided by 0.2, rounded up to the nearest cent.
The other terms of each option and the VerticalOne 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 VerticalOne Transaction, each outstanding award, including
restricted stock, stock equivalents and stock units, under any employee
incentive or benefit plans, programs or arrangements maintained by VerticalOne
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 VerticalOne 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 has made available options to purchase 2.0 million shares of S1 common
stock for grant to employees of VerticalOne. The selection of the optionees and
the number of shares subject to each such option shall be made by Gregg S.
Freishtat or the employee representative and ratified by the S1 board of
directors, such ratification not to be unreasonably withheld.
Conditions to Completion of the VerticalOne Transaction
The respective obligations of S1 and VerticalOne to complete the
VerticalOne Transaction and the other transactions contemplated by the
S1-VerticalOne merger agreement are subject to the satisfaction or waiver of
each of the following conditions:
- the issuance of shares of S1 common stock in connection with the
VerticalOne Transaction must be approved by a majority of the shares of
S1 common stock represented in person or by proxy at the S1 stockholder
meeting
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- the S1-VerticalOne merger agreement must be approved and adopted by a
collective majority of the outstanding shares of VerticalOne common
stock, VerticalOne Series A preferred stock and VerticalOne Series B
preferred stock, and by a majority of the outstanding shares of
VerticalOne Series B preferred stock voting as a separate class.
- 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 may 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 VerticalOne Transaction illegal or otherwise
prohibiting completion of the VerticalOne Transaction substantially on
the terms contemplated by the S1-VerticalOne merger agreement
- no governmental agency shall have started or threatened to start a
proceeding seeking an injunction to prevent completion of the merger
- all applicable waiting periods, if any, under applicable antitrust and
competition laws must have expired or been terminated
- S1 and VerticalOne must each receive from Alston & Bird LLP,
VerticalOne's special counsel, an opinion to the effect that the
VerticalOne Transaction will constitute a tax-free reorganization within
the meaning of Section 368(a) of the Internal Revenue Code. However, if
Alston & Bird LLP does not render this opinion, this condition will be
satisfied if Hogan & Hartson L.L.P., S1's counsel, renders the opinion.
We also agreed that our obligations to complete the VerticalOne Transaction
and the other transactions contemplated by the S1-VerticalOne merger agreement
are subject to the satisfaction or waiver of each of the following additional
conditions by the other party before completion of the VerticalOne Transaction:
- the other party's representations and warranties must be true and correct
as of September 23, 1999 and at and as of either the date the VerticalOne
Transaction is to be completed or January 10, 2000, whichever occurs
sooner, 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 S1-VerticalOne merger agreement to be performed
or complied with by it at or before completion of the VerticalOne
Transaction or January 10, 2000, whichever occurs sooner, except where
the nonperformance does not or would not have a material adverse effect
on VerticalOne (before or after the VerticalOne 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
VerticalOne to perform its obligations and to consummate the transaction
contemplated under the S1-VerticalOne merger agreement or on VerticalOne or S1,
and its subsidiaries, taken as a whole, taking into account the business,
customers, assets, capitalization, financial condition and results of operations
of the entity, except to the extent
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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 VerticalOne Transaction
- changes in general economic conditions or changes affecting the industry
generally in which such entity operates
- changes in trading prices for S1 common stock
S1's obligation to complete the VerticalOne transaction is also subject to
the satisfaction or waiver of each of the following conditions:
- any consent to the VerticalOne Transaction of a third party arising under
an agreement between that party and VerticalOne, which, if not obtained
would have a material adverse effect on VerticalOne, must be obtained
- S1 will have received letters from KPMG LLP, VerticalOne's independent
public accountants, regarding the financial data regarding VerticalOne
contained in this prospectus/proxy statement
Termination of the S1-VerticalOne Merger Agreement
The S1-VerticalOne merger agreement may be terminated at any time prior to
completion of the VerticalOne Transaction, whether before or after approval and
adoption of the S1-VerticalOne merger agreement and approval of the VerticalOne
Transaction by VerticalOne stockholders or approval of the issuance of shares of
common stock by S1 stockholders:
- by mutual written consent of S1 and VerticalOne
- by S1 or VerticalOne, 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
VerticalOne Transaction
- by S1 or VerticalOne, if the VerticalOne Transaction is not completed
before January 10, 2000 unless extended up to March 1, 2000 because
needed regulatory approvals have not been received or S1 has entered into
a further proposed acquisition or business combination, except that this
right to terminate the S1-VerticalOne merger agreement is not available
to any party whose action or failure to act has resulted in the failure
of the VerticalOne Transaction to occur on or before January 10, 2000;
- by S1 or VerticalOne, if the issuance of stock pursuant to the
VerticalOne Transaction fails to receive the requisite vote for approval
by the stockholders of S1 at the S1 stockholder meeting
- by S1 or VerticalOne, if the S1-VerticalOne merger agreement and
VerticalOne Transaction fail to receive the requisite vote for approval
and adoption by the stockholders of VerticalOne at the VerticalOne
special meeting
- by S1 or VerticalOne, if there has been a breach of the S1-VerticalOne
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 representation or warranty, or on VerticalOne or S1, in the
case of a covenant, 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 VerticalOne's board of directors (a) fails to call and hold a
VerticalOne 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 fails to
recommend approval of the S1-VerticalOne merger agreement to its
stockholders, (c) approves an acquisition transaction inconsistent with
the S1-VerticalOne merger
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<PAGE> 136
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
acquisition transaction
- by VerticalOne, 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 VerticalOne
Transaction to its stockholders
Expenses
The S1-VerticalOne merger agreement generally provides for S1 and
VerticalOne 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.
Extension, Waiver and Amendment of the S1-VerticalOne Merger Agreement
S1 and VerticalOne may amend the S1-VerticalOne merger agreement before
completion of the VerticalOne Transaction provided both comply with applicable
law in so doing, even after approval of the S1 and VerticalOne stockholders.
After the VerticalOne stockholders' approval of the S1-VerticalOne merger
agreement, no amendments can be made without further VerticalOne stockholder
approval, which (a) alter or change the amount or kind of shares or cash to be
received by VerticalOne stockholders, (b) alter or change any term of the
certificate of incorporation of VerticalOne or (c) alter or change any terms or
conditions of the S1-VerticalOne merger agreement in such a way as to have an
adverse effect on holders of VerticalOne common and preferred stock.
RELATED AGREEMENTS
The Escrow Agreement
Creation of the Escrow Account. Under the S1-VerticalOne merger agreement,
each share of VerticalOne stock will be converted into a number of shares of S1
common stock and a contingent right to receive a number of shares of S1 common
stock. At the time the VerticalOne Transaction is completed, the shares of S1
common stock issuable pursuant to that contingent right will be placed into an
escrow account. The terms of the escrow account are governed by the provisions
of an escrow agreement, attached as Exhibit B to the S1-VerticalOne merger
agreement, entered into by S1 and VerticalOne with American Stock Transfer &
Trust Company serving as escrow agent. Subject to the terms of the escrow
agreement, the shares of S1 common stock placed in the escrow account shall be
used, if necessary, to indemnify S1 for any loss suffered as a result of a
breach of any of the representations and warranties or covenants and agreements
of VerticalOne set forth in the S1-VerticalOne merger agreement.
Distribution of Shares of S1 Common Stock Held in Escrow. The shares of S1
common stock placed in the escrow account shall be held until (1) all of the
shares of S1 common stock held in escrow are distributed to satisfy the
indemnifiable losses of S1 or (2) the remaining shares are distributed to the
former stockholders of VerticalOne one year from the earlier of (A) the date the
VerticalOne Transaction is completed or (B) if S1 has requested that the
completion of the merger be extended beyond January 10, 2000, the date that
VerticalOne certifies the accuracy of its representations and warranties and the
performance of its covenants and agreements pursuant to the S1-VerticalOne
merger agreement.
Threshold Amount for Indemnifiable Losses. Notwithstanding the foregoing,
no obligation to indemnify will exist under the escrow agreement until the
aggregate indemnifiable losses of S1 under the escrow agreement equal $750,000.
Once this threshold amount of indemnifiable losses has been
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<PAGE> 137
reached, S1 will be indemnified against all indemnifiable losses incurred over
and above the threshold amount. While the shares of S1 common stock are held in
escrow, all cash dividends or other property with respect to the shares held in
escrow will be placed in the escrow account and distributed to the former
VerticalOne stockholders of S1 pursuant to the terms of the escrow agreement.
The VerticalOne stockholders have the right to direct the voting of the shares
of S1 common stock held in escrow to which they have a contingent right. In the
event of any stock split or stock dividend with respect to S1 common stock that
becomes effective during the term of the escrow agreement, the additional shares
issued with respect to the shares held in escrow shall be added to the shares
held in escrow and the terms of the escrow agreement will be adjusted
accordingly to account for such additional shares.
Dispute Resolution. If there is a dispute about whether a particular loss
is indemnifiable under the escrow agreement, it shall first be referred jointly
to designated senior executives of S1 and VerticalOne. If the senior executives
are unable to resolve the dispute, they may either refer it to outside mediation
by a neutral adviser or to formal binding arbitration. If the parties choose
outside mediation and are still unable to resolve the dispute, the parties' only
recourse is to then refer the dispute to formal binding arbitration.
VerticalOne Stockholder Representative. The stockholder representative
representing the former VerticalOne stockholders after the completion of the
VerticalOne Transaction will have full power and authority to represent the
VerticalOne stockholders with respect to all matters arising under the escrow
agreement. All action taken by the stockholder representative under the escrow
agreement shall be binding upon VerticalOne stockholders.
Strategic Marketing and Sales Agency Agreement
VerticalOne has entered into a strategic marketing and sales agency
agreement with S1, appointing S1 as VerticalOne's non-exclusive sales agent.
Under the agreement, VerticalOne grants S1:
- the right to market, provide and support the account aggregation and
consolidation service which we refer to as the VerticalOne services
- the personal, nontransferable, non-exclusive right and license to sell
the VerticalOne services to S1 customers and other financial institutions
S1 will be responsible for collecting all implementation and integration
fees, advertising revenue and subscriber fees from its customers for their use
of the VerticalOne services. S1 will be compensated through the warrants
described in the next section and a 50% revenue share of certain fees and
advertising revenue paid by customers to S1.
VerticalOne may continue to sell its services or authorize a third party to
furnish the VerticalOne services except that it may not provide the VerticalOne
services to a customer of S1 unless the customer purchased the services through
S1 or the customer declined S1's offer to buy the services. S1 will not solicit
any financial institutions that are not S1 customers unless S1 confirms that
VerticalOne has not been in contact with the institutions in the preceding six
months.
Until September 23, 2000, VerticalOne will be S1's sole provider of the
VerticalOne services as made available by VerticalOne. During this period, S1
may not offer to financial institutions any other products or technology with
functions and features similar to those of VerticalOne services.
Both S1 and VerticalOne represent and warrant that they have the right to
enter into, and perform their obligations under, the agreement and have obtained
all necessary consents, approvals and authorizations necessary to enter into,
and perform their obligations under, the agreement. However, both S1 and
VerticalOne expressly disclaim all other warranties.
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<PAGE> 138
The agreement will be in effect until September 23, 2002. VerticalOne has
the right to terminate the agreement upon 30 days' notice after September 23,
2000 if VerticalOne is no longer S1's exclusive provider of account aggregation
and consolidation services. Both S1 and VerticalOne have the right to terminate
if:
- either party is involved in any voluntary or involuntary bankruptcy
proceedings or any proceedings involving insolvency, dissolution,
cessation of operations or reorganization of indebtedness that is not
dismissed within 60 days
- either party cannot pay its debts as they mature in the ordinary course
of business or makes an assignment for the benefit of its creditors
- either party is in material default of any provision of the agreement
S1 and VerticalOne have agreed to settle disputes arising under the
agreement by arbitration and to indemnify each other for liabilities and
expenses that arise in the following circumstances:
- the negligent performance or nonperformance of their respective
obligations under the agreement
- real or tangible personal property and/or bodily injury arising from the
negligent or willful misconduct of their employees or agents
- any infringement or alleged infringement by the VerticalOne Services on
the intellectual property rights of any third party
- any third party claim arising out of an end-users' use of the VerticalOne
Services or a third party information provider that VerticalOne does not
have the right to access on-line data
Warrant Agreement
As part of the strategic marketing and sales agency agreement, VerticalOne
issued to S1 a warrant that grants S1 the option to buy up to 1,000,000 shares
of VerticalOne common stock at an exercise price of $2.50 per share. The warrant
will become exercisable in ten separate tranches of 100,000 shares.
The warrant is not currently exercisable and will never become exercisable
if the S1-VerticalOne merger is completed. If that merger is not completed, for
every 100,000 new end-users of the VerticalOne services which S1 brings to
VerticalOne pursuant to the strategic marketing and sales agency agreement
between September 23, 1999 and March 31, 2001, 100,000 warrant shares become
exercisable. The warrants must be exercised by September 23, 2001. The exercise
price and conversion ratio are protected by antidilution provisions.
To exercise the warrants, S1 must deliver to VerticalOne a notice of
exercise and a payment of the aggregate price for the warrant shares being
purchased. The shares purchased pursuant to the warrant will not be registered
and cannot be resold freely, but are entitled to the same rights to require
registration as the other VerticalOne stockholders.
The warrants are transferable, in whole or in part, subject to applicable
legal restrictions under the securities laws. Prior to the exercise of the
warrant, S1 will not have any rights as a stockholder.
Series C Preferred Stock Purchase Agreement
VerticalOne entered into a stock purchase agreement with S1 by which S1
bought 2,608,242 shares of VerticalOne Series C preferred stock for a total of
$15,000,000. The sale was completed on September 24, 1999. Although entered into
at the same time as the S1-VerticalOne merger agreement, the stock purchase
agreement is an independent investment and does not require stockholder
approval.
VerticalOne made representations and warranties in this agreement similar
to those made in the S1-VerticalOne merger agreement.
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<PAGE> 139
S1 represented and warranted:
- S1 has full power and authority to enter into the agreement
- S1 is buying VerticalOne Series C preferred stock for its own investment
and not with the intent to resell it
- S1 is a sophisticated purchaser and can evaluate risks
- S1 understands that the securities cannot be transferred unless they are
registered, sold in connection with Rule 144, or exempt under Regulation
A or another registration exemption and that there is no public market
for the securities
- S1's access to data about VerticalOne
- S1's liquidity
- S1 is duly authorized to purchase and hold the securities
- S1 has relied only on information provided in writing by VerticalOne or
in VerticalOne's books and records
The representations and warranties in the stock purchase agreement are
complicated and not easily summarized. You are urged to carefully read the
articles of the stock purchase agreement entitled "Representations and
Warranties of the Company" and "Representations and Warranties of the
Purchaser."
VerticalOne and S1 agreed that the following conditions had to be fulfilled
before completion of the stock purchase:
- the representations are warranties for each party were true on the day
the purchase was completed and each party has performed its obligations
thereunder
- an agreement granting S1 registration rights had been executed and
delivered
- the securities were exempt from registration under applicable securities
laws
- a restated certificate was adopted by VerticalOne and filed with the
Secretary of State of the State of Delaware
- an existing stockholders' agreement should be joined by S1
- the stockholder agreement and the strategic marketing and sales agency
agreement were executed.
The VerticalOne Series C preferred stock will be cancelled upon completion
of the VerticalOne Transaction. However, if the VerticalOne Transaction is not
completed, the holders of VerticalOne Series C preferred stock will have voting
rights based on the number of whole shares of common stock into which the Series
C preferred stock may be converted. The holders of Series C preferred stock will
vote together with the holders of common stock, Series A preferred stock and
Series B preferred stock as one class. Also, at such time, S1 will have the
right to name one person to serve on the board of directors of VerticalOne.
VerticalOne Share Retention Agreements
S1 entered into a share retention and voting agreement with the holders of
51% of the VerticalOne common stock, 79% of the VerticalOne Series A preferred
stock and 89% of the VerticalOne Series B preferred stock. These holders of the
VerticalOne common and preferred stock agreed to vote in favor of the
VerticalOne Transaction. In addition, each stockholder has agreed to sign or
given power of attorney to S1 to execute and deliver a proxy allowing S1 to vote
in favor of the S1-VerticalOne merger agreement. These stockholders were not
paid additional consideration in connection with the voting agreement.
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<PAGE> 140
These stockholders also agreed not to transfer, pledge, sell or otherwise
dispose of or encumber their shares of VerticalOne stock. In addition, they
agreed that all such shares acquired after the signing of the agreement but
prior to the completion of the VerticalOne Transaction would be subject to the
terms and conditions of the agreement.
Each stockholder executing the voting agreement has made the following
representations and warranties:
- the stockholder has full power and legal capacity to execute and deliver
the voting agreement, to perform its obligations under the agreement and
to consummate the transactions contemplated in the agreement
- the stockholder will not solicit or negotiate a business combination,
sale involving more than 20% of the assets or capital stock of
VerticalOne or a similar transaction involving VerticalOne and a party
other than S1
- the stockholder will not transfer its shares to a third party or provide
a third party with the right to vote the stockholder's shares unless the
third party complies with the terms of this agreement
The VerticalOne stockholders who signed this voting agreement have waived
all appraisal rights which arise out of Section 262 of the Delaware General
Corporation Law.
Pursuant to the S1-VerticalOne merger agreement, the holders of VerticalOne
Series A preferred stock and VerticalOne Series B preferred stock cannot sell
any of their shares of S1 common stock for 180 days after closing. However, if
any of the following occurs, the holders of VerticalOne preferred stock may sell
half of their shares 90 days after completion of the VerticalOne Transaction and
all of their shares 180 days thereafter:
- if S1 does not give notice within 90 days after the merger of its
intention to register shares for a public offering; or
- if S1 does not file a registration statement regarding a sale of
securities within 21 days of giving notice of its intention to
register shares; or
- if a registration is filed but subsequently withdrawn or the
offering is abandoned or terminated.
During the 180 days following the merger, the original holders of
VerticalOne preferred stock, if permitted to sell, may not sell more than 25,000
shares of S1 common stock per day, except in certain limited instances.
In addition, VerticalOne has agreed to use its best efforts to have
stockholders of VerticalOne common stock enter into an agreement with S1 not to
sell their new S1 common stock for the following time periods:
- up to 33% may be sold six months after the completion of the VerticalOne
Transaction;
- up to 66% may be sold 12 months after completion of the VerticalOne
Transaction; and
- up to 100% may be sold 18 months after completion of the VerticalOne
Transaction.
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<PAGE> 141
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............................ $ 7.13 $ 4.00 $16.25 $10.13
Second Quarter........................... 4.88 2.63 15.00 8.88
Third Quarter............................ 7.00 3.31 18.75 11.75
Fourth Quarter........................... 5.69 2.81 22.13 14.13
1998
- -----------------------------------------
First Quarter............................ $ 6.94 $ 3.19 $20.88 $14.63
Second Quarter........................... 7.88 3.75 20.19 8.06
Third Quarter............................ 13.81 5.38 11.63 4.88
Fourth Quarter........................... 18.88 4.63 9.75 4.63
1999
- -----------------------------------------
First Quarter............................ $38.00 $14.50 $11.00 $ 4.88
Second Quarter........................... 79.25 27.59 16.88 3.81
Third Quarter............................ 50.25 25.13 14.50 7.56
Fourth Quarter (through October 8,
1999).................................. 41.00 37.00 12.94 11.69
</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
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<PAGE> 142
of the specified dates by the exchange ratio of 0.330969. October 8, 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
October 8, 1999.......................... $40.00 $12.38 $13.24
</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.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following unaudited pro forma consolidated financial statements shown
below as of June 30, 1999 and for the six-month period ended June 30, 1999 and
the year ended December 31, 1998 give effect to the Edify, FICS and VerticalOne
Transactions as if they occurred on June 30, 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
six-month period ended June 30, 1999 and the year ended December 31, 1998,
respectively. The pro forma information gives effect to the Edify, FICS and
VerticalOne Transactions 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)," "Pro Forma
Adjustments (VerticalOne)," "Pro Forma Adjustments (Combined - Edify/FICS),"
"Pro Forma Adjustments (Combined - Edify/ VerticalOne)," "Pro Forma Adjustments
(Combined - FICS/VerticalOne)," and "Pro Forma Adjustments
(Combined - Edify/FICS/VerticalOne)."
S1 intends to proceed with each transaction that is approved by
stockholders. Accordingly, in addition to the accompanying unaudited pro forma
consolidated financial statements reflecting the Edify, FICS and VerticalOne
Transactions, stockholders are encouraged to read the accompanying unaudited pro
forma consolidated financial statements separately reflecting (i) the Edify and
FICS Transactions only, (ii) the Edify and VerticalOne Transactions only, (iii)
the FICS and VerticalOne Transactions only, (iv) the Edify Transaction only, (v)
the FICS Transaction only and (vi) the VerticalOne Transaction only.
The unaudited pro forma consolidated financial statements should be read in
conjunction with the historical audited consolidated financial statements and
related notes of S1, Edify, FICS and VerticalOne, included elsewhere or
incorporated by reference in this prospectus/proxy statement. VerticalOne was
formed on October 8, 1998 and, accordingly, the 1998 statement of operations
only includes results for the period from inception (October 8, 1998) through
December 31, 1998.
These 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
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<PAGE> 143
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.
Translations of euro amounts into U.S. dollars have been made at the rate
of $1.0325 to E1.00 (the daily average rate on June 30, 1999) for amounts at
June 30, 1999 and at the rate of $1.08961 to E1.00 (the average of the daily
average rates for the six-month period ended June 1999) for amounts for the
six-month period ended June 30, 1999.
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<PAGE> 144
PRO FORMA CONSOLIDATED BALANCE SHEET -- UNAUDITED
AS OF JUNE 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS CONSOLIDATED
-------------------------------------------- (FICS/EDIFY/ (S1/FICS/EDIFY/
S1 FICS EDIFY VERTICALONE VERTICALONE) VERTICALONE)
-------- -------- -------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash, cash equivalents, and
short-term investments...... $ 70,862 $ 1,478 $ 46,826 $12,926 $(23,450)(1) $ 108,642
Investment securities
available-for-sale.......... 9,071 -- -- -- 9,071
Accounts receivable, net...... 17,028 19,320 20,167 -- 56,515
Prepaid expenses and other
current assets.............. 4,091 3,821 2,904 462 11,278
-------- -------- -------- ------- -------- ----------
Total current assets........ 101,052 24,619 69,897 13,388 (23,450) 185,506
Premises and equipment, net... 7,093 4,553 6,859 2,184 20,689
Intangible assets, net........ 2,546 2,800 -- -- 870,265(1) 875,611
Notes receivable.............. 7,500 -- -- -- (6,000)(2) 1,500
Other assets.................. 1,564 -- 1,301 117 2,982
-------- -------- -------- ------- -------- ----------
Total assets................ $119,755 $ 31,972 $ 78,057 $15,689 $840,815 $1,086,288
======== ======== ======== ======= ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.............. $ 3,127 $ 8,035 $ 3,689 $ 1,052 $ 15,903
Accrued expenses.............. 7,324 6,099 10,664 28 24,115
Deferred revenues............. 14,423 3,462 4,587 -- 22,472
Borrowings under line of
credit...................... -- 11,415 -- -- 11,415
Current portion of capital
lease obligation............ 466 217 92 -- 775
Other current liabilities..... -- 246 -- -- 246
-------- -------- -------- ------- ----------
Total current liabilities... 25,340 29,474 19,032 1,080 74,926
Deferred revenues............. 9,609 -- -- -- 9,609
Deferred rent................. -- -- 68 -- 68
Capital lease obligation,
excluding current portion... 54 844 1 -- 899
Convertible note payable...... -- 6,000 -- -- $ (6,000)(2) --
Borrowings under line of
credit...................... -- -- -- 534 534
-------- -------- -------- ------- -------- ----------
Total liabilities........... 35,003 36,318 19,101 1,614 (6,000) 86,036
-------- -------- -------- ------- -------- ----------
Series B Preferred Stock
(Redeemable)................ -- -- -- 12,606 (12,606)(1) --
STOCKHOLDERS' EQUITY:
Preferred stock............... 23,136 18,971 -- 39 (19,010)(1) 23,136
Common stock.................. 276 616 18 8 (445)(1) 473
Additional paid-in-capital.... 156,582 2,932 70,335 3,849 897,487(1) 1,131,185
Receivable from the sale of
stock....................... (11,279) -- -- -- -- (11,279)
Accumulated deficit........... (88,260) (26,420) (11,397) (2,427) (19,056)(1) (147,560)
Accumulated other
comprehensive income........ 4,297 (445) -- -- 445(1) 4,297
-------- -------- -------- ------- -------- ----------
Total stockholders'
equity.................... 84,752 (4,346) 58,956 1,469 859,421 1,000,252
-------- -------- -------- ------- -------- ----------
Total liabilities and
stockholders' equity...... $119,755 $ 31,972 $ 78,057 $15,689 $840,815 $1,086,288
======== ======== ======== ======= ======== ==========
</TABLE>
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<PAGE> 145
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS -- UNAUDITED
SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS CONSOLIDATED
------------------------------------------ (FICS/EDIFY/ (S1/FICS/EDIFY/
S1 FICS EDIFY VERTICALONE VERTICALONE) VERTICALONE)
------- ------- -------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Software licenses............... $ 4,638 $ 7,209 $ 16,173 $ -- $ 28,020
Professional services........... 19,446 20,854 12,654 -- 52,954
Data center..................... 3,591 -- -- -- 3,591
------- ------- -------- ------- ---------
Total revenues................ 27,675 28,063 28,827 -- 84,565
------- ------- -------- ------- ---------
Direct costs:
Software licenses............... 232 51 1,756 -- 2,039
Professional services........... 12,118 17,697 12,476 -- 42,291
Data center..................... 3,716 -- -- -- 3,716
------- ------- -------- ------- ---------
Total direct costs............ 16,066 17,748 14,232 -- 48,046
------- ------- -------- ------- ---------
Gross margin.................. 11,609 10,315 14,595 -- 36,519
------- ------- -------- ------- ---------
Operating expenses:
Selling and marketing........... 2,253 5,522 15,938 423 24,136
Product development............. 8,889 8,378 5,593 1,123 23,983
General and administrative...... 3,724 3,129 2,695 578 10,126
Depreciation and amortization... 2,461 985 2,644 58 6,148
Amortization of intangible
assets and acquisition
charges....................... 456 2,254 690 -- $ 143,676(3) 147,076
------- ------- -------- ------- --------- ---------
Total operating expenses...... 17,783 20,268 27,560 2,182 143,676 211,469
------- ------- -------- ------- --------- ---------
Operating loss................ (6,174) (9,953) (12,965) (2,182) (143,676) (174,950)
Interest income, net.............. 754 17 666 99 1,536
------- ------- -------- ------- --------- ---------
Loss before income taxes...... (5,420) (9,936) (12,299) (2,083) (143,676) (173,414)
Provision for income taxes........ -- (1) (96) -- (97)
------- ------- -------- ------- --------- ---------
Loss from continuing
operations.................. $(5,420) $(9,937) $(12,395) $(2,083) $(143,676) $(173,511)
======= ======= ======== ======= ========= =========
Basic and diluted loss per common
share from continuing
operations...................... $ (3.85)
=========
Weighted average common shares
outstanding..................... 45,105
=========
</TABLE>
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PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS -- UNAUDITED
TWELVE MONTHS ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS CONSOLIDATED
-------------------------------------------- (FICS/EDIFY/ (S1/FICS/EDIFY/
S1 FICS EDIFY VERTICALONE VERTICALONE) VERTICALONE)
-------- -------- -------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Software licenses........... $ 4,781 $ 12,837 $ 28,685 $ -- $ 46,303
Professional services....... 16,218 45,218 20,171 -- 81,607
Data center................. 3,181 -- -- -- 3,181
-------- -------- -------- ----- ---------
Total revenues............ 24,180 58,055 48,856 -- 131,091
-------- -------- -------- ----- ---------
Direct costs:
Software licenses........... 503 464 1,240 -- 2,207
Professional services....... 10,527 36,833 17,225 -- 64,585
Data center................. 7,218 -- -- -- 7,218
-------- -------- -------- ----- ---------
Total direct costs........ 18,248 37,297 18,465 -- 74,010
-------- -------- -------- ----- ---------
Gross margin.............. 5,932 20,758 30,391 -- 57,081
-------- -------- -------- ----- ---------
Operating expenses:
Selling and marketing....... 4,723 6,194 27,529 37 38,483
Product development......... 14,625 14,247 10,902 86 39,860
General and
administrative............ 5,994 10,423 3,921 44 20,382
Intellectual property
settlement................ -- -- 5,000 -- 5,000
Depreciation and
amortization.............. 5,347 1,343 4,489 -- 11,179
Amortization of intangible
assets and acquisition
charges................... 4,384 363 -- -- $ 287,352(3) 292,099
-------- -------- -------- ----- --------- ---------
Total operating
expenses................ 35,073 32,570 51,841 167 287,352 407,003
-------- -------- -------- ----- --------- ---------
Operating loss............ (29,141) (11,812) (21,450) (167) (287,352) (349,922)
Interest income, net.......... 583 127 1,805 -- 2,515
-------- -------- -------- ----- --------- ---------
Loss before income
taxes................... (28,558) (11,685) (19,645) (167) (287,352) (347,407)
Provision for income taxes.... -- (72) (125) -- (197)
-------- -------- -------- ----- --------- ---------
Loss from continuing
operations.............. $(28,558) $(11,757) $(19,770) $(167) $(287,352) $(347,604)
======== ======== ======== ===== ========= =========
Basic and diluted loss per
common share from continuing
operations.................. $ (8.32)
=========
Weighted average common shares
outstanding................. 41,763
=========
</TABLE>
132
<PAGE> 147
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/EDIFY/VERTICALONE)":
1. The pro forma acquisition costs of FICS, Edify and Vertical One are
allocated as follows:
<TABLE>
<CAPTION>
FICS EDIFY VERTICALONE TOTAL
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Shares of S1 stock to be issued........ 10,000,000 5,869,007 3,857,538 19,726,545
Estimated market price of S1 common
stock(A)............................. $ 37.89 $ 52.54 $ 37.47
---------- ---------- --------- ----------
Estimated market price of S1 common
stock issued......................... $ 378,900 $ 308,358 $ 144,542 $ 831,800
Fair value of options issued........... 43,000 80,000 20,000 143,000
Estimated transaction costs............ 3,850 3,700 2,500 10,050
Purchase of preferred stock............ -- -- 15,000 15,000
---------- ---------- --------- ----------
Total purchase price......... 425,750 392,058 182,042 999,850
Less:
Book value of net assets acquired.... (4,346) 58,956 14,075 68,685
Adjustment to book value of net
assets acquired for purchase of
preferred
stock............................. -- -- 15,000 15,000
Adjustment to book value for
transaction costs paid by Edify,
FICS and VerticalOne.............. (5,400) (6,800) (1,200) (13,400)
---------- ---------- --------- ----------
Adjusted book value of net assets
acquired.......................... (9,746) 52,156 27,875 70,285
---------- ---------- --------- ----------
Excess purchase price over net book
value of assets acquired.......... $ 435,496 $ 339,902 $ 154,167 $ 929,565
Allocated to:
In process research & development
(B)............................... $ 32,000 $ 20,000 $ 7,300 $ 59,300
Developed technology................. $ 22,000 $ 13,000 $ 22,000 $ 57,000
Assembled work force................. 10,000 10,000 500 20,500
Customer list........................ 16,000 11,000 -- 27,000
Fair value of options issued......... 43,000 80,000 20,000 143,000
Residual excess purchase cost
(goodwill)........................ 312,496 205,902 104,367 622,765
---------- ---------- --------- ----------
Total intangible assets...... $ 403,496 $ 319,902 $ 146,867 $ 870,265
---------- ---------- --------- ----------
</TABLE>
- ------------------
(A) The estimated market value of S1 common stock for the transactions
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
$59,300 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 adjustment reflects the elimination of amounts advanced
under a loan agreement between S1 and FICS.
133
<PAGE> 148
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. 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, FICS and VerticalOne Transactions. The intangible assets consist of the
following assets and amortization periods:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL MONTHLY
INTANGIBLE ASSETS AMOUNT LIFE AMORTIZATION 6 MONTHS 12 MONTHS
----------------- -------- --------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Developed technology............. $ 57,000 3 $ 1,583 $ 9,498 $ 18,996
Assembled work force............. 20,500 5 342 2,052 4,104
Customer list.................... 27,000 3 750 4,500 9,000
Fair value of options issued..... 143,000 3 3,972 23,832 47,664
Residual excess purchase cost
(goodwill)..................... 622,765 3 17,299 103,794 207,588
-------- ------- -------- --------
TOTAL ALLOCATION....... $870,265 $23,946 $143,676 $287,352
-------- ------- -------- --------
</TABLE>
4. The weighted average number of shares outstanding used in the
computation of pro forma net loss per share consists of the following:
<TABLE>
<CAPTION>
SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30, 1999 DECEMBER 31, 1998
---------------- -------------------
<S> <C> <C>
Weighted average number of shares of S1 common stock
outstanding....................................... 25,378,877 22,036,652
Adjustment for S1 common stock issued in connection
with the Edify Transaction........................ 5,869,007 5,869,007
Adjustment for S1 common stock issued in connection
with the FICS Transaction......................... 10,000,000 10,000,000
Adjustment for S1 common stock issued in connection
with the VerticalOne Transaction.................. 3,857,538 3,857,538
---------- ----------
Average number of common shares outstanding......... 45,105,422 41,763,197
</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.
5. Certain reclassifications have been made to the Edify and FICS
historical information to conform with the S1 presentation.
6. The unaudited pro forma consolidated statements of operations reflect
only results from continuing operations and thus do not include the operations
of Edify's Employee Relationship Management Group which Edify sold to Workscape,
Inc. in July 1999, nor do they include the gain on the sale of these assets. The
unaudited pro forma consolidated balance sheet reflects the proceeds from the
sale and the gain on the sale of Edify's Employee Relationship Management Group.
7. 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 the Edify Transaction. The option
also provides that if S1 had completed the transaction with FICS contemplated by
the May agreements, the number of option shares would have increased by
1,800,000. The May agreements were terminated, and therefore the increase in
option shares will not become effective. However, S1 intends to amend its option
with Intuit to provide for additional option shares if the FICS Transaction is
completed. On May 27, 1999, Intuit completed its $50 million investment in S1 by
purchasing 970,813 shares of S1 common stock
134
<PAGE> 149
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
at a price of $52.50 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 options have not been reflected in the pro forma
presentation.
135
<PAGE> 150
PRO FORMA CONSOLIDATED BALANCE SHEET -- UNAUDITED
AS OF JUNE 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
------------------------------ ADJUSTMENTS CONSOLIDATED
S1 FICS EDIFY (FICS/EDIFY) (S1/FICS/EDIFY)
-------- -------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash, cash equivalents, and short-term
investments.......................... $ 70,862 $ 1,478 $ 46,826 $(19,750)(1) $ 99,416
Investment securities
available-for-sale................... 9,071 -- -- 9,071
Accounts receivable, net............... 17,028 19,320 20,167 56,515
Prepaid expenses and other current
assets............................... 4,091 3,821 2,904 10,816
-------- -------- -------- -------- ---------
Total current assets................. 101,052 24,619 69,897 (19,750) 175,818
Premises and equipment, net............ 7,093 4,553 6,859 18,505
Intangible assets, net................. 2,546 2,800 -- 723,398(1) 728,744
Notes receivables...................... 7,500 -- -- (6,000)(2) 1,500
Other assets........................... 1,564 -- 1,301 2,865
-------- -------- -------- -------- ---------
Total assets......................... $119,755 $ 31,972 $ 78,057 $697,648 $ 927,432
======== ======== ======== ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable....................... $ 3,127 $ 8,035 $ 3,689 $ 14,851
Accrued expenses....................... 7,324 6,099 10,664 24,087
Deferred revenues...................... 14,423 3,462 4,587 22,472
Borrowings under line of credit........ -- 11,415 -- 11,415
Current portion of capital lease
obligation........................... 466 217 92 775
Other current liabilities.............. -- 246 -- 246
-------- -------- -------- ---------
Total current liabilities............ 25,340 29,474 19,032 73,846
Deferred revenues...................... 9,609 -- -- 9,609
Deferred rent.......................... -- -- 68 68
Capital lease obligation, excluding
current portion...................... 54 844 1 899
Convertible note payable............... -- 6,000 -- $ (6,000)(2) --
-------- -------- -------- -------- ---------
Total liabilities.................... 35,003 36,318 19,101 (6,000) 84,422
-------- -------- -------- -------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock........................ 23,136 18,971 -- (18,971)(1) 23,136
Common stock........................... 276 616 18 (476)(1) 434
Additional paid-in-capital............. 156,582 2,932 70,335 736,833(1) 966,682
Receivable from the sale of stock...... (11,279) -- -- -- (11,279)
Accumulated deficit.................... (88,260) (26,420) (11,397) (14,183)(1) (140,260)
Accumulated other comprehensive
income............................... 4,297 (445) -- 445(1) 4,297
-------- -------- -------- -------- ---------
Total stockholders' equity........... 84,752 (4,346) 58,956 703,648 843,010
-------- -------- -------- -------- ---------
Total liabilities and stockholders'
equity............................. $119,755 $ 31,972 $ 78,057 $697,648 $ 927,432
======== ======== ======== ======== =========
</TABLE>
136
<PAGE> 151
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS -- UNAUDITED
SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
---------------------------- ADJUSTMENTS CONSOLIDATED
S1 FICS EDIFY (FICS/EDIFY) (S1/FICS/EDIFY)
------- ------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses........................ $ 4,638 $ 7,209 $ 16,173 $ 28,020
Professional services.................... 19,446 20,854 12,654 52,954
Data center.............................. 3,591 -- -- 3,591
------- ------- -------- ---------
Total revenues......................... 27,675 28,063 28,827 84,565
------- ------- -------- ---------
Direct costs:
Software licenses........................ 232 51 1,756 2,039
Professional services.................... 12,118 17,697 12,476 42,291
Data center.............................. 3,716 -- -- 3,716
------- ------- -------- ---------
Total direct costs..................... 16,066 17,748 14,232 48,046
------- ------- -------- ---------
Gross margin........................... 11,609 10,315 14,595 36,519
------- ------- -------- ---------
Operating expenses:
Selling and marketing.................... 2,253 5,522 15,938 23,713
Product development...................... 8,889 8,378 5,593 22,860
General and administrative............... 3,724 3,129 2,695 9,548
Depreciation and amortization............ 2,461 985 2,644 6,090
Amortization of intangible assets and
acquisition charges.................... 456 2,254 690 $ 119,232(3) 122,632
------- ------- -------- --------- ---------
Total operating expenses............... 17,783 20,268 27,560 119,232 184,843
------- ------- -------- --------- ---------
Operating loss......................... (6,174) (9,953) (12,965) (119,232) (148,324)
Interest income, net....................... 754 17 666 -- 1,437
------- ------- -------- --------- ---------
Loss before income taxes................. (5,420) (9,936) (12,299) (119,232) (146,887)
Provision for income taxes................. -- (1) (96) -- (97)
------- ------- -------- --------- ---------
Loss from continuing operations........ $(5,420) $(9,937) $(12,395) $(119,232) $(146,984)
======= ======= ======== ========= =========
Basic and diluted loss per common share
from continuing operations............... $ (3.56)
=========
Weighted average common shares
outstanding.............................. 41,248
=========
</TABLE>
137
<PAGE> 152
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 EDIFY (FICS/EDIFY) (S1/FICS/EDIFY)
-------- -------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses...................... $ 4,781 $ 12,837 $ 28,685 $ 46,303
Professional services.................. 16,218 45,218 20,171 81,607
Data center fees....................... 3,181 -- -- 3,181
-------- -------- -------- ---------
Total revenues....................... 24,180 58,055 48,856 131,091
-------- -------- -------- ---------
Direct costs:
Software licenses...................... 503 464 1,240 2,207
Professional services.................. 10,527 36,833 17,225 64,585
Data center............................ 7,218 -- -- 7,218
-------- -------- -------- ---------
Total direct costs................... 18,248 37,297 18,465 74,010
-------- -------- -------- ---------
Gross margin......................... 5,932 20,758 30,391 57,081
-------- -------- -------- ---------
Operating expenses:
Selling and marketing.................. 4,723 6,194 27,529 38,446
Product development.................... 14,625 14,247 10,902 39,774
General and administrative............. 5,994 10,423 3,921 20,338
Intellectual property settlement....... -- -- 5,000 5,000
Depreciation and amortization.......... 5,347 1,343 4,489 11,179
Amortization of intangible assets and
acquisition charges.................. 4,384 363 -- $ 238,464(3) 243,211
-------- -------- -------- --------- ---------
Total operating expenses............. 35,073 32,570 51,841 238,464 357,948
-------- -------- -------- --------- ---------
Operating loss....................... (29,141) (11,812) (21,450) (238,464) (300,867)
Interest income, net..................... 583 127 1,805 -- 2,515
-------- -------- -------- --------- ---------
Loss before income taxes............. (28,558) (11,685) (19,645) (238,464) (298,352)
Provision for income taxes............... -- (72) (125) -- (197)
-------- -------- -------- --------- ---------
Loss from continuing operations...... $(28,558) $(11,757) $(19,770) $(238,464) $(298,549)
======== ======== ======== ========= =========
Basic and diluted loss per common share
from continuing operations............. $ (7.88)
=========
Weighted average common shares
outstanding............................ 37,906
=========
</TABLE>
138
<PAGE> 153
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/EDIFY)":
1. The pro forma acquisition costs of FICS and Edify are allocated as
follows:
<TABLE>
<CAPTION>
FICS EDIFY TOTAL
----------- ---------- ----------
<S> <C> <C> <C>
Shares of S1 stock to be issued................. 10,000,000 5,869,007 15,869,007
Estimated market price of S1 common stock(A).... $ 37.89 $ 52.54
----------- ---------- ----------
Estimated market price of S1 common stock
issued........................................ $ 378,900 $ 308,358 $ 687,258
Fair value of options issued.................... 43,000 80,000 123,000
Estimated transaction costs..................... 3,850 3,700 7,550
----------- ---------- ----------
Total purchase price.................. 425,750 392,058 817,808
Less:
Book value of net assets acquired............. (4,346) 58,956 54,610
Adjustment to book value for transaction costs
paid by Edify and FICS..................... (5,400) (6,800) (12,200)
----------- ---------- ----------
Adjusted book value of net assets acquired.... (9,746) 52,156 42,410
----------- ---------- ----------
Excess purchase price over net book value of
assets acquired............................ $ 435,496 $ 339,902 $ 775,398
Allocated to:
In process research & development (B)......... $ 32,000 $ 20,000 $ 52,000
Developed technology.......................... $ 22,000 $ 13,000 $ 35,000
Assembled work force.......................... 10,000 10,000 20,000
Customer list................................. 16,000 11,000 27,000
Fair value of options issued.................. 43,000 80,000 123,000
Residual excess purchase cost (goodwill)...... 312,496 205,902 518,398
----------- ---------- ----------
Total intangible assets............... $ 403,496 $ 319,902 $ 723,398
----------- ---------- ----------
</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
$52,000 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 adjustment reflects the elimination of amounts advanced
under a loan agreement between S1 and FICS.
139
<PAGE> 154
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. 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 Transactions. The intangible assets consist of the following
assets and amortization periods:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL MONTHLY
INTANGIBLE ASSETS AMOUNT LIFE AMORTIZATION 6 MONTHS 12 MONTHS
----------------- -------- --------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Developed technology............. $ 35,000 3 $ 972 $ 5,832 $ 11,664
Assembled work force............. 20,000 5 333 1,998 3,996
Customer list.................... 27,000 3 750 4,500 9,000
Fair value of options issued..... 123,000 3 3,417 20,502 41,004
Residual excess purchase cost
(goodwill)..................... 518,398 3 14,400 86,400 172,800
-------- ------- -------- --------
TOTAL ALLOCATION....... $723,398 $19,872 $119,232 $238,464
-------- ------- -------- --------
</TABLE>
4. The weighted average number of shares outstanding used in the
computation of pro forma net loss per share consists of the following:
<TABLE>
<CAPTION>
SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30, 1999 DECEMBER 31, 1998
---------------- -------------------
<S> <C> <C>
Weighted average number of shares of S1 common stock
outstanding....................................... 25,378,877 22,036,652
Adjustment for S1 common stock issued in connection
with the Edify Transaction........................ 5,869,007 5,869,007
Adjustment for S1 common stock issued in connection
with the FICS Transaction......................... 10,000,000 10,000,000
---------- ----------
Average number of common shares outstanding......... 41,247,884 37,905,659
</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.
5. Certain reclassifications have been made to the Edify and FICS
historical information to conform with the S1 presentation.
6. The unaudited pro forma consolidated statements of operations reflect
only results from continuing operations and thus do not include the operations
of Edify's Employee Relationship Management Group which Edify sold to Workscape,
Inc. in July 1999, nor do they include the gain on the sale of these assets. The
unaudited pro forma consolidated balance sheet reflects the proceeds from the
sale and the gain on the sale of Edify's Employee Relationship Management Group.
7. 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 the Edify Transaction. The option
also provides that if S1 had completed the transaction with FICS contemplated by
the May agreements, the number of option shares would have increased by
1,800,000. The May agreements were terminated, and therefore the increase in
option shares will not become effective. However, S1 intends to amend its option
with Intuit to provide for additional option shares if the FICS Transaction is
completed. On May 27, 1999, Intuit completed its $50 million investment in S1 by
purchasing 970,813 shares of S1 common stock at a price of $52.50 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 options have not been reflected in the pro forma presentation.
140
<PAGE> 155
PRO FORMA CONSOLIDATED BALANCE SHEET -- UNAUDITED
AS OF JUNE 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS CONSOLIDATED
--------------------------------- (FICS/ (S1/FICS/
S1 FICS VERTICALONE VERTICALONE) VERTICALONE)
-------- -------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash, cash equivalents, and short-term
investments............................ $ 70,862 $ 1,478 $12,926 $(12,950)(1) $ 72,316
Investment securities
available-for-sale..................... 9,071 -- -- 9,071
Accounts receivable, net................. 17,028 19,320 -- 36,348
Prepaid expenses and other current
assets................................. 4,091 3,821 462 8,374
-------- -------- ------- -------- --------
Total current assets................... 101,052 24,619 13,388 (12,950) 126,109
Premises and equipment, net.............. 7,093 4,553 2,184 13,830
Intangible assets, net................... 2,546 2,800 -- 550,363 (1) 555,709
Notes receivable......................... 7,500 -- -- (6,000)(2) 1,500
Other assets............................. 1,564 -- 117 1,681
-------- -------- ------- -------- --------
Total assets........................... $119,755 $ 31,972 $15,689 $531,413 $698,829
======== ======== ======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable......................... $ 3,127 $ 8,035 $ 1,052 $ 12,214
Accrued expenses......................... 7,324 6,099 28 13,451
Deferred revenues........................ 14,423 3,462 -- 17,885
Borrowings under line of credit.......... -- 11,415 -- 11,415
Current portion of capital lease
obligation............................. 466 217 -- 683
Other current liabilities................ -- 246 -- 246
-------- -------- ------- --------
Total current liabilities.............. 25,340 29,474 1,080 55,894
Deferred revenues........................ 9,609 -- -- 9,609
Capital lease obligation, excluding
current portion........................ 54 844 -- 898
Convertible note payable................. -- 6,000 -- $ (6,000)(2) --
Borrowings under line of credit.......... -- -- 534 534
-------- -------- ------- -------- --------
Total liabilities...................... 35,003 36,318 1,614 (6,000) 66,935
-------- -------- ------- -------- --------
Series B Preferred Stock (Redeemable).... -- -- 12,606 (12,606)(1) 0
STOCKHOLDERS' EQUITY:
Preferred stock.......................... 23,136 18,971 39 $(19,010)(1) 23,136
Common stock............................. 276 616 8 (485)(1) 415
Additional paid-in-capital............... 156,582 2,932 3,849 579,522 (1) 742,885
Receivable from the sale of stock........ (11,279) -- -- -- (11,279)
Accumulated deficit...................... (88,260) (26,420) (2,427) (10,453)(1) (127,560)
Accumulated other comprehensive income... 4,297 (445) -- 445 (1) 4,297
-------- -------- ------- -------- --------
Total stockholders' equity............. 84,752 (4,346) 1,469 550,019 631,894
-------- -------- ------- -------- --------
Total liabilities and stockholders'
equity............................... $119,755 $ 31,972 $15,689 $531,413 $698,829
======== ======== ======= ======== ========
</TABLE>
141
<PAGE> 156
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS -- UNAUDITED
SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS CONSOLIDATED
------------------------------- (FICS/ (S1/FICS/
S1 FICS VERTICALONE VERTICALONE) VERTICALONE)
------- ------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses.......................... $ 4,638 $ 7,209 $ -- $ 11,847
Professional services...................... 19,446 20,854 -- 40,300
Data center................................ 3,591 -- -- 3,591
------- ------- ------- ---------
Total revenues........................... 27,675 28,063 -- 55,738
------- ------- ------- ---------
Direct costs:
Software licenses.......................... 232 51 -- 283
Professional services...................... 12,118 17,697 -- 29,815
Data center................................ 3,716 -- -- 3,716
------- ------- ------- ---------
Total direct costs....................... 16,066 17,748 -- 33,814
------- ------- ------- ---------
Gross margin............................. 11,609 10,315 -- 21,924
------- ------- ------- ---------
Operating expenses:
Selling and marketing...................... 2,253 5,522 423 8,198
Product development........................ 8,889 8,378 1,123 18,390
General and administrative................. 3,724 3,129 578 7,431
Depreciation and amortization.............. 2,461 985 58 3,504
Amortization of intangible assets and
acquisition charges...................... 456 2,254 -- $ 91,026(3) 93,736
------- ------- ------- -------- ---------
Total operating expenses................. 17,783 20,268 2,182 91,026 131,259
------- ------- ------- -------- ---------
Operating loss........................... (6,174) (9,953) (2,182) (91,026) (109,335)
Interest income, net......................... 754 17 99 -- 870
------- ------- ------- -------- ---------
Loss before income taxes................. (5,420) (9,936) (2,083) (91,026) (108,465)
Provision for income taxes................... -- (1) -- -- (1)
------- ------- ------- -------- ---------
Loss from continuing operations.......... $(5,420) $(9,937) $(2,083) $(91,026) $(108,466)
======= ======= ======= ======== =========
Basic and diluted loss per common share from
continuing operations...................... $ (2.76)
=========
Weighted average common shares outstanding... 39,236
=========
</TABLE>
142
<PAGE> 157
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS -- UNAUDITED
TWELVE MONTHS ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS CONSOLIDATED
--------------------------------- (FICS/ (S1/FICS/
S1 FICS VERTICALONE VERTICALONE) VERTICALONE)
-------- -------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses........................ $ 4,781 $ 12,837 $ -- $ 17,618
Professional services.................... 16,218 45,218 -- 61,436
Data center.............................. 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 37 10,954
Product development...................... 14,625 14,247 86 28,958
General and administrative............... 5,994 10,423 44 16,461
Depreciation and amortization............ 5,347 1,343 -- 6,690
Amortization of intangible assets and
acquisition charges.................... 4,384 363 -- $ 182,052(3) 186,799
-------- -------- ----- --------- ---------
Total operating expenses............... 35,073 32,570 167 182,052 249,862
-------- -------- ----- --------- ---------
Operating loss......................... (29,141) (11,812) (167) (182,052) (223,172)
Interest income, net....................... 583 127 -- -- 710
-------- -------- ----- --------- ---------
Loss before income taxes............... (28,558) (11,685) (167) (182,052) (222,462)
Provision for income taxes................. -- (72) -- -- (72)
-------- -------- ----- --------- ---------
Loss from continuing operations........ $(28,558) $(11,757) $(167) $(182,052) $(222,534)
======== ======== ===== ========= =========
Basic and diluted loss per common share
from continuing operations............... $ (6.20)
=========
Weighted average common shares
outstanding.............................. 35,894
=========
</TABLE>
143
<PAGE> 158
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
OPERATION UNDER THE COLUMN HEADED "PRO FORMA ADJUSTMENTS (FICS/VERTICALONE)":
1. The pro forma acquisition costs of FICS and Vertical One are allocated
as follows:
<TABLE>
<CAPTION>
FICS VERTICALONE TOTAL
---------- ----------- ----------
<S> <C> <C> <C>
Shares of S1 stock to be issued................... 10,000,000 3,857,538 13,857,538
Estimated market price of S1 common stock(A)...... $ 37.89 $ 37.47
---------- --------- ----------
Estimated market price of S1 common stock
issued.......................................... $ 378,900 $ 144,542 $ 523,442
Fair value of options issued...................... 43,000 20,000 63,000
Estimated transaction costs....................... 3,850 2,500 6,350
Purchase of preferred stock....................... -- 15,000 15,000
---------- --------- ----------
Total purchase price.................... 425,750 182,042 607,792
Less:
Book value of net assets acquired............... (4,346) 14,075 9,729
Adjustment to book value of net assets acquired
for purchase of preferred stock.............. -- 15,000 15,000
Adjustment to book value for transaction costs
paid by FICS and VerticalOne................. (5,400) (1,200) (6,600)
---------- --------- ----------
Adjusted book value of net assets acquired...... (9,746) 27,875 18,129
---------- --------- ----------
Excess purchase price over net book value of
assets acquired.............................. $ 435,496 $ 154,167 $ 589,663
Allocated to:
In process research & development (B)........... $ 32,000 $ 7,300 $ 39,300
Developed technology............................ $ 22,000 $ 22,000 $ 44,000
Assembled work force............................ 10,000 500 10,500
Customer list................................... 16,000 -- 16,000
Fair value of options issued.................... 43,000 20,000 63,000
Residual excess purchase cost (goodwill)........ 312,496 104,367 416,863
---------- --------- ----------
Total intangible assets................. $ 403,496 $ 146,867 $ 550,363
---------- --------- ----------
</TABLE>
- ------------------
(A) The estimated market value of S1 common stock for the transactions
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
$39,300 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 adjustment reflects the elimination of amounts advanced
under a loan agreement between S1 and FICS.
144
<PAGE> 159
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. The pro forma adjustments reflect the effects of the increase in the
amortization expense due to the increase in intangible assets resulting from the
FICS and VerticalOne Transactions. The intangible assets consist of the
following assets and amortization periods:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL MONTHLY
INTANGIBLE ASSETS AMOUNT LIFE AMORTIZATION 6 MONTHS 12 MONTHS
----------------- -------- --------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Developed technology.............. $ 44,000 3 $ 1,222 $ 7,332 $ 14,664
Assembled work force.............. 10,500 5 175 1,050 2,100
Customer list..................... 16,000 3 444 2,664 5,328
Fair value of options issued...... 63,000 3 1,750 10,500 21,000
Residual excess purchase cost
(goodwill)...................... 416,863 3 11,580 69,480 138,960
-------- ------- ------- --------
TOTAL ALLOCATION........ $550,363 $15,171 $91,026 $182,052
-------- ------- ------- --------
</TABLE>
4. The weighted average number of shares outstanding used in the
computation of pro forma net loss per share consists of the following:
<TABLE>
<CAPTION>
SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30, 1999 DECEMBER 31, 1998
---------------- -------------------
<S> <C> <C>
Weighted average number of shares of S1 common stock
outstanding....................................... 25,378,877 22,036,652
Adjustment for S1 common stock issued in connection
with the FICS Transactions........................ 10,000,000 10,000,000
Adjustment for S1 common stock issued in connection
with the VerticalOne Transactions................. 3,857,538 3,857,538
---------- ----------
Average number of common shares outstanding......... 39,236,415 35,894,190
</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.
5. Certain reclassifications have been made to the FICS historical
information to conform with the S1 presentation.
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 the Edify Transaction. The option
also provides that if S1 had completed the transaction with FICS contemplated by
the May agreements, the number of option shares would have increased by
1,800,000. The May agreements were terminated, and therefore the increase in
option shares will not become effective. However, S1 intends to amend its option
with Intuit to provide for additional option shares if the FICS Transaction is
completed. On May 27, 1999, Intuit completed its $50 million investment in S1 by
purchasing 970,813 shares of S1 common stock at a price of $52.50 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 options have not been reflected in the pro forma presentation.
145
<PAGE> 160
PRO FORMA CONSOLIDATED BALANCE SHEET -- UNAUDITED
AS OF JUNE 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS CONSOLIDATED
--------------------------------- (EDIFY/ (S1/EDIFY
S1 EDIFY VERTICALONE VERTICALONE) VERTICALONE)
-------- -------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash, cash equivalents, and short-term
investments.............................. $ 70,862 $46,826 $12,926 $(14,200)(1) $ 116,414
Investment securities available-for-sale... 9,071 -- -- 9,071
Accounts receivable, net................... 17,028 20,167 -- 37,195
Prepaid expenses and other current
assets................................... 4,091 2,904 462 7,457
-------- -------- ------- -------- ---------
Total current assets..................... 101,052 69,897 13,388 (14,200) 170,137
Premises and equipment, net................ 7,093 6,859 2,184 16,136
Intangible assets, net..................... 2,546 -- -- 466,769 (1) 469,315
Notes receivable........................... 7,500 -- -- 7,500
Other assets............................... 1,564 1,301 117 2,982
-------- -------- ------- -------- ---------
Total assets............................. $119,755 $ 78,057 $15,689 $452,569 $ 666,070
======== ======== ======= ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable........................... $ 3,127 $ 3,689 $ 1,052 $ 7,868
Accrued expenses........................... 7,324 10,664 28 18,016
Deferred revenues.......................... 14,423 4,587 -- 19,010
Borrowings under line of credit............ -- -- -- --
Current portion of capital lease
obligation............................... 466 92 -- 558
Other current liabilities.................. -- -- -- --
-------- -------- ------- ---------
Total current liabilities................ 25,340 19,032 1,080 45,452
Deferred revenues.......................... 9,609 -- -- 9,609
Deferred rent.............................. -- 68 -- 68
Capital lease obligation, excluding current
portion.................................. 54 1 -- 55
Borrowings under line of credit............ -- -- 534 534
-------- -------- ------- ---------
Total liabilities........................ 35,003 19,101 1,614 55,718
-------- -------- ------- ---------
Series B Preferred Stock (Redeemable)...... -- -- 12,606 $(12,606)(1) --
STOCKHOLDERS' EQUITY:
Preferred stock............................ 23,136 -- 39 $ (39)(1) 23,136
Common stock............................... 276 18 8 71 (1) 373
Additional paid-in-capital................. 156,582 70,335 3,849 478,619 (1) 709,385
Receivable from the sale of stock.......... (11,279) -- -- -- (11,279)
Accumulated deficit........................ (88,260) (11,397) (2,427) (13,476)(1) (115,560)
Accumulated other comprehensive income..... 4,297 -- -- -- 4,297
-------- -------- ------- -------- ---------
Total stockholders' equity............... 84,752 58,956 1,469 465,175 610,352
-------- -------- ------- -------- ---------
Total liabilities and stockholders'
equity................................. $119,755 $ 78,057 $15,689 $452,569 $ 666,070
======== ======== ======= ======== =========
</TABLE>
146
<PAGE> 161
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS -- UNAUDITED
SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS CONSOLIDATED
-------------------------------- (EDIFY/ (S1/EDIFY
S1 EDIFY VERTICALONE VERTICALONE) VERTICALONE)
------- -------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses........................... $ 4,638 $ 16,173 $ -- $ 20,811
Professional services....................... 19,446 12,654 -- 32,100
Data center................................. 3,591 -- -- 3,591
------- -------- ------- --------
Total revenues............................ 27,675 28,827 -- 56,502
------- -------- ------- --------
Direct costs:
Software licenses........................... 232 1,756 -- 1,988
Professional services....................... 12,118 12,476 -- 24,594
Data center................................. 3,716 -- -- 3,716
------- -------- ------- --------
Total direct costs........................ 16,066 14,232 -- 30,298
------- -------- ------- --------
Gross margin.............................. 11,609 14,595 -- 26,204
------- -------- ------- --------
Operating expenses:
Selling and marketing....................... 2,253 15,938 423 18,614
Product development......................... 8,889 5,593 1,123 15,605
General and administrative.................. 3,724 2,695 578 6,997
Depreciation and amortization............... 2,461 2,644 58 5,163
Amortization of intangible assets and
acquisition charges....................... 456 690 -- $ 77,100(2) 78,246
------- -------- ------- -------- --------
Total operating expenses.................. 17,783 27,560 2,182 77,100 124,625
------- -------- ------- -------- --------
Operating loss............................ (6,174) (12,965) (2,182) (77,100) (98,421)
Interest income, net.......................... 754 666 99 -- 1,519
------- -------- ------- -------- --------
Loss before income taxes.................. (5,420) (12,299) (2,083) (77,100) (96,902)
Provision for income taxes.................... -- (96) -- -- (96)
------- -------- ------- -------- --------
Loss from continuing operations........... $(5,420) $(12,395) $(2,083) $(77,100) $(96,998)
======= ======== ======= ======== ========
Basic and diluted loss per common share from
continuing operations....................... $ (2.76)
========
Weighted average common shares outstanding.... 35,105
========
</TABLE>
147
<PAGE> 162
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS -- UNAUDITED
TWELVE MONTHS ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS CONSOLIDATED
--------------------------------- (EDIFY/ (S1/EDIFY
S1 EDIFY VERTICALONE VERTICALONE) VERTICALONE)
-------- -------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses........................ $ 4,781 $ 28,685 $ -- $ 33,466
Professional services.................... 16,218 20,171 -- 36,389
Data center.............................. 3,181 -- -- 3,181
-------- -------- ----- ---------
Total revenues......................... 24,180 48,856 -- 73,036
-------- -------- ----- ---------
Direct costs:
Software licenses........................ 503 1,240 -- 1,743
Professional services.................... 10,527 17,225 -- 27,752
Data center.............................. 7,218 -- -- 7,218
-------- -------- ----- ---------
Total direct costs..................... 18,248 18,465 -- 36,713
-------- -------- ----- ---------
Gross margin........................... 5,932 30,391 -- 36,323
-------- -------- ----- ---------
Operating expenses:
Selling and marketing.................... 4,723 27,529 37 32,289
Product development...................... 14,625 10,902 86 25,613
General and administrative............... 5,994 3,921 44 9,959
Intellectual property settlement......... -- 5,000 -- 5,000
Depreciation and amortization............ 5,347 4,489 -- 9,836
Amortization of intangible assets and
acquisition charges.................... 4,384 -- -- $ 154,200(2) 158,584
-------- -------- ----- --------- ---------
Total operating expenses............... 35,073 51,841 167 154,200 241,281
-------- -------- ----- --------- ---------
Operating loss......................... (29,141) (21,450) (167) (154,200) (204,958)
Interest income, net....................... 583 1,805 -- -- 2,388
-------- -------- ----- --------- ---------
Loss before income taxes............... (28,558) (19,645) (167) (154,200) (202,570)
Provision for income taxes................. -- (125) -- -- (125)
-------- -------- ----- --------- ---------
Loss from continuing operations........ $(28,558) $(19,770) $(167) $(154,200) $(202,695)
======== ======== ===== ========= =========
Basic and diluted loss per common share
from continuing operations............... $ (6.38)
=========
Weighted average common shares
outstanding.............................. 31,763
=========
</TABLE>
148
<PAGE> 163
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
OPERATION UNDER THE COLUMN HEADED "PRO FORMA ADJUSTMENTS (EDIFY/VERTICALONE)":
1. The pro forma acquisition costs of Edify and Vertical One are allocated
as follows:
<TABLE>
<CAPTION>
EDIFY VERTICALONE TOTAL
---------- ----------- ---------
<S> <C> <C> <C>
Shares of S1 stock to be issued.................... 5,869,007 3,857,538 9,726,545
Estimated market price of S1 common stock(A)....... $ 52.54 $ 37.47
---------- --------- ---------
Estimated market price of S1 common stock issued... $ 308,358 $ 144,542 $ 452,900
Fair value of options issued....................... 80,000 20,000 100,000
Estimated transaction costs........................ 3,700 2,500 6,200
Purchase of preferred stock........................ -- 15,000 15,000
---------- --------- ---------
Total purchase price..................... 392,058 182,042 574,100
Less:
Book value of net assets acquired................ 58,956 14,075 73,031
Adjustment to book value of net assets acquired
for purchase of preferred stock............... -- 15,000 15,000
Adjustment to book value for transaction costs
paid by Edify and VerticalOne................. (6,800) (1,200) (8,000)
---------- --------- ---------
Adjusted book value of net assets acquired....... 52,156 27,875 80,031
---------- --------- ---------
Excess purchase price over net book value of
assets acquired............................... $ 339,902 $ 154,167 $ 494,069
Allocated to:
In process research & development (B)............ $ 20,000 $ 7,300 $ 27,300
Developed technology............................. $ 13,000 $ 22,000 $ 35,000
Assembled work force............................. 10,000 500 10,500
Customer list.................................... 11,000 -- 11,000
Fair value of options issued..................... 80,000 20,000 100,000
Residual excess purchase cost (goodwill)......... 205,902 104,367 310,269
---------- --------- ---------
Total intangible assets.................. $ 319,902 $ 146,867 $ 466,769
---------- --------- ---------
</TABLE>
- ------------------
(A) The estimated market value of S1 common stock for the transactions
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
$27,300 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.
149
<PAGE> 164
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 VerticalOne Transactions. The intangible assets consist of the
following assets and amortization periods:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL MONTHLY
INTANGIBLE ASSETS AMOUNT LIFE AMORTIZATION 6 MONTHS 12 MONTHS
----------------- -------- --------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Developed technology.............. $ 35,000 3 $ 972 $ 5,832 $ 11,664
Assembled work force.............. 10,500 5 175 1,050 2,100
Customer list..................... 11,000 3 306 1,836 3,672
Fair value of options issued...... 100,000 3 2,778 16,668 33,336
Residual excess purchase cost
(goodwill)...................... 310,269 3 8,619 51,714 103,428
-------- ------- ------- --------
TOTAL ALLOCATION........ $466,769 $12,850 $77,100 $154,200
-------- ------- ------- --------
</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>
SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30, 1999 DECEMBER 31, 1998
---------------- -------------------
<S> <C> <C>
Weighted average number of shares of S1 common stock
outstanding....................................... 25,378,877 22,036,652
Adjustment for S1 common stock issued in connection
with the Edify Transaction........................ 5,869,007 5,869,007
Adjustment for S1 common stock issued in connection
with the VerticalOne Transaction.................. 3,857,538 3,857,538
---------- ----------
Average number of common shares outstanding......... 35,105,422 31,763,197
</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 have been made to the Edify historical
information to conform with the S1 presentation.
5. The unaudited pro forma consolidated statements of operations reflect
only results from continuing operations and thus do not include the operations
of Edify's Employee Relationship Management Group which Edify sold to Workscape,
Inc. in July 1999, nor do they include the gain on the sale of these assets. The
unaudited pro forma consolidated balance sheet reflects the proceeds from the
sale and the gain on the sale of Edify's Employee Relationship Management Group.
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 the Edify Transaction. The option
also provides that if S1 had completed the transaction with FICS contemplated by
the May agreements, the number of option shares would have increased by
1,800,000. The May agreements were terminated, and therefore the
150
<PAGE> 165
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
increase in option shares will not become effective. However, S1 intends to
amend its option with Intuit to provide for additional option shares if the FICS
Transaction is completed. On May 27, 1999, Intuit completed its $50 million
investment in S1 by purchasing 970,813 shares of S1 common stock at a price of
$52.50 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 options have not been reflected in the pro forma presentation.
151
<PAGE> 166
PRO FORMA CONSOLIDATED BALANCE SHEET -- UNAUDITED
AS OF JUNE 30, 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...... $ 70,862 $ 1,478 $ (9,250)(1) $ 63,090
Investment securities available-for-sale................ 9,071 -- 9,071
Accounts receivable, net................................ 17,028 19,320 36,348
Prepaid expenses and other current assets............... 4,091 3,821 7,912
-------- -------- -------- ---------
Total current assets.................................. 101,052 24,619 (9,250) 116,421
Premises and equipment, net............................. 7,093 4,553 11,646
Intangible assets, net.................................. 2,546 2,800 403,496 (1) 408,842
Notes receivable........................................ 7,500 -- (6,000)(2) 1,500
Other assets............................................ 1,564 -- 1,564
-------- -------- -------- ---------
Total assets.......................................... $119,755 $ 31,972 $388,246 $ 539,973
======== ======== ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable........................................ $ 3,127 $ 8,035 $ 11,162
Accrued expenses........................................ 7,324 6,099 13,423
Deferred revenues....................................... 14,423 3,462 17,885
Borrowings under line of credit......................... -- 11,415 11,415
Current portion of capital lease obligation............. 466 217 683
Other current liabilities............................... -- 246 246
-------- -------- ---------
Total current liabilities............................. 25,340 29,474 54,814
Deferred revenues....................................... 9,609 -- 9,609
Capital lease obligation, excluding current portion..... 54 844 898
Convertible note payable................................ -- 6,000 $ (6,000)(2) --
-------- -------- -------- ---------
Total liabilities..................................... 35,003 36,318 (6,000) 65,321
-------- -------- -------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock......................................... 23,136 18,971 (18,971)(1) 23,136
Common stock............................................ 276 616 (516)(1) 376
Additional paid-in-capital.............................. 156,582 2,932 418,868 (1) 578,382
Receivable from the sale of stock....................... (11,279) -- -- (11,279)
Accumulated deficit..................................... (88,260) (26,420) (5,580)(1) (120,260)
Accumulated other comprehensive income.................. 4,297 (445) 445 (1) 4,297
-------- -------- -------- ---------
Total stockholders' equity............................ 84,752 (4,346) 394,246 474,652
-------- -------- -------- ---------
Total liabilities and stockholders' equity............ $119,755 $ 31,972 $388,246 $ 539,973
======== ======== ======== =========
</TABLE>
152
<PAGE> 167
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS -- UNAUDITED
SIX MONTHS ENDED JUNE 30, 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...................................... $ 4,638 $ 7,209 $ 11,847
Professional services.................................. 19,446 20,854 40,300
Data center............................................ 3,591 -- 3,591
------- ------- --------
Total revenues....................................... 27,675 28,063 55,738
------- ------- --------
Direct costs:
Software licenses...................................... 232 51 283
Professional services.................................. 12,118 17,697 29,815
Data center............................................ 3,716 -- 3,716
------- ------- --------
Total direct costs................................... 16,066 17,748 33,814
------- ------- --------
Gross margin......................................... 11,609 10,315 21,924
------- ------- --------
Operating expenses:
Selling and marketing.................................. 2,253 5,522 7,775
Product development.................................... 8,889 8,378 17,267
General and administrative............................. 3,724 3,129 6,853
Depreciation and amortization.......................... 2,461 985 3,446
Amortization of intangible assets and acquisition
charges.............................................. 456 2,254 $ 66,576(3) 69,286
------- ------- -------- --------
Total operating expenses............................. 17,783 20,268 66,576 104,627
------- ------- -------- --------
Operating loss....................................... (6,174) (9,953) (66,576) (82,703)
Interest income, net..................................... 754 17 -- 771
------- ------- -------- --------
Loss before income taxes............................. (5,420) (9,936) (66,576) (81,932)
Provision for income taxes............................... -- (1) -- (1)
------- ------- -------- --------
Loss from continuing operations...................... $(5,420) $(9,937) $(66,576) $(81,933)
======= ======= ======== ========
Basic and diluted loss per common share from continuing
operations............................................. $ (2.32)
========
Weighted average common shares outstanding............... 35,379
========
</TABLE>
153
<PAGE> 168
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.......................................... 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
Depreciation and amortization........................ 5,347 1,343 6,690
Amortization of intangible assets and acquisition
charges............................................ 4,384 363 $ 133,152(3) 137,899
-------- -------- --------- ---------
Total operating expenses........................... 35,073 32,570 133,152 200,795
-------- -------- --------- ---------
Operating loss..................................... (29,141) (11,812) (133,152) (174,105)
Interest income, net................................... 583 127 -- 710
-------- -------- --------- ---------
Loss before income taxes........................... (28,558) (11,685) (133,152) (173,395)
Provision for income taxes............................. -- (72) -- (72)
-------- -------- --------- ---------
Loss from continuing operations.................... $(28,558) $(11,757) $(133,152) $(173,467)
======== ======== ========= =========
Basic and diluted loss per common share from continuing
operations........................................... $ (5.41)
=========
Weighted average common shares outstanding............. 32,037
=========
</TABLE>
154
<PAGE> 169
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
OPERATION UNDER THE COLUMN HEADED "PRO FORMA ADJUSTMENTS (FICS)":
1. The pro forma acquisition costs of FICS are allocated as follows:
<TABLE>
<CAPTION>
FICS
----------
<S> <C>
Shares of S1 stock to be issued............................. 10,000,000
Estimated market price of S1 common stock(A)................ $ 37.89
----------
Estimated market price of S1 common stock issued............ $ 378,900
Fair value of options issued................................ 43,000
Estimated transaction costs................................. 3,850
Purchase of preferred stock................................. --
----------
Total purchase price.............................. 425,750
Less:
Book value of net assets acquired......................... (4,346)
Adjustment to book value for transaction costs paid by
FICS................................................... (5,400)
----------
Adjusted book value of net assets acquired................ (9,746)
----------
Excess purchase price over net book value of assets
acquired............................................... $ 435,496
----------
Allocated to:
In process research & development (B)..................... $ 32,000
Developed technology...................................... $ 22,000
Assembled work force...................................... 10,000
Customer list............................................. 16,000
Fair value of options issued.............................. 43,000
Residual excess purchase cost (goodwill).................. 312,496
----------
Total intangible assets........................... $ 403,496
----------
</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
$32,000 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 adjustment reflects the elimination of amounts advanced
under a loan agreement between S1 and FICS.
155
<PAGE> 170
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. The pro forma adjustments reflect the effects of the increase in the
amortization expense due to the increase in intangible assets resulting from the
FICS Transaction. The intangible assets consist of the following assets and
amortization periods:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL MONTHLY
INTANGIBLE ASSETS AMOUNT LIFE AMORTIZATION 6 MONTHS 12 MONTHS
----------------- -------- --------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Developed technology.............. $ 22,000 3 $ 611 $ 3,666 $ 7,332
Assembled work force.............. 10,000 5 167 1,002 2,004
Customer list..................... 16,000 3 444 2,664 5,328
Fair value of options issued...... 43,000 3 1,194 7,164 14,328
Residual excess purchase cost
(goodwill)...................... 312,496 3 8,680 52,080 104,160
-------- ------- ------- --------
TOTAL ALLOCATION........ $403,496 $11,096 $66,576 $133,152
-------- ------- ------- --------
</TABLE>
4. The weighted average number of shares outstanding used in the
computation of pro forma net loss per share consists of the following:
<TABLE>
<CAPTION>
SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30, 1999 DECEMBER 31, 1998
---------------- -------------------
<S> <C> <C>
Weighted average number of shares of S1 common stock
outstanding....................................... 25,378,877 22,036,652
Adjustment for S1 common stock issued in connection
with the FICS Transaction......................... 10,000,000 10,000,000
---------- ----------
Average number of common shares outstanding......... 35,378,877 32,036,652
</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.
5. Certain reclassifications have been made to the FICS historical
information to conform with the S1 presentation.
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 the Edify Transaction. The option
also provides that if S1 had completed the transaction with FICS contemplated by
the May agreements, the number of option shares would have increased by
1,800,000. The May agreements were terminated, and therefore the increase in
option shares will not become effective. However S1 intends to amend its option
with Intuit to provide for additional option shares if the FICS Transaction is
completed. On May 27, 1999, Intuit completed its $50 million investment in S1 by
purchasing 970,813 shares of S1 common stock at a price of $52.50 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 options have not been reflected in the pro forma presentation.
156
<PAGE> 171
PRO FORMA CONSOLIDATED BALANCE SHEET -- UNAUDITED
AS OF JUNE 30, 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... $ 70,862 $ 46,826 $(10,500)(1) $107,188
Investment securities available-for-sale............. 9,071 -- 9,071
Accounts receivable, net............................. 17,028 20,167 37,195
Prepaid expenses and other current assets............ 4,091 2,904 6,995
-------- -------- -------- --------
Total current assets............................... 101,052 69,897 (10,500) 160,449
Premises and equipment, net.......................... 7,093 6,859 13,952
Intangible assets, net............................... 2,546 -- 319,902 (1) 322,448
Notes receivable..................................... 7,500 -- 7,500
Other assets......................................... 1,564 1,301 2,865
-------- -------- -------- --------
Total assets....................................... $119,755 $ 78,057 $309,402 $507,214
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable..................................... $ 3,127 $ 3,689 $ 6,816
Accrued expenses..................................... 7,324 10,664 17,988
Deferred revenues.................................... 14,423 4,587 19,010
Current portion of capital lease obligation.......... 466 92 558
-------- -------- -------- --------
Total current liabilities.......................... 25,340 19,032 44,372
Deferred revenues.................................... 9,609 -- 9,609
Deferred rent........................................ -- 68 68
Capital lease obligation, excluding current
portion............................................ 54 1 55
-------- -------- -------- --------
Total liabilities.................................. 35,003 19,101 54,104
-------- -------- -------- --------
STOCKHOLDERS' EQUITY:
Preferred stock...................................... 23,136 -- 23,136
Common stock......................................... 276 18 $ 41 (1) 335
Additional paid-in-capital........................... 156,582 70,335 317,964 (1) 544,881
Receivable from the sale of stock.................... (11,279) -- (11,279)
Accumulated deficit.................................. (88,260) (11,397) (8,603)(1) (108,260)
Accumulated other comprehensive income............... 4,297 -- 4,297
-------- -------- -------- --------
Total stockholders' equity......................... 84,752 58,956 309,402 453,110
-------- -------- -------- --------
Total liabilities and stockholders' equity......... $119,755 $ 78,057 $309,402 $507,214
======== ======== ======== ========
</TABLE>
157
<PAGE> 172
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS -- UNAUDITED
SIX MONTHS ENDED JUNE 30, 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..................................... $ 4,638 $ 16,173 $ 20,811
Professional services................................. 19,446 12,654 32,100
Data center........................................... 3,591 -- 3,591
------- -------- --------
Total revenues...................................... 27,675 28,827 56,502
------- -------- --------
Direct costs:
Software licenses..................................... 232 1,756 1,988
Professional services................................. 12,118 12,476 24,594
Data center........................................... 3,716 -- 3,716
------- -------- --------
Total direct costs.................................. 16,066 14,232 30,298
------- -------- --------
Gross margin........................................ 11,609 14,595 26,204
------- -------- --------
Operating expenses:
Selling and marketing................................. 2,253 15,938 18,191
Product development................................... 8,889 5,593 14,482
General and administrative............................ 3,724 2,695 6,419
Depreciation and amortization......................... 2,461 2,644 5,105
Amortization of intangible assets and acquisition
charges............................................. 456 690 $ 52,656(2) 53,802
------- -------- -------- --------
Total operating expenses............................ 17,783 27,560 52,656 97,999
------- -------- -------- --------
Operating loss...................................... (6,174) (12,965) (52,656) (71,795)
Interest income, net.................................... 754 666 -- 1,420
------- -------- -------- --------
Loss before income taxes............................ (5,420) (12,299) (52,656) (70,375)
Provision for income taxes.............................. -- (96) -- (96)
------- -------- -------- --------
Loss from continuing operations..................... $(5,420) $(12,395) $(52,656) $(70,471)
======= ======== ======== ========
Basic and diluted loss per common share from continuing
operations............................................ $ (2.26)
========
Weighted average common shares outstanding.............. 31,248
========
</TABLE>
158
<PAGE> 173
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 $ 28,685 $ 33,466
Professional services.................................. 16,218 20,171 36,389
Data center............................................ 3,181 -- 3,181
-------- -------- ---------
Total revenues....................................... 24,180 48,856 73,036
-------- -------- ---------
Direct costs
Software licenses...................................... 503 1,240 1,743
Professional services.................................. 10,527 17,225 27,752
Data center............................................ 7,218 -- 7,218
-------- -------- ---------
Total direct costs................................... 18,248 18,465 36,713
-------- -------- ---------
Gross margin......................................... 5,932 30,391 36,323
-------- -------- ---------
Operating expenses
Selling and marketing.................................. 4,723 27,529 32,252
Product development.................................... 14,625 10,902 25,527
General and administrative............................. 5,994 3,921 9,915
Intellectual property settlement....................... -- 5,000 5,000
Depreciation and amortization.......................... 5,347 4,489 9,836
Amortization of intangible assets and acquisition
charges.............................................. 4,384 -- $ 105,312(2) 109,696
-------- -------- --------- ---------
Total operating expenses............................. 35,073 51,841 105,312 192,226
-------- -------- --------- ---------
Operating loss....................................... (29,141) (21,450) (105,312) (155,903)
Interest income, net..................................... 583 1,805 -- 2,388
Loss before income taxes............................. (28,558) (19,645) (105,312) (153,515)
Provision for income taxes............................... -- (125) -- (125)
-------- -------- --------- ---------
Loss from continuing operations...................... $(28,558) $(19,770) $(105,312) $(153,640)
======== ======== ========= =========
Basic and diluted loss per common share from continuing
operations............................................. $ (5.51)
=========
Weighted average common shares outstanding............... 27,906
=========
</TABLE>
159
<PAGE> 174
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
OPERATION UNDER THE COLUMN HEADED "PRO FORMA ADJUSTMENTS (EDIFY)":
1. The pro forma acquisition costs of Edify are allocated as follows:
<TABLE>
<CAPTION>
EDIFY
----------
<S> <C>
Shares of S1 stock to be issued............................. 5,869,007
Estimated market price of S1 common stock(A)................ $ 52.54
----------
Estimated market price of S1 common stock issued............ $ 308,358
Fair value of options issued................................ 80,000
Estimated transaction costs................................. 3,700
----------
Total purchase price.............................. 392,058
Less:
Book value of net assets acquired......................... 58,956
Adjustment to book value for transaction costs paid by
Edify.................................................. (6,800)
----------
Adjusted book value of net assets acquired................ 52,156
----------
Excess purchase price over net book value of assets
acquired............................................... $ 339,902
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).................. 205,902
----------
Total intangible assets........................... $ 319,902
----------
</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.
160
<PAGE> 175
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 Transaction. The intangible assets consist of the following assets and
amortization periods:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL MONTHLY
INTANGIBLE ASSETS AMOUNT LIFE AMORTIZATION 6 MONTHS 12 MONTHS
----------------- -------- --------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Developed technology.............. $ 13,000 3 $ 361 $ 2,166 $ 4,332
Assembled work force.............. 10,000 5 167 1,002 2,004
Customer list..................... 11,000 3 306 1,836 3,672
Fair value of options issued...... 80,000 3 2,222 13,332 26,664
Residual excess purchase cost
(goodwill)...................... 205,902 3 5,720 34,320 68,640
-------- ------ ------- --------
TOTAL ALLOCATION........ $319,902 $8,776 $52,656 $105,312
-------- ------ ------- --------
</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>
SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30, 1999 DECEMBER 31, 1998
---------------- -------------------
<S> <C> <C>
Weighted average number of shares of S1 common stock
outstanding....................................... 25,378,877 22,036,652
Adjustment for S1 common stock issued in connection
with the Edify Transaction........................ 5,869,007 5,869,007
---------- ----------
Average number of common shares outstanding......... 31,247,884 27,905,659
</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 have been made to the Edify historical
information to conform with the S1 presentation.
5. The unaudited pro forma consolidated statements of operations reflect
only results from continuing operations and thus do not include the operations
of Edify's Employee Relationship Management Group which Edify sold to Workscape,
Inc. in July 1999, nor do they include the gain on the sale of these assets. The
unaudited pro forma consolidated balance sheet reflects the proceeds from the
sale and the gain on the sale of Edify's Employee Relationship Management Group.
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 the Edify Transaction. The option
also provided that if S1 had completed the transaction with FICS contemplated by
the May agreements, the number of option shares would have increased by
1,800,000. The May agreements were terminated, and therefore the increase in
option shares will not become effective. However, S1 intends to amend its option
with Intuit to provide for additional option shares if the FICS Transaction is
completed. On May 27, 1999, Intuit completed its $50 million investment in S1 by
purchasing 970,813 shares of S1 common stock
161
<PAGE> 176
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
at a price of $52.50 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 options have not been reflected in the pro forma
presentation.
162
<PAGE> 177
PRO FORMA CONSOLIDATED BALANCE SHEET -- UNAUDITED
AS OF JUNE 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
---------------------- ADJUSTMENTS CONSOLIDATED
S1 VERTICALONE (VERTICALONE) (S1/VERTICALONE)
-------- ----------- ------------- ----------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash, cash equivalents, and short-term
investments.................................... $ 70,862 $12,926 $ (3,700)(1) $ 80,088
Investment securities available-for-sale......... 9,071 -- 9,071
Accounts receivable, net......................... 17,028 -- 17,028
Prepaid expenses and other current assets........ 4,091 462 4,553
-------- ------- -------- --------
Total current assets........................... 101,052 13,388 (3,700) 110,740
Premises and equipment, net...................... 7,093 2,184 9,277
Intangible assets, net........................... 2,546 -- 146,867 (1) 149,413
Notes receivable................................. 7,500 -- 7,500
Other assets..................................... 1,564 117 1,681
-------- ------- -------- --------
Total assets................................... $119,755 $15,689 $143,167 $278,611
======== ======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................. $ 3,127 $ 1,052 $ 4,179
Accrued expenses................................. 7,324 28 7,352
Deferred revenues................................ 14,423 -- 14,423
Current portion of capital lease obligation...... 466 -- 466
-------- ------- -------- --------
Total current liabilities...................... 25,340 1,080 26,420
Deferred revenues................................ 9,609 -- 9,609
Capital lease obligation, excluding current
portion........................................ 54 -- 54
Borrowings under line of credit.................. -- 534 534
-------- ------- -------- --------
Total liabilities.............................. 35,003 1,614 36,617
-------- ------- -------- --------
Series B Preferred Stock (Redeemable)............ -- 12,606 (12,606)(1) --
STOCKHOLDERS' EQUITY:
Preferred stock.................................. 23,136 39 $ (39)(1) 23,136
Common stock..................................... 276 8 31 (1) 315
Additional paid-in-capital....................... 156,582 3,849 160,654 (1) 321,085
Receivable from the sale of stock................ (11,279) -- (11,279)
Accumulated deficit.............................. (88,260) (2,427) (4,873)(1) (95,560)
Accumulated other comprehensive income........... 4,297 -- 4,297
-------- ------- -------- --------
Total stockholders' equity..................... 84,752 1,469 155,773 241,994
-------- ------- -------- --------
Total liabilities and stockholders' equity..... $119,755 $15,689 $143,167 $278,611
======== ======= ======== ========
</TABLE>
163
<PAGE> 178
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS -- UNAUDITED
SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
---------------------- ADJUSTMENTS CONSOLIDATED
S1 VERTICALONE (VERTICALONE) (S1/VERTICALONE)
-------- ----------- ------------- ----------------
<S> <C> <C> <C> <C>
Revenues:
Software licenses................................. $ 4,638 $ -- $ 4,638
Professional services............................. 19,446 -- 19,446
Data center....................................... 3,591 -- 3,591
------- ------- --------
Total revenues.................................. 27,675 -- 27,675
------- ------- --------
Direct costs:
Software licenses................................. 232 -- 232
Professional services............................. 12,118 -- 12,118
Data center....................................... 3,716 -- 3,716
------- ------- --------
Total direct costs.............................. 16,066 -- 16,066
------- ------- --------
Gross margin.................................... 11,609 -- 11,609
------- ------- --------
Operating expenses:
Selling and marketing............................. 2,253 423 2,676
Product development............................... 8,889 1,123 10,012
General and administrative........................ 3,724 578 4,302
Depreciation and amortization..................... 2,461 58 2,519
Amortization of intangible assets and acquisition
charges......................................... 456 -- $ 24,444(2) 24,900
------- ------- -------- --------
Total operating expenses........................ 17,783 2,182 24,444 44,409
------- ------- -------- --------
Operating loss.................................. (6,174) (2,182) (24,444) (32,800)
Interest income, net................................ 754 99 -- 853
------- ------- -------- --------
Loss before income taxes........................ (5,420) (2,083) (24,444) (31,947)
Provision for income taxes.......................... -- -- -- --
------- ------- -------- --------
Loss from continuing operations................. $(5,420) $(2,083) $(24,444) $(31,947)
======= ======= ======== ========
Basic and diluted loss per common share from
continuing operations............................. $ (1.09)
========
Weighted average common shares outstanding.......... 29,236
========
</TABLE>
164
<PAGE> 179
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 VERTICALONE (VERTICALONE) (S1/VERTICALONE)
-------- ----------- ------------- ----------------
<S> <C> <C> <C> <C>
Revenues:
Software licenses................................ $ 4,781 $ -- $ 4,781
Professional services............................ 16,218 -- 16,218
Data center...................................... 3,181 -- 3,181
-------- ------- --------
Total revenues................................. 24,180 -- 24,180
-------- ------- --------
Direct costs:
Software licenses................................ 503 -- 503
Professional services............................ 10,527 -- 10,527
Data center...................................... 7,218 -- 7,218
-------- ------- --------
Total direct costs............................. 18,248 -- 18,248
-------- ------- --------
Gross margin................................... 5,932 -- 5,932
-------- ------- --------
Operating expenses:
Selling and marketing............................ 4,723 37 4,760
Product development.............................. 14,625 86 14,711
General and administrative....................... 5,994 44 6,038
Depreciation and amortization.................... 5,347 -- 5,347
Amortization of intangible assets and acquisition
charges........................................ 4,384 -- $ 48,888(2) 53,272
-------- ------- -------- --------
Total operating expenses....................... 35,073 167 48,888 84,128
-------- ------- -------- --------
Operating loss................................. (29,141) (167) (48,888) (78,196)
Interest income, net............................... 583 -- -- 583
-------- ------- -------- --------
Loss before income taxes....................... (28,558) (167) (48,888) (77,613)
Provision for income taxes......................... -- -- -- --
-------- ------- -------- --------
Loss from continuing operations................ $(28,558) $ (167) $(48,888) $(77,613)
======== ======= ======== ========
Basic and diluted loss per common share from
continuing operations............................ $ (3.00)
========
Weighted average common shares outstanding......... 25,894
========
</TABLE>
165
<PAGE> 180
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
OPERATION UNDER THE COLUMN HEADED "PRO FORMA ADJUSTMENTS (VERTICALONE)":
1. The pro forma acquisition costs of VerticalOne are allocated as follows:
<TABLE>
<CAPTION>
VERTICALONE
-----------
<S> <C>
Shares of S1 stock to be issued............................. 3,857,538
Estimated market price of S1 common stock(A)................ $ 37.47
---------
Estimated market price of S1 common stock issued............ $ 144,542
Fair value of options issued................................ 20,000
Estimated transaction costs................................. 2,500
Purchase of preferred stock................................. 15,000
---------
Total purchase price.............................. 182,042
Less:
Book value of net assets acquired......................... 14,075
Adjustment to book value of net assets acquired for
purchase of preferred stock............................ 15,000
Adjustment to book value for transaction costs paid by
VerticalOne............................................ (1,200)
---------
Adjusted book value of net assets acquired................ 27,875
---------
Excess purchase price over net book value of assets
acquired............................................... $ 154,167
Allocated to:
In process research & development (B)..................... $ 7,300
Developed technology...................................... $ 22,000
Assembled work force...................................... 500
Customer list............................................. --
Fair value of options issued.............................. 20,000
Residual excess purchase cost (goodwill).................. 104,367
---------
Total intangible assets........................... $ 146,867
---------
</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
$7,300 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.
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<PAGE> 181
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
VerticalOne Transaction. The intangible assets consist of the following assets
and amortization periods:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL MONTHLY
INTANGIBLE ASSETS AMOUNT LIFE AMORTIZATION 6 MONTHS 12 MONTHS
----------------- -------- --------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Developed technology.............. $ 22,000 3 $ 611 $ 3,666 $ 7,332
Assembled work force.............. 500 5 8 48 96
Fair value of options issued...... 20,000 3 556 3,336 6,672
Residual excess purchase cost
(goodwill)...................... 104,367 3 2,899 17,394 34,788
-------- ------ ------- -------
TOTAL ALLOCATION........ $146,867 $4,074 $24,444 $48,888
-------- ------ ------- -------
</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>
SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30, 1999 DECEMBER 31, 1998
---------------- -------------------
<S> <C> <C>
Weighted average number of shares of S1 common stock
outstanding....................................... 25,378,877 22,036,652
Adjustment for S1 common stock issued in connection
with the VerticalOne Transaction.................. 3,857,538 3,857,538
---------- ----------
Average number of common shares outstanding......... 29,236,415 25,894,190
</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.
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COMPARISON OF STOCKHOLDER RIGHTS
This section of the prospectus/proxy statement explains the material
differences among the rights of the stockholders of each of FICS, Edify and
VerticalOne as compared to the rights of S1 stockholders. This summary may not
contain all of the information that is important to you. You should ready the
subsections below relating to S1 and your company and the other documents we
refer to, including the organizational or governing documents of S1 and your
company, carefully for a more complete understanding of the differences between
the rights of stockholders of S1 and your company. 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 217.
After the completion of each of the transactions, the stockholders of FICS,
Edify and VerticalOne will each 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 S1 is a Delaware
corporation, the Delaware General Corporation Law, or the DGCL, will govern the
rights of the former FICS, Edify and VerticalOne stockholders after each of the
transactions relating to each group of stockholders is completed.
S1 STOCKHOLDER RIGHTS
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
six 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 Michel Akkermans and another FICS
director chosen by Mr. Akkermans to three-year terms on S1's board. 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 a three-year term
on S1's board. In connection with the VerticalOne Transaction, S1 has agreed
that, at the closing of the VerticalOne Transaction, it will appoint Gregg S.
Freishtat, if Mr. Freishtat is then Chief Executive Officer of VerticalOne and a
member of VerticalOne's board, to a three-year term on S1's board.
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
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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.
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.
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 pass 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.
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.
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.
Authorized and Outstanding Common Stock
The certificate of incorporation of S1 authorizes 350,000,000 shares of
S1's common stock, par value $0.01 per share, of which 27,674,239 shares were
outstanding as of August 31, 1999. In addition, as of August 31, 1999,
13,953,024 shares of S1's common stock were reserved for issuance for employee
stock plans, of which, options to purchase 8,960,912 shares were currently
outstanding.
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
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incorporation authorizes 25,000,000 shares of S1's preferred stock, par value
$0.01 per share. As of August 31, 1999,
- 1,637,832 shares were designated Series A Convertible Preferred Stock of
which 391,450 were outstanding;
- 749,604 shares were designated Series B Redeemable Convertible Preferred
Stock, all of which were outstanding; and
- 215,000 shares were designated Series C Redeemable Convertible Preferred
Stock, all of which were outstanding.
FICS STOCKHOLDER RIGHTS
Directors
FICS is managed by a board of directors consisting of a minimum of five and
a maximum of ten directors. Three directors are to be nominated by the holders
of class A shares; two by the holders of class B shares; and one by the holders
of class C shares. The remaining directors are to be "independent" directors,
elected from among candidates proposed jointly by a majority of the holders of
each of the class A, B and C shares. Board meetings are called by the Chairman
of the board or by the Managing Director and must be called whenever two
directors request so. The charter of FICS allows for board resolutions to be
adopted without the holding of a formal meeting, by having a written document
signed by all FICS directors.
All FICS board resolutions are adopted by a simple majority vote. However,
under the charter of FICS, board decisions regarding the following matters
require the consent of at least one class B director and at least one class C
director:
- determining the terms of issuance of shares, warrants and other
securities of the company and of stock options (special rules apply for
the latter);
- the issuance of shares, warrants and other securities or options to
acquire such securities;
- the issuance of long term loans having a face value in excess of
$1,000,000;
- expenditures in excess of $1,000,000 per transaction not provided for in
the annual budget approved by the board;
- important changes to the company's valuation rules; and
- the transfer of a branch of activity or substantially all of the
company's assets.
Indemnification and Limitation of Liability of Directors
Under Belgian Company Law, directors are liable for any faults which they
commit in the performance of their duties. Discharge of liability can be granted
by the general assembly of shareholders, at the time of approval of the annual
accounts for the previous business year. Moreover, directors are jointly and
severally liable towards the company and third parties for any damages caused as
the result of a violation of Belgian Company Law and/or the charter of FICS.
The charter of FICS does not provide for any indemnification in favor of
the FICS directors.
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Call of Special Stockholder Meetings
Stockholders' meetings are called by the board of directors or by the
statutory auditor(s) and must be called whenever shareholders representing 20%
of the total share capital issued and outstanding request so.
Stockholder Action without a Meeting
The charter of FICS does not allow for stockholders' resolutions to be
adopted without a meeting.
General Vote and Quorum Requirements for Stockholder Meetings
Stockholders' resolutions are adopted by a simple majority vote. However,
in the event of an amendment to the corporate charter, such as a capital
increase or decrease, or a merger or split, a 75% majority vote and a 50% quorum
are required and if this quorum is not met, a second meeting must be called at
which no quorum will be required. In addition, the following decisions require
the affirmative vote of a majority of each class of shares:
- the issuance of any securities whatsoever of the company, with the
exception of shares issued pursuant to a stock option plan for employees
and directors, where special rules apply;
- the issuance of convertible bonds with a face value in excess of
$1,000,000;
- any merger, split or absorption of the company;
- a change of statutory auditor; and
- any amendment to the corporate charter.
Authorized and Outstanding FICS Securities
The statutory capital of FICS is BEF 36,650,500 represented by 146,602
capital shares, no par value. Each share represents an equal portion of the
capital, and the capital is split into classes A, B1, B2, and C. Class A shares
are ordinary shares, and the class B and class C shares are preferred shares. As
of September 30, 1999,
- 92,500 shares of class A ordinary shares were outstanding;
- 42,500 shares of class B1 preferred shares and 2,300 shares of class B2
preferred shares were outstanding; and
- 9,302 shares of class C preferred shares were outstanding.
In addition, as of September 30, 1999, 16,500 shares of the class A
ordinary shares were reserved for issuance for employee stock plans, of which,
options to purchase 12,288.03 of those shares were outstanding.
FICS has also issued two warrants each to purchase preferred shares. Both
of these warrants are automatically exercised upon the occurrence of specified
merger or acquisition events, including completion of the FICS Transaction. At
the time of the FICS Transaction, one warrant is expected to be automatically
exercised for one class C preferred share and one for one class B2 preferred
share.
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In general, FICS shares have restrictions on their transferability.
Existing stockholders have a right of first refusal over transfers of any FICS
shares that operates in the following order:
- first, to the benefit of the other stockholders of the same class;
- second, between the stockholders of class B and the stockholders of class
C; and
- third, to the benefit of all other stockholders.
In addition, the class C preferred shares cannot be transferred for a
period of 18 months following their issuance.
There are two exceptions to these transfer limitations.
- If a majority of the holders of the class A ordinary shares decides to
sell their shares for a price of at least $1,000,000, the holders of the
class B preferred shares and the class C preferred shares have the right
to take part in that sale in proportion to their interest.
- In the event of a change of control initiated by the holders of the class
A ordinary shares, the holders of the class C preferred shares have the
right to request that all of their shares be acquired either by the
holders of the class A ordinary shares themselves or by the purchaser of
the class A ordinary shares.
Preferred Stockholder Rights
In the event that FICS is liquidated, the holders of the class B2 and class
C preferred shares enjoy a preferential right to the reimbursement of the
capital initially contributed to the company. After this reimbursement has taken
place, the holders of the class B1 preferred shares shall be reimbursed by
preference over the holders of the class A ordinary shares.
Preferred stockholders are subject to additional conditions in the event
FICS makes a public offering of its stock. In the case of a public offering, the
holders of the class B2 and class C preferred shares enjoy preferred flotation
rights. In addition, the class B and class C preferred stockholders will no
longer have any preferred rights, with the exception of the preferred flotation
rights, and their shares will automatically be converted into class A ordinary
shares. Furthermore, the right of preferred stockholders to be represented on
the FICS board of directors shall be phased out based on their percentage
ownership of the total FICS shares issued and outstanding.
EDIFY STOCKHOLDER RIGHTS
Directors
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 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
Edify's bylaws provide that any director or officer of Edify shall be
indemnified to the full extent permitted by law. 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
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indemnification power. Edify has entered into indemnification contracts with all
of its executive officers and directors.
Call of Special Stockholder Meetings
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.
Stockholder Action without a Meeting
Edify's certificate of incorporation prohibits stockholder action by
written consent.
Quorum for Stockholder Meetings
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
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 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 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.
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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% or more of its assets are sold. The S1 transaction will not trigger the
rights plan.
VERTICALONE STOCKHOLDER RIGHTS
Directors
The VerticalOne bylaws provide for the number of directors to be determined
by resolution of the board of directors. There are currently eight members on
VerticalOne'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
shares. The holders of VerticalOne Series A preferred stock, voting as a
separate class, have the right to elect one director to the VerticalOne board of
directors. The holders of VerticalOne Series B preferred stock, voting as a
separate class, have the right to elect two directors to the VerticalOne board.
If and when the holders of the VerticalOne Series C preferred stock obtain
voting rights, they will have the right, voting as a separate class, to elect
one director to the VerticalOne board of directors. Other than the directors
elected by holders of VerticalOne preferred stock who shall be replaced by the
holders of VerticalOne preferred stock, if there is a vacancy of a director
position for any reason including the 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. Vacancies caused by removal may also be filled by a
vote of the stockholders entitled to elect the removed director at a special
meeting called for that purpose.
Indemnification and Limitation of Liability of Directors
VerticalOne's bylaws provide that any director, officer or employee of
VerticalOne shall be indemnified to the full extent permitted by law if that
director, officer or employee was acting in accordance with a proceeding
authorized by the board of directors. The VerticalOne board of directors is
authorized to enter into indemnification contracts with any director, officer,
employee or agent of VerticalOne, even if those rights are broader than
VerticalOne's indemnification power.
Call of Special Stockholder Meetings
VerticalOne's bylaws allow the board of directors pursuant to a resolution
adopted by a majority of the total number of authorized directors, the President
or the holders of shares entitled to cast at least ten percent of the votes at a
special meeting 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. If a meeting is adjourned to reconvene at another date,
time or place, additional notice need not be given 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.
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Stockholder Action without a Meeting
VerticalOne's bylaws provide that stockholders may act without a meeting if
a written consent setting forth the actions taken is signed by the holders of
the minimum number of outstanding shares necessary to authorize such action.
Quorum for Stockholder Meetings
The bylaws of VerticalOne 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 or the VerticalOne
certificate of incorporation. For quorum purposes, the voting shares of
preferred stock are counted based on the number of whole shares of common stock
into which they are convertible.
General Vote
VerticalOne'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, unless otherwise required by law or VerticalOne bylaws. For
voting purposes, the voting shares of preferred stock are counted based on the
number of whole shares of common stock into which they are convertible.
Authorized and Outstanding Common Stock
The certificate of incorporation of VerticalOne authorizes 40,000,000
shares of VerticalOne common stock, par value $0.001 per share, of which
7,552,400 shares were outstanding as of October 8, 1999. In addition, as of
October 8, 1999,
- 2,411,500 shares of VerticalOne's common stock were reserved for issuance
of options,
- 14,243,534 shares of VerticalOne's common stock were reserved for
conversion of VerticalOne Series A and Series B preferred stock,
- 135,000 shares of VerticalOne were reserved for warrants granted to
Jeffrey Rubin and Michael Karlin,
Authorized and Outstanding Preferred Stock
The certificate of incorporation of VerticalOne authorizes the VerticalOne
board of directors to designate and issue preferred stock with the
characteristics that the board of directors deems necessary. The certificate of
incorporation authorizes 15,980,097 shares of VerticalOne's convertible
preferred stock, par value $0.01 per share, including 3,919,243 shares of
VerticalOne Series A preferred stock, 7,716,050 shares of VerticalOne Series B
preferred stock and 4,344,804 shares of VerticalOne Series C preferred stock,
and of which 3,919,243 shares of VerticalOne Series A Preferred Stock, 7,716,049
of VerticalOne Series B Preferred Stock, and 2,608,242 of VerticalOne Series C
Preferred Stock were outstanding as of October 8, 1999.
Appraisal Rights
VerticalOne stockholders have appraisal rights under Section 262 of the
Delaware General Corporation Law. If a holder of VerticalOne common stock,
VerticalOne Series A preferred stock or
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VerticalOne Series B preferred stock exercises its right, VerticalOne will pay
that holder in accordance with Section 262 of the Delaware General Corporation
Law.
Stockholders who signed the share retention agreement in the VerticalOne
Transaction waived their appraisal rights.
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.
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 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.
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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 2.0, corporate banking over the internet maintenance
June 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
June 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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<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
June 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, June 1999, and NT 3.0, administration and maintenance days per week
June 1999)
FINANCIAL REPORTING SYSTEMS
- - FiRE - Enables automated regulatory - Supports regulatory reporting in
(Latest version: Release 1.0, reporting, internal reporting, 22 countries
June 1999) 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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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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Financial Reporting Systems Products
FICS's primary Financial Reporting Systems product is FiRE, 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. FiRE 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, FiRE is able to link to different networks, including local area
networks, the internet and intranets.
FiRE 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.
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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 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 June 30, 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)
- - CIBC (Canada) - ABSA (South Africa) - Bank of East Asia (Hong Kong)
- - Firstar (U.S.) - Arab National Bank (Saudi Arabia) - Commonwealth Bank of Australia
- - Fleet Bank (U.S.) - Artesia Bank (Belgium) (Australia)
- 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.
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 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
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(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 June 30, 1999, FICS's research and development
department consisted of 157 employees and subcontractors, of which 109 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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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 Infosystems (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 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
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- 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 June 30, 1999, FICS had 641 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.............. 307 36 38 381
Research and Development......................... 110 17 6 133
General and Administration....................... 69 8 7 84
Sales and Marketing.............................. 35 4 4 43
--- -- -- ---
Total....................................... 521 65 55 641
=== == == ===
</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 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
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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 and references to "Belgian francs" and "BEF" are to Belgian francs. 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>
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The following table sets forth, for the period indicated, certain
information concerning the average daily rate expressed in dollars per euro. The
Average Rate set forth below is the average of the average daily 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................................................ 1.19 1.13 1.16 1.14
February 1999............................................... 1.14 1.09 1.12 1.10
March 1999.................................................. 1.11 1.07 1.09 1.07
April 1999.................................................. 1.09 1.05 1.07 1.06
May 1999.................................................... 1.08 1.04 1.06 1.05
June 1999................................................... 1.06 1.03 1.04 1.03
</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
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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.
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.
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<PAGE> 203
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 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
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<PAGE> 204
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
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.
190
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Results of Operations
The following table presents certain consolidated statement of operations
data:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
---------------------------- -----------------
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 3,356 E 6,616
Services............................... 17,439 29,522 38,752 19,550 19,139
------- ------- -------- ------- -------
Total revenues...................... 23,706 35,681 49,753 22,906 25,755
------- ------- -------- ------- -------
Cost of revenues
Software licenses...................... 407 397 398 124 47
Services............................... 15,651 22,268 32,038 15,981 16,241
------- ------- -------- ------- -------
Total cost of revenues.............. 16,058 22,665 32,436 16,105 16,288
------- ------- -------- ------- -------
Gross profit........................ 7,648 13,016 17,317 6,801 9,467
Operating expenses:
Sales and marketing.................... 1,603 3,762 5,401 2,302 5,068
Research and development............... 6,314 6,325 12,659 6,020 7,689
General and administrative............. 3,491 5,012 7,829 4,068 3,776
IPO and merger related................. -- -- -- -- 1,475
Stock-based compensation............... -- -- 1,241 562 306
Amortization of intangibles............ 294 890 310 3 288
------- ------- -------- ------- -------
Total operating expenses............ 11,702 15,989 27,440 12,955 18,602
------- ------- -------- ------- -------
Loss from operations..................... (4,054) (2,973) (10,123) (6,154) (9,135)
Interest and other income (expense)...... 412 (460) 109 (129) 16
------- ------- -------- ------- -------
Loss before income taxes................. (3,642) (3,433) (10,014) (6,283) (9,119)
Income tax provision..................... 11 62 62 40 1
------- ------- -------- ------- -------
Net loss................................. E(3,653) E(3,495) E(10,076) E(6,323) E(9,120)
======= ======= ======== ======= =======
</TABLE>
191
<PAGE> 206
The following table presents certain items in FICS's consolidated statement
of operations reflected as a percentage of total revenues:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
----------------------------- -----------------
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% 14.7% 25.7%
Services.................................. 73.6 82.7 77.9 85.3 74.3
----- ----- ----- ----- -----
Total revenues......................... 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- -----
Cost of revenues Software licenses.......... 1.7 1.1 0.8 0.5 0.2
Services.................................. 66.0 62.4 64.4 69.8 63.0
----- ----- ----- ----- -----
Total cost of revenues................. 67.7 63.5 65.2 70.3 63.2
----- ----- ----- ----- -----
Gross profit........................... 32.3 36.5 34.8 29.7 36.8
Operating expenses:
Sales and marketing....................... 6.8 10.5 10.9 10.0 19.7
Research and development.................. 26.6 17.7 25.4 26.3 29.9
General and administrative................ 14.7 14.0 15.7 17.8 14.6
IPO and merger related.................... -- -- -- -- 5.7
Stock-based compensation.................. -- -- 2.5 2.5 1.2
Amortization of intangibles............... 1.2 2.5 0.6 -- 1.1
----- ----- ----- ----- -----
Total operating expenses............... 49.3 44.7 55.1 56.6 72.2
----- ----- ----- ----- -----
Loss from operations........................ (17.1) (8.2) (20.3) (26.9) (35.4)
Interest and other income (expense)......... 1.7 (1.3) 0.2 (0.6) --
----- ----- ----- ----- -----
Loss before income taxes.................... (15.4) (9.5) (20.1) (27.4) (35.4)
Income tax provision........................ 0.0 0.2 0.1 0.2 --
----- ----- ----- ----- -----
Net loss.................................... (15.4)% (9.7)% (20.2)% (27.6)% (35.4)%
===== ===== ===== ===== =====
</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
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<PAGE> 207
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.
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.
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<PAGE> 208
Sales and marketing expenses represented 10.5% of its total revenues in
1997 and 10.9% in 1998.
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.
194
<PAGE> 209
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 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.
195
<PAGE> 210
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
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.
196
<PAGE> 211
SIX MONTHS ENDED JUNE 30, 1998 AND 1999
Revenues
Total revenues increased by 12.4% over the prior year period. Software
license revenues increased by 97.1% 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 9.7% from E17.3
million for the six months ended June 30, 1998 compared to E18.9 million for the
six months ended June 30, 1999. This was due to a significant increase in
software license revenue of 201.2% over the prior year period. Services revenue
from Electronic Services Delivery products declined by 7.9% against the prior
year period. The six months ended June 30, 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 20.7% due to growth in services revenues for maintenance and
implementation services. Software license revenue from Financial Reporting
Systems increased by 17.7% over the prior year period to E2.3 million for the
six months ended June 30, 1999.
Cost of Revenues
Cost of license revenues
FICS's cost of license revenues were lower in the first half of 1999
compared to the prior year period as a result of a decrease in the costs of
product media, duplication and manuals attributable to the introduction during
1998 of its Corporate Internet Banking product and new versions of its other
products.
Cost of service revenues
FICS's cost of service revenues increased for the six months ended June 30,
1998 as a result of increased hiring, training and compensating personnel to
support FICS's growing customer base. In addition, the increase in cost of
services revenues as a percentage of services revenue reflected the execution of
lower margin services contracts to extend and strengthen present customer
relationships.
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
six months ended June 30, 1999 increased by E2.8 million (120.2%) over the prior
year period 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 six months ended June 30, 1999 increased by E1.7
million (27.7%) over the prior year period due to increased development.
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<PAGE> 212
General and administrative
General and administrative expenses decreased in absolute terms and as a
percentage of total revenues during the six months ended June 30, 1999 compared
to the last year period. 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.
IPO and Merger Related Expenses
During the second quarter 1999, FICS incurred E1.5 million in expenses
related to the preparation for an initial public offering and the merger with
Security First Technologies Corporation. These expenses consisted primarily of
legal and accounting professional services. As a result of entering into the
merger agreement with S1, the plans for the initial public offering were
terminated. Therefore all costs associated with its preparation were expensed in
the second quarter.
Stock-based compensation
FICS recorded stock-based compensation in each quarter from the first
quarter of 1998 through the second quarter of 1999 in connection with the grant
of certain stock options in the first quarter of 1998.
Amortization of intangibles
Amortization of intangibles in the six months ended June 30, 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 the six months ended June 30, 1999 and 1998
amounting to E217,000 and E164,000, 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 ten quarters ended June 30, 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
198
<PAGE> 213
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,
1997 1997 1997 1997 1998 1998 1998 1998
-------- -------- --------- -------- -------- -------- --------- --------
(IN THOUSANDS)
<S> <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
Services..................... 6,042 7,257 7,901 8,322 9,598 9,952 9,621 9,581
------ ------ ------ ------- ------- ------- ------- -------
Total revenues............. 7,407 9,025 9,547 9,702 11,347 11,559 13,286 13,561
------ ------ ------ ------- ------- ------- ------- -------
Cost of revenues
Software licenses............ 88 114 106 89 64 60 131 143
Services..................... 5,095 5,808 5,568 5,797 7,771 8,210 8,081 7,976
------ ------ ------ ------- ------- ------- ------- -------
Total cost of revenues..... 5,183 5,922 5,674 5,886 7,835 8,270 8,212 8,119
------ ------ ------ ------- ------- ------- ------- -------
Gross profit................... 2,224 3,103 3,873 3,816 3,512 3,289 5,074 5,442
Operating expenses:
Sales and marketing.......... 702 709 1,057 1,294 936 1,366 1,311 1,788
Research and development..... 961 1,263 1,941 2,160 2,800 3,220 3,425 3,214
General and administrative... 892 1,158 1,290 1,672 2,015 2,053 2,000 1,761
IPO and merger related....... -- -- -- -- -- -- -- --
Stock-based compensation..... -- -- -- -- 281 281 281 398
Amortization of
intangibles................ 224 226 226 214 1 2 2 305
------ ------ ------ ------- ------- ------- ------- -------
Total operating expenses... 2,779 3,356 4,514 5,340 6,033 6,922 7,019 7,466
------ ------ ------ ------- ------- ------- ------- -------
Loss from operations........... (555) (253) (641) (1,524) (2,521) (3,633) (1,945) (2,024)
Interest and other income
(expense), net............... (168) (88) (89) (115) (28) (101) (26) 264
------ ------ ------ ------- ------- ------- ------- -------
Loss before income taxes....... (723) (341) (730) (1,639) (2,549) (3,734) (1,971) (1,760)
Income tax provision........... 13 6 13 30 16 24 24 (2)
------ ------ ------ ------- ------- ------- ------- -------
Net loss................... E (736) E (347) E (743) E(1,669) E(2,565) E(3,758) E(1,995) E(1,758)
====== ====== ====== ======= ======= ======= ======= =======
<CAPTION>
THREE MONTHS ENDED
-------------------
MAR. 31, JUNE 30,
1999 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
CONSOLIDATED STATEMENT OF OPERA
Revenues
Software licenses............ E 3,610 E 3,006
Services..................... 9,649 9,490
------- -------
Total revenues............. 13,259 12,496
------- -------
Cost of revenues
Software licenses............ 34 13
Services..................... 8,179 8,062
------- -------
Total cost of revenues..... 8,213 8,075
------- -------
Gross profit................... 5,046 4,421
Operating expenses:
Sales and marketing.......... 2,210 2,828
Research and development..... 3,453 4,236
General and administrative... 1,587 2,189
IPO and merger related....... -- 1,475
Stock-based compensation..... 153 153
Amortization of
intangibles................ 131 288
------- -------
Total operating expenses... 7,534 11,068
------- -------
Loss from operations........... (2,488) (6,647)
Interest and other income
(expense), net............... (208) (224)
------- -------
Loss before income taxes....... (2,696) (6,423)
Income tax provision........... 1 --
------- -------
Net loss................... E(2,697) E(6,423)
======= =======
</TABLE>
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<PAGE> 214
The following table sets forth unaudited quarterly results of operations as
a percentage of revenues for the ten quarters ended June 30, 1999.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1997 1997 1997 1998 1998 1998 1998
-------- -------- --------- -------- -------- -------- --------- --------
<S> <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%
Services........................ 81.6 80.4 82.8 85.8 84.6 86.1 72.4 70.7
----- ----- ----- ----- ----- ----- ----- -----
Total revenues................ 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
Services........................ 68.8 64.4 58.3 59.8 68.5 71.0 60.8 58.8
----- ----- ----- ----- ----- ----- ----- -----
Total cost of revenues........ 70.0 65.7 59.4 60.7 69.1 71.5 61.8 59.9
----- ----- ----- ----- ----- ----- ----- -----
Gross margin...................... 30.0 34.3 40.6 39.3 30.9 28.5 38.2 40.1
Operating expenses:
Sales and marketing............. 9.5 7.9 11.1 13.3 8.2 11.8 9.9 13.2
Research and development........ 13.0 14.0 20.3 22.3 24.7 27.9 25.8 23.7
General and administrative...... 12.0 12.8 13.5 17.2 17.8 17.8 15.1 13.0
IPO and merger related.......... -- -- -- -- -- -- -- --
Stock-based compensation........ -- -- -- -- 2.5 2.4 2.1 2.9
Amortization of intangibles..... 3.0 2.5 2.4 2.2 0.0 0.0 0.0 2.2
----- ----- ----- ----- ----- ----- ----- -----
Total operating expenses...... 37.5 37.2 47.3 55.0 53.2 59.9 52.9 55.0
----- ----- ----- ----- ----- ----- ----- -----
Loss from operations.............. (7.5) (2.9) (6.7) (15.7) (22.3) (31.4) (14.6) (14.9)
Interest and other income
(expense)....................... (2.3) (0.9) (0.9) (1.2) (0.2) (0.9) (0.2) 1.9
----- ----- ----- ----- ----- ----- ----- -----
Loss before income taxes.......... (9.8) (3.8) (7.6) (16.9) (22.5) (32.3) (14.8) (13.0)
Income tax provision.............. (0.2) (0.1) (0.1) (0.3) (0.1) (0.2) (0.2) --
----- ----- ----- ----- ----- ----- ----- -----
Net loss...................... (10.0)% (3.9)% (7.7)% (17.2)% (22.6)% (32.5)% (15.0)% (13.0)%
===== ===== ===== ===== ===== ===== ===== =====
<CAPTION>
THREE MONTHS ENDED
-------------------
MAR. 31, JUNE 30,
1999 1999
-------- --------
<S> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues
Software licenses............... 27.2% 24.1%
Services........................ 72.8 75.9
----- -----
Total revenues................ 100.0 100.0
----- -----
Cost of revenues
Software licenses............... 0.3 0.1
Services........................ 61.7 64.5
----- -----
Total cost of revenues........ 62.0 64.6
----- -----
Gross margin...................... 38.0 35.4
Operating expenses:
Sales and marketing............. 16.7 22.9
Research and development........ 26.0 33.9
General and administrative...... 12.0 17.5
IPO and merger related.......... -- 11.8
Stock-based compensation........ 1.1 1.2
Amortization of intangibles..... 1.0 1.3
----- -----
Total operating expenses...... 56.8 88.6
----- -----
Loss from operations.............. (18.8) (53.2)
Interest and other income
(expense)....................... (1.5) 1.8
----- -----
Loss before income taxes.......... (20.3) (51.4)
Income tax provision.............. 0 --
----- -----
Net loss...................... (20.3)% (51.4)%
===== =====
</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 ten quarters ended June 30, 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 June 30,
1999, FICS had cash and cash equivalents of E1.4 million and its working capital
was a deficit of E4.7 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 3.1% as of June 30, 1999.
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The amount FICS can borrow on a short term basis will be reduced to E2.0 million
on December 31, 1999. As of June 30, 1999, FICS had borrowed E2.5 million on a
short-term basis under the credit facility. Under the credit facility, FICS may
convert amounts 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 June 30, 1999. As of June 30, 1999, FICS had E8.2 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 specified financial covenants, including a requirement that FICS
maintains certain specified financial ratios. FICS was in compliance with all
financial covenants of the credit facility at June 30, 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 six months
ended June 30, 1999, its operating activities resulted in net cash outflows of
E9.5 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 June 30, 1999, average days outstanding was 108
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 six months ended
June 30, 1999, investing activities used cash of E1.4, 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 six
months ended June 30, 1999, financing activities provided cash of E9.5 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 believes that its own computer systems and software are Year 2000
compliant. To the extent that FICS implements additional computer systems and
software in the future, FICS will assess Year 2000 compliance prior to their
implementation. Furthermore, FICS has designed its internet products to be Year
2000 compliant. FICS has not incurred any costs relating to the Year 2000
compliance and does not expect to incur any meaningful costs in the future.
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<PAGE> 216
Share Ownership by Management and Directors of FICS
The following table presents information about the directors and executive
officers of FICS.
<TABLE>
<CAPTION>
CLASS A CLASS B1 CLASS B2
ORDINARY SHARES PREFERRED SHARES PREFERRED SHARES
BENEFICIALLY OWNED AT BENEFICIALLY OWNED AT BENEFICIALLY OWNED AT
SEPTEMBER 30, 1999 SEPTEMBER 30, 1999 SEPTEMBER 30, 1999
---------------------- ---------------------- ----------------------
NUMBER OF PERCENT OF NUMBER OF PERCENT OF NUMBER OF PERCENT OF
NAME POSITION SHARES CLASS SHARES CLASS SHARES CLASS
---- ------------------ --------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Michel Akkermans(1) Chief Executive 88,620 95.80% -- -- -- --
Officer and
Chairman of the
Board of Directors
Steven Sipowicz(2) Chief Financial 822.92 0.88% -- -- -- --
Officer
Herve Couturier(3) Head of Marketing 324.08 0.35% -- -- -- --
and Product
Development
Etienne Castiaux(4) Chief Technology 311.81 0.34% -- -- -- --
Officer
Frederick Dumas(5) President of FICS 2,563.18 2.71% -- -- -- --
America
Stephen Chu Regional Director -- -- -- -- -- --
Asia/Pacific
Goort Gelten Regional Director 2,500 2.70% -- -- -- --
Europe, Middle
East and Africa
Ad van Gageldonk(6) Director of Human 112.5 0.12% -- -- -- --
Resources
Martin Stein(7) Director 313.69 0.34% -- -- -- --
Loek van den Boog(8) Director 659.08 0.71% -- -- 1,350 100%
Raynier van Outryve Director -- -- -- -- -- --
d'Ydewalle
Peter Bloom(9) Director -- -- 40,000 94.12% 951 41.33%(10)
David Hodgson(9) Director -- -- 40,000 94.12% 951 41.33%(10)
</TABLE>
- ------------------
(1) Includes 25,000 class A ordinary shares held by Pamica N.V., a company
controlled by Mr. Akkermans.
(2) Includes 822.92 class A ordinary shares subject to options exercisable
within 60 days of September 30, 1999.
(3) Includes 324.08 class A ordinary shares subject to options exercisable
within 60 days of September 30, 1999.
(4) Includes 111.81 class A ordinary shares subject to options exercisable
within 60 days of September 30, 1999.
(5) Includes 2,063.18 class A ordinary shares subject to options exercisable
within 60 days of September 30, 1999.
(6) Includes 112.5 class A ordinary shares subject to options exercisable
within 60 days of September 30, 1999.
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<PAGE> 217
(7) Includes 313.69 class A ordinary shares subject to options exercisable
within 60 days of September 30, 1999.
(8) Includes 659.08 class A ordinary shares subject to options exercisable
within 60 days of September 30, 1999.
(9) These securities are held by General Atlantic Partners 20, L.P., GAP
Coinvestment Partners, L.P. and General Atlantic Partners 52, L.P. The
general partner of each of these entities is General Atlantic Partners,
LLC, a Delaware limited liability company. The managing members of General
Atlantic Partners, LLC are Steven Denning, David Hodgson, Peter Bloom, J.
Michael Cline, William Grabe, William Ford and Franchon Smithson. Mr.
Hodgson and Mr. Bloom, directors of FICS, are managing members of General
Atlantic Partners, LLC. Mr. Hodgson and Mr. Bloom disclaim beneficial
ownership of FICS securities held by General Atlantic Partners, LLC except
to the extent of their respective pecuniary interest therein.
(10) Includes 1 class B2 preferred share issuable upon conversion of a
convertible bond held jointly by GAP Coinvestment Partners, L.P. and
General Atlantic Partners 52, L.P.
SHARE OWNERSHIP BY PRINCIPAL STOCKHOLDERS, MANAGEMENT AND DIRECTORS OF FICS
Principal Stockholders
The following table presents information about the principal stockholders
of FICS:
<TABLE>
<CAPTION>
FICS SECURITIES
SHARES BENEFICIALLY
OWNED
--------------------
IDENTITY OF PERSON OR GROUP NUMBER PERCENT
--------------------------- -------- ---------
<S> <C> <C>
Michel Akkermans(1)......................................... 88,620 60.4%
Excelsiorlaan 87 1930 Zaventem, Belgium
General Atlantic Partners, LLC(2)........................... 40,951 27.9%
c/o General Atlantic Service Corporation
3 Pickwick Plaza
Greenwich, CT 06830
U.S.A.
GIMV N.V.(3)................................................ 9,303 6.3%
Karel Oomsstraat 37
B-2018 Antwerp
Belgium
</TABLE>
- ------------
(1) Includes 25,000 class A ordinary shares held by Pamica N.V., a company
controlled by Mr. Akkermans.
(2) Includes 40,000 class B1 preferred shares, 950 class C preferred shares and
1 class B2 preferred share issuable upon conversion of a convertible bond,
all of which are convertible to class A ordinary shares on a one-to-one
basis in connection with the FICS Transaction. These securities are held by
General Atlantic Partners 20, L.P., GAP Coinvestment Partners, L.P. and
General Atlantic Partners 52, L.P. The general partner of each of these
entities is General Atlantic Partners, LLC, a Delaware limited liability
company. The managing members of General Atlantic Partners, LLC are Steven
Denning, David Hodgson, Peter Bloom, J. Michael Cline, William Grabe,
William Ford and Franchon Smithson. Mr. Hodgson and Mr. Bloom, directors of
FICS, are managing members of General Atlantic Partners, LLC. Mr. Hodgson
and Mr. Bloom disclaim beneficial ownership of FICS securities held by
General Atlantic Partners, LLC except to the extent of their respective
pecuniary interest therein.
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<PAGE> 218
(3) Includes 9,302 class C preferred shares and 1 class C preferred share
issuable upon conversion of a convertible bond, all of which are convertible
to class A ordinary shares on a one-to-one basis in connection with the FICS
Transaction.
NEW S1 DIRECTORS
At the closing of the FICS Transaction, S1 will appoint Michel Akkermans
and another individual designated by Mr. Akkermans to three-year terms on the S1
board of directors. Mr. Akkermans has also agreed to serve as Chairman of the
Board and President of S1 following the closing of the FICS Transaction.
Mr. Akkermans has been the Chief Executive Officer and Chairman of the
board of directors of FICS from its inception in 1989. From 1986 to 1988, Mr.
Akkermans was Manager at Econocom Expert N.V., an international financial
software consulting company. From 1985 to 1986, Mr. Akkermans was a Project
Manager for Continental Bank. From 1984 to 1985, Mr. Akkermans was a Systems
Analyst and Project Leader at Morgan Guaranty Trust Company of New York. From
1983 to 1984, Mr. Akkermans conducted research in artificial intelligence at the
University of Leuven in Belgium. Mr. Akkermans holds a master's degree in
electronic engineering and a master's degree in Management, Economics and
Finance from the University of Leuven.
INFORMATION ABOUT VERTICALONE CORPORATION
DESCRIPTION OF VERTICALONE'S BUSINESS
VerticalOne provides an internet-based service that consolidates, organizes
and presents consumers' personal account information in a single, easy-to-use
interface, saving them the inconvenience of having to log onto the Web sites of
multiple account providers. VerticalOne plans to establish relationships with
internet portals and other destination sites, and provide VerticalOne's service
to users of those sites to allow access to various personal accounts at one
location. Through a secure, reliable and private information source,
VerticalOne's service provides access to such personal account information as
bank and investment information, credit card balances, household bills, travel
rewards programs, and e-mail. In the future, VerticalOne plans to add other
categories of personal account information to its service.
VerticalOne was founded in October 1998, and its service was launched in
August 1999, with three internet destination sites offering the initial beta
release. Product development continued with the final release of version 1.0 in
October 1999. Version 2.0 is scheduled for release in early 2000.
VerticalOne expects to continue making significant investments in product
development and operations in order to enhance its existing product, develop
additional functionality, add new features, provide support for additional
account providers, and support users of the service. Future expenditures in
product development will be primarily used to attract additional development
personnel with the technological expertise necessary to advance VerticalOne's
technology. Future expenditures in operations will be primarily used to provide
services and products that will support the projected increase in usage, and to
attract the personnel to support customer service and distribution
relationships.
VerticalOne expects to increase its sales and marketing efforts to expand
its customer base. The sales and marketing staff, which numbered four at June
30, 1999, is expected to grow through the rest of 1999. VerticalOne will
continue to promote its services through public relations, industry events,
seminars and trade publications.
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The technology market for internet related products and services is
characterized by significant risk as a result of rapid, evolving industry
standards, emerging competition and frequent introductions of new products and
services. To a great extent, VerticalOne's success will be dependent on
completing development of its products and services and the evolution of the
markets for internet products and services.
THE VERTICALONE SOLUTION
VerticalOne's service provides benefits to consumers, destination sites and
providers of account information. Consumers are able to obtain personal account
information without the inconvenience of having to log onto multiple sites using
multiple passwords and user IDs. Destination sites are able to provide their
users with content that VerticalOne believes increases the frequency, duration
and quality of user visits. Providers of account information also benefit when
users receive their account information from VerticalOne's service. Such account
providers, which are often "brick and mortar" companies with long-standing
customer relationships, are able to extend their internet strategies to their
customers at destination sites where their customers have chosen to spend their
time on the internet. Thus, VerticalOne believes its solution is a logical
intersection of the one-to-many broadcast model of internet destination sites
and the one-to-one commerce model that has existed for a long time between
consumers and established companies with which they do business.
Advantages for Destination Sites
- Increases customer retention. Users are able to obtain a wide variety of
personal account information at one place. Such content is expected to
increase the frequency, duration and quality of customer visits to
destination sites.
- One-to-one marketing. By working with VerticalOne, destination sites are
able to use unique customer profile information to enhance marketing
campaigns that might be offered on the destination sites.
- Branding. Destination sites are able to use their own tradenames and
graphics when offering the VerticalOne service, thus presenting valuable
multiple account information as a service presented by the destination
site.
- Scalable Technology. VerticalOne has built its service using products of
proven technology providers. Scaling its service to accommodate growing
numbers of users and large destination sites has been VerticalOne's
technological and operational objective since the company was founded.
Advantages for End-Users
- Convenience. Consumers who use VerticalOne's service are able to obtain
personal account information without the inconvenience of logging onto
multiple sites and remembering multiple user IDs and passwords.
- Extended sense of community. By being able to use VerticalOne's service
at a destination site, a consumer is able to extend the community
relationship that is already established with a trusted provider of
internet content.
- Continuation of long-standing commercial relationships. Often, a
consumer's longest-standing commercial relationships are with banks,
credit card companies, brokerage firms and companies such as utility
companies that send monthly consumer bills. Using the VerticalOne
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<PAGE> 220
service at the destination site of choice, a consumer is able to continue
these relationships over the internet.
Advantages for Account Providers
- Increased traffic from existing customers. VerticalOne believes that
providers of account information will benefit from increased visits to
their sites of customers who view their account information using
VerticalOne's service. Such customers typically visit a destination site
more frequently than a site with which they have only a commercial
relationship. Consumers choose destination sites because of the content
of that site, and they visit such sites regularly to receive updated
content.
- Activation of online customer relationships. Many commercial
institutions such as banks, brokerage firms, and airlines, do not have an
online relationship with a large percentage of their customers.
VerticalOne believes that by extending the reach through VerticalOne's
account aggregation service, companies can turn more of their offline
customers into online relationships.
- Customer retention. Many traditional brick-and-mortar companies have
lost customers to companies that have aggressively pursued an online
strategy. Now, these companies offer online access to accounts, customer
service, shopping and other services to their customers. VerticalOne
believes that extending the reach of this online relationship will make
companies less vulnerable to losing such a relationship to another
company with a more advanced online offering.
- New customer acquisition. It is common for companies to use direct
marketing techniques to obtain new customers. VerticalOne's service
provides an opportunity for presenting direct marketing messages to
potential new customers through the use of anonymous customer profile
information or with more direct opt-in customer targeting.
VERTICALONE'S STRATEGY
Successful internet strategies are measured by the frequency, duration and
quality of end-users' visits. The ability of customers to personalize their
internet experience enhances the success of these strategies. To date,
personalization has focused on customizing generic content such as news, sports,
weather and stock quotes. Destination sites command internet traffic by helping
consumers manage this wealth of available information. Thousands of brick and
mortar, as well as online, companies are now executing their internet strategies
to better interact with their customers and to bring their customer interactions
online.
VerticalOne provides a network-based service that it believes increases the
frequency, duration and quality of visits to its customers' Web sites by
providing the next generation of personalization services. VerticalOne will
empower portals and other destination sites to offer their customers a simple,
easy-to-use interface to access all of their personal information like bank
statements, credit card balances, voice mails, emails, frequent flier balances
and other uniquely personal information from companies with which the consumer
has an existing and often long-standing business relationship. In essence,
VerticalOne will be a wire service of personal information that consolidates,
organizes and presents end-users personal account information.
VerticalOne will simplify the process of accessing this personal
information by consolidating, organizing, and presenting it to the end-user in a
single, easy-to-access interface. VerticalOne capitalizes upon the fact that
well-established companies, all with large numbers of individual
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<PAGE> 221
customers, are rapidly embracing the internet as an essential medium to interact
with their customers. As more and more of these companies provide access to
account information on the internet, customers will become overwhelmed or
"overloaded" with information. By providing the next generation of
personalization services, VerticalOne expects to increase the frequency,
duration and quality of visits to our customers' internet sites.
VERTICALONE'S SERVICE
VerticalOne acts as the agent of an end-user to consolidate, organize and
present consumers' personal account information for confidential viewing and
access. End-users have to remember only one login and password to access a
variety of personal accounts - fundamentally changing the way they use the
internet. Personal content and transactions have always taken place with
consumers face-to-face or through mail, telephone or fax. VerticalOne's service
is a virtual repository for the documents a consumer has traditionally received
in his or her mailbox, while also acting as a springboard to engage consumers in
e-commerce with their long-standing commercial relationships.
- Customization. VerticalOne's service is engineered to allow its
presentation to reflect the unique look and feel of a destination site
partner.
- Snapshot of end-user account information. A variety of personal accounts
are consolidated and presented in one place. Additional categories of
accounts are planned to be added in the future. Categories presently
offered include banking, investments, credit cards, communications,
rewards programs and bills.
- Access to a large number of accounts. As of late September 1999, over
120 online personal accounts are supported in VerticalOne's beta release.
VerticalOne is supporting the availability of new online accounts each
week.
- Online demonstration. VerticalOne provides an online demonstration and
an easy-to-use registration process for its service as offered by
destination site partners.
- Account summary. VerticalOne's service provides a one-screen viewing of
available online accounts, such as the number of points earned, number of
messages received, investment net equity, checking account balance, and
bill balances due.
- Account detail. Each account has a detail screen for showing the
history, dates and descriptions of the most recent transactions.
- Refreshed data. The VerticalOne service allows account data to be
refreshed on demand.
- Quick Link and Quick Login. In order to facilitate an end-user's
relationship with account providers. VerticalOne provides "springboard"
access to a provider's Web site, allowing the end-user to conduct
transactions, receive customer service or view more detailed information
without having to perform additional manual logins.
- Customer service. In the future, VerticalOne will tailor its customer
service to match destination sites' customer care strategies, using a
combination of toll-free service, chat and e-mail to assist with the
registration process for first-time users and ongoing service support.
- Alternative delivery channels. VerticalOne's service is presently
delivered via browser-based internet access. However, the technology is
readily adaptable to access via other means. As an example, in October
1999, VerticalOne made its service available via a wireless device.
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REVENUE MODEL
VerticalOne's service was not released in beta versions until August 1999
and produced no revenue prior to June 30, 1999. VerticalOne expects to generate
revenue in the future from both destination sites and information providers.
Categories of revenue may include advertising revenue, set-up fees,
customization and development fees, maintenance fees and user licenses.
VerticalOne believes that portals and other destination sites, as well as
information providers with long-standing customer relationships, will be willing
to pay for this service because it will enhance customer acquisition and
retention by providing a value-added service that will increase the consumer's
use of the destination site. VerticalOne also plans to use anonymous profile
information, subject to privacy agreements and regulations, to work with
destination sites, account providers and others to provide online direct
marketing programs.
TECHNOLOGY AND PRODUCT DEVELOPMENT
The core technology upon which VerticalOne's services have been built is
called the Secure Data Mining Architecture, or "SDMA(sm)". The SDMA architecture
consists of a traditional batch-oriented data acquisition system and a
conventional n-tiered client/server system. The acquisition system harvests data
on the user's behalf from a variety of disparate sources utilizing a combination
of web-automation techniques and custom business-to-business interfaces. Once
the data is harvested, it is stored in a secure data-store that is accessible by
the client/server presentation system. Upon user request of the data, the
presentation system retrieves the data from the data-store and renders a
document formatted with both the distribution partner's brand and the delivery
channel in mind. The delivery channel may range from the HTTP application
protocol to proprietary wireless protocols. All documents are delivered in a
secure manner.
PROPRIETARY RIGHTS
VerticalOne 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.
VerticalOne has several pending U.S. patent applications. VerticalOne 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 or services with features based upon,
or otherwise similar to, those of VerticalOne's software and services.
VerticalOne presently enters into invention assignment and confidentiality
agreements with its employees and independent contractors and confidentiality
agreements with certain of its customers. VerticalOne also limits access to the
source codes for its software and other proprietary information.
VerticalOne is not aware that it is infringing any proprietary rights of
third parties. VerticalOne relies upon certain software that it licenses from
third parties, including software that is integrated with VerticalOne's
internally developed software and used in its solutions to perform key
functions.
EMPLOYEES
As of June 30, 1999, VerticalOne had 65 employees, all of whom are located
in VerticalOne's Atlanta offices.
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FACILITIES
VerticalOne's administrative, sales, marketing, support and research and
development facilities are located in approximately 20,000 square feet of space
in Atlanta, Georgia. VerticalOne's lease expires on February 28, 2001.
LEGAL PROCEEDINGS
VerticalOne is not a party to any material legal proceedings. From time to
time, VerticalOne may become involved in litigation relating to claims arising
out of its operations in the normal course of business.
VERTICALONE MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of VerticalOne'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.
OVERVIEW
VerticalOne provides an internet-based service that consolidates, organizes
and presents consumers' personal account information in a single, easy-to-use
interface, saving them the inconvenience of having to log onto multiple web
sites. VerticalOne plans to establish relationships with internet portals and
other destination sites, and provide VerticalOne's service to users of those
sites to allow access to various personal accounts at one location. Through a
secure, reliable and private information source, VerticalOne's service provides
access to such personal account information as bank and investment information,
credit card balances, household bills, travel rewards programs, and e-mail. In
the future, VerticalOne plans to add other categories of personal account
information to its service.
VerticalOne was founded in October 1998, and its service was launched in
August 1999, with three internet destination sites offering the initial beta
release. Product development continued with the final release of version 1.0 in
October 1999. Version 2.0 is scheduled for release in early 2000.
VerticalOne completed three rounds of equity financing in 1999. VerticalOne
issued a total of $3.9 million of Series A preferred stock in January and
February 1999, a total of $12.5 million of Series B preferred stock in May and
June 1999 and a total of $15.0 million of Series C preferred stock in September
1999. These funds have been used to fund operations and invest in the technology
and capital equipment necessary to build and support VerticalOne's services and
products. VerticalOne projects that continued investments will be necessary
through 1999 and early 2000 on capital equipment and software to build its
service infrastructure and data handling capabilities as well as continue and
expand its current operations in all areas.
VerticalOne expects to continue making significant investments in product
development and operations in order to enhance its existing product, develop
additional functionality, add new features, provide support for additional
account providers, and support users of the service. Future expenditures in
product development will be primarily used to attract additional development
personnel with the technological expertise necessary to advance VerticalOne's
technology. Future expenditures in operations will be used primarily to provide
the services and products that will support the projected increase in usage, and
to employ additional personnel to support customer service and distribution
relationships.
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All research and development expenses are expensed as incurred.
VerticalOne's policy is to expense all software development costs associated
with establishing technological feasibility, which VerticalOne defines as
completion of beta testing. Because beta testing was completed only as of the
beginning of October 1999, VerticalOne has not capitalized any software
development costs.
VerticalOne has devoted most of its efforts since its inception to
activities such as preparing business plans, raising capital, and planning and
developing its internet products and services. From inception through June 30,
1999, VerticalOne had not generated any revenues and had incurred an aggregate
of $2.4 million of losses, and as of June 30, 1999, had an accumulated deficit
of $2.4 million. Since VerticalOne's services are new, and operational with only
a limited number of account providers, there can be no assurance that
VerticalOne's revenues will grow in future periods to offset these losses, that
VerticalOne will achieve profitability in the future or that, if profitability
is achieved, it will be sustained.
The market for internet related products and services is characterized by
significant risk as a result of rapid, evolving industry standards, emerging
competition and the frequent introduction of new products and services. To a
great extent, VerticalOne's success will be dependent on completing development
of its products and services and the evolution of the technology markets for
internet products and services. Negative developments resulting from any of
these factors or others could have a material adverse impact on VerticalOne's
financial position and results of operations.
RESULTS OF OPERATIONS
The following discussion of VerticalOne's results of operations is based on
data derived from the statements of operations contained in VerticalOne's
financial statements appearing elsewhere in this prospectus/proxy statement.
Six Months Ended June 30, 1999
For the six months ended June 30, 1999, VerticalOne reported no revenues
from operations and a net loss of $2.1 million, or $0.10 per common share.
Selling and Marketing Expenses. Selling and marketing expenses consist
primarily of salaries, travel expenses, market research and public relations.
Sales and marketing expenses were $423,000, or 19% of total operating expenses,
and included $154,000 for market research and public relations. Travel expenses
in connection with sales and marketing were $34,000. Selling and marketing
expenses are expected to increase through the rest of 1999 as VerticalOne
continues to promote its service and increase its sales and marketing
activities.
Product Development. Product development expenses consist of research and
product development costs. The expenses consisted primarily of salaries for
technical and development personnel, payments to consultants for technology
implementation, recruiting fees, and hardware and software expenses. Product
development expenses for the six months amounted to $1.1 million, or 51% of
total operating expenses. Major expenses were salaries, which amounted to
$765,000, and payments to consultants that amounted to $136,000. VerticalOne
believes that continued investment in product development is critical to
attaining its strategic objectives and, as a result, expects product development
expenses to increase during the rest of 1999. Service operations and customer
services which were not significant during the six months ended June 30, 1999,
but are expected to grow rapidly as a percentage of total operating expenses for
the rest of 1999.
General and Administrative. General and administrative expenses consist of
salaries to administrative and operating personnel, lease payments, legal
expenses and general corporate
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expenses. General and administrative expenses were $578,000, which represented
27% of total operating expenses. A major portion of this consists of salaries
and professional fees, including legal expenses of approximately $110,000.
VerticalOne's general and administrative expenses are expected to grow as it
adds administrative personnel and systems to support growth.
Depreciation and Amortization. Depreciation and amortization expenses were
$58,000, or 3% of total operating expenses. As VerticalOne continues to invest
in capital equipment necessary to support its growth and usage, depreciation
expenses will continue to increase for the rest of 1999.
Year Ended December 31, 1998
During 1998, VerticalOne was in a start-up phase with no employees or
significant operations until December 1998 when it began to hire employees,
purchase capital equipment and technology, and occupy office space to begin
operation. For the year beginning at inception in October 1998 and ending
December 31, 1998, VerticalOne reported no revenues from operations and a net
loss of $167,000, or $0.02 per common share.
Selling and Marketing Expenses. Selling and marketing expenses amounted to
$37,000, or 22% of total operating expenses, and included $24,000 for design and
printing of marketing materials.
Product Development. Product development expenses included research and
development expenses and software development costs, all of which have been
charged to operations. Product development expenses during 1998 were $86,000, or
51% of total operating expenses. Product development expenses included
approximately $35,000 for professional fees related to the search and placement
of several key personnel.
General and Administrative. General and administrative expenses include
lease payments, compensation for management and administrative personnel, and
general office expenses. General and administrative expenses amounted to
$45,000, or 27% of total operating expenses.
Depreciation and Amortization. VerticalOne did not record any depreciation
or amortization expense for the year ended December 31, 1998 because property
and equipment was not placed into service until December 1998. In accordance
with company policy, depreciation expense is not recorded until the following
month after property and equipment has been placed in service.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, VerticalOne has financed its operations primarily
through private placements of equity securities and bank borrowings. In January
and February 1999, VerticalOne raised approximately $3.9 million by issuing
3,919,243 shares of Series A preferred stock. In May and June 1999, VerticalOne
raised $12.5 million by issuing 7,716,049 additional shares of Series B
preferred stock. In June 1999, VerticalOne secured a $2.75 million credit
facility from a commercial bank to fund capital equipment purchases, of which
$533,745 was outstanding as of June 30, 1998. This term loan is payable in three
years in the case of loans for the purchase of computer hardware and two years
in the case of purchases of licenses for computer software.
At June 30, 1999, VerticalOne had $12.9 million in cash and cash
equivalents to fund future operations and capital purchases. In connection with
the execution of the S1-VerticalOne merger agreement on September 23, 1999,
VerticalOne issued to S1 $15.0 million of Series C preferred stock. While
management believes that VerticalOne has adequate cash resources available to
fund operations through the rest of 1999, it is expected that additional capital
will be required to fund continued expansion of all areas of the business in
1999 and 2000 before adequate revenues are generated.
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YEAR 2000 CONSIDERATIONS
The Year 2000 issue arises as the result of computer programs having been
written, and systems having been designed, using two digits rather than four to
define the applicable year. Consequently, such software has the potential to
recognize a date using the "00" as the year 1900, rather than the year 2000.
This could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
VerticalOne believes that its own computer systems and software are Year
2000 compliant. To the extent that VerticalOne implements additional computer
systems and software in the future, VerticalOne will assess Year 2000 compliance
prior to their implementation. Furthermore, VerticalOne has designed its
internet products to be Year 2000 compliant. VerticalOne has not incurred any
costs relating to the Year 2000 compliance and does not expect to incur any
meaningful costs in the future.
SHARE OWNERSHIP BY PRINCIPAL STOCKHOLDERS, MANAGEMENT AND DIRECTORS OF
VERTICALONE
Management
The following table presents information about the directors and executive
officers of VerticalOne.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF NUMBER OF SHARES OF NUMBER OF SHARES OF
VERTICALONE COMMON VERTICALONE SERIES A VERTICALONE SERIES B
STOCK BENEFICIALLY PREFERRED STOCK PREFERRED STOCK
OWNED AT BENEFICIALLY OWNED AT BENEFICIALLY OWNED AT
SEPTEMBER 30, 1999 SEPTEMBER 30, 1999 SEPTEMBER 30, 1999
------------------------- ----------------------- -----------------------
PERCENT PERCENT PERCENT
NAME PRESENT POSITION BENEFICIALLY OF CLASS BENEFICIALLY OF CLASS BENEFICIALLY OF CLASS
---- ------------------------ ------------ -------- ------------ -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Gregg S. Freishtat Chairman and Chief
Executive Officer 4,975,000 65.87% 100,000 2.55% 15,432 0.20%
Jeffrey A. Director 775,000 10.23 705,243 17.99 860,891 11.16
Allred(1)(2)
Tim Cobb(1) Director 25,000 0.33 50,000 1.28 0 0
Jarrett Collins(3) Director 0 0 0 0 1,234,568 16.0
Jerry Colonna(4) Director 0 0 0 0 3,086,420 40.00
John Huntz(5) Director 0 0 500,000 12.76 308,642 4.00
Christopher Klaus(1) Director 25,000 0.33 100,000 2.55 30,864 0.40
Jack W. Simpson, Sr. Director 5,000 0.07 10,000 0.26 41,882 0.54
Neal W. McEwen(6) President and Chief
Financial Officer 405,000 5.33 10,000 0.26 12,346 0.16
Marc J. Gorlin(7) Executive Vice President 623,487 8.22 10,000 0.26 6,174 0.08
Palaniswamy Rajan Chief Technology Officer 592,500 7.81 10,000 0.26 0 0
Vikas Rijsinghani(7) Senior Vice President,
Product Development 255,000 3.36 30,000 0.77 15,432 0.20
</TABLE>
- ---------------
(1) Includes the right to acquire 25,000 shares of common stock through the
exercise of an option.
(2) Includes 750,000 shares of common stock, 680,243 shares of Series A
preferred stock and 837,743 shares of Series B preferred stock held by
Premiere Technologies, Inc., of which Mr. Allred is a director and the
President and Chief Operating Officer.
(3) Includes 1,234,568 shares held by TTCV, L.L.C.
(4) Includes 61,728 shares held by Flatiron Associates, LLC, 604,938 shares held
by The Flatiron Fund 1998/99, LLC, and 2,419,754 shares held by Chase
Venture Capital Associates, L.P.
(5) Includes 500,000 shares of Series A preferred stock and 308,642 shares of
Series B preferred stock held by Fuqua Venture Partners I, LLC.
(6) Includes the right to acquire 50,000 shares of common stock through the
exercise of an option.
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(7) Includes the right to acquire 30,000 shares of common stock through the
exercise of an option.
Principal Stockholders
The following table sets forth certain information concerning the
beneficial owners of more than 5.0% of any class of VerticalOne capital stock.
Unless otherwise indicated, the person listed is the record owner and has the
sole voting and investment power over the shares.
<TABLE>
<CAPTION>
NUMBER OF SHARES BENEFICIALLY
OWNED AT SEPTEMBER 30, 1999
------------------------------
NAME AND ADDRESS PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER DIRECTLY OF CLASS
-------------- --------------------------------------- ------------- ------------
<S> <C> <C> <C>
Common
Gregg S. Freishtat 4,975,000 65.87%
VerticalOne Corporation
Two Concourse Parkway
Suite 700
Atlanta, GA 30328
Neal W. McEwen 405,000(1) 5.33
VerticalOne Corporation
Two Concourse Parkway
Suite 700
Atlanta, GA 30328
Marc J. Gorlin 623,487(2) 8.22
VerticalOne Corporation
Two Concourse Parkway
Suite 700
Atlanta, GA 30328
Palaniswamy Rajan 592,500(3) 7.81
VerticalOne Corporation
Two Concourse Parkway
Suite 700
Atlanta, GA 30328
Premiere Technologies, Inc. 750,000 9.93
3399 Peachtree Road, N.E.
The Lenox Building, Suite 600
Atlanta, GA 30326
Series A Preferred
PTEKVentures.com, Inc. 680,243 17.36
2597 Mill Street
Reno, NV 89502
Fuqua Ventures 500,000 12.76
1201 West Peachtree Street
One Atlantic Center, Suite 5000
Atlanta, GA 30309
Kenneth J. and Emily Klawans 500,000 12.76
c/o Coastal Mortgage
3706 Crondall Lane, Suite 100
Owings Mill, MD 21117
</TABLE>
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<TABLE>
<CAPTION>
NUMBER OF SHARES BENEFICIALLY
OWNED AT SEPTEMBER 30, 1999
------------------------------
NAME AND ADDRESS PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER DIRECTLY OF CLASS
-------------- --------------------------------------- ------------- ------------
<S> <C> <C> <C>
Esher Limited 350,000 8.93%
36 Hilgrove Street
St. Hiler
Jersey
Channel Isles, United Kingdom
Steve Gorlin 200,000 5.10
150 Gulf Shore Drive #601
Destin, FL 32541
Series B Preferred
PTEKVentures.com, Inc. 837,743 10.86
2597 Mill Street
Reno, NV 89502
Flatiron Partners(4) 666,666 8.64
257 Park Avenue South
12th Floor
New York, NY 10010
Chase Venture Capital Associates, L.P. 2,419,754 31.36
380 Madison Avenue
New York, NY 10017
Kinetic Ventures 1,234,568 16.00
The South Terraces
115 Perimeter Center Place
Suite 640
Atlanta, GA 30346
TTCV, L.L.C. 1,234,568 16.00
One Main Street
Cambridge, MA 02142
Jerry Colonna(5) 3,086,420 40.00
257 Park Avenue South
12th Floor
New York, NY 10010
Series C Preferred
Security First Technologies Corporation 2,608,242 100.00
3390 Peachtree Road, N.E.
Suite 1700
Atlanta, GA 30326
</TABLE>
- ---------------
(1) Includes the right to acquire 50,000 shares through the exercise of an
option.
(2) Includes the right to acquire 30,000 shares through the exercise of an
option.
(3) Includes the right to acquire 30,000 shares through the exercise of an
option.
(4) Includes 61,728 shares held by Flatiron Associates, LLC and 604,938 shares
held by Flatiron Fund.
(5) Includes 61,728 shares held by Flatiron Associates, LLC, 604,938 shares held
by The Flatiron Fund 1998/99, LLC, and 2,419,754 shares held by Chase
Venture Capital Associates, L.P.
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<PAGE> 229
NEW S1 DIRECTOR
At the closing of VerticalOne Transaction, S1 will appoint Gregg S.
Freishtat to a three-year term on the S1 board of directors. Mr. Freishtat has
also agreed to continue to serve as the chief executive officer of VerticalOne
following the closing of the VerticalOne Transaction. Mr. Freishtat, age 32, has
served as Chairman and Chief Executive Officer of VerticalOne since its founding
in October 1998. Mr. Freishtat served as Senior Vice President of Premiere
Technologies, Inc. from September 1996 until he left Premiere Technologies to
found VerticalOne. In 1995, he founded and served as CEO of Telet Communications
LLC, which was sold to Premiere Technologies in September 1996. Mr. Freishtat
worked with the law firm of Freishtat and Sandler in Baltimore, MD from 1993
until he founded Telet Communications.
Mr. Freishtat did not receive any compensation from VerticalOne in 1998. In
addition, Mr. Freishtat did not hold, and was not granted, any VerticalOne stock
options or stock appreciation rights during 1998.
RELATED PARTY TRANSACTIONS
During 1998, VerticalOne issued to Mr. Freishtat 4,975,000 shares of
VerticalOne common stock primarily in consideration for his services as a
founder of VerticalOne. In connection with the founding of VerticalOne, Mr.
Freishtat loaned VerticalOne $100,000 on a noninterest-bearing basis. In
February 1999, VerticalOne issued to Mr. Freishtat 100,000 shares of its Series
A preferred stock to retire the loan. Additionally, Mr. Freishtat invested
$25,077 in VerticalOne in consideration for 15,432 shares of VerticalOne Series
B preferred stock.
LEGAL OPINIONS
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.,
Washington, D.C. Certain United States federal tax matters with respect to the
Edify Transaction will be passed upon by Hogan & Hartson L.L.P., Washington,
D.C. Certain United States federal tax matters with respect to the VerticalOne
Transaction will be passed upon by Alston & Bird LLP, Atlanta, Georgia.
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 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/proxy statement 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.
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
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 financial statements of VerticalOne Corporation as of December 31, 1998
and 1997, and for the period from inception (October 8, 1998) through December
31, 1998, have been included herein
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in reliance upon the report of KPMG LLP, independent auditors, and upon the
authority of said firm as experts in accounting and auditing.
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 in 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 Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1999, filed with the SEC on August 16, 1999
- S1's Current Reports on Form 8-K filed with the SEC on April 29, 1999,
May 21, 1999, August 5, 1999, September 8, 1999, September 23, 1999 and
October 1, 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 Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 1999, filed with the SEC on August 16, 1999
- Edify's Current Reports on Form 8-K filed with the SEC on May 20, 1999
and July 30, 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 deemed to be
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.
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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, November 3, 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.
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
FOR INCLUSION IN PROXY STATEMENT
Any proposal which an S1 stockholder wishes to have included in our proxy
statement and form of proxy for our 2000 annual meeting of stockholders under
Rule 14a-8 of the Securities and Exchange Commission must be received by our
Secretary at 3390 Peachtree Road, NE, Atlanta, Georgia 30326 by January 8, 2000.
Any other proposal for consideration by stockholders at our 2000 annual meeting
of stockholders must be delivered to, or mailed to and received by, our
Secretary not
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less than 30 days and not more than 90 days prior to the date of the meeting if
we give at least 45 days' notice or prior public disclosure of the date of the
meeting. Nothing in this paragraph shall be deemed to require us to include in
our proxy statement and form of proxy for the annual meeting any stockholder
proposal which does not meet the requirements of the Securities and Exchange
Commission in effect at the time.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FICS GROUP N.V.:
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 Consolidated Financial Statements.................. F-7
Introductory Note to Unaudited Interim Financial
Statements................................................ F-18
Unaudited Consolidated Balance Sheet as of December 31, 1998
and June 30, 1999......................................... F-19
Unaudited Consolidated Statement of Operations for the Three
and Six Months Ended June 30, 1998 and 1999............... F-20
Unaudited Consolidated Statement of Cash Flows for the Six
Months Ended June 30, 1998 and 1999....................... F-21
VERTICALONE CORPORATION:
Independent Auditors' Report................................ F-22
Balance Sheet as of December 31, 1998....................... F-23
Statement of Operations for the Period from Inception
(October 8, 1998) Through December 31, 1998............... F-24
Statement of Shareholders' Deficit for the Period from
Inception (October 8, 1998) Through December 31, 1998..... F-25
Statement of Cash Flows for the Period from Inception
(October 8, 1998) Through December 31, 1998............... F-26
Notes to Financial Statements............................... F-27
Unaudited Balance Sheet as of June 30, 1999................. F-33
Unaudited Statements of Operations for the Six-Month Period
ended June 30, 1999 and for the Period from Inception
(October 8, 1998) through June 30, 1999................... F-34
Unaudited Statements of Cash Flows for the Six-Month Period
ended June 30, 1999 and for the Period from Inception
(October 8, 1998) through June 30, 1999................... F-35
Notes to Unaudited Financial Statements..................... F-36
</TABLE>
F-1
<PAGE> 234
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 October 6, 1999
F-2
<PAGE> 235
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> 236
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> 237
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> 238
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> 239
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> 240
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> 241
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> 242
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> 243
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> 244
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> 245
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> 246
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 E 2,106
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> 247
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> 248
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> 249
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 September 21, 1999, FICS Group entered into a share purchase agreement
and a stock purchase agreement with Security First Technologies Corporation, or
S1, a U.S. company. Under the terms of the agreements, S1 will, in effect, issue
10,000,000 shares of common stock in exchange for up to 100% of the outstanding
shares of FICS Group. Current FICS stock options will convert into options to
purchase S1 common stock. In addition, the FICS stockholders will be able to
obtain up to 4,500,000 additional shares of S1 common stock if certain earn-out
conditions are fulfilled. Consummation of the transaction is subject to certain
conditions which, among other items, include the approval by the stockholders of
S1. In addition, S1 has made available to FICS Group loans totaling $25,000,000,
of which $16,000,000 was received by FICS Group through September 30, 1999.
Amounts borrowed under the line 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 loans may be made, at the option of FICS
Group, in cash or in shares of its common stock.
F-17
<PAGE> 250
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 the management, are necessary for a fair presentation of
financial position as of June 30, 1999 and results of operations and cash flows
for the interim periods presented. The results of operations of the three and
six months ended June 30, 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.
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). The Company previously presented
its 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 June 30, 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> 251
FICS GROUP N.V.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS OF EURO, EXCEPT SHARE DATA)
(AMOUNTS HAVE BEEN RESTATED FROM THE PRIOR REPORTING CURRENCY, BELGIAN FRANCS,
TO EURO)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1999
------------ ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. E 2,968 E 1,431
Accounts receivable, net.................................. 22,529 18,712
Unbilled receivables...................................... 1,561 1,739
Other receivables......................................... 678 1,962
-------- --------
Total current assets................................... 27,736 23,844
-------- --------
Property, plant, and equipment, net......................... 4,120 4,410
Intangible assets, net...................................... 2,755 2,712
-------- --------
Total assets........................................... E 34,611 E 30,966
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings under line of credit........................... E 7,094 E 11,056
Current portion of long-term debt......................... 588 210
Accounts payable.......................................... 9,660 7,782
Accrued liabilities....................................... 3,457 5,931
Income taxes payable...................................... 98 214
Deferred revenue.......................................... 7,560 3,353
-------- --------
Total current liabilities.............................. 28,457 28,546
-------- --------
Long-term debt............................................ 710 817
Convertible note payable -- S1............................ -- 5,811
-------- --------
Total liabilities...................................... 29,167 35,174
-------- --------
Stockholders' equity:
Convertible preferred stock:
Series B1: 40,000 shares authorized, 40,000 shares
issued and outstanding
at June 30, 1999..................................... 9,040 9,040
Series B2: 950 shares authorized, issued and
outstanding
at June 30, 1999..................................... 863 863
Series C: 9,302 shares authorized, issued and
outstanding
at June 30, 1999..................................... 8,471 8,471
Common stock: 96,350 shares authorized, issued and
outstanding
at June 30, 1999....................................... 597 597
Additional paid-in capital................................ 3,521 3,521
Deferred stock-based compensation......................... (987) (681)
Accumulated deficit....................................... (16,469) (25,589)
Accumulated other comprehensive income (loss)............. 408 (430)
-------- --------
Total stockholders' equity............................. 5,444 (4,208)
-------- --------
Total liabilities and stockholders' equity............. E 34,611 E 30,966
======== ========
</TABLE>
F-19
<PAGE> 252
FICS GROUP N.V.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS OF EURO, EXCEPT SHARE DATA)
(AMOUNTS HAVE BEEN RESTATED FROM THE PRIOR REPORTING CURRENCY, BELGIAN FRANCS,
TO EURO)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
1998 1999 1998 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues
Software licenses............................. E 1,607 E 3,006 E 3,356 E 6,616
Services...................................... 9,952 9,490 19,550 19,139
------- ------- ------- -------
Total revenues............................. 11,559 12,496 22,906 25,755
------- ------- ------- -------
Cost of revenues
Software licenses............................. 60 13 124 47
Services...................................... 8,210 8,062 15,981 16,241
------- ------- ------- -------
Total cost of revenues..................... 8,270 8,075 16,105 16,288
------- ------- ------- -------
Gross profit............................... 3,289 4,421 6,801 9,467
Operating expenses
Sales and marketing........................... 1,366 2,858 2,302 5,068
Research and development...................... 3,220 4,236 6,020 7,689
General and administrative.................... 2,053 2,189 4,068 3,776
IPO and merger related........................ -- 1,475 -- 1,475
Stock-based compensation...................... 281 153 562 306
Amortization of intangibles................... 2 157 3 288
------- ------- ------- -------
Total operating expenses................... 6,922 11,068 12,955 18,602
------- ------- ------- -------
Loss from operations............................ (3,633) (6,647) (6,154) (9,135)
Interest income............................... 8 16 13 28
Interest expense.............................. (136) (122) (164) (217)
Other income (expense)........................ 27 330 22 205
------- ------- ------- -------
Loss before income taxes................... (3,734) (6,423) (6,283) (9,119)
Income tax provision............................ 24 0 40 1
------- ------- ------- -------
Net loss................................... (3,758) (6,423) (6,323) (9,120)
======= ======= ======= =======
Basic and diluted net loss per share............ (27.63) (43.69) (46.49) (62.04)
======= ======= ======= =======
Weighted average shares outstanding ('000)...... 136 147 136 147
======= ======= ======= =======
</TABLE>
F-20
<PAGE> 253
FICS GROUP N.V.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS OF EURO)
(AMOUNTS HAVE BEEN RESTATED FROM THE PRIOR REPORTING CURRENCY, BELGIAN FRANCS,
TO EURO)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------
1998 1999
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. E(6,323) E(9,120)
Adjustments to reconcile net loss to net cash flow used by
operating activities:
Depreciation and amortization.......................... 586 1,193
Amortization of stock-based compensation............... -- 306
Decrease (increase) in accounts receivable............. (694) 3,456
Decrease (increase) in unbilled receivables............ (1,088) (178)
(Decrease) increase in accounts payable................ 1,094 (1,878)
Increase (decrease) in accrued liabilities and taxes
payable............................................... 12 2,590
Increase in deferred revenue........................... 1,858 (4,604)
(Increase) decrease in other receivables............... (207) (1,284)
------- -------
Net cash used in operating activities................ (4,762) (9,519)
------- -------
Cash flows from investing activities:
Purchase of property, plant and equipment................. (1,035) (1,440)
------- -------
Net cash used in investing activities................ (1,035) (1,440)
------- -------
Cash flows from financing activities:
Increase in borrowings under line of credit............... 4,016 3,962
Proceeds from merger-related convertible debt............. -- 5,811
Repayment of long-term debt............................... -- (40)
Repayments of obligations under capital leases:........... (443) (231)
------- -------
Net cash flows provided by (used in) financing
activities.......................................... 3,573 9,502
------- -------
Effect of exchange rate changes on cash and cash
equivalents............................................... (3) (80)
(Decrease) increase in cash and cash equivalents............ (2,227) (1,537)
------- -------
Cash and cash equivalents at beginning of period............ 4,178 2,968
------- -------
Cash and cash equivalents at end of period.................. 1,954 1,431
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for interest.................. 164 217
Cash paid during the period for taxes..................... 18 1
Supplemental disclosure of non-cash information:
Acquisition of property and equipment under capital
leases................................................. 60 57
</TABLE>
F-21
<PAGE> 254
INDEPENDENT AUDITORS' REPORT
The Board of Directors
VerticalOne Corporation:
We have audited the accompanying balance sheet of VerticalOne Corporation
(a development stage enterprise) as of December 31, 1998, and the related
statements of operations, shareholders' deficit, and cash flows for the period
from inception (October 8, 1998) through December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of VerticalOne Corporation (a
development stage enterprise) as of December 31, 1998, and the results of its
operations and its cash flows for the period from inception (October 8, 1998)
through December 31, 1998 in conformity with generally accepted accounting
principles.
KPMG LLP
Atlanta, Georgia
September 21, 1999
F-22
<PAGE> 255
VERTICALONE CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 75,392
Prepaid expenses and other current assets................. 59,082
---------
Total current assets................................... 134,474
Property and equipment (Note 4)............................. 62,872
Other assets................................................ 11,268
---------
$ 208,614
=========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable.......................................... $ 72,215
Due to shareholder (Note 5)............................... 100,000
Short-term borrowings (Note 6)............................ 100,000
Accrued expenses and other liabilities.................... 95,521
---------
Total liabilities...................................... 367,736
---------
Shareholders' deficit (Note 8):
Common stock, $0.001 par value. Authorized 40,000,000
shares. Issued and outstanding 7,500,000 shares........ 7,500
Additional paid-in capital................................ 675
Accumulated deficit during the development stage.......... (167,297)
---------
Total shareholders' deficit............................ (159,122)
Commitments and contingencies (Note 9)
---------
$ 208,614
=========
</TABLE>
See accompanying notes to financial statements.
F-23
<PAGE> 256
VERTICALONE CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (OCTOBER 8, 1998) THROUGH DECEMBER 31, 1998
<TABLE>
<S> <C>
Revenues.................................................... $ --
--------
Operating expenses:
Selling and marketing..................................... 36,928
Product development....................................... 85,673
General and administrative................................ 44,696
--------
Total operating expenses............................... 167,297
--------
Net loss............................................... $167,297
========
</TABLE>
See accompanying notes to financial statements.
F-24
<PAGE> 257
VERTICALONE CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF SHAREHOLDERS' DEFICIT
FOR THE PERIOD FROM INCEPTION (OCTOBER 8, 1998) THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------ PAID-IN ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT DEFICIT
--------- ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Issuance of common stock to founders..... 7,500,000 $7,500 675 -- 8,175
Net loss................................. -- -- -- (167,297) (167,297)
--------- ------ --- -------- --------
Balances at December 31, 1998............ 7,500,000 $7,500 675 (167,297) (159,122)
========= ====== === ======== ========
</TABLE>
See accompanying notes to financial statements.
F-25
<PAGE> 258
VERTICALONE CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (OCTOBER 8, 1998) THROUGH DECEMBER 31, 1998
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss.................................................. $(167,297)
Adjustments to reconcile net loss to net cash used in
operating activities:
Compensation expense for stock issuance................ 7,425
Increase in prepaid expenses and other assets.......... (69,600)
Increase in:
Accounts payable..................................... 72,215
Accrued expenses and other liabilities............... 95,521
---------
Net cash used in operating activities............. (61,736)
---------
Cash flows from investing activities -- capital
expenditures.............................................. (62,872)
---------
Cash flows from financing activities:
Proceeds from shareholder loan............................ 100,000
Short-term borrowings..................................... 100,000
---------
Net cash provided by financing activities......... 200,000
---------
Net increase in cash and cash equivalents......... 75,392
Cash and cash equivalents at beginning of period............ --
---------
Cash and cash equivalents at end of period.................. $ 75,392
=========
</TABLE>
See accompanying notes to financial statements.
F-26
<PAGE> 259
VERTICALONE CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(1) BUSINESS, BASIS OF PRESENTATION, AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
(a) BUSINESS AND BASIS OF PRESENTATION
VerticalOne Corporation (the "Company") was formed on October 8, 1998 to
develop, market, and license Internet applications. The Company is a
privately-held company which, through its partnerships with Internet portals and
other destination sites, provides an easy-to-access interface service that
allows Internet users to obtain their personal account information on a single
Website in a secure environment.
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent liabilities as of the date of the
balance sheet and revenues and expenses during the reporting period. Actual
results could differ from those estimates.
The technology market for Internet related products and services is
characterized by significant risk as a result of rapid, evolving industry
standards, emerging competition and frequent new product and service
introductions. To a great extent, the Company's success is dependent on
completing development of its products and services and the evolution of the
technology markets for Internet products and services. Negative developments
resulting from any of these factors or others could have a material adverse
impact on the Company's financial position and results of operations.
(b) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
(c) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated depreciation
and amortization. Depreciation and amortization of property and equipment is
provided using the straight-line method over the estimated useful lives.
Leasehold improvements are amortized using the straight-line method over
the estimated useful life of the improvement or the lease term, whichever is
shorter.
There was no depreciation expense recorded for the period ended December
31, 1998 because property and equipment was not placed in service until December
1998. In accordance with the Company's policy, depreciation expense is not
recorded until the following month after the property and equipment has been
placed in service.
(d) PRODUCT DEVELOPMENT
Product development includes all research and development expenses and
software development costs. All research and development expenses are expensed
as incurred. The Company's policy is to expense all software development costs
associated with establishing technological feasibility, which the Company
defines as completion of beta testing. Because beta testing is not yet complete,
the Company has not capitalized any software development costs in the
accompanying financial statements.
F-27
<PAGE> 260
VERTICALONE CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(e) INCOME TAXES
The Company uses the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred income tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and net operating loss and tax
credit carryforwards. Deferred income tax assets and liabilities are measured
using the enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred income tax assets and liabilities of a change in tax rates is
recognized in the statement of operations in the period that includes the
enactment date.
(f) STOCK-BASED COMPENSATION
The Company accounts for its stock-based awards in accordance with the
provisions of Statement of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation ("SFAS No. 123"), which encourages entities to
recognize as compensation expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively, SFAS No. 123 allows
entities to continue to apply the provisions of Accounting Principles Board
("APB") Opinion No. 25 and related interpretations, and provide pro forma
disclosures for employee stock based awards as if the fair-value-based method of
SFAS No. 123 has been applied. The Company has elected to continue applying the
provisions of APB Opinion No. 25 and provide the pro forma disclosures required
by SFAS No. 123.
(g) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
The Company accounts for long-lived assets in accordance with the
provisions of Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of ("SFAS No. 121"). SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell.
(h) COMPREHENSIVE INCOME
No statements of comprehensive income have been included in the
accompanying financial statements for the period ended December 31, 1998 since
the Company does not have any "other comprehensive income" to report.
(i) START-UP ACTIVITIES
In April 1998, the AICPA issued Statement of Position 98-5, Reporting on
the Costs of Start-up Activities. This statement became effective January 1,
1999 and requires that costs of start-up activities and organization costs be
expensed as incurred. For financial reporting purposes, the Company has expensed
all costs of start-up activities and organization costs. The adoption of this
statement will not have an effect on the Company's financial position or results
of operations.
F-28
<PAGE> 261
VERTICALONE CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(2) DEVELOPMENT STAGE ENTERPRISE
The Company was incorporated on October 8, 1998 (inception). The Company
has devoted most of its efforts to date to activities such as preparing business
plans, raising capital, and planning and developing its Internet products and
services. From inception through December 31, 1998, the Company has not
generated any revenues and has incurred expenses of $167,297, resulting in an
accumulated deficit during the development stage of $167,297 as of December 31,
1998.
(3) LIQUIDITY
Since inception, the Company has been engaged in preparing business plans,
raising capital, and planning and developing its Internet products and services.
As a result, the Company has not generated any revenues, and losses from
inception through December 31, 1998 have amounted to $167,297.
Despite these negative cash flows, the Company has been able to secure
financing from a variety of sources to support its development to date. These
sources have included both equity and debt financing.
Significant amounts of additional financing will be required to complete
development of its Internet products and services and to commence operations.
Subsequent to December 31, 1998, the Company completed two rounds of preferred
stock financing resulting in additional proceeds of $16.2 million and secured
certain equipment financing from a commercial bank (refer to note 11).
While there is no assurance that additional funding will be available to
execute these plans, the Company believes that funding received to date will be
sufficient to fund operations for the foreseeable future.
(4) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1998:
<TABLE>
<S> <C>
Leasehold improvements...................................... $ 6,400
Computer equipment.......................................... 49,149
Computer software........................................... 7,323
-------
Property and equipment............................ $62,872
=======
</TABLE>
(5) DUE TO SHAREHOLDER
In connection with starting the Company, the Company's Chairman and Chief
Executive Officer loaned the Company $100,000 on a noninterest-bearing basis.
The loan arrangement provided for conversion into Series A preferred stock at
the completion of the Series A preferred stock financing. In February 1999, the
Company issued 100,000 shares of Series A preferred stock to retire the loan.
(6) SHORT-TERM BORROWINGS
The Company borrowed $100,000 from a commercial bank to partially fund its
start-up. The terms of the loan provide for interest at the prime rate (7.75% at
December 31, 1998) payable monthly with outstanding principal due on demand. The
loan is secured by all assets of the Company and the personal guarantee of the
Company's Chairman and Chief Executive Officer. The loan was repaid in January
1999 from proceeds received from the Series A preferred stock financing.
F-29
<PAGE> 262
VERTICALONE CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(7) INCOME TAXES
The Company has experienced losses since inception and, therefore, has not
incurred any current income tax liabilities. Because of its development stage
status, the Company has capitalized for income tax reporting purposes all
expenses as either organizational or start-up costs through December 31, 1998.
The Company has provided a valuation allowance through December 31, 1998 to
fully offset all deferred income tax assets resulting from the capitalization of
organizational and start-up costs.
(8) STOCK OPTION PLAN
In November 1998, the Company adopted the VerticalOne Corporation 1998
Stock Option Plan (the "Plan") to provide a vehicle to attract, retain, and
reward the Company's employees. The terms of the Plan provide for 1,176,500
shares of the Company's common stock to be reserved for issuance. As of December
31, 1998, the Company had not made any grants under the terms of the Plan.
(9) COMMITMENTS AND CONTINGENCIES
(a) LEASE COMMITMENTS
The Company is obligated under a noncancelable operating lease agreement
for office facilities.
Future minimum lease payments under this noncancelable operating lease
agreement in the aggregate and for the next two years are shown as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1999........................................................ $135,212
2000........................................................ 135,212
--------
$270,424
========
</TABLE>
Rental expense for all cancelable and noncancelable operating leases was
$11,268 for the period from inception (October 8, 1998) through December 31,
1998.
(b) CONTRACTUAL COMMITMENTS
The Company has entered into contractual commitments to deliver products
and services in the ordinary course of business. The Company believes that all
such contractual commitments will be met or renegotiated such that no material
adverse financial impact on the Company's financial position or results of
operations will result from the Company's failure to meet these commitments.
(c) CONTINGENCIES
The Company is subject to lawsuits, claims, and other complaints arising
out of the ordinary conduct of business. While the ultimate results and outcomes
from these matters cannot be determined precisely, management, based in part
upon the advice of legal counsel, believes that all matters are adequately
covered by insurance or, if not covered, are without merit or are of such
amounts as would not have a material adverse effect on the Company's financial
position or results of operations.
F-30
<PAGE> 263
VERTICALONE CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(d) 401(k) PLAN
On December 4, 1998, the Company adopted a defined contribution 401(k)
Profit Sharing Plan and Trust (the "401(k) Plan") for the benefit of all
eligible employees. The 401(k) Plan is intended to qualify under Section 401(k)
of the Internal Revenue Code of 1986 (the "Code") as amended. Employees can
elect to contribute from 1% to 12% of their annual compensation (subject to an
annual limit specified in the Code) to the 401(k) Plan on a pretax basis. The
401(k) Plan requires the Company to match participant contributions on a
dollar-for-dollar basis up to 3% of the participant's annual compensation.
Employees are immediately vested in their elective contributions including the
earnings thereon and vest 20% annually in the Company's matching contributions
such that employees become fully vested in the Company's matching contribution
after their sixth anniversary. The Company did not make any contribution to the
401(k) Plan for the period from inception (October 8, 1998) through December 31,
1998.
(e) SEPARATION AGREEMENT
The Company is a party to a separation agreement between the Company's
Chairman and Chief Executive Officer and his former employer. The Separation
Agreement provides, among other terms, for the former employer's right to
maintain a 12.5% ownership interest through additional incremental investments
in the Company, provides the former employer with representation on the
Company's Board of Directors, and provides for a license agreement and
cross-marketing agreement between the Company and the former employer.
(10) YEAR 2000
The Year 2000 issue arises as the result of computer programs having been
written, and systems having been designed, using two digits rather than four to
define the applicable year. Consequently, such software has the potential to
recognize a date using the "00" as the year 1900, rather than the year 2000.
This could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
The Company believes that its own computer systems and software are Year
2000 compliant. To the extent that the Company implements additional computer
systems and software in the future, the Company will assess Year 2000 compliance
prior to their implementation. Furthermore, the Company has designed its
Internet products to be Year 2000 compliant. The Company has not incurred any
costs relating to the Year 2000 compliance.
(11) SUBSEQUENT EVENTS
(a) EQUITY TRANSACTIONS
In February 1999, the Company completed the sale of 3,919,243 shares of the
Company's Series A preferred stock resulting in proceeds to the Company of $3.8
million.
In June 1999, the Company completed the sale of 7,716,049 shares of the
Company's Series B preferred stock resulting in proceeds to the Company of $12.4
million.
F-31
<PAGE> 264
VERTICALONE CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Subsequent to December 31, 1998 (and through September 23, 1999), the
Company made grants of options and warrants to employees and others in the
ordinary course of business enabling them to acquire the Company's common stock
as follows:
<TABLE>
<CAPTION>
RANGE OF
RECIPIENT SHARES EXERCISE PRICES
--------- --------- ---------------
<S> <C> <C>
Employees................................................... 2,153,500 $0.10-$0.50
Directors................................................... 255,000 $0.10-$0.32
Other....................................................... 140,000 $0.10-$0.32
</TABLE>
(b) BANK FINANCING
In April 1999, the Company entered into a financing arrangement with a
commercial bank which provides for term loan financing up to $2,750,000 for
qualifying purchases of property and equipment. The interest rate on the
borrowing facility ranges from prime plus 1.75% to prime plus 2% with principal
and interest payments due over a 36-month amortization. The facility is secured
by substantially all assets of the Company and includes certain financial
covenants.
(c) PENDING ACQUISITION
On September 23, 1999, the Company entered into agreements which provide
for the sale of the Company to Security First Technologies Corporation. The
closing of the transaction is subject to customary closing conditions such as
regulatory filings and shareholder approval.
F-32
<PAGE> 265
VERTICALONE CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $12,926,180
Prepaid expenses and other current assets................. 461,938
-----------
Total current assets................................... 13,388,118
Property and equipment, net................................. 2,184,388
Other assets................................................ 116,696
-----------
$15,689,202
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 1,051,601
Accrued expenses and other liabilities.................... 28,628
-----------
Total current liabilities.............................. 1,080,229
Borrowing under equipment line of credit.................. 533,745
-----------
Total liabilities...................................... 1,613,974
-----------
Series B preferred stock, convertible and redeemable, $0.01
par value, $1.62 per share liquidation value. Authorized
7,716,050 shares. Issued and outstanding 7,716,049
shares.................................................... 12,606,315
Shareholders' equity:
Series A preferred stock, convertible, $0.01 par value,
$1.00 per share liquidation value. Authorized
3,919,243 shares. Issued and outstanding
3,919,243 shares....................................... 39,192
Common stock, $0.001 par value. Authorized 40,000,000
shares. Issued and outstanding 7,527,400 shares........ 7,527
Additional paid-in capital................................ 3,849,298
Accumulated deficit during the development stage.......... (2,427,104)
-----------
Total shareholders' equity............................. 1,468,913
Commitments and contingencies...............................
-----------
$15,689,202
===========
</TABLE>
F-33
<PAGE> 266
VERTICALONE CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
SIX-MONTH PERIOD ENDED JUNE 30, 1999 AND FOR THE PERIOD FROM INCEPTION
(OCTOBER 8, 1998)
THROUGH JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
1999 CUMULATIVE
----------- ----------
<S> <C> <C>
Revenues.................................................... $ -- --
----------- ----------
Operating expenses:
Selling and marketing..................................... 422,882 459,810
Product development....................................... 1,122,782 1,208,455
General and administrative................................ 578,445 623,141
Depreciation and amortization............................. 57,891 57,891
----------- ----------
Total operating expenses............................... 2,182,000 2,349,297
----------- ----------
Operating loss......................................... (2,182,000) (2,349,297)
Interest income, net........................................ 98,606 98,606
----------- ----------
Net loss............................................... $(2,083,394) (2,250,691)
=========== ==========
</TABLE>
F-34
<PAGE> 267
VERTICALONE CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1999 AND FOR THE PERIOD
FROM INCEPTION (OCTOBER 8, 1998) THROUGH JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
1999 CUMULATIVE
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(2,083,394) $(2,250,691)
Adjustments to reconcile net loss to net cash used in
operating activities:
Consulting expense on stock options issued............. 3,360 3,360
Compensation expense on stock options issued........... 18,000 25,425
Depreciation and amortization.......................... 57,891 57,891
Increase (Decrease) in accrued expenses................ (66,893) 28,628
Increase in:
Prepaid expenses and other current assets............ (402,856) (472,456)
Other assets......................................... (105,428) (105,428)
Accounts payable..................................... 979,386 1,051,601
----------- -----------
Net cash used in operating activities............. (1,599,934) (1,661,670)
----------- -----------
Cash flows from investing activities -- capital
expenditures.............................................. (2,179,407) (2,242,279)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of Series A preferred stock, less
offering costs......................................... 3,765,982 3,765,982
Proceeds from issuance of Series B preferred stock, less
offering costs......................................... 12,429,902 12,429,902
Proceeds from equipment financing loan.................... 533,745 533,745
Proceeds from shareholder loan............................ -- 100,000
Proceeds from short-term borrowings....................... -- 100,000
Repayment of short-term borrowings........................ (100,000) (100,000)
Proceeds from exercise of stock options................... 500 500
----------- -----------
Net cash provided by financing activities......... 16,630,129 16,830,129
----------- -----------
Net increase in cash and cash equivalents......... 12,850,788 12,926,180
Cash and cash equivalents at beginning of period............ 75,392 --
----------- -----------
Cash and cash equivalents at end of period.................. $12,926,180 $12,926,180
=========== ===========
</TABLE>
F-35
<PAGE> 268
VERTICALONE CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 1999
(1) BASIS OF PRESENTATION
The accompanying unaudited financial statements represent the accounts of
VerticalOne Corporation (the "Company"). These unaudited financial statements
have been prepared in accordance with instructions for preparing interim
financial information and, therefore, do not include all information and
footnotes necessary for a fair presentation of financial position, results of
operations, and cash flows in conformity with generally accepted accounting
principles. All adjustments, consisting of normal recurring accruals, which, in
the opinion of management, are necessary to a fair presentation of financial
position and results of operations have been included. The accompanying
unaudited financial statements should be read in conjunction with the Company's
audited financial statements and related notes appearing elsewhere herein.
(2) DEVELOPMENT STAGE ENTERPRISE
The Company was incorporated on October 8, 1998 (inception). The Company
has devoted most of its efforts to date to activities such as preparing business
plans, raising capital, and planning and developing its Internet products and
services. From inception through June 30, 1999, the Company has not generated
any revenues and has incurred expenses and provided for preferred dividends of
$2,427,104 resulting in an accumulated deficit during the development stage of
$2,427,104 as of June 30, 1999.
(3) EQUITY TRANSACTIONS AND BANK FINANCING
(a) EQUITY TRANSACTIONS
In February 1999, the Company completed the sale of 3,919,243 shares of the
Company's Series A preferred stock resulting in proceeds to the Company of $3.8
million.
In June 1999, the Company completed the sale of 7,716,049 shares of the
Company's Series B preferred stock resulting in proceeds to the Company of $12.4
million.
Subsequent to December 31, 1998 (and through September 23, 1999), the
Company made grants of options and warrants to employees and others in the
ordinary course of business enabling them to acquire the Company's common stock
as follows:
<TABLE>
<CAPTION>
RANGE OF
RECIPIENT SHARES EXERCISE PRICES
--------- --------- ---------------
<S> <C> <C>
Employees................................................... 2,153,500 $0.10-$0.50
Directors................................................... 255,000 $0.10-$0.32
Other....................................................... 140,000 $0.10-$0.32
</TABLE>
(b) BANK FINANCING
In April 1999, the Company entered into a financing arrangement with a
commercial bank which provides for term loan financing up to $2,750,000 for
qualifying purchases of property and equipment. The interest rate on the
borrowing facility ranges from prime plus 1.75% to prime plus 2% with principal
and interest payments due over a 36-month amortization. The facility is secured
by substantially all assets of the Company and includes certain financial
covenants.
F-36
<PAGE> 269
VERTICALONE CORPORATION
NOTES TO UNAUDITED FINANCIAL STATEMENTS -- (CONTINUED)
(4) SUBSEQUENT EVENT -- PENDING ACQUISITION
On September 23, 1999, the Company entered into agreements which provide
for the sale of the Company to Security First Technologies Corporation. The
closing of the transaction is subject to customary closing conditions such as
regulatory filings and shareholder approval.
F-37
<PAGE> 270
ANNEXES
TO
REGISTRATION STATEMENT
<PAGE> 271
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Annex A -- Share Purchase Agreement, as amended -- FICS
Transaction............................................... A-1
Annex B -- Stock Purchase Agreement, as amended -- FICS
Transaction............................................... B-1
Annex C -- Agreement and Plan of Merger -- Edify
Transaction............................................... C-1
Annex D -- Agreement and Plan of Merger -- VerticalOne
Transaction............................................... D-1
Annex E -- Opinion of BancBoston Robertson Stephens,
Financial Advisor to S1 -- FICS Transaction............... E-1
Annex F -- Opinion of BancBoston Robertson Stephens,
Financial Advisor to S1 -- Edify Transaction.............. F-1
Annex G -- Opinion of Goldman, Sachs & Co., Financial
Advisor to Edify -- Edify Transaction..................... G-1
Annex H -- Opinion of Goldman, Sachs & Co., Financial
Advisor to S1 -- VerticalOne Transaction.................. H-1
Annex I -- Section 262 of the Delaware General Corporation
Law -- Dissenters' Rights of Appraisal.................... I-1
</TABLE>
<PAGE> 272
ANNEX A
SHARE PURCHASE AGREEMENT II
BY AND AMONG
S1 EUROPE HOLDINGS N.V.
AND
THE STOCKHOLDERS OF
FICS GROUP N.V.
WHO ARE SIGNATORIES HERETO,
AND FOR THE LIMITED PURPOSES STATED HEREIN
SECURITY FIRST TECHNOLOGIES CORPORATION
AND
FICS GROUP N.V.
DATED AS OF
SEPTEMBER 21, 1999,
AS AMENDED
A-1
<PAGE> 273
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I THE TRANSACTION................................... A-4
1.1 The Transaction................................... A-4
1.2 Closing........................................... A-4
1.3 Purchase Amount................................... A-5
1.4 FICS Securities Transfers......................... A-6
1.5 Deliveries at Closing............................. A-6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLERS.... A-8
2.1 Organization of Sellers........................... A-8
2.2 Authorization of Transaction...................... A-8
2.3 Noncontravention.................................. A-9
2.4 Broker's Fees..................................... A-9
2.5 FICS Securities................................... A-9
2.6 Absence of Bankruptcy Proceedings................. A-9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF FICS.......... A-9
3.1 Corporate Organization............................ A-9
3.2 Capitalization.................................... A-10
3.3 Authority; No Violation........................... A-11
3.4 Consents and Approvals............................ A-11
3.5 Financial Statements; Books and Records........... A-11
3.6 Broker's Fees..................................... A-12
3.7 Absence of Certain Changes or Events.............. A-12
3.8 Legal Proceedings................................. A-12
3.9 Taxes and Tax Returns............................. A-13
3.10 Employee Plans.................................... A-14
3.11 Employees......................................... A-15
3.12 Certain Contracts................................. A-15
3.13 Environmental Matters............................. A-15
3.14 Properties and Assets............................. A-16
3.15 Insurance......................................... A-17
3.16 Compliance with Applicable Laws................... A-17
3.17 FICS Information.................................. A-17
3.18 Intellectual Property............................. A-17
3.19 Delivery of FICS Stock Transfer Book.............. A-19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF S1 HOLDINGS AND
S1........................................................ A-20
4.1 Corporate Organization............................ A-20
4.2 Authority; No Violation........................... A-20
4.3 Consents and Approvals............................ A-21
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS......... A-21
5.1 Covenants relating to FICS........................ A-21
5.2 Covenants of Sellers.............................. A-23
5.3 Covenants of S1................................... A-23
5.4 Compliance with Antitrust Laws.................... A-24
</TABLE>
A-2
<PAGE> 274
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE VI ADDITIONAL AGREEMENTS............................ A-24
6.1 Regulatory Matters................................ A-24
6.2 Access to Information............................. A-25
6.3 Shareholder Meeting............................... A-26
6.4 Reserved.......................................... A-26
6.5 FICS Year 2000 Officer............................ A-26
6.6 Subsequent Interim Financial Statements........... A-26
6.7 Advice of Changes................................. A-27
6.8 Current Information............................... A-27
6.9 Transaction Expenses of FICS...................... A-27
6.10 Joinder of Additional Sellers..................... A-28
ARTICLE VII CONDITIONS PRECEDENT............................ A-28
7.1 Conditions to Each Party's Obligation To Effect
the Transaction........................................ A-28
7.2 Conditions to Obligations of S1 Holdings.......... A-28
7.3 Conditions to Obligations of the Sellers.......... A-29
ARTICLE VIII TERMINATION AND AMENDMENT...................... A-30
8.1 Termination....................................... A-30
8.2 Effect of Termination............................. A-31
8.3 Amendment......................................... A-32
8.4 Extension; Waiver................................. A-32
ARTICLE IX GENERAL PROVISIONS............................... A-32
9.1 Expenses.......................................... A-32
9.2 Notices........................................... A-32
9.3 Interpretation.................................... A-34
9.4 Counterparts...................................... A-34
9.5 Entire Agreement.................................. A-34
9.6 Governing Law..................................... A-34
9.7 Enforcement of Agreement.......................... A-34
9.8 Severability...................................... A-35
9.9 Publicity......................................... A-35
9.10 Assignment; Limitation of Benefits................ A-35
9.11 Additional Definitions............................ A-35
9.12 Survival.......................................... A-36
9.13 Cumulative Remedies............................... A-36
9.14 Release of Claims................................. A-36
ARTICLE X INDEMNIFICATION................................... A-36
10.1 Indemnification of the Sellers................... A-36
10.2 Claim for Indemnification........................ A-37
10.3 Third Party Claims............................... A-37
EXHIBITS
A. Form of S1 Stockholder Agreement.......... A-41
SCHEDULES
A. Schedule of holders of FICS Securities.... A-46
</TABLE>
A-3
<PAGE> 275
SHARE PURCHASE AGREEMENT II
This SHARE PURCHASE AGREEMENT II, dated as of September 21, 1999, as
amended by an Amendment to Share Purchase Agreement II, dated as of October 7,
1999 (this "Agreement"), is entered into by and among S1 Europe Holdings N.V., a
Belgian corporation (naamloze vennootschap ("N.V.")) ("S1 Holdings") and a
subsidiary of Security First Technologies Corporation, a Delaware corporation
("S1"), each of the stockholders of FICS Group N.V., a Belgian corporation
registered with the Brussels Registry of Commerce under number 515450 ("FICS"),
who are signatories hereto, and as may be joined by other stockholders from time
to time (individually, a "Seller," and collectively, the "Sellers"), and for the
limited purposes stated herein, S1 and FICS.
WHEREAS, the parties hereto and other stockholders of FICS had previously
entered into that certain Share Purchase Agreement, dated as of May 16, 1999, by
and among S1 Holdings as represented by S1, each of the stockholders of FICS
listed on the signature page thereto (the "Former Sellers"), and for the limited
purposes stated therein, S1 and FICS (the "Former Agreement");
WHEREAS, pursuant to Section 8.1(a) of the Former Agreement the parties
thereto have terminated the Former Agreement as confirmed by that certain letter
agreement from S1 Holdings to the Former Sellers, S1 and FICS, dated as of even
date herewith;
WHEREAS, the Sellers own capital stock of FICS (the "FICS Capital Stock"),
and securities otherwise convertible into capital stock of FICS (the "FICS Stock
Equivalents," and together with FICS Capital Stock, the "FICS Securities"), in
the name and the amounts set forth on Schedule A; and
WHEREAS, S1 Holdings and each of the Sellers have determined that it is in
their best interests to consummate the transactions provided for herein in
which, subject to the terms and conditions set forth herein, S1 Holdings will
acquire all of the issued and outstanding FICS Securities in exchange for the
Transaction Consideration as defined in Section 1.3 hereunder;
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 TRANSACTION
1.1 THE TRANSACTION.
At the Closing (as defined below at Section 1.2), and subject to the terms
and conditions of this Agreement, the Sellers hereby agree to sell to S1
Holdings, and S1 Holdings hereby agrees to purchase from the Sellers, the FICS
Securities (the "Transaction").
1.2 CLOSING.
Subject to the terms and conditions of this Agreement, the closing of the
Transaction (the "Closing") will take place at 10:00 a.m. at the offices of
Hogan & Hartson L.L.P., 555 Thirteenth Street, NW, Washington, DC and, as to the
recordation of change of ownership of the FICS Capital Stock, at the offices of
Hogan & Hartson L.L.P., Avenue des Arts 41, 1040 Brussels, Belgium, on (i) the
fifth business day after the latest to occur of (x) the date the last of any
required governmental or regulatory approvals is received and all applicable
statutory or regulatory waiting periods have expired or been terminated, and (y)
the date on which the approval of S1's stockholders is obtained, or (ii) such
other date, place and time as the parties may reasonably determine (the "Closing
Date"). Notwithstanding the foregoing, any of Michel Akkermans ("Akkermans"),
General
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Atlantic Partners 20, L.P., GAP Coinvestment Partners, L.P., General Atlantic
Partners 52, L.P., or GIMV N.V. (together the "Majority Sellers"), or S1
Holdings, may extend the Closing Date by up to 90 days (but not later than March
31, 2000) if, in the case of S1 Holdings, any of the conditions set forth at
Sections 7.1 and 7.2 are not met as of the date which would otherwise be the
Closing Date under the preceding sentence, and, in the case of the Majority
Sellers, if any of the conditions set forth at Sections 7.1 and 7.3 are not met
as of the date which would otherwise be the Closing Date under the preceding
sentence.
1.3 PURCHASE AMOUNT.
(a) At the Closing and subject to the terms and conditions of this
Agreement, S1 Holdings hereby agrees to purchase the FICS Securities that are
issued and outstanding immediately before Closing.
(b) In consideration for the purchase of all issued and outstanding FICS
Securities as contemplated by the terms of this Agreement, S1 Holdings hereby
agrees to pay an aggregate amount of cash, except as set forth at Section 1.3(c)
hereof (the "Transaction Consideration") at the Closing, and to pay additional
compensation if applicable, all as follows:
(1) Upon the Closing, S1 Holdings shall pay $357,500,000 for all of
the FICS Securities (the "Initial Payment");
(2) At a date to be determined in S1 Holding's sole discretion, but
in any case no later than 30 calendar days following the filing of
S1's Annual Report on Form 10-K for the fiscal year 2000 (such date
the "Second Payment Date") if there is any 2000 Earn-out Payment (as
such term is defined and calculated pursuant to Schedule 1.3 hereof),
then S1 Holdings shall pay to the Sellers an amount equal to the 2000
Earn-out Payment (the "Second Payment"); and
(3) At a date to be determined in S1 Holding's sole discretion, but
in any case no later than 30 calendar days following the filing of
S1's Annual Report on Form 10-K for the fiscal year 2001 (such date
the "Third Payment Date", and together with the Initial Payment Date
and the Second Payment Date, the "Payment Dates") if there is any
2001 Earn-out Payment (as such term is defined and calculated
pursuant to Schedule 1.3 hereof), then S1 Holdings shall pay to the
Sellers an amount equal to the 2001 Earn-out Payment (the "Third
Payment", and together with the Initial Payment and the Second
Payment, the "Payments").
The amount of the Transaction Consideration to be paid to each of the
Sellers on each of the Payment Dates shall be determined by multiplying the
amount to be paid at such date by the percentage listed next to such Seller's
name (which percentage reflects such Seller's percentage ownership of FICS
Securities) at Schedule A hereto and rounded to the nearest whole cent.
(c). Each of the Payments shall be paid by S1 Holdings in cash into an
escrow account at a bank designated by S1 Holdings and held solely for the
purpose of purchasing shares of common stock of S1, par value $.01 per share
("S1 Common Stock"), if S1 Holdings is able to arrange or is offered third party
financing for such amount on terms that are reasonably acceptable to S1
Holdings. If such third party cash financing is not available or offered with
respect to either the Second or Third Payment, S1 Holdings may make such Payment
by tendering a bill of exchange issued by S1 Holdings in the amount of such
Payment.
(d). Notwithstanding any other provision of this Section 1.3, if from
and after the Closing Date until the Third Payment Date any one or more of the
"Acceleration Events" set forth in this Section 1.3(d) shall occur; then (x) S1
Holdings shall not pay either the Second Payment or the Third Payment if the
Second Payment Date shall not have occurred, or the Third Payment if the
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Third Payment Date shall not have occurred, as of the date of the occurrence of
any of the above, and (y) S1 Holdings shall immediately pay the Sellers an
aggregate amount of cash, or if third party financing is not available to S1
Holdings, such other type of consideration selected by Akkermans as set forth in
Section 1.3(c) hereof, equal to the product of (i) $35.75 multiplied by (ii) the
number of Earn-out Points (as computed pursuant to Schedule 1.3 hereto) which
have not then been forfeited. Any such payments of cash under this Section
1.3(d) shall be deemed a "Payment" hereunder and subject to the terms of Section
1.3(c) above, and it is understood that upon occurrence of an Acceleration Event
any references hereunder to the Second Payment Date or the Third Payment Date
shall be deemed to be references to the date of such Acceleration Event and any
references to the Second Payment or the Third Payment shall be deemed to be
references to the Payment made on such date, and the amount of such Payment
shall constitute the 2000 Earn-out Payment and/or the 2001 Earn-out Payment, as
applicable.
For purposes of this Section 1.3(d), an "Acceleration Event" shall mean (A)
any person or group of persons (within the meaning of Section 13 or 14 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by
the SEC under said Act) of 50% or more of the outstanding shares of common stock
of S1, (B) S1 shall consolidate or merge with or into any other person (other
than pursuant to a consolidation or merger pursuant to which the common
stockholders of S1 immediately prior to the effective time of such consolidation
or merger own a majority of the issued and outstanding common stock of the
surviving corporation immediately after such effective time), (C) S1 shall sell,
lease or otherwise transfer, directly or indirectly, all or any substantial part
of the assets of S1 and its Subsidiaries, taken as a whole, to any other person,
(D) S1 Common Stock (or any successor security thereto) is no longer quoted on
the Nasdaq Stock Market ("Nasdaq") or a "national securities exchange" (as
defined in Section 6 of the Exchange Act), (E) S1(or any successor entity
thereto) no longer has a class of securities registered under the Exchange Act,
or (F) there shall have been an "Akkermans Termination Event," as defined below.
For purposes hereof, an "Akkermans Termination Event" shall mean the removal of
Akkermans, without Akkermans's consent and other than for cause (as contemplated
in the Amended and Restated Certificate of Incorporation of S1), from his
position as Chairman of the Board of S1.
1.4 FICS SECURITIES TRANSFERS.
Each of the Sellers covenants that it shall not in any way transfer or
assign any of its FICS Securities prior to the Closing.
1.5 DELIVERIES AT CLOSING.
(a) In addition to the other items required pursuant hereto, including
without limitation the documents and items required under Article VII below, at
the Closing, each Seller shall deliver or cause a representative of all Sellers
(the "Custodian") to deliver, as the case may be, to S1 Holdings the following:
1. If the Seller is not a natural person, a copy of the resolutions
or other corporate documentation, certified by the Secretary (or, if the Seller
is a partnership, a general partner) of such Seller as being true, correct and
complete and then in full force and effect, authorizing the Transaction, the
execution, delivery and performance of this Agreement by the Seller, and the
performance of the Seller's obligations hereunder.
2. A certificate of the Seller certifying that the representations
and warranties of such Seller made herein are true, complete and correct as of
the date of this Agreement and are true and correct as of the Closing Date, and
that such Seller has performed and complied with all covenants and agreements
required to be performed or complied with by him or it on or prior to the
Closing.
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3. Such other certificates, instruments or documents as S1 Holdings
may reasonably request in order to effect and document the transactions
contemplated hereby.
4. The irrevocable instruction of each Seller to record in the share
registry of FICS the transfer of its FICS Securities to S1 Holdings.
5. An update of the Seller Disclosure Schedule reflecting any change
required as if the Agreement were being executed as of the date of the Closing.
(b) In addition to the other items required pursuant hereto, including
without limitation the documents and items required under Article VII below, at
the Closing, FICS shall deliver, or cause to be delivered, as the case may be,
to S1 Holdings the following:
1. A copy of the resolutions of the Board of Directors of FICS,
certified by the Secretary of FICS as being true, correct and complete and then
in full force and effect, authorizing the execution, delivery and performance of
this Agreement by FICS, and the performance of FICS' obligations hereunder.
2. A certificate of FICS signed by the managing director of FICS
certifying that the representations and warranties of FICS made herein are true,
complete and correct as of the date of this Agreement and are true and correct
as of the Closing Date, and FICS has performed and complied with all covenants
and agreements required to be performed or complied with by it on or prior to
the Closing.
3. Such other certificates, instruments or documents as S1 Holdings
may reasonably request in order to effect and document the transactions
contemplated hereby.
4. An update of the FICS Disclosure Schedule reflecting any change
required as if the Agreement were being executed as of the date of the Closing.
5. The stock transfer register of FICS, certified by the Managing
Director of FICS as then being true, accurate and complete.
(c) In addition to the other items required pursuant hereto, including
without limitation the documents and items required under Article VII below, at
the Closing, S1 Holdings shall deliver, or cause to be delivered, as the case
may be, to each Seller the following:
1. A copy of the resolutions of the Board of Directors of S1
Holdings, certified by the Managing Director of S1 Holdings as being true,
correct and complete and then in full force and effect, authorizing the
Transaction, the execution, delivery and performance of this Agreement by S1
Holdings, and the performance of S1 Holdings' obligations hereunder.
2. Such other certificates, instruments or documents as the Sellers
may reasonably request in order to effect and document the transactions
contemplated hereby.
3. The Initial Payment.
(d) In addition to the other items required pursuant hereto, including
without limitation the documents and items required under Article VII below, at
the Closing, S1 shall deliver, or cause to be delivered, as the case may be, to
each Seller the following:
1. A copy of the resolutions of the Board of Directors of S1,
certified by the Secretary of S1 as being true, correct and complete and then in
full force and effect, authorizing the Transaction, the execution, delivery and
performance of this Agreement by S1, and the performance of S1's obligations
hereunder.
2. A certificate of S1 signed by the President of S1 certifying that
the representations and warranties of S1 made herein are true, complete and
correct as of the date of this Agreement
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and are true and correct as of the Closing Date, and S1 has performed and
complied with all covenants and agreements required to be performed or complied
with by it on or prior to the Closing.
3. Such other certificates, instruments or documents as the Sellers
may reasonably request in order to effect and document the transactions
contemplated hereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each of the Sellers severally and not jointly hereby makes the following
representations and warranties to S1 Holdings as set forth in this Article II,
each of which is being relied upon by S1 Holdings as a material inducement to
enter into and perform this Agreement. All of the disclosure schedules of the
Sellers referenced below and thereby required of the Sellers 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 "Sellers' Disclosure Schedule."
2.1 ORGANIZATION OF SELLERS.
If such Seller is not a natural person, such Seller is duly organized and
validly existing under the laws of the jurisdiction of its formation.
2.2 AUTHORIZATION OF TRANSACTION.
(a) If such Seller is not a natural person, such Seller has full power
and authority to execute and deliver this Agreement and to perform his, her or
its obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all requisite action on the part of such Seller and no other proceedings on
the part of such Seller are necessary to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by such Seller and (assuming due authorization, execution and delivery
by FICS and S1 Holdings of this Agreement) will constitute a valid and legally
binding obligation of such Seller, enforceable 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 laws affecting creditors' rights and remedies generally. Except as set
forth in Section 2.2(a) of the Sellers' Disclosure Schedule, such Seller need
not give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement.
(b) Such Seller acknowledges that he, she or it has read this Agreement
and has been provided with, or been granted access to, all information necessary
to make his or her decision to execute this Agreement. Such Seller acknowledges
that his, her or its signature on this Agreement shall be deemed his, her or its
written consent, in his, her or its capacity as a shareholder of FICS, to the
execution of the Agreement by a representative of FICS on behalf of FICS, and to
the consummation of all of the transactions contemplated by this Agreement. Such
Seller hereby waives any right of first refusal, preemptive right or other right
which he, she or it may have (including, without limitation, rights arising
under Article 11 of the FICS Restated Articles of Association (Statuten)) to
acquire any of the FICS Securities and the FICS Bonds to be sold by any other
Seller pursuant to this Agreement.
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2.3 NONCONTRAVENTION.
Neither the execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will (A) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which such Seller is subject, (B) conflict with, result in a breach of,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, note, bond,
mortgage, deed of trust, or other arrangement to which such Seller is a party or
by which he or it is bound or to which any of his or its assets is subject or
(C) if such Seller is not a natural person, violate any provisions of its
organizational documents.
2.4 BROKER'S FEES.
Except for the agreement described in Section 3.6, such Seller has no
liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement nor has
such Seller created any such liability or obligation which, upon consummation of
the Transaction, will become an obligation of FICS or any FICS Subsidiary
(defined below), or S1 Holdings or S1.
2.5 FICS SECURITIES.
Such Seller holds of record and owns beneficially the FICS Securities set
forth next to his, her or its name in Section 2.5 of the Sellers' Disclosure
Schedule, free and clear of any restrictions on transfer (other than the rights
of S1 Holdings hereunder and the rights in favor of FICS and certain other
Sellers which are described in Section 2.5 of the Sellers' Disclosure Schedule),
taxes, security interests, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. Such Seller is not a party to any
option, warrant, purchase right, call, or other contract or commitment that
could require such Seller to sell, transfer, or otherwise dispose of any capital
stock of FICS. Except as set forth at Section 2.5 of the Sellers' Disclosure
Schedule, such Seller is not a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any capital stock of
FICS.
2.6 ABSENCE OF BANKRUPTCY PROCEEDINGS.
There are no bankruptcy, reorganization or arrangement proceedings pending
against, being contemplated by, or threatened against such Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FICS
FICS hereby makes the following representations and warranties to S1
Holdings as set forth in this Article III, each of which is being relied upon by
S1 Holdings as a material inducement to enter into and perform this Agreement.
All of the disclosure schedules of FICS referenced below and thereby required
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 "FICS Disclosure Schedule."
3.1 CORPORATE ORGANIZATION.
(a) FICS is a corporation duly organized and validly existing under the
laws of Belgium. FICS has the corporate power and authority to own or lease all
of its properties and assets and to
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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 Restated Articles of Association (Statuten) of FICS (the "FICS
Statuten"), copies of which have previously been delivered to S1, are true,
correct and complete copies of such documents as in effect as of the date of
this Agreement.
(b) Each "Subsidiary" (defined below) of FICS (each, a "FICS
Subsidiary") and the jurisdiction of its organization is set forth at Section
3.1(b) of the FICS Disclosure Schedule. Each FICS Subsidiary is a corporation
duly organized and validly existing under the laws of the jurisdiction of its
organization. Each FICS 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 charter or other
constitutive or corporate governance documents of each FICS Subsidiary, copies
of which have previously been delivered to S1, are true, correct and complete
copies of such documents as in effect as of the date of this Agreement. For
purposes of this Agreement, the term "Subsidiary," with respect to any party,
means any corporation, partnership or other organization, whether incorporated
or unincorporated, (i) which is consolidated with such party for financial
reporting purposes, or (ii) in which such party holds a 25% or greater equity,
partnership or other capital interest.
3.2 CAPITALIZATION.
(a) The capital stock of FICS, all of which is issued and outstanding,
is as follows: (i) 96,350 FICS Ordinary Shares, (ii) 40,000 shares of Series B1
preferred stock, no par value per share, (iii) 950 shares of Series B2 preferred
stock, no par value per share and (iv) 9,302 shares of Series C preferred stock,
no par value per share (the Series B1, B2 and C preferred stock is collectively
referred to herein as "FICS Preferred Stock"). The FICS Ordinary Shares and FICS
Preferred Stock have been duly authorized and validly issued and are fully paid
and nonassessable. Except for rights arising pursuant to Article 11 of the FICS
Statuten, statutory preferential subscription rights as provided by Belgian law
and except as set forth in Section 1.4 of the FICS Disclosure Schedule, there
are no preemptive or statutory rights to acquire any FICS Securities, including
without limitation, any FICS Ordinary Shares or FICS Preferred Stock. Except for
$3,750,000 of FICS Convertible Bond 1 bonds and $383,737 of Convertible Bond 2
bonds, FICS 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 FICS Ordinary Shares or shares of FICS Preferred
Stock or any other equity security of FICS or any securities representing the
right to purchase or otherwise receive any FICS Ordinary Shares or any other
equity security of FICS.
(b) Except as set forth at Section 3.2(b) of the FICS Disclosure
Schedule, FICS owns, directly or indirectly, all of the issued and outstanding
shares of capital stock of each FICS Subsidiary, 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. Except for 16,500 shares of FICS Option Subsidiary Stock reserved for
issuance upon exercise of outstanding stock options or otherwise, pursuant to
the FICS Stock Plan (of which options for 15,682.5 shares are currently
outstanding), no FICS 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
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security of such Subsidiary. The names of the optionees, the date of each option
to purchase FICS Option Subsidiary 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 FICS Stock Plan are set forth
in Section 3.2(b) of the FICS Disclosure Schedule.
3.3 AUTHORITY; NO VIOLATION.
(a) FICS has full corporate power and authority to execute and deliver
this Agreement. The execution and delivery of this Agreement has been duly and
validly approved by the Board of Directors of FICS. Assuming the due execution
hereof by each Seller, no further corporate approvals or consents on the part of
FICS, its directors or shareholders are necessary to approve this Agreement, or
to consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by FICS and (assuming due authorization,
execution and delivery by S1 and each of the Sellers of this Agreement) will
constitute valid and binding obligation of FICS, enforceable against FICS 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 laws affecting creditors' rights and
remedies generally.
(b) Neither the execution and delivery of this Agreement by FICS nor
compliance by FICS with any of the terms or provisions hereof, will (i) violate
any provision of the Restated Articles of Association of FICS, or (ii) assuming
that the consents and approvals referred to in Section 3.4 hereof are duly
obtained, (x) violate any Laws (as defined in Section 9.11) applicable to FICS
or any FICS Subsidiary, or any of their respective 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
FICS or any FICS Subsidiary, 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 FICS or any FICS Subsidiary is a
party, or by which they or any of their respective properties or assets may be
bound or affected.
3.4 CONSENTS AND APPROVALS.
Except for such filings, notices, authorizations or approvals, as
applicable, as may be set forth in Section 3.4 of the FICS 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 FICS of this
Agreement, and (2) the consummation of the Transaction and the other
transactions contemplated hereby, except, in each case, for such consents,
approvals or filings, the failure of which to obtain will not have a Material
Adverse Effect on the ability of S1 Holdings to consummate the transactions
contemplated hereby.
3.5 FINANCIAL STATEMENTS; BOOKS AND RECORDS.
FICS has previously delivered to S1 Holdings true, correct and complete
copies of the consolidated balance sheets of FICS 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 1998, 1997 and 1996, inclusive, as reported in FICS' Registration
Statement on Form F-1 filed with the Securities and Exchange Commission (the
"SEC") on April 13, 1999, as amended by Amendment No. 1 filed with the SEC on
April 30, 1999 (the "Registration Statement") under the U.S. Securities Act of
1933, as amended (the "Securities Act"), in each case accompanied by the audit
report of PricewaterhouseCoopers & Co. Bedrijfsrevisoren, independent public
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accountants with respect to FICS, the interim financial statements of FICS as of
and for the six months ended June 30, 1999 and 1998. 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 6.6 hereof
will fairly present (subject, in the case of the unaudited statements, to normal
and recurring audit adjustments), the results of the consolidated operations and
consolidated financial condition of FICS 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 6.6 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 6.6 hereof will be prepared in accordance with generally accepted
accounting principles, as applied in the United States, and consistently applied
during the periods involved ("U.S. GAAP"), except in each case as indicated in
such statements or in the notes thereto or, in the case of unaudited statements.
The books and records of FICS have been, and are being, maintained in all
material respects in accordance with U.S. GAAP and any other applicable legal
and accounting requirements. The statutory financial statements of FICS and
those of its books and records prepared to conform with the requirements of
Belgian law are prepared in accordance with Belgian GAAP. Other than in the
previous sentence, references elsewhere in this Agreement to "financial
statements and "books and records" do not refer to financial statements and
books and records prepared by FICS to conform with the requirements of Belgian
law.
3.6 BROKER'S FEES.
Neither FICS nor any FICS 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, except that FICS has engaged, and
will pay a fee or commission to Credit Suisse First Boston ("CSFB") in
accordance with the terms of a letter agreement between CSFB and FICS, dated May
16, 1999, a true, complete and correct copy of which has been provided to S1
Holdings.
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as set forth at Section 3.7 of the FICS Disclosure Schedule,
since December 31, 1998 (i) neither FICS nor any FICS Subsidiary has incurred
any material liability, except as contemplated by this Agreement or in the
ordinary course of their businesses consistent with their past practices, and
(ii) no event has occurred which has had, or is likely to have, individually or
in the aggregate, a Material Adverse Effect on FICS.
(b) Since December 31, 1998, FICS and each FICS Subsidiary has carried
on its respective businesses in the ordinary and usual course consistent with
past practices.
3.8 LEGAL PROCEEDINGS.
(a) Except as set forth at Section 3.8 of the FICS Disclosure Schedule,
neither FICS nor any FICS Subsidiary is a party to any, and there are no
pending, or to the knowledge of FICS, threatened, legal, administrative,
arbitration or other proceedings, claims, actions or governmental or regulatory
investigations of any nature against FICS or any FICS Subsidiary or which
challenge the validity of the transactions contemplated by this Agreement as to
which there is a reasonable probability of success.
(b) There is no injunction, order, judgment, or decree imposed upon
FICS, any FICS Subsidiary or the assets of FICS or any FICS Subsidiary.
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3.9 TAXES AND TAX RETURNS.
(a) For purposes of this Section 3.9, FICS shall include FICS and each
FICS Subsidiary and any other affiliated or related corporation or entity if
FICS or any FICS Subsidiary has or could have any material liability for the
taxes of such corporation or entity. FICS has duly filed all Tax Returns
required to be filed by it on or prior to the date hereof (all such returns
being accurate and complete in all material respects) and has duly paid or made
provision on the financial statements referred to in Sections 3.5 and 6.6 hereof
in accordance with U.S. GAAP for the payment of all material Taxes which have
been incurred or are due or claimed to be due from it by Taxing Authorities on
or prior to the date hereof other than Taxes (a) which (x) are not yet
delinquent or (y) are being contested in good faith and set forth in Section 3.9
of the FICS Disclosure Schedule and (b) which have not been finally determined.
The charges, accruals, and reserves with respect to Taxes on the books of FICS
are adequate (as determined in accordance with U.S. GAAP) and are at least equal
to its liability for Taxes. There exists no proposed tax assessment against FICS
except as disclosed in the FICS financial statements. 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 FICS. All Taxes that
FICS 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 Governmental
Entity. All liability with respect to the Tax Returns of FICS and its
Subsidiaries has been satisfied for all years to and including 1998. No Taxing
Authority has notified FICS of, or otherwise asserted, that there are any
material deficiencies with respect to the Tax Returns of FICS subsequent to
1998. There are no material disputes pending, or claims asserted for, Taxes or
assessments upon FICS, nor has FICS been requested to give any currently
effective waivers extending the statutory period of limitation applicable to any
Tax Return for any period. In addition, Tax Returns that are accurate and
complete in all material respects have been filed by FICS for all periods for
which returns were due with respect to income 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
U.S. GAAP has been included by FICS in the financial statements referred to in
Sections 3.5 and 6.6 hereto. No audit by any relevant Taxing Authority in
connection with any FICS Tax Return is pending or has been announced. All
deficiencies proposed as a result of any examinations have been paid or settled,
for all periods before and including the taxable year ended December 31, 1998.
FICS has not consented to any waiver or extension of any statute of limitations
with respect to any Tax. FICS has provided or made available to S1 Holdings
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 FICS.
(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.
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"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: (1) "Employee Benefit Plan" means
any plan, agreement or other arrangement (other than plans mandated or provided
for by U.S. and foreign statute such as Social Security, workmen's compensation,
unemployment compensation and the like) for the providing of retirement or
welfare benefits as described in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or any other benefit other than cash
compensation to employees, including plans which would not be subject to ERISA
because all of the participants are non-resident in the United States; (2) the
FICS Group means FICS, its Subsidiaries, and any other entity which would be
deemed part of a controlled or affiliated group within the meaning of Section
414 of the Code without regard to whether such entities are organized outside
the United States.
(b) Section 10(b) of the FICS Disclosure Schedule sets forth a true and
complete list of each Employee Benefit Plan that FICS maintains or contributes
to as of the date of this Agreement, or under which FICS has any liability
(collectively, the "FICS Plans"). FICS has previously delivered to S1 a true,
correct and complete copy of each FICS Plan and all related documents and a
written description of any FICS Plan that is not otherwise in writing.
(c) FICS has performed all of its obligations under all FICS Plans. FICS
has made appropriate entries in its financial records and statements for all
obligations and liabilities under the FICS Plans that have accrued but are not
due. No statement, either written or oral, has been made by FICS with regard to
any FICS Plan that was not in accordance with the FICS Plan and that could have
a Material Adverse Effect on S1 Holdings. FICS has no material liability to the
IRS, the U.S. Pension Benefit Guaranty Corporation or any other governmental or
quasi-governmental agency or authority with respect to any FICS Plan.
(d) Except as set forth at Section 3.10(d) of the FICS Disclosure
Schedule, (i) each of the FICS Plans has been operated and administered in all
material respects in compliance with applicable Laws, (ii) FICS does not provide
health, life insurance or other welfare benefits for any retired or former
employee and is not obligated to provide such benefits to any active employee
following such employee's retirement or other termination of service, other than
coverage mandated by applicable Law, (iii) FICS has incurred no liability under
ERISA or any other Law relating to employee benefits or employees or their
beneficiaries that has not been satisfied in full or accrued in accordance with
U.S. GAAP in the financial statements referred to in Section 3.5 and 6.6 hereof,
and
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no condition exists that presents a material risk of FICS incurring a material
liability thereunder, (iv) all contributions or other amounts payable by FICS
with respect to each FICS Plan and all other liabilities of FICS with respect to
each FICS Plan, in respect of current or prior plan years have been paid or
accrued in accordance with U.S. GAAP in the financial statements referred to in
Sections 3.5 and 6.6 hereof, (v) to the knowledge of FICS, there are no pending,
threatened or anticipated claims (other than routine claims for benefits) by, or
behalf of or against any of the plans or any trust related thereto, (vi) all
FICS 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 6.6 hereof.
3.11 EMPLOYEES.
FICS and each FICS Subsidiary complies with all labor and social security
laws, decrees, ordinances and regulations applicable to it.
3.12 CERTAIN CONTRACTS.
(a) Except as set forth at Section 3.12 of the FICS Disclosure Schedule,
neither FICS nor any FICS Subsidiary 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, (ii) which, upon 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), except as contemplated by Article I, becoming due
from S1, FICS or any of their respective Subsidiaries to any director, officer
or employee thereof, (iii) which materially restricts the conduct of any line of
business by FICS or any FICS Subsidiary, (iv) with or to a labor union or guild
(including any collective bargaining agreement) or (v) except as contemplated by
Article I and as set forth on Section 3.12(a)(v) of the FICS 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 (v), any stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan). Except
as set forth at Section 3.12 of the FICS Disclosure Schedule, there are no
employment, consulting and deferred compensation agreements to which FICS or any
FICS Subsidiary is a party. Section 3.12(a) of the FICS Disclosure Schedule sets
forth a list of all (i) material contracts (as defined in Item 601(b)(10) of
Regulation S-K promulgated under the Securities Act) of FICS and the FICS
Subsidiaries and (ii) any other contract to which FICS or any FICS Subsidiary is
obligated to pay $15,000 or more in any annual period. Each contract,
arrangement or commitment of the type described in this Section 3.12(a), whether
or not set forth in Section 3.12(a) of the FICS Disclosure Schedule, is referred
to herein as a "FICS Contract," and neither FICS nor any of its Subsidiaries has
received notice of, nor do any executive officers of such entities know of, any
violation of any FICS Contract.
(b) (i) Each FICS Contract is valid and binding and in full force and
effect, (ii) FICS and each FICS Subsidiary has in all material respects
performed all obligations required to be performed by it to date under each FICS
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 FICS or any FICS Subsidiary under any such FICS Contract.
3.13 ENVIRONMENTAL MATTERS.
(a) Each of FICS and the FICS 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
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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 FICS and the FICS 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 FICS or any FICS
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 FICS or any FICS Subsidiary, or to the
knowledge of FICS, 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 FICS or any FICS Subsidiary.
(c) To the knowledge of FICS and the FICS Subsidiaries, during the
period of FICS' or any FICS 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 Agreement, 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.
3.14 PROPERTIES AND ASSETS.
Section 3.14 of the FICS Disclosure Schedule lists (i) all real property,
including a description and identification of location, owned by FICS and each
FICS Subsidiary; (ii) each real property lease, sublease or installment purchase
arrangement to which FICS or any FICS Subsidiary is a party; (iii) a description
of each contract for the purchase, sale, or development of real estate to which
FICS or any FICS Subsidiary is a party; and (iv) all items of FICS' or any FICS
Subsidiary's tangible personal property and equipment with a book value of
$50,000 or more or having any annual lease payment of $50,000 or more. Except
for (a) items reflected in FICS' 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 FICS' or any FICS 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 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 3.14 of the FICS Disclosure Schedule, FICS and each FICS
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. FICS and each FICS Subsidiary, as lessees, have
the right under valid and subsisting leases to occupy, use and possess all
property leased by them, and neither FICS nor any FICS Subsidiary has
experienced any material uninsured damage or destruction with respect to such
properties since December 31, 1998. All properties and assets used by FICS and
each FICS Subsidiary are in good operating condition and repair suitable for the
purposes for which they are currently utilized and comply in all material
respects with all Laws relating thereto now in effect or scheduled to come into
effect. FICS and each FICS 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 FICS or any FICS Subsidiary is a party are valid and
binding obligations in accordance
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with the terms thereof. Neither FICS nor any FICS Subsidiary is in material
default with respect to any such lease, and there has occurred no default by
FICS or any FICS 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. To
the knowledge of FICS, there are no Laws, conditions of record, or other
impediments which interfere with the intended use by FICS or any FICS Subsidiary
of any of the property owned, leased, or occupied by them.
3.15 INSURANCE.
Section 3.15 of the FICS Disclosure Schedule contains a true, correct and
complete list of all insurance policies and bonds maintained by FICS and any
FICS 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 FICS and any FICS Subsidiary) are in
full force and effect and have been in full force and effect since the
respective dates each such policies and bonds were first obtained. As of the
date hereof, neither FICS nor any FICS 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 FICS and FICS 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 FICS and the FICS Subsidiaries, and is sufficient for
compliance by FICS and the FICS Subsidiaries with all requirements of Law and
agreements to which FICS or any of the FICS Subsidiaries is subject or is party.
True, correct and complete copies of all such policies and bonds reflected at
Section 3.15 of the FICS Disclosure Schedule, as in effect on the date hereof,
have been delivered or made available to S1.
3.16 COMPLIANCE WITH APPLICABLE LAWS.
Each of FICS and any FICS Subsidiary has complied in all material respects
with all Laws applicable to it or to the operation of its business. Neither FICS
nor any FICS Subsidiary has received any 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 any remaining liability.
3.17 FICS INFORMATION.
The information relating to FICS and each FICS Subsidiary to be provided by
FICS to be contained in a proxy statement to be filed with the SEC in connection
with obtaining stockholder approval of the transactions contemplated by this
Agreement will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading.
3.18 INTELLECTUAL PROPERTY.
Except, in each case, as set forth in Section 3.18 of the FICS Disclosure
Schedule:
(a)(i) FICS and each FICS 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
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tangible or intangible proprietary information or material ("Intellectual
Property") that are used in the business of FICS and the FICS 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 FICS or any FICS
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
FICS or any FICS Subsidiary, FICS and the FICS Subsidiaries have taken
reasonable steps to protect their Intellectual Property. There is no litigation
pending or, to the knowledge of FICS and the FICS Subsidiaries, threatened or
any written claim from any person challenging the ownership, use, validity or
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 3.18 is necessary to conduct the
businesses of FICS and its Subsidiaries as presently conducted.
(b) Schedule 3.18(b) lists all (i) patents, patent applications,
registered and unregistered trademarks, trade names and service marks and
registered copyrights owned by FICS 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 FICS and any FICS Subsidiary 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 FICS and any FICS
Subsidiary are a party and pursuant to which FICS 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 FICS or FICS Subsidiary product.
(c)(i) To the knowledge of FICS and the FICS Subsidiaries, there is no
unauthorized use, disclosure, infringement or misappropriation of any
Intellectual Property rights of FICS or any FICS Subsidiary, any trade secret
material to FICS or its Subsidiaries, or any Intellectual Property right of any
third party to the extent licensed by or through FICS or its Subsidiaries, by
any employee of FICS or any FICS Subsidiary or third party for whom FICS is
responsible. Except as set forth in Schedule 3.18(c), there are no royalties,
fees or other payments payable by FICS or its Subsidiaries to any person by
reason of the ownership, use, sale or disposition of Intellectual Property.
(ii) To the knowledge of FICS and its Subsidiaries, there has been no
prior use of FICS's registered trademarks by any third party which would confer
upon said third party superior rights in such trademarks. FICS 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 FICS 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) FICS 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
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performance of the obligations under this Agreement by FICS 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 FICS' 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) FICS 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 FICS or any of its
Subsidiaries, was either (i) developed by employees of FICS or any of its
Subsidiaries within the scope of their employment; (ii) developed by independent
contractors or consultants who have assigned their rights to FICS or any of its
Subsidiaries pursuant to written agreements; or (iii) otherwise acquired by FICS
or its Subsidiary from a third party.
(g) All employees and independent contractors and consultants of FICS
and its Subsidiaries have executed and delivered to FICS or its Subsidiaries, as
the case may be, agreements regarding the protection of proprietary information
and the assignment to FICS or its Subsidiaries of any Intellectual Property
arising from services performed for FICS or its Subsidiaries by such persons.
(h) FICS 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
FICS and its Subsidiaries and not otherwise protected by a patent, a patent
application, copyright, trademark, or other registration or legal scheme ("FICS
Confidential Information"), and do not know of any situation involving such
employee or third party use, disclosure or appropriation of FICS 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 3.18(h) of the FICS
Disclosure Schedule, neither FICS 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 FICS or
its Subsidiaries, FICS 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-FICS or non-FICS Subsidiary products (e.g.,
hardware, software and firmware) used in or in combination with FICS' or its
Subsidiaries' products, are year 2000 compliant and properly exchange data with
FICS' and its Subsidiaries products.
3.19 DELIVERY OF FICS STOCK TRANSFER BOOK.
FICS has made a notation in its share registry that, prior to the Closing,
no transfer of FICS Securities shall be recorded in FICS's share registry from
the date hereof, and has delivered such
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stock transfer book to a Belgian notary, which notary shall hold such stock
transfer book until the Closing (or the termination of this Agreement, if
earlier).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF S1 HOLDINGS AND S1
S1 Holdings and S1 hereby make the following representations and warranties
to each Seller as set forth in this Article IV, each of which is being relied
upon by each Seller as a material inducement to enter into and perform this
Agreement. All of the disclosure schedules of S1 referenced below and thereby
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."
4.1 CORPORATE ORGANIZATION.
(a) S1 Holdings is a corporation (N.V.) duly organized and validly
existing under the laws of Belgium. S1 Holdings has the corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as contemplated by this Agreement, 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 charter and other corporate governance documents of S1 Holdings have
previously been made available to FICS and are true, correct and complete copies
of such documents as in effect as of the date thereof.
(b) 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 FICS, are true, correct and
complete copies of such documents as in effect as of the date of this Agreement.
(c) S1 owns, directly or indirectly, the issued and outstanding shares
of capital stock of S1 Holdings, free and clear of all liens, charges,
encumbrances and security interests whatsoever, and all of such shares shall be
duly authorized and validly issued and shall be fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to the ownership
thereof. S1 Holdings 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 capital stock or any other equity security
of S1 Holdings or any securities representing the right to purchase or otherwise
receive any shares of capital stock or any other equity security of S1 Holdings.
4.2 AUTHORITY; NO VIOLATION.
(a) S1 Holdings has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
No other corporate proceedings on the part of S1 Holdings are necessary to
approve this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by S1 Holdings
and (assuming due authorization, execution and delivery by S1 and FICS) will
constitute valid and binding obligations of S1 Holdings, enforceable against S1
Holdings in accordance with its terms, except as enforcement may be limited by
general principles of equity
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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) S1 has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. 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 S1. Except for required approvals of S1 stockholders 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 has been duly
and validly executed and delivered by S1 and (assuming due authorization,
execution and delivery by FICS and each of the Sellers) will constitute a valid
and binding obligation of S1, enforceable against S1 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.
(c) Neither the execution and delivery of this Agreement by S1 or S1
Holdings nor the consummation by S1 or S1 Holdings of the transactions
contemplated hereby or thereby, nor compliance by S1 or S1 Holdings 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 Articles of Association of S1 Holdings, or (ii) assuming
that the consents and approvals referred to in Section 4.4 are duly obtained,
(x) violate any Laws applicable to S1 or S1 Holdings 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 S1 Holdings 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 S1 Holdings is
or will be, as the case may be, a party, or by which S1 or S1 Holdings or any of
their properties or assets may be bound or affected.
4.3 CONSENTS AND APPROVALS.
(a) Except as set forth at Schedule 4.3(a), 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 or S1
Holdings of this Agreement, and (2) the consummation by S1 and S1 Holdings of
the Transaction and the other transactions contemplated hereby, except for such
consents, approvals or filings the failure of which to obtain will not have a
Material Adverse Effect on the ability of S1 or S1 Holdings to consummate the
transactions contemplated thereby.
(b) S1 hereby represents to the Sellers that it has no knowledge of any
reason why approval or effectiveness of any of the applications, notices or
filings referred to in Section 4.3(a) cannot be obtained or granted on a timely
basis.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 COVENANTS RELATING TO FICS.
During the period from the date of this Agreement and continuing until the
Closing, except as expressly contemplated or permitted by this Agreement or with
the prior written consent of S1
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Holdings, the Sellers shall cause FICS and each FICS Subsidiary to carry on
their respective businesses in the ordinary course consistent with past
practices. The Sellers shall cause FICS to use its reasonable efforts to (x)
preserve its business organization and that of each FICS Subsidiary intact, (y)
keep available to itself and S1 Holdings the present services of the employees
of FICS and each FICS Subsidiary and (z) preserve for itself and S1 Holdings the
goodwill of the customers of FICS and each FICS Subsidiary and others with whom
business relationships exist. Without limiting the generality of the foregoing,
and except as set forth in the FICS Disclosure Schedule or as otherwise
contemplated by this Agreement or consented to by S1 Holdings in writing, the
Sellers shall not permit FICS or any FICS 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
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, or (ii)
repurchase, redeem or otherwise acquire, any shares of the capital stock of FICS
or any FICS Subsidiary, or any securities convertible into or exercisable for
any shares of the capital stock of FICS or any FICS Subsidiary;
(c) issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or 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;
(d) amend its Restated Articles of Association (Statuten) or other
similar governing documents;
(e) after the date hereof, directly or indirectly, through any officer,
director, employee, agent or otherwise, solicit, initiate or encourage
submission of proposals or offers from any person relating to any acquisition or
purchase of all or a substantial portion of the assets of, or any equity
interest in, FICS or any business combination with FICS (collectively, all such
events referred to herein as a "Competing Offer"), or otherwise enter into any
agreement or understanding with respect to a Competing Offer (Under any
circumstances, the Sellers shall cause FICS to promptly advise S1 Holdings if
any such proposal or offer, or any inquiry or contact with any person with
respect thereto, is made, shall promptly inform S1 Holdings of all the terms and
conditions thereof, and shall furnish to S1 Holdings copies of any such written
proposal or offer and the contents of any communications by FICS in response
thereto.);
(f) make any capital expenditure in excess of $100,000;
(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 FICS or any of its Subsidiaries is a
party or waive, release or assign any material rights or claims thereunder;
(h) acquire or agree to acquire, by merging or consolidating with, or by
purchasing an equity interest in or the 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 assets, other than 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 Transaction 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;
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(j) change its methods of accounting in effect at December 31, 1998
except as required by changes in applicable law or accounting standards, as
concurred to by S1 Holdings' independent auditors;
(k)(i) except as required by applicable law, adopt, amend, renew or
terminate any FICS Plan or any agreement, arrangement, plan or policy between
FICS or any FICS Subsidiary and one or more of its current or former directors
or officers, (ii) 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
an annual compensation in excess of $100,000, (v) promote to a rank of vice
president or more senior any employee, or (vi) other than in compliance with
agreements in force as of the date hereof, 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, other than in the ordinary course of business consistent with past
practices;
(n) make any equity investment or commitment to make such an investment
in real estate;
(o) make any investments, other than in the ordinary course of business
consistent with past practices;
(p) sell, purchase or lease any real property; or
(q) agree or commit to do any of the actions set forth in (a) -- (p)
above.
The consent of S1 Holdings to any action by FICS or any FICS Subsidiary
that is not permitted by any of the preceding paragraphs shall be evidenced by a
writing signed by an authorized representative of S1 Holdings.
5.2 COVENANTS OF SELLERS.
(a) After the date hereof, no Seller shall, directly or indirectly,
solicit, initiate or encourage submission of proposals or offers from any person
relating to any Competing Offer with respect to FICS. Each Seller shall promptly
advise S1 Holdings if any such Competing Offer, or any inquiry or contact with
any person with respect thereto, is made, shall promptly inform S1 Holdings of
all the terms and conditions thereof, and shall furnish to S1 Holdings copies of
any such written proposal or offer and the contents of any communications in
response thereto.
(b) After the date hereof, each Seller hereby waives and refuses any
right to purchase, acquire or otherwise obtain any equity securities of FICS
pursuant to the Restated Articles of Association of FICS, any preemptive right
to acquire such securities, the FICS Stock Plan or otherwise.
5.3 COVENANTS OF S1.
S1 unconditionally guarantees (as a principal and not merely as a surety)
each and all of the obligations of S1 Holdings under this Agreement. S1 hereby
agrees and covenants to take all
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necessary actions to cause S1 Holdings to perform its obligations in accordance
with this Agreement. S1 further agrees for at least three years from the last of
the Payment Dates that it will maintain S1 Holdings as a subsidiary and that S1
Holdings will be operated as the holding company for S1's European operations,
providing treasury and other services to FICS, the FICS Subsidiaries and any
other European entity which becomes a subsidiary of S1 Holdings. S1 further
agrees with each of the Sellers that, for at least three years from the last of
the Payment Dates, it will cause S1 Holdings not to sell or directly or
indirectly transfer or assign (including transfers in case of a merger or
split-up) the FICS Securities. S1 Holdings agrees that for at least three years
from the last of the Payment Dates (i) it will operate as the holding company
for S1's European operations, providing treasury and other services to FICS, the
FICS Subsidiaries and any other European entity which becomes a subsidiary of S1
Holdings, and (ii) it will not sell or directly or indirectly transfer or assign
(including transfers in case of a merger or split-up) the FICS Securities. S1
further agrees from the Closing Date until at least the Third Payment Date, if
any, that it will provide resources for the operations of FICS consistent with
the operating budget of S1, as determined by the Board of Directors of S1 in
accordance with Annex A.
5.4 COMPLIANCE WITH ANTITRUST LAWS.
Each of the parties hereto shall make all filings of any applications,
notices or other documents required under applicable antitrust Laws and use its
reasonable best efforts to resolve objections, if any, which may be asserted
with respect to the Transaction under antitrust laws, including, without
limitation, the Hart-Scott-Rodino Act and any foreign competition laws. In the
event a suit is threatened or instituted challenging the Transaction as
violative of antitrust laws, each of the parties hereto shall use its reasonable
best efforts to avoid the filing of, or resist or resolve such suit. The parties
hereto shall use their reasonable best efforts to take such action as may be
required: (a) by 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 Transaction under antitrust laws, or (b) by any federal or state
court of the United States, in any suit brought by a private party or
governmental entity challenging the Transaction 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 Transaction or by any foreign entity that may require
prior approval of the Transaction. Reasonable best efforts shall not include,
among other things and to the extent S1 so desires, the willingness of S1 to
accept an order agreeing to the divestiture, or the holding separate, of any
assets of FICS or S1.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 REGULATORY MATTERS.
(a) 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, 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. S1 Holdings and the Sellers 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 S1 Holdings or FICS, 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; provided, however, that nothing contained herein shall be deemed to
provide either party with a right to review any information provided to any
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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 consummation of the transactions contemplated
herein.
(b) The Sellers shall cause FICS to, upon request, furnish S1 Holdings
with all information concerning FICS and its directors, officers and
shareholders and such other matters as may be reasonably necessary or advisable
in connection with any statement, filing, notice or application made by or on
behalf of S1 Holdings to any Governmental Entity in connection with the
Transaction or the other transactions contemplated by this Agreement.
(c) S1 Holdings and the Sellers 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(b)
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, the Sellers shall cause FICS to accord to the
officers, employees, accountants, counsel and other representatives of S1
Holdings, access, during normal business hours during the period prior to the
Closing, to all FICS's and its Subsidiaries' properties, books, contracts,
commitments and records and, during such period, FICS shall make available to S1
Holdings (i) a copy of each report, schedule, Proxy Statement and other document
filed or received by it (including its Subsidiaries) during such period pursuant
to the requirements of federal securities laws or other federal or state Laws
and (ii) all other information concerning its (including its Subsidiaries)
business, properties and personnel as S1 Holdings may reasonably request (except
as to information deemed confidential or competitively sensitive ("Confidential
Matters")) and such meetings of committees of the Board of Directors and
management of FICS which S1 Holdings desires. S1 Holdings shall receive notice
of all meetings of the FICS Board of Directors and any committees thereof, and
of any management committees (in all cases, at least as timely as all FICS
representatives to such meetings are required to be provided notice). S1
Holdings 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 FICS, Edify Corporation and S1 (by which S1
Holdings unconditionally agrees to be bound by signing this Agreement) dated
April 27, 1999 and the Confidential Information and Non-disclosure Agreement
between FICS and S1 dated March 31, 1999 (together, the "Confidentiality
Agreements"). The parties agree and acknowledge that the Confidentiality
Agreements will continue in full force and effect in accordance with their
terms.
(b) Upon reasonable notice and subject to applicable Laws relating to
the exchange of information, S1 Holdings shall afford to the officers,
employees, accountants, counsel and other representatives of FICS, access,
during normal business hours during the period prior to the Closing, to such
information regarding S1 Holdings, except as to Confidential Matters, as shall
be reasonably necessary for FICS to fulfill its obligations pursuant to this
Agreement or which may be reasonably necessary for FICS to confirm that the
representations and warranties of S1 Holdings contained herein are true and
correct and that the covenants of S1 Holdings contained herein have been
performed in all material respects. The Sellers shall cause FICS to hold all
such information in
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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) The Sellers shall cause FICS to provide S1 Holdings with true,
correct and complete copies of all financial and other information provided to
directors of FICS in connection with meetings of its Boards of Directors or
committees thereof.
6.3 SHAREHOLDER MEETING.
S1 shall take all steps necessary to duly call, give notice of, convene and
hold a meeting of its shareholders within 45 days after the proxy statement to
be used for such meeting is approved by the SEC for use for the purpose of
voting upon the approval of this Agreement, this Transaction and other
transactions related to this Agreement. Management and the Board of Directors of
S1 shall recommend approval of each of this Agreement and the Transaction.
6.4 RESERVED.
6.5 FICS YEAR 2000 OFFICER.
No later than 20 business days following the date of this Agreement, the
Sellers shall cause FICS to appoint an officer (the "Y2K Officer"), reasonably
acceptable to S1 Holdings, which officer shall be responsible for coordinating
matters related to any year 2000 issues of FICS and any FICS Subsidiary. Such
Y2K Officer shall, among other things, coordinate the efforts of FICS and each
FICS Subsidiary and take those steps necessary to ensure 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-FICS or
FICS Subsidiary products (e.g., hardware, software and firmware) used in or in
combination with FICS' or its Subsidiaries' products, properly exchange data
with FICS' and its Subsidiaries products. Such year 2000 compliance shall, at a
minimum, meet the standards and guidelines established by the United States
Federal Financial Institutions Examination Council. The Y2K Officer shall also
provide monthly written reports regarding year 2000 issues of FICS and any FICS
Subsidiary, and resolution thereof, to the management of FICS and S1.
6.6 SUBSEQUENT INTERIM FINANCIAL STATEMENTS.
(a) As soon as reasonably available, but in no event more than 45 days
after the end of each fiscal quarter, S1 shall make available to FICS its
Quarterly Reports on Form 10-Q, as filed with the SEC under the Exchange Act. S1
shall make available to FICS any Current Reports on Form 8-K promptly after
filing such reports with the SEC. For the purposes of this Section 6.6, the
filing of any such document required to be made available herein via the SEC's
EDGAR filing system shall be deemed to satisfy the requirements hereof.
(b) The Sellers shall cause FICS, as soon as reasonably practicable, but
in no event more than 30 days after the end of each fiscal quarter, to deliver
to S1 Holdings its unaudited consolidated financial statements for such quarter.
(c) The Sellers shall cause FICS, as soon as reasonably practicable, but
in no event more than 30 days after the end of each calendar month prior to
Closing, to deliver to S1 Holdings its consolidated interim financial statements
for such month.
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6.7 ADVICE OF CHANGES.
S1 Holdings, S1 and the Sellers, with respect to FICS, 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 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 FICS with the covenants set forth in
Section 5.1 hereof.
6.8 CURRENT INFORMATION.
(a) During the period from the date of this Agreement to the Closing
Date, the Sellers shall cause FICS to cause one or more of its designated
representatives to confer on a regular and frequent basis (not less than
monthly) with representatives of S1 Holdings and to report the general status of
the ongoing operations of FICS. The Sellers will promptly notify S1 Holdings of
any material change in the normal course of business or in the operation of the
properties of FICS 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 FICS, and will keep S1
Holdings fully informed of such events.
(b) During the period from the date of this Agreement to the Closing
Date, S1 Holdings will cause one or more of its designated representatives to
confer on a regular and frequent basis (not less than monthly) with
representatives of FICS and to report the general status of the ongoing
operations of S1. S1 Holdings will promptly notify the Sellers of any material
change in the normal course of business or in the operation of the properties of
S1 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 S1 Holdings or S1, and will keep the
Sellers fully informed of such events.
6.9 TRANSACTION EXPENSES OF FICS.
(a) For planning purposes, the Sellers shall cause FICS, within 15 days
from the date hereof, to provide S1 Holdings with its estimated budget of
transaction-related expenses reasonably anticipated to be payable by FICS in
connection with this transaction, including the fees and expenses of counsel,
accountants, investment bankers and other professionals. The Sellers shall cause
FICS to promptly notify S1 Holdings if or when it determines that it will expect
to exceed its budget.
(b) Promptly after the execution of this Agreement, the Sellers shall
cause FICS to ask all of its attorneys and other professionals to render current
and correct invoices for all unbilled time and disbursements. FICS shall accrue
and/or pay all of such amounts which are actually due and owing as soon as
possible.
(c) The Sellers shall cause FICS to advise S1 Holdings monthly of all
out-of-pocket expenses which FICS has incurred in connection with this
transaction.
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6.10 JOINDER OF ADDITIONAL SELLERS.
Prior to Closing, S1 Holdings hereby agrees to send, at the same time and
in the same manner as to S1's stockholders, a copy of the S1 Proxy Statement (as
defined in the S1 Stock Purchase Agreement) and a copy of this Agreement to each
of the individuals identified by FICS as a stockholder or bondholder of FICS who
is not a party hereto. Prior to the Closing, S1 and the Sellers hereby agree
that each of the stockholders of FICS who is not a party hereto shall be offered
the opportunity to join this Agreement as a Seller by indicating acceptance of
the terms of this Agreement by a writing signed by such person stating that such
person (i) has read the S1 Proxy Statement and this Agreement, (ii) fully
understands the risks involved in proceeding with the transactions contemplated
by this Agreement, and (iii) agrees to join this Agreement as a Seller.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE TRANSACTION.
The respective obligation of each party to effect the Transaction shall be
subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) SHAREHOLDER APPROVALS.
This Agreement shall have been approved by any requisite shareholder
vote.
(b) OTHER APPROVALS.
All governmental and regulatory approvals required to consummate the
transactions contemplated hereby shall have been obtained and shall remain in
full force and effect and all statutory waiting periods in respect thereof shall
have expired or been terminated (all such approvals and the expiration or
termination of all such waiting periods being referred to herein as the
"Requisite Regulatory Approvals"). No Requisite Regulatory Approval shall
contain a non-customary condition that S1 Holdings or the Sellers reasonably
determines to be burdensome or otherwise alter the benefits for which it
bargained in this Agreement.
(c) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY.
No order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Transaction or any of the other transactions (an
"Injunction") contemplated by this Agreement 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 Transaction.
7.2 CONDITIONS TO OBLIGATIONS OF S1 HOLDINGS.
The obligation of S1 Holdings to effect the Transaction is also subject to
the satisfaction or waiver by S1 Holdings at or prior to the Closing of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Sellers 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
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representations and warranties to be so true and correct, individually or in the
aggregate, would have a Material Adverse Effect on FICS. Such determination of
aggregate Material Adverse Effect shall be made as if there were no materiality
qualifications in such representations and warranties. S1 Holdings shall have
received a certificate signed on behalf of FICS by each of the President and
Chief Financial Officer of FICS to the foregoing effect.
(b) PERFORMANCE OF COVENANTS AND AGREEMENTS OF THE SELLERS
The Sellers shall have performed in all material respects all covenants
and agreements required to be performed by them under this Agreement at or prior
to the Closing Date. S1 Holdings shall have received a certificate signed on
behalf of each Seller to such effect.
(c) CONSENTS UNDER AGREEMENTS.
The consent, approval or waiver of each person (other than the
Governmental Entities referred to in Section 7.1(b) hereof) whose consent or
approval shall be required in order to permit the succession by S1 Holdings, to
the extent applicable, to any obligation, right or interest of FICS 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 Holdings
or FICS.
(d) NO PENDING GOVERNMENTAL ACTIONS.
No proceeding initiated by any Governmental Entity seeking an Injunction
shall be pending.
(e) NO MATERIAL ADVERSE CHANGE.
There shall have been no changes, other than changes contemplated by
this Agreement, in the business, operations, condition (financial or otherwise),
assets or liabilities of FICS or any FICS Subsidiary (regardless of whether or
not such events or changes are inconsistent with the representations and
warranties given herein) that individually or in the aggregate has had or would
have a Material Adverse Effect on FICS.
(f) ACCOUNTANT'S COMFORT LETTER.
The Sellers shall have caused to be delivered on the respective dates
thereof to S1 Holdings "comfort letters" from PricewaterhouseCoopers & Co.
Bedrijfsrevisoren, FICS' independent public accountants, dated the date the
Proxy Statement (or last amendment thereto) and dated the date of the Closing,
and addressed to S1 Holdings, the Sellers and FICS, with respect to FICS'
financial data presented in the Proxy Statement, which letters shall be based
upon Statements on Auditing Standards Nos. 72 and 76.
(g) FINANCING
S1 Holdings shall have obtained the necessary financing contemplated by
Section 1.3(c) above no later than October 15, 1999.
7.3 CONDITIONS TO OBLIGATIONS OF THE SELLERS
The obligation of the Sellers to effect the Transaction is also subject to
the satisfaction or waiver by the Majority Sellers at or prior to the Closing
Date of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES.
The representations and warranties of S1 Holdings and S1 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
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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
Holdings or S1, as the case may be. Such determination of aggregate Material
Adverse Effect shall be made as if there were no materiality qualifications in
such representations and warranties. FICS and the Sellers shall have received a
certificate signed on behalf of S1 Holdings by each of the Managing Director of
S1 Holdings and the President and the Chief Financial Officer of S1 Holdings to
the foregoing effect.
(b) PERFORMANCE OF COVENANTS AND AGREEMENTS OF S1 HOLDINGS AND S1.
S1 Holdings and S1 shall have performed in all material respects all
covenants and agreements required to be performed by them under this Agreement
at or prior to the Closing Date. FICS and the Sellers shall have received a
certificate signed on behalf of S1 Holdings by each of the President and Chief
Financial Officer of S1 Holdings to such effect.
(c) TAX OPINION.
General Atlantic Partners 20, L.P., General Atlantic Partners 52, L.P.
and GAP Coinvestment Partners, L.P. shall have received an opinion as to the
tax-free nature of the transactions contemplated hereby, in form and substance
reasonably satisfactory to them.
(d) CONSENTS UNDER AGREEMENTS.
The consent or approval or waiver of each person (other than the
Governmental Entities referred to in Section 7.1(b)) whose consent or approval
shall be required in connection with the transactions contemplated hereby under
any loan or credit agreement, note, mortgage, indenture, lease, license or other
agreement or instrument to which S1 Holdings is a party or is otherwise bound
shall have been obtained.
(e) NO PENDING GOVERNMENTAL ACTIONS.
No proceeding initiated by any Governmental Entity seeking an Injunction
shall be pending.
(f) NO MATERIAL ADVERSE CHANGE.
There shall have been no changes, other than changes contemplated by
this Agreement, in the business, operations, condition (financial or otherwise),
assets or liabilities of S1 or any S1 Subsidiary (regardless of whether or not
such events or changes are inconsistent with the representations and warranties
given herein) that individually or in the aggregate has had or would have a
Material Adverse Effect on S1.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 TERMINATION.
This Agreement may be terminated at any time prior to the Closing Date,
whether before or after approval of the matters presented in connection with the
Transaction by any of the Majority Sellers, if applicable:
(a) by mutual consent of S1 Holdings and each of the Sellers in a
written instrument, if the Board of Directors of S1 Holdings so determines by a
vote of a majority of the members of its entire Board and each of the Sellers so
determines in its individual judgment;
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<PAGE> 302
(b) by either S1 Holdings or any of the Majority Sellers upon written
notice to the other party (i) 30 days after the date on which any request or
application for a Regulatory Approval shall have been denied or withdrawn at the
request or recommendation of the Governmental Entity which must grant such
Regulatory Approval, unless within the 30-day period following such denial or
withdrawal the parties agree to file, and have filed with the applicable
Governmental Entity, a petition for rehearing or an amended application,
provided, however, that no party shall have the right to terminate this
Agreement pursuant to this Section 8.1(b), if such denial or request or
recommendation for withdrawal 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;
(c) by either S1 Holdings or any of the Majority Sellers if the
Transaction 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 Holdings (provided that S1 Holdings is not in breach of
its obligations under Section 6.3 hereof) or any of the Majority Sellers if the
approval of the S1 shareholders required for the consummation of the Transaction
shall not have been obtained by reason of the failure to obtain the required
vote at a duly held meeting of shareholders or at any adjournment or
postponement thereof;
(e) by either S1 Holdings or any of the Majority Sellers (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 or the Sellers (as to S1
Holdings), if such breach, individually or in the aggregate, has had or is
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;
(f) by either S1 Holdings or any of the Majority Sellers (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;
(g) by either S1 Holdings or any of the Majority Sellers at any time
after the termination of the S1 Stock Purchase Agreement in accordance with its
terms;
(h) by any of the Majority Sellers in the event any requested advance
that is permitted by the terms of the Loan Agreement, dated the date hereof,
between FICS and S1, is not made by S1 within five business days after FICS
makes a written demand therefor; and
8.2 EFFECT OF TERMINATION.
In the event of termination of this Agreement by either S1 Holdings or the
Sellers as provided in Section 8.1 hereof, this Agreement shall forthwith become
void and have no effect except (i) the last sentences of Sections 6.2(a) and
6.2(b) and Sections 8.2, 9.2 and 9.3 hereof shall survive any termination of
this Agreement, and (ii) notwithstanding anything to the contrary contained in
this
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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, at any time before or after approval of the matters
presented in connection with the Transaction by the stockholders of S1. 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 Closing, the parties hereto 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
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 EXPENSES.
All costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expense.
9.2 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 Holdings, to:
S1 Europe Holdings N.V.
c/o Hogan & Hartson L.L.P.
Avenue des Arts 41
1040 Brussels, Belgium
Attn.: Robert F. Stockwell,
President
</TABLE>
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<PAGE> 304
<TABLE>
<S> <C>
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.
(b) if to any Seller, to:
</TABLE>
The address set forth next to such Seller's name in Section 9.2 of the FICS
Disclosure Schedule.
<TABLE>
<S> <C>
(c) if to S1, to:
Security First Technologies Corporation
3390 Peachtree Road, NE, Suite 1700
Atlanta, Georgia 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 20004-1109
Attn.: Stuart G. Stein, Esq.
</TABLE>
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<PAGE> 305
<TABLE>
<S> <C>
(d) if to FICS, 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.
</TABLE>
9.3 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."
9.4 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.
9.5 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.
9.6 GOVERNING LAW.
This Agreement shall be governed and construed in accordance with the laws
of Delaware, without regard to any applicable conflicts of law rules.
9.7 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
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<PAGE> 306
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.
9.8 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.
9.9 PUBLICITY.
Except as otherwise required by applicable law or the rules of the Nasdaq
Stock Market National Market System (or such other exchange on which any capital
stock of S1 Holdings or any parent or subsidiary of S1 Holdings may become
listed), EASDAQ or the Belgian Banking and Finance Commission, so long as this
Agreement is in effect, neither S1 Holdings nor FICS shall, or shall permit any
of S1 Holdings, FICS or any of their 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 without the consent of the other party, which consent shall
not be unreasonably withheld.
9.10 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
which shall not be unreasonably withheld. 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 and this Section 9.10, 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 set out
herein shall be solely for the benefit of, and shall be enforceable only by, the
parties hereto and their permitted assigns.
9.11 ADDITIONAL DEFINITIONS.
References to "$" in this Agreement are to United States dollars. 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.
"knowledge": with respect to any entity, refers to the knowledge of such
entity's directors and officers in the ordinary course of their duties in such
positions.
"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 Holdings, S1 or FICS, means a
condition, event, change or occurrence that is reasonably likely to have a
material adverse effect upon (A) the financial condition, results of operations,
business or properties of the relevant entity (other than as a result of changes
in laws or regulations or accounting rules of general applicability or
interpretations
A-35
<PAGE> 307
thereof), or (B) the ability of the relevant entity to perform its obligations
under, and to consummate the transactions contemplated by, this Agreement. In
addition to the foregoing, with respect to FICS only, if the Transaction shall
not have then been consummated and FICS's "revenue" for either (i) the third
fiscal quarter of 1999 is below $10,000,000, or (ii) the fourth fiscal quarter
of 1999 is below $12,000,000, then a Material Adverse Effect shall have been
deemed to have occurred.
For the purpose of the foregoing sentence, the term "revenue" shall equal
all amounts properly reported as such under U.S. GAAP, except that any revenue
attributable to operations of FICS other than in accordance with Section 5.1
hereof shall not be deemed to be "revenue."
9.12 SURVIVAL.
None of the representations, warranties, covenants and agreements of the
Sellers, FICS or S1 in this Agreement or in any instrument delivered pursuant to
this Agreement shall survive the Transaction, except for those covenants and
agreements contained herein and therein which by their terms apply in whole or
in part after the Transaction.
9.13 CUMULATIVE REMEDIES.
The remedies provided herein shall be cumulative 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. In no event may any claim be brought
hereunder by any party against FICS.
9.14 RELEASE OF CLAIMS.
Each Seller, for himself or itself, and for his or its heirs and assigns or
his or its successors and assigns, hereby agrees that as of the Transaction he,
she or it shall remise, release, acquit and forever discharge FICS and each FICS
Subsidiary and all present or former officers, directors and employees of FICS
and each FICS Subsidiary in their capacities as such, and each of them, from any
and all actions and causes of action (whether at law or in equity), losses,
damages, costs, expenses, liabilities, obligations and claims or demands of any
kind, including, without limitation, attorneys' fees and other legal costs and
expenses, known or unknown, foreseen and unforeseen, whether now existing or
arising at any time in the future; provided, however, that this release shall
not apply to rights and claims of a Seller for indemnification from FICS where
the Seller is made a party to a proceeding because he or it was an officer or
director of FICS and to rights and claims of a Seller against FICS as necessary
to allow the Seller to make claims under any insurance policies maintained by
FICS. Notwithstanding, and without limiting the generality of the foregoing,
each Seller further agrees that he, she or it waives any right of contribution
or indemnification against FICS with respect to any claim to Damages asserted
against the such Seller pursuant to this Agreement.
ARTICLE X
INDEMNIFICATION
10.1 INDEMNIFICATION OF THE SELLERS.
S1 Holdings agrees to indemnify, defend and hold harmless the Sellers at
all times after the Transaction from and against any and all claims, damages,
losses, liabilities, payments, costs, obligations and expenses (including,
without limitation, all legal, accounting and other professional
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<PAGE> 308
fees and disbursements) (collectively, "Damages") to the extent such Damages
arise out of, result from or relate to:
(a) a breach in any respect of any representation or warranty made by S1
Holdings contained in this Agreement; or
(b) a breach in any respect of any covenant, agreement or undertaking
made by S1 Holdings in this Agreement or in any certificate or other instrument
or agreement delivered by or on behalf of S1 Holdings pursuant to this
Agreement.
10.2 CLAIM FOR INDEMNIFICATION.
Any claim for indemnification made under Section 10.1 hereof must be made
by a written notice to S1 Holdings. Such notice shall specify in reasonable
detail the particulars of the claim for indemnity and the basis upon which
indemnity is claimed.
10.3 THIRD PARTY CLAIMS.
Each party shall cooperate with the other in determining the validity of
any third party claim or assertion and in defending the validity of any third
party claim or assertion and in defending against third parties with respect to
the same. The party seeking indemnification ("Claimant") shall promptly furnish
to S1 Holdings (for the purposes of this Section 10.3, the "Respondent") copies
of all notices, pleadings and other documents with respect to any third party
claim for which indemnification is sought, provided, however, that failure to so
notify the Respondent will relieve the Respondent from any liability which the
Claimant may have hereunder, if but only if, and only to the extent that, such
failure to notify the Respondent results in loss or damage to the Respondent or
the forfeiture by the Respondent of substantial rights or defenses otherwise
available to the Respondent with respect to such claim. The defense of such
litigation and choice of counsel with respect thereto shall be within the
control of the Claimant (and the fees and reimbursements of counsel for Claimant
in connection with such defense shall be at the Claimant's sole expense), unless
the Respondent, no later than 10 days before an answer or other pleading must be
served, elects to undertake the defense of such claim. The Respondent shall
always have the right to elect to participate in the defense of any such third
party claim at its sole expense. Each of the parties agrees not to settle or
compromise any third party suit, claim or proceeding with respect to which any
of the other parties has an obligation to indemnify without the prior written
consent of such other parties, which consent shall not be unreasonably withheld,
provided such other party has acknowledged the obligation to indemnify.
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<PAGE> 309
IN WITNESS WHEREOF, the Sellers have executed and delivered this Agreement,
and S1 Holdings, S1 and FICS have caused this Agreement to be executed and
delivered by their respective representatives duly authorized, all as of the
date first above written.
S1 EUROPE HOLDINGS N.V.
By: /s/
-------------------------------------------
Name: Robert F. Stockwell
Title: President
THE SELLERS:
/s/
----------------------------------------------
MICHEL AKKERMANS
PAMICA N.V.
By: /s/
-------------------------------------------
Name:
Title:
GENERAL ATLANTIC PARTNERS 20, L.P.
By: GENERAL ATLANTIC PARTNERS, LLC, its
General Partner
By: /s/
-------------------------------------------
Name:
Title:
GENERAL ATLANTIC PARTNERS 52, L.P.
By: GENERAL ATLANTIC PARTNERS, LLC, its
General Partner
By: /s/
-------------------------------------------
Name:
Title:
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<PAGE> 310
GAP COINVESTMENT PARTNERS, L.P.
By: /s/
-------------------------------------------
Name:
Title:
GIMV N.V.
By: /s/
-------------------------------------------
Name:
Title:
----------------------------------------------
GUY MOONS
----------------------------------------------
STEVEN VAN ROSSEN
----------------------------------------------
NADINE QUAEYHAEGENS
/s/
----------------------------------------------
ETIENNE CASTIAUX
/s/
----------------------------------------------
GOORT GELTEN
/s/
----------------------------------------------
LOEK VAN DEN BOOG
/s/
----------------------------------------------
FREDRICK DUMAS
UNICO PORTFOLIO LTD.
By: /s/
-------------------------------------------
Name:
Title:
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<PAGE> 311
SECURITY FIRST TECHNOLOGIES CORPORATION
(for the limited purposes set forth herein)
By: /s/
-------------------------------------------
Name: James S. Mahan III
Title: Chairman and Chief Executive
Officer
FICS GROUP N.V.
(for the limited purposes set forth herein)
By: /s/
-------------------------------------------
Name:
Title:
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<PAGE> 312
EXHIBIT A
S1
STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT, dated as of September 21, 1999, is entered into
by and among each of the stockholders of FICS Group N.V., a Belgian corporation
(naamloze vennootschap ("N.V.")) ("FICS"), listed on the signature page of this
Stockholder Agreement (collectively, the "FICS Stockholders"), and the
stockholders of Security First Technologies Corporation, a Delaware corporation
("S1"), named on Schedule I hereto (collectively, the "Stockholders") who are
directors, executive officers or other affiliates of S1 (for purposes of Rule
145 under the Securities Act of 1933, as amended).
WHEREAS, S1, the FICS Stockholders, S1 Europe Holdings N.V., a Belgian
corporation ("S1 Holdings"), and FICS have entered into that certain Share
Purchase Agreement II, dated as of September 21, 1999 (the "Agreement"), which
is conditioned upon, and requires, the execution of this Stockholder Agreement
and which provides for, among other things, the acquisition of all or
substantially all of the capital stock of FICS by S1 Holdings (the
"Transaction"); and
WHEREAS, in order to induce the FICS Stockholders to enter into or proceed
with the Agreement, the Stockholders represent and warrant that the facts
provided herein are accurate as to each of the Stockholders set forth herein,
and each of the Stockholders agrees to, among other things, vote in favor of the
Agreement, the Transaction and the other transactions contemplated by the
Agreement in his/her capacity as a stockholder of S1.
NOW, THEREFORE in consideration of the premises, the mutual covenants and
agreements set forth herein and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. OWNERSHIP OF S1 COMMON STOCK. Each Stockholder represents and warrants
that the number of shares of S1 common stock, par value $.01 per share ("S1
Common Stock"), set forth opposite such Stockholder's name on Schedule I hereto
is the total number of shares of S1 Common Stock over which such person has
"beneficial ownership" within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended, except that the provisions of Rule
13d-3(d)(1)(i) shall be considered without any limit as to time.
2. AGREEMENTS OF THE STOCKHOLDERS. Each Stockholder covenants and agrees
that:
(a) Such Stockholder shall, at any meeting of the holders of S1 Common
Stock called for the purpose, vote or cause to be voted all shares of S1 Common
Stock with respect to which such Stockholder has the right to vote (whether
owned as of the date hereof or hereafter acquired) in favor of the Agreement,
the Transaction and the other transactions contemplated by the Agreement.
(b) Prior to the Closing Date, except as otherwise expressly permitted
hereby, such Stockholder shall not, sell, pledge, transfer or otherwise dispose
of his/her shares of S1 Common Stock; provided, however, that this Section 2(b)
shall not apply to a pledge existing as of the date hereof.
3. SUCCESSORS AND ASSIGNS. A Stockholder may sell, pledge, transfer or
otherwise dispose of his/her shares of S1 Common Stock, provided that such
Stockholder obtains the prior written consent of a number of FICS Stockholders
that together own a majority of the capital stock of FICS and that any acquirer
of such S1 Common Stock agrees in writing to be bound by this Stockholder
Agreement.
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<PAGE> 313
4. SPECIFIC PERFORMANCE; TERMINATION. The parties agree and intend that
this Stockholder Agreement be a valid and binding agreement enforceable against
the parties hereto and that damages and other remedies at law for the breach of
this Stockholder Agreement are inadequate. Each of the Stockholders agrees that
irreparable damage to the FICS Stockholders would occur in the event that the
provisions of this Stockholder Agreement were not performed in accordance with
its specific terms or were otherwise breached by any of the Stockholders. It is
accordingly agreed that the FICS Stockholders shall be entitled to an injunction
or injunctions to prevent breaches of this Stockholder Agreement by any of the
Stockholders and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which S1 is entitled at law or in equity. This
Stockholder Agreement may be terminated at any time prior to the consummation of
the Transaction by the mutual written consent of the parties hereto and shall be
automatically terminated in the event that the Agreement is terminated in
accordance with its terms.
5. NOTICES. Notices may be provided to the FICS Stockholders and the
Stockholders in the manner specified in the Agreement, with all notices to the
Stockholders being provided to them at the addresses set forth at Schedule I.
6. GOVERNING LAW. This Stockholder Agreement shall be governed by the laws
of the State of Delaware, without giving effect to the principles of conflicts
of laws thereof.
7. COUNTERPARTS. This Stockholder Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same and each of
which shall be deemed an original.
8. HEADINGS. The section headings contained herein are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Stockholder Agreement.
9. DEFINITIONS. Capitalized terms used but not defined herein have the
meanings ascribed to them in the Agreement.
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<PAGE> 314
IN WITNESS WHEREOF, each of the FICS Stockholders and the Stockholders have
caused this Stockholder Agreement to be executed and delivered as of the day and
year first above written.
FICS STOCKHOLDERS:
----------------------------------------------
MICHEL AKKERMANS
PAMICA N.V.
By:
-------------------------------------------
Name:
Title:
GENERAL ATLANTIC PARTNERS 20, L.P.
By: GENERAL ATLANTIC PARTNERS, LLC, its
General Partner
By:
-------------------------------------------
Name:
Title:
GENERAL ATLANTIC PARTNERS 52, L.P.
By: GENERAL ATLANTIC PARTNERS, LLC, its
General Partner
By:
-------------------------------------------
Name:
Title:
GAP COINVESTMENT PARTNERS, L.P.
By:
-------------------------------------------
Name:
Title:
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<PAGE> 315
GIMV N.V.
By:
-------------------------------------------
Name:
Title:
----------------------------------------------
GUY MOONS
----------------------------------------------
STEVEN VAN ROSSEN
----------------------------------------------
NADINE QUAEYHAEGENS
----------------------------------------------
ETIENNE CASTIAUX
----------------------------------------------
GOORT GELTEN
----------------------------------------------
LOEK VAN DEN BOOG
----------------------------------------------
FREDRICK DUMAS
UNICO PORTFOLIO LTD.
By:
-------------------------------------------
Name:
Title:
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<PAGE> 316
THE STOCKHOLDERS:
<TABLE>
<S> <C>
- ------------------------------------------------------ ----------------------------
- ------------------------------------------------------ ----------------------------
- ------------------------------------------------------ ----------------------------
- ------------------------------------------------------ ----------------------------
- ------------------------------------------------------ ----------------------------
- ------------------------------------------------------ ----------------------------
</TABLE>
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<PAGE> 317
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF SHARES OF S1 COMMON
NAME AND ADDRESS OF STOCKHOLDER STOCK BENEFICIALLY OWNED
------------------------------- -----------------------------
<S> <C>
James S. Mahan III..........................................
Chairman, Chief Executive Officer and President
3390 Peachtree Road
Suite 1700
Atlanta, GA 30326
Robert F. Stockwell.........................................
Chief Financial Officer and Treasurer
3390 Peachtree Road
Suite 1700
Atlanta, GA 30326
Daniel H. Drechsel..........................................
President and Chief Operating Officer
of S1's operating subsidiary
3390 Peachtree Road
Suite 1700
Atlanta, GA 30326
Robert W. Copelan, D.V.M. ..................................
Director
Post Office Box 10
Paris, KY 40362
Dorsey R. Gardner...........................................
Director
1 International Place
Suite 2401
Boston, MA 02110
Joseph S. McCall............................................
Director
Two Ravinia Drive
Suite 1000
Atlanta, GA 30346
Howard J. Runnion, Jr.......................................
Director
420 West (4th) Street
Suite 100, NC 35795
Winston-Salem, NC 27101
Jackson L. Wilson...........................................
Director
5215 North O'Connor Boulevard
Suite 2100
Irving, TX 75039
</TABLE>
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<PAGE> 318
SCHEDULE A
<TABLE>
<CAPTION>
STOCKHOLDERS PERCENTAGE
------------ ----------
<S> <C>
Michel Akkermans............................................ 43.40
PAMICA N.V.................................................. 17.05
General Atlantic Partners 20, L.P........................... 23.99
GAP Coinvestment Partners, L.P.............................. 3.41
General Atlantic Partners 52, L.P........................... .53
GIMV N.V.................................................... 6.34
Guy Moons................................................... .27
Steven Van Rossen........................................... .05
Nadine Quaeyhaegens......................................... .14
Etienne Castiaux............................................ .14
Goort Gelten................................................ 1.71
Frederick Dumas............................................. .34
Loek van den Boog........................................... .92
UNICO PORTFOLIO Ltd......................................... 1.71
------
TOTAL............................................. 100.00%
======
</TABLE>
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<PAGE> 319
SCHEDULE 1.3
For purposes of this Schedule, the following terms shall have the meanings
set out below. For the purposes of this Schedule, any fractional number shall be
rounded to the nearest thousandth.
The "2000 Carry-over Earn-out Points" shall mean such number of Earn-out
Points as computed in Section 3 or Section 7 of this Schedule.
The "2000 Contract Earn-out Period" shall mean the period beginning on the
date hereof and ending on December 31, 2000.
The "2001 Contract Earn-out Period" shall mean the period beginning on
January 1, 2001 and ending on the Third Payment Date.
The "2000 Contract Earn-out Points" shall mean such number of Earn-out
Points as computed in Section 5 of this Schedule.
The "2001 Contract Earn-out Points" shall mean such number of Earn-out
Points as computed in Section 6 of this Schedule.
The "2000 Earn-out Payment" shall equal the product of (x) the 2000
Earn-out Points multiplied by (y) $35.75.
The "2001 Earn-out Payment" shall equal the product of (x) the 2001
Earn-out Points multiplied by (y) $35.75.
The "2001 Earn-out Points Pool" shall mean such number of Earn-out Points
remaining after subtracting (i) the 2000 Earn-out Points, (ii) the number of
Earn-out Points deemed unearned and forfeited at the time of calculating the
number of 2000 Revenue Earn-out Points and (iii) the 2000 Carry-over Earn-out
Points from 4,500,000.
The "2000 Earn-out Points" shall mean such number of Earn-out Points equal
to the sum of the 2000 Contract Earn-out Points plus the 2000 Revenue Earn-out
Points.
The "2001 Earn-out Points" shall mean such number of Earn-out Points equal
to the sum of the 2001 Contract Earn-out Points plus the 2001 Revenue Earn-out
Points.
The "2000 Revenue Earn-out Points" shall mean such number of Earn-out
Points as computed in Section 7 of this Schedule.
The "2001 Revenue Earn-out Points" shall mean such number of Earn-out
Points as computed in Section 8 of this Schedule.
The "2000 Revenue Shortfall" shall mean the difference between the 2000
Revenue Target and FICS 2000 Revenue.
The "Earn-out Payments" shall mean the 2000 Earn-out Payment together with
the 2001 Earn-out Payment.
"FICS Fourth Quarter 1999 Revenue" shall mean all revenues generated by
FICS on a consolidated basis, based upon the year-end audited numbers, for the
fourth quarter of 1999.
The "FICS Fourth Quarter 1999 Revenue Adjustment" shall be computed as
follows:
- if FICS Fourth Quarter 1999 Revenue is greater than or equal to
$14,000,000 but less than or equal to $17,000,000, then the FICS
Fourth Quarter 1999 Revenue Adjustment shall be 0.
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- if FICS Fourth Quarter 1999 Revenue is greater than $17,000,000 or
less than $14,000,000, then:
- if the FICS Fourth Quarter 1999 Revenue is greater than
$17,000,000, then the FICS Fourth Quarter 1999 Revenue Adjustment
shall mean (x) the FICS Fourth Quarter 1999 Revenue minus
$17,000,000 divided by (y) 2.
- if the FICS Fourth Quarter 1999 Revenue is less than $14,000,000,
then the FICS Fourth Quarter 1999 Revenue Adjustment shall mean (x)
the FICS Fourth Quarter 1999 Revenue minus $14,000,000 divided by
(y) 2.
"FICS 2000 Expenses" shall mean all expenses generated by FICS on a
consolidated basis, based upon the year-end audited numbers, for fiscal year
2000, as adjusted pursuant to Annex A hereto.
"FICS 2001 Expenses" shall mean all expenses generated by FICS on a
consolidated basis, based upon the year-end audited numbers, for fiscal year
2001, as adjusted pursuant to Annex A hereto.
"FICS 2000 Revenue" shall mean all revenues generated by FICS on a
consolidated basis, based upon the year-end audited numbers, for fiscal year
2000, as adjusted pursuant to Annex A hereto.
"FICS 2001 Revenue" shall mean all revenues generated by FICS on a
consolidated basis, based upon the year-end audited numbers, for fiscal year
2001, as adjusted pursuant to Annex A hereto.
A "Final Contract" shall mean any contract which has been executed by the
relevant Large Customer and S1, or any subsidiary thereof, and which has been
approved in connection with S1's standard contract approval process, as may be
in effect from time to time.
"Fiscal Year 2000" shall mean the fiscal year ending December 31, 2000.
"Fiscal Year 2001" shall mean the fiscal year ending December 31, 2001.
A "Large Customer" is any entity or any subsidiary of any entity listed on
Annex C hereto, or as otherwise agreed to by the Board of Directors of S1.
A "Large Customer Contract" shall mean a Final Contract with any Large
Customer for one of the following: (i) Corporate Internet Banking product, (ii)
S1 data center operations, or (iii) Virtual Financial Manager product, or as
otherwise agreed to by the Board of Directors of S1.
"Revenue" or "revenues" shall mean any amounts which should properly be
reported as "revenue" in accordance with U.S. GAAP in the consolidated audited
income statement of S1.
1. EARN-OUT POINTS. The 2000 Earn-out Points and the 2001 Earn-out
Points (together, the "Earn-out Points") shall be determined in accordance with
Sections 2 through 9 below; provided that, the maximum aggregate number of
Earn-out Points shall be 4,500,000.
2. FICS CONSOLIDATED EXPENSES. Notwithstanding anything in this
Schedule 1.3 to the contrary, if the FICS 2000 Expenses exceed the consolidated
expenses budgeted by the Board of Directors of S1 for FICS on a consolidated
basis by more than 10%, or if FICS does not achieve at least 90% of the
consolidated gross margin specified in the annual budget of S1 Board of
Directors, then at the Second Payment Date (i) the 2000 Revenue Earn-out Points
shall equal 0, (ii) the 2000 Carry-over Points shall equal 0, (iii) a number of
points equal to ((4,500,000 minus the 2000 Contract Earn-out Points) divided by
2), shall be deemed unearned and forfeited, and (iv) the 2001 Earn-out Points
shall be calculated in the manner set forth at Section 6 and Section 8 below.
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Notwithstanding anything in this Schedule 1.3 to the contrary, if FICS 2001
Expenses exceed the consolidated expenses budgeted by the Board of Directors of
S1 for FICS's on a consolidated basis by more than 10%, or if FICS does not
achieve at least 90% of the consolidated gross margin specified in the annual
budget of S1 Board of Directors, then at the Third Payment Date (a) the 2001
Revenue Earn-out Points shall equal 0, and (b) any remaining Earn-out Points not
earned as 2001 Contract Earn-out Points shall be deemed unearned and forfeited.
Nothing in this Section 2 shall be construed to affect the ability to earn the
2000 Contract Earn-out Points or the 2001 Contract Earn-out Points.
3. REVENUE TARGETS. The applicable revenue target for FICS for fiscal
year 2000 shall be $89,000,000 (the "2000 Revenue Target"). The applicable
revenue target for FICS for fiscal year 2001 shall be $123,000,000 (the "2001
Revenue Target"); provided that if the Financial Reporting Services division of
FICS is sold or its operations are discontinued (the date of such occurrence,
the "FRS Sale/Discontinuation Date") at any time after the date hereof but prior
to December 31, 2001, then the 2000 Revenue Target and the 2001 Revenue Target
shall be adjusted pursuant to the following:
(i) if the FRS Sale/Discontinuation Date occurs prior to January 1,
2000, then the 2000 Revenue Target shall be reduced by
$21,500,000 (the "2000 FRS Revenue Target Reduction Amount") and
the 2001 Revenue Target shall be reduced by $30,500,000 (the
"2001 FRS Revenue Target Reduction Amount");
(ii) if the FRS Sale/Discontinuation Date occurs after December 31,
1999 but prior to January 1, 2001, then the 2000 Revenue Target
shall be reduced by the 2000 FRS Revenue Target Reduction Amount
on a pro rata basis and the 2001 Revenue Target shall be reduced
by the 2001 FRS Revenue Target Reduction Amount; or
(iii) if the FRS Sale/Discontinuation Date occurs after December 31,
2000 but prior to January 1, 2002, then there shall be no
adjustment of the 2000 Revenue Target and the 2001 Revenue
Target shall be reduced by the 2001 Revenue Target Reduction
Amount on a pro rata basis.
In addition, the 2000 Revenue Target and 2001 Revenue Target will be
appropriately adjusted to reflect any discontinuation or disposition of any
operations of FICS approved by the Board of S1.
4. DISTRIBUTION OF EARN-OUT PAYMENTS. The 2000 Earn-out Payment shall
be distributed on the Second Payment Date. The 2001 Earn-out Payment shall be
distributed on the Third Payment Date. The maximum aggregate value of the
Earn-out Payments shall be $160,875,000.
5. 2000 CONTRACT EARN-OUT POINTS. A number of Earn-out Points equal to
225,000 shall be deemed earned for each Large Customer Contract executed during
the 2000 Contract Earn-out Period, up to five such Large Customer Contracts
(such aggregate number of points, the "2000 Contract Earn-out Points");
provided, however, if more than five (but in any case less than ten) Large
Customer Contracts are executed during the 2000 Earn-out Contract Period, then a
number of Earn-out Points computed pursuant to Section 6 below shall be deemed
earned during the 2001 Contract Earn-Out Period with respect to each such Large
Customer Contract executed over five (together, the "Excess 2000 Large Customer
Contracts"). For the 2000 Contract Earn-out Period and the 2001 Contract
Earn-out Period, for purposes hereof, Earn-out Points may be earned for
executing up to ten Large Customer Contracts, in the aggregate. Notwithstanding
anything to the contrary herein, for the purposes hereof, Earn-out Points may be
earned only once for each Large Customer.
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<PAGE> 322
6. 2001 CONTRACT EARN-OUT POINTS. A number of Earn-out Points as
computed below shall be deemed earned for each Large Customer Contract executed
during the 2001 Contract Earn-out Period (each, a "2001 Large Customer
Contract") and shall be distributed on the Third Payment Date. The "2001
Contract Earn-out Point Pool" shall mean the number of Earn-out Points remaining
after subtracting 1,125,000 from the 2001 Earn-out Point Pool.
The "2001 Contract Earn-out Point Value" shall be computed as follows:
((2001 Contract Earn-out Point Pool divided by (the total number of 2001
Large Customer Contracts plus the total number of Excess 2000 Large Customer
Contracts)
; provided, however, the 2001 Contract Earn-out Point Value shall not
exceed 225,000.
The "2001 Contract Earn-out Points" shall be computed as follows:
((the total number of 2001 Large Customer Contracts plus the total
number of Excess 2000 Large Customer Contracts) multiplied by the 2001 Contract
Earn-out Point Value)
7. 2000 REVENUE EARN-OUT POINTS. For Fiscal Year 2000, a number of
Earn-out Points may be earned pursuant to the following:
((FICS 2000 Revenue plus the FICS Fourth Quarter 1999 Revenue
Adjustment) divided by the 2000 Revenue Target) = Y
- if Y is greater than or equal to 1.000, then (a) the number of 2000
Revenue Earn-out Points shall equal:
((4,500,000 minus the 2000 Contract Earn-out Points) divided by
2);
(b) the "2000 Carry-over Earn-out Points" shall equal 0; and (c)
the number of forfeited Earn-out Points shall equal 0.
- if Y is greater than 0.800, but less than 1.000, then (a) the
number of 2000 Revenue Earn-out Points shall equal:
(((Y minus 0.800) divided by 0.200) multiplied by ((4,500,000
minus the 2000 Contract Earn-out Points) divided by 2));
(b) the "2000 Carry-over Earn-out Points" shall equal the
following (and such 2000 Carry-over Earn-out Points shall be
earned and distributed pursuant to Section 8 below):
(((1.000 minus Y) divided by 0.200) multiplied by ((4,500,000
minus the 2000 Contract Earn-out Points) divided by 2));
and (c) the number of forfeited Earn-out Points shall equal 0.
- if Y is less than or equal to 0.800, then (a) the number of 2000
Revenue Earn-out Points shall equal 0; (b) the "2000 Carry-over
Earn-out Points" shall equal the following (and such 2000
Carry-over Earn-out Points shall be earned and distributed pursuant
to Section 8 below):
(4,500,000 minus the 2000 Contract Earn-out Points) divided by
4));
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<PAGE> 323
and (c) a number of Earn-out Points equal to the following shall
be deemed unearned and forfeited:
(4,500,000 minus the 2000 Contract Earn-out Points) divided by
4))
8. 2001 REVENUE EARN-OUT POINTS. For Fiscal Year 2001, a number of
Earn-out Points may be earned pursuant to the following:
((FICS 2001 Revenue plus the FICS Fourth Quarter 1999 Revenue
Adjustment) divided by the 2001 FICS Revenue Target) = Z
((FICS 2001 Revenue minus 2001 FICS Revenue Target) divided by the
2000 Revenue Shortfall) = X; provided that, X shall be less than or
equal to 1.000
- if Z is less than or equal to 0.800, then (a) the number of 2001
Revenue Earn-out Points shall equal 0; and (b) any remaining
Earn-out Points, including any 2000 Carry-over Earn-out Points
shall be deemed unearned and shall be forfeited.
- if Z is exactly 1.000, then (a) the number of 2001 Revenue Earn-out
Points shall equal:
(2001 Earn-out Point Pool minus the 2001 Contract Earn-out
Points);
and (b) any remaining Earn-out Points, including any 2000
Carry-over Earn-out Points, shall be deemed unearned and shall
be forfeited.
- if Z is greater than 0.800 but less than 1.000, then (a) the number
of 2001 Revenue Earn-out Points shall equal:
(((Z minus 0.800) divided by 0.200) multiplied by (2001 Earn-out
Points Pool minus 2001 Contract Earn-out Points));
and (b) any remaining Earn-out Points, including any 2000
Carry-over Earn-out Points, shall be deemed unearned and shall
be forfeited.
- if Z is greater than 1.000, then (a) the number of 2001 Revenue
Earn-out Points shall equal:
((2001 Earn-out Points Pool minus the 2001 Contract Earn-out
Points) plus (X multiplied by the 2000 Carry-over Earn-out
Points));
and (b) any remaining Earn-out ) Points, including any unearned
2000 Carry-over Earn-out Points, after giving effect to the
distribution in the immediately preceding subsection (a), shall
be deemed unearned and shall be forfeited.
9. DISPUTE RESOLUTION. All disputes with respect to this Schedule 1.3
which cannot be resolved by mutual agreement of the parties thereto (each a
"Disputed Matter"), shall be resolved solely in accordance with the provisions
of Annex B to this Schedule.
10. OTHER. Attached at Annex D is a set of examples of calculations of
Earn-out Points, the purpose of which is to serve as guidance in calculating
Earn-out Points.
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<PAGE> 324
ANNEX A TO SCHEDULE 1.3
REVENUE AND EXPENSES
REVENUE
- Inter-company revenues (to or from (a) North, South and Central America
operations, as reported on FICS Financial Statements (together, the "Americas"),
to or from (b) Europe, Middle East and Africa operations, as reported on FICS
Financial Statements (together, "EMEA"), and Asian Pacific operations, as
reported on FICS Financial Statements ("APAC")) will count only to the extent
that the Americas or EMEA has recognized revenues from external parties.
EXPENSES
- On an annual basis, the board of directors of S1 shall establish a
reasonable budget for each of the geographical theaters (which are the Americas,
EMEA and APAC) which will establish operating parameters (which shall be in the
ordinary course and consistent with past practice) for gross margins on licenses
and professional services (except FRS which will have its own budget), data
center operations and FRS licenses and services. In addition, the board shall
establish for each theatre, as a percentage of revenue, expense targets for
sales and marketing, general and administrative expenses (expenses of management
controlled by the theatres) and depreciation and amortization expenses,
excluding goodwill. All such budgets and targets will be reasonable and
consistent with S1's worldwide operations.
- Any general overhead allocations from headquarters will not be included
in the expense parameters noted above. However, direct costs paid by any
non-EMEA or APAC entity on behalf of the EMEA or APAC theatres will be charged
to EMEA or APAC as a direct cost.
- Any expense or loss actually accrued on the consolidated financial
statements by S1 following Closing related to any of the following shall be
treated as an expense for purposes hereof:
(a) a breach of any representation or warranty made by FICS contained in
this Agreement (provided that, any potential expense related to a breach of any
representation or warranty that is the subject of a claim may be accrued outside
such period upon final resolution thereof);
(b) any liability relating to payment of any employer or employee
(ordinary or extraordinary) social security taxes, withholding taxes, or other
levies, taxes or charges, of whatever nature, on payments, of whatever nature,
made or which should have been made by FICS or any FICS Subsidiary to its
employees or independent contractors with respect to the period prior to
Closing;
(c) any liability relating to payment of any remuneration, vacation pay
or any fringe benefits of whatever nature (other than stock options) on the
basis of any laws, decrees, ordinances, regulations, collective labor agreements
or any other rules, to any employee or independent contractor employed or hired
by FICS or any FICS Subsidiary on or prior to the Closing;
(d) any liability relating to payment of any group insurance
contributions, any related taxes, or any related social security contributions
on the basis of any laws, decrees, ordinances or regulations applicable to FICS
or any FICS Subsidiary prior to the Closing; or
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<PAGE> 325
(e) any liability relating to the sale by FICS or any FICS Subsidiary of
the ABACUS engine outside of Belgium.
; provided that, no such expense or loss shall be so treated as an expense or
loss if, and to the extent, that it is already reflected as an expense or
reduction in revenue on the FICS Financial Statements.
A-54
<PAGE> 326
ANNEX B
DISPUTE RESOLUTION
1. INTERNAL MEDIATION. First the Disputed Matter shall be referred jointly
to such senior executives as may be mutually agreed upon by the parties from
time to time. If such persons do not agree upon a decision within 10 days after
referral of the matter to them, the parties shall proceed to the next stage of
the dispute resolution procedure.
2. OUTSIDE MEDIATION. S1 and the other party may, upon written notice and
within 10 days after the conclusion of internal mediation, elect to utilize a
non-binding resolution procedure whereby each presents its case at a hearing
(the "Hearing") before a panel consisting of a senior executive of each of the
parties and a mutually acceptable neutral adviser. If a party elects to utilize
outside mediation the other party agrees to participate. The Hearing will occur
no more than 10 days after a party serves written notice to use outside
mediation. Each party may be represented at the Hearing by lawyers. If the
matter cannot be resolved at such Hearing by the senior executives, the neutral
adviser may be asked to assist the senior executives in evaluating the strengths
and weaknesses of each party's position on the merits of the Disputed Matter.
Thereafter, the senior executives shall meet and try again to resolve the
matter. If the matter cannot be resolved at such meeting, the parties' only
recourse is binding arbitration as provided for in this Annex and the outside
mediation proceedings will have been without prejudice to the legal position of
either party. No arbitration may commence concerning the Disputed Matter until
15 days have elapsed from the first day of the Hearing. The parties shall each
bear their respective costs incurred in connection with this procedure, except
that they shall share equally the fees and expenses of the neutral adviser and
the costs of the facility for the Hearing.
3. ARBITRATION. If the Disputed Matter is not submitted to outside
mediation and cannot be resolved within 10 days of referral to inside mediation,
or, if submitted, cannot be resolved within 15 days of the Hearing, then either
party may within 10 days after the completion of inside or outside mediation, as
appropriate, upon written notice, submit the Disputed Matter to formal binding
arbitration in accordance with the arbitration provisions below.
4. NO ACTIONS. Neither party will institute any action or proceeding
against the other party in any court concerning any Disputed Matter other than
to seek entry of a judgment upon an award rendered by the arbitrators pursuant
to this dispute resolution process or to seek temporary or preliminary equitable
relief.
5. ARBITRATION PROVISIONS.
(A) The Disputed Matter shall be settled by final and binding
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (the "AAA"); provided, however, that if such Rules are
inconsistent with any provision of this Agreement, this Agreement shall control;
(B) Any such arbitration shall be conducted in the Atlanta metropolitan
area at a place and time mutually agreed upon by the parties or, failing mutual
agreement, selected by the arbitrators;
(C) Any arbitration shall be conducted before a panel of 3 arbitrators
who shall be compensated for their services at a rate to be determined by the
AAA in the event the parties are not able to agree upon their rate of
compensation, but based upon hourly or daily consulting rates for the neutral
arbitrator reasonably consistent with such arbitrator's normal charges or fees.
Within 15 days of notice by a party seeking arbitration under this provision,
the party requesting arbitration shall appoint one arbitrator and within 15 days
thereafter the other party shall appoint the second
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<PAGE> 327
arbitrator. The persons so appointed shall meet the qualification requirement
described in (D) below. Within 15 days after the appointment of the second
arbitrator, the two arbitrators so chosen shall mutually agree upon the
selection of the third, impartial and neutral arbitrator. In the event the
chosen arbitrators cannot agree upon the selection of the third arbitrator, the
AAA Rules for the selection of such an arbitrator shall be followed, provided
that the selection is from among such persons who meet the above-stated
requirements;
(D) In any dispute in which the amount of controversy, exclusive of
interest and costs, is less than $25,000, there shall be only one arbitrator
agreed to by the parties who shall meet the requirements described above for the
neutral arbitrator; in all other cases, there shall be three arbitrators.
(E) Each party shall bear its own costs and expenses of arbitration
including, but not limited to, filing fees and attorneys' fees, and each party
hereby agrees to pay one-half of the administrative fees of the AAA and of the
compensation to be paid to the arbitrators in any such arbitration and one-half
of the costs of transcripts and other expenses of the arbitration proceedings,
subject, however, to allocation of costs and expenses (excluding attorneys'
fees) by the arbitrators consistent with the award.
(F) The parties agree to make available to the arbitrator(s) all
non-privileged books, records, schedules and other information reasonably
requested by them. Such materials are to be made available to the arbitrator(s)
at such times as are deemed necessary by them to make their decision as herein
provided;
(G) The arbitrator(s) may conduct any pre-trial proceedings by
telephonic conference call rather than by a face-to-face meeting;
(H) The arbitrator(s) shall, prior to rendering their decision on the
arbitration matter, afford each of the parties an opportunity, both orally and
in writing, to present any relevant evidence (the formal rules of evidence
applicable to judicial proceedings shall not apply) and to express, orally
and/or in writing that party's point of view and arguments as to the proper
determination of the arbitration matter; provided, however, that either party
submitting written material shall be required to deliver a copy of such written
material to the other party concurrently with the delivery thereof to the
arbitrator(s) and such other party shall have the opportunity to submit a
written reply, a copy of which shall also be delivered to the other party
concurrently with the delivery thereof to the arbitrator(s). Oral argument shall
take place only at a hearing before the arbitrator(s) at which all parties are
afforded a reasonable opportunity to be present and be heard;
(I) In the event of a willful default by any of the parties hereto in
appearing before the arbitrator(s) after due written notice shall have been
given, the arbitrator(s) are hereby authorized to render a decision upon the
testimony of the party(ies) appearing before the arbitrator(s);
(J) The arbitrator(s) shall (by decision of a majority of the
arbitrators) make a decision and award resolving the dispute within 45 days
after the selection of the last arbitrator, or the first arbitrator if only one
arbitrator is to decide the dispute; and within 15 days of the last hearing held
concerning such dispute(s);
(K) Any judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof;
(L) Within 30 days after the arbitrators make their decision and award,
the arbitrators shall render findings of fact and conclusions of law and a
written opinion setting forth the basis and reasons for any decision and award
rendered by them and deliver such documents to each party to this Agreement
along with a signed copy of the award;
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<PAGE> 328
(M) The arbitrator(s) shall have the authority to grant any equitable
and legal remedies that would be available in any judicial proceeding instituted
to resolve a disputed matter, including the award of interim or preliminary
relief; and
(N) The arbitrator(s) chosen in accordance with these provisions shall
not have the power to alter, amend or otherwise affect the terms of these
arbitration provisions or the Agreement.
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<PAGE> 329
ANNEX C
LARGE CUSTOMERS
1. Current list of top 200 largest banks worldwide by asset size as
reported by Institutional Investor (or if such publication does not
then publish such a list, another internationally recognized
directory of similar acceptance), as updated from time to time;
provided however, that for purposes hereof any such bank must have at
least $25,000,000,000 in assets; and
2. Current list of top 100 world financial institutions by market
capitalization as reported by American Banker (or if such publication
does not then publish such a list, another internationally recognized
directory of similar acceptance).
Notwithstanding the foregoing, a Large Customer shall not include (i) any
entity ("Entity") with which S1, in each case at the time of entering into the
related contract, has any contractual relationship, (ii) any parent or
subsidiary of such Entity, or (iii) any entity under the direct or indirect
common control of such Entity.
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<PAGE> 330
ANNEX D
EARN-OUT EXAMPLES(1)
<TABLE>
<CAPTION>
2001 LARGE
FICS CUSTOMER
FICS 2000 2001 CONTRACTS
EXPENSES EXCESS EXPENSES INCLUDING
<110% 2000 2000 2000 2000 2000 2000 <110% EXCESS 2000
AND GROSS LARGE CONTRACT LARGE REVENUES CARRY-OVER EARN-OUT AND GROSS LARGE
MARGIN CUSTOMER EARN-OUT CUSTOMER EARN-OUT EARN-OUT POINTS MARGIN CUSTOMER
TEST MET CONTRACTS POINTS CONTRACTS Y POINTS POINTS FORFEITED TEST MET CONTRACTS)
- --------- --------- ------------ --------- -------- ------------ ------------ ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Y 3 675,000 0 0.91 1,051,875 860,625 0 Y 5
Y 7 1,125,000 2 0.87 590,625 1,096,875 0 N 2
Y 1 225,000 0 1.0 2,137,500 0 0 Y 3
Y 4 900,000 0 0.89 810,000 990,000 0 Y 5
Y 6 1,125,000 1 0.77 0 843,750 843,750 Y 3
N 5 1,125,000 0 -- 0 0 1,687,500 Y 2
Y 10 1,125,000 5 1.0 1,687,500 0 0 Y 5
Y 0 0 0 0.99 2,137,500 112,500 0 Y 1
N 2 450,000 0 -- 0 0 2,025,000 N 3
N 3 675,000 0 0.75 0 956,250 956,250 Y 4
<CAPTION>
2000 2000
2001 CARRY- CARRY-
LARGE 2001 2001 OVER OVER 2001
CONTRACT EARN-OUT REVENUE EARN-OUT EARN-OUT EARN-OUT
EARN-OUT POINT EARN-OUT POINTS POINTS POINTS
POINTS VALUE Z X POINTS EARNED FORFEITED FORFEITED
- -------- -------- -------- -------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
787,500 157,500 0.89 0 506,250 0 860,625 618,750
450,000 225,000 -- -- 0 0 1,096,875 1,237,500
675,000 225,000 0.96 0 1,170,000 0 0 292,500
675,000 135,000 >1.0 0.4 1,125,000 396,000 594,000 0
562,000 187,000 >1.0 0.06 1,125,000 50,625 793,125 0
450,000 225,000 0.82 0 123,750 0 0 1,113,750
562,500 112,500 >1.0 1.0 1,125,000 0 0 0
225,000 225,000 >1.0 0.8 2,025,000 90,000 22,500 0
225,000 225,000 -- -- 0 0 0 1,350,000
787,500 196,875 0.79 0 0 0 956,250 1,125,000
</TABLE>
- ---------------
(1) Revenue targets for Fiscal Year 2000 and Fiscal Year 2001 are $89 million
and $123 million respectively, as adjusted for the FICS Fourth Quarter 1999
Revenue Adjustment and the sale or discontinuation of the FICS Financial
Reporting System Division, if applicable.
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<PAGE> 331
ANNEX B
STOCK PURCHASE AGREEMENT II
BY AND AMONG
SECURITY FIRST TECHNOLOGIES CORPORATION,
THE INDIVIDUALS AND ENTITIES
WHO ARE SIGNATORIES HERETO
AND
FICS GROUP N.V.
DATED AS OF
SEPTEMBER 21, 1999,
AS AMENDED
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TABLE OF CONTENTS
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PAGE
SECTION 1 PURCHASE AND SALE OF THE SHARES................... B-4
1.1 Sale and Issuance of the Initial Shares........... B-4
1.2 Stock Purchase.................................... B-5
1.3 First Closing..................................... B-5
1.4 Second Closing.................................... B-5
1.5 Third Closing..................................... B-5
SECTION 2 STOCK OPTIONS..................................... B-6
2.1 Successor Options................................. B-6
2.2 Additional Options................................ B-6
SECTION 3 REPRESENTATIONS AND WARRANTIES OF S1.............. B-7
3.1 Corporate Organization............................ B-7
3.2 Capitalization.................................... B-7
3.3 Authority; No Violation........................... B-8
3.4 Consents and Approvals............................ B-8
3.5 Financial Statements; Exchange Act Filings; Books
and Records............................................ B-9
3.6 Broker's Fees..................................... B-9
3.7 Absence of Certain Changes or Events.............. B-9
3.8 Legal Proceedings................................. B-10
3.9 Taxes and Tax Returns............................. B-10
3.10 Employee Plans.................................... B-11
3.11 Certain Contracts................................. B-13
3.12 Environmental Matters............................. B-13
3.13 Properties and Assets............................. B-14
3.14 Insurance......................................... B-14
3.15 Compliance with Applicable Laws................... B-14
3.16 S1 Information.................................... B-15
3.17 Intellectual Property............................. B-15
SECTION 4 REPRESENTATIONS AND WARRANTIES OF PURCHASERS...... B-17
4.1 Organization of Purchasers........................ B-17
4.2 Authorization of Transaction...................... B-17
4.3 Non-Contravention................................. B-18
4.4 Broker's Fees..................................... B-18
4.5 Adequate Resources................................ B-18
4.6 No Legal, Tax or Investment Advice................ B-18
4.7 Status of Purchasers.............................. B-18
SECTION 5 ADDITIONAL AGREEMENTS............................. B-19
5.1 Lock-up Covenant.................................. B-19
5.2 S1 Board of Directors............................. B-19
5.3 Compliance with Antitrust Laws.................... B-19
5.4 Regulatory Matters................................ B-20
5.5 Stockholder Meeting............................... B-21
5.6 Legal Conditions.................................. B-21
5.7 Stock Exchange Listing............................ B-21
5.8 Registration of S1 Common Stock................... B-21
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5.9 Resale of Akkermans' S1 Common Stock.............. B-22
5.10 Registration Proceedings.......................... B-22
5.11 Conduct of S1's Business.......................... B-25
5.12 Advice of Changes................................. B-25
5.13 Joinder of Additional Purchasers.................. B-25
SECTION 6 CONDITIONS TO FIRST CLOSING....................... B-26
6.1 Conditions to Obligations of All Parties.......... B-26
6.2 Conditions to the Obligations of Purchasers....... B-26
6.3 Conditions to Obligations of S1................... B-27
SECTION 7 CLOSINGS.......................................... B-27
7.1 Deliveries by S1.................................. B-27
7.2 Deliveries by Purchasers.......................... B-28
SECTION 8 LEGEND............................................ B-29
8.1 Endorsement....................................... B-29
8.2 Removal of Legend................................. B-29
SECTION 9 TERMINATION....................................... B-30
9.1 Mutual Consent.................................... B-30
9.2 Other Termination................................. B-30
9.3 Effect of Termination............................. B-31
SECTION 10 MISCELLANEOUS.................................... B-31
10.1 Additional Actions and Documents................. B-31
10.2 Expenses......................................... B-31
10.3 Notices.......................................... B-31
10.4 Waiver........................................... B-32
10.5 Binding Effect................................... B-32
10.6 Entire Agreement; Amendment...................... B-32
10.7 Severability..................................... B-33
10.8 Headings......................................... B-33
10.9 Governing Law.................................... B-33
10.10 Signature in Counterparts........................ B-33
10.11 No Third Party Beneficiaries..................... B-33
10.12 Assignability.................................... B-33
10.13 Parties Not Partners............................. B-34
10.14 Non-Survival of Representations and Warranties... B-34
10.15 Certain Definitions.............................. B-34
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STOCK PURCHASE AGREEMENT II
This Stock Purchase Agreement II, dated as of the 21st day of September,
1999, as amended by an Amendment to Stock Purchase Agreement II, dated as of
October 7, 1999 (this "Agreement"), is entered into by and among Security First
Technologies Corporation, a Delaware corporation ("S1"), the individuals and
entities who are signatories hereto, and as may be joined by other individuals
and entities from time to time, (each, a "Purchaser" and collectively,
"Purchasers") and FICS Group N.V., a Belgian corporation ("FICS") (for the
limited purposes set forth in Section 5 and Section 6.3(b) hereof).
WHEREAS, the parties hereto and other individuals had previously entered
into that certain Stock Purchase Agreement, dated as of May 16, 1999, by and
among S1, the individuals identified on Schedule 1 thereto (the "Former
Purchasers"), and FICS for the limited purposes stated therein (the "Former
Agreement");
WHEREAS, pursuant to Section 9.1 of the Former Agreement the parties
thereto have terminated the Former Agreement as confirmed by that certain letter
agreement from S1 to the Former Purchasers and FICS, dated as of even date
herewith;
WHEREAS, the Board of Directors of S1 and each Purchaser have determined
that it is in their best interests, or in the best interests of their respective
companies and stockholders, as the case may be, to complete the transaction
described in this Agreement whereby S1 will sell and issue to each Purchaser,
and each Purchaser will subscribe for and acquire, a number of shares of S1's
common stock, par value $0.01 per share ("S1 Common Stock") and a number of
options to purchase shares of S1 Common Stock, as described below.
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement, the
sufficiency of which is hereby acknowledged, the parties mutually agree as
follows:
SECTION 1
PURCHASE AND SALE OF THE SHARES
1.1 SALE AND ISSUANCE OF THE INITIAL SHARES.
(a) At the First Closing (as defined at Section 1.3 hereof) and subject
to the terms and conditions of this Agreement, each Purchaser hereby subscribes
for, and agrees to purchase the "Initial shares" for aggregate consideration
(the "Initial Share Consideration") equal to the product of (i) $35.75
multiplied by (ii) the number of Initial shares (after adjustment for any stock
splits, combinations or dividends or distributions in such common stock between
the date of this Agreement and the date immediately prior to the First Closing).
As to each Purchaser, "Initial shares" shall mean 10,000,000 multiplied by the
percentage (the "Purchaser Ratio") set forth across from each Purchaser's name
on Schedule 1 hereto. S1 agrees to sell and issue the Initial Shares to the
Purchasers at the First Closing for the Initial Share Consideration subject to
the terms of this Agreement.
(b) The Initial Share Consideration shall be payable in cash, a bill of
exchange issued by S1 Holdings or in any other form reasonably acceptable to S1.
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1.2 STOCK PURCHASE.
(a) Upon the Second Closing, the Purchasers shall purchase from S1 and
S1 agrees to sell to the Purchasers that number of shares of S1 Common Stock
equal to (i) the "2000 Earn-out Payment" (as such term is defined in that
certain Share Purchase Agreement II, dated of even date herewith, by and among
S1 Europe Holdings N.V., a Belgian corporation (naamloze vennootschap ("N.V."))
and a subsidiary of S1, the Purchasers, and for the limited purposes stated
therein, S1 and FICS (the "Holdings Purchase Agreement")), divided by (ii)
$35.75 (the "2000 shares").
(b) Upon the Third Closing, the Purchasers shall purchase from S1 and S1
agrees to sell to the Purchasers that number of shares of S1 Common Stock equal
to (i) the "2001 Earn-out Payment" (as such term is defined in the Holdings
Purchase Agreement), divided by (ii) $35.75 (the "2001 shares").
(c) In the event S1 should split or combine the S1 Common Stock, or pay
any dividend or other distribution on all of its common stock in such common
stock, then the dollar amount set forth in clause (ii) in each of paragraphs
1.2(a) and (b) above shall be appropriately adjusted to reflect such split,
combination, dividend or distribution.
1.3 FIRST CLOSING.
(a) The First Closing shall take place concurrently with the closing of
the "Transaction," as defined in the Holdings Purchase Agreement.
(b) On the date of the First Closing (the "First Closing Date"), the
First Closing shall take place at 10:00 a.m., Washington, D.C. time, at the
offices of Hogan & Hartson L.L.P., 555 13th Street, N.W., Washington, D.C.
20004, or at such other time and place as the parties shall mutually agree.
1.4 SECOND CLOSING.
(a) The Second Closing shall take place concurrently with the "Second
Payment Date" as defined in the Holdings Purchase Agreement.
(b) On the date of the Second Closing (the "Second Closing Date"), the
Second Closing shall take place at 10:00 a.m., Washington, D.C. time, at the
offices of Hogan & Hartson L.L.P., 555 13th Street, N.W., Washington, D.C.
20004, or at such other time and place as the parties shall mutually agree.
1.5 THIRD CLOSING.
(a) The Third Closing shall take place concurrently with the "Third
Payment Date" as defined in the Holdings Purchase Agreement.
(b) On the date of the Third Closing (the "Third Closing Date"), the
Third Closing shall take place at 10:00 a.m., Washington, D.C. time, at the
offices of Hogan & Hartson L.L.P., 555 13th Street, N.W., Washington, D.C.
20004, or at such other time and place as the parties shall mutually agree.
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SECTION 2
STOCK OPTIONS
2.1 SUCCESSOR OPTIONS.
Upon the First Closing, S1 shall offer in exchange for each option (a "FICS
Option") which is outstanding and unexercised immediately prior thereto, and
granted by FICS under the 1998 Stock Plan of FICS Group Holdings, Inc., a
Delaware corporation ("FICS Holdings") (the "FICS Stock Plan"), or otherwise, an
option to purchase shares of S1 Common Stock (each, a "Successor Option") in an
amount and at an exercise price determined as provided below:
(1) The number of Successor Options to be granted shall be equal to (a)
98.905896 (the "Conversion Number") multiplied by (b) the number of shares of
FICS Holdings subject to FICS Options; provided that such Conversion Number
shall be adjusted for any stock splits, combinations or dividends or
distributions of the S1 Common Stock between the date hereof and the First
Closing; and
(2) The exercise price for each of the Successor Options shall be equal
to the exercise price per share of FICS Subsidiary Stock under the option
immediately before the First Closing divided by the Conversion Number, provided
that such exercise price shall be rounded down to the nearest cent.
The parties hereto understand that the number of shares of S1 Common Stock
subject to Successor Options and the price thereof shall be adjusted
appropriately for any stock splits, combinations or dividends or distributions
in the FICS capital stock, as of the date hereof. The duration and other terms
of the Successor Options immediately after the First Closing shall be the same
as the corresponding terms of the FICS Options in effect immediately before the
First Closing, except that all references to FICS in the FICS Stock Plan (and
the corresponding references in the option agreement documenting such FICS
Option) shall be deemed to be references to S1.
2.2 ADDITIONAL OPTIONS.
Upon the First Closing, or as soon as possible thereafter, S1 shall grant,
as compensation and pursuant to the terms of one of its stock option plans
existing as of the date hereof, a number of options to purchase shares of S1
Common Stock (each, an "Additional Option") to such individuals who are
employees of FICS or any of its subsidiaries and as designated by Michel
Akkermans ("Akkermans"), solely in his capacity as an officer and director of S1
and in consultation with S1. No such options will be granted to Akkermans or a
person related to Akkermans. The aggregate number of such grants shall not
exceed (a) 4,000,000 (after adjustment for any stock splits, combinations or
dividends or distributions in the S1 Common Stock between the date of this
Agreement and the First Closing) minus (b) the number of Successor Options to be
granted pursuant to Section 2.1 hereof. Each Additional Option shall have an
exercise price not less than the stock price, as quoted on the Nasdaq Stock
Market or such other national exchange on which the S1 Common Stock is then
traded, of a share of S1 Common Stock at the close of business on the last
business day prior to the date of such grant.
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SECTION 3
REPRESENTATIONS AND WARRANTIES OF S1
S1 hereby makes the following representations and warranties to each
Purchaser as set forth in this Section 3, each of which is being relied upon by
each Purchaser as a material inducement to enter into and perform this
Agreement. All of the disclosure schedules of S1 referenced below and thereby
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."
3.1 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 the Purchasers, are true, correct
and complete copies of such documents as in effect as of the date of this
Agreement.
(b) Each Subsidiary of S1 (each, a "S1 Subsidiary") and the jurisdiction
of its organization is set forth at Section 3.1(b) of the S1 Disclosure
Schedule. Except as set forth at Section 3.1(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 charter and other corporate governance documents
of each S1 Subsidiary, copies of which have previously been delivered to the
Purchasers, are true, correct and complete copies of such documents as in effect
as of the date of this Agreement.
3.2 CAPITALIZATION.
(a) The authorized capital stock of S1 consists of (i) 350,000,000
shares S1 Common Stock, of which 27,674,239 shares were outstanding at August
31, 1999 and (ii) 25,000,000 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," 749,064 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 August
30, 1999, 391,450 shares of Series A Convertible Preferred Stock, 749,064 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 13,953,024 shares of S1 Common Stock reserved for issuance pursuant to
employee stock options (of which options to purchase 8,960,912 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 Initial shares will be duly authorized and validly issued, and
fully paid, nonassessable and free of preemptive rights. 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
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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 3.2(a) of the S1
Disclosure Schedule.
(b) 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
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.
3.3 AUTHORITY; NO VIOLATION.
(a) S1 has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. 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 S1. Except for the approval of the S1 Issuance as
contemplated by this Agreement 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 has been duly and validly executed and
delivered by S1 and (assuming due authorization, execution and delivery by FICS
and each of the Purchasers) will constitute a valid and binding obligation of
S1, enforceable against S1 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.
(b) Neither the execution and delivery of this Agreement by S1, nor the
consummation by S1 of the transactions contemplated hereby, nor compliance by S1
with any of the terms or provisions hereof or thereof, will (i) violate any
provision of the Amended and Restated Certificate of Incorporation or Amended
and Restated Bylaws of S1, or (ii) assuming that the consents and approvals
referred to in Section 3.4 are duly obtained, (x) violate any Laws (as defined
below) applicable to S1 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 respective properties or assets of S1 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 is or will be, as the case may be, a party, or by which S1 or any of its
properties or assets may be bound or affected.
3.4 CONSENTS AND APPROVALS.
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 S1 of this
Agreement, and (2) the consummation by S1 of the S1 Issuance and the other
transactions
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contemplated hereby, except for such consents, approvals or filings the failure
of which to obtain will not have a Material Adverse Effect (as defined below) on
the ability of S1 to consummate the transactions contemplated hereby.
3.5 FINANCIAL STATEMENTS; EXCHANGE ACT FILINGS; BOOKS AND RECORDS.
S1 has previously delivered to representatives of Purchasers 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 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 S1, and the interim financial
statements of S1 as of and for the six months ended June 30, 1999 and 1998, as
included in S1's quarterly report on Form 10-Q for the quarter ended June 30,
1999, as filed with the SEC, and the financial statements of S1 as of and for
the month ended July 31, 1999 and 1998. The financial statements referred to in
this Section 3.5 (including the related notes, where applicable) fairly present
(subject, in the case of the unaudited statements, to normal recurring audit
adjustments) the results of the consolidated operations and consolidated
financial 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 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 prepared in accordance with U.S. 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. 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 delivered to FICS
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 U.S. GAAP and any other applicable legal and
accounting requirements.
3.6 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, 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
Purchasers.
3.7 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 under Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act, true, correct and complete copies
of which have previously been delivered or made available to representatives of
Purchasers, since December 31, 1998, (i) neither S1 nor any S1 Subsidiary has
incurred any material liability, except as contemplated by this Agreement or in
the ordinary course of their businesses consistent with their past practices,
and (ii) no event has occurred which has had, or is likely to have, individually
or in the aggregate, a Material Adverse Effect on S1.
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(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.
3.8 LEGAL PROCEEDINGS.
(a) 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 of the transactions contemplated by this Agreement as to
which there is a reasonable probability of success.
(b) There is no injunction, order, judgment or decree imposed upon S1,
any of its Subsidiaries or the assets of S1 or any of its Subsidiaries.
3.9 TAXES AND TAX RETURNS.
(a) For purposes of this Section 3.9, S1 shall include S1, 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 prior to the date hereof (all such returns being accurate and complete
in all material respects) and has duly paid or made provision on the financial
statements referred to in Section 3.5 hereof in accordance with United States
generally accepted accounting principles ("U.S. GAAP") for the payment of all
material Taxes which have been incurred or are due or claimed to be due from it
by Taxing Authorities on or prior to the date hereof other than Taxes (a) which
(x) are not yet delinquent or (y) are being contested in good faith and set
forth in Section 3.9 of the S1 Disclosure Schedule and (b) which have not been
finally determined. The charges, accruals, and reserves with respect to Taxes on
the books of S1 are adequate (as determined in accordance with U.S. GAAP) and
are at least equal to its liability for Taxes. There exists no proposed tax
assessment against S1 except as disclosed in the S1 financial statements. 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
Governmental Body. 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 upon S1, nor has
S1 been requested to give any currently effective waivers extending the
statutory period of limitation applicable to any Tax Return for any period. 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 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 U.S. GAAP has been included by S1
in the financial statements referred to in Section 3.5. 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 not consented to any
waiver or extension of any statute of limitations with respect to any Tax. S1
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
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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.
(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, S1 shall include each of its
Subsidiaries and any other entity that together with S1 would be deemed a
"single employer" within for purposes of ERISA (determined without regard to
whether such entity conducts business in the United States). Section 3.10 of the
S1 Disclosure Schedule sets forth a true and complete list of each U.S. Plan and
each other plan, arrangement or agreement providing benefits to the current or
former employees of S1 that S1 maintains or contributes to as of the date of
this Agreement, or that S1 has within the last six years maintained or
contributed to or under which S1 has any liability (collectively, the "S1
Plans").
(b) S1 has heretofore delivered or made available to S1 true, correct
and complete copies of each of the S1 Plans and all related documents (other
than S1 Plans established by a governmental agency or authority to which S1 is
required to contribute under applicable law), 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 U.S. Plan, (iii) the current summary plan description and any summaries
of material modification for each U.S. Plan and any corresponding document for
each other S1 Plan, (iv) all annual reports for each U.S. Plan filed for the
preceding five plan years and any annual or other periodical financial
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information concerning any other S1 Plan filed with any governmental agency or
authority or provided to employees or beneficiaries of such S1 Plan, (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, (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 its financial records and statements for all
obligations and liabilities under the S1 Plans that have accrued but are not
due. 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
adverse economic consequence to 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 Plan
is subject to Title IV of ERISA.
(d) Except as set forth at Section 3.10 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 U.S. Plan, to ERISA and the Code, (ii) each of the U.S. 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 U.S. 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
on the books of S1 , or (d) benefits the full cost of which is borne by the
current or former employee (or his beneficiary), (v) no liability under ERISA or
any other law relating to employee benefits or employees or their beneficiaries
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 U.S. 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 accordance with generally accepted accounting practices and,
in the case of a U.S. Plan, ERISA and the Code, (viii) S1 and each S1 Subsidiary
have 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 plans or any
trusts related thereto, (x) all S1 Plans could be terminated as of the First
Closing without material liability in excess of the amount accrued therefor on
the S1 financial statements; (xi) no S1 Plan, either individually or
collectively, provides for any 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 U.S. Plan;
(xiii) no U.S. Plan has
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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(a) 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, (ii) which, upon 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 or any of its respective
Subsidiaries to any director, officer or employee thereof, (iii) which
materially restricts the conduct of any line of business by S1 or any of its
Subsidiaries, (iv) with or to a labor union or guild (including any collective
bargaining agreement) or (v) except as set forth on Section 3.11(a) 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 (v), any stock
option plan, stock appreciation rights plan, restricted stock plan or stock
purchase plan). Except as set forth at Section 3.11(a) 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 3.11(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
3.11(a), whether or not set forth in Section 3.11(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, (ii) S1 and each of its Subsidiaries has in all material respects
performed all obligations 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.
3.12 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
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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; and
(d) For purposes of this Agreement, 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.
3.13 PROPERTIES AND ASSETS.
Except for (a) items reflected in S1'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 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 3.5
above), and (d) properties and assets sold or transferred in the ordinary course
of business consistent with past practices since December 31, 1998, 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 suitable for the purposes for which
they are currently utilized 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, and all leases to which S1
or any S1 Subsidiary is a party are valid and binding obligations 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. To the knowledge
of S1, 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.
3.14 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.
3.15 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 notice of
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any material alleged or threatened claim, violation, or liability under any such
Laws that has not heretofore been cured and for which there is any remaining
liability.
3.16 S1 INFORMATION.
The information relating to S1 and each S1 Subsidiary to be provided by S1
to be contained in the S1 Proxy Statement (as defined below) will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances in which
they are made, not misleading.
3.17 INTELLECTUAL PROPERTY.
Except, in each case, as set forth in Section 3.17 of the S1 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 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, 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 Section 3.17 of the S1 Disclosure Schedule is
necessary to conduct the businesses of S1 and its Subsidiaries as presently
conducted.
(b) Section 3.17 of the S1 Disclosure Schedule 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
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any third party to the extent licensed by or through S1 or its Subsidiaries, by
any employee of S1 or any S1 Subsidiary or third party for whom S1 is
responsible. Except as set forth in Section 3.17 of the S1 Disclosure Schedule,
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 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 Section 3.17 of the S1
Disclosure Schedule, neither S1 nor any of its Subsidiaries have furnished the
source code of any of their
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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.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Each of the Purchasers severally and not jointly hereby makes the following
representations and warranties to S1 as set forth in this Section 4 each of
which is being relied upon by S1 as a material inducement to enter into and
perform this Agreement. All of the disclosure schedules of the Purchasers
referenced below and thereby required of the Purchasers 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 "Purchasers' Disclosure Schedule."
4.1 ORGANIZATION OF PURCHASERS.
Such Purchaser not a natural person is duly organized and validly existing
under the laws of the jurisdiction of its formation.
4.2 AUTHORIZATION OF TRANSACTION.
(a) If such Purchaser is not a natural person, such Purchaser has full
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all requisite action on the part of such Purchaser and no other proceedings
on the part of such Purchaser are necessary to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by such Purchaser and (assuming due authorization, execution and
delivery by S1 and FICS of this Agreement) will constitute a valid and legally
binding obligation of such Purchaser, enforceable 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 laws affecting creditors' rights and remedies generally. Except as set
forth in Section 4.2(a) of the Purchasers' Disclosure Schedule, no Purchaser
need give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement.
(b) Such Purchaser acknowledges that he, she or it has read this
Agreement and has been provided with, or been granted access to, all information
necessary to make his or her decision to execute this Agreement. Such Purchaser
acknowledges that his, her or its signature on this Agreement shall be deemed
his, her or its written consent to the execution of this Agreement and to the
consummation of all of the transactions contemplated by this Agreement, except
for such
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consents, approvals or filings the failure of which to obtain will not have a
Material Adverse Effect on the ability of such Purchaser to consummate the
transactions contemplated hereby.
4.3 NON-CONTRAVENTION.
Neither the execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will (A) assuming that the
consents and approvals referred to in Section 4.2(a) are duly obtained, (x)
violate any Laws applicable to such Purchaser 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 respective
properties or assets of such Purchaser 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 such Purchaser is or
will be, as the case may be, a party, or by which such Purchaser or any of its
properties or assets may be bound or affected or (B) if such Purchaser is not a
natural person, violate any provisions of its organizational documents.
4.4 BROKER'S FEES.
Except for the fee payable to Credit Suisse First Boston ("CSFB") in
accordance with the terms of a letter agreement between CSFB and FICS, dated May
16, 1999, such Purchaser has no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement nor has such Purchaser created any such liability
or obligation which, upon consummation of the transactions contemplated by this
Agreement or the Transaction, will become an obligation of S1 or any subsidiary.
4.5 ADEQUATE RESOURCES.
Such Purchaser will have, at the time of the First Closing, the Second
Closing and the Third Closing, sufficient cash or other resources to perform its
obligations hereunder.
4.6 NO LEGAL, TAX OR INVESTMENT ADVICE.
Such Purchaser understands that nothing in this Agreement or any other
materials presented to such Purchaser in connection with the purchase and sale
of the Initial Shares, the 2000 Earn-out Shares, the 2001 Earn-out Shares or the
Transaction constitutes legal, tax or investment advice. Such Purchaser has
consulted such legal, tax and investment advisors as it, in its sole discretion,
has deemed necessary or appropriate in connection with its purchase of the
Initial Shares.
4.7 STATUS OF PURCHASERS.
Each of the Purchasers who are original signatories to this Agreement not
including any Purchasers joined to this Agreement pursuant to Section 5.13
hereof represent that as of the date hereof, such Purchaser is a director,
executive officer or other affiliate of FICS.
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SECTION 5
ADDITIONAL AGREEMENTS
5.1 LOCK-UP COVENANT.
During the period beginning on the First Closing and ending on the date 180
days after the First Closing, each of the Akkermans, Pamica N.V., General
Atlantic Partners 20, L.P., GAP Coinvestment Partners, L.P., or General Atlantic
Partners 52, L.P., covenant that they will not, without the prior written
consent of S1, offer, sell or otherwise dispose of, directly or indirectly, any
capital stock of S1 which Purchasers may own directly, indirectly or
beneficially; provided, however, that any such Purchaser may transfer some or
all of the Initial Shares to a corporation, partnership or other legal entity
controlled by such Purchaser if such transferee agrees in writing to hold any
Initial Shares received subject to the provisions of this Agreement and to
transfer such Initial Shares back to such Purchaser if such transferee ceases to
be controlled by such Purchaser.
5.2 S1 BOARD OF DIRECTORS.
(a) Effective upon the First Closing, S1 shall have adopted a resolution
pursuant to Section 3.2 of its Amended and Restated Bylaws to increase the size
of its Board of Directors by at least two members, and shall thereupon invite
Akkermans and one other individual designated by Akkermans to serve as an
additional member (the "FICS Members") of the Board of Directors of S1 to serve
for a term expiring at the third successive annual meeting following the First
Closing; provided, however, that S1 shall have no obligation to invite any FICS
Member to serve on S1's Board if such person is not a member in good standing of
the FICS Board of Directors immediately prior to the First Closing. In addition,
S1 shall have amended its Amended and Restated Bylaws to provide that for a
period of two years following the First Closing, the nominating committee for
vacancies or additional members shall consist of all members of the Board of
Directors.
(b) The parties agree that, as of the date of the First Closing,
Akkermans shall be appointed to hold the offices of President and Chairman of
the Board of Directors of S1, each with the duties and responsibilities
specified in the Amended and Restated Bylaws of S1.
5.3 COMPLIANCE WITH ANTITRUST LAWS.
Each of FICS, the Purchasers and S1 shall make all filings of any
applications, notices or other documents required under applicable antitrust
Laws and use its reasonable best efforts to resolve objections, if any, which
may be asserted with respect to the transactions contemplated by this Agreement
or the Transaction under antitrust laws, including, without limitation, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"). In the event a suit is threatened or instituted challenging the
transactions contemplated by this Agreement or the Transaction as violative of
antitrust laws, each of the Purchasers and S1 shall use its reasonable best
efforts to avoid the filing of, or resist or resolve such suit. The Purchasers
and S1 shall use their reasonable best efforts to take such action as may be
required: (a) by 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 transactions contemplated by this Agreement or the Transaction
under antitrust laws, or (b) by any federal or state court of the United States,
in any suit brought by a private party or Governmental Entity challenging the
transactions contemplated by this Agreement or the Transaction 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 transactions contemplated by this
Agreement or the Transaction. Reasonable
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best efforts shall not include, among other things and to the extent S1 so
desires, the willingness of S1 to accept an order agreeing to the divestiture,
or the holding separate, of any assets of FICS or S1.
5.4 REGULATORY MATTERS.
(a) Upon the execution and delivery of this Agreement, S1 and the
Purchasers shall promptly cause to be prepared and filed with the SEC a proxy
statement and prospectus (the "S1 Proxy Statement") for soliciting the approval
of this Agreement and the S1 Issuance by the stockholders of S1. The S1 Proxy
Statement may be included in a registration statement on an appropriate
registration form prepared pursuant to Section 5.8 hereof. S1 shall use its
reasonable best efforts to have the S1 Proxy Statement cleared for use by the
SEC as soon as possible after the filing. The parties shall cooperate in
responding to and considering any questions or comments from the SEC staff
regarding the information contained in the S1 Proxy Statement. If at any time
after the S1 Proxy Statement is filed with the SEC, and prior to the date of the
First Closing, any event relating to FICS is discovered by the Purchasers which
should be set forth in an amendment of, or a supplement to, the S1 Proxy
Statement, the Purchasers shall promptly inform S1, and shall furnish S1 with
all necessary information relating to such event whereupon S1 shall promptly
cause an appropriate amendment to the S1 Proxy Statement to be filed with the
SEC. S1 (if prior to the meeting of stockholders pursuant to Section 4.5 hereof)
shall take all necessary action as promptly as practicable to permit an
appropriate amendment or supplement to be transmitted to its stockholders
entitled to vote at such meeting. If at any time after the S1 Proxy Statement is
filed with the SEC, and prior to the date of the First Closing, any event
relating to S1 is discovered by S1 which should be set forth in an amendment of,
or a supplement to, the S1 Proxy Statement, S1 shall promptly inform the
Purchasers, and S1 shall promptly cause an appropriate amendment to the Proxy
Statement to be filed with the SEC. S1 (if prior to the meeting of stockholders
pursuant to Section 4.5 hereof) shall take all necessary action as promptly as
practicable to permit an appropriate amendment or supplement to be transmitted
to its stockholders entitled to vote at such meeting.
(b) 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, 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. S1 and the Purchasers 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 S1 or the Purchasers, 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; 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; and further provided that S1 and Akkermans shall mutually
agree on any such information regarding the structure or purpose of the
structure of the transactions contemplated by this Agreement and the Holdings
Purchase Agreement prior to its appearance. 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.
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(c) The Purchasers shall, upon request, furnish S1 with all information
concerning FICS and its directors, officers and stockholders and such other
matters as may be reasonably necessary or advisable in connection with the S1
Proxy Statement or any other statement, filing, notice or application made by or
on behalf of S1 to any Governmental Entity in connection with the transactions
contemplated by this Agreement or the Transaction.
(d) S1 and the Purchasers 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 (as defined in the Holdings
Purchase Agreement) will not be obtained or that the receipt of any such
approval will be materially delayed.
5.5 STOCKHOLDER MEETING.
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 S1 Proxy Statement
is approved by the SEC for use for the purpose of voting upon the approval of
this Agreement and the S1 Issuance. Management and the Board of Directors of S1
shall recommend approval of each of this Agreement, the S1 Issuance and the
Transaction.
5.6 LEGAL CONDITIONS.
Each of S1 and the Purchasers 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 transactions contemplated by this Agreement or the
Transaction and, subject to the conditions set forth in Section 6 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 the Purchasers or S1 in
connection with transactions contemplated by this Agreement or the Transaction.
5.7 STOCK EXCHANGE LISTING.
S1 shall cause the Initial Shares, the 2000 Shares and the 2001 Shares to
be approved for quotation on the Nasdaq Stock Market National Market System
("Nasdaq") (or such other exchange on which the S1 Common Stock has become
listed, or approved for listing) prior to the First Closing.
5.8 REGISTRATION OF S1 COMMON STOCK.
Upon the execution and delivery of this Agreement, S1 and FICS (as to
information to be included therein pertaining to FICS) 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 (including the 2000 Shares and the
2001 Shares) to be issued pursuant to this Agreement, and for soliciting the
approval of this Agreement by the stockholders of S1. S1 and FICS 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
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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 First Closing,
any event relating to S1 or FICS 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, 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 meeting of stockholders pursuant to Section 5.5 hereof)
will take all necessary action as promptly as practicable to permit an
appropriate amendment or supplement to be transmitted to the S1 stockholders
entitled to vote at such meeting. 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.
5.9 RESALE OF AKKERMANS' S1 COMMON STOCK.
Prior to the First Closing, S1 shall either (i) file a registration
statement on an appropriate form (the "Akkermans Registration Statement") with
the SEC and use its commercially reasonable efforts to cause the Akkermans
Registration Statement to be declared effective upon the First Closing (or such
later date as Akkermans may request) to effect the registration under the
Securities Act of 1933 as amended (the "Securities Act") of the Akkermans
Registration Statement for the resale by Akkermans of such amount of shares of
S1 Common Stock as determined by Akkermans not later than the day before the
First Closing, but in no event greater than an amount of shares (the "Resale
Shares") the net proceeds from the sale of which (after giving effect to
underwriting fees, expenses, commissions and discounts) shall be at least (A)
(x) 0.18 multiplied by (y) the closing per share price of S1 Common Stock on the
last trading day prior to the First Closing, multiplied by (z) the number of
shares of S1 Common Stock he beneficially acquires in the First Closing pursuant
to this Agreement, plus (B) $15,000,000, on customary terms and under then
prevailing market conditions, at a per share offering price as determined by S1
in its reasonable judgment to be fair and adequate to Akkermans, or (ii) make
arrangements for Akkermans to sell the Resale Shares pursuant to an exemption
from registration under the Securities Act with the same net proceeds as set
forth in subsection (i) of this paragraph and on substantially similar terms to
those specified in subsection (i) of this paragraph, including without
limitation the per share offering price.
5.10 REGISTRATION PROCEEDINGS.
S1 shall conduct all registration proceedings pursuant to this Agreement in
accordance with the following:
(1) S1 shall use its commercially reasonable efforts, but shall not be
required, to conduct an underwritten offering.
(2) If, after it becomes effective, such registration statement is
interfered with by any stop order, injunction or other order or requirement of
the SEC or any other governmental authority, such registration shall not be
deemed to have been effected unless such stop order, injunction or other order
shall have been subsequently vacated or removed.
(3) S1 shall, subject to the other relevant provisions of this
Agreement:
(A) use its commercially reasonable efforts to cause the registration
statement to become effective as soon as practicable after the filing thereof;
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(B) prepare and file with the SEC as promptly as is reasonably
practicable (and in any event within 60 days after such amendment or supplement
becomes necessary) such amendments and supplements to the registration statement
contained therein as may be necessary to keep such registration statement
effective for the respective periods specified or until each Purchaser has
completed the distribution described in such registration statement, whichever
occurs first;
(C) furnish to Purchasers such number of copies of such registration
statement, each amendment and supplement thereto as they may reasonably request;
(D) use its commercially reasonable efforts to register or qualify
such shares under the state blue sky or securities or banking laws ("Blue Sky
Laws") of such jurisdictions as Purchasers reasonably request (and to keep such
registrations and qualifications effective for a period of no less than one year
following the First Closing, or until Purchasers have completed the distribution
of such shares, whichever occurs first), and to do any and all other acts and
things that may be reasonably necessary or advisable to enable such Purchasers
to consummate the disposition of such shares in such jurisdictions; provided,
however, that S1 will not be required to do any of the following: (i) qualify
generally to do business in any jurisdiction where it would not be required but
for this Section 5.10, (ii) subject itself to taxation in any such jurisdiction,
or (iii) file any general consent to service of process in any such
jurisdiction;
(E) promptly notify Purchasers at any time during the period that S1
is required to keep the registration statement effective, of the occurrence of
any event as a result of which such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the statements
therein in the light of the circumstances under which they were made, not
misleading, and prepare a supplement or amendment to the registration statement
so that, as thereafter delivered to the purchasers of such shares, the
registration statement will not contain an untrue statement of a material fact
or omit to state any fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading;
(F) use commercially reasonable efforts to cause all such shares to
be listed on Nasdaq or such other national exchange on which S1 Common Stock
shall then be listed; and
(G) provide a transfer agent and registrar (if S1 does not already
have such an agent) for all such shares not later than the effective date of
such registration statement.
(4) If, pursuant to this Section 5.10, S1 Common Stock owned by a
Purchaser is included in a registration statement, then such Purchaser shall pay
all transfer taxes, if any, relating to the sale of its S1 Common Stock, the
fees and expenses of its own counsel, and its pro rata portion of any
underwriting discounts or commissions or the equivalent thereof.
(5) Except for the fees and expenses specified in paragraph (4) of this
Section 5.10 and except as provided this paragraph (5), S1 shall pay all
expenses incident to the registration and to S1's performance of or compliance
with this Agreement, including, without limitation, all SEC registration and
filing fees, fees and expenses of compliance with Blue Sky Laws, underwriting
discounts, fees, and expenses (other than a Purchaser's pro rata portion of any
underwriting discounts or commissions or the equivalent thereof), printing
expenses, messenger and delivery expenses, and fees and expenses of counsel for
S1 and all independent certified public accountants and other persons retained
by S1.
(6) Each Purchaser (for the purposes of this paragraph (6), the
"Indemnifying Person") agrees to indemnify and hold harmless S1, each of S1's
officers and directors, and each person, if any, who controls or may control S1
within the meaning of the Securities Act (for the purposes of this paragraph
(6), S1, its officers and directors, and any such other persons being referred
to individually
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as an "Indemnified Person" and collectively as "Indemnified Persons") from and
against all demands, claims, actions or causes of action, assessments, losses,
damages, liabilities, costs, and expenses, including, without limitation,
interest, penalties, and reasonable attorneys' fees and disbursements, asserted
against, resulting to, imposed upon, or incurred by such Indemnified Person,
directly or indirectly (collectively, referred to for purposes of this paragraph
(vii) and the corresponding provision of paragraph (viii) below in the singular
as a "Claim" and in the plural as "Claims"), based upon, arising out of, or
resulting from any untrue statement of a material fact contained in the
registration statement or any omission to state therein a material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading, to the extent that
such Claim is based upon, arises out of or results from any untrue statement or
omission based upon information furnished to S1 by such Purchaser in a written
document provided by such Purchaser for use in connection with the Registration
Statement; provided that such Purchaser will not be liable in any such case to
the extent that any such Claim arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement in reliance upon or in conformity with written
information furnished to such Purchaser by S1 or an underwriter in connection
with the registration statement specifically for use in the preparation thereof.
(7) S1 (for the purposes of this paragraph (7), the "Indemnifying
Person") agrees to indemnify and hold harmless the Purchasers and any
underwriters participating in the distribution of S1 Common Stock pursuant to a
registration statement (for the purposes of this paragraph (7), the Purchasers
and any such other persons also being referred to individually as an
"Indemnified Person" and collectively as "Indemnified Persons") from and against
all Claims based upon, arising out of, or resulting from any untrue statement of
a material fact contained in the registration statement or any omission to state
therein a material fact necessary in order to make the statement made therein,
in the light of the circumstances under which they were made, not misleading,
provided that S1 will not be liable in any such case to the extent that any such
Claim arises out of or results from any untrue statement or omission based upon
information furnished to S1 by any Purchaser in a written document provided by
such Purchaser for use in connection with the registration statement.
(8) The indemnification set forth herein shall be in addition to any
liability S1 or any Purchaser may otherwise have in connection with any
registration of S1 Common Stock. Within a reasonable time after receiving
definitive notice of any Claim in respect of which an Indemnified Person may
seek indemnification under this Section 5.10, such Indemnified Person shall
submit written notice thereof to such Indemnifying Person. The failure of the
Indemnified Person so to notify the Indemnifying Person of any such Claim shall
not relieve the Indemnifying Person from any liability it may have hereunder
except to the extent that (a) such liability was caused or increased by such
omission, or (b) the ability of the Indemnifying Person to reduce such liability
was materially adversely affected by such omission. In addition, the omission of
the Indemnified Person so to notify the Indemnifying Person of any such Claim
shall not relieve the Indemnifying Person from any liability it may have
otherwise than hereunder. The Indemnifying Person shall have the right to
undertake, by counsel or representatives of its own choosing, the defense,
compromise, or settlement (without admitting liability of the Indemnifying
Person) of any such Claim asserted, such defense, compromise, or settlement to
be undertaken at the expense and risk of the Indemnifying Person, and the
Indemnified Person shall have the right to engage separate counsel, at its own
expense, which counsel for the Indemnifying Person shall keep informed and
consult with in a reasonable manner. In the event the Indemnifying Person shall
fail to undertake such defense by its own representatives, the Indemnifying
Person shall give prompt written notice of such election to the Indemnified
Person, and the Indemnified Person shall undertake the defense, compromise, or
settlement (without admitting liability of the Indemnified Person) thereof on
behalf of and for the account and risk of the Indemnifying Person by counsel or
other representatives designated by the Indemnified Person. In the
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event that any Claim shall arise out of a transaction or cover any period or
periods wherein S1 and any Purchaser shall each be liable hereunder for part of
the liability or obligation arising therefrom, then the parties shall, each
choosing its own counsel and bearing its own expenses, defend such Claim, and no
settlement or compromise of such Claim may be made without the joint consent or
approval of S1 and such Purchaser. Notwithstanding the foregoing, no
Indemnifying Person shall be obligated hereunder with respect to amounts paid in
settlement of any Claim if such settlement is effected without the consent of
such Indemnifying Person (which consent shall not be unreasonably withheld).
(9) If the indemnification provided for in this Section 5.10 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party (as
defined in either paragraph (6) or (7)) with respect to any Claim, then such
Purchaser or S1, as applicable and as the case may be (each an "Indemnifying
Party"), in lieu of indemnifying an Indemnified Party hereunder, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Claim in such proportion as is appropriate to reflect the relative fault
of the Indemnifying Party on the one hand and of the Indemnified Party on the
other in connection with the statements or omissions which resulted in such
claim.
5.11 CONDUCT OF S1'S BUSINESS.
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the First Closing, except with
respect to (i) the certain Agreement and Plan of Merger dated as of May 16, 1999
by and among S1, Sahara Strategy Corporation and Edify Corporation, and (ii) the
certain Stock Purchase and Option Agreement dated as of May 16, 1999 by and
between S1 and Intuit Inc., prior to entering into any such agreement S1 agrees
to consult with the Purchasers and reasonably consider their views with respect
to any transactions having a value over $50,000,000 in which S1 proposes to
engage.
5.12 ADVICE OF CHANGES.
S1 and the Purchasers 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 First Closing Date, each party will
promptly supplement or amend its 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 6.2(a) or 6.3(a) hereof, as the case may be.
5.13 JOINDER OF ADDITIONAL PURCHASERS.
Prior to the First Closing, S1 hereby agrees to send, at the same time and
in the same manner as to the S1 stockholders, a copy of the S1 Proxy Statement
and a copy of this Agreement to each of the FICS shareholders who is not an
original signatory to this Agreement. Prior to the First Closing, S1 and the
Purchasers hereby agree that such individuals shall be offered the opportunity
to join this Agreement as an additional Purchaser by indicating acceptance of
the terms of this Agreement by a writing signed by such individual stating that
such individual (i) has read the S1 Proxy Statement
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and this Agreement, (ii) fully understands this risks involved in proceeding
with the transaction contemplated by this Agreement, and (iii) agrees to join
this Agreement as a Purchaser.
SECTION 6
CONDITIONS TO FIRST CLOSING
6.1 CONDITIONS TO OBLIGATIONS OF ALL PARTIES.
The obligations of each party to consummate the transactions contemplated
by this Agreement are subject to the satisfaction, on or before the date of the
First Closing, of each of the following conditions precedent:
(a) Termination. Neither this Agreement nor the Holdings Purchase
Agreement shall have been terminated in accordance with its terms.
(b) No Governmental Action. No action or proceeding by or before any
governmental authority shall have been instituted or threatened (and not
subsequently dismissed, settled or otherwise terminated) which is reasonably
expected to restrain, prohibit or invalidate the transactions contemplated by
this Agreement or to affect adversely the financial condition and business
prospects of S1.
6.2 CONDITIONS TO THE OBLIGATIONS OF PURCHASERS.
The obligations of Purchasers to purchase the Initial Shares as
contemplated by this Agreement are subject to the satisfaction, on or before the
date of the First Closing, of each of the following conditions precedent, any
one or more of which may be waived by the written consent of the Purchasers:
(a) Representations and Warranties. The representations and warranties
of S1 contained in this Agreement shall be true, correct and complete in all
material respects when made and shall be true and correct on the date of the
First Closing, with the same force and effect as if made on the date of the
First Closing.
(b) Compliance with Covenants. S1 shall have in all material respects
performed all obligations and agreements and complied with all covenants
contained in this Agreement to be performed and complied with by S1 on or prior
to the date of the First Closing.
(c) Akkermans Resale Agreement. At the First Closing, either (i) the
Akkermans Registration Statement shall be able to be declared effective by the
SEC, subject only to completion of the Closing (and the action of the SEC
thereafter to declare said Registration Statement effective) and an underwriting
agreement in reasonable and customary form shall have been prepared and executed
by S1 and the lead underwriter for the offering of S1 Common Stock described in
the prospectus constituting a part of the Akkermans Registration Statement, and
shall be ready for use upon execution by Akkermans, or (ii) arrangements shall
have been made for Akkermans to sell the Resale Shares pursuant to an exemption
from registration under the Securities Act on substantially similar terms to
those specified in subsection (i) of Section 5.9 hereof, including without
limitation the per share offering price.
(d) Transaction. The Transaction contemplated by the Holdings Purchase
Agreement shall have been consummated.
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(e) Registration Statement. The Registration Statement shall have been
declared effective and no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the Securities Act.
6.3 CONDITIONS TO OBLIGATIONS OF S1.
The obligations of S1 to sell the Initial Shares as contemplated by this
Agreement are subject to the satisfaction, on or before the date of the First
Closing, of each of the following conditions precedent, any one or more of which
may be waived by S1, in its sole and absolute discretion:
(a) Representations and Warranties. The representations and warranties
of Purchasers contained in this Agreement shall be true, correct and complete in
all material respects when made and shall be true and correct as of the date of
the First Closing with the same force and effect as if made on the date of the
First Closing.
(b) Compliance with Covenants. Purchasers and FICS shall have in all
material respects performed all obligations and agreements and complied with all
covenants contained in this Agreement to be performed and complied with by it on
or prior to the date of the First Closing.
SECTION 7
CLOSINGS
7.1 DELIVERIES BY S1.
(a) At the First Closing, S1 shall deliver to Purchasers the following:
(1) Certificates registered in Purchasers' names, representing all of
the Initial Shares in the amounts set forth in Section 1.1 above.
(2) A copy of the resolutions of the Board of Directors of S1, as
certified as of the First Closing Date by the Secretary or other appropriate
officer of S1, as being true, correct and complete and then in full force and
effect, authorizing the execution, delivery and performance of this Agreement by
S1, the authorization, sale, issuance and delivery of the Initial Shares, and
the performance of S1's obligations hereunder.
(3) A certificate of S1 signed by an authorized officer of S1
certifying that the representations and warranties of S1 made herein are true,
complete and correct in all material respects as of the date of this Agreement
and are true and correct as of the date of the First Closing, and S1 has in all
material respects performed all obligations and agreements and complied with all
covenants required to be performed or complied with by S1 on or prior to the
First Closing.
(4) Successor Options and related option agreements for each option
delivered pursuant to Section 2.1 above.
(5) Additional Options and related option agreements for each option
delivered pursuant to Section 2.2 above.
(6) Such other certificates, instruments or documents as Purchasers
may reasonably request in order to effect and document the transactions
contemplated hereby.
(7) An update of S1's Disclosure Schedule reflecting any change
required as if the Agreement were being executed as of the date of the First
Closing.
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(b) At the Second Closing, S1 shall deliver to Purchasers the following:
(1) Certificates registered in Purchasers' names, representing all of
the 2000 Earn-out Shares in the amounts set forth in Section 1.2 above.
(2) Such other certificates, instruments or documents as Purchasers
may reasonably request in order to effect and document the transactions
contemplated hereby.
(c) At the Third Closing, S1 shall deliver to Purchasers the following:
(1) Certificates registered in Purchasers' names, representing all of
the 2001 Earn-out Shares in the amounts set forth in Section 1.2 above.
(2) Such other certificates, instruments or documents as Purchasers
may reasonably request in order to effect and document the transactions
contemplated hereby.
7.2 DELIVERIES BY PURCHASERS.
(a) At the First Closing, the Purchasers shall deliver to S1 the
following:
(1) The Initial Share Consideration, in the form determined pursuant
to Section 1.1(b) hereof.
(2) A certificate of each Purchaser signed by such Purchaser or an
authorized officer of such Purchaser certifying that the representations and
warranties of such Purchaser made herein are true, complete and correct in all
material respects as of the date of this Agreement and are true and correct as
of the date of the First Closing, and such Purchaser has in all material
respects performed all obligations and agreements and complied with all
covenants required to be performed or complied with by Purchaser on or prior to
the First Closing.
(3) If the Purchaser is not a natural person, a copy of the
resolutions or other corporate documentation, certified by the Secretary of such
Purchaser as being true, correct and complete and then in full force and effect,
authorizing the execution, delivery and performance by Purchaser of this
Agreement, Purchaser's obligations hereunder and the Transaction.
(4) Such other certificates, instruments or documents as S1 may
reasonably request in order to effect and document the transaction contemplated
hereby.
(5) An update of the Purchasers' Disclosure Schedule reflecting any
change required as if the Agreement were being executed as of the date of the
First Closing.
(b) At the Second Closing, the Purchasers shall deliver to S1 the
following:
(1) The 2000 Earn-out Consideration, in the form determined pursuant
to Section 1.3(c) hereof.
(2) Such other certificates, instruments or documents as S1 may
reasonably request in order to effect and document the transaction contemplated
hereby.
(c) At the Third Closing, the Purchasers shall deliver to S1 the
following:
(1) The 2001 Earn-out Consideration, in the form determined pursuant
to Section 1.3(c) hereof.
(2) Such other certificates, instruments or documents as S1 may
reasonably request in order to effect and document the transaction contemplated
hereby.
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SECTION 8
LEGEND
8.1 ENDORSEMENT.
(a) Certificates representing the Initial Shares delivered to the
Purchasers subject to the lock-up period specified in Section 5.1, shall bear
the following legend (in addition to the legends specified by Sections 8.1(b)
and 8.1(c) hereof, if applicable, and any legend required by applicable state
securities laws):
THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO CERTAIN RESTRICTIONS SPECIFIED IN THE STOCK PURCHASE AGREEMENT II DATED
SEPTEMBER 21, 1999 (THE "AGREEMENT") BETWEEN S1 AND THE ORIGINAL PURCHASER,
AND NO TRANSFER OF SHARES SHALL BE VALID OR EFFECTIVE ABSENT COMPLIANCE
WITH SUCH RESTRICTIONS. ALL SUBSEQUENT HOLDERS OF THIS CERTIFICATE WILL
HAVE AGREED TO BE BOUND BY CERTAIN OF THE TERMS OF THE AGREEMENT. COPIES OF
THE AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
REGISTERED HOLDER OF THIS CERTIFICATE TO THE SECRETARY OF S1.
(b) Certificates representing the Initial Shares delivered to each of
Akkermans, Pamica N.V., General Atlantic Partners 20, L.P., GAP Coinvestment
Partners, L.P., General Atlantic Partners 52, L.P., and GIMV N.V. shall bear the
following legend (in addition to the legends specified by Sections 8.1(a) and
8.1(c) hereof, if applicable, and any legend required by applicable state
securities laws):
THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION
TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
UNTIL SEPTEMBER 21, 2000, THE SECURITIES REPRESENTED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
EXCEPT IN COMPLIANCE WITH SUCH RULE OR UNLESS AND UNTIL REGISTERED UNDER
THE SECURITIES ACT OF 1933.
(c) Certificates representing the Initial Shares and the Earn-out Shares
delivered to the FICS Members shall bear the following legend (in addition to
the legends specified by Sections 8.1(a) and 8.1(b) hereof, if applicable, and
any legend required by applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNLESS S1 HAS RECEIVED AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
8.2 REMOVAL OF LEGEND.
For each stock certificate that has been endorsed with the legend pursuant
to Section 8.1(a) hereof, insofar as it relates to restrictions specified in
this Agreement, such paragraph shall be removed upon the expiration of the
six-month lock-up period described in Section 5.1.
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<PAGE> 360
SECTION 9
TERMINATION
9.1 MUTUAL CONSENT.
S1 and the Purchasers may terminate this Agreement at any time by mutual
written agreement.
9.2 OTHER TERMINATION.
S1 or the Purchasers may terminate this Agreement by giving notice (a
"Termination Notice") to the other parties at the time designated in this
Section or, in the absence of such designation, at any time up to and including
the date of the First Closing, if any one or more of the following shall have
occurred and be continuing:
(a) Termination By Any Party. Any party may terminate this Agreement
under any one or more of the following circumstances:
(1) at any time after termination of the Holdings Purchase Agreement
in accordance with its terms;
(2) a court or other governmental authority of competent jurisdiction
shall have issued an order, writ, injunction or decree or shall have taken any
other action permanently restraining or otherwise prohibiting the purchase of
the Initial Shares contemplated hereby and such order, writ, injunction, decree
or other action shall have become final and nonappealable.
(b) Termination By the Purchasers. The Purchasers may terminate this
Agreement
(1) on the date of the First Closing, if any condition precedent set
forth in Sections 6.1 or 6.2 shall not have been satisfied;
(2) at any time prior to or on the date of the First Closing, if S1
engages in any transaction (i) in which S1 proposes to issue, deliver or sell,
or authorize or propose the issuance, delivery or sale of, a number of shares of
voting capital stock greater than 50% of its shares of its outstanding shares of
voting capital stock, (ii) involving or contemplating the acquisition or
purchase of more than 50% of any class or series of capital stock, or 50% of the
assets of S1, (iii) any lease or sale transaction out of the ordinary course of
business of more than 50% of the assets of S1, or (iv) any liquidation or
dissolution of S1, without obtaining the prior written consent of the Purchasers
(which consent shall not be unreasonably withheld); and
(3) provided that the Purchasers are not then in breach of any
representation, warranty, covenant or other agreement contained herein that,
individually or in the aggregate, would give S1 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 S1, if such breach,
individually or in the aggregate, has had or is likely to have a Material
Adverse Effect on S1, and such breach shall not have been cured within 30 days
following receipt by the S1 of written notice of such breach from the Purchasers
or such breach, by its nature, cannot be cured prior to the First Closing
(c) Termination By S1. S1 may terminate this Agreement on the date of
the First Closing, if any condition precedent set forth in Sections 6.1 or 6.3
shall not have been satisfied.
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<PAGE> 361
9.3 EFFECT OF TERMINATION.
Termination of this Agreement pursuant to this Section shall not relieve
any party of any liability for a default or other breach, default or
nonperformance under this Agreement. Notwithstanding the foregoing, no party
hereto shall be liable for consequential or punitive damages in connection with
such termination.
SECTION 10
MISCELLANEOUS
10.1 ADDITIONAL ACTIONS AND DOCUMENTS.
Each of the parties hereto agrees that it will, at any time, prior to, at
or after the Third Closing, take or cause to be taken such further actions, and
execute, deliver and file or cause to be executed, delivered and filed such
further documents and instruments (including export license applications) as may
be necessary or reasonably requested in connection with the consummation of the
purchase and sale contemplated by this Agreement or in order to fully effectuate
the purposes, terms and conditions of this Agreement.
10.2 EXPENSES.
Each party hereto shall pay its own expenses incurred in connection with
this Agreement and in the preparation for and consummation of the transactions
contemplated hereby.
10.3 NOTICES.
All notices, demands, requests, or other communications which may be or are
required to be given or made by any party to any other party pursuant to this
Agreement shall be in writing and shall be hand delivered, mailed by first-class
registered or certified mail, return receipt requested, postage prepaid, or
delivered by overnight air courier, addressed as follows:
<TABLE>
<S> <C>
(i) if to S1:
Security First Technologies Corporation
3390 Peachtree Road, NE, Suite 1700
Atlanta, Georgia 30326
Attn.: President
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Attn.: Stuart G. Stein, Esq.
</TABLE>
B-31
<PAGE> 362
<TABLE>
<S> <C>
and
Hogan & Hartson L.L.P.
Avenue des Arts 41
1040 Brussels, Belgium
Attn.: Claud V. S. Eley, Esq.
(b) if to FICS, 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.
(c) if to any Purchaser, to the address set forth opposite such
Purchaser's name on Schedule 1 attached hereto.
</TABLE>
or such other address as the addressee may indicate by written notice to the
other parties. Each notice, demand, request, or communication which shall be
given or made in the manner described above shall be deemed sufficiently given
or made for all purposes at such time as it is delivered to the addressee (with
the return receipt, the delivery receipt, or the affidavit of messenger being
deemed conclusive but not exclusive evidence of such delivery) or at such time
as delivery is refused by the addressee upon presentation.
10.4 WAIVER.
No waiver by any party of any failure or refusal of any other party to
comply with its obligations under this Agreement shall be deemed a waiver of any
other or subsequent failure or refusal to so comply by such other party. No
waiver shall be valid unless in writing signed by the party to be charged and
only to the extent therein set forth.
10.5 BINDING EFFECT.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns.
10.6 ENTIRE AGREEMENT; AMENDMENT.
This Agreement, including the other instruments and documents referred to
herein or delivered pursuant hereto, contains the entire agreement among the
parties with respect to the subject matter hereof and supersedes all prior oral
or written agreements, commitments or understandings with
B-32
<PAGE> 363
respect to such matters. No amendment, modification or discharge of this
Agreement shall be valid or binding unless set forth in writing and duly
executed by the party against whom enforcement of the amendment, modification or
discharge is sought.
10.7 SEVERABILITY.
If any part of any provision of this Agreement shall be invalid or
unenforceable under applicable law, such part shall be ineffective to the extent
of such invalidity or unenforceability only, without in any way affecting the
remaining parts of such provisions or the remaining provisions of said
Agreement.
10.8 HEADINGS.
The headings of the sections and subsections contained in this Agreement
are inserted for convenience only and do not form a part or affect the meaning,
construction or scope thereof.
10.9 GOVERNING LAW.
This Agreement, the rights and obligations of the parties hereto, and any
claims or disputes relating thereto, shall be governed by and construed under
and in accordance with the laws of the State of Delaware, excluding the choice
of law rules thereof.
10.10 SIGNATURE IN COUNTERPARTS.
This Agreement may be executed in separate counterparts, none of which need
contain the signatures of all parties, each of which shall be deemed to be an
original, and all of which taken together constitute one and the same
instrument. It shall not be necessary in making proof of this Agreement to
produce or account for more than the number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
Except as expressly provided herein, this Agreement is made and entered
into for the sole protection and benefit of the parties hereto, and no other
person or entity shall have any right of action hereon, right to claim any right
or benefit from the terms contained herein or be deemed a third party
beneficiary hereunder.
10.11 NO THIRD PARTY BENEFICIARIES.
Except as expressly provided herein, this Agreement is made and entered
into for the sole protection and benefit of the parties hereto, and no other
person or entity shall have any right of action hereon, right to claim any right
or benefit from the terms contained herein or be deemed a third party
beneficiary hereunder.
10.12 ASSIGNABILITY.
All terms and provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto, and their respective transferees,
successors and assigns; provided, however, that neither this Agreement nor any
rights, privileges, duties and obligations of the parties hereto may be assigned
or delegated by any party hereto without the prior written consent of all the
parties to this Agreement and any such purported or attempted assignment shall
be null and void ab initio and of no force or effect provided, further that a
Purchaser may assign this Agreement, including rights, privileges, duties and
obligations hereunder to any affiliate of such Purchaser which is wholly or
substantially
B-33
<PAGE> 364
owned directly or indirectly by such Purchaser so long as such assignment does
not in any way materially delay or otherwise materially adversely impact the
ability of the parties hereto to effect the transactions contemplated hereby.
10.13 PARTIES NOT PARTNERS.
Nothing contained in this Agreement shall constitute any party as a partner
with, agent for or principal of any one or more of the other parties or their
successors and assigns
10.14 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
None of the representations, warranties, covenants and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the First Closing, except for those covenants and agreements contained
herein and therein which by their terms apply in whole or in part after the
First Closing.
10.15 CERTAIN DEFINITIONS.
References to "$" in this Agreement are to United States dollars. 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 shareholder,
spouse or other person living in the same household of such director, officer or
shareholder, or any company, partnership or trust in which any of the foregoing
persons is an officer, 5% or greater shareholder, general partner or 5% or
greater trust beneficiary.
"knowledge": with respect to any entity, refers to the knowledge of such
entity's directors and officers in the ordinary course of their duties in such
positions.
"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, means a condition, event,
change or occurrence that is reasonably likely to have a material adverse effect
upon (A) the financial condition, results of operations, business or properties
of the relevant entity (other than as a result of changes in laws or regulations
or accounting rules of general applicability or interpretations thereof), or (B)
the ability of the relevant entity to perform its obligations under, and to
consummate the transactions contemplated by, this Agreement.
[SIGNATURE PAGE FOLLOWS]
B-34
<PAGE> 365
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
SECURITY FIRST TECHNOLOGIES CORPORATION
By: /s/ JAMES S. MAHAN III
-------------------------------------------
Name: James S. Mahan III
Title: Chairman and Chief Executive
Officer
B-35
<PAGE> 366
THE PURCHASERS:
By: /s/
----------------------------------------
MICHEL AKKERMANS
PAMICA N.V.
By: /s/
----------------------------------------
Name:
Title:
GENERAL ATLANTIC PARTNERS 20, L.P.
By: GENERAL ATLANTIC PARTNERS, LLC, its
General Partner
By: /s/
----------------------------------------
Name:
Title:
GENERAL ATLANTIC PARTNERS 52, L.P.
By: GENERAL ATLANTIC PARTNERS, LLC, its
General Partner
By: /s/
----------------------------------------
Name:
Title:
GAP COINVESTMENT PARTNERS, L.P.
By: /s/
----------------------------------------
Name:
Title:
B-36
<PAGE> 367
GIMV N.V.
By: /s/
-----------------------------------------------------------------
Name:
Title:
- ------------------------------------------------------------------
GUY MOONS
- ------------------------------------------------------------------
STEVEN VAN ROSSEN
- ------------------------------------------------------------------
NADINE QUAEYHAEGENS
/s/
- ------------------------------------------------------------------
ETIENNE CASTIAUX
/s/
- ------------------------------------------------------------------
GOORT GELTEN
/s/
- ------------------------------------------------------------------
LOEK VAN DEN BOOG
/s/
- ------------------------------------------------------------------
FREDRICK DUMAS
B-37
<PAGE> 368
UNICO PORTFOLIO LTD.
By: /s/
-----------------------------------------------------------------
Name:
Title:
B-38
<PAGE> 369
FICS GROUP N.V.
(for the limited purposes set forth herein)
By: /s/
----------------------------------------
Name:
Title:
B-39
<PAGE> 370
SCHEDULE 1
<TABLE>
<CAPTION>
PURCHASER PERCENTAGE
--------- ----------
<S> <C>
Michel Akkermans............................................ 43.40
PAMICA N.V.................................................. 17.05
General Atlantic Partners 20, L.P........................... 23.99
GAP Coinvestment Partners, L.P.............................. 3.41
General Atlantic Partners 52, L.P........................... .53
GIMV N.V.................................................... 6.34
Guy Moons................................................... .27
Steven Van Rossen........................................... .05
Nadine Quaeyhaegens......................................... .14
Etienne Castiaux............................................ .14
Goort Gelten................................................ 1.71
Frederick Dumas............................................. .34
Loek van den Boog........................................... .92
UNICO PORTFOLIO Ltd......................................... 1.71
TOTAL............................................. 100.00%
</TABLE>
B-40
<PAGE> 371
ANNEX C
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SECURITY FIRST TECHNOLOGIES CORPORATION,
SAHARA STRATEGY CORPORATION
AND
EDIFY CORPORATION
DATED AS OF
MAY 16, 1999
C-1
<PAGE> 372
TABLE OF CONTENTS
<TABLE>
<S> <C>
PAGE
ARTICLE I THE MERGER........................................ C-5
1.1 The Merger........................................ C-5
1.2 Effective Time.................................... C-5
1.3 Effects of the Merger............................. C-6
1.4 Conversion of Edify Common Stock.................. C-6
1.5 Conversion of Merger Sub Common Stock............. C-7
1.6 Options........................................... C-7
1.7 Certificate of Incorporation...................... C-7
1.8 By-Laws........................................... C-8
1.9 Directors and Officers............................ C-8
1.10 Tax Consequences.................................. C-8
ARTICLE II EXCHANGE OF SHARES............................... C-8
2.1 S1 to Make Shares Available........................ C-8
2.2 Exchange of Shares................................. C-8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF EDIFY......... C-10
3.1 Corporate Organization............................ C-10
3.2 Capitalization.................................... C-10
3.3 Authority; No Violation........................... C-11
3.4 Consents and Approvals............................ C-12
3.5 Financial Statements; Exchange Act Filings; Books
and Records............................................ C-13
3.6 Broker's Fees..................................... C-13
3.7 Absence of Certain Changes or Events.............. C-14
3.8 Legal Proceedings................................. C-14
3.9 Taxes and Tax Returns............................. C-14
3.10 Employee Plans.................................... C-15
3.11 Certain Contracts................................. C-17
3.12 Agreements with Regulatory Agencies............... C-18
3.13 Certificate of Incorporation...................... C-18
3.14 Environmental Matters............................. C-18
3.15 Properties and Assets............................. C-19
3.16 Insurance......................................... C-19
3.17 Compliance with Applicable Laws................... C-20
3.18 Affiliates........................................ C-20
3.19 Ownership of S1 Common Stock...................... C-20
3.20 Fairness Opinion.................................. C-20
3.21 Change of Control Payments........................ C-21
3.22 Disclosure........................................ C-21
3.23 Board Approval.................................... C-21
3.24 Section 203 of the Delaware General Corporation
Law and Edify Rights Plan Not Applicable.......... C-21
3.25 Intellectual Property............................. C-22
3.26 Additional Information............................ C-24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF S1............. C-24
4.1 Corporate Organization............................ C-24
4.2 Capitalization.................................... C-25
</TABLE>
C-2
<PAGE> 373
<TABLE>
<S> <C>
4.3 Authority; No Violation........................... C-25
4.4 Consents and Approvals............................ C-26
4.5 Financial Statements; Exchange Act Filings; Books
and Records............................................ C-27
4.6 Broker's Fees..................................... C-28
4.7 Absence of Certain Changes or Events.............. C-28
4.8 Legal Proceedings................................. C-28
4.9 Taxes and Tax Returns............................. C-28
4.10 Employee Plans.................................... C-29
4.11 Certain Contracts................................. C-31
4.12 Environmental Matters............................. C-31
4.13 Properties and Assets............................. C-32
4.14 Insurance......................................... C-33
4.15 Compliance with Applicable Laws................... C-33
4.16 S1 Information.................................... C-33
4.17 Intellectual Property............................. C-33
4.18 BBRS Fairness Opinion............................. C-35
4.19 Merger Sub Board Approval......................... C-35
4.20 S1 Board Approval................................. C-36
4.21 Agreements with Regulatory Agencies............... C-36
4.22 Certificate of Incorporation...................... C-36
4.23 Affiliates........................................ C-36
4.24 Additional Information............................ C-36
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS......... C-36
5.1 Covenants of Edify................................ C-36
5.2 Covenants of S1................................... C-39
5.3 Compliance with Antitrust Laws.................... C-39
ARTICLE VI ADDITIONAL AGREEMENTS............................ C-40
6.1 Regulatory Matters................................ C-40
6.2 Access to Information............................. C-41
6.3 Stockholder Meetings.............................. C-42
6.4 Legal Conditions to Merger........................ C-42
6.5 Stock Exchange Listing............................ C-42
6.6 Employees......................................... C-43
6.7 Indemnification................................... C-43
6.8 Subsequent Interim and Annual Financial
Statements............................................. C-44
6.9 Additional Agreements............................. C-44
6.10 Advice of Changes................................. C-45
6.11 Current Information............................... C-45
6.12 Transaction Expenses of Edify..................... C-45
6.13 Form S-8.......................................... C-45
6.14 Edify ESPP........................................ C-45
6.15 Board of Directors................................ C-46
6.16 Bylaws............................................ C-46
ARTICLE VII CONDITIONS PRECEDENT............................ C-46
7.1 Conditions to Each Party's Obligation To Effect
the Merger............................................. C-46
7.2 Conditions to Obligations of S1 and Merger Sub.... C-47
7.3 Conditions to Obligations of Edify................ C-48
</TABLE>
C-3
<PAGE> 374
<TABLE>
<S> <C>
ARTICLE VIII TERMINATION AND AMENDMENT...................... C-49
8.1 Termination....................................... C-49
8.2 Effect of Termination............................. C-50
8.3 Amendment......................................... C-51
8.4 Extension; Waiver................................. C-51
ARTICLE IX GENERAL PROVISIONS............................... C-51
9.1 Closing........................................... C-51
9.2 Nonsurvival of Representations, Warranties and
Agreements............................................. C-51
9.3 Expenses; Breakup Fee............................. C-52
9.4 Notices........................................... C-52
9.5 Interpretation.................................... C-53
9.6 Counterparts...................................... C-53
9.7 Entire Agreement.................................. C-53
9.8 Governing Law..................................... C-53
9.9 Enforcement of Agreement.......................... C-53
9.10 Severability...................................... C-54
9.11 Publicity......................................... C-54
9.12 Assignment; Limitation of Benefits................ C-54
9.13 Additional Definitions............................ C-54
EXHIBITS
A Option Agreement
B Certificate of Merger
C Edify Stockholder Agreement
D S1 Stockholder Agreement
</TABLE>
C-4
<PAGE> 375
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.
C-5
<PAGE> 376
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.
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
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to exercise any such repurchase option or other right set forth in any such
restricted stock purchase agreement or other agreement.
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.
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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.
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
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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 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.
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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."
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
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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 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
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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.
(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
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(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 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.
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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, 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
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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 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
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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 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
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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 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
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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 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
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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 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
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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.
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).
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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.
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
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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
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
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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 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.
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(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."
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
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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 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
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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)
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
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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 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.
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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 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
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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 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
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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 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
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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 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,
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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, 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.
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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 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
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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 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
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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.
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.
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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.
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
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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, 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
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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 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;
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(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 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
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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.
(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
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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 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
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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.
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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, 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
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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 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.
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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 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
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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 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
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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.
(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
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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.
(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
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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.
(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
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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 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.
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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
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.
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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.
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.
</TABLE>
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<TABLE>
<S> <C>
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.
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
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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 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.
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"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 D
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SECURITY FIRST TECHNOLOGIES CORPORATION,
VERTICALONE ACQUISITION CORPORATION
AND
VERTICALONE CORPORATION
DATED AS OF
SEPTEMBER 23, 1999
D-1
<PAGE> 428
TABLE OF CONTENTS
<TABLE>
<S> <C>
PAGE
ARTICLE I THE MERGER........................................ D- 5
1.1 The Merger........................................ D- 5
1.2 Effective Time.................................... D- 6
1.3 Effects of the Merger............................. D- 6
1.4 Conversion of VerticalOne Capital Stock........... D- 6
1.5 Conversion of Merger Sub Common Stock............. D- 8
1.6 Options, Warrants and Other Rights................ D- 8
1.7 Certificate of Incorporation...................... D- 8
1.8 By-Laws........................................... D- 9
1.9 Directors and Officers............................ D- 9
1.10 Tax Consequences.................................. D- 9
ARTICLE II EXCHANGE OF SHARES AND ESCROW.................... D- 9
2.1 S1 to Make Shares Available....................... D- 9
2.2 Exchange of Shares................................ D- 9
2.3 Escrow Agreement.................................. D-11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF VERTICALONE... D-11
3.1 Organization and Standing......................... D-11
3.2 Authorization; Binding Obligation................. D-11
3.3 Subsidiaries...................................... D-12
3.4 Non-contravention................................. D-12
3.5 Taxes and Tax Returns............................. D-12
3.6 Capitalization.................................... D-13
3.7 Directors, Officers and Employees................. D-14
3.8 Financial Statements.............................. D-14
3.9 [OMITTED]......................................... D-15
3.10 Conduct of Business; Absence of Changes having a
Material Adverse Effect............................... D-15
3.11 Properties and Assets............................. D-15
3.12 Consents and Approval............................. D-15
3.13 Intellectual Property............................. D-16
3.14 Contracts......................................... D-17
3.15 Books and Records................................. D-18
3.16 Litigation; Disputes.............................. D-18
3.17 Pension and Benefit Plans......................... D-19
3.18 Compliance with Applicable Laws................... D-20
3.19 Fees and Expenses of Brokers and Others........... D-20
3.20 Disclosure........................................ D-20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF S1............. D-20
4.1 Organization and Standing......................... D-21
4.2 Authorization; Binding Obligation................. D-21
4.3 Subsidiaries...................................... D-22
4.4 Capitalization; Validity of Shares; Issuance...... D-22
4.5 Non-Contravention................................. D-22
4.6 Financial Statements; Exchange Act Filings; Books
and Records............................................ D-23
4.7 Properties and Assets............................. D-23
4.8 Consents and Approval............................. D-24
4.9 Litigation; Disputes.............................. D-24
</TABLE>
D-2
<PAGE> 429
<TABLE>
<S> <C>
4.10 Absence of Certain Changes or Events.............. D-25
4.11 Compliance with Applicable Laws................... D-25
4.12 Taxes and Tax Returns............................. D-25
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS......... D-26
5.1 Covenants of VerticalOne.......................... D-26
ARTICLE VI ADDITIONAL AGREEMENTS............................ D-28
6.1 Regulatory Matters................................ D-28
6.2 Access to Information............................. D-30
6.3 Stockholder Meetings.............................. D-30
6.4 Legal Conditions to Merger........................ D-31
6.5 Stock Exchange Listing............................ D-31
6.6 Employees......................................... D-31
6.7 Indemnification................................... D-32
6.8 Freely Tradable Shares............................ D-34
6.9 Additional Agreements............................. D-34
6.10 Advice of Changes................................. D-35
6.11 Current Information............................... D-35
6.12 Transaction Expenses of VerticalOne............... D-35
6.13 Form S-8.......................................... D-35
6.14 Lock-up........................................... D-36
6.15 Board of Directors................................ D-36
6.16 Tax Treatment..................................... D-37
ARTICLE VII CONDITIONS PRECEDENT............................ D-37
7.1 Conditions to Each Party's Obligation To Effect
the Merger............................................. D-37
7.2 Conditions to Obligations of S1 and Merger Sub.... D-38
7.3 Conditions to Obligations of VerticalOne.......... D-39
ARTICLE VIII TERMINATION AND AMENDMENT...................... D-40
8.1 Termination....................................... D-40
8.2 Effect of Termination............................. D-41
8.3 Amendment......................................... D-41
8.4 Extension; Waiver................................. D-42
ARTICLE IX GENERAL PROVISIONS............................... D-42
9.1 Closing........................................... D-42
9.2 [OMITTED]......................................... D-42
9.3 Expenses.......................................... D-42
9.4 Notices........................................... D-42
9.5 Interpretation.................................... D-43
9.6 Counterparts...................................... D-43
9.7 Entire Agreement.................................. D-44
9.8 Governing Law..................................... D-44
9.9 Enforcement of Agreement.......................... D-44
9.10 Severability...................................... D-44
9.11 Publicity......................................... D-44
9.12 Assignment; Limitation of Benefits................ D-44
9.13 Additional Definitions............................ D-45
</TABLE>
D-3
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<TABLE>
<S> <C>
EXHIBITS
A omitted
B Escrow Agreement
C omitted
D omitted
</TABLE>
D-4
<PAGE> 431
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of September 23, 1999 (this
"Agreement"), is entered into by and among Security First Technologies
Corporation, a Delaware corporation ("S1"), VerticalOne Acquisition Corporation,
a Delaware corporation and a wholly owned subsidiary of S1 ("Merger Sub"), and
VerticalOne Corporation, a Delaware corporation ("VerticalOne").
WHEREAS, the Boards of Directors of S1, Merger Sub and VerticalOne have
determined that it is advisable and 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 VerticalOne, with VerticalOne
being the Surviving Corporation (as defined in Section 1.1 hereof) and a wholly
owned subsidiary of S1 (the "Merger"); 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; and
WHEREAS, contemporaneous with execution of this Agreement, S1 and
VerticalOne are entering into that certain Stock Purchase Agreement dated as of
the date hereof (the "Investment Agreement"), pursuant to which S1 has agreed to
purchase $15,000,000 of a newly designated series of preferred stock of
VerticalOne; and
WHEREAS, contemporaneous with execution of this Agreement, S1 and
VerticalOne are entering into a Strategic Marketing Agreement, dated as of the
date hereof (the "Strategic Marketing Agreement"), pursuant to which S1 agrees
to market to its customers certain products and services of VerticalOne, and a
related Warrant Agreement, also dated as of the date hereof (the "S1 Warrant
Agreement"), pursuant to which VerticalOne has granted to S1 a warrant to
purchase up to 1,000,000 shares of common stock of VerticalOne on the terms and
subject to the conditions set forth therein; and
WHEREAS, the execution of this Agreement and the consummation of the
transactions contemplated hereby by VerticalOne (including the issuance by
VerticalOne of the Series C Preferred Stock) represents consideration for an
overall strategic relationship entered in by and between VerticalOne and S1 as
of the date hereof;
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
Section 251 of the Delaware General Corporation Law (the "DGCL"), at the
Effective Time (as defined in Section 1.2 hereof), Merger Sub shall merge into
VerticalOne, with VerticalOne 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. Notwithstanding the foregoing, the parties agree
that they will take all such actions as may be reasonably necessary (including,
without limitation, amending this Article I) to change the method of effecting
the Merger
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(including, without limitation, causing Merger Sub to be the Surviving
Corporation) if and to the extent reasonably necessary to satisfy the condition
set forth in Section 7.1(f); provided, however, that no such change shall (i)
alter or change the amount or kind of consideration to be issued to holders of
VerticalOne Capital Stock as provided for in this Agreement, (ii) adversely
affect the tax treatment of VerticalOne's stockholders or (iii) materially
impede or delay consummation of the transactions contemplated by this Agreement.
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 A hereto with the
Secretary of State of the State of Delaware (or at such later time as may be
agreed by VerticalOne 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.
1.4 CONVERSION OF VERTICALONE CAPITAL STOCK.
(a) At the Effective Time, subject to Section 1.4(c), 1.4(d), 1.4(e) and
1.4(g) hereof, each share of VerticalOne common stock, par value $0.001 per
share ("VerticalOne Common Stock"), issued and outstanding immediately prior to
the Effective Time (excluding shares held by stockholders who perfect their
dissenters' rights of appraisal as provided in Section 1.4(g) hereof) 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, (i)
0.1903 shares of S1 Common Stock, par value $0.01 per share ("S1 Common Stock")
(the "Firm Exchange Ratio") and (ii) the contingent right to receive up to
0.0097 shares of S1 Common Stock (as the same may be adjusted as provided
herein, the "Escrow Exchange Ratio"). The sum of the Firm Exchange Ratio and the
Escrow Exchange Ratio (0.2000 shares of S1 Common Stock) is referred to herein
as the "Exchange Ratio."
(b) At the Effective Time, subject to Sections 1.4(c), 1.4(d), 1.4(e)
and 1.4(g) hereof, each share of VerticalOne Series A Preferred Stock
("VerticalOne Series A Stock"), each share of VerticalOne Series B Preferred
Stock ("VerticalOne Series B Stock"), and each share of VerticalOne Series C
Preferred Stock ("VerticalOne Series C Stock" and, together with the VerticalOne
Series A Stock and the VerticalOne Series B Stock, the "VerticalOne Preferred
Stock") issued and outstanding immediately prior to the Effective Time
(excluding shares held by stockholders who perfect their dissenters' rights of
appraisal as provided in Section 1.4(g) hereof) 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, (i) the number of shares of
S1 Common Stock which equals the number of whole shares of VerticalOne Common
Stock (rounding down where necessary) into which such share of VerticalOne
Preferred Stock would be convertible immediately prior to the Effective Time,
pursuant to VerticalOne's certificate of incorporation as in effect at the
Effective Time, multiplied by the Firm Exchange Ratio, and (ii) the contingent
right to receive up to the number of shares of S1 Common Stock which equals the
number of whole shares of VerticalOne Common Stock (rounding down where
necessary) into which such share of VerticalOne Preferred Stock would be
convertible immediately prior to the Effective Time, pursuant
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to VerticalOne's certificate of incorporation as in effect at the Effective
Time, multiplied by the Escrow Exchange Ratio.
(c) At the Effective Time, all of the shares of VerticalOne Common Stock
and VerticalOne Preferred Stock ("VerticalOne Capital 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 VerticalOne Capital
Stock shall thereafter represent the right to receive (i) the number of whole
Firm Shares (as defined below), (ii) cash in lieu of fractional Firm Shares into
which the shares of VerticalOne Capital Stock represented by such Certificate
have been converted pursuant to Section 1.4(a) and 1.4(b) hereof, and (iii) the
contingent right to receive Escrow Shares (as defined below) as provided in the
Escrow Agreement. Certificates previously representing shares of VerticalOne
Capital 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 the S1 Common Stock, or pay a dividend or other distribution in
S1 Common Stock, then the Firm Exchange Ratio and the Escrow Exchange Ratio
shall be appropriately adjusted to fully reflect such split, combination,
dividend or distribution. For purposes of this Agreement, the "Firm Shares"
shall mean the aggregate number of shares of S1 Common Stock issuable pursuant
to Sections 1.4(a)(i) and 1.4(b)(i) and "Escrow Shares" shall mean the aggregate
number of shares of S1 Common Stock issuable pursuant to Sections 1.4(a)(ii) and
1.4(b)(ii).
(d) At the Effective Time, all shares of VerticalOne Capital Stock that
are owned by VerticalOne as treasury stock and all shares of VerticalOne Capital
Stock that are owned by S1 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 VerticalOne shall become treasury
stock of S1.
(e) 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
VerticalOne Capital Stock otherwise entitled to a fraction of a Firm Share 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
ten 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 date hereof.
(f) Following consummation of the Merger, no holder of VerticalOne
Capital Stock shall be entitled to dividends or any other rights in respect of
any fraction of a share of S1 Common Stock.
(g) Any holder of shares of VerticalOne Capital Stock who perfects such
holder's dissenters' rights in accordance with and as contemplated by Section
262 of the DGCL shall be entitled to receive such payments as may be determined
pursuant to such provision of Law; provided that no such payment shall be made
to any dissenting stockholder unless and until such dissenting stockholder has
complied with the applicable provisions of the DGCL and surrendered to the
Surviving Corporation the Certificate or Certificates representing the shares of
VerticalOne Capital Stock for which payment is being made. In the event that
after the Effective Time a dissenting stockholder of VerticalOne fails to
perfect or effectively withdraws or loses such holder's rights to appraisal and
of payment of such holder's shares of VerticalOne Capital Stock, the Surviving
Corporation shall issue and deliver the consideration to which such holder of
shares of VerticalOne
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Capital Stock is entitled under this Section 1.4 (without interest) upon
surrender of such holder's Certificate or Certificates.
1.5 CONVERSION OF MERGER SUB COMMON STOCK.
Each of the shares of the common stock, par value $.01 per share, of Merger
Sub ("Merger Sub Common Stock") issued and outstanding immediately prior to the
Effective Time shall be cancelled and exchanged for one share of Common Stock of
the Surviving Corporation and all of the shares of Common Stock of the Surviving
Corporation issued in exchange for shares of Merger Sub Common Stock shall
thereupon constitute all of the issued and outstanding shares of the Surviving
Corporation.
1.6 OPTIONS, WARRANTS AND OTHER RIGHTS.
At the Effective Time, each option, warrant or other right or instrument
(each, an "instrument") granted by VerticalOne to purchase shares of VerticalOne
Common Stock which is outstanding and unexercised immediately prior thereto,
whether or not vested, shall be converted automatically into a corresponding
right to purchase shares of S1 Common Stock in an amount and at an exercise
price to be determined as provided below and, if applicable to any particular
instrument, subject to the terms of VerticalOne's 1998 Stock Option Plan (the
"VerticalOne Plan"):
(a) The number of shares of S1 Common Stock to be subject to the
instrument immediately after the Effective Time shall be equal to the product of
the number of shares of VerticalOne Common Stock subject to the instrument
immediately prior to 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 whole share; and
(b) The exercise price per share of S1 Common Stock under the instrument
immediately after the Effective Time shall be equal to the exercise price per
share of VerticalOne Common Stock under the instrument immediately prior to the
Effective Time divided by the Exchange Ratio, provided that such exercise price
shall be rounded up to the nearest whole 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"). Except as set forth in SECTION 1.6 OF THE
VERTICALONE DISCLOSURE SCHEDULE, the duration, vesting schedule, exercisability
and other terms of each instrument immediately after the Effective Time shall be
the same as the corresponding terms in effect immediately prior to the Effective
Time. Except as set forth in SECTION 1.6 OF THE VERTICALONE DISCLOSURE SCHEDULE,
vesting of stock options under the VerticalOne Plan shall not be accelerated as
a result of the Merger. Continuous employment with VerticalOne shall be credited
to the optionee for purposes of determining the vesting of all assumed
VerticalOne options after the Effective Time. It is intended that VerticalOne
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 immediately 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 instrument notice of the
foregoing assumption by S1 of such VerticalOne instrument.
1.7 CERTIFICATE OF INCORPORATION.
At the Effective Time, the certificate of incorporation of VerticalOne, as
the Surviving Corporation, shall be amended to be the same form of certificate
of incorporation as Merger Sub, except that the name of the Surviving
Corporation shall be VerticalOne Corporation.
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1.8 BYLAWS.
At the Effective Time, the bylaws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the bylaws of the Surviving Corporation.
1.9 DIRECTORS AND OFFICERS.
At the Effective Time, the directors of Merger Sub, together with Gregg
Freishtat, and the officers of VerticalOne 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 AND ESCROW
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 VerticalOne (the "Exchange Agent"), for the benefit of
the holders of Certificates, for exchange in accordance with this Article II,
certificates representing the Firm Shares, cash in lieu of fractional Firm
Shares and any dividends or distributions pursuant to Section 2.2(b) hereof
(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 hereof and paid pursuant to Section 2.2(a) hereof in exchange for
outstanding shares of VerticalOne Capital 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 Firm
Shares, the cash in lieu of fractional Firm Shares into which the shares of
VerticalOne Capital Stock represented by such Certificate or Certificates shall
have been converted and any dividends or distributions pursuant to Section
2.2(b) hereof. VerticalOne 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 Firm Shares to which such holder of
VerticalOne Capital Stock shall have become entitled pursuant to the provisions
of Article I hereof, (y) a check representing the amount of cash in lieu of
fractional Firm 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 (z) any dividends or distributions pursuant to Section 2.2(b)
hereof, and the Certificate so surrendered shall
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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 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 such holder's VerticalOne Capital 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 reasonable 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
VerticalOne of the shares of VerticalOne Capital Stock that 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 the consideration
provided in Article I.
(e) Any portion of the Exchange Fund that remains unclaimed by the
former holders of VerticalOne Capital Stock for six months after the Effective
Time will be returned to S1. Any former holders of VerticalOne Capital Stock who
have not complied with this Article II prior to such return shall thereafter
look only to S1 for payment of their Firm Shares, cash in lieu of fractional
shares and unpaid dividends and distributions on S1 Common Stock deliverable in
respect of each share of VerticalOne Capital Stock such stockholder holds as
determined pursuant to this Agreement, in each case, without any interest
thereon. Notwithstanding the foregoing, none of S1, VerticalOne, the Exchange
Agent or any other person shall be liable to any former holder of shares of
VerticalOne Capital 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 a certificate representing the number of whole Firm Shares
to which the holder of such Certificate shall have become entitled pursuant to
the provisions of Article I hereof, cash in lieu of fractional shares
deliverable in respect thereof and any dividends or distributions pursuant to
Section 2.2(b) hereof pursuant to this Agreement.
(g) Whenever Firm Shares are deposited with the Exchange Agent pursuant
to Section 2.1 hereof, S1 shall also deposit the Escrow Shares, rounded to the
nearest whole share, and any
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dividends or distribution pursuant to Section 2.2(b) hereof to be issued and
paid pursuant to Section 1.4 hereof with American Stock Transfer and Trust
Company as escrow agent (the "Escrow Agent") to collectively be held in escrow
pursuant to the Escrow Agreement and distributed in accordance with terms
thereof.
2.3 ESCROW AGREEMENT.
Pursuant to the escrow agreement, attached hereto as EXHIBIT B, to be
entered into among S1, the stockholder representative as named in the escrow
agreement and the Escrow Agent (the "Escrow Agreement"), the Escrow Shares and
other property to be delivered pursuant to Section 2.2(g) hereof shall be
delivered to the Escrow Agent at Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF VERTICALONE
VerticalOne 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 VerticalOne 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 VerticalOne referenced below or otherwise required pursuant to this
Agreement are referred to herein as the "VerticalOne Disclosure Schedule."
3.1 ORGANIZATION AND STANDING.
VerticalOne is a corporation duly organized and validly existing under the
laws of the State of Delaware. VerticalOne has the full corporate power and
authority to own and operate its properties and assets, to carry on its business
as currently conducted, to execute and deliver this Agreement and, subject to
the conditions specified herein, to carry out and perform its obligations under
the terms of this Agreement. VerticalOne has furnished to S1 a true and complete
copy of VerticalOne's certificate of incorporation, as currently in effect, and
a true and complete copy of VerticalOne's bylaws, as currently in effect, in
both cases, certified by its corporate secretary.
3.2 AUTHORIZATION; BINDING OBLIGATION.
VerticalOne has all requisite corporate power and authority to enter into
and to deliver this Agreement and, subject to the adoption of this Agreement by
the holders of a majority of the outstanding shares of VerticalOne Common Stock,
by the holders of a majority of the outstanding shares of VerticalOne Series A
Stock, by the affirmative vote of a majority of the votes entitled to be cast by
the holders of the outstanding shares of VerticalOne Common Stock, VerticalOne
Series A Stock and VerticalOne Series B Stock, voting together as a single
class, and by a majority of the votes entitled to be cast by the holders of the
outstanding shares of VerticalOne Series B Stock, voting as a separate class, to
consummate the transactions contemplated hereby. 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 VerticalOne. The
Board of Directors of VerticalOne has declared the Merger and this Agreement
advisable and directed that this Agreement be submitted to VerticalOne's
stockholders for adoption at a VerticalOne special meeting of stockholders and,
except for the adoption of this Agreement by the requisite votes of the
appropriate group of VerticalOne stockholders, no other corporate proceedings on
the part of VerticalOne (except for matters related to setting the date, time,
place and record date for such special meeting) are necessary to approve or
adopt this Agreement or to consummate the transactions contemplated
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hereby. This Agreement has been duly and validly executed and delivered by
VerticalOne and (assuming due authorization, execution and deliver by S1 and
Merger Sub) constitutes a valid and binding obligation of VerticalOne
enforceable in accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
effecting the enforcement of creditor's rights.
3.3 SUBSIDIARIES.
VerticalOne has no subsidiaries and no equity investment or other interest
in, nor has VerticalOne made advances or loans to, any corporation, association,
partnership, joint venture or other entity.
3.4 NON-CONTRAVENTION.
Neither the execution and delivery of this Agreement by VerticalOne, nor
the consummation by VerticalOne of the transactions contemplated hereby, nor
compliance by VerticalOne with any of the terms or provisions hereof, will (i)
violate any provision of the certificate of incorporation or bylaws of
VerticalOne, or (ii) assuming that the consents and approvals referred to in
Sections 3.2 and 3.12 hereof are duly obtained, (x) violate any Laws (as defined
in Section 9.13 hereof) applicable to VerticalOne 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 VerticalOne 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 VerticalOne 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
VerticalOne or the Surviving Corporation.
3.5 TAXES AND TAX RETURNS.
(a) For purposes of this Section 3.5, VerticalOne shall include
VerticalOne and each other affiliated or related corporation or entity if
VerticalOne has or could have any material liability for the Taxes of such
corporation or entity. VerticalOne 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 Section 3.8 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 3.5 OF THE VERTICALONE 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
Section 3.8 are adequate (determined in accordance with GAAP) and are at least
equal to its liability for Taxes. There exists no proposed tax assessment
against VerticalOne except as disclosed in the financial statements referred to
in Section 3.8 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 VerticalOne. All Taxes that
VerticalOne 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 VerticalOne has been
satisfied for all years to and including 1998. No Taxing Authority has notified
VerticalOne of, or otherwise asserted, that there are any material deficiencies
with respect to the Tax Returns of
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VerticalOne subsequent to its incorporation. There are no material disputes
pending, or claims asserted for, Taxes or assessments of VerticalOne, nor has
VerticalOne 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 VerticalOne 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 VerticalOne in the financial statements referred to in Section 3.8
hereto. VerticalOne 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 requests therefor, and all other written
communications to or from Taxing Authorities relating to any material Tax
liability of VerticalOne.
(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.
3.6 CAPITALIZATION.
The authorized capital stock of VerticalOne consists of 40,000,000 shares
of common stock, $.001 par value per share, of which 7,552,400 shares are issued
and outstanding, and 15,980,097 shares of convertible preferred stock (3,919,243
shares of VerticalOne Series A Stock, 7,716,050 shares of VerticalOne Series B
Stock and 4,344,804 shares of VerticalOne Series C Stock), $.01 per
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value per share, of which 14,243,534 shares are issued and outstanding,
3,919,243 of which are VerticalOne Series A Stock, 7,716,049 shares are
VerticalOne Series B Stock, and 2,608,242 shares are VerticalOne Series C Stock.
SECTION 3.6 OF THE VERTICALONE DISCLOSURE SCHEDULE sets forth a true and correct
list of the shares of VerticalOne Capital Stock owned of record and beneficially
by each VerticalOne stockholder presently, to be updated immediately prior to
the Effective Time. 2,411,500 shares of VerticalOne Common Stock are reserved
for issuance of options and 14,243,534 shares of VerticalOne Common Stock are
reserved for conversion of VerticalOne Preferred Stock. In addition, a warrant
has been granted to Jeffrey Rubin which is exercisable for 45,000 shares of
VerticalOne Common Stock for an exercise price of $.10 per share, a warrant has
been issued to Michael Karlin for 90,000 shares of VerticalOne Common Stock for
an exercise price of $.32 per share, and a warrant has been issued to S1
pursuant to the Warrant Agreement. As of the date of this Agreement, except as
set forth above, VerticalOne 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 VerticalOne
Capital Stock or any other equity securities of VerticalOne or any securities
presenting the right to purchase or otherwise receive any shares of VerticalOne
Capital Stock, other than as set forth at Section 3.6 of the VerticalOne
Disclosure Schedule.
3.7 DIRECTORS, OFFICERS AND EMPLOYEES.
SECTION 3.7 OF THE VERTICALONE DISCLOSURE SCHEDULE sets forth an accurate
and complete list of all current directors, officers and employees of
VerticalOne, showing each such person's name, positions, and annual rate of
remuneration, and bonus arrangements and fringe benefits, not otherwise required
to be identified in SECTION 3.17 OF THE VERTICALONE DISCLOSURE SCHEDULE, for the
current fiscal year.
3.8 FINANCIAL STATEMENTS.
VerticalOne has prepared and furnished to S1, and there are included as
attachments to SECTION 3.8 OF THE VERTICALONE DISCLOSURE SCHEDULE, the balance
sheet of VerticalOne as of the end of the fiscal year ending December 31, 1998
and the statements of income, changes in stockholders' equity and cash flows for
such fiscal year, all of which are unaudited. VerticalOne also has prepared and
furnished to S1, and there are included as attachments to SECTION 3.8 OF THE
VERTICALONE DISCLOSURE SCHEDULE, the balance sheets of VerticalOne as of August
31, 1999, and the statements of income, changes in stockholders' equity and cash
flows for the period then ended, all of which are unaudited. The financial
statements referred to in the preceding two sentences, together with all
financial statements furnished to S1 after the date hereof pursuant to this
Agreement, are collectively referred to as the "VerticalOne Financial
Statements". The VerticalOne Financial Statements (a) are in accordance with the
books and records of VerticalOne, (b) present fairly the financial position of
VerticalOne as of the respective dates and the results of operations and changes
in financial position for the respective periods indicated, except that
unaudited interim financial statements are subject to year-end adjustments which
are not expected to be material in amount or effect, and (c) except as indicated
in the notes thereto, have been prepared in accordance with generally accepted
accounting principals ("GAAP") on a basis consistent with prior accounting
periods (except for the omission of footnotes). SECTION 3.8 OF THE VERTICALONE
DISCLOSURE SCHEDULE sets forth all changes in accounting methods (for financial
accounting purposes) at any time made, agreed to, requested or required with
respect to VerticalOne.
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3.9 [OMITTED].
3.10 CONDUCT OF BUSINESS; ABSENCE OF CHANGES HAVING A MATERIAL ADVERSE
EFFECT.
Since August 31, 1999, (i) the business of VerticalOne has been conducted
only in the ordinary course of business, (ii) there have been no changes in the
business financial condition or results of operations of VerticalOne which have
had a Material Adverse Effect on VerticalOne, (iii) VerticalOne has not incurred
any material liability, except as contemplated by this Agreement or in the
ordinary course of business and (iv) there has been no material change in any
policy or practice followed by VerticalOne in the ordinary course of business.
3.11 PROPERTIES AND ASSETS.
SECTION 3.11 OF THE VERTICALONE DISCLOSURE SCHEDULE lists all real property
owned by VerticalOne as of the date hereof. Except for (a) items reflected in
VerticalOne's financial statements as of August 31, 1999 referred to in Section
3.8 hereof, (b) exceptions to title that do not interfere materially with
VerticalOne'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 3.8 above), (d) properties and assets sold or transferred in the
ordinary course of business consistent with past practices since August 31,
1999, and (e) items listed in SECTION 3.11 OF THE VERTICALONE DISCLOSURE
SCHEDULE, VerticalOne has good and, as to owned real property, marketable and
insurable title to all its properties and assets, reflected in the VerticalOne
Financial Statements, free and clear of all encumbrances. All tangible personal
property used by VerticalOne is in good operating condition and repair (subject
to ordinary wear and tear) and is suitable and adequate for the uses for which
it is intended and is being used. There are no Laws or conditions of record
which interfere with the intended use by VerticalOne of any of the real or
tangible personal property owned, leased, or occupied by it.
3.12 CONSENTS AND APPROVAL.
(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
VerticalOne's and S1's stockholders at the special meetings 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 votes of the stockholders of VerticalOne, (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 and state securities (or
related) laws and, if applicable, the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), and (v) such filings, authorizations or
approvals as may be set forth in SECTION 3.12(a) OF THE VERTICALONE 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 VerticalOne of
this Agreement and (2) the consummation by VerticalOne of the Merger and the
other transactions contemplated hereby, 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 VerticalOne to consummate the
transactions contemplated hereby or (y) a Material Adverse Effect on
VerticalOne, S1 or the Surviving Corporation following the Effective Time.
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(b) VerticalOne hereby represents to S1 that it has no knowledge of any
reason relating to VerticalOne why approval or effectiveness of any of the
applications, notices or filings referred to in Section 3.12(a) cannot be
obtained or granted on a timely basis.
3.13 INTELLECTUAL PROPERTY.
3.13.1 SECTION 3.13 OF THE VERTICALONE DISCLOSURE SCHEDULE sets forth
separately all patents and patent applications (domestic and foreign), trademark
registrations and trademark applications (domestic and foreign) and all
copyright registrations (x) of which VerticalOne is the exclusive owner,
identifying the subject matter and any related registration, (y) that
VerticalOne uses pursuant to license or other authorization of a third party,
listing the subject matter, any ancillary registration and the source of
authorization and (z) that VerticalOne owns jointly with a third party. SECTION
3.13 OF THE VERTICALONE DISCLOSURE SCHEDULE also identifies all owned or
licensed software that is integral to the delivery by VerticalOne of the
services it offers as of the date hereof to its end users.
3.13.2 VerticalOne owns or has the right to use pursuant to license,
sublicense, agreement or permission all Intellectual Property. Except as set
forth in SECTION 3.13 OF THE VERTICALONE DISCLOSURE SCHEDULE and license fees
paid in respect of "shrink-wrap" software, VerticalOne pays no royalty to anyone
with respect to any Intellectual Property. Each item of Intellectual Property
owned or used by VerticalOne immediately prior to the Closing Date will be owned
or available for use on identical terms and conditions immediately subsequent to
the Closing Date.
3.13.3 SECTION 3.13 OF THE VERTICALONE DISCLOSURE SCHEDULE identifies each
patent, franchise, trademark, copyright or other registration that has been
issued to VerticalOne with respect to any of its Intellectual Property,
identifies each pending application or application for registration that
VerticalOne has made with respect to any of its Intellectual Property and
identifies each license, agreement or other permission that VerticalOne has
granted to any third party with respect to any of its Intellectual Property
(together with any exceptions thereto). VerticalOne has made available to S1
correct and complete copies of all such patents, franchises, registrations,
applications, licenses, agreements and permissions (as amended to date) and all
other written documentation evidencing ownership and prosecution (if applicable)
of each such item. SECTION 3.13 OF THE VERTICALONE DISCLOSURE SCHEDULE also
identifies each trade name or unregistered trademark used by VerticalOne in
connection with its business. With respect to each item of Intellectual Property
required to be identified on SECTION 3.13 OF THE VERTICALONE DISCLOSURE
SCHEDULE:
(i) the item is not subject to any outstanding injunction, judgment,
order, decree, ruling or charge;
(ii) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand is pending or, to the knowledge of VerticalOne, is
threatened which challenges the legality, validity, enforceability, use or
ownership of the item; and
(iii) VerticalOne has not licensed or permitted any third party to use
any such item.
3.13.4 VerticalOne has not infringed upon or misappropriated any
intellectual property of any third party, and VerticalOne has not received any
unresolved charge, complaint, claim, demand or notice alleging any such
infringement from any third party or misappropriation (including any claim that
VerticalOne must obtain an independent license from any third party or refrain
from using any intellectual property rights of any third party). To the
knowledge of VerticalOne, no third party has infringed upon or misappropriated
any Intellectual Property rights of VerticalOne.
3.13.5 The Software owned or purported to be owned by VerticalOne was
either (i) developed by employees of VerticalOne within the scope of their
employment; (ii) developed by independent
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contractors or consultants who have assigned their rights to VerticalOne
pursuant to written agreements; or (iii) otherwise acquired by VerticalOne from
a third party.
3.13.6 All employees and independent contractors and consultants of
VerticalOne have executed and delivered to VerticalOne, agreements regarding the
protection of VerticalOne's proprietary information and the assignment to
VerticalOne of any Intellectual Property arising from services performed for
VerticalOne by such persons.
3.13.7 VerticalOne has obtained or entered into appropriate written
agreements with its employees and with third parties in connection with the
disclosure to or use or appropriation by, employees and third parties, of trade
secret or proprietary information owned by VerticalOne and not otherwise
protected by a patent, a patent application, copyright, trademark, or other
registration or legal scheme ("Confidential Information"). Except as set forth
in SECTION 3.13 OF THE VERTICALONE DISCLOSURE SCHEDULE, VerticalOne has not
furnished the source code of any of its 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.
3.13.8 VerticalOne will have taken reasonable steps with the intent of
ensuring that its 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 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-VerticalOne products (e.g., hardware, software and firmware) used in or in
combination with VerticalOne's products, properly exchange data with
VerticalOne's products, except for failures which would not be materially
adverse to the business of VerticalOne.
3.13.9 For purposes of this Section 3.13, the term "Intellectual Property"
shall mean the following items as necessary for the operation of the business of
VerticalOne of gathering of personal information from various Web sites and
delivering that information to end users over the Internet: (a) inventions
(whether patentable or unpatentable and whether or not reduced to practice), all
improvements thereto and all patents, patent applications and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof, (b)
trademarks, service marks, trade dress, logos, trade names and corporate names,
including all goodwill associated therewith and all applications, registrations
and renewals in connection therewith, (c) copyrightable works, copyrights and
all applications, registrations and renewals in connection therewith, (d) trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information and business and
marketing plans and proposals), (e) computer software, together with all
translations, adaptations, derivations and combinations thereof (including data
and related documentation), (f) all other proprietary rights, and (g) all copies
and tangible embodiments thereof (in whatever form or medium).
3.14 CONTRACTS.
3.14.1 SECTION 3.14 OF THE VERTICALONE DISCLOSURE SCHEDULE contains an
accurate and complete list as of the date of this Agreement of: (a) all
Contracts (as defined in Section 9.13 hereof), including: (i) all Contracts for
the employment of any officer, employee, consultant or independent contractor
(other than standard offer letters which provide for no more than at-will
employment); (ii) all distributor, dealer, manufacturer's representative, sales
agency or advertising agreements; (iii) all Contracts for the future purchase,
sale or lease of materials, supplies, services, merchandise
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or equipment involving payments of more than $250,000 over its remaining term
(including, without limitation, periods covered by any option to renew by either
party); (iv) all Contracts for the purchase, sale or lease of any real estate;
and (v) all Contracts granting any preferential rights to purchase any of its
real or tangible personal property, other than in the ordinary course of
business; (b) all Contracts which contains any provisions requiring VerticalOne
to indemnify any other party thereto; (c) all joint venture agreements; (d) all
outstanding loans to any affiliate of VerticalOne; (e) all Contracts containing
Contracts not to compete and exclusivity Contracts that impose any restriction
on any business operations of VerticalOne; and (f) all Contracts guaranteeing
payment or any other obligation of any affiliate of VerticalOne to any other
Person. VerticalOne has made available to S1 true and complete copies of each
Contract listed (or required to be listed) in SECTION 3.14 OF THE VERTICALONE
DISCLOSURE SCHEDULE (and all amendments and modifications thereto)
(collectively, the "Material Contracts"). VerticalOne has performed and, to the
knowledge of VerticalOne, every other party has performed, each material term,
covenant and condition of each Material Contract that is to be performed by any
of them at or before the date of this Agreement.
3.14.2 Each Material Contract, to the knowledge of VerticalOne, is in full
force and effect and constitutes a valid and binding obligation of, and is
legally enforceable against, each party thereto. There does not exist under any
Material Contract any event of default and no event has occurred that would,
with the passage of time or compliance with any applicable notice requirements,
constitute a default by VerticalOne, or, to the knowledge of VerticalOne, any
other party under the Material Contracts. Except as set forth in SECTION 3.14 OF
THE VERTICALONE DISCLOSURE SCHEDULE, to the knowledge of VerticalOne, no party
to any of the Material Contracts intends to cancel, terminate, or exercise any
option under any of the Contracts. Except as set forth in SECTION 3.14 OF THE
VERTICALONE DISCLOSURE SCHEDULE, consummation of the transactions contemplated
by this Agreement will not (and will not give any firm, person or other entity a
right to) terminate or modify any rights of, or accelerate or increase any
obligation of, VerticalOne under any Material Contract.
3.14.3 VerticalOne, as lessee, has the right under valid and subsisting
leases to occupy, use and possess all property leased by it, and there has not
occurred under any such lease any breach, violation or default by VerticalOne
which would have a Material Adverse Effect on VerticalOne, and VerticalOne has
not experienced any material uninsured damage or destruction with respect to
such properties since December 31, 1998. VerticalOne enjoys peaceful and
undisturbed possession under all leases for the use of all property under which
it is the lessee.
3.15 BOOKS AND RECORDS.
Except as set forth in SECTION 3.15 OF THE VERTICALONE DISCLOSURE SCHEDULE,
the books of account, stock records, minute books and other records of
VerticalOne are true and complete and have been maintained in accordance with
good business practices, and the matters contained therein are appropriately and
accurately reflected in the Financial Statements.
3.16 LITIGATION; DISPUTES.
3.16.1 Except as set forth on SECTION 3.16 OF THE VERTICALONE DISCLOSURE
SCHEDULE, there are no actions, suits, claims, arbitrations, proceedings or
investigations pending, or to the knowledge of VerticalOne, threatened or
reasonably anticipated against, affecting or involving VerticalOne or its
business or properties or assets, or the transactions contemplated by this
Agreement, at law or in equity or admiralty, or before or by any court,
arbitrator or governmental authority, domestic or foreign. VerticalOne is not
operating under, subject to or in default with respect to any order, award,
writ, injunction, decree or judgment of any court, arbitrator or governmental
authority.
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3.16.2 VerticalOne is not involved in or, to the knowledge of VerticalOne,
does not reasonably anticipate any dispute with any of its current or former
employees, agents, brokers, distributors, vendors, customers, business
consultants, representatives or independent contractors (or any current or
former employees of any of the foregoing persons or entities).
3.17 PENSION AND BENEFIT PLANS.
3.17.1 SECTION 3.17 OF THE VERTICALONE DISCLOSURE SCHEDULE sets forth a
true and complete list of each employee benefit plan (within the meaning of
Section 3(3) of ERISA), arrangement or agreement that is maintained or
contributed to as of the date of this Agreement, or that has within the last six
years been maintained or contributed to, by VerticalOne or any other entity
which together with VerticalOne would be deemed a "single employer" within the
meaning of Section 4001 of ERISA or Code Sections 414(b), (c) or (m) or under
which VerticalOne has any liability (collectively, the "Plans").
3.17.2 VerticalOne has heretofore made available to S1 true, correct and
complete copies of each of the Plans and all related documents, including but
not limited to (i) the actuarial report for such Plan (if applicable) since such
Plan came into existence, (ii) the most recent determination letter from the
Internal Revenue Service (if applicable) for such Plan, (iii) the current
summary plan description and any summaries of material modification, (iv) all
annual reports (Form 5500 series) for each Plan filed since such Plan came into
existence, (v) all agreements with fiduciaries and service providers relating to
the Plan, and (vi) all substantive correspondence relating to any such Plan
addressed to or received from the Internal Revenue Service, the Department of
Labor, the Pension Benefit Guaranty Corporation or any other governmental
agency.
3.17.3 Except as set forth at SECTION 3.17 OF THE VERTICALONE DISCLOSURE
SCHEDULE, (i) each of the Plans has been operated and administered in all
material respects in compliance with applicable Laws, including but not limited
to ERISA and the Code, (ii) each of the Plans intended to be "qualified" within
the meaning of Section 401(a) of the Code is so qualified, (iii) with respect to
each Plan which is subject to Title IV of ERISA, the present value of accrued
benefits under such Plan, based upon the actuarial assumptions used for funding
purposes in the most recent actuarial report prepared by such Plan's actuary
with respect to such Plan, did not, as of its latest valuation date, exceed the
then current value of the assets of such Plan allocable to such accrued
benefits, (iv) no Plan provides benefits, including, without limitation, death
or medical benefits (whether or not insured), with respect to current or former
employees of VerticalOne beyond their retirement or other termination of
service, other than (w) coverage mandated by applicable Law, (x) death benefits
or retirement benefits under a Plan that is an "employee pension plan," as that
term is defined in Section 3(2) of ERISA, (y) deferred compensation benefits
under a Plan that are accrued as liabilities on the books of VerticalOne, or (z)
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
VerticalOne that has not been satisfied in full, and no condition exists that
presents a material risk to VerticalOne incurring a material liability
thereunder, (vi) no Plan is a "multi employer pension plan," as such term is
defined in Section 3(37) of ERISA, (vii) all contributions or other amounts
payable by VerticalOne as of the Effective Time with respect to each Plan and
all other liabilities of VerticalOne with respect to each Plan, in respect of
current or prior plan years have been paid or accrued in accordance with
generally accepted accounting practices and Section 412 of the Code, (viii)
VerticalOne has not engaged in a transaction in connection with which
VerticalOne could be subject to either a civil penalty assessed pursuant to
Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section 4975 or 4976
of the Code, (ix) to the knowledge of VerticalOne, there are no pending,
threatened or anticipated claims (other than routine claims for benefits) by, on
behalf of or against any of the Plans or any trusts related thereto, and
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(x) all Plans (other than Plans providing for the payment of benefits from the
general assets of VerticalOne) could be terminated as of the Effective Time
without material liability; (xi) no Plan, program, agreement or other
arrangement, either individually or collectively, provides for any payment by
VerticalOne that would not be deductible under Code Sections 162(a)(1), 162(m)
or 404 or that would constitute a "parachute payment" within the meaning of Code
Section 280G; (xii) no "accumulated funding deficiency" as defined in Section
302(a)(2) of ERISA or Section 412 of the Code, whether or not waived, and no
"unfunded current liability" as determined under Section 412(l) of the Code
exists with respect to any Plan; and (xiii) no Plan has experienced a
"reportable event" (as such term is defined in Section 4043(b) of ERISA) that is
not subject to an administrative or statutory waiver from the reporting
requirement.
3.18 COMPLIANCE WITH APPLICABLE LAWS.
VerticalOne has not received any notice of any alleged violation of any
federal, state or local Law relating to VerticalOne or the assets or properties
of VerticalOne.
3.19 FEES AND EXPENSES OF BROKERS AND OTHERS.
Except as set forth in SECTION 3.19 OF THE VERTICALONE DISCLOSURE SCHEDULE,
no agent, broker, investment or commercial banker, person or firm acting on
behalf of VerticalOne is or will be entitled to any broker's or finder's fee or
any other commission or similar fee directly or indirectly in connection with
any of the transactions contemplated by this Agreement.
3.20 DISCLOSURE.
None of the information supplied or to be supplied by or on behalf of
VerticalOne for inclusion 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 make the statements made therein, not misleading, except that no
representation or warranty is made by VerticalOne with respect to statements
made or incorporated by reference therein about S1 or Merger Sub. None of the
information supplied or to be supplied by or on behalf of VerticalOne for
inclusion in the Joint Proxy Statement/Prospectus will, at the time the Joint
Proxy Statement/Prospectus is mailed to the stockholders of VerticalOne or S1,
at the time of VerticalOne Special Meeting or the S1 Special 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 in order to make the
statements made therein, in the light of the circumstances under which they were
made, no misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF S1
S1 hereby makes the following representations and warranties to VerticalOne
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 VerticalOne 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 are referred to herein as
the "S1 Disclosure Schedule."
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4.1 ORGANIZATION AND STANDING.
(a) S1 is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. S1 has the full corporate
power and authority to own and operate its properties and assets, to carry on
its business as currently conducted, to execute and deliver this Agreement, to
sell and issue the S1 Common Stock hereunder, and, subject to the conditions
specified herein, to carry out and perform its obligations under the terms of
this Agreement. S1 has furnished to VerticalOne a true and complete copy of S1's
certificate of incorporation, as currently in effect, and a true and complete
copy of S1's bylaws, as currently in effect, in both cases, certified by its
corporate secretary.
(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 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 except as set forth at SECTION 4.1 OF
THE S1 DISCLOSURE SCHEDULE. 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 VerticalOne, are true,
correct and complete copies of such documents as in effect as of the date of
this Agreement.
4.2 AUTHORIZATION; BINDING OBLIGATION.
(a) S1 has all requisite corporate power and authority to enter into and
to 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 S1
Special Meeting at which the issuance of the shares of S1 Common Stock in the
Merger contemplated hereby is considered, to consummate the transactions
contemplated hereby. 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 S1. The Board of Directors of S1 has
declared the issuance of the shares of S1 Common Stock in the Merger and this
Agreement advisable and directed that the issuance of the shares of S1 Common
Stock in the Merger be submitted to S1's stockholders for approval at the S1
Special Meeting and, except for the approval of such matter 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 S1 Special Meeting) are necessary to approve this Agreement or to consummate
the transactions contemplated hereby. This Agreement, has been duly and validly
executed and delivered by S1, and constitutes a valid and binding obligation of
S1 enforceable in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws effecting the enforcement of creditor's rights.
(b) Merger Sub has all requisite corporate power and authority to enter
into and to deliver this Agreement, and to consummate the transactions
contemplated hereby. 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 the
Merger Sub has declared this Agreement advisable and directed the 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 (except for matters related to setting the date, time, place and
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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
constitutes a valid and binding obligation of Merger Sub enforceable in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws effecting the
enforcement of creditor's rights.
4.3 SUBSIDIARIES.
S1's direct subsidiaries are Security First Technologies, Inc., Horizontal
Corporation, Sahara Strategy Corporation, S1 Europe Holdings, N.V. and Security
First Technologies Holding LLC, and S1 does not otherwise directly own any other
corporation, association or business entity.
4.4 CAPITALIZATION; VALIDITY OF SHARES; ISSUANCE.
(a) The authorized capital stock of S1 consists of (i) 350,000,000
shares of S1 Common Stock, of which 27,674,239 shares were outstanding at August
31, 1999 and (ii) 25,000,000 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," 749,064 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 August
31, 1999, 391,450 shares of Series A Convertible Preferred Stock, 749,064 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 13,953,024 shares of S1 Common Stock reserved for issuance pursuant to
employee stock options (of which options for 8,960,912 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 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 4.4(a) OF THE S1
DISCLOSURE SCHEDULE.
(b) Except as set forth at SECTION 4.4(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 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.
4.5 NON-CONTRAVENTION.
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
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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) assuming that the
consents and approvals referred to in Sections 4.2 and 4.8 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.
4.6 FINANCIAL STATEMENTS; EXCHANGE ACT FILINGS; BOOKS AND RECORDS.
S1 has previously made available to VerticalOne 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 Securities and
Exchange Commission ("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 S1, and the interim
financial statements of S1 as of and for the six months ended June 30, 1999 and
1998, as included in S1's quarterly report on Form 10-Q for the quarter ended
June 30, 1999, as filed with the SEC. The financial statements referred to in
this Section 4.6 (including the related notes, where applicable) (the "S1
Financial Statements") 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
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 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 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
VerticalOne 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.
4.7 PROPERTIES AND ASSETS.
Except for (a) items reflected in S1's consolidated financial statements as
of December 31, 1998 referred to in Section 4.6 hereof, (b) exceptions to title
that do not interfere materially with S1'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
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statements referred to in Section 4.6 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 4.7 OF THE S1
DISCLOSURE SCHEDULE, S1 (for purposes of this section, including its
Subsidiaries) has good, and as to real property, valid and marketable title to
all of its properties and assets reflected in the S1 Financial Statements, free
and clear of all encumbrances, except as set forth in the S1 Financial
Statements. All personal property used by S1 is in good operating condition and
repair (subject to ordinary wear and tear) and is suitable and adequate for the
uses for which it is intended or is being used. Each of S1 and its Subsidiaries
owns or possesses the right to use all material trademarks, service marks, trade
names, copyrights, patents, and licenses currently used by it in the conduct of
its business. No material product or service offered and no material trademark,
service mark, or similar right used by S1 or its Subsidiaries infringes any
rights or patents of any other person, and, as of the date hereof, neither S1
nor any of its Subsidiaries has received any written or oral notice of any claim
of such infringement. There are no Laws, conditions of record, or other
impediments which interfere with the intended use by S1 of any of the property
owned, leased, or occupied by it.
4.8 CONSENTS AND APPROVAL.
(a) Except for (i) the effectiveness of a 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 and state securities (or related) laws and, if applicable,
the HSR Act, (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 4.8 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 and Merger Sub of this
Agreement and (2) the consummation by S1 and Merger Sub of the Merger, the S1
Issuance 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
VerticalOne, S1 or the Surviving Corporation following the Effective Time.
(b) S1 hereby represents to VerticalOne that it has no knowledge of any
reason relating to S1 or its Subsidiaries why approval or effectiveness of any
of the applications, notices or filings referred to in Section 4.8(a) cannot be
obtained or granted on a timely basis.
4.9 LITIGATION; DISPUTES.
Except as set forth in SECTION 4.9 OF THE S1 DISCLOSURE SCHEDULE, there are
no actions, suits, claims, arbitrations, proceedings or investigations pending,
or to the knowledge of S1, threatened or reasonably anticipated against,
affecting or involving S1 or its business or properties or assets, or the
transactions contemplated by this Agreement, at law or in equity or admiralty,
or before or by any court, arbitrator or governmental authority, domestic or
foreign in each case which will have a Material Adverse Effect on S1. S1 is not
operating under, subject to or in default with respect to any order, award,
writ, injunction, decree or judgment of any court, arbitrator or governmental
authority.
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4.10 ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as disclosed in its reports filed prior to the date hereof under the
Exchange Act, there have been no changes in the business, operations, results of
operations or financial condition of S1 and its Subsidiaries which have had a
Material Adverse Effect on S1, and since December 31, 1998 neither S1 nor any of
its Subsidiaries has incurred any material liability, except as contemplated
hereby or in the ordinary course of their business consistent with their past
practices and which has not had a Material Adverse Effect on S1. Since December
31, 1998, S1 and its Subsidiaries have carried on their respective businesses in
the ordinary and usual course consistent with their past practices.
4.11 COMPLIANCE WITH APPLICABLE LAWS.
Neither S1 nor any Subsidiary thereof has received any notice of any
alleged violation, of any federal, state or local Law relating to S1, its
Subsidiaries or the assets or properties of S1 or its Subsidiaries.
4.12 TAXES AND TAX RETURNS.
For purposes of this Section 4.12, 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 Section 4.6 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 4.12 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 Section 4.6 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 Section 4.6 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 Section 4.6 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 VerticalOne 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
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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.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 COVENANTS OF VERTICALONE.
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 with the prior written
consent of S1, VerticalOne shall carry on its business in the ordinary course
consistent with past practices. VerticalOne will use its reasonable efforts to
(x) preserve its business organization intact, (y) keep available to itself and
S1 the present services of the employees of VerticalOne and (z) preserve for
itself and S1 the goodwill of the customers of VerticalOne and others with whom
business relationships exist. Without limiting the generality of the foregoing,
and except as set forth in the VERTICALONE DISCLOSURE SCHEDULE or as otherwise
contemplated by this Agreement or consented to by S1 in writing, VerticalOne
shall not:
(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
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, or (ii)
repurchase, redeem or otherwise acquire (except repurchases of unvested shares
in connection with the termination of the employee relationship with any
employee pursuant to and in accordance with stock option or purchase agreements
in effect on the date of this Agreement or entered into after the date of the
Agreement in compliance herewith), any shares of the capital stock of
VerticalOne, or any securities convertible into or exercisable for any shares of
the capital stock of VerticalOne;
(c) issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock, or enter into any
agreement with respect to any of the foregoing, except upon the conversion of
shares of the Preferred Stock in accordance with VerticalOne's certificate of
incorporation or the exercise or fulfillment of instruments, all to the extent
outstanding and in existence on the date of this Agreement or issued after the
date of this Agreement in compliance herewith;
(d) amend its certificate of incorporation, bylaws 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. VerticalOne 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.
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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 VerticalOne or (iii) the acquisition in any manner of a substantial
equity interest in, or a substantial portion of the assets of VerticalOne other
than the transactions contemplated or permitted by this 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
VerticalOne, as well as any lease or sale transaction out of the ordinary course
of business of more than 20% of the assets of VerticalOne or any liquidation or
dissolution of VerticalOne;
(f) make capital expenditures aggregating in excess of $250,000;
(g) enter into any new line of business or, except in the ordinary
course of business, or 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 contact to which VerticalOne 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 the
VerticalOne Plan or any agreement, arrangement, plan or policy between
VerticalOne and one or more of its current or former directors or officers, (ii)
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) other than normal course increases in pay, consistent with past
practice, (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 increases in pay, consistent with
past practice, (iv) hire any new employee at an annual base salary compensation
in excess of $150,000, (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 practices; (vi) promote any employee other than consistent with past
practices, or (vi) 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;
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(m) sell or purchase any real property or enter into a lease, relocate,
open or close any office, except that VerticalOne may enter into a lease and
open an office at a to-be-determined location in Northern California;
(n) make any equity investment or commitment to make such an investment
in any entity or real estate;
(o) 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;
(p) 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;
(q) agree or commit to do any of the actions set forth in (a) - (p)
above.
The consent of S1 to any action by VerticalOne 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.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 REGULATORY MATTERS.
(a) Upon the execution and delivery of this Agreement, S1 and
VerticalOne (as to information to be included therein pertaining to VerticalOne)
shall promptly cause to be prepared and filed with the SEC a registration
statement of S1 on Form S-4, including the joint proxy statement - prospectus
(the "Joint Proxy Statement/Prospectus") to be delivered to the VerticalOne and
S1 stockholders in connection with the Merger (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 VerticalOne and S1. S1 and VerticalOne 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 VerticalOne is discovered by such
party which should be set forth in an amendment of, or a supplement to, the
Registration Statement, including the Joint Proxy Statement/Prospectus, 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 Joint Proxy Statement/Prospectus 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
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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 VerticalOne 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 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.
(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). VerticalOne 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 VerticalOne 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) Each of S1 and VerticalOne 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, the HSR Act. In the event a
suit is threatened or instituted challenging the Merger as violative of
antitrust laws, each of S1 and VerticalOne shall use its reasonable best efforts
to avoid the filing of, or resist or resolve such suit. S1 and VerticalOne shall
use their reasonable best efforts to take such action as may be required by: (x)
the DOJ or the FTC in order to resolve such objections as either of them may
have to the Merger under antitrust laws, or (y) 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 VerticalOne which S1 reasonably determines to be material to S1
or to benefits of the transaction for which it has bargained for hereunder.
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(e) S1 and VerticalOne 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 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, VerticalOne 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, VerticalOne shall make available to S1 all information
concerning its business, properties and personnel as S1 may reasonably request
(except as to information which is confidential or competitively sensitive
("Confidential Matters")) provided that such investigation shall be reasonably
related to the transactions contemplated hereby and shall not interfere
unnecessarily with normal operations. Each party 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 September 10, 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
VerticalOne, 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 VerticalOne to fulfill its
obligations pursuant to this Agreement or which may be reasonably necessary for
VerticalOne 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 by it during
such period pursuant to the requirements of federal securities laws and all
other information concerning its business as VerticalOne may reasonably request
(except Confidential Matters). VerticalOne 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 or covenants of
the other set forth herein.
(d) VerticalOne shall provide S1 with true, correct and complete copies
of all financial information provided to the directors of VerticalOne in
connection with meetings of its Board of Directors or committees thereof, except
as to Confidential Matters. S1 shall provide the chief executive office of
VerticalOne true, correct and complete copies of all financial information
provided to the directors of S1 in connection with meetings of its board of
Directors or committees thereof, except as to Confidential Information.
6.3 STOCKHOLDER MEETINGS.
(a) VerticalOne 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
adoption of this Agreement (the "VerticalOne Special Meeting"). The Board of
Directors of VerticalOne shall declare the advisability of the Merger and
recommend to
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VerticalOne's stockholders adoption of this Agreement, together with any matters
incident thereto, and shall oppose and 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 VerticalOne reasonably
determines, following consultation with VerticalOne's legal counsel, that to
declare the Merger inadvisable or 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 S1 issuing of shares of S1 Common Stock in the Merger so that it may
perform its obligations under Article II hereof, and to increase the number of
shares available under its Stock Option Plan so that it may perform its
obligations under Section 6.6 hereof (the "S1 Special Meeting"). The Board of
Directors of S1 shall recommend to S1's stockholders approval of such issuance
of S1 Common Stock.
(c) The Board of Directors of S1 shall approve the Merger as the sole
stockholder of Merger Sub. S1 shall vote, and shall cause each of its
Subsidiaries to vote, all shares of VerticalOne Capital Stock owned by it or any
of its Subsidiaries in favor of adoption of this Agreement.
(d) VerticalOne and S1 will coordinate and cooperate with respect to the
timing of, calling, mailing notice and convening the VerticalOne Special Meeting
and the S1 Special Meeting.
6.4 LEGAL CONDITIONS TO MERGER.
Each of S1 and VerticalOne 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 VerticalOne
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 VerticalOne options assumed hereunder to be approved for quotation
on the Nasdaq Stock Market National Market System (or any 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, in connection with the Merger, 2.0 million shares of
S1 Common Stock will be available for grant to employees of VerticalOne,
pursuant to one or more of the S1 stock option plans. The selection of the
optionees and the number of shares subject to each such option shall be made by
Gregg Freishtat or his designee (the "Employee Representative") and ratified by
S1 in accordance with its stock option plans, such ratification not to be
unreasonably withheld. The optionees may be selected before or after the Closing
Date. The exercise price of options granted at Closing or for two months after
the Closing Date shall be the lesser of the fair market value of a share of S1
Common Stock as of the close of business on the date hereof or the Closing Date
(fair market value meaning the closing price of S1 Common Stock on the
applicable day). The exercise price of options granted after such two-month
period shall be the fair market value of the S1
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Common Stock on the date of grant. Except as otherwise provided in the specific
option grant to an optionee as consented to by S1, the options granted to each
optionee shall vest over four years, 25% at each one-year anniversary date of
the grant. Notwithstanding Section 5.1 hereof, VerticalOne may grant instruments
to purchase any number of shares of VerticalOne Common Stock after the date
hereof but prior to the Closing Date, provided that (i) the exercise or
conversion price with respect to any such instrument is not less than $5.751 per
share and (ii) the grant of any such instrument to purchase shares of
VerticalOne Common Stock shall, upon consummation of the Merger, have the effect
of reducing the number of shares of S1 Common Stock (determined by converting
the number of shares of VerticalOne Common Stock subject to such instruments
into the corresponding number of shares of S1 Common Stock at the Exchange
Ratio) otherwise available for grant pursuant to this Section 6.6(a).
(b) S1 will have no obligation to retain any employee or group of
employees of VerticalOne following the Effective Time. As soon as practicable
after the execution of this Agreement, VerticalOne and S1 shall confer and work
together in good faith to agree upon mutually acceptable employee benefit and
compensation arrangements (and terminate VerticalOne employee plans immediately
prior to the Effective Time, if appropriate) so as to provide benefits to
VerticalOne employees initially upon the Merger which are generally equivalent
to those being provided to employees of S1 at the Effective Time as long as such
benefits are not materially less favorable as those available to the employees
of VerticalOne immediately preceding the Effective Time. If, however, during a
two-year period beginning on the Closing Date, S1 causes the termination of a
VerticalOne employee over the objection of the Employee Representative, such
employee shall be paid a one-time severance payment equal to his or her then
current salary for 90 days and any options granted under the VerticalOne Plan or
granted pursuant to Section 6.6(a) hereof which are then unvested, but which
vest in the next twelve months, will automatically vest.
(c) Any shares of VerticalOne Common Stock subject to options currently
outstanding under the VerticalOne Plan, which options are forfeited by an
employee who leaves VerticalOne's employment or are otherwise terminated in
accordance with the VerticalOne Plan without being exercised, shall be available
for re-grant by the Employee Representative before or at any time within two
years following the Closing Date subject to the ratification provided for in
Section 6.6(a). Any such re-grants that take effect after the Merger shall be
effected as grants of instruments to purchase shares of S1 Common Stock, after
taking into account the conversion of the shares of VerticalOne Common Stock
underlying such forfeited options into shares of S1 Common Stock at the Exchange
Ratio, and taking into account the appropriate exercise price for such
instruments based on the provisions of Section 6.6(a) of this Agreement.
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 VerticalOne (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 VerticalOne or any of VerticalOne's subsidiaries, or a trustee
administering an employee benefit plan of VerticalOne or (ii) this Agreement or
any of the transactions contemplated hereby, whether in any case asserted or
arising before or after the Effective Time (an "Indemnifiable Claim"), 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 bylaws of VerticalOne.
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(b) It is understood and agreed that after the Effective Time, the
Surviving Corporation and S1 shall indemnify and hold harmless, as and to the
fullest extent permitted by applicable law and the certificate of incorporation
and bylaws of the Surviving Corporation or the certificate of incorporation and
bylaws of S1, 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 in
connection with an Indemnifiable Claim, 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 withheld or delayed).
(c) 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 (1) S1 would be
permitted to advance such expenses pursuant to the DGCL and S1's certificate of
incorporation or bylaws, and (2) 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 certificate of
incorporation or bylaws, VerticalOne'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 Section 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.
(d) S1 shall use commercially reasonable efforts to cause the persons
serving as officers and directors of VerticalOne 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
VerticalOne'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 150% of the premium for current coverage (the "Maximum Amount"),
and for a period not less than two years. If the amount of the premiums
necessary to maintain or procure such insurance coverage exceeds the Maximum
Amount, S1 shall use its reasonable efforts to maintain the most advantageous
policies of directors' and officers' liability insurance obtainable for a
premium equal to the Maximum Amount.
(e) 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
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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.
(f) In addition to the obligations listed in Section 6.7(b), S1 agrees
to indemnify, defend and hold harmless the Indemnified Parties at all times
after the Effective Time from and against any and all claims, damages, losses,
liabilities, payments, costs, obligations and expenses (including, without
limitation, all legal, accounting and other professional fees and disbursements)
(collectively, "Damages") to the extent such Damages arise out of, result from
or relate to:
(1) a breach in any material respect of any representation or
warranty made by S1 contained in this Agreement; or
(2) a breach in any material respect of any agreement or undertaking
made by S1 in this Agreement, the Escrow Agreement, the Investment Agreement,
the Warrant Agreement, or any other agreement delivered by or on behalf of
VerticalOne or S1 pursuant to this Agreement.
(g) All representations and warranties, covenants, agreements and
undertakings of VerticalOne and S1 continued in or made pursuant to this
Agreement or in any certificate furnished pursuant hereto shall survive for a
period of 12 months after the Effective Time; provided, however, that if a claim
is still pending under the Escrow Agreement at the end of such period, the
particular representation, warranty, covenant, agreement and/or undertaking upon
which such claim is based will survive (but only with respect to such claim)
until the claim is resolved in accordance with the provisions of the Escrow
Agreement.
(h) Each party shall cooperate with the other in determining the
validity of any third party claim or assertion and in defending the validity of
any third party claim or assertion in defending against third parties with
respect to the same.
6.8 FREELY TRADABLE SHARES.
If, for whatever reason, any former VerticalOne stockholder receives shares
of S1 Common Stock at the Effective Time that are either "restricted securities"
within the meaning of SEC Rule 144(a)(3) under the Securities Act of 1933, as
amended (the "Securities Act"), or otherwise (other than by reason of the
application of the restrictions set forth in Section 6.14 or, in the case of a
former VerticalOne stockholder who becomes an affiliate of S1, by reason of S1
trading policies applicable to others similarly situated) is precluded by Rule
145 under the Securities Act from selling or disposing of all of the shares of
S1 Common Stock received by such person in the Merger within one calendar
quarter immediately following the Effective Time in the absence of an effective
registration statement therefor, shall be entitled to registration rights for
such shares as set forth in EXHIBIT C.
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
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.
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6.10 ADVICE OF CHANGES.
S1 and VerticalOne shall promptly advise the other party of any change or
event that, individually or in the aggregate, has had, or would reasonably be
expected 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 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
VerticalOne with the covenants set forth in Section 5.1 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 VERTICALONE.
(a) For planning purposes, VerticalOne shall, within 30 days from the
date hereof, provide S1 with its estimated budget of transaction-related
expenses reasonably anticipated to be payable by VerticalOne in connection with
this transaction, including the fees and expenses of counsel, accountants,
investment bankers and other professionals. VerticalOne 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, VerticalOne shall
ask all of its attorneys and other professionals to render current and correct
invoices for all unbilled time and disbursements. VerticalOne shall accrue
and/or pay all of such amounts promptly thereafter.
(c) S1, in reasonable consultation with VerticalOne, 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 S1 Special Meeting and the VerticalOne Special Meeting. VerticalOne 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 VerticalOne stock options, as
described in Section 1.6 of this Agreement, and, to the extent not already
covered by an effective registration statement, the shares of S1 Common Stock
issuable with respect to S1 options granted pursuant to Sections 6.6(a) and
6.6(c) of this Agreement, in each case as soon as reasonably practicable after
the Effective Time and shall maintain the effectiveness of each such
registration statement thereafter for so long as any of such options or other
rights remain outstanding.
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6.14 LOCK-UP.
(a) The holders of VerticalOne Series A Stock and VerticalOne Series B
Stock shall not be permitted to sell any shares of S1 Common Stock received upon
conversion of their VerticalOne Preferred Stock pursuant to this Agreement for
180 days after the Closing Date; (x) provided, however, (i) if S1 does not give
notice (the "Offering Notice") within 90 days after the Closing Date of its
intention to register shares for sale in a public offering, (ii) if S1 does not
file a registration statement regarding such sale within 21 days after the date
of the Offering Notice, or (iii) if such registration statement is filed, it is
subsequently withdrawn or the offering to which it relates is subsequently
abandoned or otherwise terminated, each holder of VerticalOne Series A Stock and
VerticalOne Series B Stock may sell half of such holder's shares 90 days after
the Closing Date and the other half 180 days after the Closing Date; and (y)
provided further that if such registration is effected, but each of the holders
of VerticalOne Series A Stock and VerticalOne Series B Stock are not able (under
the terms of any underwriting agreement for the offering to which such
registration statement relates) to sell at least one-half of such holder's
shares in such registration, then each former holder of VerticalOne Series A
Stock and VerticalOne Series B Stock may sell such number of such holder's
shares of S1 Common Stock as is equal to the difference between one-half of such
holder's shares and the number of shares of such holder sold in the offering for
the remainder of the 180 days after the Closing Date. In the event that such
holders are permitted to sell S1 Common Stock during the 180 day period after
the Closing Date, other than shares sold in the offering to which such Offering
Notice relates or other than shares sold in accordance with proviso (y) of the
preceding sentence, each holder of VerticalOne Series A Stock and VerticalOne
Series B Stock may not sell more than 25,000 shares per day.
(b) VerticalOne shall use its best efforts to cause all holders of
shares of VerticalOne Common Stock outstanding as of the Effective Time to agree
not to sell any shares of S1 Common Stock received upon conversion of such
VerticalOne Common Stock pursuant to this Agreement except as follows: 33% of
the S1 Common Stock received may be sold six months after the Closing Date; 66%,
12 months after the Closing Date; and the other 100%, 18 months after the
Closing Date.
(c) The agreements set forth in this section shall be memorialized by a
lock-up agreement attached hereto as EXHIBIT D, which VerticalOne shall use its
best efforts to cause the holders of VerticalOne Common Stock, VerticalOne
Series A Stock and VerticalOne Series B Stock to execute.
(d) Each certificate representing shares of S1 Common Stock received by
holders of VerticalOne Common Stock, VerticalOne Series A Stock and VerticalOne
Series B Stock in the Merger shall be stamped or otherwise imprinted with a
legend substantially in the following form:
The sale, transfer or assignment, pledge, or encumbrance of the
securities represented by this certificate are subject to the terms and
conditions of an Agreement and Plan of Merger dated September 23, 1999 among
Security First Technologies Corporation, VerticalOne Acquisition Corporation and
VerticalOne Corporation. Copies of such agreement may be obtained at no cost by
written request made by the holder of record of this certificate to the
Secretary of Security First Technologies Corporation.
S1 need not register a transfer of legended S1 Common Stock and may
instruct its transfer agent not to register such transfer, unless the conditions
specified in the legend are satisfied.
6.15 BOARD OF DIRECTORS.
Promptly following the Effective Time, the Board of Directors of S1 will
take all actions necessary in order for Gregg Freishtat to be appointed promptly
to S1's Board of Directors for a term ending at the third annual meeting of S1
stockholders after the Effective Time; provided, however,
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that S1 shall have no obligation to invite Gregg Freishtat to serve on S1's
Board of Directors if he is not both Chief Executive Officer and a member in
good standing of VerticalOne's Board of Directors immediately prior to the
Effective Time.
6.16 TAX TREATMENT.
Each of the parties undertakes and agrees to use its reasonable efforts to
cause the Merger, and to take no action which would cause the Merger not, to
qualify for treatment as a "reorganization" within the meaning of Section 368(a)
of the Internal Revenue Code for federal income tax purposes.
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 VerticalOne Special Meeting by the
affirmative vote of a majority of the votes entitled to be cast by the holders
of the outstanding shares of VerticalOne Common Stock, VerticalOne Series A
Stock and VerticalOne Series B Stock, voting together as a single class, and by
a majority of the votes entitled to be cast by the holders of the outstanding
shares of VertricalOne Series C Stock, voting as a separate class, in person or
by proxy. The issuance of shares of S1 Common Stock in the Merger 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 any 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; provided, however,
this condition is not applicable if Section 6.8 becomes applicable.
(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
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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) 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.
(f) FEDERAL TAX OPINION.
S1 and VerticalOne shall have received from Alston & Bird LLP,
VerticalOne's special counsel, an opinion to S1 and VerticalOne, 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 VerticalOne, S1, Merger Sub, their respective affiliates and others.
If Alston & Bird LLP does not render such opinion, this condition may be
satisfied if Hogan & Hartson L.L.P., S1's special counsel, 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 VerticalOne 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
VerticalOne. 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 VerticalOne
by each of the President and Chief Executive Officer and the Chief Financial
Officer of VerticalOne to the foregoing effect.
(b) PERFORMANCE OF COVENANTS AND AGREEMENTS OF VERTICALONE.
VerticalOne 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 VerticalOne, S1 or the
Surviving Corporation. S1 shall have received a certificate signed on behalf of
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VerticalOne by each of the President and Chief Executive Officer and the Chief
Financial Officer of VerticalOne to such effect.
(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 VerticalOne under any
Contract shall have been obtained except for those, the failure of which to
obtain, will not result in a Material Adverse Effect on S1 or VerticalOne.
(d) NO MATERIAL ADVERSE EFFECT.
There shall have been no Material Adverse Effect with respect to
VerticalOne, which is continuing.
(e) ACCOUNTANT'S COMFORT LETTER.
VerticalOne shall have caused to be delivered on the respective dates
thereof to S1 "comfort letters" from KPMG LLP, VerticalOne'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 VerticalOne, with
respect to VerticalOne's financial data presented in the Joint Proxy
Statement/Prospectus, which letters shall be based upon Statements on Auditing
Standards Nos. 72 and 76.
7.3 CONDITIONS TO OBLIGATIONS OF VERTICALONE.
The obligation of VerticalOne to effect the Merger is also subject to the
satisfaction or waiver by VerticalOne 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.
VerticalOne 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 VerticalOne, S1 or the
Surviving Corporation. VerticalOne 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 VerticalOne or S1, if applicable:
(a) by mutual consent of S1 and VerticalOne 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 VerticalOne 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 VerticalOne if the Merger shall not have been
consummated on or before January 10, 2000 (the "Original Final Date"), 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; provided, however, that
if the Merger has not been consummated as of the Original Final Date because S1
or VerticalOne has not received a required consent or approval from one or more
Governmental Entities, or any waiting period required by law has not expired or
been terminated, in either case in a time frame sufficient to permit the Merger
to be consummated by the Original Final Date; or in the event that S1, in its
discretion, reasonably exercised, postpones the Closing due to the pending
nature of a proposed acquisition or business combination of another Person by S1
or an underwritten offering of its equity or debt securities, then S1 may, by
the delivery to VerticalOne of the notice (an "Extension Notice") not earlier
than January 6, 2000 and not later than the close of business on the Original
Final Date, extend the Closing Date to a date not later than March 1, 2000 (and
such extension shall be given effect irrespective of whether VerticalOne
responds as contemplated in the following sentence). Upon receipt of such
Extension Notice, VerticalOne may, in its sole discretion, provide notice to S1
within five business days following its receipt of such Extension Notice, of its
desire to consummate the Merger on the basis of its satisfaction of the
conditions to Closing set forth in Sections 7.2(a), (b), (c) and (d). If
VerticalOne so elects, then it shall provide to S1 the certificates referred to
in the final sentences of Sections 7.2(a) and 7.2(b) as to its satisfaction of
such conditions as of the Original Final Date (or such later date as of which
such notice from VerticalOne is delivered) (the date of such delivery, the
"Certificate Date"). The effect of the delivery of such certificate shall be as
follows: (i) VerticalOne shall be deemed to have satisfied such conditions to
Closing as of the Certificate Date and no further satisfaction of such
conditions on the part of VerticalOne shall be necessary as of the Closing Date
and (ii) the "Distribution Date," as such term is defined in the Escrow
Agreement shall mean one year from the Certificate Date;
(d) by either S1 or VerticalOne (provided that S1 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 either the S1
Special Meeting or the VerticalOne Special Meeting or at any adjournment or
postponement thereof, respectively;
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(e) by either S1 or VerticalOne (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 VerticalOne (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
VerticalOne, S1 or the Surviving Corporation;
(g) by S1, if VerticalOne's Board of Directors, for any reason, (i)
fails to call and hold within 45 days of the effectiveness of the Registration
Statement the VerticalOne Special Meeting to consider and approve this Agreement
and the transactions contemplated hereby, (ii) withdraws or 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 VerticalOne'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; and
(h) by VerticalOne, 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 the S1 Special Meeting 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 VerticalOne or fails to recommend to stockholders the approval
of the issuance of shares of S1 Common Stock in the Merger.
8.2 EFFECT OF TERMINATION.
In the event of termination of this Agreement by either S1 or VerticalOne
as provided in Section 8.1 hereof, this Agreement shall forthwith become void
and have no effect except (i) the last two sentences of Section 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 VerticalOne or S1; provided,
however, that after any approval of the transactions contemplated by this
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Agreement by VerticalOne'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 VerticalOne, (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 VerticalOne. 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
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 and 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 [OMITTED].
9.3 EXPENSES.
Except as provided in Section 6.12(c) and in this Section 9.3, 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 and all printing and mailing
expenses associated with the registration statement and the Joint Proxy
Statement/Prospectus shall be borne by S1.
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
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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 VerticalOne, to:
VerticalOne Corporation
Two Concourse Parkway, Suite 700
Atlanta, GA 30328
Attn: Gregg S. Freishtat
Chairman and Chief Executive Officer
with a copy (which shall not constitute notice) to:
Alston & Bird LLP
601 Pennsylvania Avenue, N.W.
North Building, 11th Floor
Washington, DC 20004
Attn.: David E. Brown, Jr., 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
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parties and delivered to the other parties, it being understood that all parties
need not sign the same counterpart.
9.7 ENTIRE AGREEMENT.
This Agreement (including the disclosure schedules, exhibits, documents and
the instruments referred to herein, which hereby incorporated by reference)
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 Escrow Agreement, the Confidentiality
Agreement and the Certificate of Merger.
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 any national securities exchange on which the S1 Common Stock may become
listed), so long as this Agreement is in effect, neither S1 nor VerticalOne
shall, or shall permit any of S1'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 or the Certificate of Merger without the consent of the other
party, which consent shall not be unreasonably withheld. S1 and VerticalOne
agree that the joint press release announcing the signing of this Agreement
shall contain a statement regarding the use of VerticalOne'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,
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inure to the benefit of and be enforceable by the parties and their respective
successors and assigns. Except as otherwise specifically provided in Sections
6.6 and 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 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.
"affiliate": of any Person means any director, officer or 5% or greater
stockholder of such Person, any 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.
"Contract": shall mean any contract, agreement, license, instrument and
understanding (whether or not in writing) to which VerticalOne or S1 is a party
which, if it imposes a future annual monetary obligation on any party thereto,
that monetary obligation is $25,000 or greater, except for a Contract for which
another monetary obligation is specified herein.
"knowledge": "know" or "known" 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 VerticalOne, as the case
may be, means a condition, event, change or occurrence that has had or would
have a material adverse effect upon VerticalOne or upon 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 VerticalOne or S1 and its 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, or (ii) changes in general
economic conditions or changes affecting the industry generally in which such
entity operates, or (iii) changes in the trading price for S1 Common Stock
(excluding any condition, event, change or occurrence underlying such change to
the extent such condition, event, change or occurrence would otherwise
constitute a Material Adverse Effect), or (B) the ability of S1 or VerticalOne
to perform its obligations under, and to consummate the transactions
contemplated by, this Agreement or the Certificate of Merger.
"Person": shall mean an individual, corporation, partnership, association,
joint venture, trust, unincorporated organization, other entity or group (as
defined in Section 13(d) of the Exchange Act).
"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 VerticalOne 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/ ROBERT F. STOCKWELL
-------------------------------------------
Name: Robert F. Stockwell
Title: Chief Financial Officer and
Treasurer
VERTICALONE ACQUISITION CORPORATION
By: /s/ ROBERT F. STOCKWELL
-------------------------------------------
Name: Robert F. Stockwell
Title: Director and President
VERTICALONE CORPORATION
By: /s/ NEAL W. MCEWEN
-------------------------------------------
Name: Neal W. McEwen
Title: President and Chief Financial
Officer
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<PAGE> 473
EXHIBIT B
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made and entered into as of
January , 2000, by and among Security First Technologies Corporation, a
Delaware corporation ("S1"), , as representative (the "Stockholder
Representative") of the interests of the former stockholders of VerticalOne
Corporation, a Delaware corporation ("VerticalOne"), and American Stock Transfer
& Trust Company, as escrow agent, hereunder (including any successor escrow
agent, the "Escrow Agent").
WITNESSETH
VerticalOne Acquisition Corporation ("Merger Sub") is a wholly owned
subsidiary of S1 and each of S1, Merger Sub and VerticalOne is a party to an
Agreement and Plan of Merger, dated as of September 23, 1999 (the "Merger
Agreement"), pursuant to which Merger Sub has on the Closing Date (as defined in
the Merger Agreement) merged (the "Merger") with and into VerticalOne with
VerticalOne surviving the Merger and becoming a wholly owned subsidiary of S1.
Pursuant to Section 1.4 of the Merger Agreement, each share of VerticalOne
Capital Stock (as defined in the Merger Agreement) was converted into and
exchanged for the right to receive (i) a number of shares of common stock, par
value $0.001 per share, of S1 ("S1 Common Stock") and (ii) the contingent right
to receive a number of shares of S1 Common Stock (including any cash or other
property distributable in respect thereof, the "Escrow Shares").
Pursuant to the terms of the Merger Agreement, the Escrow Shares have been
issued and will be held by the Escrow Agent pursuant to the terms of this
Agreement until termination of this Agreement as provided herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
ARTICLE 1
ESTABLISHMENT OF ESCROW
1.1 ESCROW SHARES. On this date, S1 has executed a stock certificate in
negotiable form representing the Escrow Shares and naming the Escrow Agent, on
behalf of the respective interests of the former holders of VerticalOne Capital
Stock (other than holders who perfected their dissenters' rights of appraisal as
provided in Section 1.4(g) of the Merger Agreement) (the "Stockholders"), as the
registered holder. The Escrow Agent acknowledges receipt of the Escrow Shares
and agrees to hold and disburse the Escrow Shares for the benefit of S1 and the
Stockholders, as the case may be, in accordance with the provisions of this
Agreement, with the same force and effect as if the Escrow Shares had been
delivered by S1 to each Stockholder and subsequently delivered by such
Stockholder to the Escrow Agent.
1.2 STOCKHOLDER PERCENTAGE INTERESTS. On this date, S1 and VerticalOne have
prepared and delivered to the Stockholder Representative a schedule showing for
each Stockholder (a) the respective percentage interest (the "Percentage
Interest") of each such Stockholder in the Escrow Shares, and (b) the
corresponding aggregate maximum number of shares of S1 Common Stock issuable to
each Stockholder, subject to the adjustments provided herein.
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ARTICLE 2
ASSERTION AND RESOLUTION OF CLAIMS
2.1 DEFINITIONS. As used in this Agreement, the following terms shall have
the following meanings:
(a) "AGGREGATE VALUE" at any time shall mean the product of the Value
Per Share and the number of Escrow Shares then held in escrow pursuant to
this Agreement.
(b) "DISPUTED LOSS NOTICE" shall mean a Loss Notice that is disputed
by the Stockholder Representative by delivery of a Protest Notice.
(c) "DISTRIBUTION DATE" shall mean the date that is one year from the
earlier of (i) the date of the Effective Time or (ii), if applicable, the
Certificate Date (as defined in the Section 8.1(c) of the Merger
Agreement).
(d) "LOSS" shall mean any direct or indirect demand, claim, damage,
payment, obligation, action or cause of action, assessment, loss,
liability, cost or expense, including without limitation, penalties,
interest on any amount payable to a third party as a result of the
foregoing, and any legal or other expense reasonably incurred in connection
with investigating or defending any claim or action, whether or not
resulting in any liability, and any amount paid in settlement of any claim
or action.
(e) "LOSS NOTICE" shall mean a written notice, as prescribed in
Section 2.3 hereof, provided by S1 to the Escrow Agent and the Stockholder
Representative setting forth in reasonable detail the nature and amount of
an Recoverable Loss or potential Recoverable Loss.
(f) "PROTEST NOTICE" shall mean a written notice, as prescribed in
Section 2.3 hereof, provided by the Stockholder Representative to S1 if the
Stockholder Representative disputes any Loss Notice received from S1.
(g) "RECOVERABLE LOSS" shall mean any Loss for which S1 may obtain
recovery pursuant to Section 2.2 hereof.
(h) "VALUE PER SHARE" shall mean, with respect to determining the
number of Escrow Shares attributable to any Recoverable Loss, the average
of the closing prices per share of S1 Common Stock on the Nasdaq Stock
Market's National Market System for the ten trading days immediately
preceding the date of the Loss Notice relating to such Recoverable Loss (as
reported in The Wall Street Journal or, if not reported therein, any other
authoritative source selected by S1).
(i) Any other capitalized term used herein but not defined herein
shall have the same meaning as provided in the Merger Agreement.
2.2 RIGHT TO REIMBURSEMENT. Subject to the express limitations of Section
3.5 hereof, S1 shall be entitled to receive a distribution of a number of Escrow
Shares having an aggregate Value Per Share in the amount of any Recoverable Loss
suffered or incurred by S1, its Subsidiaries (including VerticalOne), and their
respective directors, officers and employees, as and when due, which arises out
of or results from (i) any inaccuracy in any of the representations and
warranties of VerticalOne existing as of the earlier of (x) the date of closing
of the Merger Agreement or (y) if applicable, the Certificate Date or (ii)
breach of any of the covenants and agreements of VerticalOne set forth in the
Merger Agreement.
2.3 NOTICE OF CLAIM. If S1 incurs a Recoverable Loss, or should S1
negotiate a proposed settlement in satisfaction of a potential Recoverable Loss,
it shall promptly provide a Loss Notice to
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the Stockholder Representative and the Escrow Agent. If the Stockholder
Representative disputes the amount sought under any such Loss Notice or
otherwise disputes the right of S1 to be reimbursed hereunder, the Stockholder
Representative shall provide S1 a Protest Notice within 15 days of the date of
any such Loss Notice is given. If no Protest Notice is received by S1 within 15
days from the date on which any Loss Notice is given, or if a Protest Notice is
received and the dispute is resolved in favor of S1 after following the
procedures set forth below, then the amount sought under such Loss Notice shall
represent an reimbursement obligation hereunder (the amount so reimbursable
being referred to as the "Reimbursement Amount").
2.4 PROCEDURE WITH RESPECT TO DISPUTED LOSS NOTICES. A Loss Notice with
respect to which a Protest Notice is given shall mean a Disputed Loss Notice.
(a) INTERNAL MEDIATION. First the Disputed Loss Notice shall be
referred jointly to such senior executives as may be mutually agreed upon
by the parties from time to time. If such persons do not agree upon a
decision within 10 days after referral of the matter to them, the parties
shall proceed to the next stage of the dispute resolution procedure.
(b) OUTSIDE MEDIATION. Escrow Agent and S1 may, upon written notice
and within 10 days after the conclusion of internal mediation, elect to
utilize a non-binding resolution procedure whereby each presents its case
at a hearing (the "Hearing") before a panel consisting of a senior
executive of each of the parties and a mutually acceptable neutral adviser.
If a party elects to utilize outside mediation the other party agrees to
participate. The Hearing will occur no more than 10 days after a party
serves written notice to use outside mediation. Each party may be
represented at the Hearing by lawyers. If the matter cannot be resolved at
such Hearing by the senior executives, the neutral adviser may be asked to
assist the senior executives in evaluating the strengths and weaknesses of
each party's position on the merits of the Disputed Loss Notice.
Thereafter, the senior executives shall meet and try again to resolve the
matter. If the matter cannot be resolved at such meeting, the parties' only
recourse is binding arbitration as provided for in this Agreement and the
outside mediation proceedings will have been without prejudice to the legal
position of either party. No arbitration may commence concerning the
Disputed Loss Notice until 15 days have elapsed from the first day of the
Hearing. The parties shall each bear their respective costs incurred in
connection with this procedure, except that they shall share equally the
fees and expenses of the neutral adviser and the costs of the facility for
the Hearing.
(c) ARBITRATION. If the Disputed Loss Notice is not submitted to
outside mediation and cannot be resolved within 10 days of referral to
inside mediation, or, if submitted, cannot be resolved within 15 days of
the Hearing, then either party may within 10 days after the completion of
inside or outside mediation, as appropriate, upon written notice, submit
the Disputed Loss Notice to formal binding arbitration in accordance with
the arbitration provisions below.
(d) NO ACTIONS. Neither party will institute any action or proceeding
against the other party in any court concerning any Disputed Loss Notice
other than to seek entry of a judgment upon an award rendered by the
arbitrators pursuant to this dispute resolution process or to seek
temporary or preliminary equitable relief.
(e) ARBITRATION PROVISIONS.
(i) The Disputed Loss Notice shall be settled by final and
binding arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association (the "AAA"); provided,
however, that if such Rules are inconsistent with any provision of
this Agreement, this Agreement shall control;
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(ii) Any such arbitration shall be conducted in the Atlanta
metropolitan area at a place and time mutually agreed upon by the
parties or, failing mutual agreement, selected by the arbitrators;
(iii) Any arbitration shall be conducted before a panel of 3
arbitrators who shall be compensated for their services at a rate to
be determined by the AAA in the event the parties are not able to
agree upon their rate of compensation, but based upon hourly or daily
consulting rates for the neutral arbitrator reasonably consistent
with such arbitrator's normal charges or fees. Within 15 days of
notice by a party seeking arbitration under this provision, the party
requesting arbitration shall appoint one arbitrator and within 15
days thereafter the other party shall appoint the second arbitrator.
The persons so appointed shall meet the qualification requirement
described in (iv) below. Within 15 days after the appointment of the
second arbitrator, the two arbitrators so chosen shall mutually agree
upon the selection of the third, impartial and neutral arbitrator. In
the event the chosen arbitrators cannot agree upon the selection of
the third arbitrator, the AAA Rules for the selection of such an
arbitrator shall be followed, provided that the selection is from
among such persons who meet the above-stated requirements;
(iv) In any dispute in which the amount of controversy,
exclusive of interest and costs, is less than $25,000, there shall be
only one arbitrator agreed to by the parties who shall meet the
requirements described above for the neutral arbitrator; in all other
cases, there shall be three arbitrators;
(v) Each party shall bear its own costs and expenses of
arbitration including, but not limited to, filing fees and attorneys'
fees, and each party hereby agrees to pay one-half of the
administrative fees of the AAA and of the compensation to be paid to
the arbitrators in any such arbitration and one-half of the costs of
transcripts and other expenses of the arbitration proceedings,
subject, however, to allocation of costs and expenses (excluding
attorneys' fees) by the arbitrators consistent with the award;
(vi) The parties agree to make available to the arbitrator(s)
all non-privileged books, records, schedules and other information
reasonably requested by them. Such materials are to be made available
to the arbitrator(s) at such times as are deemed necessary by them to
make their decision as herein provided;
(vii) The arbitrator(s) may conduct any pre-trial proceedings by
telephonic conference call rather than by a face-to-face meeting;
(viii) The arbitrator(s) shall, prior to rendering their
decision on the arbitration matter, afford each of the parties an
opportunity, both orally and in writing, to present any relevant
evidence (the formal rules of evidence applicable to judicial
proceedings shall not apply) and to express, orally and/or in writing
that party's point of view and arguments as to the proper
determination of the arbitration matter; provided, however, that
either party submitting written material shall be required to deliver
a copy of such written material to the other party concurrently with
the delivery thereof to the arbitrator(s) and such other party shall
have the opportunity to submit a written reply, a copy of which shall
also be delivered to the other party concurrently with the delivery
thereof to the arbitrator(s). Oral argument shall take place only at
a hearing before the arbitrator(s) at which all parties are afforded
a reasonable opportunity to be present and be heard;
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(ix) In the event of a willful default by any of the parties
hereto in appearing before the arbitrator(s) after due written notice
shall have been given, the arbitrator(s) are hereby authorized to
render a decision upon the testimony of the party(ies) appearing
before the arbitrator(s);
(x) The arbitrator(s) shall (by decision of a majority of the
arbitrators) make a decision and award resolving the dispute within
45 days after the selection of the last arbitrator, or the first
arbitrator if only one arbitrator is to decide the dispute; and
within 15 days of the last hearing held concerning such dispute(s);
(xi) Any judgment upon the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof;
(xii) Within 30 days after the arbitrators make their decision
and award, the arbitrators shall render findings of fact and
conclusions of law and a written opinion setting forth the basis and
reasons for any decision and award rendered by them and deliver such
documents to each party to this Agreement along with a signed copy of
the award;
(xiii) The arbitrator(s) shall have the authority to grant any
equitable and legal remedies that would be available in any judicial
proceeding instituted to resolve a disputed matter, including the
award of interim or preliminary relief; and
(xiv) The arbitrator(s) chosen in accordance with these
provisions shall not have the power to alter, amend or otherwise
affect the terms of these arbitration provisions or the Agreement.
2.5 EMPLOYMENT OF COUNSEL. The Stockholder Representative may designate
legal counsel of its choice to conduct and direct the entire defense of any
litigation or claim described in a Loss Notice. Upon the receipt by the
Stockholder Representative of notice of any such claim contained in a Loss
Notice and the designation by the Stockholder Representative of counsel to
defend any such claim, the Stockholder Representative shall notify S1 in
writing. Any attorneys' fees incurred in connection with the defense of such
litigation or claim shall be paid from any cash then held in the escrow, and if
there is not sufficient cash to pay such fees, then from the sale of Escrow
Shares, not in excess of the amount necessary to pay such fees, as directed by
the Stockholder Representative. S1 may, at his expense, participate in the
defense of any litigation or claim; provided that control of any such defense
shall be with counsel selected by the Stockholder Representative.
2.6 EXCLUSIVE REMEDY. If S1 incurs an Recoverable Loss, the sole and
exclusive means of recovery shall be as set forth in this Agreement and the
escrow established hereunder. Neither the Stockholder Representative nor the
Stockholders have any obligation or liability to S1 or any of its subsidiaries
(including VerticalOne) beyond the several interests of such Stockholders in the
Escrow Shares. S1 agrees that if it or any of its subsidiaries (including
Vertical One) incurs any Recoverable Loss it will not sue or seek recourse
against the Stockholder Representative or the Stockholders, or any of them,
other than as provided in this Agreement.
ARTICLE 3
TERM; DISTRIBUTION OF ESCROW SHARES; LIMITS
3.1 TERM. The term of this Agreement shall commence at the Effective Time
and shall terminate at such time as all Escrow Shares have been distributed to
the Stockholders, to S1 or canceled pursuant to the terms of this Agreement.
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3.2 ADJUSTMENT OF ESCROW SHARES. The number of Escrow Shares subject to
this Agreement shall be adjusted from time to time, as follows: If, between the
date of this Agreement and the Distribution Date, S1 shall be entitled to be
reimbursed pursuant to a Loss Notice under Article 2 of this Agreement, then (a)
the Escrow Agent shall deliver to S1 (or, if so directed by S1, the transfer
agent for the S1 Common Stock) the S1 Common Stock certificates representing the
Escrow Shares held in escrow immediately prior to delivery of the Loss Notice,
(b) S1 shall issue and deliver to the Escrow Agent new stock certificates (the
"Replacement Certificates") in the name of the Escrow Agent representing a
number of shares of S1 Common Stock equal to the difference between (x) the
number of Escrow Shares in escrow immediately prior to such Loss Notice and (y)
the quotient (rounded to the next highest whole number) obtained by dividing the
Reimbursement Amount by the Value Per Share, and (c) the Escrow Agent shall hold
the Replacement Certificates in escrow pursuant to this Agreement. Upon the
issuance of any Replacement Certificates, the shares represented by such
Replacement Certificates shall be deemed to be "Escrow Shares" for all purposes
of this Agreement.
3.3 DISTRIBUTION OF ESCROW SHARES. On the Distribution Date, the Escrow
Agent shall deliver to S1 (or, if so directed by S1, the transfer agent for the
S1 Common Stock) for cancellation the certificates representing the Escrow
Shares then held in escrow as of the Distribution Date ("Available Escrow
Shares") and with respect to which a Loss Notice is not pending. With respect to
Loss Notices pending as of the Distribution Date, S1 and the Stockholder
Representative shall use their reasonable efforts to agree in writing on the
Reimbursement Amount with respect to any such pending Loss Notices; provided,
that if S1 and the Stockholder Representative are not able to agree on the
Reimbursement Amount with respect to such Loss Notices by the Distribution Date,
the amount of the Reimbursement Amount for purposes of the calculations in the
following sentence of this Section 3.3 shall be the amount claimed by S1 in its
Loss Notice plus an estimate of S1's and the Stockholder Representative's
maximum legal expenses made by S1 in good faith. Upon determination of the
Reimbursement Amount in accordance with the preceding sentence, (a) the Escrow
Agent shall deliver to S1 (or, if so directed by S1, the transfer agent for the
S1 Common Stock) for cancellation the S1 Common Stock certificates representing
the Escrow Shares then held in escrow, (b) S1 shall promptly issue and deliver
to the Escrow Agent for distribution to the Stockholders new certificates
representing the number of shares of S1 Common Stock (the "Distribution Shares")
equal to the quotient obtained by dividing (x) the difference between the
Aggregate Value immediately prior to such Distribution Date and the aggregate
Reimbursement Amount with respect to such pending Loss Notices by (y) the Value
Per Share (the "Undisputed Escrow Shares"), and such certificates shall be
denominated in the names of the respective Stockholders in amounts equal to the
product of the Undisputed Escrow Shares and each Stockholder's Percentage
Interest, and (c) S1 shall issue to the Escrow Agent, and the Escrow Agent shall
retain in escrow pending final determination of the Reimbursement Amount, new
certificates representing the number of shares of S1 Common Stock equal to the
quotient obtained by dividing (x) the aggregate Reimbursement Amount with
respect to such pending Loss Notices by (y) the Value Per Share ("Disputed
Escrow Shares"). Any such delivery of S1 Common Stock to Stockholders shall be
of full shares and any fractional portions shall be rounded to the nearest whole
number by the Escrow Agent so that the number of shares remaining in escrow to
be delivered will be fully allocated among such Stockholders. Upon the final
resolution as agreed by S1 and the Stockholder Representative in writing of any
Loss Notice for which Disputed Escrow Shares were retained in escrow after the
Distribution Date, the Escrow Agent shall promptly deliver to S1 (or, if so
directed by S1, the transfer agent for the S1 Common Stock) the appropriate
number of Disputed Escrow Shares corresponding to the Reimbursement Amount
corresponding to such Loss Notice (if any) as well as S1's and the Stockholder
Representative's reasonable legal and other expenses and shall deliver any
remaining Disputed Escrow Shares to the Stockholders in accordance with their
respective Percentage Interests in such remaining Disputed Escrow Shares.
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3.4 EFFECT OF FINAL DELIVERY. This Agreement shall continue in full force
and effect until the Escrow Agent has delivered all of the Escrow Shares
pursuant to the terms hereof. After all of such Escrow Shares have been so
delivered, all rights, duties and obligations of the respective parties
hereunder shall terminate.
3.5 LIMITATIONS. Notwithstanding anything to the contrary contained in this
Agreement, S1 may not submit a Loss Notice (and no obligation to reimburse shall
exist) until the aggregate Recoverable Losses hereunder shall equal $750,000
(the "Deductible"). If and when the sum of all Recoverable Losses hereunder
equals or exceeds the Deductible, then S1 may submit a Loss Notice for all
Recoverable Losses incurred in excess of the Deductible.
ARTICLE 4
ESCROW STOCK CERTIFICATES
The Escrow Agent may at any time request S1 to issue new certificates
representing the Escrow Shares in such denominations as may be necessary or
appropriate in carrying out the Escrow Agent's obligations under this Agreement.
ARTICLE 5
DIVIDENDS; VOTING RIGHTS
5.1 CASH DIVIDENDS; VOTING RIGHTS. All cash dividends or other property
distributed by S1, or received by the Escrow Agent in respect of, the Escrow
Shares shall be retained by the Escrow Agent in escrow and shall be considered
"Escrow Shares" to be distributed in accordance with the terms of this
Agreement. Each Stockholder shall have the right to direct the Escrow Agent in
writing as to the exercise of voting rights with respect to such Escrow Shares
held by the Escrow Agent on behalf of such Stockholder, and the Escrow Agent
shall comply with any such directions if received in a timely manner. In the
absence of such directions, the Escrow Agent shall not vote any such Escrow
Shares.
5.2 STOCK SPLITS; STOCK DIVIDENDS. In the event of any stock split or stock
dividend with respect to S1 Common Stock that becomes effective during the term
of this Agreement, the additional shares so issued with respect to the Escrow
Shares shall be added to the Escrow Shares and any other references herein to a
specific number of shares of S1 Common Stock or references herein to prices for
or the fair market value of S1 Common Stock shall be adjusted accordingly.
ARTICLE 6
THE ESCROW AGENT
6.1 LIABILITY. The Escrow Agent shall be liable only to hold the Escrow
Shares and to deliver the same to the persons named herein in accordance with
the provisions of this Agreement. By acceptance of this Escrow Agreement, the
Escrow Agent is acting in the capacity of a depository only, and shall not be
liable or responsible for any damages, losses or expenses unless such damages,
losses or expenses shall be caused by the gross negligence or malfeasance of the
Escrow Agent. No Escrow Agent shall incur any liability with respect to (a) any
action taken or omitted in good faith upon the advice of its counsel with
respect to any questions relating to the duties and responsibilities of the
Escrow Agent under this Agreement; or (b) any action taken or omitted in
reliance upon any instrument, including the written instructions provided for
herein, not only as to the due execution of such instrument, or the identity, or
authority of any person executing such instrument, or the validity and
effectiveness of such instrument, but also as to the truth and accuracy of any
information
D-53
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contained therein, provided that such Escrow Agent shall in good faith believe
such instrument to be genuine, to have been signed by a proper person or
persons, and to conform to the provisions of this Agreement. In the event of any
disagreement or the presentation of adverse claims or demands in connection with
or for any item affected hereby, the Escrow Agent shall, at its option, be
entitled to refuse to comply with any such claims or demands during the
continuance of such disagreement and may refrain from delivering any item
affected hereby, and in so doing the Escrow Agent shall not become liable to the
parties, or to any other person, due to its failure to comply with any such
adverse claim or demand. The Escrow Agent shall be entitled to continue, without
liability, to refrain and refuse to act until all of the rights of the adverse
claimants have been either fully resolved among themselves, arbitrated to a
final award, or finally adjudicated by a court having jurisdiction over the
dispute. The Escrow Agent shall be held harmless and indemnified by S1 in
connection with any claims against it in connection with its service as escrow
agent hereunder. Any action requested to be taken by the Escrow Agent hereunder
and not otherwise specifically set forth herein shall require the agreement in
writing of the Stockholder Representative, S1 and any successor Escrow Agent.
6.2 SUCCESSOR. The Escrow Agent, with the prior written consent of the
Stockholder Representative and S1, may by written instrument designate a bank or
trust company to act as successor Escrow Agent. Any such successor Escrow Agent
must agree to be and shall be bound by, and shall have all the rights, duties
and responsibilities of the Escrow Agent under, this Agreement.
6.3 EXPENSES. S1 shall bear all of the Escrow Agent's reasonable expenses,
including the actual out-of-pocket cost of outside legal services should the
Escrow Agent deem it necessary in its reasonable discretion to retain an outside
attorney, incurred in carrying out its obligations under this Agreement. The
Escrow Agent shall not be liable for any action taken in good faith in
accordance with the advice of an attorney.
ARTICLE 7
STOCKHOLDER REPRESENTATIVE
7.1 POWER AND AUTHORITY. The Stockholder Representative shall have full
power and authority to represent the Stockholders and their successors with
respect to all matters arising under this Agreement, and all action taken by the
Stockholder Representative hereunder shall be binding upon such Stockholders and
their successors as if expressly ratified and confirmed in writing by each of
them. Without limiting the generality of the foregoing, the Stockholder
Representative shall have full power and authority, on behalf of all the
Stockholders and their successors, to interpret all the terms and provisions of
this Agreement, to dispute or fail to dispute any claim of Recoverable Loss
against the Escrow Shares made by S1, to negotiate and compromise any dispute
which may arise under this Agreement, to sign any releases or other documents
with respect to any such dispute, and to authorize payments to be made with
respect thereto.
7.2 RESIGNATION; SUCCESSORS. The Stockholder Representative, or any
successor hereafter appointed, may resign and shall be discharged of his duties
hereunder upon the appointment of a successor Stockholder Representative as
hereinafter provided. In case of such resignation, or in the event of the death
or inability to act of the Stockholder Representative, a successor shall be
named from among the Stockholders by a majority of the members of the Board of
Directors of VerticalOne who served on such board immediately prior to the
Effective Time of the Merger and are not then serving on the Board of S1. Each
such successor Stockholder Representative shall have all the power, authority,
rights and privileges hereby conferred upon the original Stockholder
Representative, and the term "Stockholder Representative" as used herein shall
be deemed to include such successor Stockholder Representative.
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ARTICLE 8
MISCELLANEOUS
8.1 TRANSFERABILITY. A Stockholder may not transfer any interest in the
Escrow Shares or any other right under this Escrow Agreement to any other party,
except that upon written notice from the legal representative of the estate of a
deceased Stockholder to the Escrow Agent, the rights of such Stockholder under
this Escrow Agreement shall be transferred to the estate of such Stockholder,
and subsequently to any beneficiary thereof, in the event of the Stockholder's
death; provided, however, that any such beneficiary or the legal representative
of any such estate shall be bound by the provisions of this Escrow Agreement
without taking any further action. The Escrow Agent shall be entitled to treat
the legal representative of the estate of such Stockholder, and subsequently any
beneficiary thereof, as the absolute owner of the rights of such Stockholder
under this Escrow Agreement in all respects and shall incur no liability for
distributions made in good faith to the legal representatives of such
Stockholder or such beneficiary in accordance with the terms of this Escrow
Agreement.
8.2 NOTICES. Each party shall keep each of the other parties hereto advised
in writing of all transactions pursuant to this Agreement. Any notices or other
communications required or permitted under this Agreement shall be in writing
and shall be sufficiently given if sent by registered or certified mail, postage
prepaid, addressed as follows:
If to S1:
Security First Technologies Corporation
3390 Peachtree Road, NE
Suite 1700
Atlanta, GA 30326
Attn.: Robert F. Stockwell
Chief Financial Officer
with a copy to:
Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, DC 20004
Attn.: Stuart G. Stein, Esq.
If to Stockholder Representative:
Attn:
with a copy to:
Alston & Bird LLP
601 Pennsylvania Avenue, N.W.
North Building, 11th Floor
Washington, DC 20004
Attn.: David E. Brown, Jr., Esq.
or such other person or address as shall be furnished in writing by any of the
parties and any such notice or communication shall be deemed to have been given
as of the date so mailed.
8.3 CONSTRUCTION. The validity, enforcement and construction of this
Agreement shall be governed by the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
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<PAGE> 482
8.4 BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon the respective heirs, executors, administrators, successors and
assigns of the parties hereto.
8.5 SEPARABILITY. If any provision or section of this Agreement is
determined to be void or otherwise unenforceable, it shall not affect the
validity or enforceability of any other provisions of this Agreement which shall
remain unenforceable in accordance with their terms.
8.6 HEADINGS. The headings and subheadings contained in this Agreement are
for reference only and for the benefit of the parties and shall not be
considered in the interpretation or construction of this Agreement.
8.7 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
8.8 AMENDMENTS. This Agreement may be amended from time to time but only by
written agreement signed by all of the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Escrow Agreement as of
the day and year first above written.
SECURITY FIRST TECHNOLOGIES
CORPORATION
By:
--------------------------------------
President
"STOCKHOLDER REPRESENTATIVE"
--------------------------------(SEAL)
"ESCROW AGENT"
By:
--------------------------------------
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PRIVILEGED AND CONFIDENTIAL
ANNEX E
September 21, 1999
Board of Directors
Security First Technologies Corporation
3390 Peachtree Road, NE, Suite 1700
Atlanta, Georgia 30326
Members of the Board:
We understand that (i) Security First Technologies Corporation ("S1" or the
"Company"), S1 Europe Holdings N.V. ("S1 Holdings"), FICS Group N.V. ("FICS")
and each of the stockholders and bondholders of FICS listed therein are
proposing to terminate that certain Share Purchase Agreement, dated May 16,
1999, (ii) S1, FICS and the individuals identified on Schedule 1 thereto are
proposing to terminate that certain Stock Purchase Agreement, dated May 16,
1999, (iii) S1 Holdings and certain of the shareholders of FICS who are
signatories thereto (the "Sellers"), and, for the limited purposes stated
therein, S1 and FICS are proposing to enter into that certain Share Purchase
Agreement II (the "Share Purchase Agreement II") which will provide for, among
other things, the purchase by S1 Holdings from the Sellers of all the issued and
outstanding FICS Securities (as defined below) and (iv) S1 and each of the
entities and individuals who are signatories thereto (the "Purchasers") and, for
the limited purposes stated therein, FICS, are proposing to enter into that
certain Stock Purchase Agreement II (the "Stock Purchase Agreement II", and,
together with the Share Purchase Agreement II, the "Agreements") which will
provide for, among other things, the purchase by the Purchasers from S1 of a
number of shares of the Company's common stock, par value $0.01 per share (the
"Company's Common Stock"). The transactions contemplated by the Agreements are
referred to herein as the "Transaction."
Upon consummation of the Transaction, FICS will be a subsidiary of the
Company. The Agreements contemplate that at the initial closing of the
Transaction: (i) 96,350 ordinary shares of FICS ("FICS Ordinary Shares"); (ii)
40,000 shares of Series B1 preferred stock of FICS ("FICS Series B1 Preferred
Stock"); (iii) 950 shares of Series B2 preferred stock of FICS ("FICS Series B2
Preferred Stock"); (iv) 9,302 shares of Series C preferred stock of FICS ("FICS
Series C Preferred Stock", and, together with FICS Ordinary Shares, FICS Series
B1 Preferred Stock and FICS Series B2 Preferred Stock, the "FICS Capital
Stock"); and (v) FICS securities otherwise convertible into capital stock of
FICS (the "FICS Stock Equivalents", and, together with the FICS Capital Stock,
the "FICS Securities"), in the aggregate, shall be exchanged for 10,000,000
shares of the Company's Common Stock; accordingly, each share of FICS Capital
Stock and FICS Stock Equivalents shall be exchanged under the Agreements for
68.21189342574 shares of Company Common Stock, as such number may be adjusted to
account for the additional issuance of up to 4,500,000 shares of the Company's
Common Stock pursuant to certain earn-out provisions included in the Agreements,
(the "Exchange Ratio") of the Company's Common Stock. Also upon the initial
closing, S1 will assume outstanding options for FICS Securities and issue
additional options for an aggregate of 4,000,000 shares of Company Common Stock.
You have asked us whether, in our opinion, as of the date hereof, the
Exchange Ratio is fair to the Company from a financial point of view.
E-1
<PAGE> 484
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 FICS,
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 Transaction, prepared by the management
of the Company and FICS, respectively;
(iii) reviewed certain financial forecasts and other forward looking
financial information prepared by the management of the Company and
FICS, respectively;
(iv) held discussions with the respective management 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 management
of the Company and FICS concerning cost savings and other synergies
that are expected to result from the Transaction, as well as their
views regarding the strategic rationale for the Transaction;
(v) reviewed the financial terms and conditions set forth in copies of
the Agreements, each dated September 20, 1999 (the "Agreements");
(vi) reviewed the stock price and trading history of the Company's 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 Transaction with the financial
terms, to the extent publicly available, of other transactions we
deemed relevant;
(ix) reviewed the pro forma impact of the 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, respectively, 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
(xii) 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 has also entered into an Agreement and Plan
of Merger (the "Edify Merger Agreement") with Sahara Strategy Corporation (a
wholly owned subsidiary of the Company, "Merger Sub") and Edify Corporation
("Edify"), which will provide for, among other things, the acquisition of Edify
(the "Edify Merger") by the merger of Merger Sub with and into Edify. Upon
consummation of the Edify Merger, Edify will become a wholly owned subsidiary of
the Company. We have reviewed a copy of the executed Edify Merger Agreement
dated May 16, 1999 (the "Edify Merger Agreement"). The Company has informed us
that the Edify Merger could occur at approximately the same time as the
Transaction, but neither the Transaction nor the Edify Merger
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<PAGE> 485
is contingent upon the other occurring. As a result, we have conducted the Pro
Forma Analysis as if the Transaction and the Edify Merger are both consummated
and also as if the 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 as
otherwise discussed with us by the management of the Company, FICS and Edify,
respectively) 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 the management of the Company, FICS and Edify,
respectively, 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
assumptions and bases therefor) for each of the Company, FICS and Edify that we
have reviewed, upon the advice of the management of the Company, FICS and Edify,
respectively, 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 management 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 Transaction
will be consummated in accordance with the terms set forth in the Agreements,
including that the 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 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, to the Company of the Exchange Ratio. We do not
express any opinion as to (i) the value of any employee agreements or other
arrangements entered into in connection with the Transaction, (ii) any tax or
other consequences that might result from the Transaction, (iii) what the value
of the Company's Common Stock will be when issued to FICS's stockholders
pursuant to the Transaction or the price at which the shares of the Company's
Common Stock that are issued pursuant to the 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 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 Transaction.
E-3
<PAGE> 486
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
Transaction. 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 Edify Merger and will
receive (i) a fee contingent upon the delivery of an opinion and (ii) an
additional fee contingent upon the consummation of the Edify Merger. The Company
has 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 potential 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 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 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
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 Ratio is fair to the Company from a
financial point of view.
Very truly yours,
/s/ BANCBOSTON ROBERTSON STEPHENS INC.
BANCBOSTON ROBERTSON STEPHENS INC.
E-4
<PAGE> 487
ANNEX F
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 May 16, 1999 (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"), 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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<PAGE> 488
(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
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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, 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.
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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 Ratio is fair to the Company from a
financial point of view.
Very truly yours,
/s/ BANCBOSTON ROBERTSON STEPHENS INC.
BANCBOSTON ROBERTSON STEPHENS INC.
F-4
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ANNEX G
[GOLDMAN SACHS LOGO]
PERSONAL AND CONFIDENTIAL
- -------------------------------------------------------------------------------
October 12, 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 "Edify 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 and a
wholly-owned subsidiary of S1 ("S1 Europe Holdings"), has entered into the Share
Purchase Agreement II, dated as of September 21, 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 II, dated as of September 21, 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 also
understand that S1 has entered into an Agreement and Plan of Merger, dated as of
September 23, 1999 (the "VerticalOne Agreement"), with VerticalOne Acquisition
Corporation, a Delaware corporation and wholly-owned subsidiary of S1
("Acquisition Sub"), and VerticalOne Corporation, a Delaware corporation
("VerticalOne"), pursuant to which Acquisition Sub will merge with and into
VerticalOne and each issued and outstanding share of common stock, par value
$0.001 per share ("VerticalOne Common Stock"), of VerticalOne will be converted
into a number of shares of S1 Common Stock equal to the Exchange Ratio (as
defined in the VerticalOne Agreement) and each share of preferred stock of
VerticalOne will be converted into a number of shares of S1 Common Stock equal
to that
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number of shares of VerticalOne Common Stock into which it is then convertible
multiplied by the Exchange Ratio (as defined in the VerticalOne Agreement) (the
"VerticalOne Transaction"). We understand that, pursuant to the Agreement,
consummation of the Merger is not conditioned upon consummation of the FICS
Transaction or the VerticalOne 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. As you know and with your consent,
Goldman, Sachs & Co. is acting as financial advisor to S1 in connection with the
VerticalOne Transaction and may provide investment banking services to S1 in the
future. 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 963,882 Shares.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Share Purchase Agreement; the Stock Purchase Agreement; the
VerticalOne 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 financial analyses and forecasts for
VerticalOne prepared by the management of S1; and certain pro forma combined
financial analyses and forecasts for Edify, S1, FICS and VerticalOne prepared by
the managements of S1, Edify and FICS (the "Pro Forma Forecasts"), including
certain cost savings and operating synergies projected by the managements of S1,
Edify and FICS to result from the Merger, the FICS Transaction and the
VerticalOne Transaction. We also have held discussions with members of the
senior management of Edify, S1 and FICS regarding the past and current business
operations, financial condition and future prospects of their respective
companies and the strategic rationale for, and the potential benefits of, the
Merger and the FICS Transaction, and with members of the senior management of S1
and Edify regarding the strategic rationale for, and the potential benefits of,
the VerticalOne Transaction. 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
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Transaction and the VerticalOne Transaction are consummated, the Pro Forma
Forecasts will be realized in the amounts and time periods contemplated thereby,
and (ii) if one or more of the FICS Transaction and the VerticalOne Transaction
are not consummated, the applicable forecasts for S1, FICS and VerticalOne, as
the case may be, 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, FICS or VerticalOne 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 Edify
Exchange Ratio is fair from a financial point of view to the holders of Shares.
Very truly yours,
/s/GOLDMAN, SACHS & CO.
- ---------------------------
(GOLDMAN, SACHS & CO.)
G-3
<PAGE> 494
ANNEX H
[GOLDMAN SACHS LOGO]
PERSONAL AND CONFIDENTIAL
- -------------------------------------------------------------------------------
September 23, 1999
Board of Directors
Security First Technologies Corporation
3390 Peachtree Road, NE, Suite 1700
Atlanta, Georgia 30326
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to Security First Technologies Corporation (the "Company") of the exchange
ratio of 0.200 shares of Common Stock, par value $0.01 per share (the "Shares"),
of the Company (the "Exchange Ratio") to be issued for each share of Common
Stock, par value $.001 per share, of VerticalOne Corporation (the "Seller")
pursuant to the Agreement and Plan of Merger, dated as of September 23, 1999,
among the Seller, VerticalOne Acquisition Corporation, a wholly-owned subsidiary
of the Company, and the Company (the "Agreement"). We understand that the
Company also entered into an agreement to purchase (the "FICS Transaction") all
of the outstanding capital stock of FICS N.V. ("FICS"), and that the Company
also entered into an agreement to merge (the "Edify Transaction") with Edify
Corporation ("Edify").
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 the Company having acted as its financial advisor in connection
with, and having participated in certain of the negotiations leading to, the
Agreement. As you know, Edify has retained Goldman, Sachs & Co. as its financial
advisor in connection with the Edify Transaction. The Company has consented to
Goldman, Sachs & Co. acting as financial advisor to Edify in connection with the
Edify Transaction and acting as financial advisor to the Company in connection
with its potential transaction with the Seller.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of the
Company for the two years ended December 31, 1998 and of Edify for the three
years ended December 31, 1998; the form of Registration Statement on Form S-4
dated July 9, 1999, which you have informed us is not yet effective; certain
interim reports to stockholders and Quarterly Reports on Form 10-Q of the
Company and Edify; certain other communications from the Company and Edify to
their respective stockholders; certain financial and other information of the
Seller with respect to its operations on and after November 1998, the date of
its organization; audited historical financial statements of FICS for the two
years ended December 31, 1998; certain internal financial analyses and forecasts
for the Company prepared by the management of the Company on a pro forma basis
for the Edify Transaction and the FICS Transaction (the "Pro Forma
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<PAGE> 495
Forecasts"); certain internal financial analyses and forecasts for the Seller
prepared by the management of the Seller; and certain financial analyses and
forecasts for the Seller prepared by the management of the Company, including
certain cost savings and operating synergies projected by the managements of the
Company and the Seller to result from the transaction contemplated by the
Agreement (the "Seller Forecasts"). We also have held discussions with members
of the senior management of the Company and the Seller regarding the strategic
rationale for, and the potential benefits of, the transaction contemplated by
the Agreement 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, compared
certain financial and stock market information for the Company with similar
information for certain other companies the securities of which are publicly
traded, reviewed the financial terms of certain recent business combinations 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 Pro Forma Forecasts and Seller Forecasts have
been reasonably prepared on a basis reflecting the best currently available
estimates and judgments of the Company, and that the Pro Forma Forecasts and
Seller Forecasts 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 the Company or Seller 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 the Company in
connection with its consideration of the transaction 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 pursuant to the Agreement is fair from a financial point of view
to the Company.
Very truly yours,
/s/GOLDMAN, SACHS & CO.
- ---------------------------
(GOLDMAN, SACHS & CO.)
H-2
<PAGE> 496
ANNEX I
DELAWARE GENERAL CORPORATION LAW
262. APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec.228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec.251 (other than a merger effected pursuant to
sec.251(g) of this title), sec.252, sec.254, sec.257, sec.258, sec.263 or
sec.264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock,
which stock, or depository receipts in respect thereof, at the
record date fixed to determine the stockholders entitled to
receive notice of and to vote at the meeting of stockholders to
act upon the agreement of merger or consolidation, were either (i)
listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system
by the National Association of Securities Dealers, Inc. or (ii)
held of record by more than 2,000 holders; and further provided
that no appraisal rights shall be available for any shares of
stock of the constituent corporation surviving a merger if the
merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in
subsection (f) of sec.251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class
or series of stock of a constituent corporation if the holders
thereof are required by the terms of an agreement of merger or
consolidation pursuant to sec.sec.251, 252, 254, 257, 258, 263 and
264 of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts
in respect thereof) or depository receipts at the effective date
of the merger or consolidation will be either listed on a national
securities exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more
than 2,000 holders;
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<PAGE> 497
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of
this paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a., b. and c. of
this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec.253 of this title is not owned
by the parent corporation immediately prior to the merger, appraisal
rights shall be available for the shares of the subsidiary Delaware
corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days
prior to the meeting, shall notify each of its stockholders who was
such on the record date for such meeting with respect to shares for
which appraisal rights are available pursuant to subsection (b) or
(c) hereof that appraisal rights are available for any or all of the
shares of the constituent corporations, and shall include in such
notice a copy of this section. Each stockholder electing to demand
the appraisal of such stockholder's shares shall deliver to the
corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of such stockholder's
shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such
stockholder's shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder
electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation
shall notify each stockholder of each constituent corporation who
has complied with this subsection and has not voted in favor of or
consented to the merger or consolidation of the date that the merger
or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to sec.228 or
sec.253 of this title, each constituent corporation, either before
the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series
of stock of such constituent corporation who are entitled to
appraisal rights of the approval of the merger or consolidation and
that appraisal rights are available for any or all shares of such
class or series of stock of such constituent corporation, and shall
include in such notice a copy of this section; provided that, if the
notice is given on or after the effective date of the merger or
consolidation, such notice shall be given by the surviving or
resulting corporation to all such holders of any class or series of
stock of a constituent corporation that are entitled to appraisal
rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation.
Any stockholder entitled to appraisal rights may, within twenty days
after the date of mailing of such
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<PAGE> 498
notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will
be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby
to demand the appraisal of such holder's shares. If such notice did
not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall
send a second notice before the effective date of the merger or
consolidation notifying each of the holders of any class or series
of stock of such constituent corporation that are entitled to
appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall
send such a second notice to all such holders on or within 10 days
after such effective date; provided, however, that if such second
notice is sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder who
is entitled to appraisal rights and who has demanded appraisal of
such holder's shares in accordance with this subsection. An
affidavit of the secretary or assistant secretary or of the transfer
agent of the corporation that is required to give either notice that
such notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that
shall be not more than 10 days prior to the date the notice is
given; provided that, if the notice is given on or after the
effective date of the merger or consolidation, the record date shall
be such effective date. If no record date is fixed and the notice is
given prior to the effective date, the record date shall be the
close of business on the day next preceding the day on which the
notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by l or more publications at
least l week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware
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<PAGE> 499
or such publication as the Court deems advisable. The forms of the notices by
mail and by publication shall be approved by the Court, and the costs thereof
shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be
I-4
<PAGE> 500
dismissed as to any stockholder without the approval of the Court, and such
approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
I-5
<PAGE> 501
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 II, dated as of September 21, 1999,
by and among S1 Europe Holdings N.V., a Belgian corporation,
the stockholders of FICS Group N.V., a Belgian corporation,
who are listed as signatories thereto, and, for the limited
purposes 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
September 23, 1999 and incorporated herein by reference).
2.1.1 Amendment to Share Purchase Agreement II, dated as of
October 7, 1999, by and among S1 Europe Holdings N.V., a
Belgian corporation, the stockholders of FICS Group N.V., a
Belgian corporation, who are listed as signatories thereto,
and, for the limited purposes therein, S1 and FICS Group
N.V.
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).
</TABLE>
II-1
<PAGE> 502
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S>
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).
2.4 Agreement and Plan of Merger, dated as of September 23,
1999, by and among S1, VerticalOne Acquisition Corporation
and VerticalOne Corporation (filed as Exhibit 2.1 to S1's
Current Report on Form 8-K filed with the SEC on October 1,
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 KPMG LLP regarding tax matters in
connection with the FICS Transaction.
8.2 Form of Opinion of Hogan & Hartson L.L.P. regarding tax
matters in connection with the Edify Transaction.*
8.3 Form of Opinion of Alston & Bird LLP regarding tax matters
in connection with the VerticalOne Transaction.
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).
</TABLE>
II-2
<PAGE> 503
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S>
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 September 21, 1999, by
and among S1, the individuals and entities listed as
signatories thereto, and for the limited purposes therein,
FICS Group N.V. (filed as Exhibit 10.1 to S1's Current
Report on Form 8-K filed with the SEC on September 23, 1999
and incorporated herein by reference).
10.11.1 Amendment to Stock Purchase Agreement, dated as of October
7, 1999, by and among S1, the individuals and entities
listed as signatories thereto, and for the limited purposes
therein, FICS Group N.V.
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 as of May 16, 1999, entered into by
and between S1 and FICS Group N.V.*
10.16 Loan Agreement, dated as of September 21, 1999, entered into
by and between S1 and FICS Group N.V.
</TABLE>
II-3
<PAGE> 504
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S>
21.1 Subsidiaries of Security First Technologies Corporation.
23.1 Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1).
23.2 Consent of KPMG LLP regarding S1 matters.
23.3 Consent of Hogan & Hartson L.L.P. regarding tax matters in
connection with the Edify Transaction (included in Exhibit
8.2).
23.4 Consent of Alston & Bird LLP regarding tax matters in
connection with the VerticalOne Transaction.
23.5 Consent of BancBoston Robertson Stephens Inc.
23.6 Consent of Goldman, Sachs & Co. as advisor to S1 in
connection with the VerticalOne Transaction.
23.7 Consent of Goldman, Sachs & Co. as advisor to Edify in
connection with the Edify Transaction.
23.8 Consent of KPMG LLP regarding S1 financial statements
(included in Exhibit 23.2).
23.9 Consent of PricewaterhouseCoopers & Co. Bedrijfsrevisoren.
23.10 Consent of KPMG LLP regarding Edify Corporation financial
statements.
23.11 Consent of KPMG LLP regarding VerticalOne financial
statements.
24.1 Power of Attorney (included at signature page to
Registration Statement).
24.2 Power of Attorney for Jackson L. Wilson, Jr.
99.1 Consent of Michel Akkermans.
99.2 Consent of Jeffrey M. Crowe.
99.3 Consent of Gregg S. Freishtat.
99.4 Proxy card of S1.
99.5 Signature pages for FICS stockholders.
99.6 Proxy card of Edify.*
99.7 Proxy card of VerticalOne.
</TABLE>
- ---------------
* Previously filed.
(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.
II-4
<PAGE> 505
(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.
The undersigned registrant hereby undertakes:
(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 percent 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> 506
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 October 12, 1999.
SECURITY FIRST TECHNOLOGIES CORPORATION
By: /s/ ROBERT F. STOCKWELL
---------------------------------------
ROBERT F. STOCKWELL
CHIEF FINANCIAL OFFICER AND TREASURER
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 October 12, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
* 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)
* Director
- ---------------------------------------------------
ROBERT W. COPELAN
* Director
- ---------------------------------------------------
DORSEY R. GARDNER
* Director
- ---------------------------------------------------
JOSEPH S. MCCALL
* Director
- ---------------------------------------------------
HOWARD J. RUNNION, JR.
* Director
- ---------------------------------------------------
JACKSON L. WILSON, JR.
</TABLE>
- -------------
* Pursuant to Power of Attorney
By: /s/ ROBERT F. STOCKWELL
-------------------------------
ROBERT F. STOCKWELL
ATTORNEY-IN-FACT
II-6
<PAGE> 507
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S>
2.1 Share Purchase Agreement II, dated as of September 21, 1999,
by and among S1 Europe Holdings N.V., a Belgian corporation,
the stockholders of FICS Group N.V., a Belgian corporation,
who are listed as signatories thereto, and, for the limited
purposes 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
September 23, 1999 and incorporated herein by reference).
2.1.1 Amendment to Share Purchase Agreement II, dated as of
October 7, 1999, by and among S1 Europe Holdings N.V., a
Belgian corporation, the stockholders of FICS Group N.V., a
Belgian corporation, who are listed as signatories thereto,
and, for the limited purposes therein, S1 and FICS Group
N.V.
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).
2.4 Agreement and Plan of Merger, dated as of September 23,
1999, by and among S1, VerticalOne Acquisition Corporation
and VerticalOne Corporation (filed as Exhibit 2.1 to S1's
Current Report on Form 8-K filed with the SEC on October 1,
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 KPMG LLP regarding tax matters in
connection with the FICS Transaction.
8.2 Form of Opinion of Hogan & Hartson L.L.P. regarding tax
matters in connection with the Edify Transaction.*
</TABLE>
<PAGE> 508
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S>
8.3 Form of Opinion of Alston & Bird LLP regarding tax matters
in connection with the VerticalOne Transaction.
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 September 21, 1999, by
and among S1, the individuals and entities listed as
signatories thereto, and for the limited purposes therein,
FICS Group N.V. (filed as Exhibit 10.1 to S1's Current
Report on Form 8-K filed with the SEC on September 23, 1999
and incorporated herein by reference).
10.11.1 Amendment to Stock Purchase Agreement, dated as of October
7, 1999, by and among S1, the individuals and entities
listed as signatories thereto, and for the limited purposes
therein, FICS Group N.V.
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).
</TABLE>
<PAGE> 509
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S>
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 as of May 16, 1999, entered into by
and between S1 and FICS Group N.V.*
10.16 Loan Agreement, dated as of September 21, 1999, entered into
by and between S1 and FICS Group N.V.
21.1 Subsidiaries of Security First Technologies Corporation.
23.1 Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1).
23.2 Consent of KPMG LLP regarding S1 matters.
23.3 Consent of Hogan & Hartson L.L.P. regarding tax matters in
connection with the Edify Transaction (included in Exhibit
8.2).
23.4 Consent of Alston & Bird LLP regarding tax matters in
connection with the VerticalOne Transaction.
23.5 Consent of BancBoston Robertson Stephens Inc.
23.6 Consent of Goldman, Sachs & Co. as advisor to S1 in
connection with the VerticalOne Transaction.
23.7 Consent of Goldman, Sachs & Co. as advisor to Edify in
connection with the Edify Transaction.
23.8 Consent of KPMG LLP regarding S1 financial statements
(included in Exhibit 23.2).
23.9 Consent of PricewaterhouseCoopers & Co. Bedrijfsrevisoren.
23.10 Consent of KPMG LLP regarding Edify Corporation financial
statements.
23.11 Consent of KPMG LLP regarding VerticalOne financial
statements.
24.1 Power of Attorney (included at signature page to
Registration Statement).
24.2 Power of Attorney for Jackson L. Wilson, Jr.
99.1 Consent of Michel Akkermans.
99.2 Consent of Jeffrey M. Crowe.
99.3 Consent of Gregg S. Freishtat.
99.4 Proxy card of S1.
99.5 Signature pages for FICS stockholders.
99.6 Proxy card of Edify.*
99.7 Proxy card of VerticalOne.
</TABLE>
- ---------------
* Previously filed.
(B) FINANCIAL STATEMENT SCHEDULES
(C) OPINIONS OF FINANCIAL ADVISORS (INCLUDED IN THE PROSPECTUS/PROXY
STATEMENT)
<PAGE> 1
EXHIBIT 2.1.1
AMENDMENT TO SHARE PURCHASE AGREEMENT II
THIS AMENDMENT TO SHARE PURCHASE AGREEMENT II (the "Amendment") is
dated as of the 7th day of October, 1999, and is entered into by and between S1
Europe Holdings N.V., a Belgian corporation (naamloze vennootschap ("N.V")) and
a subsidiary of Security First Technologies Corporation, a Delaware corporation
("S1") ("S1 Holdings"), each of the stockholders of FICS Group N.V., a Belgian
corporation registered with the Brussels Registry of Commerce under number
515450 ("FICS"), who are signatories hereto (individually, a "Seller," and
collectively, the "Sellers"), S1 and FICS.
RECITALS:
A. The parties hereto have previously entered into that certain
Share Purchase Agreement II, dated as of September 21, 1999 (the "Agreement"),
pursuant to which the Sellers agreed to sell, and S1 Holdings agreed to
purchase, all of the issued and outstanding FICS Securities (as defined in the
Agreement) upon the terms and conditions contained in the Agreement.
B. Pursuant to Section 8.3 of the Agreement, the parties hereto
desire to amend subsection 1.3(d) of the Agreement and amend and replace Section
9.10 of the Agreement.
C. All capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to them in the Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing Recitals and the
mutual promises, representations, warranties, covenants and conditions set forth
herein and in the Agreement, the sufficiency of which is hereby acknowledged,
the parties mutually agree as follows:
SECTION 1. FIRST AMENDMENT.
Effective as of the date hereof, subsection 1.3(d) of the Agreement
shall be amended by adding the following sentence at the end of the first
paragraph thereof:
"Any such payments of cash under this Section 1.3(d) shall be deemed
a "Payment" hereunder and subject to the terms of Section 1.3(c) above,
and it is understood that upon occurrence of an Acceleration Event any
references hereunder to the Second Payment Date or the Third Payment Date
shall be deemed to be references to the date of such Acceleration Event
and any references to the Second Payment or the Third Payment shall be
deemed to
<PAGE> 2
be references to the Payment made on such date, and the amount of such
Payment shall constitute the 2000 Earn-out Payment and/or the 2001
Earn-out Payment, as applicable."
SECTION 2. SECOND AMENDMENT.
Effective as of the date hereof, Section 9.10 of the Agreement shall
be deleted and the following shall be substituted in lieu thereof:
"9.10. 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 which shall not be unreasonably withheld.
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 and this Section 9.10, 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 set out herein shall be solely for the benefit of, and shall
be enforceable only by, the parties hereto and their permitted assigns."
SECTION 3. AGREEMENT OTHERWISE UNCHANGED.
Except as otherwise specifically amended herein, the balance of the
Agreement shall remain unchanged and in full force and effect.
[SIGNATURE PAGE FOLLOWS]
- 2 -
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed and delivered as of the date first above written.
S1 EUROPE HOLDINGS N.V.
By: /s/ ROBERT F. STOCKWELL
--------------------------------
Name: Robert F. Stockwell
Title: President
- 3 -
<PAGE> 4
THE SELLERS:
/s/ MICHEL AKKERMANS
- ----------------------------------
MICHEL AKKERMANS
PAMICA N.V.
By: /s/ MICHEL AKKERMANS
-------------------------------
Name:
Title:
GENERAL ATLANTIC PARTNERS 20, L.P.
By: GENERAL ATLANTIC PARTNERS, LLC, its General Partner
By: /s/
-------------------------------
Name:
Title:
GENERAL ATLANTIC PARTNERS 52, L.P.
By: GENERAL ATLANTIC PARTNERS, LLC, its General Partner
By: /s/
-------------------------------
Name:
Title:
GAP COINVESTMENT PARTNERS, L.P.
By: /s/
-------------------------------
Name:
Title:
- 4 -
<PAGE> 5
GIMV N.V.
By: /s/
-------------------------------
Name:
Title:
- ----------------------------------
GUY MOONS
- ----------------------------------
STEVEN VAN ROSSEN
- ----------------------------------
NADINE QUAEYHAEGENS
/s/ ETIENNE CASTIAUX
- ----------------------------------
ETIENNE CASTIAUX
/s/ GOORT GELTEN
- ----------------------------------
GOORT GELTEN
/s/ LOEK VAN DEN BOOG
- ----------------------------------
LOEK VAN DEN BOOG
/s/ FREDRICK DUMAS
- ----------------------------------
FREDRICK DUMAS
- 5 -
<PAGE> 6
UNICO PORTFOLIO LTD.
By: /s/
--------------------------------
Name:
Title:
- 6 -
<PAGE> 7
SECURITY FIRST TECHNOLOGIES CORPORATION
By: /s/ ROBERT F. STOCKWELL
--------------------------------
Name: Robert F. Stockwell
Title: Chief Financial Officer
FICS GROUP N.V.
By: /s/
--------------------------------
Name:
Title:
- 7 -
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF HOGAN & HARTSON L.L.P.]
October 12, 1999
Board of Directors
Security First Technologies Corporation
3390 Peachtree Road, NE, Suite 1700
Atlanta, GA 30326
Ladies and Gentlemen:
We are acting as counsel to Security First Technologies
Corporation, a Delaware corporation (the "Company"), in connection with its
registration statement on Form S-4, as amended (the "Registration Statement"),
filed with the Securities and Exchange Commission relating to the proposed
public offering of up to 32,330,682 shares of the Company's common stock, par
value $0.01 per share (the "Company Common Stock"), all of which shares (the
"Shares") may be issued by the Company, of which:
(i) up to 18,500,000 of the Shares are to be issued by the
Company in connection with its acquisition of FICS Group N.V., a Belgian
corporation ("FICS"), pursuant to that certain Stock Purchase Agreement II,
dated as of September 21, 1999, by and among the Company, the individuals and
entities listed as signatories thereto, and as may be joined by additional
individuals and entities from time to time, and, for the limited purposes
therein, FICS (the "FICS Stock Purchase Agreement"), and that certain Share
Purchase Agreement, dated as of September 21, 1999, by and among S1 Europe
Holdings N.V., a Belgian corporation and a subsidiary of the Company, the
stockholders of FICS who are listed as signatories thereto, and who may be
joined by additional stockholders of FICS from time to time, and, for the
limited purposes therein, the Company and FICS (the "FICS Share Purchase
Agreement," and together with the FICS Stock Purchase Agreement, the "FICS
Agreements");
(ii) up to 7,481,844 of the Shares are to be issued by the
Company in connection with its acquisition by merger of Edify Corporation, a
Delaware corporation ("Edify"), pursuant to that certain Agreement and Plan of
Merger, dated as of May 16, 1999, by and among the Company, Sahara Strategy
Corporation, a Delaware corporation and a wholly owned subsidiary of the
Company, and Edify (the "Edify Agreement"); and
(iii) up to 6,348,838 of the Shares are to be issued by the
Company in connection with its acquisition by merger of VerticalOne Corporation,
a Delaware corporation ("VerticalOne"), pursuant to that certain Agreement and
Plan of
<PAGE> 2
Merger, dated as of September 23, 1999, by and among the Company, VerticalOne
Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of
the Company, and VerticalOne Corporation (the "VerticalOne Agreement," and
together with the FICS Agreements and the Edify Agreement, the "Agreements").
This opinion letter is furnished to you at your request to
enable you to fulfill the requirements of Item 601(b)(5) of Regulation S-K, 17
C.F.R. Section 229.601(b)(5), in connection with the Registration Statement.
For purposes of this opinion letter, we have examined copies
of the following documents:
1. An executed copy of the Registration Statement.
2. The Certificate of Incorporation of the Company, as
certified by the Secretary of the Company on the date
hereof as being complete, accurate, and in effect.
3. The Bylaws of the Company, as certified by the
Secretary of the Company on the date hereof as being
complete, accurate, and in effect.
4. Resolutions of the Board of Directors of the Company
adopted at meetings held on May 16, 1999, September
19, 1999 and September 23, 1999, relating to the
issuance and sale of the Shares and arrangements in
connection therewith, as certified by the Secretary
of the Company on the date hereof as being complete,
accurate, and in effect.
5. The FICS Agreements.
6. The Edify Agreement.
7. The VerticalOne Agreement.
In our examination of the aforesaid documents, we have assumed
the genuineness of all signatures, the legal capacity of all natural persons,
the accuracy and completeness of all documents submitted to us, the authenticity
of all original documents, and the conformity to authentic original documents of
all documents submitted to us as copies (including telecopies). This opinion
letter is given, and all statements herein are made, in the context of the
foregoing.
This opinion letter is based as to matters of law solely on
Delaware corporate law. We express no opinion herein as to any other laws,
statutes, ordinances, rules, or regulations.
<PAGE> 3
Based upon, subject to and limited by the foregoing, we are of
the opinion that following (i) effectiveness of the Registration Statement, (ii)
issuance of the Shares pursuant to the terms of the Agreements, and (iii)
receipt by the Company of the consideration for the Shares specified in the
resolutions of the Board of Directors and each of the respective Agreements, the
Shares will be validly issued, fully paid, and nonassessable.
This opinion letter has been prepared for your use in
connection with the Registration Statement and speaks as of the date hereof. We
assume no obligation to advise you of any changes in the foregoing subsequent to
the delivery of this opinion letter.
We hereby consent to the filing of this opinion letter as
Exhibit 5.01 to the Registration Statement and to the reference to this firm
under the caption "Legal Matters" in the prospectus constituting a part of the
Registration Statement. In giving this consent, we do not thereby admit that we
are an "expert" within the meaning of the Securities Act of 1933, as amended.
Very truly yours,
/s/ HOGAN & HARTSON L.L.P.
<PAGE> 1
EXHIBIT 8.1
FORM OF TAX OPINION
_______ __, 1999
PRIVATE & CONFIDENTIAL
<TABLE>
<S> <C> <C>
The Board of Directors The Board of Directors GENERAL ATLANTIC PARTNERS 20, L.P.
Security First Technologies Corp. FICS Group N.V. GENERAL ATLANTIC PARTNERS 52, L.P.
3390 Peachtree Road Excelsirolaan 87 GAP COINVESTMENT PARTNERS, L.P.
Suite 1700 1930 Zaventem, Belgium c/o General Atlantic Service Corp.
Atlanta, GA USA 30326 3 Pickwick Plaza
Greenwich, CT USA 06830
</TABLE>
Dear Members of the Boards:
You have requested the opinion of KPMG LLP ("KPMG") regarding certain United
States federal income tax consequences resulting from the proposed acquisition
(hereinafter referred to as "the Acquisition") of FICS Group N.V., a Belgian
corporation (a naamloze vennootschap ("N.V.") ("FICS")) from its participating
shareholders by S1 Europe Holdings N.V., a newly created Belgian corporation (a
naamloze vennootschap), ("Acquiring") that is directly owned by Security First
Technologies Corporation ("Issuing"), in exchange solely for voting common stock
of Issuing and the right to receive solely additional common stock of Issuing in
the future, pursuant to the Share Purchase Agreement II and the Stock Purchase
Agreement II, each dated September 21, 1999 (the "Agreements") and as amended on
October 7, 1999. Specifically, you have requested an opinion from KPMG that the
Acquisition should constitute a reorganization pursuant to section 368(a)(1)(B)
of the Internal Revenue Code of 1986, as amended (the "Code") (hereinafter, all
section references are to the Code unless otherwise indicated).
FACTS
Issuing is a publicly traded holding company incorporated under the laws of the
state of Delaware. Issuing has issued and outstanding both voting common stock
(the "Issuing Common Stock") and various classes of non-voting preferred stock.
Issuing owns all of the stock of Security First Technologies, Inc. ("Sub 1") a
Kentucky corporation. Sub 1 owns all of the member interests in S1 Holdings,
LLC, a Delaware LLC ("Sub 2"). Sub1 develops integrated, brandable internet
applications that enable financial services companies to create their own
financial portals. Among other things, Sub 1's software integrates banking,
investment, loan and credit card accounts at an institution (the "Virtual
Financial Manager Software"). Sub 1 licenses its Virtual Financial Manager
<PAGE> 2
The Boards of Directors of
Security First Technologies Corporation and
FICS Group NV
Page 2
Software, provides installation and integration services, and offers outsourced
internet transaction processing through its data center.
Issuing and Sub 2 created Acquiring and own 99 percent and 1 percent
respectively of Acquiring. Acquiring will be treated as a corporation for United
States federal income tax purposes.
FICS is a Belgian N.V., treated as a corporation for U.S. federal income tax
purposes, with subsidiaries located throughout the world. It 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. FICS's
software provides both corporate and retail banking solutions.
FICS has issued and outstanding both ordinary and preferred shares.
Specifically, FICS's outstanding shares consist of 96,350 ordinary shares (the
"FICS Common Stock"), 40,000 shares of Series B1 preferred stock (the "Class B1
Preferred Stock"), 950 shares of Series B2 preferred stock (the "Class B2
Preferred Stock"), and 9,302 shares of Series C preferred stock (the "Class C
Preferred Stock"). (Collectively, the FICS Common Stock, the Class B1 Preferred
Stock, the Class B2 Preferred Stock and the Class C Preferred Stock are referred
to as the "FICS Stock"). In addition, FICS currently has outstanding options to
acquire 12,288.03 shares of FICS Common Stock (the "FICS Options").
Three General Atlantic Partnerships (collectively the "US FICS Shareholders")
own all of the Class B1 Preferred Stock and 950 shares of the Class B2 Preferred
Stock. Persons that may or may not be subject to US tax own the remaining stock
of FICS (the "Other FICS Shareholders").
It has been represented to KPMG that, for valid corporate business purposes,
Acquiring will acquire all of the stock of FICS owned by the US FICS
Shareholders and the participating Other FICS Shareholders (collectively, the
"FICS Shareholders"). To that end, and pursuant to the Agreements, the following
Steps are proposed:
Acquiring will borrow $357,500,000 (the "Initial Payment") from a third party
financial institution (the "Bank") (on a short-term basis and solely for
purposes of effectuating this transaction) chosen solely by Issuing.
<PAGE> 3
The Boards of Directors of
Security First Technologies Corporation and
FICS Group NV
Page 3
1. The Bank will establish an escrow account on behalf of each of the FICS
Shareholders (collectively the "Escrow"), to facilitate the following
transactions, all of the steps of which will take place on one day: (a)
Acquiring will transfer the Initial Payment to the Escrow and the FICS
Shareholders will transfer all of their FICS Stock to Acquiring, and (b),
the FICS Shareholders will, pursuant to the Agreement, cause the Initial
Payment held in the Escrow to be paid to Issuing to acquire solely
10,000,000 shares of Issuing Common Stock from Issuing in exchange for the
Initial Payment.
2. Immediately after Step 2, Issuing will transfer the Initial Payment
received in Step 2(b) as a capital contribution to Acquiring. Immediately
thereafter, Acquiring will repay the Bank the Initial Payment.
3. No later than thirty days after the filing of Issuing's Form 10-K for each
of fiscal years 2000 and 2001, or immediately upon the occurrence of an
Acceleration Event(1), Acquiring will duplicate the procedure described in
Steps 1, 2, and 3, described above. The amount transferred to the Escrow
(the "Subsequent Payment in each case will represent an agreed upon amount
pursuant to the Agreements and the number of shares of Issuing Common
Stock received by the FICS Shareholders will be based on a per-share price
equal to $35.75 per-share. If an acceptable bank cannot be found,
Acquiring will substitute it's own bill of exchange (the "Bill of
Exchange") for the
- -------------------
(1) An Acceleration Event occurs upon the happening of any one of the following
events: (1) any person or group of persons (within the meaning of Section 13 or
14 of the Securities Exchange Act of 1934 (the "Exchange Act")) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 50 percent or more of the outstanding common stock of
Issuing; (2) Issuing shall consolidate or merge with or into any other person
(other than pursuant to a consolidation or merger to which Issuing Shareholders
immediately prior to the effective time of such consolidation or merger own a
majority of the issued and outstanding common stock of the surviving corporation
immediately after such effective time); (3) Issuing shall sell, lease or
otherwise transfer, directly or indirectly, all or any substantial part of the
assets of Issuing and its subsidiaries, taken as a whole, to any other person;
(4) Issuing Common Stock or any successor security thereto is no longer quoted
on the NASDAQ Stock Market or a "national securities exchange" (as defined in
section 6 of the Exchange Act); (5) Issuing or any other successor entity
thereto no longer has a class of securities registered under the Exchange Act;
or (6) Michel Akkermans is removed from his position of chairman of the board of
directors of Issuing, without his consent and other than for cause.
<PAGE> 4
The Boards of Directors of
Security First Technologies Corporation and
FICS Group NV
Page 4
Subsequent Payment. In no event will the additional shares issued under
the Agreement exceed 4,500,000 shares of Issuing Common Stock.
4. The FICS Options will be exchanged for options to acquire Issuing Common
Stock (the "Issuing Options"), such Issuing Options having a fair market
(at the time of the Acquisition) value approximately equal to the fair
market value of the surrendered FICS Options.
In addition, Issuing shall grant a number of Issuing Options (the "Issuing
Compensatory Options") to employees of FICS ("FICS Employees"), solely for the
purpose of providing incentives to FICS Employees for the performance of past
and future services. The recipients of the Issuing Compensatory Options will be
designated by Michel Akkermans, solely in his capacity as an officer and
director of Issuing. Neither Michel Akkermans, nor any person related to Michel
Akkermans will be a recipient of any Issuing Compensatory Options.
REPRESENTATIONS
You have also made the following additional representations to KPMG regarding
the proposed transaction:
1. Acquiring and FICS are per se corporations as identified in Reg. sec.
301.7701-2(b)(8)(i).
2. The fair market value of the Issuing Common Stock received by each FICS
Shareholder in exchange for FICS Stock will be approximately equal to the
fair market value of the FICS Stock surrendered by each FICS Shareholder
in the Acquisition.
3. Except as to any Subsequent Payment or Bill of Exchange described in step
4, there is no current plan or intention for Issuing or any person related
(as defined in Reg. sec. 1.368-1(e)(3), applying the principles of
paragraph (4) and (5) of that subsection) to Issuing, to acquire, during
the five year period beginning immediately after the Acquisition, with
consideration other than Issuing Common Stock, the Issuing Common Stock
furnished in exchange for a proprietary interest in FICS in the
Acquisition, either directly or through any transaction, agreement or
arrangement with any other person.
<PAGE> 5
The Boards of Directors of
Security First Technologies Corporation and
FICS Group NV
Page 5
4. FICS has no plan or intention to issue additional shares of its stock that
would result in Acquiring losing control of FICS within the meaning of
section 368(c) of the Code.
5. Neither Issuing nor Acquiring has any plan or intention to liquidate FICS;
to merge FICS into another corporation; to cause FICS to sell or otherwise
dispose of any of its assets, except for dispositions made in the ordinary
course of business; or to sell or otherwise dispose of any of the FICS
Stock acquired in the transaction, except for transfers described in
section 368(a)(2)(C) of the Code.
6. Issuing, Acquiring, FICS, and the FICS Shareholders will each pay their
respective expenses, if any, incurred in connection with the Acquisition.
7. Acquiring will acquire FICS Stock solely in exchange for Issuing Common
Stock. For purposes of this representation, the Initial Payment (and any
Subsequent Payment or Bill of Exchange as the case may be pursuant to Step
4, described above) will be ignored. Further, for purposes of this
representation, FICS Stock redeemed for cash or other property furnished
by Issuing, or any person related to Issuing (including Acquiring), will
be considered as acquired by Acquiring in exchange for that other cash or
property. No liabilities of FICS or the FICS Shareholders will be assumed
by Issuing or any person related to Issuing (including Acquiring), nor
will any of the FICS Stock be subject to any liabilities.
8. At the time of the transaction, FICS will not have outstanding any
warrants, options, convertible securities, or any other type of right
pursuant to which any person could acquire stock in FICS that, if
exercised or converted, would affect Acquiring's acquisition or retention
of control of FICS, as defined in section 368(c) of the Code.
9. During the five year period ending immediately before the Acquisition (and
disregarding the transfer of the Initial Payment):
(i) none of the following will have acquired FICS Stock with
consideration other than Issuing Common Stock either directly or
through any transaction, agreement, or arrangement with any other
person: Issuing, Acquiring, or any person related (as defined in
Reg. Sec. 1.368-1(e)(3)) to Issuing or Acquiring;
<PAGE> 6
The Boards of Directors of
Security First Technologies Corporation and
FICS Group NV
Page 6
(ii) neither FICS, nor any person related (as defined in Reg. Sec.
1.368-1(e)(3) applying the principles of paragraph (4) and (5)) to
FICS, will have (in the case of FICS) redeemed or (in the case of a
related party) acquired FICS stock with consideration other than
Issuing Common Stock or FICS Stock either directly or through any
transaction, agreement, or arrangement with any other person; and
(iii) no distributions (except for ordinary, normal, or regular dividend
distributions made pursuant to FICS's historical dividend paying
practice) will have been made with respect to FICS Stock either
directly or through any transaction, agreement, or arrangement with
any other person.
10. Following the transaction, FICS will continue its historical business or
use a significant portion of its historical business assets in the
business.
11. Issuing, Acquiring, and FICS are not investment companies as defined in
section 368(a)(2)(F)(iii) and (iv) of the Code.
12. On the date of the transaction, the fair market value of the assets of
FICS will exceed the sum of its liabilities, plus the liabilities, if any,
to which the assets are subject.
13. None of the compensation received by any shareholder employee of FICS will
be separate consideration for, or allocable to, any of their shares of
FICS Stock; none of the shares of Issuing Common Stock received by any
shareholder employee will be separate consideration for, or allocable to,
any employment agreement; and the compensation paid to any shareholder
employee will be for services actually rendered and will be commensurate
with amounts paid to third parties bargaining at arm's-length for similar
services.
14. Neither FICS nor Acquiring is a passive foreign investment company (PFIC)
as defined in section 1297(a) of the Code.
15. All stock to be issued in the Acquisition is to be issued within five
years from the date of the Acquisition.
16. There is a valid business reason for not issuing all the Issuing Common
Stock to be issued in the Acquisition immediately.
<PAGE> 7
The Boards of Directors of
Security First Technologies Corporation and
FICS Group NV
Page 7
17. The maximum number of shares that may be issued in the exchange is stated
and at least 50 percent of the maximum number of shares of each class of
stock that may be issued will be issued on the date of the Acquisition.
18. The rights to receive Issuing Common Stock in the future ("Contingent
Stock Rights") pursuant to the Agreements are not evidenced by negotiable
certificates of any kind, are not readily marketable, and the Contingent
Stock Rights can only give right to the receipt of additional Issuing
Common Stock.
19. The issuance of shares pursuant to the Contingent Stock Rights will not be
triggered by an event the occurrence or nonoccurrence of which is within
the control of the FICS Shareholders in their capacity as FICS
Shareholders.
20. The issuance of shares pursuant to the Contingent Stock Rights will not be
triggered by reason of the payment of additional tax or the reduction in
tax paid as a result of an Internal Revenue Service audit of the FICS
Shareholders or Issuing.
21. The mechanism for the calculation of the additional Issuing Common Stock
to be issued is objective and readily ascertainable. Stock issued as
compensation, royalties or any other consideration other than in exchange
for stock or assets will not be received in the Acquisition.
22. No interest will be earned on the Initial Payment or any Subsequent
Payment (or on any Bill of Exchange, as the case may be) when held by the
Escrow.
23. FICS Option holders who own no FICS Stock, in the aggregate, hold a
substantial proportion of the FICS Options.
24. The transfer of the Initial Payment and any Subsequent Payment (or any
Bill of Exchange, as the case may be) to the Escrow, the transfer of same
to Issuing, and Issuing's return of same to Acquiring are all undertaken
for reasons of foreign law.
25. No FICS shareholder who is a U.S. person will own 5 percent or more (in
vote or value), directly or indirectly, of the stock of Issuing. For
purposes of this representation, stock of Issuing owned by a partnership
will be treated as owned proportionately by its partners.
<PAGE> 8
The Boards of Directors of
Security First Technologies Corporation and
FICS Group NV
Page 8
SCOPE OF OPINION
You have submitted for our consideration certain Facts and Representations and
Agreements as to the proposed Acquisition, which are specifically described
above. Our opinion is based on our review of the Agreements and upon the Facts
and Representations set forth in this letter. If any Fact or Representation is
not entirely complete or accurate, it is imperative that we be informed
immediately in writing because the incompleteness or inaccuracy could cause us
to change our opinion.
The opinion contained herein is rendered only with respect to the specific
opinions set forth below under the heading Opinion and KPMG expresses no opinion
with respect to any other foreign, federal, state, or local tax aspect, except
as expressed to you in separate advices. Specifically, no opinion was requested
and no opinion is rendered with respect to whether the exchange of FICS Options
for Issuing Options is subject to nonrecognition treatment. Additionally, KPMG
is not rendering any opinion as to the United States federal tax consequences on
the receipt, by any person or persons, of Issuing Common Stock that are
determined to be compensatory in nature. No inference should be drawn on any
matter not specifically opined upon.
This opinion is not binding upon any tax authority (including the Internal
Revenue Service) or any court and no assurance can be given that a position
contrary to that expressed herein will not be asserted by a tax authority and
ultimately sustained by a court. In rendering our opinion, we are relying upon
the relevant provisions of the Code, the regulations thereunder, and judicial
and administrative interpretations thereof, all as of the date hereof and all of
which are subject to change or modification by subsequent legislative,
regulatory, administrative, or judicial decisions. Any such changes could be
retroactive in effect and, therefore, could also have an effect on the validity
of our opinion. We assume no duty to inform you of any changes in our opinion
due to changes in law that occur subsequent to the issuance of this letter.
KPMG is rendering this opinion only to Issuing, FICS, and the FICS Shareholders.
Therefore, this opinion cannot be relied upon by any person or persons other
than Issuing, FICS, or the FICS Shareholders. This opinion may not be included
in any documents available to any third parties, or be incorporated by reference
in any documents available to such third parties, without the express written
consent of KPMG.
<PAGE> 9
The Boards of Directors of
Security First Technologies Corporation and
FICS Group NV
Page 9
KPMG has not verified the accuracy of the Facts or Representations contained
herein. The parties referred to in the prior paragraph understand this fact and
agree to KPMG's reliance on each Fact and Representation included herein in
rendering its opinions.
OPINIONS
Based solely on our review of the Agreements and on the Facts and
Representations as stated herein, and as limited by the Scope Of Opinion, above,
it is the opinion of KPMG that for United States federal income tax purposes:
1. The transitory steps (i.e., the transfer of the Initial Payment and
the Subsequent Payment, if any (or any Bill of Exchange, as the case
may be), by Acquiring to Escrow, followed by the transfer of the
same by Escrow to Issuing, followed by the transfer of the same by
Issuing back to Acquiring) occurring as part of the plan of
Acquisition, should be disregarded and the Acquisition should
constitute an exchange by the FICS Shareholders of their FICS Stock
for Issuing Common Stock. Rev. Rul. 78-397, 1978-2 C.B. 150 and Rev.
Rul. 80-154, 1980-1 C.B. 68.
2. The Acquisition should constitute a reorganization pursuant to
section 368(a)(1)(B). Issuing, Acquiring, and FICS should each be "a
party to a reorganization" within the meaning of section 368(b).
3. No gain or loss should be recognized by Acquiring upon the issuance,
pursuant to the Agreements, of the Issuing Common Stock in exchange
for FICS Stock. Reg. Section 1.1032-2.
4. The basis of the stock of FICS, in the hands of Acquiring, should be
the same as the basis of such stock in the hands of the FICS
Shareholders immediately prior to the Acquisition. Section 362(b).
5. The holding period of the stock of FICS, in the hands of Acquiring,
should include the holding period of such stock in the hands of the
FICS Shareholders immediately prior to the Acquisition. Section
1223(2).
6. No gain or loss should be recognized by the FICS Shareholders on the
receipt of Issuing Common Stock that is received solely in exchange
for their FICS Stock (a) on the date of the Acquisition, or (b) in
the future pursuant to the Contingent
<PAGE> 10
The Boards of Directors of
Security First Technologies Corporation and
FICS Group NV
Page 10
Stock Rights. Section 354(a)(1). A portion of the Issuing Common
Stock that is received in the future pursuant to the Contingent
Stock Rights should not be treated as in exchange for FICS Stock,
but rather should be treated as interest income. Reg. Section
1.483-2(b). Issuing Common Stock received by the FICS Shareholders
that is not in exchange for their FICS Stock, if any, is not covered
by this Opinion.
7. The basis of the Issuing Common Stock received by the FICS
Shareholders solely in exchange for the FICS Stock, pursuant to the
Acquisition should be, in each instance, the same as the basis of
the FICS Stock surrendered in exchange therefore. Section 358(a)(1).
If the Issuing Common Stock is disposed of prior to completion of
Step 4, this aggregate basis must be allocated over the maximum
shares of Issuing Common Stock that may be received in exchange for
FICS Stock in order to determine the basis of individual shares.
Reg. Section 1.453-1(f)(2)(iv) and Rev. Proc. 84-42, 1984-1 C.B.
521.
8. The holding period of the Issuing Common Stock received pursuant to
the Acquisition by the FICS Shareholders solely in exchange for the
FICS stock should include the holding period of the FICS Stock for
which it is exchanged, provided that the shares of the FICS Stock
are capital assets in the hands of the holder. Section 1223(1).
Very truly yours,
KPMG LLP
<PAGE> 1
Exhibit 8.3
ALSTON&BIRD LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
404-881-7000
Fax: 404-881-4777
www.alston.com
FORM OF TAX OPINION
_______ __, 1999
VerticalOne Corporation
Two Concourse Parkway
Suite 700
Atlanta, Georgia 30328
Security First Technologies Corporation
3390 Peachtree Road, NE
Suite 1700
Atlanta, Georgia 30326
Re: Proposed Merger Involving Security First Technologies Corporation
and VerticalOne Corporation
Ladies and Gentlemen:
We have served as special counsel to VerticalOne Corporation, a
corporation organized under the laws of the state of Delaware ("VerticalOne") in
connection with the reorganization involving Security First Technologies
Corporation, a corporation organized under the laws of the State of Delaware
("S1"), VerticalOne, and VerticalOne Acquisition Corporation, a corporation
organized under the laws of the State of Delaware and a wholly owned subsidiary
of S1 ("Merger Sub"), pursuant to the Agreement and Plan of Merger by and among
S1, Merger Sub and VerticalOne, dated as of September 23, 1999 (the
"Agreement"), which sets forth the terms and conditions of the acquisition of
VerticalOne by S1 pursuant to the merger of Merger Sub with and into VerticalOne
(the "Merger"). In our capacity as special counsel to VerticalOne, our opinion
has been requested with respect to certain of the federal income tax
consequences of the Merger.
Pursuant to the Merger, and as more fully described in the Agreement, at
the Effective Time, each share of VerticalOne Common Stock and VerticalOne
Preferred
<PAGE> 2
VerticalOne Corporation
Security First Technologies Corporation
_______ __, 1999
Page 2
Stock ("VerticalOne Stock") issued and outstanding at the Effective Time shall
be converted into a certain number of shares of S1 Common Stock. To ensure
funding for indemnification obligations of VerticalOne for breaches of certain
representations and warranties, 4.85 percent of the S1 Common Stock to be issued
in the Merger shall be placed in escrow (the "Escrow Shares").
Contemporaneous with the execution of the Agreement, S1 and VerticalOne
entered a Stock Purchase Agreement, pursuant to which S1 agreed to purchase
$15,000,000 of a newly designated series of preferred stock of VerticalOne. This
purchase took place on September 24, 1999. In addition, contemporaneous with the
execution of the Agreement, S1 and VerticalOne entered into a Strategic
Marketing Agreement pursuant to which S1 agreed to market to its customers
certain products and services of VerticalOne, and a related Warrant Agreement,
pursuant to which VerticalOne granted to S1 a warrant to purchase up to
1,000,000 shares of common stock of VerticalOne. Under Rev. Rul. 72-522, 1972-2
C.B. 215, the transactions that take place pursuant to the Stock Purchase
Agreement, the Strategic Marketing Agreement and the related Warrant Agreement
are separate from the exchange of stock that will take place pursuant to the
Merger.
In rendering the opinions expressed herein, we have examined such
documents as we deemed appropriate, including the Agreement and the Registration
Statement on Form S-4, filed as of October __, 1999, with the Securities and
Exchange Commission under the Securities Act of 1933, including the Proxy
Statement/Prospectus for a special meeting of stockholders of VerticalOne (the
"Registration Statement"). In addition, we have assumed that the Agreement and
the Registration Statement accurately and completely describe the Merger and
that the Merger will be consummated in accordance with the Agreement and the
Registration Statement.
In rendering the opinions expressed herein, we have relied, with the
consent of S1 and VerticalOne, upon the accuracy and completeness of the factual
statements and factual representations (which factual statements and factual
representations we have neither investigated nor verified) contained in the
certificates of S1 and VerticalOne to us, dated as of the date hereof,
respectively (together, the "Certificates"), which we have assumed are correct,
complete and accurate as of the date hereof and will be correct, complete and
accurate as of the Effective Time. All terms used herein without definition
shall have the respective meanings specified in the Agreement, and unless
otherwise specified, all section references herein are to the Internal Revenue
Code of 1986, as amended (the "Code").
Based on the foregoing, we are of the opinion that, under presently
applicable federal income tax law:
<PAGE> 3
VerticalOne Corporation
Security First Technologies Corporation
_______ __, 1999
Page 3
(1) The Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code, and each of S1, VerticalOne and Merger Sub will be a
party to the reorganization within the meaning of Section 368(b) of the Code.
(2) No gain or loss will be recognized by holders of VerticalOne Stock
upon the exchange in the Merger of all of their shares of VerticalOne Stock
solely for shares of S1 Common Stock plus cash in lieu of fractional shares
(except to the extent of gain recognized with respect to the receipt of cash in
lieu of fractional shares).
(3) The aggregate tax basis of the S1 Common Stock received by holders of
VerticalOne Stock who exchange all of their shares of VerticalOne Stock solely
for S1 Common Stock plus cash in lieu of fractional shares in the Merger will be
the same as the aggregate tax basis of the VerticalOne Stock surrendered in
exchange therefor, as decreased by the tax basis allocated to any fractional
share interest exchanged for cash.
(4) The holding period of the S1 Common Stock received by holders who
exchange their VerticalOne Stock for S1 Common Stock in the Merger will include
the holding period of the VerticalOne Stock surrendered in exchange therefor,
provided that such VerticalOne Stock is held as a capital asset at the Effective
Time.
(5) The payment of cash to holders of VerticalOne Stock in lieu of
fractional share interests of S1 will be treated for federal income tax purposes
as if the fractional shares were distributed as part of the exchange and then
were redeemed by S1. These cash payments will be treated as having been received
as distributions in full payment in exchange for the S1 Common Stock redeemed,
as provided in Section 302(a) of the Code.
(6) Where solely cash is received by a holder of VerticalOne Stock in
exchange for VerticalOne Stock pursuant to the exercise of dissenters' rights,
such cash will be treated as having been received in redemption of such holder's
VerticalOne Stock, subject to the provisions and limitations of Section 302 of
the Code.
(7) Neither S1 nor VerticalOne will recognize any gain or loss as a result
of the Merger.
(8) S1's basis in the VerticalOne Stock acquired in the Merger will equal
the aggregate basis of such shares in the hands of the exchanging VerticalOne
stockholders immediately before the Merger.
Notwithstanding the foregoing, if the shares of stock placed in escrow are
used to satisfy an indemnification obligation, such application of the escrowed
shares could result in gain or loss to the shareholders otherwise entitled to
receive such shares. The opinions expressed herein are based upon existing
statutory, regulatory, and judicial authority, any of which may be changed at
any time with retroactive effect. The federal income tax consequences described
herein may not apply to certain stockholders of VerticalOne with
<PAGE> 4
VerticalOne Corporation
Security First Technologies Corporation
_______ __, 1999
Page 4
special situations, including, without limitation, stockholders who hold their
VerticalOne Stock other than as a capital asset, who received their VerticalOne
Stock upon the exercise of employee stock options or otherwise as compensation,
who hold their VerticalOne Stock as part of a "straddle" or "conversion
transaction" for federal income tax purposes, or are foreign persons, insurance
companies, or securities dealers.
In addition, our opinions are based solely on the documents that we have
examined and the factual statements and factual representations set out in the
Certificates which we have assumed are true on the date hereof and will be true
at the Effective Time. Our opinions cannot be relied upon if any of the facts
pertinent to the federal income tax treatment of the Merger stated in the
Agreements or any of the factual statements or factual representations set out
in the Certificates is, or becomes inaccurate in any material respect.
Our opinions are limited to the tax matters specifically covered thereby,
and we have not been asked to address, nor have we addressed, any other tax
consequences of the Merger, including for example any issues related to
intercompany transactions, changes in accounting methods resulting from the
Merger, the conversion of options, or the consequences of the Merger under
state, local or foreign law.
These opinions are provided by Alston & Bird LLP solely for the benefit
and use of S1, VerticalOne and the stockholders of VerticalOne. No other party
or person is entitled to rely on the opinions.
Very truly yours,
ALSTON & BIRD LLP
By:________________________
<PAGE> 1
EXHIBIT 10.11.1
AMENDMENT TO STOCK PURCHASE AGREEMENT II
THIS AMENDMENT TO STOCK PURCHASE AGREEMENT II (the "Amendment") is
dated as of the 7th day of October, 1999, and is entered into by and between
Security First Technologies Corporation, a Delaware corporation ("S1") and
Michel Akkermans ("Akkermans").
RECITALS:
A. The parties hereto and other individuals and entities have
previously entered into that certain Stock Purchase Agreement II, dated as of
September 21, 1999 (the "Agreement"), pursuant to which the Purchasers (as
defined in the Agreement) agreed to purchase, and S1 agreed to sell, a certain
number of shares of S1 Common Stock (as defined in the Agreement) upon the terms
and conditions contained in the Agreement.
B. Pursuant to Section 10.6 of the Agreement, the parties hereto
desire to amend and replace Section 2.2 of the Agreement.
C. All capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to them in the Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing Recitals and the
mutual promises, representations, warranties, covenants and conditions set forth
herein and in the Agreement, the sufficiency of which is hereby acknowledged,
the parties mutually agree as follows:
SECTION 1. AMENDMENT.
Effective as of the date hereof, Section 2.2 of the Agreement shall
be deleted and the following shall be substituted in lieu thereof:
"2.2 ADDITIONAL OPTIONS.
Upon the First Closing, or as soon as possible thereafter, S1 shall
grant, as compensation and pursuant to the terms of one of its stock
option plans existing as of the date hereof, a number of options to
purchase shares of S1 Common Stock (each, an "Additional Option") to such
individuals who are employees of FICS or any of its subsidiaries and as
designated by Michel Akkermans ("Akkermans"), solely in his capacity as
an officer and director of S1 and in consultation with S1. No such
options will be granted to Akkermans or a person related to Akkermans.
The aggregate number of
<PAGE> 2
such grants shall not exceed (a) 4,000,000 (after adjustment for any
stock splits, combinations or dividends or distributions in the S1 Common
Stock between the date of this Agreement and the First Closing) minus (b)
the number of Successor Options to be granted pursuant to Section 2.1
hereof. Each Additional Option shall have an exercise price not less than
the stock price, as quoted on the Nasdaq Stock Market or such other
national exchange on which the S1 Common Stock is then traded, of a share
of S1 Common Stock at the close of business on the last business day
prior to the date of such grant."
SECTION 2. AGREEMENT OTHERWISE UNCHANGED.
Except as otherwise specifically amended herein, the balance of the
Agreement shall remain unchanged and in full force and effect.
[SIGNATURE PAGE FOLLOWS]
- 2 -
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed and delivered as of the date first above written.
SECURITY FIRST TECHNOLOGIES CORPORATION
By: /s/ ROBERT F. STOCKWELL
-----------------------------------
Name: Robert F. Stockwell
Title: Chief Financial Officer
/s/ MICHEL AKKERMANS
--------------------------------------
MICHEL AKKERMANS
- 3 -
<PAGE> 1
EXHIBIT 10.16
LOAN AGREEMENT
LOAN AGREEMENT dated as of September 21, 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 II, dated
as of the date hereof (the "Purchase Agreement"), with the individuals and
entities who are signatories thereto, and as may be joined by other individuals
and entities from time to time (each a "Purchaser" and collectively,
"Purchasers") and Borrower for the limited purposes set forth therein, pursuant
to which such Purchasers 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 $15,000,000 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
1
<PAGE> 2
part of its assets; or its consent to any of the foregoing in an
involuntary 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 $6,000,000 pursuant to a Note substantially in the
form of Exhibit A hereto. Not later than thirty (30) days after the date of this
Agreement, Lender shall make an additional advance to Borrower in the amount of
$2,000,000. 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 $6,000,000 advance made on the date of this Agreement and the
$2,000,000 advance made not later than 30 days after the date of this Agreement,
$15,000,000 in the aggregate 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 at the Default Rate of Interest and
bear other consequences 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.
2
<PAGE> 3
(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 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 (Statuten) 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.
[SIGNATURE PAGE FOLLOWS]
5
<PAGE> 6
Duly executed as of the date set forth above.
FICS GROUP N.V.
By: /s/
----------------------------------
Name: Steven Sipowicz
Title: Chief Financial Officer
SECURITY FIRST TECHNOLOGIES CORPORATION
By: /s/
----------------------------------
Name: Robert F. Stockwell
Title: Chief Financial Officer
<PAGE> 7
EXHIBIT A
<PAGE> 8
PROMISSORY NOTE
$15,000,000.00 Atlanta, Georgia
September 21, 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 FIFTEEN MILLION
DOLLARS ($15,000,000.00), 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 Share Purchase Agreement II, dated the date hereof (the "BelCo
Purchase Agreement"), by and among S1 Europe Holdings N.V., a Belgian
corporation and a subsidiary of Lender ("S1 Europe"), the stockholders of Maker
who are signatories thereto, and as may be joined by other stockholders from
time to time, and for the limited purposes stated therein, Lender and Maker, and
(ii) the certain Stock Purchase Agreement II, dated the date hereof (the "Lender
Purchase Agreement"), by and among Lender, the individuals and entities who are
signatories thereto, and as may be joined by other individuals and entities from
time to time, and Maker for the limited purposes stated therein. In the event
that either (i) the BelCo Purchase Agreement is terminated pursuant to Section
8.1(e) thereof by any of the 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 Purchasers (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. If the BelCo Purchase Agreement or the Lender
Purchase Agreement are terminated for any reason, Maker may, at its choice, pay
any or all of the obligations due and
-1-
<PAGE> 9
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 divided by (y)
$2,438.54 (the "Exchange Ratio"). Notwithstanding the foregoing, in the event
that (i) either the BelCo Purchase Agreement or the Lender Purchase Agreement is
terminated by any party thereto for any reason other than a default or breach
thereof by Lender or a subsidiary of Lender; and (ii) FICS, or any successor,
subsidiary or controlling entity thereof, raises equity capital (or debt
convertible into equity) within one year from the date of such termination at a
lower valuation per share of "FICS Securities" (or any successor securities
thereto) than reflected by the "Initial Payment" (as such terms in quotes are
defined in the BelCo Purchase Agreement), then the Exchange Ratio shall be
adjusted for such lower valuation on a retroactive basis, and the Lender shall
be entitled to additional shares of FICS Securities (or any successor securities
thereto) consistent with such adjustment. 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> 10
Duly executed as of the date set forth above.
FICS GROUP N.V.
By:
----------------------------------
Name:
Title:
-3-
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF S1
1. Security First Technologies, Inc., a Kentucky corporation
2. S1 Holdings, LLC, a Delaware limited liability company
3. S1 Europe Holdings, N.V., a Belgian corporation
4. Sahara Strategy Corporation, a Delaware corporation
5. VerticalOne Acquisition Corporation, a Delaware corporation
<PAGE> 1
EXHIBIT 23.2
The Board of Directors
Security First Technologies Corporation:
We consent to incorporation by reference in the prospectus/proxy statement
and related registration statement on Form S-4 of our reports 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 reports appear 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 headings "Experts" and "The FICS Transaction --
Material United States Federal Income Tax Consequences of the FICS Transaction"
in the prospectus/proxy statement.
/s/ KPMG LLP
KPMG LLP
Atlanta, Georgia
October 6, 1999
<PAGE> 1
ALSTON&BIRD LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
404-881-7000
Fax: 404-881-4777
www.alston.com
EXHIBIT 23.4
CONSENT OF ALSTON & BIRD LLP
We hereby consent to the use of this opinion and to the references made to
Alston & Bird LLP in the Registration Statement under the caption "Material
United States Federal Income Tax Consequences of the VerticalOne Transaction -
Tax Opinion as to Certain Tax Consequences" and to the filing of this opinion as
an exhibit to the Registration Statement.
ALSTON & BIRD LLP
/s/ ALSTON & BIRD LLP
Atlanta, Georgia
October 7, 1999.
<PAGE> 1
EXHIBIT 23.5
CONSENT OF BANCBOSTON ROBERTSON STEPHENS INC.
We hereby consent to the inclusion of and reference to (i) our opinion
dated September 21, 1999 to the Board of Directors of Security First
Technologies Corporation ("Security First") relating to the proposed business
combination involving Security First and FICS Group N.V. (the "FICS
Transaction") and (ii) our opinion dated May 16, 1999 to the Board of Directors
of Security First relating to the proposed business combination involving
Security First and Edify Corporation (the "Edify Transaction") in the
Registration Statement on Form S-4 (the "Registration Statement") of Security
First, covering common stock of Security First to be issued in connection with
the FICS Transaction and the Edify Transaction. In giving the foregoing consent,
we do not admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended (the
"Securities Act"), or the rules and regulations promulgated thereunder, nor do
we admit that we are experts with respect to any part of the Registration
Statement within the meaning of the term "experts" as used in the Securities Act
or the rules and regulations promulgated thereunder.
/s/ BancBoston Robertson Stephens Inc.
San Francisco, California
October 7, 1999
<PAGE> 1
EXHIBIT 23.6
October 12, 1999
Board of Directors
Security First Technologies Corporation
3390 Peachtree Road, NE, Suite 1700
Atlanta, Georgia 30326
Re: Registration Statement (File No. 333-82771) of Security First Technologies
Corporation
Gentlemen and Madame:
Reference is made to our opinion letter dated September 23, 1999 with respect to
the fairness from a financial point of view to Security First Technologies
Corporation (the "Company") of the exchange ratio of 0.200 shares of Common
Stock, par value $0.01 per share, of the Company to be issued for each share of
Common Stock, par value $0.001 per share, of VerticalOne Corporation
("VerticalOne") pursuant to the Agreement and Plan of Merger, dated as of
September 23, 1999, among VerticalOne, VerticalOne Acquisition Corporation, a
wholly-owned subsidiary of the Company, and the Company.
The foregoing opinion letter is provided for the information and assistance of
the Board of Directors of the Company in connection with its consideration of
the transaction contemplated therein and is not to be used, circulated, quoted
or otherwise referred to for any other purpose, nor is it to be filed with,
included in or referred to in whole or in part in any registration statement,
proxy statement or any other document, except in accordance with our prior
written consent. We understand that the Company has determined to include our
opinion in the above-referenced Registration Statement.
In that regard, we hereby consent to the reference to the opinion of our Firm
under the captions "Summary of the Prospectus/Proxy Statement-The Edify
Transaction-Opinions of Financial Advisors", "Summary of the Prospectus/Proxy
Statement-The VerticalOne Transaction-Opinion of S1's Financial Advisor",
"Background of the Transactions", "The VerticalOne Transaction-S1's Reasons for
the VerticalOne Transaction" and "The VerticalOne Transaction-Opinion of S1's
Financial Advisor" and to the inclusion of the foregoing opinion in the
above-mentioned Proxy Statement/Prospectus included in the above-mentioned
Registration Statement, as amended. In giving such consent, we do not thereby
admit that we come within the category of persons
<PAGE> 1
EXHIBIT 23.7
October 12, 1999
Board of Directors
Edify Corporation
2840 San Tomas Expressway
Santa Clara, CA 95051
Re: Registration Statement (File No. 333-82771) of
Security First Technologies Corporation
Gentlemen:
Reference is made to our opinion letter dated October 12, 1999 with respect 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, of Security First Technologies Corporation
("S1") to be received for each Share 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, and Edify.
The foregoing opinion letter is provided for the information and assistance of
the Board of Directors of Edify in connection with its consideration of the
transaction contemplated therein and is not to be used, circulated, quoted or
otherwise referred to for any other purpose, nor is it to be filed with,
included in or referred to in whole or in part in any registration statement,
proxy statement or any other document, except in accordance with our prior
written consent. We understand that Edify has determined to include our opinion
in the above-referenced Registration Statement.
In that regard, we hereby consent to the reference to the opinion of our Firm
under the captions "Summary of the Prospectus/Proxy Statement--The Edify
Transaction--Opinions of Financial Advisors", "Summary of the Prospectus/Proxy
Statement--The VerticalOne Transaction--Opinion of S1's Financial Advisor",
"Background of the Transactions", "The Edify Transaction--Edify's Reasons for
the Edify Transaction", "The Edify Transaction--Opinion of Edify's Financial
Advisor" and to the inclusion of the foregoing opinion in the
<PAGE> 2
Board of Directors
Edify Corporation
October 12, 1999
Proxy Statement/Prospectus included in the above-mentioned Registration
Statement, as amended. In giving such consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933 or the rules and regulations of the Securities and
Exchange Commission thereunder.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
- ------------------------
GOLDMAN, SACHS & CO.
-2-
<PAGE> 1
EXHIBIT 23.9
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 October 6, 1999, relating to the financial
statements of FICS Group N.V., which appears in such Registration Statement. We
also consent to the reference to us under the heading "Experts" in such
Registration Statement.
/s/
PricewaterhouseCoopers & Co. Bedrijfsrevisoren
Brussels, Belgium
October 9, 1999
<PAGE> 1
EXHIBIT 23.10
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. 333-82711) 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
October 6, 1999
<PAGE> 1
EXHIBIT 23.11
The Board of Directors
VerticalOne Corporation:
We consent to the use in this prospectus/proxy statement and related
registration statement on Form S-4 of our report dated September 21, 1999,
relating to the balance sheet of VerticalOne Corporation as of December 31,
1998, and the related statements of operations, shareholders' deficit, and cash
flows for the period from inception (October 8, 1998) through December 31,
1998, which report appears in this prospectus/proxy statement and related
registration statement. We also consent to the reference to our firm under the
heading "Experts" in the prospectus/proxy statement.
/s/ KPMG LLP
KPMG LLP
Atlanta, Georgia
October 6, 1999
<PAGE> 1
Exhibit 24.2
POWER OF ATTORNEY
I, the undersigned director of Security First Technologies Corporation,
hereby constitute and appoint James S. Mahan III and Robert F. Stockwell and
each and either of them, my true and lawful attorneys-in-fact and agents, to do
any and all acts and things in my name and on my behalf in my capacity as a
director and to execute any and all instruments for me and in my name in the
capacity 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 I hereby ratify and confirm
all that said attorneys and agents, or either of them, shall do or cause to be
done by virtue thereof.
Signature Title
--------- -----
/s/ JACKSON L. WILSON, JR. Director
- ----------------------------
Jackson L. Wilson, Jr.
<PAGE> 1
EXHIBIT 99.1
CONSENT OF FUTURE DIRECTOR
I, Michel Akkermans, do hereby consent to being named in the
Registration Statement on Form S-4 (Reg. No. 333-82711) filed with the
Securities and Exchange Commission by Security First Technologies Corporation,
as a person about to become a director of that company.
Date: October 6, 1999 /s/ MICHEL AKKERMANS
--------------- --------------------
Michel Akkermans
<PAGE> 1
EXHIBIT 99.2
CONSENT OF FUTURE DIRECTOR
I, Jeffrey M. Crowe, do hereby consent to being named in the
Registration Statement on Form S-4 (Reg. No. 333-82711) filed with the
Securities and Exchange Commission by Security First Technologies Corporation,
as a person about to become a director of that company.
Date: August 23, 1999 /s/ JEFFREY M. CROWE
--------------- --------------------
Jeffrey M. Crowe
<PAGE> 1
EXHIBIT 99.3
CONSENT OF FUTURE DIRECTOR
I, Gregg S. Freishtat, do hereby consent to being named in the
Registration Statement on Form S-4 (Reg. No. 333-82711) filed with the
Securities and Exchange Commission by Security First Technologies Corporation,
as a person about to become a director of that company.
Date: October 6, 1999 /s/ GREGG S. FREISHTAT
--------------- ----------------------
Gregg S. Freishtat
<PAGE> 1
EXHIBIT 99.4
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 8:00 a.m., local time, on November 10, 1999,
at the S1 Technology Center, 705 Westech Drive, Norcross, GA 30092, 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 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 approve the issuance of shares
of S1 common stock in the transaction that will cause VerticalOne
Corporation to become a wholly owned subsidiary of S1.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To consider and vote upon a proposal to amend S1's charter 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 99.5
SIGNATURE PAGES
FOR
FICS TRANSACTION
IN WITNESS WHEREOF, the Sellers have executed and delivered this Agreement,
and S1 Holdings, S1 and FICS have caused this Agreement to be executed and
delivered by their respective representatives duly authorized, all as of the
date first above written.
----------------------------
Guy Moons
----------------------------
Steven Van Rossen
----------------------------
Nadine Quaeyhaegens
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
----------------------------
Guy Moons
----------------------------
Steven Van Rossen
----------------------------
Nadine Quaeyhaegens
<PAGE> 1
EXHIBIT 99.7
PROXY
VERTICALONE CORPORATION
Two Concourse Parkway, Suite 700
Atlanta, Georgia 30328
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints J. Stephen Hufford and Gregg S.Freishtat,
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, Series A Preferred Stock and Series B Preferred
Stock, $0.01 par value of VerticalOne Corporation held of record by the
undersigned on October 8, 1999, at the special meeting of stockholders of
VerticalOne Corporation to be held at VerticalOne's headquarters at Two
Concourse Parkway, Suite 700, Atlanta, Georgia, on November 10, 1999, at 8:00
a.m., Eastern time, and at any postponements or adjournments thereof.
The undersigned acknowledges receipt of the Notice of Special Meeting
of Stockholders and the Prospectus/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 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.
<TABLE>
<S> <C> <C> <C>
To approve and adopt the Agreement and Plan of Merger dated as of FOR AGAINST ABSTAIN
September 23, 1999, by and among Security First Technologies [ ] [ ] [ ]
Corporation, VerticalOne Acquisition Corporation and VerticalOne
Corporation.
</TABLE>
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.
<TABLE>
<S> <C> <C> <C> <C> <C>
Signature: Date: , 1999 Signature: Date: , 1999
------------------- ---------- ------------------ ----------
</TABLE>
