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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
________________
STATE OF THE ART, INC.
(NAME OF ISSUER)
________________
COMMON STOCK, NO PAR VALUE
(TITLE OF CLASS OF SECURITIES)
________________
85730710
(CUSIP NUMBER OF CLASS OF SECURITIES)
________________
PAUL WALKER
CHIEF EXECUTIVE OFFICER
THE SAGE GROUP PLC
SAGE HOUSE
BENTON PARK ROAD
NEWCASTLE UPON TYNE
ENGLAND NE7 7LZ
(191) 255-3000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
COPY TO:
KENTON J. KING, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
FOUR EMBARCADERO CENTER, SUITE 3800
SAN FRANCISCO, CALIFORNIA 94111
TELEPHONE: (415) 984-6400
FACSIMILE: (415) 984-2698
JANUARY 27, 1998
(DATE OF EVENT WHICH REQUIRES FILING OF STATEMENT ON SCHEDULE 13D)
- -----------------------------
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this statement because of Rule 13d-1(b)(3) or (4), check the following box: [_]
*The remainder of this cover page shall be filled out for a reporting
person's initial filing of this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter the disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be
deemed to be "filed" for the purposes of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act, but shall be subject to all other provisions of the Act (however, see
the Notes).
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CUSIP NO. 85730710 13D PAGE 2 OF 7 PAGES
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NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON
Rose Acquisition Corp. (75-2749525)
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_] (b) [_]
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3 SEC USE ONLY
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SOURCE OF FUNDS
4 AF
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
5 ITEMS 2(d) or 2(e) [_]
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6 Delaware
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SOLE VOTING POWER
7 None
NUMBER OF
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8 15,116,923 See Item 4
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9 None
REPORTING
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10 None
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11 15,116,923 See Item 4
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES [_]
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
13 60.5%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14 CO
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CUSIP NO. 85730710 13D PAGE 3 OF 7 PAGES
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NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON
The Sage Group plc
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_] (b) [_]
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3 SEC USE ONLY
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SOURCE OF FUNDS
4 BK, WC, OO
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
5 ITEMS 2(d) or 2(e) [_]
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CITIZENSHIP OR PLACE OF ORGANIZATION
6 United Kingdom
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SOLE VOTING POWER
7 None
NUMBER OF
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8 15,116,923 See Item 4
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9 None
REPORTING
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10 None
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11 15,116,923 See Item 4
- ------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES [_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
13 60.5%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14 CO
- ------------------------------------------------------------------------------
<PAGE>
Item 1. Security and Issuer.
-------------------
This statement on Schedule 13D (this "Statement" or the "Schedule 13D")
relates to the common stock, no par value (the "Shares"), of State Of The Art,
Inc., a California corporation (the "Company"). The address of the Company's
principal executive offices is 56 Technology Drive, Irvine, California 92618.
Item 2. Identity and Background.
-----------------------
(a) - (c), (e) This Statement is being filed by The Sage Group plc, a
company organized under the laws of England ("Parent"), and Rose Acquisition
Corp., a Delaware corporation ("Purchaser"), and a direct and indirect wholly
owned subsidiary of Parent. The information set forth in the "INTRODUCTION" and
"Section 9 -- Certain Information Concerning Parent and Purchaser" of
Purchaser's Offer to Purchase, dated as of February 2, 1998 (the "Offer to
Purchase"), is incorporated herein by reference. The name, business address,
present principal occupation or employment, the material occupations, positions,
offices or employments for the past five years and citizenship of each director
and executive officer of Parent and Purchaser and the name, principal business
and address of any corporation or other organization in which such occupations,
positions, offices and employments are or were carried on are set forth in
Schedule I of the Offer to Purchase and are incorporated herein by reference.
(d) - (e) During the past five years, neither Purchaser nor Parent nor,
to the best knowledge of Purchaser and Parent, any of the persons listed in
Schedule I of the Offer to Purchase have been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or was a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction as a
result of which any such person was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violation of such laws.
Item 3. Source and Amount of Funds or Other Consideration.
-------------------------------------------------
Except as set forth below, the information set forth in "Section 10 -
Source and Amount of Funds" of the Offer to Purchase is incorporated herein by
reference.
The information set forth in the first paragraph of the subsection
entitled "The Equity Placing" contained in "Section 10-Source and Amount of
Funds" of the Offer to Purchase is replaced in its entirety with the
following:
It is anticipated that approximately (Pounds) 75 million (or
approximately $123 million) of the funds necessary to purchase all of
the Shares in the Offer, finance the Merger Consideration and pay fees
and expenses in connection with the Offer and Merger will be obtained
by the allotment and issue of new ordinary shares of the Parent (the
"New Ordinary Shares") pursuant to the terms of the Vendor Placing
Agreement, dated January 27, 1998 (the "Vendor Placing Agreement"), by
and between Parent and J. Henry Schroder & Co. Limited ("Schroders").
New Ordinary Shares will be allotted and issued, credited as fully
paid, by Parent to such persons as may be nominated by Schroders under
the Vendor Placing Agreement (who will not be shareholders of the
Company), and if no such person is nominated by Schroders, then to
Schroders itself. Schroders'
<PAGE>
obligations under the Vendor Placing Agreement are conditioned upon,
among other things, the admission to listing on the London Stock
Exchange of the New Ordinary Shares and that admission becoming
effective not later than 9:00 a.m. on March 27, 1998. Under the terms
of the Vendor Placing Agreement, Parent has given certain
representations, warranties and undertakings to Schroders customarily
given in transactions of this type. All New Ordinary Shares will rank
pari passu with all ordinary shares of Parent currently in issue,
except that they will not rank for any final dividend in respect of the
fiscal year of Parent ended September 30, 1997, declared in respect of
such ordinary shares.
The shareholders of the Company will receive, as a result of these
arrangements, the full amount due to them of $22.00 per Share accepted
for payment in the Offer, of which approximately $10.34 will represent
an amount equal to the proceeds of the sale of the New Ordinary Shares.
The shareholders of the Company will not obtain any right under the
Offer which any of them may enforce against Schroders or any person
nominated by Schroders to accept the allotment and issue of New
Ordinary Shares.
Item 4. Purpose of the Transaction.
--------------------------
(a) - (g), (j) The information set forth in the "INTRODUCTION,"
"Section 11-- Background of the Offer; Purpose of the Offer and the Merger; The
Merger Agreement and Certain Other Agreements" and "Section 12 -- Plans for the
Company; Other Matters" of the Offer to Purchase is incorporated herein by
reference.
(h) - (i), (j) The information set forth in the "Section 7 -- Effect
of the Offer on the Market for the Shares; Stock Listing; Exchange Act
Registration; Margin Regulations" of the Offer to Purchase is incorporated
herein by reference.
Except as set forth in this Item 4, neither Parent nor Purchaser has
any plans or proposals which relate to or would result in any of the actions
specified in clauses (a) through (j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
------------------------------------
(a) The information set forth in "Section 9 -- Certain Information
Concerning Parent and Purchaser" and "Section 11 -- Background of the Offer;
Purpose of the Offer and the Merger; The Merger Agreement and Certain Other
Agreements" of the Offer to Purchase is incorporated herein by reference.
(b) The number of Shares of the Company beneficially owned by each of
Parent and Purchaser (i) with respect to which there is sole voting power is
none, (ii) with respect to which there is shared voting power is 15,116,923,
(iii) with respect to which there is sole dispositive power is none, and (iv)
with respect to which there is shared dispositive power is none.
(c) Except as set forth in Item 4, neither Parent nor Purchaser has
effected any transactions in the Shares during the past 60 days.
(d) - (e) Inapplicable
<PAGE>
Item 6. Contracts, Arrangements, Understandings or
Relationships With Respect to Securities of the Issuer.
-------------------------------------------------------
The information set forth in the "INTRODUCTION," "Section 9 -- Certain
Information Concerning Parent and Purchaser," "Section 10 -- Source and Amount
of Funds," "Section 11 -- Background of the Offer; Purpose of the Offer and the
Merger; The Merger Agreement and Certain Other Agreements," "Section 12 -- Plans
for the Company; Other Matters" and "Section 16 -- Fees and Expenses" of the
Offer to Purchase is incorporated herein by reference.
Item 7. Material to be Filed as Exhibits.
---------------------------------
The following documents are being filed as exhibits to this Statement
and are each incorporated by reference herein.
(a)(1) Offer to Purchase dated February 2, 1998.
(a)(2) Letter of Transmittal.
(a)(3) Letter for use by Brokers, Dealers, Banks, Trust Companies and
Nominees to their Clients.
(a)(4) Letter to Clients.
(a)(5) Notice of Guaranteed Delivery.
(a)(6) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
(a)(7) Press Release issued by Parent, dated January 27, 1998.
(a)(8) Press Release issued by the Company, dated January 27, 1998.
(a)(9) Form of Summary Advertisement, dated February 2, 1998.
(a)(10) Fairness Opinion of UBS Securities LLC, dated January 26, 1998.
(a)(11) Financial Statements of Parent for the fiscal years ended
September 30, 1997 and 1996.
(b)(1) Facilities Agreement, dated January 27, 1998, by and among
Parent, Purchaser, the Banks and Financial Institutions named in
Schedule 1 thereto, and Lloyds Bank plc Capital Markets.
(b)(2) Placing Agreement, dated January 27, 1998, by and between Parent
and J. Henry Schroder & Co.
(c)(1) Agreement and Plan of Merger, dated January 27, 1998, by and
among Parent, the Purchaser and the Company
(c)(2) Shareholder Agreement, dated January 27, 1998 by and among
Parent, the Purchaser, David W. Hanna, George Riviere and
Jeffrey E. Gold.
(c)(3) Option Agreement, dated January 27, 1998, by and among Parent,
the Purchaser and the Company.
(c)(4) Confidentiality Agreement, dated January 14, 1998, by and
between Parent and the Company.
(c)(5) Letter Agreement, dated February 20, 1998, between the Company
and each of Parent and Purchaser.
(c)(6) Letter Agreement, dated February 20, 1998, between David W.
Hanna and each of Parent and Purchaser.
(c)(7) Letter Agreement, dated February 20, 1998, between Jeffrey E.
Gold and each of Parent and Purchaser.
(c)(8) Letter Agreement, dated February 20, 1998, between George
Riviere and each of Parent and the Purchaser.
<PAGE>
(c)(9) Letter Agreement, dated February 20, 1998, between David R.
Butler and each of Parent and the Purchaser.
(c)(10) Letter Agreement, dated February 20, 1998, between W. Frank King
and each of Parent and the Purchaser.
(c)(11) Joint Filing Agreement, dated as of February 27, 1998, by and
between Parent and Purchaser.
(d) None
(e) Not applicable.
(f) None.
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SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: February 27, 1998
THE SAGE GROUP PLC
By: /s/ PAUL WALKER
--- ---------------
Name: Paul Walker
Title: Chief Executive Officer
ROSE ACQUISITION CORP.
By: /s/ PAUL WALKER
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Name: Paul Walker
Title: Vice President and Secretary
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EXHIBIT INDEX
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Exhibit
Number Exhibit
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(a)(1) Offer to Purchase dated February 2, 1998.
(a)(2) Letter of Transmittal.
(a)(3) Letter for use by Brokers, Dealers, Banks, Trust Companies and
Nominees to their Clients.
(a)(4) Letter to Clients.
(a)(5) Notice of Guaranteed Delivery.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Press Release issued by Parent, dated January 27, 1998.
(a)(8) Press Release issued by the Company, dated January 27, 1998.
(a)(9) Form of Summary Advertisement, dated February 2, 1998.
(a)(10) Fairness Opinion of UBS Securities LLC, dated January 26, 1998.
(a)(11) Financial Statements of Parent for the fiscal years ended
September 30, 1997 and 1996.
(b)(1) Facilities Agreement, dated January 27, 1998, by and among Parent,
Purchaser, the Banks and Financial Institutions named in Schedule
1 thereto, and Lloyds Bank plc Capital Markets.
(b)(2) Placing Agreement, dated January 27, 1998, by and between Parent
and J. Henry Schroder & Co.
(c)(1) Agreement and Plan of Merger, dated January 27, 1998, by and among
Parent, the Purchaser and the Company
(c)(2) Shareholder Agreement, dated January 27, 1998 by and among Parent,
the Purchaser, David W. Hanna, George Riviere and Jeffrey E. Gold.
(c)(3) Option Agreement, dated January 27, 1998, by and among Parent, the
Purchaser and the Company.
(c)(4) Confidentiality Agreement, dated January 14, 1998, by and between
Parent and the Company.
(c)(5) Letter Agreement, dated February 20, 1998, between the Company and
each of Parent and Purchaser.
(c)(6) Letter Agreement, dated February 20, 1998, between David W. Hanna
and each of Parent and Purchaser.
(c)(7) Letter Agreement, dated February 20, 1998, between Jeffrey E. Gold
and each of Parent and Purchaser.
(c)(8) Letter Agreement, dated February 20, 1998, between George Riviere
and each of Parent and the Purchaser.
(c)(9) Letter Agreement, dated February 20, 1998, between David R. Butler
and each of Parent and the Purchaser.
(c)(10) Letter Agreement, dated February 20, 1998, between W. Frank King
and each of Parent and the Purchaser.
(c)(11) Joint Filing Agreement, dated as of February 27, 1998, by and
between Parent and Purchaser.
(d) None
(e) Not applicable.
(f) None.
<PAGE>
Exhibit (A)(1)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
STATE OF THE ART, INC.
BY
ROSE ACQUISITION CORP.
A DIRECT AND INDIRECT
WHOLLY OWNED SUBSIDIARY OF
THE SAGE GROUP PLC
AT
$22.00 NET PER SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, MARCH 2, 1998, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED
JANUARY 27, 1998, BY AND AMONG THE SAGE GROUP PLC, ROSE ACQUISITION CORP. AND
STATE OF THE ART, INC. THE BOARD OF DIRECTORS OF STATE OF THE ART, INC. HAS
UNANIMOUSLY DETERMINED THAT EACH OF THE MERGER AGREEMENT, THE OFFER, THE
MERGER AND THE OPTION AGREEMENT IS FAIR TO AND IN THE BEST INTERESTS OF THE
SHAREHOLDERS OF THE COMPANY, AND RECOMMENDS THAT THE SHAREHOLDERS OF THE
COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER, THAT NUMBER
OF SHARES WHICH, WHEN ADDED TO THE SHARES THEN OWNED BY THE PURCHASER,
REPRESENTS AT LEAST NINETY PERCENT (90%) OF THE SHARES OUTSTANDING ON A FULLY
DILUTED BASIS (WITHOUT GIVING PRO FORMA EFFECT TO THE POTENTIAL ISSUANCE OF
ANY SHARES ISSUABLE UNDER THE OPTION AGREEMENT DESCRIBED BELOW) ON THE DATE OF
PURCHASE (THE "MINIMUM CONDITION"), THE EXPIRATION OR TERMINATION OF ANY
APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS
ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER, AND THE OTHER
CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE. SEE SECTION 14. AS USED HEREIN
"FULLY DILUTED BASIS" TAKES INTO ACCOUNT THE CONVERSION OR EXERCISE OF ALL
OUTSTANDING OPTIONS AND OTHER RIGHTS AND SECURITIES EXERCISABLE OR CONVERTIBLE
INTO SHARES OF COMMON STOCK.
IN THE EVENT THAT THE MINIMUM CONDITION IS NOT SATISFIED ON THE INITIAL
EXPIRATION DATE, THE PURCHASER IS REQUIRED TO EXTEND THE OFFER AND MAY WAIVE,
AND IN CERTAIN CIRCUMSTANCES THEREAFTER, IS REQUIRED TO WAIVE, THE MINIMUM
CONDITION AND AMEND THE OFFER TO REDUCE THE NUMBER OF SHARES SUBJECT TO THE
OFFER TO SUCH NUMBER OF SHARES THAT WHEN ADDED TO THE SHARES THEN OWNED BY THE
PURCHASER WILL EQUAL 49.9999% OF THE SHARES THEN OUTSTANDING (THE "REVISED
MINIMUM NUMBER") AND, IF A GREATER NUMBER OF SHARES IS TENDERED INTO THE OFFER
AND NOT WITHDRAWN, PURCHASE, ON A PRO RATA BASIS, THE REVISED MINIMUM NUMBER
OF SHARES (THE "REVISED MINIMUM NUMBER PRORATION") (IT BEING UNDERSTOOD THAT
THE PURCHASER MAY, BUT SHALL NOT IN ANY EVENT BE REQUIRED TO ACCEPT FOR
PAYMENT, OR PAY FOR, ANY SHARES IF LESS THAN THE REVISED MINIMUM NUMBER OF
SHARES ARE TENDERED PURSUANT TO THE OFFER AND NOT WITHDRAWN AT THE APPLICABLE
EXPIRATION DATE OF THE OFFER).
--------------
IMPORTANT
Any shareholder who desires to tender all or any portion of such
shareholder's Shares (as defined herein) should either (i) complete and sign
the Letter of Transmittal (or facsimile thereof) in accordance with the
instructions in the Letter of Transmittal, mail or deliver it and any other
required documents to the Depositary and either deliver the certificates for
such Shares to the Depositary or tender such Shares pursuant to the procedures
for book-entry transfer set forth in Section 3 or (ii) request such
shareholder's broker, dealer, commercial bank, trust company or other nominee
to effect the transaction for such shareholder. Any shareholder whose Shares
are registered in the name of a broker, dealer, commercial bank, trust company
or other nominee must contact such person to tender their Shares.
Any shareholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available, or who cannot comply
with the procedures for book-entry transfer on a timely basis, may tender such
Shares by following the procedures for guaranteed delivery set forth in
Section 3.
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective locations and telephone
numbers set forth on the back cover of this Offer to Purchase. Requests for
additional copies of this Offer to Purchase, the Letter of Transmittal and the
Notice of Guaranteed Delivery may be directed to the Information Agent, or the
Dealer Manager, or to brokers, dealers, commercial banks or trust companies. A
shareholder also may contact brokers, dealers, commercial banks or trust
companies for assistance concerning the Offer.
--------------
THE DEALER MANAGER FOR THE OFFER IS:
BT ALEX. BROWN INCORPORATED
--------------
February 2, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
INTRODUCTION............................................................ 1
THE OFFER............................................................... 3
1. Terms of the Offer.............................................. 3
2. Acceptance for Payment and Payment.............................. 5
3. Procedure for Tendering Shares.................................. 6
4. Withdrawal Rights............................................... 8
5. Certain Federal Income Tax Consequences......................... 9
6. Price Range of the Shares; Dividends on the Shares.............. 10
7. Effect of the Offer on the Market for the Shares; Stock Listing;
Exchange Act Registration; Margin Regulations.................. 10
8. Certain Information Concerning the Company...................... 11
9. Certain Information Concerning Parent and the Purchaser......... 13
10. Source and Amount of Funds...................................... 16
11. Background of the Offer; Purpose of the Offer and the Merger;
The Merger Agreement and Certain Other Agreements.............. 17
12. Plans for the Company; Other Matters............................ 28
13. Dividends and Distributions..................................... 30
14. Conditions of the Offer......................................... 30
15. Certain Legal Matters........................................... 32
16. Fees and Expenses............................................... 34
17. Miscellaneous................................................... 35
</TABLE>
Schedule I--Directors and Executive Officers of Rose Acquisition Corp. and The
Sage Group plc.
i
<PAGE>
TO THE HOLDERS OF COMMON STOCK OF STATE OF THE ART, INC.:
INTRODUCTION
Rose Acquisition Corp., a Delaware corporation (the "Purchaser") and a
direct and indirect wholly owned subsidiary of The Sage Group plc, a company
organized under the laws of England ("Parent"), hereby offers to purchase all
issued and outstanding shares of common stock ("Common Stock"), no par value
(the "Shares"), of State Of The Art, Inc., a California corporation (the
"Company"), at a price of $22.00 per Share, net to the seller in cash, upon
the terms and subject to the conditions set forth in this Offer to Purchase
and in the related Letter of Transmittal (which, together with any amendments
or supplements hereto or thereto, collectively constitute the "Offer").
Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the sale of Shares pursuant to the Offer. The
Purchaser will pay all fees and expenses incurred in connection with the Offer
of BT Alex. Brown Incorporated which is acting as the Dealer Manager (the
"Dealer Manager"), MacKenzie Partners, Inc., which is acting as the
Information Agent (the "Information Agent"), and ChaseMellon Shareholder
Services, L.L.C. which is acting as the Depositary (the "Depositary").
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER, THAT NUMBER
OF SHARES OF COMMON STOCK WHICH REPRESENTS, WHEN ADDED TO THE SHARES THEN
OWNED BY THE PURCHASER, AT LEAST NINETY PERCENT (90%) OF THE SHARES
OUTSTANDING ON A FULLY DILUTED BASIS (WITHOUT GIVING PRO FORMA EFFECT TO THE
POTENTIAL ISSUANCE OF ANY SHARES OF COMMON STOCK ISSUABLE UNDER THE OPTION
AGREEMENT (AS HEREINAFTER DEFINED)) ON THE DATE OF PURCHASE (THE "MINIMUM
CONDITION"). SEE SECTION 14. As used in this Offer to Purchase, "fully diluted
basis" takes into account the conversion or exercise of all outstanding
options and other rights and securities exercisable or convertible into shares
of Common Stock (without giving pro forma effect to the potential issuance of
any Shares issuable under the Option Agreement). The Company has informed the
Purchaser that, as of December 31, 1997, there were (i) 11,173,945 shares of
Common Stock issued and outstanding and (ii) outstanding options to purchase
an aggregate of 1,709,227 shares of Common Stock under the Company's stock
plans. The Merger Agreement (as defined below) provides, among other things,
that the Company will not, without the prior written consent of Parent, issue
any additional Shares (except on the exercise of outstanding options and other
rights and securities). Based on the foregoing, the terms of the Option
Agreement described below and after giving effect to the exercise of all
outstanding options and warrants, the Purchaser believes that the Minimum
Condition would be satisfied, after giving effect to the exercise of the
Option pursuant to the Option Agreement (as described below) if 8,673,945
shares of Common Stock are validly tendered and not withdrawn prior to the
expiration of the Offer.
As a condition and inducement to Parent's and the Purchaser's entering into
the Merger Agreement and incurring the liabilities therein, certain
shareholders of the Company (each, a "Shareholder"), who together share voting
power and dispositive power with respect to 1,290,868 Shares, concurrently
with the execution and delivery of the Merger Agreement entered into a
Shareholder Agreement (the "Shareholder Agreement"), dated January 27, 1998,
with Parent and the Purchaser. Pursuant to the Shareholder Agreement, the
Shareholders have agreed, among other things, to tender the Shares held by
them in the Offer, and to grant Parent a proxy with respect to the voting of
such Shares in favor of the Merger with respect to such Shares upon the terms
and subject to the conditions set forth therein. See Section 11.
As a condition and further inducement to the Parent's and the Purchaser's
entering into the Merger Agreement and incurring the liabilities therein,
concurrently with the execution and delivery of the Merger Agreement, the
Purchaser and the Company entered into a Stock Option Agreement, dated January
27, 1998 (the "Option Agreement"), pursuant to which, among other things, the
Company has granted the Purchaser an option to purchase certain newly issued
shares of Common Stock, subject to certain conditions. See Section 11.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
January 27, 1998 (the "Merger Agreement"), by and among Parent, the Purchaser
and the Company pursuant to which, as soon as
<PAGE>
practicable after the completion of the Offer and satisfaction or waiver, if
permissible, of all conditions to the Merger (as defined below), the Purchaser
will be merged with and into the Company and the separate corporate existence
of the Purchaser will thereupon cease. The merger, as effected pursuant to the
immediately preceding sentence, is referred to herein as the "Merger," and the
Company as the surviving corporation of the Merger is sometimes herein
referred to as the "Surviving Corporation." At the effective time of the
Merger (the "Effective Time"), each share of Common Stock then outstanding
(other than Shares held by Parent, the Purchaser or any other wholly owned
subsidiary of Parent and Shares held by shareholders who properly perfect
their dissenters' rights under California law) will be cancelled and retired
and converted into the right to receive $22.00 per Share, net to the seller in
cash or any higher price per share of Common Stock paid in the Offer (such
price, being referred to herein as the "Offer Price"), in cash payable to the
holder thereof without interest (the "Merger Consideration"). The Merger
Agreement is more fully described in Section 11.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT EACH
OF THE MERGER AGREEMENT, THE OFFER, THE MERGER AND THE OPTION AGREEMENT IS
FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY, AND
RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER
THEIR SHARES TO THE PURCHASER PURSUANT TO THE OFFER.
UBS Securities LLC, the Company's financial advisor ("UBS"), has delivered
to the Company's Board of Directors its written opinion (the "Fairness
Opinion"), dated January 26, 1998, to the effect that, as of such date, the
consideration to be received by the holders of shares of Company Common Stock
(as defined in the Fairness Opinion) (other than Parent, the Purchaser and any
affiliate thereof) pursuant to the Offer and under the terms of the Merger
Agreement, is fair from a financial point of view, to such holders. Such
opinion is set forth in full as an exhibit to the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
that is being mailed to shareholders of the Company.
The Merger Agreement provides that the initial scheduled expiration date of
the Offer shall be twenty (20) business days after the date the Offer is
commenced (the "Initial Expiration Date"). If as of the Initial Expiration
Date all conditions to the Offer shall not have been satisfied or waived, the
Merger Agreement provides that the Purchaser shall, and shall continue to
extend the expiration date of the Offer from time to time until a date not
later than March 26, 1998 or, at the request of the Company or the option of
the Purchaser, until a date not later than July 31, 1998 (with interim
expiration dates during such extension to be determined by the Purchaser),
provided, that in the event that the Purchaser extends the Offer in accordance
with such request of the Company, (A) Section 14 shall be deemed to be amended
to provide an additional condition that the Purchaser shall not be required to
accept for payment any tendered Shares unless and until Parent and the
Purchaser shall have obtained sufficient financing in replacement, if
necessary, of the financing described in Section 10 in order to permit Parent
and the Purchaser to acquire all of the Shares in the Offer and the Merger and
pay the anticipated expenses in connection therewith, and (B) the condition
set forth in paragraph h of Section 14 shall be amended and replaced with the
condition set forth in clause (A) above. In addition, in the event the Minimum
Condition is not satisfied on the Initial Expiration Date pursuant to the
Offer, the Purchaser may waive, and in certain circumstances thereafter is
required to waive, the Minimum Condition and amend the Offer to reduce the
number of Shares subject to the Offer to such number of Shares that when added
to the Shares then owned by the Purchaser will equal 49.9999% of the Shares
then outstanding (the "Revised Minimum Number"), and, if a greater number of
shares are tendered into the Offer and not withdrawn, purchase, on a pro rata
basis, the Revised Minimum Number of Shares (the "Revised Minimum Number
Proration") (it being understood that the Purchaser may, but shall not in any
event be required to accept for payment, or pay for, any Shares if less than
the Revised Minimum Number of Shares are tendered pursuant to the Offer and
not withdrawn at the applicable expiration date of the Offer). In addition,
the Merger Agreement provides that the Purchaser shall, on the terms and
subject to the prior satisfaction or waiver of the conditions of the Offer,
accept for payment and purchase, as soon as permitted under the terms of the
Offer, all Shares validly tendered and not withdrawn prior to the expiration
of the Offer. The Offer will not remain open following the time Shares are
accepted for payment.
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Consummation of the Merger is conditioned upon, among other things, the
approval and adoption by the requisite vote of shareholders of the Company of
the Merger Agreement, if required by applicable law in order to consummate the
Merger. See Section 11. Under the California General Corporation Law (the
"GCL"), if the Purchaser acquires, pursuant to the Offer, the Option Agreement
or otherwise, at least 90% of the Shares then outstanding, the Purchaser will
be able to approve the Merger Agreement and the transactions contemplated
thereby, including the Merger, without a vote of the shareholders. In such
event, Parent, the Purchaser and the Company have agreed in the Merger
Agreement to take, subject to the satisfaction of the conditions set forth in
the Merger Agreement, all necessary and appropriate action to cause the Merger
to become effective as soon as practicable after the acceptance and payment
for Shares by the Purchaser pursuant to the Offer without a meeting of the
shareholders, in accordance with Section 1110 of the GCL. If, however, the
Purchaser does not acquire at least 90% of the then outstanding Shares on a
fully diluted basis (without giving pro form effect to the potential issuance
of any shares of Common Stock issuable under the Option Agreement) on the date
of purchase, pursuant to the Offer, the Option Agreement or otherwise and the
Purchaser instead waives the Minimum Condition and amends the Offer to reduce
the number of Shares subject to the Offer to the Revised Minimum Number of
Shares, the Purchaser would own upon consummation of the Offer 49.9999% of the
Shares then outstanding and would thereafter solicit the approval of the
Merger and the Merger Agreement by a vote of the shareholders of the Company.
Under such circumstances, a significantly longer period of time will be
required to effect the Merger. See Sections 11 and 12.
Under the GCL, the Merger may not be accomplished for cash paid to the
shareholders if the Purchaser or Parent owns, directly or indirectly, more
than 50% but less than 90% of the then outstanding Shares unless either all
the shareholders consent or the Commissioner of Corporations of the State of
California approves, after a hearing, the terms and conditions of the Merger
and the fairness thereof. Accordingly, concurrently with the execution of the
Merger Agreement, and as an inducement to Parent and the Purchaser to enter
into the Merger Agreement, the Company entered into the Option Agreement with
Parent and the Purchaser. Pursuant to the Option Agreement, the Company
granted to the Purchaser an irrevocable option (the "Stock Option") to
purchase up to the number of Shares (the "Option Shares") that, when added to
the number of Shares owned by the Purchaser and its affiliates immediately
following consummation of the Offer, would constitute 90% of the Shares then
outstanding on a fully diluted basis (assuming the issuance of the Option
Shares) at a cash purchase price per Option Share equal to the Offer Price
(the "Option Price") subject to the terms and conditions set forth in the
Option Agreement, including, without limitation, that the number of Shares to
be issued under the Stock Option shall not exceed the number of authorized
Shares available for issuance. If the Stock Option is exercised by the
Purchaser (resulting in the Purchaser owning 90% or more of the outstanding
Shares), the Purchaser will be able to effect a short-form Merger under the
GCL, subject to the terms and conditions of the Merger Agreement. The
Purchaser is required to effect a short-form Merger as soon as practicable if
it is able to do so under the GCL.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
THE OFFER
1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the
Offer, and subject to the Revised Minimum Number Proration, the Purchaser will
accept for payment and pay for all Shares validly tendered prior to the
Expiration Date and not theretofore withdrawn in accordance with Section 4 of
this Offer to Purchase. The term "Expiration Date" shall mean 12:00 Midnight,
New York City time, on Monday, March 2, 1998, unless and until the Purchaser,
in accordance with the terms of the Merger Agreement, shall have extended the
period of time for which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as
so extended by the Purchaser, shall expire.
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The Offer is conditioned upon, among other things, the satisfaction of the
Minimum Condition, and the expiration or termination of all waiting periods
imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the regulations thereunder (the "HSR Act"). See Section 14. If
such conditions are not satisfied prior to the Expiration Date, the Purchaser
reserves the right (but shall not be obligated) to (i) decline to purchase any
of the Shares tendered and terminate the Offer, subject to the terms of the
Merger Agreement, (ii) waive any of the conditions to the Offer, to the extent
permitted by applicable law and the provisions of the Merger Agreement, and,
subject to complying with applicable rules and regulations of the Securities
and Exchange Commission (the "Commission"), purchase all Shares validly
tendered, (iii) subject to the terms of the Merger Agreement, extend the Offer
and, subject to the right of shareholders to withdraw Shares until the
Expiration Date, retain the Shares which will have been tendered during the
period or periods for which the Offer is open or extended or (iv) amend the
Offer.
Subject to the terms of the Merger Agreement, the Purchaser may, and under
certain circumstances shall, from time to time, (i) extend the period of time
during which the Offer is open and thereby delay acceptance for payment of,
and the payment for, any Shares, by giving oral or written notice of such
extension to the Depositary and (ii) amend the Offer by giving oral or written
notice of such amendment to the Depositary. Any extension, amendment or
termination of the Offer will be followed as promptly as practicable by public
announcement thereof, the announcement in the case of an extension to be
issued no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date in accordance with the public
announcement requirements of Rule 14d-4(c) under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Without limiting the obligation of
the Purchaser under such Rule or the manner in which the Purchaser may choose
to make any public announcement, the Purchaser currently intends to make
announcements by issuing a press release to the Dow Jones News Service. UNDER
NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER PRICE TO BE PAID BY THE
PURCHASER FOR THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY
DELAY IN MAKING SUCH PAYMENT.
The Merger Agreement provides that, except as described below, the Purchaser
will not, without the prior written consent of the Company, (i) decrease the
Offer Price or change the form of consideration payable in the Offer, (ii)
decrease the number of Shares sought (except as set forth below), (iii) impose
additional conditions to the Offer other than those described in Section 14,
(iv) amend any condition of the Offer described in Section 14, (v) extend the
Initial Expiration Date, provided, however, that if on the Initial Expiration
Date of the Offer, all conditions to the Offer shall not have been satisfied
or waived, the Purchaser shall extend the Expiration Date from time to time
until a date not later than March 26, 1998, or at the request of the Company
or the option of the Purchaser, until a date not later than July 31, 1998,
provided, that in the event that the Purchaser extends the Offer pursuant to
the Company's request, (A) Section 14 shall be deemed to be amended to provide
an additional condition that the Purchaser shall not be required to accept for
payment any tendered Shares unless and until Parent and the Purchaser shall
have obtained sufficient financing in replacement, if necessary, of the
financing described in Section 10 in order to permit Parent and the Purchaser
to acquire all of the Shares in the Offer and the Merger and pay the
anticipated expenses in connection therewith, and (B) the condition set forth
in paragraph (h) of Section 14 shall be amended and replaced with the
condition set forth in clause (A) above, or (vi) amend any other term of the
Offer in any manner adverse to the holders of Shares without the written
consent of the Company. Notwithstanding the foregoing, in the event that less
than 90% of the Shares then outstanding on a fully diluted basis are tendered
pursuant to the Offer on the Initial Expiration Date pursuant to the Offer,
the Purchaser is required to extend the Offer and may waive, and in certain
circumstances thereafter is required to waive, the Minimum Condition and amend
the Offer to reduce the number of Shares subject to the Offer to such number
of Shares equal to the Revised Minimum Number, and, if a greater number of
shares are tendered into the Offer and not withdrawn, purchase, on a pro rata
basis, the Revised Minimum Number of Shares (it being understood that the
Purchaser may, but shall not in any event be required to accept for payment,
or pay for, any Shares if less than the Revised Minimum Number of Shares are
tendered pursuant to the Offer and not withdrawn at the applicable expiration
date of the Offer).
If the Purchaser extends the Offer, or if the Purchaser (whether before or
after its acceptance for payment of Shares) is delayed in its purchase of or
payment for Shares or is unable to pay for Shares pursuant to the
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Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer, the Depositary may retain tendered Shares on behalf of the
Purchaser, and such Shares may not be withdrawn except to the extent tendering
shareholders are entitled to withdrawal rights as described in Section 4.
However, the ability of the Purchaser to delay the payment for Shares which
the Purchaser has accepted for payment is limited by Rule 14e-l(c) under the
Exchange Act, which requires that a bidder pay the consideration offered or
return the securities deposited by or on behalf of holders of securities
promptly after the termination or withdrawal of the Offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
the Purchaser will disseminate additional tender offer materials and extend
the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under
the Exchange Act. The minimum period during which the Offer must remain open
following material changes in the terms of the Offer or information concerning
the Offer, other than a change in price or a change in percentage of
securities sought, will depend upon the facts and circumstances then existing,
including the relative materiality of the changed terms or information. In a
public release, the Commission has stated that in its view an offer must
remain open for a minimum period of time following a material change in the
terms of the Offer and that waiver of a material condition, such as the
Minimum Condition, is a material change in the terms of the Offer. The release
states that an offer should remain open for a minimum of five business days
from the date a material change is first published, sent or given to security
holders and that, if material changes are made with respect to information not
materially less significant than the offer price and the number of shares
being sought, a minimum of ten business days may be required to allow adequate
dissemination and investor response. The requirement to extend the Offer will
not apply to the extent that the number of business days remaining between the
occurrence of the change and the then-scheduled Expiration Date equals or
exceeds the minimum extension period that would be required because of such
amendment. As used in this Offer to Purchase, "business day" has the meaning
set forth in Rule 14d-1 under the Exchange Act.
The Company has provided the Purchaser with the Company's shareholder lists
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of
Transmittal will be mailed by the Purchaser to record holders of Shares and
will be furnished by the Purchaser to brokers, dealers, banks and similar
persons whose names, or the names of whose nominees, appear on the shareholder
lists or, if applicable, who are listed as participants in a clearing agency's
security position listing, for subsequent transmittal to beneficial owners of
Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT. Upon the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of any such extension or amendment), and subject to the
Revised Minimum Number Proration, the Purchaser will accept for payment and
will pay, promptly after the Expiration Date, for all Shares validly tendered
prior to the Expiration Date and not properly withdrawn in accordance with
Section 4. All determinations concerning the satisfaction of such terms and
conditions will be within the Purchaser's discretion, which determinations
will be final and binding. See Sections 1 and 14. The Purchaser expressly
reserves the right, in its sole discretion, to delay acceptance for payment of
or payment for Shares in order to comply in whole or in part with any
applicable law, including, without limitation, the HSR Act. Any such delays
will be effected in compliance with Rule 14e-l(c) under the Exchange Act
(relating to a bidder's obligation to pay the consideration offered or return
the securities deposited by or on behalf of holders of securities promptly
after the termination or withdrawal of such bidder's offer).
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) certificates
for such Shares (or a timely Book-Entry Confirmation (as defined below) with
respect thereto), (ii) a Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message (as defined
below), and (iii) any other documents required by the Letter of Transmittal.
The per share consideration paid to any holder of Common Stock pursuant to the
Offer will be the highest per Share consideration paid to any other holder of
such shares pursuant to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered to the Purchaser and
not withdrawn as, if and when the Purchaser gives oral
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or written notice to the Depositary of the Purchaser's acceptance for payment
of such Shares. Payment for Shares accepted for payment pursuant to the Offer
will be made by deposit of the purchase price therefor with the Depositary,
which will act as agent for tendering shareholders for the purpose of
receiving payment from the Purchaser and transmitting payment to tendering
shareholders. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE
PRICE TO BE PAID BY THE PURCHASER FOR THE SHARES, REGARDLESS OF ANY EXTENSION
OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
If the Purchaser is delayed in its acceptance for payment of, or payment
for, Shares or is unable to accept for payment or pay for Shares pursuant to
the Offer for any reason, then, without prejudice to the Purchaser's rights
under the Offer (including such rights as are set forth in Sections 1 and 14)
(but subject to compliance with Rule 14e-1(c) under the Exchange Act), the
Depositary may, nevertheless, on behalf of the Purchaser, retain tendered
Shares, and such Shares may not be withdrawn except to the extent tendering
shareholders are entitled to exercise, and duly exercise, withdrawal rights as
described in Section 4.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, certificates for any such Shares will be returned, without expense to
the tendering shareholder (or, in the case of Shares delivered by book-entry
transfer of such Shares into the Depositary's account at the Book-Entry
Transfer Facility (as defined below) pursuant to the procedures set forth in
Section 3, such Shares will be credited to an account maintained at the Book-
Entry Transfer Facility), as promptly as practicable after the expiration or
termination of the Offer.
The Purchaser reserves the right to transfer or assign, in whole or in part,
to Parent or to any affiliate of Parent, the right to purchase Shares tendered
pursuant to the Offer, but any such transfer or assignment will not relieve
the Purchaser of its obligations under the Offer and will in no way prejudice
the rights of tendering shareholders to receive payment for Shares validly
tendered and accepted for payment pursuant to the Offer.
3. PROCEDURE FOR TENDERING SHARES.
Valid Tender. For Shares to be validly tendered pursuant to the Offer,
either (i) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), together with any required signature guarantees, or in the
case of a book-entry transfer, an Agent's Message (as defined below), and any
other required documents, must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date and either certificates for tendered Shares must be received
by the Depositary at one of such addresses or such Shares must be delivered
pursuant to the procedures for book-entry transfer set forth below (and a
Book-Entry Confirmation (as defined below) received by the Depositary), in
each case, prior to the Expiration Date or (ii) the tendering shareholder must
comply with the guaranteed delivery procedures set forth below.
The Depositary will establish an account with respect to the Shares at The
Depositary Trust Company or the Philadelphia Depositary Trust Company (each, a
"Book-Entry Transfer Facility") for purposes of the Offer within two business
days after the date of this Offer to Purchase. Any financial institution that
is a participant in the Book-Entry Transfer Facility's systems may make book-
entry delivery of Shares by causing the Book-Entry Transfer Facility to
transfer such Shares into the Depositary's account in accordance with the
Book-Entry Transfer Facility's procedure for such transfer. However, although
delivery of Shares may be effected through book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility, the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or an Agent's Message, and any other
required documents must, in any case, be transmitted to, and received by, the
Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase prior to the Expiration Date, or the tendering shareholder must
comply with the guaranteed delivery procedures described below. The
confirmation of a book-entry transfer of Shares into the Depositary's account
at the Book-Entry Transfer Facility as described above is referred to herein
as a "Book-Entry Confirmation." DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY
TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry
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Transfer Facility has received an express acknowledgment from the participant
in such Book-Entry Transfer Facility tendering the Shares that such
participant has received and agrees to be bound by the terms of the Letter of
Transmittal and that the Purchaser may enforce such agreement against the
participant.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER
FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. SHARES
WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY
(INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION).
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ENSURE TIMELY DELIVERY.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal (i) if the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section, includes any participant
in the Book Entry Transfer Facility's systems whose name appears on a security
position listing as the owner of the Shares) of Shares tendered therewith and
such registered holder has not completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on
the Letter of Transmittal or (ii) if such Shares are tendered for the account
of a financial institution (including most commercial banks, savings and loan
associations and brokerage houses) that is a participant in the Security
Transfer Agent's Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program (each, an
"Eligible Institution" and, collectively, "Eligible Institutions"). In all
other cases, all signatures on Letters of Transmittal must be guaranteed by an
Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal.
If the certificates for Shares are registered in the name of a person other
than the signer of the Letter of Transmittal, or if payment is to be made, or
certificates for Shares not tendered or not accepted for payment are to be
returned, to a person other than the registered holder of the certificates
surrendered, then the tendered certificates for such Shares must be endorsed
or accompanied by appropriate stock powers, in either case, signed exactly as
the name or names of the registered holders or owners appear on the
certificates, with the signatures on the certificates or stock powers
guaranteed as aforesaid. See Instruction 5 to the Letter of Transmittal.
Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's certificates for Shares are not immediately
available or the procedures for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such shareholder's tender may be
effected if all the following conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser, is received
by the Depositary, as provided below, prior to the Expiration Date; and
(iii) the certificates for (or a Book-Entry Confirmation with respect to)
such Shares, together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message, and any other
required documents are received by the Depositary within three trading days
after the date of execution of such Notice of Guaranteed Delivery. A
"trading day" is any day on which the National Association of Security
Dealers Automated Quotation System, Inc. (the "NASDAQ") is open for
business.
The Notice of Guaranteed Delivery may be delivered by hand to the Depositary
or transmitted by telegram, facsimile transmission or mail to the Depositary
and must include a guarantee by an Eligible Institution in the form set forth
in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares, (ii) a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
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Message, and (iii) any other documents required by the Letter of Transmittal.
Accordingly, tendering shareholders may be paid at different times depending
upon when certificates for Shares or Book-Entry Confirmations with respect to
Shares are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE TO BE PAID BY THE PURCHASER FOR THE
SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT.
The valid tender of Shares pursuant to one of the procedures described above
will constitute a binding agreement between the tendering shareholder and the
Purchaser upon the terms and subject to the conditions of the Offer.
Appointment. By executing the Letter of Transmittal as set forth above, the
tendering shareholder will irrevocably appoint designees of the Purchaser, and
each of them, as such shareholder's attorneys-in-fact and proxies in the
manner set forth in the Letter of Transmittal, each with full power of
substitution, to the full extent of such shareholder's rights with respect to
the Shares tendered by such shareholder and accepted for payment by the
Purchaser and with respect to any and all other Shares or other securities or
rights issued or issuable in respect of such Shares. All such proxies will be
considered coupled with an interest in the tendered Shares. Such appointment
will be effective when, and only to the extent that, the Purchaser accepts for
payment Shares tendered by such shareholder as provided herein. Upon such
appointment, all prior powers of attorney, proxies and consents given by such
shareholder with respect to such Shares or other securities or rights will,
without further action, be revoked and no subsequent powers of attorney,
proxies, consents or revocations may be given by such shareholder (and, if
given, will not be deemed effective). The designees of the Purchaser will
thereby be empowered to exercise all voting and other rights with respect to
such Shares and other securities or rights, including, without limitation, in
respect of any annual, special or adjourned meeting of the Company's
shareholders, actions by written consent in lieu of any such meeting or
otherwise, as they in their sole discretion deem proper. The Purchaser
reserves the right to require that, in order for Shares to be deemed validly
tendered, immediately upon the Purchaser's acceptance for payment of such
Shares, the Purchaser must be able to exercise full voting, consent and other
rights with respect to such Shares and other related securities or rights,
including voting at any meeting of shareholders.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by the Purchaser, in its sole discretion, which
determination will be final and binding. The Purchaser reserves the absolute
right to reject any or all tenders of any Shares determined by it not to be in
proper form or the acceptance for payment of, or payment for which may, in the
opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves
the absolute right, in its sole discretion, subject to the provisions of the
Merger Agreement, to waive any of the conditions of the Offer or any defect or
irregularity in the tender of any Shares of any particular shareholder,
whether or not similar defects or irregularities are waived in the case of
other shareholders. No tender of Shares will be deemed to have been validly
made until all defects or irregularities relating thereto have been cured or
waived. None of the Purchaser, Parent, the Depositary, the Information Agent,
the Company or any other person will be under any duty to give notification of
any defects or irregularities in tenders or incur any liability for failure to
give any such notification. Subject to the terms of the Merger Agreement, the
Purchaser's interpretation of the terms and conditions of the Offer (including
the Letter of Transmittal and the instructions thereto) will be final and
binding.
Backup Withholding. Under the "backup withholding" provisions of federal
income tax law, unless a tendering registered holder, or his assignee (in
either case, the "Payee"), satisfies the conditions described in Instruction 9
of the Letter of Transmittal or is otherwise exempt, the cash payable as a
result of the Offer may be subject to backup withholding tax at a rate 31% of
the gross proceeds. To prevent backup withholding, each Payee should complete
and sign the Substitute Form W-9 provided in the Letter of Transmittal. See
Instruction 9 of the Letter of Transmittal.
4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4,
tenders of Shares are irrevocable. Shares tendered pursuant to the Offer may
be withdrawn pursuant to the procedures set forth below at any time prior to
the Expiration Date and, unless theretofore accepted for payment and paid for
by the Purchaser pursuant to the Offer, may also be withdrawn at any time
after April 2, 1998.
8
<PAGE>
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase and
must specify the name of the person having tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the name of the registered
holder of the Shares to be withdrawn, if different from the name of the person
who tendered the Shares. If certificates for Shares have been delivered or
otherwise identified to the Depositary, then, prior to the physical release of
such certificates, the serial numbers shown on such certificates must be
submitted to the Depositary and, unless such Shares have been tendered by an
Eligible Institution, the signatures on the notice of withdrawal must be
guaranteed by an Eligible Institution. If Shares have been delivered pursuant
to the procedures for book-entry transfer as set forth in Section 3, any
notice of withdrawal must also specify the name and number of the account at
the appropriate Book-Entry Transfer Facility to be credited with the withdrawn
Shares and otherwise comply with such Book-Entry Transfer Facility's
procedures. Withdrawals of tenders of Shares may not be rescinded, and any
Shares properly withdrawn will thereafter be deemed not validly tendered for
purposes of the Offer. However, withdrawn Shares may be retendered by again
following one of the procedures described in Section 3 any time prior to the
Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, which determination will be final and binding. None of the
Purchaser, Parent, the Depositary, the Information Agent, or any other person
will be under any duty to give notification of any defects or irregularities
in any notice of withdrawal or incur any liability for failure to give any
such notification.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for Shares
pursuant to the Offer or the Merger will be a taxable transaction for Federal
income tax purposes and also may be a taxable transaction under state, local
or foreign tax laws. In general, a shareholder who tenders Shares in the Offer
or receives cash in exchange for Shares in the Merger will recognize gain or
loss for Federal income tax purposes equal to the difference between the
amount of cash received and the shareholder's tax basis in the Shares sold.
Gain or loss will be determined separately for each block of Shares (i.e.,
Shares acquired at the same time and price) exchanged pursuant to the Offer or
the Merger. Such gain or loss generally will be capital gain or loss if the
Shares disposed of were held as capital assets by the shareholder. Any net
capital gain (i.e., generally, capital gain in excess of capital loss)
recognized by an individual upon a disposition of the Shares pursuant to the
Offer or the Merger that have been held for more than 18 months will generally
be subject to tax at a rate not to exceed 20%. Net capital gain recognized by
an individual upon such a disposition of Shares that have been held for more
than 12 months but for not more than 18 months will be subject to tax at a
rate not to exceed 28% and net capital gain recognized upon the sale of Shares
that have been held for 12 months or less will be subject to tax at ordinary
income tax rates. In addition, any net capital gain recognized by a
corporation upon a disposition of Shares pursuant to the Merger or the Offer
will be subject to tax at ordinary income tax rates.
A holder of Shares who perfects such shareholder's appraisal rights, if any,
under the GCL probably will recognize gain or loss at the Effective Time in an
amount equal to the difference between the "amount realized" and such
shareholder's adjusted tax basis of such Shares. For this purpose, although
there is no authority to this effect directly on point, the amount realized
generally should equal the trading value per share of the Shares at the
Effective Time. Ordinary interest income and/or capital gain (or capital loss,
assuming that the Shares were held as capital assets) should be recognized by
such shareholder at the time of actual receipt of payment, to the extent that
such payment exceeds (or is less than) the amount realized at the Effective
Time.
The foregoing summary constitutes a general description of certain Federal
income tax consequences of the Offer and the Merger without regard to the
particular facts and circumstances of each shareholder of the Company and is
based on the provisions of the Internal Revenue Code of 1986, as amended,
Treasury Department Regulations issued pursuant thereto and published rulings
and court decisions in effect as of the date hereof, all of which are subject
to change, possibly with retroactive effect. Special tax consequences not
described herein may be applicable to certain shareholders subject to special
tax treatment (including, but not limited to, insurance companies, tax-exempt
organizations, financial institutions or broker dealers, foreign shareholders
and shareholders who have acquired their Shares pursuant to the exercise of
employee stock options or otherwise as compensation). ALL SHAREHOLDERS ARE
URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO
9
<PAGE>
SPECIFIC TAX EFFECTS APPLICABLE TO THEM OF THE OFFER AND THE MERGER, INCLUDING
THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL AND FOREIGN TAX LAWS.
6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES. The shares of Common
Stock are traded through the Nasdaq National Market under the symbol "SOTA".
The following table sets forth, for each of the calendar quarters indicated,
the high and low reported sales price per share of Common Stock on the Nasdaq
National Market based on published financial sources. The Company did not
declare or pay any cash dividends during any of the periods indicated in the
table below. In addition, under the terms of the Merger Agreement, the Company
is not permitted to declare or pay dividends with respect to the shares
without the prior written consent of Parent.
<TABLE>
<CAPTION>
COMMON STOCK
------------------
HIGH LOW
------ ------
<S> <C> <C>
1996
First Quarter...................................... $ 14 7/8 $ 9 3/16
Second Quarter..................................... 19 3/4 11 5/8
Third Quarter...................................... 18 7/8 10 7/8
Fourth Quarter..................................... 14 11 1/4
1997
First Quarter...................................... $ 14 1/4 $ 9 3/8
Second Quarter..................................... 12 1/4 8 7/8
Third Quarter...................................... 16 1/2 10 3/4
Fourth Quarter..................................... 18 14
1998
First Quarter (through January 30, 1998)........... $ 21 15/16 $ 14 7/8
</TABLE>
On January 26, 1998, the last full trading day prior to the public
announcement of the execution of the Merger Agreement by the Company, Parent
and the Purchaser, the last reported sales price of the Shares on the Nasdaq
National Market was $16 1/2 per share of Common Stock. On January 30, 1998,
the last full trading day prior to the commencement of the Offer, the last
reported sales price of the Shares on the Nasdaq National Market was $21 23/32
per share of Common Stock. SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET
QUOTATION FOR THE SHARES.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK LISTING; EXCHANGE
ACT REGISTRATION; MARGIN REGULATIONS.
Market for the Shares. The purchase of Shares by the Purchaser pursuant to
the Offer will reduce the number of Shares that might otherwise trade publicly
and will reduce the number of holders of Shares, which could adversely affect
the liquidity and market value of the remaining Shares held by the public.
Stock Listing. The Common Stock is traded through the Nasdaq National
Market. Depending upon the number of Shares purchased pursuant to the Offer,
the Shares may no longer meet the requirements of the National Association of
Securities Dealers, Inc. (the "NASD") for continued inclusion on the Nasdaq
National Market, which requires that an issuer either (i) have at least
750,000 publicly held shares, held by at least 400 shareholders, with a market
value of at least $5,000,000, capital and surplus (total shareholders' equity)
of at least $4 million and have a minimum bid price of $1 or (ii) have at
least 1,000,000 publicly held shares, held by at least 400 shareholders, with
a market value of at least $15,000,000, have a minimum bid price of $5 and
have either (A) a market capitalization of at least $50,000,000 or (B) total
assets and revenues each of at least $50,000,000. If the Nasdaq National
Market and the Nasdaq Smallcap Market were to cease to publish quotations for
the Shares, it is possible that the Shares would continue to trade in the
over-the-counter market and that price or other quotations would be reported
by other sources. The extent of the public market for such Shares and the
availability of such quotations would depend, however, upon such factors as
the number of shareholders and/or the aggregate market value of such
securities remaining at such time, the interest in maintaining a market in the
Shares on the part of securities firms, the possible termination of
registration under the Exchange Act as
10
<PAGE>
described below, and other factors. The Purchaser cannot predict whether the
reduction in the number of Shares that might otherwise trade publicly would
have an adverse or beneficial effect on the market price for, or marketability
of, the Shares or whether it would cause future market prices to be greater or
lesser than the Offer Price. The Company has represented that, as of December
31, 1997, 11,173,945 Shares were issued and outstanding.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the Commission if the Shares are
neither listed on a national securities exchange nor held by 300 or more
holders of record. Termination of registration of the Shares under the
Exchange Act, assuming there are no other securities of the Company subject to
registration, would substantially reduce the information required to be
furnished by the Company to its shareholders and to the Commission and would
make certain provisions of the Exchange Act, such as the short-swing profit
recovery provisions of Section 16(b), the requirement of furnishing a proxy
statement pursuant to Section 14(a) in connection with shareholders' meetings
and the related requirement of furnishing an annual report to shareholders and
the requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions, no longer applicable to the Company. Furthermore, the
ability of "affiliates" of the Company and persons holding "restricted
securities" of the Company to dispose of such securities pursuant to Rule 144
or Rule 144A promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), may be impaired or eliminated.
The Purchaser may seek to cause the Company to apply for termination of
registration of the Shares under the Exchange Act as soon after the completion
of the Offer as the requirements for such termination are met. If the Nasdaq
National Market listing and the Exchange Act registration of the Shares are
not terminated prior to the Merger, then the Shares will be delisted from the
Nasdaq National Market and the registration of the Shares under the Exchange
Act will be terminated following the consummation of the Merger.
Margin Regulations. The Shares presently are "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which status has the effect, among other things, of
allowing brokers to extend credit on the collateral of such securities.
Depending upon factors similar to those described above regarding listing and
market quotations, it is possible that, following the Offer, the Shares would
no longer constitute "margin securities" for the purposes of the margin
regulations of the Federal Reserve Board and therefore could no longer be used
as collateral for loans made by brokers. If registration of the Shares under
the Exchange Act were terminated, the Shares would no longer be "margin
securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
General. The information concerning the Company contained in this Offer to
Purchase, including that set forth below under the caption "Selected Financial
Information," has been furnished by the Company or has been taken from or
based upon publicly available documents and records on file with the
Commission and other public sources. Neither Parent nor the Purchaser assumes
responsibility for the accuracy or completeness of the information concerning
the Company contained in such documents and records or for any failure by the
Company to disclose events which may have occurred or may affect the
significance or accuracy of any such information but which are unknown to
Parent or the Purchaser.
The Company provides accounting software for small-to-medium-sized
businesses and distributes its products through a reseller network. The
Company is a California corporation with its principal executive offices at 56
Technology Drive, Irvine, California 92618. The telephone number of the
Company at such offices is (714) 753-1222.
Selected Financial Information. Set forth below is certain selected
consolidated financial information with respect to the Company, excerpted or
derived from the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, and with respect to financial information for the
fiscal year ended December 31, 1997, from the Company's Current Report on Form
8-K, filed on February 2, 1998, each filed with the Commission pursuant to the
Exchange Act.
11
<PAGE>
More comprehensive financial information is included in such reports and in
other documents filed by the Company with the Commission. The following
summary is qualified in its entirety by reference to such reports and other
documents and all of the financial information (including any related notes)
contained therein. Such reports and other documents may be inspected and
copies may be obtained from the Commission in the manner set forth below.
STATE OF THE ART, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
DECEMBER 31,
-----------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
OPERATING DATA:
Net sales............................................ $63,956 $52,046 $46,118
Operating income (loss).............................. 7,816 2,917 7,362
Net earnings (loss).................................. 6,543 2,892 5,663
Net earnings (loss) per share........................ 0.56 0.25 0.51
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets......................................... 67,624 52,331 47,632
Total liabilities.................................... 13,672 5,319 5,382
Shareholders' equity................................. 53,952 47,012 42,250
</TABLE>
Approximately 11.55% of the outstanding Shares are held by the Shareholders,
who have agreed, among other things, to tender, or cause to be tendered, all
Shares owned by them pursuant to the Offer. The Shareholders also have granted
to Parent a proxy to vote the Shares owned by them in favor of the Merger
(which proxy will terminate in the event that the Purchaser waives the Minimum
Condition and accepts for payment the Revised Number of Shares). See Section
11.
Certain Company Projections. To the knowledge of Parent and the Purchaser,
the Company does not as a matter of course, make public forecasts as to its
future financial performance. However, in connection with the discussions
concerning the Offer and the Merger, the Company furnished Parent with
financial projections contained in the Company's 1998 operating budget
prepared by management for management's 1998 operating plan. The financial
projections contained therein are based on numerous assumptions concerning
revenue growth in all product areas, additional spending in research and
development to enhance the breadth of the acuity financials client server, and
increases in sales and marketing and general administrative expenses.
The Company's projections for Fiscal Year 1998 anticipated net sales of
approximately $87.1 million. Fiscal net earnings were projected at
approximately $11.0 million.
The Company's 1998 operating budget and the financial projections contained
therein were prepared for the limited purpose of managing the operating plan
of the Company for fiscal year 1998. They do not reflect recent developments
which have occurred since they were prepared, such as the Offer and the
Merger. This reference to the projections is provided solely because such
projections have been provided to the Purchaser and none of the Purchaser,
Parent, the Company or any of their respective affiliates or representatives
believes that such projections should be relied upon.
THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR
COMPLIANCE WITH PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES
ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
REGARDING PROJECTIONS OR FORECASTS. THESE FORWARD-LOOKING STATEMENTS (AS THAT
TERM IS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995) ARE
12
<PAGE>
SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THE PROJECTIONS. THE COMPANY HAS ADVISED THE PURCHASER
AND PARENT THAT ITS INTERNAL FINANCIAL FORECASTS (UPON WHICH THE PROJECTIONS
PROVIDED TO PARENT WERE BASED IN PART) ARE, IN GENERAL, PREPARED SOLELY FOR
INTERNAL USE AND CAPITAL BUDGETING AND OTHER MANAGEMENT DECISIONS, AND ARE
SUBJECTIVE IN MANY RESPECTS AND THUS SUSCEPTIBLE TO INTERPRETATIONS AND
PERIODIC REVISION BASED ON ACTUAL EXPERIENCE AND BUSINESS DEVELOPMENTS. THE
PROJECTIONS ALSO REFLECT NUMEROUS ASSUMPTIONS (NOT ALL OF WHICH WERE PROVIDED
TO PARENT), ALL MADE BY MANAGEMENT OF THE COMPANY, WITH RESPECT TO INDUSTRY
PERFORMANCE, GENERAL BUSINESS, ECONOMIC, MARKET AND FINANCIAL CONDITIONS AND
OTHER MATTERS, INCLUDING EFFECTIVE TAX RATES CONSISTENT WITH HISTORICAL LEVELS
FOR THE COMPANY, ALL OF WHICH ARE DIFFICULT TO PREDICT, MANY OF WHICH ARE
BEYOND THE COMPANY'S CONTROL AND NONE OF WHICH WERE SUBJECT TO APPROVAL BY
PARENT OR THE PURCHASER. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE
ASSUMPTIONS MADE IN PREPARING THE PROJECTIONS WILL PROVE ACCURATE, AND ACTUAL
RESULTS MAY BE MATERIALLY GREATER OR LESS THAN THOSE CONTAINED IN THE
PROJECTIONS. THE INCLUSION OF THE PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS
AN INDICATION THAT ANY OF PARENT, THE PURCHASER, THE COMPANY OR THEIR
RESPECTIVE AFFILIATES OR REPRESENTATIVES CONSIDERED OR CONSIDER THE
PROJECTIONS TO BE A RELIABLE PREDICTION OF FUTURE EVENTS, AND THE PROJECTIONS
SHOULD NOT BE RELIED UPON AS SUCH. NONE OF PARENT, THE PURCHASER, THE COMPANY
OR ANY OF THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES HAS MADE, OR MAKES
ANY REPRESENTATION TO ANY PERSON REGARDING THE INFORMATION CONTAINED IN THE
PROJECTIONS AND NONE OF THEM INTENDS TO UPDATE OR OTHERWISE REVISE THE
PROJECTIONS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO
REFLECT THE OCCURRENCE OF FUTURE EVENTS EVEN IN THE EVENT THAT ANY OR ALL OF
THE ASSUMPTIONS UNDERLYING THE PROJECTIONS ARE SHOWN TO BE IN ERROR. IT IS
EXPECTED THAT THERE WILL BE DIFFERENCES BETWEEN ACTUAL AND PROJECTED RESULTS,
AND ACTUAL RESULTS MAY BE MATERIALLY HIGHER OR LOWER THAN THOSE PROJECTED.
Available Information. The Company is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is obligated to
file reports, proxy statements and other information with the Commission
relating to its business, financial condition and other matters. Information
as of particular dates concerning the Company's directors and officers, their
remuneration, options granted to them, the principal holders of the Company's
securities and any material interests of such persons in transactions with the
Company is required to be disclosed in proxy statements distributed to the
Company's shareholders and filed with the Commission. Such reports, proxy
statements and other information should be available for inspection at the
public reference facilities of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission located
at Seven World Trade Center, Suite 1300, New York, NY 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies of such
information should be obtainable by mail, upon payment of the Commission's
customary charges, by writing to the Commission's principal office at 450
Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains a
website at http://www.sec.gov that contains reports, proxy statements and
other information relating to the Company that have been filed via the EDGAR
System. Such material should also be available for inspection at the offices
of the Nasdaq National Market, located at 20 Broad Street, New York, New York
10005.
9. CERTAIN INFORMATION CONCERNING PARENT AND THE PURCHASER.
Parent. Parent is a company organized under the laws of England. Parent
develops, distributes and provides support for mainstream PC accounting
software and related products for small to medium sized enterprises. The
Purchaser is a Delaware entity newly formed at the direction of Parent for the
purpose of effecting the Offer and the Merger. Parent owns, directly and
indirectly, all of the outstanding capital stock of the Purchaser. It is not
anticipated that, prior to the consummation of the Offer, the Purchaser will
have any
13
<PAGE>
significant assets or liabilities or will engage in any activities other than
those incident to the Offer and the Merger and the financing thereof. The
offices of Parent are located at Sage House, Benton Park Road, Newcastle Upon
Tyne, NE7 7LZ, England. The offices of the Purchaser are located c/o Sage U.S.
Holdings, Inc., 17950 Preston Road, Suite 800, Dallas, Texas 75252.
For certain information concerning the executive officers and directors, as
the case may be, of the Purchaser and Parent, see Schedule I.
Pursuant to the Option Agreement and the Shareholder Agreement, Parent may
be deemed to beneficially own 15,116,923 shares of Common Stock constituting
approximately 60.5% of the total currently outstanding shares of Common Stock.
See Section 11. Each of the Purchaser and Parent disclaims beneficial
ownership of such shares. Except as set forth in this Offer to Purchase, none
of the Purchaser, Parent, or, to the best knowledge of the Purchaser or
Parent, any of the persons listed on Schedule I, or any associate or majority-
owned subsidiary of any of the foregoing, beneficially owns or has a right to
acquire any Shares, and none of the Purchaser, Parent, or, to the best
knowledge of the Purchaser or Parent, any of the persons or entities referred
to above, nor any of the respective executive officers, directors or
subsidiaries of any of the foregoing, has effected any transaction in Shares
during the past 60 days.
Except as set forth in this Offer to Purchase, none of the Purchaser,
Parent, or, to the best knowledge of the Purchaser and Parent, any of the
persons listed on Schedule I, has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Company, including, but not limited to, any contract, arrangement,
understanding or relationship concerning the transfer or the voting of any
securities of the Company, joint ventures, loan or option arrangements, puts
or calls, guarantees of loans, guarantees against loss, or the giving or
withholding of proxies. Except as set forth in this Offer to Purchase, none of
the Purchaser, Parent, or any of their respective affiliates, or, to the best
knowledge of the Purchaser and Parent, any of the persons listed on Schedule
I, has had, since January 1, 1993, any business relationships or transactions
with the Company or any of its executive officers, directors or affiliates
that would require reporting under the rules of the Commission. Except as set
forth in this Offer to Purchase, since January 1, 1993, there have been no
contacts, negotiations or transactions between the Purchaser or Parent, any of
their respective affiliates or, to the best knowledge of the Purchaser or
Parent, any of the persons listed on Schedule I, and the Company or its
affiliates concerning a merger, consolidation or acquisition, tender offer or
other acquisition of securities, election of directors or a sale or other
transfer of a material amount of assets.
Parent is not subject to the informational reporting requirements of the
Exchange Act, and, accordingly, does not file reports or other information
with the Commission relating to its business, financial condition and other
matters.
Set forth below is certain selected consolidated financial information
relating to Parent and its subsidiaries for the fiscal years ended September
30, 1997, 1996 and 1995 (the "Financial Statements"). The selected
consolidated financial information is denominated in pounds sterling and
prepared in accordance with generally accepted accounting principles in the
United Kingdom ("UK GAAP"). UK GAAP differs in certain significant respects
from generally accepted accounting principles in the United States ("US
GAAP"). Immediately following Parent's summary consolidated financial
information set forth below is a brief summary of certain differences between
UK GAAP and US GAAP. Parent has not examined whether adjustments necessary to
conform its Financial Statements with US GAAP would be material. Parent's
financial statements for the fiscal years ended September 30, 1997 and 1996
are incorporated herein by reference and a copy of which has been filed with
the Commission as Exhibit (a)(11) to the Schedule 14D-1 may be inspected at
the Commission's public reference facilities in Washington D.C., and copies
thereof may be obtained from such facilities upon payment of the Commission's
customary charges, in the manner set forth in Section 8 above under "Available
Information" (although they will not be available at the regional offices of
the Commission). Set forth below is certain summary financial information
excerpted or derived from Parent's Financial Statements. Such summary
information is qualified in its entirety by reference to the Purchaser's
Financial Statements and all the financial information and related notes
contained therein.
14
<PAGE>
THE SAGE GROUP PLC
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS OF POUNDS STERLING(/1/), EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
-----------------------------------
1997 1996 1995
(Pounds)000 (Pounds)000 (Pounds)000
----------- ----------- -----------
<S> <C> <C> <C>
Income statement data
Amounts in accordance with UK GAAP
Turnover.................................. 152,089 136,236 102,234
Operating profit.......................... 40,080 32,094 24,040
Profit on ordinary activities before
interest................................. 40,080 32,094 24,040
Profit on ordinary activities before
taxation................................. 37,635 30,053 22,362
Profit attributable to shareholders....... 25,215 19,828 14,692
Per share data
Amounts in accordance with UK GAAP
Earnings per ordinary share - pence (2)... 23.43p 18.50p 13.88p
Balance sheet data (at end of period)
Amounts in accordance with UK GAAP
Net current assets/(liabilities).......... (10,172) (13,341) (4,687)
Total assets.............................. 64,774 52,890 41,080
Total liabilities......................... (111,015) (76,104) (56,732)
Shareholders' funds/(deficit)............. (46,241) (23,214) (15,652)
</TABLE>
- --------
(1) Parent publishes its financial statements in pounds sterling. The United
States dollar exchange rate based on the London closing mid-rates for
pounds sterling to dollars, expressed in $1 per (Pounds)1, for the fiscal
dates indicated, are as follows and are based on published financial
sources:
<TABLE>
<CAPTION>
YEAR END RATE YEAR HIGH YEAR LOW YEAR AVERAGE
------------- --------- -------- ------------
<S> <C> <C> <C> <C>
Fiscal Year ended 9/30/95.... 1.5848 1.6432 1.5322 1.5846
Fiscal Year ended 9/30/96.... 1.5641 1.5896 1.4948 1.5428
Fiscal Year ended 9/30/97.... 1.6142 1.7153 1.5628 1.6332
</TABLE>
(2) The weighted average number of shares outstanding during the fiscal years
ended September 30, 1995, 1996 and 1997 were 105,886,050, 107,149,618 and
107,641,176, respectively.
CERTAIN DIFFERENCES BETWEEN UK GAAP AND US GAAP. Although UK GAAP differs in
certain significant respects from US GAAP, Parent believes that the
differences are not material to a decision by a holder of Shares whether to
sell, tender or hold any Shares because any such differences would not reflect
the ability of the Purchaser to obtain sufficient funds to pay for the Shares
to be acquired pursuant to the Offer. While the following is not a
comprehensive summary of all the differences between UK GAAP and US GAAP,
other differences are unlikely to have a significant effect on the
consolidated income or shareholder's funds of the Purchaser.
Goodwill and US Purchase Accounting. Under US GAAP and UK GAAP, purchase
consideration in respect of subsidiaries acquired is allocated on the basis of
appraised values to the various net assets of the subsidiaries at the dates of
acquisition and any net balance is treated as goodwill. However, US GAAP also
requires value to be assigned to any separately identifiable intangible
assets--which would be amortized over their estimated useful lives not to
exceed 40 years--and to acquired in-process research and development which
would be written off to the profit and loss account in the period of the
acquisition. Also, US GAAP requires goodwill to be recognized as an asset and
amortized over its estimated useful life not to exceed 40 years. Under UK GAAP
goodwill is written off directly against reserves. Any acquisition related
expenses are considered part of the purchase consideration under US GAAP and
effectively added to goodwill. Such costs are either written off on the income
statement or reserves under UK GAAP in the period of acquisition.
Ordinary Dividends. Under UK GAAP, final ordinary dividends are provided for
in the fiscal year in respect of which they are recommended by the board of
directors for approval by the shareholders. Under US GAAP, such dividends are
not provided for until declared by the board of directors.
15
<PAGE>
Deferred Taxation. Under UK GAAP, no provision is made for deferred taxation
if there is reasonable evidence that such deferred taxation will not be
payable in the foreseeable future, deferred tax assets are generally not
recognized under UK GAAP unless they are likely to be recovered in the
foreseeable future (i.e. one year from the balance sheet date). Under US GAAP,
deferred tax assets and liabilities are recognized in full and any net
deferred tax assets are then assessed for probable recoverability. As long as
it is more likely than not that sufficient future taxable income will be
available to utilize the deferred tax assets, no valuation allowance is
provided.
Depreciation on freehold buildings. Under UK GAAP, companies are permitted
to carry freehold buildings at undepreciated historical cost or valuation so
long as these buildings are "well-maintained". US GAAP requires that all
tangible fixed assets in service, other than freehold land, be depreciated
over their estimated useful lives.
10. SOURCE AND AMOUNT OF FUNDS.
Parent and the Purchaser estimate that the total amount of funds required by
the Purchaser to (i) purchase all of the Shares pursuant to the Offer and
finance the Merger Consideration and (ii) pay fees and expenses incurred in
connection with the Offer and the Merger will be approximately (Pounds)162
million (or approximately $267 million). Of these funds, it is anticipated
that (a) approximately (Pounds)75 million (or approximately $123 million) will
be obtained from the proceeds of an offering (the "Equity Placing") of New
Ordinary Shares (as defined below) of Parent in the United Kingdom, and (b)
(Pounds)87 million (or approximately $144 million) will be financed through a
permanent bank financing (the "Bank Financing"), the principal terms of which
are described below.
The Equity Placing.
It is anticipated that approximately (Pounds)75 million (or approximately
$123 million) of the funds necessary to purchase all of the Shares in the
Offer, finance the Merger Consideration and pay fees and expenses in
connection with the Offer and Merger will be obtained by the allotment and
issue of new ordinary shares of Parent (the "New Ordinary Shares") pursuant to
the terms of the Vendor Placing Agreement, dated January 27, 1998 (the "Vendor
Placing Agreement"), by and between Parent and J. Henry Schroders & Co.
Limited ("Schroders"). The New Ordinary Shares, which represent the
consideration for the transfer of Shares under the Offer, will not be allotted
to shareholders of the Company, but will be allotted and issued, credited as
fully paid, by Parent to such persons as may be nominated by Schroders under
the Vendor Placing Agreement, and if no such person is nominated by Schroders,
then to Schroders itself. The shareholders of the Company will receive, as a
result of these arrangements, the full amount due to them of $22.00 per Share
accepted for payment in the Offer, of which approximately $10.34 will
represent an amount equal to the proceeds of the sale of the New Ordinary
Shares. The shareholders of the Company will not obtain any right under the
Offer which any of them may enforce against Schroders or any person nominated
by Schroders to accept the allotment and issue of the New Ordinary Shares.
THE OFFER DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO PURCHASE NEW ORDINARY SHARES OR ANY OTHER SECURITIES OF PARENT. The New
Ordinary Shares have not been and will not be registered under the Securities
Act of 1933, as amended (the "Securities Act"), and they may not, as part of
their distribution, be offered, sold, taken up, renounced or delivered,
directly or indirectly, in the United States, except pursuant to an exemption
from, or in transaction not subject to, the registration requirements of the
Securities Act.
The Bank Financing. In connection with the Offer, Parent and the Purchaser
have signed a facilities agreement, dated January 27, 1998 (the "Facilities
Agreement"), with the banks and financial institutions named in Schedule I
thereto and Lloyds Bank plc Capital Markets, as Agent and Arranger, relating
to a $233,000,000 multicurrency term and revolving credit facility (the
"Facility"). The Facility is available for borrowing by Parent and the
Purchaser for the purposes of (i) financing the consideration payable by the
Purchaser pursuant to the Offer and paying costs and expenses incurred in
connection therewith, (ii) refinancing existing borrowings of Parent in an
amount of approximately (Pounds)30,000,000, and (iii) financing the general
working capital requirements of Parent. The Facility is guaranteed by Parent,
Sage Overseas Limited, Sagesoft Limited, and any other future UK incorporated
subsidiaries of Parent which satisfy certain materiality tests.
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The Facility has a final maturity date of January 27, 2003 and accrues
interest at a rate per annum equal to LIBOR plus a sliding margin of between
85 and 65 basis points (depending on the ratio of Total Consolidated Borrowing
to Consolidated EBITDA (such terms are defined in the Facilities Agreement) of
Parent).
The Facilities Agreement contains customary representations and warranties
and financial and restrictive covenants, including without limitation,
restrictions on the granting of liens and restrictions on disposals and
acquisitions (except for the Offer and the Merger).
A number of the terms contained in the Facilities Agreement (including the
financial covenants, the material adverse change event of default, cross
default to other borrowings, the change of control event of default and the
environmental, litigation and material adverse change representations and
warranties and certain other terms) are suspended in whole or in part during a
"certain funds period" ending on the merger closing date, so that the Facility
will be available for drawing to finance the Offer and the completion of the
Merger, even if those terms of the Facility are breached at the time of
drawdown under the Facility.
11. BACKGROUND OF THE OFFER; PURPOSE OF THE OFFER AND THE MERGER; THE MERGER
AGREEMENT AND CERTAIN OTHER AGREEMENTS.
The following description was prepared by the Purchaser and the Company.
Information about the Company was provided by the Company, and neither the
Purchaser nor Parent takes any responsibility for the accuracy or completeness
of any information regarding meetings or discussions in which Parent or its
representatives did not participate.
BACKGROUND OF THE OFFER.
As early as 1994, Parent was reviewing opportunities in the U.S. market with
a view towards pursuing a potential acquisition in the accounting software
industry. In February 1994, Messrs. Paul A. Walker, Michael E.W. Jackson,
Kevin C. Howe, and A.D. Goldman of Parent met informally with Mr. David W.
Hanna and an executive management team of the Company. At the meeting, which
was conducted at the offices of the Company, there was no discussion of a
potential merger, although the parties did exchange information relating to
each of their respective companies. Except for brief product due diligence
discussions in October 1995, the parties did not meet again until November
1995, when Messrs. Goldman and Howe met with Mr. Hanna in Las Vegas, Nevada in
a brief update meeting relating to the status of their respective businesses.
In January 1996, Parent engaged the services of a predecessor of BT Alex.
Brown Incorporated ("BT Alex. Brown") to act as financial advisor on behalf of
Parent pursuant to the terms of an Engagement Letter between Parent and BT
Alex. Brown, dated January 24, 1996. In the spring of 1996, the Board of
Directors of Parent concluded that it was in the best interests of Parent and
the shareholders of Parent for Parent to pursue a strategic initiative in the
U.S. accounting software market. At the time, Parent considered, but
ultimately rejected, the idea of pursuing an asset acquisition or joint
venture in the United States. Instead, Parent resolved to pursue discussions
of a possible merger transaction with the Company.
In July 1996, Mr. Hanna met with Messrs. Walker, Jackson, Howe and Goldman
in London. At the meeting, Mr. Hanna provided an update on the Company's
marketing and product initiatives, and the parties discussed a possible merger
transaction between the two companies, although there was no discussion of
price or valuation.
Also during that month, representatives of BT Alex. Brown met with
management of the Company and commenced a preliminary due diligence review of
the Company. BT Alex. Brown then reported the results of its due diligence
findings to the management of Parent. After conducting its preliminary due
diligence review, BT Alex. Brown then met with representatives of UBS, acting
as financial advisor on behalf of the Company. At that meeting, which was held
in July 1996, BT Alex. Brown indicated that it believed Parent might be
willing to acquire all of the issued and outstanding Shares of the Company for
a price of approximately $15.00 to $20.00
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per share. During the month of July 1996, the Shares were trading in a range
of approximately $14.00 to $18.00 per share. Representatives of UBS indicated
that the Company's Board of Directors was unlikely to consider a transaction
with Parent at the levels indicated by BT Alex. Brown. Given the gap between
what was proposed and the Company's response, the parties agreed to terminate
discussions at the time.
In October 1996, Messrs. Walker, Jackson, Howe and Goldman met again
informally with Mr. Hanna in Del Mar, California. At that meeting, a potential
merger transaction was again discussed, Parent agreed to revisit its valuation
analysis of the Company, and Parent indicated that it might be willing to
acquire all of the issued and outstanding Shares of the Company at a price of
$15.00 per share. The Company rejected this proposal and the parties ceased
further discussions until March 1997.
In March 1997, management of Parent had several informal meetings with
Company management to discuss the possibility of renewing consideration of a
potential merger transaction. The substance of these discussions resulted in
BT Alex. Brown and UBS having a meeting by telephone to reconsider the
valuation issue, and perhaps reach a compromise position. However, the result
of these discussions was that, although BT Alex. Brown indicated that Parent
might be willing to pay a price in the $16.00 to $18.00 per share range, UBS
indicated that it believed the Company would not consider a proposal of less
than $20.00 per share. In April 1997, representatives of BT Alex. Brown met
with Messrs. Walker, Jackson, Goldman and Howe to consider the Company's
position and how the valuation gap might be closed.
Towards the last quarter of 1997, the parties determined to renew
discussions relating to the gap in valuation with a view towards focusing
efforts to close the gap. In September 1997, Mr. Hanna had a meeting with
Messrs. Walker, Jackson and Howe in London, wherein a potential transaction
among the parties and management's expectation for the Company's future
performance were further discussed. This was followed by a meeting in November
1997 in Las Vegas, Nevada, during which Messrs. Walker and Howe, and Mr.
A.W.G. Wylie of Parent, discussed with Mr. Hanna Parent's strategy for
international growth and a brief background relating to Parent's recent
acquisition of KHK Software GmbH & Co. KG in Germany. At the meeting, the
parties discussed the mutual benefits of a merger between the Company and
Parent, and agreed to increase their efforts towards structuring a
transaction. In addition, the Company's representative indicated that he did
not believe the Company's Board of Directors would be interested in a
transaction at a purchase price of less than $20.00 per share.
During December 1997, Parent continued its review of the Company's products
through product review meetings with the Company. In late December 1997,
Parent made an offer to the Company in writing of $20.00 per share. Mr. Hanna
expressed interest in Parent's proposal, and the parties determined that
further in-depth discussions were warranted. During the fourth quarter of
1997, the Shares were trading in a range of approximately $14.00 to $18.00 per
share. In early January 1998, Mr. Hanna and an executive management team of
the Company met with Messrs. Walker, Jackson and Howe, and Mr. Paul Stobart of
Parent, and discussed with them the then current business of the Company. In
addition, representatives of the Company provided Parent with the operating
budget of the Company for 1998 at such time. This was followed by a more
detailed discussion regarding pricing and valuation. The result of this
meeting was that Parent indicated that it would consider offering a purchase
price of $21.50 per share. Mr. Hanna indicated that he did not believe that
the Company's Board of Directors would find such price acceptable. After
further discussions at this meeting, Parent's representatives indicated that
they would explore with Parent's Board of Directors whether Parent would be
prepared to offer up to $22.00 per share.
Subsequent to this meeting, Parent indicated it was prepared to proceed with
a transaction at a price of $22.00 per share, subject to satisfactory
definitive documentation and additional due diligence. Representatives of the
Company indicated that they were prepared to seek board approval from the
Board of Directors of the Company to proceed on this basis.
On January 14, 1998, Parent and the Company executed a confidentiality
agreement (the "Confidentiality Agreement"), pursuant to which each party
agreed to keep all information relating to the proposed transaction
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and each of the subject companies confidential for a specified period of time,
and which included a "stand still" provision. On January 20 and 21, 1998,
Messrs. Walker, Jackson and Howe met with Mr. Hanna, together with each of
their respective financial and legal advisors, at the offices of BT Alex.
Brown in San Francisco, California to discuss timing and other pertinent
issues relating to the transaction.
At a meeting of the Board of Directors of the Company held on January 26,
1998, the Board unanimously approved the Offer, as well as the principal terms
of a merger transaction between the parties, and determined that the terms of
such transactions are fair to, and in the best interests of, the shareholders
of the Company. In addition, the Board determined to recommend that
shareholders of the Company accept the proposed Offer and tender their Shares
pursuant to the Offer. On January 26, 1998, UBS delivered to the Board of
Directors of the Company its oral opinion to the effect that, as of the date
thereof, the consideration to be received by the shareholders of the Company
(other than Parent, the Purchaser and any affiliate of either of them)
pursuant to the Offer and under the terms of the proposed merger, is fair,
from a financial point of view, to such shareholders. Such oral opinion was
subsequently confirmed by the written opinion of UBS, dated January 26, 1998.
Following a period of negotiation between the parties, the Company, Parent
and the Purchaser, a direct and indirect U.S. subsidiary of the Parent formed
to acquire the Shares of the Company, executed a definitive Merger Agreement
(the "Merger Agreement") on January 27, 1998, the principal terms and
provisions of which are described below in Section 11 of this Offer to
Purchase.
Separate press releases announcing the execution of the Merger Agreement
were issued by Parent and the Company before opening of the U.K. and U.S.
stock markets on the morning of January 27, 1998.
On February 2, 1998, the Purchaser commenced this Offer.
PURPOSE OF THE OFFER AND THE MERGER.
The purpose of the Offer, the Merger and the Merger Agreement is to enable
Parent to acquire control of, and the entire equity interest in, the Company.
The Offer is being made pursuant to the Merger Agreement and is intended to
increase the likelihood that the Merger will be effected. The purpose of the
Merger is to acquire all outstanding Shares not purchased pursuant to the
Offer. The transaction is structured as a merger in order to ensure the
acquisition by Parent of all the outstanding Shares.
If the Merger is consummated, Parent's common equity interest in the Company
would increase to 100% and Parent would be entitled to all benefits resulting
from that interest. These benefits include complete management with regard to
the future conduct of the Company's business and any increase in its value.
Similarly, Parent will also bear the risk of any losses incurred in the
operation of the Company and any decrease in the value of the Company.
Shareholders of the Company who sell their Shares in the Offer will cease to
have any equity interest in the Company and to participate in its earnings and
any future growth. If the Merger is consummated, the shareholders will no
longer have an equity interest in the Company and instead will have only the
right to receive cash consideration pursuant to the Merger Agreement or to
exercise statutory appraisal rights under the GCL, if available. See Section
12. Similarly, the shareholders of the Company will not bear the risk of any
decrease in the value of the Company after selling their Shares in the Offer
or the subsequent Merger.
The primary benefits of the Offer and the Merger to the shareholders of the
Company are that such shareholders are being afforded an opportunity to sell
all of their Shares for cash at a price which represents a premium of
approximately 33% over the closing market price of the Common Stock on the
last full trading day prior to the public announcement that the Company,
Parent and the Purchaser executed the Merger Agreement, and a more substantial
premium over recent historical trading prices.
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MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement.
The summary is qualified in its entirety by reference to the Merger Agreement
which is incorporated herein by reference and a copy of which has been filed
with the Commission as an exhibit to the Schedule 14D-1. The Merger Agreement
may be examined and copies may be obtained at the places and in the manner set
forth in Section 8 of this Offer to Purchase.
The Offer. The Merger Agreement provides that the Purchaser will commence
the Offer and that, upon the terms and subject to the prior satisfaction or
waiver of the conditions of the Offer, the Purchaser will purchase all Shares
validly tendered pursuant to the Offer. The Merger Agreement provides that,
without the written consent of the Company, the Purchaser will not (i)
decrease the Offer Price, (ii) decrease the number of Shares sought in the
Offer (except as set forth below), (iii) impose additional conditions to the
offer, (iv) amend any condition to the Offer described in Section 14, (v)
extend the Initial Expiration Date, provided, that if on the Initial
Expiration Date of the Offer, all conditions to the Offer shall not have been
satisfied or waived, the Purchaser shall extend the Expiration Date from time
to time until a date not later than March 26, 1998, or at the request of the
Company or the Option of the Purchaser, until a date not later than July 31,
1998, provided that in the event the Purchaser extends the Offer pursuant to
the Company's request, (A) Section 14 shall be deemed to be amended to provide
an additional condition that the Purchaser shall not be required to accept for
payment any tendered Shares unless and until Parent and the Purchaser shall
have obtained sufficient financing in replacement, if necessary, of the
financing described in Section 10 in order to permit Parent and the Purchaser
to acquire all of the Shares in the Offer and the Merger and pay the
anticipated expenses in connection therewith and (B) the condition set forth
in paragraph (h) of Section 14 shall be amended and replaced with the
condition set forth in clause (A) above, or (vi) amend any other term of the
Offer in any manner adverse to any holders of Shares without the written
consent of the Company.
In the event the Minimum Condition is not satisfied on the Initial
Expiration Date, the Purchaser may either (i) extend the Offer for a period or
periods not to exceed, in the aggregate, ten (10) business days or (ii) amend
the Offer to provide that, in the event (X) the Minimum Condition is not
satisfied at the next scheduled Expiration Date (without giving pro forma
effect to the potential issuance of any Shares issuable upon exercise of the
Option Agreement) and (Y) the number of Shares tendered pursuant to the Offer
and not withdrawn as of such next scheduled Expiration Date is more than 50%
of the then outstanding Shares, the Purchaser shall waive the Minimum
Condition and amend the Offer to reduce the number of Shares subject to the
Offer to a number of Shares equal to the Revised Minimum Number and, if a
greater number of Shares is tendered into the Offer and not withdrawn,
purchase, on a pro rata basis, the Revised Minimum Number of Shares (it being
understood that the Purchaser may, but shall not in any event be required to,
accept for payment, or pay for any Shares if less than the Revised Minimum
Number of Shares are tendered pursuant to the Offer and not withdrawn at the
applicable Expiration Date), provided further, that in the event the Minimum
Condition is not satisfied on or before the ten (10) business day period
referred to above, the Purchaser shall waive the Minimum Condition and amend
the Offer to reduce the number of Shares subject to the Offer to the Revised
Minimum Number of Shares. In the event that the Purchaser purchases a number
of Shares equal to the Revised Minimum Number, without the prior written
consent of the Purchaser prior to the termination of the Merger Agreement, the
Company shall take no action whatsoever to increase the number of Shares owned
by the Purchaser in excess of the Revised Minimum Number.
The Purchaser shall, on the terms and subject to the prior satisfaction or
waiver of the conditions to the Offer, accept for payment and pay for Shares
tendered as soon as legally permitted to do so under applicable law.
The Merger. Following the consummation of the Offer, the Merger Agreement
provides that, subject to the terms and conditions thereof, at the Effective
Time the Purchaser shall be merged with and into the Company and, as a result
of the Merger, the separate corporate existence of the Purchaser shall cease
and the Company shall continue as the surviving corporation (sometimes
referred to as the "Surviving Corporation").
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The respective obligations of Parent and the Purchaser, on the one hand, and
the Company, on the other hand, to effect the Merger are subject to the
satisfaction on or prior to the Closing Date (as defined in the Merger
Agreement) of each of the following conditions: (i) the Purchaser shall have
purchased or caused to be purchased, the Shares pursuant to the Offer, unless
such failure to purchase is a result of a breach of the Purchaser's
obligations under the Merger Agreement, (ii) the Merger Agreement shall have
been approved and adopted by the requisite vote of the holders of Shares, to
the extent required by the Company's Articles of Incorporation and the GCL, in
order to consummate the Merger; (iii) no statute, rule, regulation or order
shall have been enacted or promulgated by any United States or United Kingdom
governmental authority which prohibits the consummation of the Merger, and
there shall be no order or injunction of a court of competent jurisdiction in
effect preventing the consummation of the Merger and (iv) the applicable
waiting period under the HSR Act shall have expired or been terminated.
At the Effective Time of the Merger (i) each issued and outstanding Share
(other than Shares that are owned by owned by Parent, the Purchaser or any
Shares which are held by shareholders properly exercising dissenters' rights
under the GCL) will be converted into the right to receive the Offer Price
paid pursuant to the Offer and (ii) each issued and outstanding share of any
class or series of common stock, par value $.01 per share, of the Purchaser
will be converted into one share of common stock of the Surviving Corporation.
The Company's Board of Directors. The Merger Agreement provides that
promptly upon the purchase of and payment for any Shares by the Purchaser
pursuant to the Offer, Parent shall be entitled to designate such number of
directors, rounded up to the next whole number, on the Company's Board of
Directors as will give Parent representation on the Board of Directors equal
to at least that number of directors which equals the product of the total
number of directors on the Company's Board of Directors (after giving effect
to the directors designated by Parent) multiplied by the percentage that the
aggregate number of Shares beneficially owned by the Purchaser or any of its
affiliates bears to the number of Shares outstanding. The Company shall
promptly secure the resignations of such number of its incumbent directors as
is necessary to enable Parent's designees to be elected to the Company's Board
of Directors, provided that (i) in the event that Parent's designees are
appointed or elected to the Company's Board of Directors, until the Effective
Time the Company's Board of Directors will have at least two directors who are
directors as of the date of the execution of the Merger Agreement and neither
of whom is an officer of the Company (other than the present Chief Executive
Officer of the Company) nor a designee, shareholder, affiliate or associate
(within the meaning of federal securities laws) of Parent (one or more of such
directors, the "Independent Directors") and (ii) if no Independent Directors
remain, the other directors will designate one person to fill one of the
vacancies who shall not be a shareholder, affiliate or associate of Parent or
the Purchaser, such person so designated being deemed an Independent Director.
The Company's obligation to appoint Parent's designees to the Company's Board
of Directors is subject to compliance with Section 14(f) of the Exchange Act
and Rule 14f-1 promulgated thereunder.
Following the election of Parent's designees to the Company's Board of
Directors and prior to the Effective Time, the affirmative vote of a majority
of the Independent Directors shall be required to (i) amend or terminate the
Merger Agreement on behalf of the Company, (ii) exercise or waive any of the
Company's rights, benefits or remedies under the Merger Agreement or (iii)
take any other action by the Company's Board of Directors under or in
connection with the Merger Agreement which would adversely affect the rights
of the Company's shareholders under the Merger Agreement; provided, further,
that if there will be no such directors, such actions may be effected by the
unanimous vote of the entire Board of Directors of the Company.
Shareholders' Meeting. Pursuant to the Merger Agreement, the Company will,
if required by applicable law or the Company's Articles of Incorporation, in
order to consummate the Merger, duly call, give notice of, convene and hold a
special meeting of its shareholders as promptly as practicable following the
acceptance for payment and purchase of Shares by the Purchaser pursuant to the
Offer for the purpose of considering and taking action upon the approval of
the Merger and the adoption of the Merger Agreement. The Merger Agreement
provides that the Company will, if required by applicable law in order to
consummate the Merger, prepare and file with the Commission a preliminary
proxy or information statement relating to the Merger and the Merger Agreement
and use its commercially reasonable efforts (i) to obtain and furnish the
information required to be
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included by the Commission in the Proxy Statement (as hereinafter defined)
and, after consultation with Parent, to respond promptly to any comments made
by the Commission with respect to the preliminary Proxy Statement and cause a
definitive Proxy Statement to be mailed to its shareholders, provided that no
amendment or supplement to the Proxy Statement will be made by the Company
without consultation with Parent and its counsel and (ii) to obtain the
necessary approvals of the Merger and the Merger Agreement by its
shareholders. Subject to the terms of the Merger Agreement, the Company has
agreed to include in the Proxy Statement the recommendation of the Company's
Board of Directors that shareholders of the Company vote in favor of the
approval of the Merger and the adoption of the Merger Agreement.
The Merger Agreement provides that in the event that Parent or the Purchaser
acquires at least 90% of outstanding shares of Common Stock, pursuant to the
Offer or otherwise, Parent, the Purchaser and the Company will, at the request
of Parent and subject to the terms of the Merger Agreement, take all necessary
and appropriate action to cause the Merger to become effective as soon as
practicable after such acquisition, without a meeting of shareholders of the
Company, in accordance with Section 1110 of the GCL.
Options. Pursuant to the Merger Agreement, at the Effective Time, the
Company will take all actions necessary to provide that at the Effective Time,
(i) each Cash-Out Option (as defined below) shall be cancelled and (ii) in
consideration of such cancellation, each holder of a Cash-Out Option shall
receive in consideration thereof an amount (subject to any applicable
withholding tax) in cash equal to the product of (x) the excess, if any, of
the Offer Price over the per Share exercise price of such Cash-Out Option and
(y) the number of Shares subject to such Cash-Out Option. The Company is
required to use commercially reasonable efforts to effectuate the foregoing,
including amending the Stock Plans (as defined below) and obtaining any
necessary consents. At the Effective Time, each Assumed Option (as defined
below) shall be assumed by Parent and shall be converted into an option to
acquire that number of Parent Common Shares (as defined below) equal to (A)
the number of Shares subject to the Assumed Option immediately prior to the
Effective Time, multiplied by (B) the Exchange Ratio (as defined below),
rounded down to the nearest whole share, at a price per Parent Common Share
equal to (1) the exercise price of the Assumed Option immediately prior to the
Effective Time, divided by (2) the Exchange Ratio, rounded up to the nearest
whole cent. Parent shall take all action necessary for the Parent Common
Shares to rank pari passu in all respects with all other Parent Common Shares
then in issue and to be listed and issuable upon exercise of the Assumed
Options to be freely tradeable on the London Stock Exchange. The Company is
required to take all necessary actions to provide that as of the Effective
Time no holder of Options (as defined below) under the Stock Plans will have
any right to receive shares of common stock of the Surviving Corporation upon
exercise of any such Option.
The Company is required to take all actions necessary to provide that at or
immediately prior to the Effective Time, (i) each outstanding option under the
Company's 1997 Employee Stock Purchase Plan (the "Stock Purchase Plan") shall
automatically be exercised and (ii) in lieu of the issuance of certificates
representing Shares, each option holder shall receive an amount in cash
(subject to applicable withholding tax) equal to the product of (x) the number
of Shares otherwise issuable upon such exercise and (y) the Offer Price in
cash without interest thereon. The Company is required to use all reasonable
efforts to effectuate the foregoing, including amending the Stock Purchase
Plan and obtaining any necessary consents.
"Cash-Out Options" means each option outstanding at the Effective Time to
purchase Shares (an "Option") granted under (A) the Company's 1990 Stock
Option Plan, 1994 Incentive Stock Option, Nonqualified Stock Option and
Restricted Stock Purchase Plan, or Stock Option Plan for Non-Employee
Directors, (B) the Manzanita Software Systems 1985 Stock Option Plan or (C)
any other stock-based incentive plan or arrangement of the Company excluding
any options granted under the Company's 1997 Employee Stock Purchase Plan (the
"Stock Plans") that is not an Assumed Option.
"Assumed Options" means those certain Options or portions thereof granted
under the Company's 1990 Stock Option Plan or 1994 Incentive Stock Option,
Nonqualified Stock Option and Restricted Stock Purchase Plan that will not
have vested and become exercisable as of the Effective Time having an
aggregate exercise price on the date of the Merger Agreement in an amount not
materially less than $5 million, as designated by the
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Company in Section 2.4 of the Company Disclosure Schedule. To the extent any
Options or portions thereof cannot be assumed by Parent, such Options or
portions thereof shall be treated as Cash-Out Options and shall be cancelled
as of the Effective Time in consideration for a cash payment.
"Exchange Ratio" means the quotient of (x) the Offer Price multiplied by the
average of the mid-point of the bid and ask price of the rate of currency
exchange of pounds sterling for U.S. dollars quoted in The Financial Times for
each of the business days in a consecutive twenty business day period ending
two business days prior to the Effective Date and (y) the average per Share
closing price of the ordinary shares of 1 pence each in the capital of Parent
(a "Parent Common Share") as reported on the London Stock Exchange on each of
the ten trading days immediately preceding the Effective Time.
Interim Operations; Covenants. Pursuant to the Merger Agreement, the Company
has agreed that, except (i) as expressly contemplated by the Merger Agreement
or the Option Agreement, (ii) as set forth in Section 5.2 of the Company
Disclosure Schedule related to the Merger Agreement, (iii) in the ordinary
course of business consistent with past practice or (iv) as agreed to in
writing by Parent, after the date of execution of the Merger Agreement, and
prior to the earlier of (x) the termination of the Merger Agreement in
accordance with its terms and (y) the time the designees of the Purchaser
constitute a majority of the Company's Board of Directors, the business of the
Company and its Subsidiaries will be conducted only in the ordinary course
consistent with past practice, the Company will use its commercially
reasonable efforts to preserve its present business organization intact and
maintain its satisfactory relations with customers, suppliers, employees,
contractors, distributors and others having business dealings with it, and (a)
the Company will not, directly or indirectly, (i) issue, sell, transfer or
pledge or agree to sell, transfer or pledge any capital stock of any of its
Subsidiaries beneficially owned by it, Options or other rights to purchase
shares of Common Stock pursuant to the Stock Plans outstanding on the date of
the Merger Agreement; (ii) amend its Articles of Incorporation or By-Laws or
similar organizational documents; or (iii) split, combine or reclassify the
outstanding Shares of the Company; and (b) the Company shall not (i) declare,
set aside or pay any dividend or other distribution payable in cash, stock or
property with respect to its capital stock; (ii) issue, sell, pledge, dispose
of or encumber any additional shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights of any
kind to acquire any shares of capital stock of any class of the Company or its
Subsidiaries, other than Shares reserved for issuance on the date of the
Merger Agreement pursuant to the exercise of the Options outstanding on the
date of the Merger Agreement and except with respect to any sales in
accordance with the Stock Purchase Plan; (iii) transfer, lease, license, sell,
mortgage, pledge, dispose of, or encumber any of its material assets, or incur
or modify any material indebtedness or other liability, other than in the
ordinary and usual course of business and consistent with past practice; (iv)
redeem, purchase or otherwise acquire, any shares of any class or series of
its capital stock or any instrument or security which consists of or includes
a right to acquire such shares except as permitted by the Merger Agreement and
other than in connection with the exercise of options or rights under the
Stock Plans and except with respect to any sales in accordance with the Stock
Purchase Plan; (v) make any change in the compensation payable or to become
payable by the Company to any of its officers, directors, employees, agents or
consultants (other than general increases in wages to employees who are not
directors or affiliates in the ordinary course consistent with past practice)
or to persons providing management services (vi) enter into or amend any
employment, severance, consulting, termination or other agreement or employee
benefit plan or make any loans to any of its officers, directors, employees,
affiliates, agents or consultants or make any change in its existing borrowing
or lending arrangements for or on behalf of any of such persons pursuant to
any employee benefit plan or otherwise; (vii) pay or make any accrual or
arrangement for payment of any pension, retirement allowance or other employee
benefit pursuant to any existing plan, agreement or arrangement to any
officer, director, employee or affiliate or pay or agree to pay or make any
accrual or arrangement for payment to any officers, directors, employees or
affiliates of the Company of any amount relating to unused vacation days,
except payments and accruals made in the ordinary course consistent with past
practice; adopt or pay, grant, issue, accelerate or accrue salary or other
payments or benefits pursuant to any pension, profit-sharing, bonus, extra
compensation, incentive, deferred compensation, stock purchase, stock option,
stock appreciation right, group insurance, severance pay, retirement or other
employee benefit plan, agreement or arrangement, or any employment or
consulting agreement with or for the benefit of any director,
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officer, employee, agent or consultant, whether past or present; or amend in
any material respect any such existing plan, agreement or arrangement in a
manner inconsistent with the foregoing; (viii) modify, amend or terminate any
of the Company Agreements (as defined in the Merger Agreement) or waive,
release or assign any material rights or claims under any of the Company
Agreements (as defined in the Merger Agreement); (ix) make any loans, advances
or capital contributions to or investments in any other person; incur or
assume any long-term debt or any short-term indebtedness; assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person; or enter
into any material commitment or transaction (including, but not limited to,
any material borrowing, capital expenditure or purchase, sale or lease of
assets or real estate); (x) pay, discharge or satisfy any claims or
liabilities (whether absolute, accrued, contingent or otherwise) other than in
the ordinary course of business and consistent with past practices or
reflected or reserved against in the consolidated financial statements (or the
notes thereto) of the Company; (xi) adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company (other than the
Merger); (xii) take or agree in writing or otherwise to take, any action that
would or is reasonably likely to result in any of the conditions to the Merger
or the Offer not being satisfied, or would make any representation or warranty
of the Company contained in the Merger Agreement inaccurate in any material
respect, at or as of any time prior to the Effective Time, or that would
materially impair the Company's ability to consummate the Merger or materially
delays such consummation; (xiii) change any of the accounting methods used by
it materially affecting its assets, liabilities or business, except for such
changes required by generally accepted accounting principles, make any
material tax election, change any material tax election already made, enter
into any closing agreement or settle any material tax audit; or (xiv) enter
into any written agreement, contract, commitment or arrangement with respect
to the foregoing or authorize, recommend, propose, in writing or announce an
intention to do any of the foregoing.
No Solicitation. Pursuant to the Merger Agreement, the Company has agreed to
notify the Purchaser promptly if any proposals are received by, any
information is requested from, or any negotiations or discussions are sought
to be initiated or continued with the Company or its representatives, in each
case in connection with any Acquisition Proposal (as defined below) or the
possibility or consideration of making an Acquisition Proposal ("Acquisition
Proposal Interest") indicating, in connection with such notice, the name of
the Person indicating such Acquisition Proposal Interest and the terms and
conditions of any proposals or offers. In addition, the Company has agreed
that it will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted prior to
the date of the Merger Agreement with respect to any Acquisition Proposal
Interest and that it will keep Parent informed, on a current basis, of the
status and terms of any Acquisition Proposal Interest. Pursuant to the Merger
Agreement, except as set forth below, from the date of the Merger Agreement
until the earlier of the termination of the Merger Agreement or the Effective
Time, the Company has agreed that the Company will not (nor shall it authorize
or permit its officers, directors, employees, investment bankers, attorneys,
accountants and other agents to, and at the further request of Parent, will
use reasonable efforts to ensure that such persons do not), directly or
indirectly (i) initiate, solicit or knowingly encourage, or knowingly take any
action to facilitate the making of, any offer or proposal which constitutes or
is reasonably likely to lead to any Acquisition Proposal, (ii) enter into any
agreement with respect to any Acquisition Proposal, or (iii) in the event of
an unsolicited written Acquisition Proposal for the Company engage in
negotiations or discussion with, or provide information or data to, any Person
(other than Parent, any of its affiliates or representatives) relating to any
Acquisition Proposal, except that the Merger Agreement does not prohibit the
Company or the Company's Board of Directors from (x) taking and disclosing to
the Company's shareholders a position with respect to tender or exchange offer
by a third party pursuant to Rules 14d-9 and 14e-2 promulgated under the
Exchange Act, (y) making such disclosure to the Company's shareholders as, in
the good faith judgment of the Board, after receiving advice from outside
counsel, is necessary for the Company's Board of Directors to comply with its
fiduciary duties to the Company's shareholders under applicable law or (z)
otherwise complying with their fiduciary duties to shareholders.
An "Acquisition Proposal" means any tender or exchange offer involving the
Company, any proposal for a merger, consolidation or other business
combination involving the Company, any proposal or offer to acquire in any
manner a substantial equity interest in, or a substantial portion of the
business or assets of, the Company (other than immaterial or insubstantial
assets or inventory in the ordinary course of business or assets held for
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sale), any proposal or offer with respect to the Company or any proposal or
offer with respect to any other transaction similar to any of the foregoing
with respect to the Company other than pursuant to the transactions effected
pursuant to the Merger Agreement.
Notwithstanding the foregoing, prior to the acceptance of Shares pursuant to
the Offer, the Company may furnish information concerning its business to any
Person (as defined in the Merger Agreement) pursuant to a confidentiality
agreement with terms no less favorable to the Company than those contained in
the Confidentiality Agreement, dated January 14, 1998, entered into between
Parent and the Company and may negotiate an Acquisition Proposal if (a) such
Person submitted on an unsolicited basis a bona fide written proposal to the
Company relating to any such transaction which the Board determines in good
faith, after receiving advice from a nationally recognized investment banking
firm, represents a superior transaction to the Offer and the Merger which is
not conditioned upon obtaining additional financing, the certainty of closing
of which is less certain than the satisfaction of the condition to the Offer
described in paragraph h of Section 14 and (b) in the opinion of the Company's
Board of Directors, only after receipt of advice from outside legal counsel to
the Company, the failure to provide such information or access or to engage in
such discussions or negotiations would cause the Board of Directors to violate
its fiduciary duties to the Company's shareholders under applicable law (an
Acquisition Proposal which satisfied clauses (a) and (b), a "Superior
Proposal"). Within one business day following receipt by the Company of a
Superior Proposal, the Company must notify Parent of the receipt thereof. The
Company must then provide Parent any material nonpublic information regarding
the Company provided to the other party which was not previously provided to
Parent. Except as permitted under the terms of the Merger Agreement, neither
the Company's Board of Directors nor any committee thereof shall (i) withdraw
or modify, or propose to withdraw or modify, in a manner adverse to Parent or
the Purchaser, the approval or recommendation of the Company's Board of
Directors, or any such committee thereof, of the Offer, the Merger Agreement
or the Merger, (ii) approve or recommend, or propose to approve or recommend,
any Acquisition Proposal, or (iii) enter into any agreement with respect to
any Acquisition Proposal. Notwithstanding the foregoing, prior to the time of
acceptance for payment of Shares in the Offer, the Board of Directors of the
Company may (subject to the terms of the Merger Agreement) withdraw or modify
its approval or recommendation of the Offer, the Merger Agreement or the
Merger, approve or recommend a Superior Proposal, or enter into an agreement
with respect to a Superior Proposal, in each case at any time after the fifth
business day following the Company's delivery to Parent of written notice
advising Parent that the Board of Directors has received a Superior Proposal,
specifying the material terms and conditions of such Superior Proposal and
identifying the person making such Superior Proposal; provided that the
Company shall not enter into an agreement with respect to a Superior Proposal
unless the Company also shall have furnished Parent with written notice that
it intends to enter into such agreement.
Indemnification and Insurance. The Merger Agreement provides that for six
years after the Effective Time, the Surviving Corporation (or any successor to
the Surviving Corporation) shall indemnify, defend and hold harmless, the
present and former officers and directors of the Company and its subsidiaries,
and any persons who become any of the foregoing prior to the Effective Time
(each, an "Indemnified Party") against all losses, claims, damages,
liabilities costs, fees and expenses (including reasonable fees, disbursements
of counsel and judgments, fines, losses, claims, liabilities and amounts paid
in settlement (provided that any such settlement is effected with the written
consent of Parent or the Surviving Corporation)) arising out of the actions or
omissions occurring at or prior to the Effective Time to the fullest extent
permissible under applicable provisions of the GCL, the terms of the Company's
Articles of Incorporation or the By-Laws, and under any agreements as in
effect at the date of the Merger Agreement. The Merger Agreement also provides
that Parent or the Surviving Corporation will maintain the Company's existing
officers' and directors' liability insurance ("D&O Insurance") for a period of
not less than six years after the Effective Time, provided, that if the
aggregate annual premiums for such D&O Insurance at any time shall exceed 150%
of the average per annum rate of premium paid by the Company for such
insurance in 1996 and 1997, as adjusted for any increase in the Consumer Price
Index following the date of the Merger Agreement, then Parent will cause the
Company or the Surviving Corporation to provide the maximum coverage then
available at an annual premium equal to 150% of such rate.
Representations and Warranties. Pursuant to the Merger Agreement, the
Company has made customary representations and warranties to Parent and the
Purchaser with respect to, among other things, its organization,
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capitalization, authority relative to the Merger, financial statements, public
filings, conduct of business, employee benefit plans, intellectual property,
employment matters, compliance with laws, tax matters, litigation,
environmental matters, material contracts, potential conflicts of interest,
brokers' fees, real property, insurance, accounts receivable and inventory,
vote required to approve the Merger Agreement, undisclosed liabilities,
information in the Proxy Statement and the absence of any material adverse
effect on the Company since December 31, 1997.
Termination; Fees. The Merger Agreement may be terminated and the
transactions contemplated therein abandoned at any time prior to the Effective
Time, whether before or after approval of the shareholders of the Company
(provided that if Shares are purchased to the Offer, Parent may not in any
event terminate the Merger Agreement):
a. By mutual written consent of Parent and the Company; or
b. By Parent if the Offer shall have expired without any Shares being
purchased thereunder by the Purchaser and without the Purchaser having had
an obligation under the Merger Agreement to extend the Offer; provided,
however, that Parent shall not be entitled to terminate this Agreement if
it or the Purchaser is in material breach of its representations and
warranties, covenants or other obligations under this Agreement; or
c. By either Parent or the Company (i) if a court of competent
jurisdiction or other governmental entity shall have issued an order,
decree or ruling or taken any other action, in each case permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by the Merger Agreement or (ii) prior to the purchase of
Shares pursuant to the Offer, if there has been a willful breach by the
other party of any representation, warranty, covenant or agreement set
forth in this Agreement, which breach shall result in any condition set
forth in Annex I of the Merger Agreement (other than clause (i) thereof)
not being satisfied (and such breach is not reasonably capable of being
cured and such condition satisfied within thirty (30) days after the
receipt of notice thereof); or
d. By the Company to allow the Company to enter into an agreement with
respect to a Superior Proposal which the Board of Directors has determined
is more favorable to the shareholders of the Company than the transactions
contemplated hereby; provided, however, that it has complied with all
provisions thereof, including the notice provision therein, and that it
makes simultaneous payment of the Termination Fee (as hereinafter defined),
plus any amounts then due as a reimbursement of expenses; or
e. By Parent, at any time prior to the purchase of the Shares pursuant to
the Offer, if (i) the Company's Board of Directors shall have withdrawn,
modified, or changed its recommendation in respect of this Agreement or the
Offer in a manner adverse to the Purchaser, or (ii) the Company's Board of
Directors shall have recommended any proposal other than by Parent or the
Purchaser in respect of an Acquisition Proposal, (iii) the Company shall
have exercised a right with respect to an Acquisition Proposal and directly
or through its representatives, continue discussions with any third party
concerning an Acquisition Proposal for more than ten business days after
the date of receipt of such Acquisition Proposal, or (iv) an Acquisition
Proposal that is publicly disclosed shall have been commenced, publicly
proposed or communicated to the Company which contains a proposal as to
price (without regard to whether such proposal specifies a specific price
or a range of potential prices) and the Company shall not have rejected
such proposal within ten business days of its receipt or, if sooner, the
date its existence first becomes publicly disclosed; or
f. By the Company, if the Offer shall have expired without any Shares
being purchased thereunder by the Purchaser and without the Company having
the right to extend the Offer pursuant to the Merger Agreement (unless
Parent shall have timely extended the Offer in accordance with its rights
under the Merger Agreement); provided, however, that the Company shall not
be entitled to terminate this Agreement pursuant to this section if it is
in material breach of its representations, warranties, covenants or other
obligations under this Agreement.
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If (i) Parent shall have terminated the Merger Agreement pursuant to clause
(e)(i) or (e)(ii); (ii) (x) Parent shall have terminated the Agreement
pursuant to clause (c)(ii), (e)(iii) or (e)(iv) above and (y) following the
date of the Merger Agreement but prior to such termination there shall have
been an Acquisition Proposal Interest and (z) the Company shall have entered
into a definitive agreement with respect to an Acquisition Proposal or
consummated an Acquisition Proposal with respect to the Company within one
year after the termination by Parent pursuant to clause (c)(ii), clause
(e)(iii) or clause (e)(iv); or (iii) the Company shall have terminated this
Agreement pursuant to clause (d), then the Company shall pay (A)
simultaneously with such termination if pursuant to clause (d), (B) promptly,
but in no event later than two business days after the date of such
termination if pursuant to clause (e)(i) or clause (e)(ii), or (C) upon
execution of a definitive agreement with respect to a Acquisition Proposal or
upon the consummation of an Acquisition Proposal with respect to the Company
if pursuant to clause (c)(ii), clause (e)(iii) or clause (e)(iv), to Parent a
termination fee (the "Termination Fee") of $8,000,000 plus an amount, not in
excess of $1,250,000, equal to the Purchaser's reasonable actual and
documented out-of-pocket expenses incurred by Parent and the Purchaser in
connection with the Offer, the Merger, the Merger Agreement and the
consummation of the transactions contemplated thereby.
If the Merger Agreement is terminated, and at any time on or prior to March
26, 1998, all of the conditions set forth on Annex I have been fulfilled
except (i) the condition set forth in paragraph (h) of Annex I of the Merger
Agreement and (ii) any other conditions that are not fulfilled as a result,
directly or indirectly, of a breach by Parent or the Purchaser or any
representation, warranty, covenant or agreement set forth in this Agreement,
then promptly, but in no event later than two business days after the date of
such termination, Parent will pay to the Company a termination fee of
$8,000,000 plus an amount, not in excess of $1,250,000, equal to the Company's
reasonable actual and documented out-of-pocket expenses incurred by the
Company in connection with the Offer, the Merger, this Agreement and the
consummation of the transactions contemplated hereby.
SHAREHOLDER AGREEMENT
As a condition and inducement to Parent and the Purchaser's entering into
the Merger Agreement and incurring the liabilities therein, certain
shareholders of the Company (each a "Shareholder") who have voting power and
dispositive power with respect to an aggregate of 1,290,868 Shares,
representing approximately 11.55% of the Shares outstanding on December 31,
1997, concurrently with the execution and delivery of the Merger Agreement
entered into the Shareholder Agreement. The Shareholders are David W. Hanna,
George Riviere and Jeffrey E. Gold, the President and Chief Executive Officer,
Vice President and Vice President, respectively, of the Company. Pursuant to
the Shareholder Agreement, each of the Shareholders has agreed to validly
tender, in accordance with the terms of the Offer promptly, all Shares subject
to the Shareholder Agreement. Each Shareholder agreed not to withdraw his
Shares so tendered unless the Offer is terminated or expired. Each of the
Shareholders has granted Parent an irrevocable proxy with respect to the
voting of such Shares in favor of the Merger, which proxy will terminate in
the event that the Purchaser waives the Minimum Condition and accepts for
payment the Revised Number of Shares.
Each of the Shareholders has agreed that, prior to the termination of the
Shareholder Agreement pursuant to its terms, he will not (i) transfer, or
consent to the transfer, of any or all of the Shares or any interest therein;
(ii) enter into any contract, option or other agreement or understanding with
respect to any transfer of any or all of the Shares or any interest therein;
(iii) grant any proxy, power-of-attorney or other authorization in or with
respect to the Shares; (iv) deposit the Shares into a voting trust or enter
into a voting agreement or arrangement with respect to the Shares or (v) take
any other action that would in any way restrict, limit or interfere with the
performance of the Shareholder's obligations under the Shareholder Agreement
or the Merger Agreement.
The Shareholder Agreement, and all rights and obligations of the parties
thereto, shall terminate immediately upon the earlier of (i) six months
following the termination of the Merger Agreement in accordance with its terms
or (ii) the Effective Time.
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OPTION AGREEMENT
Pursuant to the Option Agreement, the Company granted to the Purchaser the
Stock Option to purchase the Option Shares at the Option Price, subject to the
terms and conditions set forth in the Option Agreement; provided, however,
that the Stock Option will not be exercisable if the number of shares subject
thereto exceeds the number of authorized shares available for issuance.
The Option Agreement provides that, subject to the conditions therein and
any additional requirements of law, the Stock Option may be exercised by the
Purchaser, in whole but not in part, at any one time after the occurrence of a
Top-up Exercise Event (as defined below) and prior to the Termination Date (as
defined below). For the purpose of the Option Agreement, a "Top-up Exercise
Event" would occur upon the Purchaser's acceptance for payment pursuant to the
Offer of shares of Common Stock constituting more than 50% but less than 90%
of the shares of Common Stock then outstanding on a fully diluted basis, and
the Termination Date would occur upon the first to occur of any of the
following: (i) the Effective Time; (ii) the date which is ten (10) business
days after the occurrence of a Top-up Exercise Event; (iii) the termination of
the Merger Agreement and (iv) the date on which the Purchaser waives the
Minimum Condition and accepts for payment the Revised Minimum Number of
Shares.
The Option Agreement provides that the obligation of the Company to deliver
Option Shares upon the exercise of the Stock Option is subject to the
following conditions: (i) all waiting periods, if any, under the HSR Act
applicable to the issuance of the Option Shares shall have expired or have
been terminated and (ii) there shall be no preliminary or permanent injunction
or other final, non-appealable judgment by a court of competent jurisdiction
preventing or prohibiting the exercise of the Stock Option or the delivery of
the Option Shares in respect of such exercise.
CONFIDENTIALITY AGREEMENT
The following is a summary of certain provisions of the Confidentiality
Agreement, dated January 14, 1998, between the Company and Parent. The
following summary of the Confidentiality Agreement does not purport to be
complete and is qualified by reference to the text of the Confidentiality
Agreement, a copy of which is filed as Exhibit (c) (4) hereto and incorporated
herein by reference.
The Confidentiality Agreement contains customary provisions pursuant to
which, among other matters, Parent has agreed to keep confidential all
nonpublic, confidential or proprietary information furnished to it by the
Company relating to the Company subject to certain exceptions (the
"Confidential Information"), and to use the Confidential Information solely in
connection with the certain future business agreements relating to the
Company.
In addition, the Company and Parent agreed, for a period of one year
following the termination of the Confidentiality Agreement, not to, nor allow
any of their affiliates to, (i) acquire or seek to acquire any of the other
party's or its subsidiaries' assets (other than in the ordinary course of
business) or business or any voting securities issued by the other party which
are or may be entitled to vote in the election of directors ("Voting
Securities"), or any rights or options to acquire such ownership; (ii) make or
participate in any solicitation of proxies or consents with respect to any
Voting Securities of the other party, become a participant in any proxy
context of the other party, influence the voting of any Voting Securities,
demand information with respect to the other party's stockledger or
stockholders or attempt to call a meeting of the other party or (iii) enter
into any discussions, negotiations or arrangements with any third party with
respect to these matters.
12. PLANS FOR THE COMPANY; OTHER MATTERS.
Plans for the Company. Parent intends to conduct a detailed review of the
Company and its assets, corporate structure, dividend policy, capitalization,
operations, properties, policies, management and personnel and will consider,
subject to the terms of the Merger Agreement, what, if any, changes would be
desirable in light of the circumstances which exist upon completion of the
Offer. Such changes could include changes in the Company's business, corporate
structure, certificate of incorporation, by-laws, capitalization, Board of
Directors,
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management or dividend policy, although, except as disclosed in this Offer to
Purchase, Parent has no current plans with respect to any of such matters. The
Merger Agreement provides that, promptly upon the purchase of and payment for
any Shares by the Purchaser pursuant to the Offer, and from time to time
thereafter as Shares are acquired by the Purchaser, Parent has the right to
designate such number of directors, rounded up to the next whole number, on
the Company's Board of Directors as is equal to the product of the total
number of directors on the Company's Board of Directors (giving effect to the
directors designated by Parent) multiplied by the percentage that the number
of Shares beneficially owned by the Purchaser or any affiliate of the
Purchaser bears to the total number of Shares then outstanding. See Section
11. The Merger Agreement provides that the directors of the Purchaser and the
officers of the Company at the Effective Time of the Merger will, from and
after the Effective Time, be the initial directors and officers, respectively,
of the Surviving Corporation.
Except as disclosed in this Offer to Purchase, neither Parent nor the
Purchaser has any present plans or proposals that would result in an
extraordinary corporate transaction, such as a merger, reorganization,
liquidation, relocation of operations, or sale or transfer of assets,
involving the Company or any of its subsidiaries, or any material changes in
the Company's corporate structure, business or composition of its management
or personnel.
OTHER MATTERS
Shareholder Approval. Under the GCL, the approval of the Board of Directors
of the Company and the affirmative vote of the holders of a majority of the
outstanding Shares are required to adopt and approve the Merger Agreement and
the transactions contemplated thereby. The Company has represented in the
Merger Agreement that the execution and delivery of the Merger Agreement by
the Company and the consummation by the Company of the transactions
contemplated by the Merger Agreement, the Shareholder Agreement and the Option
Agreement have been duly authorized by all necessary corporate action on the
part of the Company, subject to the approval of the Merger by the Company's
shareholders in accordance with the GCL. In addition, the Company has
represented that the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock is the only vote of the holders of any
class or series of the Company's capital stock which is necessary to approve
the Merger Agreement and the transactions contemplated thereby, including the
Merger. Therefore, unless the Merger is consummated pursuant to the short-form
merger provisions under the GCL described below (in which case no further
corporate action by the shareholders of the Company will be required to
complete the Merger), the only remaining required corporate action of the
Company will be the approval of the Merger Agreement and the transactions
contemplated thereby by the affirmative vote of the holders of a majority of
the shares of Common Stock. The Merger Agreement provides that Parent will
vote, or cause to be voted, all of the Shares then owned by Parent, the
Purchaser or any of Parent's other subsidiaries and affiliates in favor of the
approval of the Merger and the adoption of the Merger Agreement. In the event
that the Minimum Condition is satisfied, the Purchaser will have sufficient
voting power to cause the approval of the Merger Agreement and the
transactions contemplated thereby without the affirmative vote of any other
shareholders of the Company.
Short-Form Merger. Section 1110 of the GCL provides that, if the parent
corporation owns at least 90% of the outstanding shares of each class of the
subsidiary corporation, the merger into the subsidiary corporation of the
parent corporation may be effected by a resolution or plan of Merger adopted
and approved by the board of directors of the parent corporation and the
appropriate filings with the California Secretary of State, without any action
or vote on the part of the shareholders of the subsidiary corporation (a
"short-form merger"). Under the GCL, if the Purchaser acquires, pursuant to
the Offer, the Stock Option or otherwise, at least 90% of the outstanding
Shares, the Purchaser will be able to effect the Merger without a vote of the
shareholders of the Company. In such event, Parent, the Purchaser and the
Company have agreed in the Merger Agreement to take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after such acquisition, without a meeting of the Company's
shareholders. Under the GCL, the Merger may not be accomplished for cash paid
to the Company's shareholders if the Purchaser owns, directly or indirectly,
more than 50% but less than 90% of the then outstanding Shares unless either
all the shareholders consent or the Commissioner of Corporations of the State
of California, approves, after a hearing, the terms and conditions of the
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Merger and the fairness thereof. If such shareholder consent or Commissioner
of Corporations approval is not obtained, the GCL requires that the
consideration received in the Merger consist only of non-redeemable common
stock of Parent. The purpose of the Offer is to obtain 90% or more of the
Shares (on a fully diluted basis) and to enable Parent and the Purchaser to
acquire all of the equity of the Company.
In the event that less than 90% of the Shares then outstanding on a fully
diluted basis are tendered pursuant to the Offer on the Initial Expiration
Date, the Purchaser is required to extend the Offer and may waive, and in
certain circumstances thereafter, is required to waive, the Minimum Condition
and amend the Offer to reduce the number of Shares subject to the Offer to the
Revised Minimum Number and, if a greater number of Shares is tendered into the
Offer and not withdrawn, purchase on a pro rata basis, the Revised Minimum
Number of Shares (it being understood that the Purchaser may, but shall not in
any event be required to accept for payment, or pay for, any Shares if less
than the Revised Minimum Number of Shares are tendered pursuant to the Offer
and not withdrawn at the applicable expiration date of the Offer). The
Purchaser would thus own upon consummation of the Offer, 49.9999% of the
Shares then outstanding and would thereafter solicit the approval of the
Merger and the Merger Agreement by a vote of the shareholders of the Company.
The Purchaser is required to effect a short-form merger as soon as practicable
if permitted to do so under the GCL.
Dissenters' Rights. Holders of the Shares do not have dissenters' rights as
a result of the Offer. However, if the Merger is consummated, holders of the
Shares at the Effective Time by complying with the provisions of Chapter 13 of
the GCL, may have certain rights to dissent and to require the Company to
purchase their Shares for cash at "fair market value." In general, holders of
Shares will be entitled to exercise dissenters' rights under the GCL only if
the holders of five percent or more of the outstanding Shares properly file
demands for payment or if the Shares held by such holders are subject to any
restriction on transfer imposed by the Company or any law or regulation
("Restricted Shares"). Accordingly, if any holder of Restricted Shares and, if
the holders of five percent or more of the Shares properly file demands for
payment, all other such holders who fully comply with all other applicable
provisions of Chapter 13 of the GCL will be entitled to require the Company to
purchase their Shares for cash at their fair market value if the Merger is
consummated. In addition, if immediately prior to the Effective Time, the
Shares are not listed on a national securities exchange or on the list of OTC
margin stocks issued by the Federal Reserve Board, holders of Shares may
likewise exercise their dissenters' rights as to any or all of their Shares
entitled to such rights. If the statutory procedures under the GCL relating to
dissenters' rights were complied with, such rights could lead to a judicial
determination of the fair market value of the Shares. The "fair market value"
would be determined as of the day before the first announcement of the terms
of the Merger, excluding any appreciation or depreciation in consequence of
the Merger. The value so determined could be more or less than the Merger
Consideration.
THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING SHAREHOLDERS DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY
SHAREHOLDERS DESIRING TO EXERCISE ANY AVAILABLE DISSENTERS' RIGHTS. THE
PRESERVATION AND EXERCISE OF DISSENTERS' RIGHTS REQUIRE STRICT ADHERENCE TO
THE APPLICABLE PROVISIONS OF THE GCL.
The foregoing description of the GCL, including the descriptions of Chapter
13, is not necessarily complete and is qualified in its entirety by reference
to the GCL.
Rule 13e-3. The Merger would have to comply with any applicable Federal law
operative at the time. Rule 13e-3 under the Exchange Act is applicable to
certain "going private" transactions; however, the Purchaser believes that
Rule 13e-3 will not be applicable to the Merger because it is anticipated that
the Merger will be effected within one year following the consummation of the
Offer. If Rule 13e-3 were applicable to the Merger, it would require, among
other things, that certain financial information concerning the Company, and
certain information relating to the fairness of the proposed transaction and
the consideration offered to minority shareholders in such a transaction, be
filed with the Commission and disclosed to minority shareholders prior to
consummation of the transaction.
30
<PAGE>
13. DIVIDENDS AND DISTRIBUTIONS.
The Merger Agreement provides that neither the Company nor any of its
Subsidiaries shall: (i) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to its capital
stock; (ii) issue, sell, pledge, dispose of or encumber any additional shares
of, or securities convertible into or exchangeable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of capital
stock of any class of the Company or its Subsidiaries, other than Shares
reserved for issuance on the date hereof pursuant to the exercise of Options
outstanding on the date of the Merger Agreement and with respect to any sales
in accordance with the Stock Purchase Plan; or (iii) redeem, purchase or
otherwise acquire any shares of any class or series of its capital stock.
14. CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of the Offer, the Purchaser is not
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-l(c) under the Exchange Act
(relating to the Purchaser's obligation to pay for or return tendered Shares
promptly after termination or withdrawal of the Offer), pay for, and may delay
the acceptance for payment of or, subject to the restriction referred to
above, the payment for, any tendered Shares unless the Minimum Condition has
been satisfied; provided, however, that the Minimum Condition must be waived
by the Purchaser and the Revised Minimum Number substituted therefor as
contemplated, and to the extent required, by Section 1.1(d) of the Merger
Agreement. Furthermore, notwithstanding any other provisions of the Offer, the
Purchaser is not required to accept for payment or pay for any tendered Shares
if, at the scheduled expiration date, (i) any applicable waiting period under
the HSR Act has not expired or terminated prior to termination of the Offer,
or (ii) any of the following events shall have occurred and be continuing:
a. there shall be pending any suit, action or proceeding by any United
States or United Kingdom Governmental Entity (as defined in the Merger
Agreement) against the Purchaser, Parent, the Company or any Subsidiary of
the Company (i) seeking to prohibit or impose any material limitations on
Parent's or the Purchaser's ownership or operation (or that of any of their
respective subsidiaries or affiliates) of all or a material portion of the
business or assets of Parent and its subsidiaries, taken as a whole, or all
or a material portion of the business or assets of the Company and its
subsidiaries, taken as a whole, or to compel Parent or the Purchaser or
their respective Subsidiaries and affiliates to dispose of or hold separate
any material portion of the business or assets of the Company or Parent and
their respective Subsidiaries, in each case taken as a whole, (ii)
challenging the acquisition by Parent or the Purchaser of any Shares under
the Offer or seeking to restrain or prohibit the making or consummation of
the Offer or the Merger, (iii) seeking to impose material limitations on
the ability of the Purchaser, or render the Purchaser unable, to accept for
payment, pay for or purchase some or all of the Shares pursuant to the
Offer and the Merger, or (iv) subject to the limitations under Section
1101(e) of the GCL, seeking to impose material limitations on the ability
of Purchaser or Parent effectively to exercise full rights of ownership of
the Shares, including, without limitation, the right to vote the Shares
purchased by it on all matters properly presented to the Company's
shareholders;
b. there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated, or deemed applicable
(pursuant to an authoritative interpretation by or on behalf of a
Government Entity, to the Offer or the Merger) or any other action shall be
taken by any Governmental Entity, other than the application to the Offer
or the Merger of applicable waiting periods under HSR Act, that is likely
to result in any of the consequences referred to in clauses (i) through
(iv) of paragraph (a) above;
c. there shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on the London Stock Exchange, the New
York Stock Exchange, the American Stock Exchange or the Nasdaq Stock Market
for a period in excess of 24 hours (excluding suspensions or limitations
resulting solely from physical damage or interference with such exchanges
not related to market conditions), (ii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States or the United Kingdom (whether or not mandatory), (iii) a
commencement of a war, armed hostilities or
31
<PAGE>
other international or United States or United Kingdom calamity directly or
indirectly involving the United States or the United Kingdom (other than an
action involving solely U.N. personnel or support of U.N. personnel), (iv)
any limitation (whether or not mandatory) by any United States or United
Kingdom Governmental Entity on the extension of credit generally by banks
or other financial institutions, or (v) a change in general financial, bank
or capital market conditions which materially and adversely affects the
ability of financial institutions in the United States to extend credit or
syndicate loans, which, in the case any of the foregoing, in the reasonable
judgment of Parent, makes it impractical to proceed with the acceptance of
Shares for payment pursuant to the Offer or the payment therefor;
d. the representations and warranties of the Company set forth in the
Merger Agreement that are not qualified by reference to Company Material
Adverse Effect (as defined in the Merger Agreement) were not true and
correct in any respect, or any other such representations or warranties
were not true and correct in any respect that (when taken together with all
other such representations and warranties not true and correct) would
likely have a Company Material Adverse Effect (i) in the case of any
representation or warranty which addresses matters as of a particular date,
as of such date, or (ii) in the case of all other representations and
warranties, as of the date of this Agreement and as of the scheduled
expiration of the Offer.
e. since the date of this Agreement, there shall have occurred any change
that constitutes (or that would likely constitute) a Company Material
Adverse Change;
f. the Board of Directors of the Company or any committee thereof shall
have withdrawn or materially modified in a manner adverse to Parent or the
Purchaser or its recommendation of the Offer, the Merger or the Merger
Agreement, or approved or recommended any Acquisition Proposal;
g. the Company shall have failed to perform or to comply in any material
respect with any agreement or covenant to be performed or complied with by
it under this Agreement;
h. The London Stock Exchange shall have failed to admit to the Official
List of the London Stock Exchange the New Shares or such admission shall
have not become effective in accordance with paragraph 7.1 of the listing
rules of the London Stock Exchange ; provided, however, that this condition
to the Offer shall be deemed to have been met if, assuming the Purchaser
had accepted the Shares for payment in the Offer, such Admission would be
substantially certain to occur; and
i. the Merger Agreement shall have been terminated in accordance with its
terms.
The foregoing conditions are for the sole benefit of Parent and the
Purchaser, may be asserted by Parent or the Purchaser regardless of the
circumstances giving rise to such condition and may be waived by Parent or the
Purchaser in whole or in part at any time and from time to time in the sole
discretion of Parent or the Purchaser, subject in each case to the terms of
the Merger Agreement. The failure by Parent or the Purchaser at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
15. CERTAIN LEGAL MATTERS.
Except as described in this Section 15, based on information provided by the
Company, none of the Company, Purchaser or Parent is aware of any license or
regulatory permit that appears to be material to the business of the Company
that might be adversely affected by the Purchaser's acquisition of Shares as
contemplated herein or of any approval or other action by a domestic or
foreign governmental, administrative or regulatory agency or authority that
would be required for the acquisition and ownership of the Shares by the
Purchaser as contemplated herein. Should any such approval or other action be
required, the Purchaser and Parent presently contemplate that such approval or
other action will be sought, except as described below under "State Takeover
Laws." While, except as otherwise described in this Offer to Purchase, the
Purchaser does not presently intend to delay the acceptance for payment of or
payment for Shares tendered pursuant to the Offer pending the outcome of any
such matter, there can be no assurance that any such approval or other action,
if needed, would be obtained or would be obtained without substantial
conditions or that failure to obtain any such approval or other action might
not result in consequences adverse to the Company's business or that certain
parts
32
<PAGE>
of the Company's business might not have to be disposed of or other
substantial conditions complied with in the event that such approvals were not
obtained or such other actions were not taken or in order to obtain any such
approval or other action. If certain types of adverse action are taken with
respect to the matters discussed below, the Purchaser could decline to accept
for payment or pay for any Shares tendered. See Section 14 for certain
conditions to the Offer, including conditions with respect to governmental
actions.
Sections 1203. The Company is incorporated under the laws of the State of
California. Section 1203 provides that if a tender offer is made to some or
all of a corporation's shareholders by an "interested party", an affirmative
opinion in writing as to the fairness of the consideration to the shareholders
of that corporation shall be delivered to the shareholders at the time that
the tender offer is first made in writing to the shareholders. However, if the
tender offer is commenced by publication and tender offer materials are
subsequently mailed or otherwise distributed to the shareholders, the opinion
may be omitted in that publication if the opinion is included in the materials
distributed to the shareholders. For purposes of Section 1203, the term
"interested party" includes, among other things, a person who is a party to
the transaction and (A) directly or indirectly controls the corporation that
is the subject of the tender offer or proposal, (B) is, or is directly or
indirectly controlled by, an officer or director of the subject corporation,
or (C) is an entity in which a material financial interest is held by any
director or executive officer of the subject corporation. While none of the
Company, Parent or Purchaser believes that the Offer constitutes a transaction
which falls within the provisions of Section 1203, an independent financial
advisor, UBS, has been retained by the Company, to provide a fairness opinion
with respect to the Offer.
State Takeover Laws. The Company's principal executive offices are located
in, and the Company is incorporated under the laws of, the State of
California, which currently has no takeover statute that would apply to the
Offer or to the Merger. However, there can be no assurances that California
will not, prior to the completion of the Offer, adopt such a statute. Under
the GCL, the Merger may not be accomplished for cash paid to the shareholders
of the Company if the Purchaser or Parent owns directly or indirectly more
than 50% but less than 90% of the then outstanding Shares unless either all of
the shareholders of the Company consent or the Commissioner of Corporations of
the State of California approves, after a hearing, the terms and conditions of
the Merger and the fairness thereof. The purpose of the Offer is to obtain 90%
or more of the Shares (on a fully diluted basis) and to enable Parent and the
Purchaser to acquire control of the Company.
In the event that less than 90% of the Shares then outstanding on a fully
diluted basis are tendered pursuant to the Offer on the Initial Expiration
Date, the Purchaser is required to extend the Offer and may waive, and in
certain circumstances thereafter, is required to waive, the Minimum Condition
and amend the Offer to reduce the number of Shares subject to the Offer to the
Revised Minimum Number and, if a greater number of Shares is tendered into the
Offer and not withdrawn, purchase on a pro rata basis, the Revised Minimum
Number of Shares (it being understood that the Purchaser may, but shall not in
any event be required to accept for payment, or pay for, any Shares if less
than the Revised Minimum Number of Shares are tendered pursuant to the Offer
and not withdrawn at the applicable expiration date of the Offer). In the
event that the Purchaser acquires the Revised Minimum Number of Shares, it
would have the ability to ensure approval of the Merger by the shareholders of
the Company with the approval of a de minimis number of remaining outstanding
Shares.
A number of states have adopted laws and regulations applicable to attempts
to acquire securities of corporations which are incorporated, or have
substantial assets, shareholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In Edgar v. MITE Corp., the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover Statute, which, as a matter of state securities law, made takeovers
of corporations meeting certain requirements more difficult. However, in 1987,
in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the
State of Indiana may, as a matter of corporate law and, in particular, with
respect to those aspects of corporate law concerning corporate governance,
constitutionally disqualify a potential acquiror from voting on the affairs of
a target corporation without the prior approval of the remaining shareholders.
The state law before the Supreme Court was by its terms applicable only to
corporations that had a substantial number of shareholders in the state and
were incorporated there.
33
<PAGE>
The Company, directly or through subsidiaries, conducts business in a number
of states throughout the United States, some of which have enacted takeover
laws. The Purchaser does not know whether any of these laws will, by their
terms, apply to the Offer or the Merger and has not complied with any such
laws. Should any Person seek to apply any state takeover law, the Purchaser
will take such action as then appears desirable, which may include challenging
the validity or applicability of any such statute in appropriate court
proceedings. In the event it is asserted that one or more state takeover laws
are applicable to the Offer or the Merger, and an appropriate court does not
determine that it is inapplicable or invalid as applied to the Offer, the
Purchaser might be required to file certain information with, or receive
approvals from, the relevant state authorities. In addition, if enjoined, the
Purchaser might be unable to accept for payment any Shares tendered pursuant
to the Offer, or be delayed in continuing or consummating the Offer and the
Merger. In such case, the Purchaser may not be obligated to accept for
payment, or pay for, any Share tendered pursuant to the Offer. See Section 14.
Antitrust. Under the HSR Act, and the rules that have been promulgated
thereunder by the Federal Trade Commission (the "FTC"), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice (the
"Antitrust Division") and the FTC and certain waiting period requirements have
been satisfied.
A Notification and Report Form with respect to the Offer is expected to be
filed under the HSR Act on or about February 3, 1998, and if filed on such
date, the waiting period with respect to the Offer under the HSR Act will
expire at 11:59 P.M., New York City time, on February 18, 1998. Before such
time, however, either the FTC or the Antitrust Division may extend the waiting
period by requesting additional information or material from the Purchaser. If
such request is made, the waiting period will expire at 11:59 P.M., New York
City time, on the tenth calendar day after the Purchaser has substantially
complied with such request. Thereafter, the waiting period may be extended
only by court order or with the Purchaser's consent.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's acquisition of
Shares pursuant to the Offer and the Merger. At any time before or after the
Purchaser's acquisition of Shares, the Antitrust Division or the FTC could
take such action under the antitrust laws as it deems necessary or desirable
in the public interest, including seeking to enjoin the acquisition of Shares
pursuant to the Offer or otherwise or seeking divestiture of Shares acquired
by the Purchaser or divestiture of substantial assets of Parent or its
subsidiaries. Private parties, as well as state governments, may also bring
legal action under the antitrust laws under certain circumstances. Based upon
an examination of publicly available information relating to the businesses in
which Parent and the Company are engaged, Parent and the Purchaser believe
that the acquisition of Shares by the Purchaser will not violate the antitrust
laws. Nevertheless, there can be no assurance that a challenge to the Offer or
other acquisition of Shares by the Purchaser on antitrust grounds will not be
made or, if such a challenge is made, of the result. See Section 14 for
certain conditions to the Offer, including conditions with respect to
litigation and certain governmental actions.
Federal Reserve Board Regulations. Regulations G, U and X (the "Margin
Regulations") of the Federal Reserve Board restrict the extension or
maintenance of credit for the purpose of buying or carrying margin stock,
including the Shares, if the credit is secured directly or indirectly by
margin stock. Such secured credit may not be extended or maintained in an
amount that exceeds the maximum loan value of all the direct and indirect
collateral securing the credit, including margin stock and other collateral.
All financing for the Offer will be structured so as to be in full compliance
with the Margin Regulations.
16. FEES AND EXPENSES.
Except as set forth below, neither Parent nor the Purchaser will pay any
fees or commissions to any broker, dealer or other person for soliciting
tenders of Shares pursuant to the Offer.
BT Alex. Brown is acting as the Dealer Manager in connection with the Offer
and is acting as financial advisor to Parent in connection with its effort to
acquire the Company. In connection with the Offer, Parent has agreed to pay BT
Alex. Brown for its services $75,000 as a retainer fee which will be offset
against a success fee paid by Parent upon completion of the Offer in the
amount of $600,000 (the "Success Fee"). In addition,
34
<PAGE>
Parent has agreed to pay BT Alex. Brown a monthly retainer fee of $25,000 upon
the first day of each month from March 1, 1996 until the earlier of the
completion of the Offer, the termination of transaction discussions or the
termination of the agreement between Parent and BT Alex. Brown. This monthly
retainer fee will also be offset against the Success Fee of $600,000. Parent
has also agreed, whether or not the Offer is consummated, to pay BT Alex.
Brown (in its capacity as Dealer Manager and financial advisor) for its
reasonable out-of-pocket expenses, including the reasonable fees and expenses
of its legal counsel, incurred in connection with its engagement, and to
indemnify BT Alex. Brown against certain liabilities and expenses in
connection with their engagement. BT Alex. Brown renders various investment
banking and other advisory services to Parent and its affiliates and is
expected to continue to render such services, for which it has received and
will continue to receive customary compensation from Parent and its
affiliates.
The Purchaser has retained MacKenzie Partners, Inc. to act as the
Information Agent and ChaseMellon Shareholder Services, L.L.C. to act as the
Depositary in connection with the Offer. Such firms each will receive
reasonable and customary compensation for their services. The Purchaser has
also agreed to reimburse each such firm for certain reasonable out-of-pocket
expenses and to indemnify each such firm against certain liabilities in
connection with their services, including certain liabilities under federal
securities laws.
The Purchaser will not pay any fees or commissions to any broker or dealer
or other person (other than the Information Agent and the Dealer Manager) for
making solicitations or recommendations in connection with the Offer. Brokers,
dealers, banks and trust companies will be reimbursed by the Purchaser for
customary mailing and handling expenses incurred by them in forwarding
material to their customers.
17. MISCELLANEOUS.
The Offer is being made to all holders of Shares other than the Company. The
Purchaser is not aware of any jurisdiction in which the making of the Offer or
the tender of Shares in connection therewith would not be in compliance with
the laws of such jurisdiction. If the Purchaser becomes aware of any
jurisdiction in which the making of the Offer would not be in compliance with
applicable law, the Purchaser will make a good faith effort to comply with any
such law. If, after such good faith effort, the Purchaser cannot comply with
any such law, the Offer will not be made to (nor will tenders be accepted from
or on behalf of) the holders of Shares residing in such jurisdiction. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made
on behalf of the Purchaser by one or more registered brokers or dealers
licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF PARENT OR THE PURCHASER NOT CONTAINED HEREIN OR IN
THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
The Purchaser and Parent have filed with the Commission the Schedule 14D-1
pursuant to Rule 14d-3 under the Exchange Act furnishing certain additional
information with respect to the Offer. The Schedule 14D-1 and any amendments
thereto, including exhibits, may be examined and copies may be obtained from
the offices of the Commission and the Nasdaq National Market in the manner set
forth in Section 9 of this Offer to Purchase (except that they will not be
available at the regional offices of the Commission).
Rose Acquisition Corp.
February 2, 1998
35
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
OF
ROSE ACQUISITION CORP.
AND
THE SAGE GROUP PLC
1. ROSE ACQUISITION CORP. Set forth below is the name, business address and
present principal occupation or employment, and material occupations,
positions, offices or employments for the past five years, of each director
and executive officer of the Rose Acquisition Corp. Unless otherwise
indicated, (a) each such person is a citizen of the United Kingdom, and (b)
the business address of each such person is c/o Sage U.S. Holdings, Inc.,
17950 Preston Road, Suite 800, Dallas, Texas 75252.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME AND ADDRESS HELD DURING THE PAST FIVE YEARS
---------------- -------------------------------
<C> <S>
Aidan John Hughes Director, Vice-President and Treasurer of Rose
Acquisition Corp. since formation; Finance Director of
The Sage Group plc since January 1994; Director of
Sagesoft Ltd. from 1993 to 1997.
Michael Edward Wilson Jackson Director and President of Rose Acquisition Corp. since
formation; Director of The Sage Group plc from October
1988 to present, and Chairman from October 1997 to
present; Director of Sagesoft Ltd. since October 1988;
Director of Hat Pin plc since June 1996; Director of
Bywel Holdings Ltd. since June 1996; Director of Weyrad
Electronics Ltd. since February 1996; Director of
Quality & Safety Services Ltd. since November 1995;
Director of BR QAS Ltd. since November 1995; Director
of Steve Dudman Plant Ltd. since November 1995;
Director of Elderstreet Corporate Finance Ltd. since
June 1995; Director of Photoaward Ltd. since June 1995;
Director of Select Software plc since September 1992;
Director of Matrix Aegis plc since February 1992;
Director of A&M Furniture Hire Ltd. since January 1992;
Director of Faverwise Ltd. since October 1991; Director
of Elmbridge Village Ltd. since March 1991; Director of
ID Data Holdings Ltd. since December 1992; Director of
Micromuse plc since September 1993; Director of Golf
Park Developments Ltd. since September 1993; Director
of Baldwin & Francis Ltd since May 1994; Director of
Starburst Ltd. since May 1994; Director of Spargo
Consulting plc since May 1994; Director of Cedars
Village Ltd. since June 1994; Director of Elderstreet
Capital Partners Ltd. since June 1995; Director of
Service Power Business Solutions until December 1996;
Director of W Fearnehough Limited until February 1995;
Director of Target Resources Ltd. until January 1994;
Director of SLS Information Systems until October 1994;
Director of Brightstone Properties plc until October
1993; Director of Pharmasol Ltd. until February 1993.
Paul Ashton Walker Director, Vice President and Secretary of Rose
Acquisition Corp. since formation; Director of The Sage
Group plc from October 1988 to present, and Chief
Executive Officer from January 1994 to present;
Director of Sagesoft Ltd. since October 1987; Director
of DacEasy, Inc. since 1991; Director of Sage France SA
since November 1996; Director of KHK Software GmbH &
Co. KG since February 1997; Director of Cussins
Property Group plc since February 1997.
Kevin Clyde Howe Citizen of the United States of America; Vice President
of Rose Acquisition Corp. since formation; President of
Sage U.S. Holdings, Inc. since May 1991; Director of
The Sage Group plc since May 1991.
</TABLE>
I-1
<PAGE>
2. THE SAGE GROUP PLC. Set forth below is the name, business address and
present principal occupation or employment, and material occupations,
positions, offices or employments for the past five years, of the directors
and executive officers of The Sage Group plc. Unless otherwise indicated, (a)
each such person is a citizen of the United Kingdom, and (b) the business
address of each such person is c/o The Sage Group plc, Sage House, Benton Park
Road, Newcastle Upon Tyne, NE7 7LZ, England.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME AND ADDRESS HELD DURING THE PAST FIVE YEARS
---------------- -------------------------------
<C> <S>
Michael Edward Wilson See Part 1 of this Schedule I.
Jackson
Aidan John Hughes See Part 1 of this Schedule I.
Paul Ashton Walker See Part 1 of this Schedule I.
Kevin Clyde Howe See Part 1 of this Schedule I.
Lindsay Claude Neils Bury Director of The Sage Group plc since January 1996;
Chairman of Casewise Systems plc since 1997; Director
of Wray-Tech (UK) Ltd since 1995; Director of Electric
and General Investment Co. plc since 1995; Director of
Roxboro plc since 1993; Chairman of South Staffordshire
Water Holdings plc since 1979; Chairman of Unicorn
International plc from 1995 to 1997; Director of
Portals Group plc from 1973 to 1995; Director of ACT
plc from 1968 to 1995; Director of Christie Group plc
from 1988 to 1994.
Charles John Constable Director of The Sage Group plc since January 1996;
Director of NMBZ Holdings Ltd. since March 1997;
Chairman of Harpur Trust since 1997; Chairman of
Truesand Ltd. since 1992; Chairman of Brigtech
Developments Ltd. since 1989; Director of Foundation
for Management Education (FME) Ltd. since 1985;
Director of Lloyds Abbey Life PLC from 1987 to April
1997; Trustee of the Pensions Trust, 15 Rathbone
Street, London W1P 2AJ, England; Visiting Professor at
Cranfield School of Management, Cranfield University,
Cranfield, Bedfordshire, MK43 OAL, England; Visiting
Associate Professor at Ashridge Management College,
Berkhamstead, Hertfordshire, HP4 INS, England.
Paul Lancelot Stobart Business Development Director of The Sage Group plc
since January 1997; Director of Sagesoft Ltd. since
July 1996; Director of KHK Software GmbH & Co. KG since
February 1997; Director of Lopex plc since 1997;
Director of Interbrand Design UK Limited from 1988 to
1996; Director of Interbrand Group Limited from 1988 to
1996; Director of Interbrand UK Limited from 1988 to
1996; Director of Markforce Associates Limited from
1988 to 1992; Director of Asda Interactive Sampling
Limited from 1989 to 1995; Director of Novamark
International Limited from 1988 to 1996; Director of
Sportsmanager (Bisham Abbey) Limited from 1992 to 1994.
Andrew William Graham Wylie Director of The Sage Group plc since August 1988;
Managing Director of Sagesoft Ltd. since August 1988.
Rupert Charles Edward Secretary of The Sage Group plc since January 1995;
Wyndham Secretary of Sagesoft Ltd. since January 1995; Company
Secretary of Harland and Wolff Holdings plc from
October 1989 to June 1994.
</TABLE>
I-2
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each
shareholder of the Company or his broker, dealer, commercial bank, trust
company or other nominee to the Depositary, at one of the addresses set forth
below:
<TABLE>
<CAPTION>
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDERS SERVICES, L.L.C.
BY MAIL: BY HAND: BY OVERNIGHT DELIVERY:
<S> <C> <C>
ChaseMellon Shareholder ChaseMellon Shareholder ChaseMellon Shareholder
Services, L.L.C. Services, L.L.C. Services, L.L.C.
Post Office Box 3301 120 Broadway, 13th Floor 85 Challenger Road--Mail Drop-Reorg.
South Hackensack, NJ 07606 New York, NY 10271 Ridgefield Park, NJ 07660
Attn: Reorganization Department Attn: Reorganization Department Attn: Reorganization Department
BY FACSIMILE TRANSMISSION: CONFIRM RECEIPT OF FACSIMILE
(FOR ELIGIBLE INSTITUTIONS ONLY) BY TELEPHONE:
(201) 329-8936 (201) 296-4860
</TABLE>
Questions and requests for assistance or additional copies of this Offer to
Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and the
Guidelines for Certification of Taxpayer Identification on Substitute Form W-9
may be directed to the Information Agent at the locations and telephone
numbers set forth below. Shareholders may also contact BT Alex. Brown, Dealer
Manager for the Offer, or their broker, dealer, commercial bank or trust
company for assistance concerning the Offer.
The Information Agent for the Offer is:
[LOGO OF MACKENZIE PARTNERS]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
Call Toll-Free (800) 322-2885
The Dealer Manager for the Offer is:
BT ALEX. BROWN INCORPORATED
101 California Street, 48th Floor
San Francisco, California 94111
(415) 544-2800 (Call Collect)
or
Call Toll-Free (800) 334-2640
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
STATE OF THE ART, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED FEBRUARY 2, 1998
BY
ROSE ACQUISITION CORP.
A DIRECT AND INDIRECT
WHOLLY OWNED SUBSIDIARY OF
THE SAGE GROUP PLC
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, MARCH 2, 1998 (THE "INITIAL EXPIRATION DATE"),UNLESS THE
OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
The Depositary for the Offer is:
ChaseMellon Shareholder Services, L.L.C.
By Mail: By Hand: By Overnight Delivery:
ChaseMellon Shareholder
Services, L.L.C.
ChaseMellon Shareholder Services, L.L.C.
ChaseMellon Shareholder
120 Broadway, 13th Floor Services, L.L.C.
Post Office Box 3301 New York, NY 10271 85 Challenger Road--Mail
South Hackensack, NJ Drop-Reorg.
07606 Attn: Reorganization Department
Ridgefield Park, NJ 07660
Attn: Reorganization Attn: Reorganization
Department Department
By Facsimile Transmission: Confirm Receipt of Facsimile
(For Eligible Institutions Only) by Telephone:
(201) 329-8936 (201) 296-4860
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN
THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE
PROVIDED THEREFORE AND COMPLETE THE SUBSTITUTE
FORM W-9 PROVIDED BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL
SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL
IS COMPLETED.
DESCRIPTION OF COMMON STOCK SHARES TENDERED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY
AS NAME(S) APPEAR(S) ON SHARE CERTIFICATE(S) AND SHARES TENDERED
SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
- -----------------------------------------------------------------------------------------------------------
TOTAL NUMBER OF
SHARE CERTIFICATE SHARES EVIDENCED BY NUMBER OF SHARES
NUMBER(S)* SHARE CERTIFICATE(S)* TENDERED**
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
TOTAL SHARES:
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by stockholders delivering Shares by Book-
Entry Transfer.
** Unless otherwise indicated, it will be assumed that all Shares
evidenced by each Share Certificate delivered to the Depositary are
being tendered hereby. See Instruction 4.
<PAGE>
This Letter of Transmittal is to be used either if certificates are to be
forwarded herewith or if delivery of Shares (as defined below) is to be made
by book-entry transfer to an account maintained by the Depositary at The
Depository Trust Company ("DTC") or the Philadelphia Depository Trust Company
("PDTC," and together with DTC each a "Book-Entry Transfer Facility" and
collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures
set forth in Section 3 of the Offer to Purchase (as defined below). Delivery
of documents to a Book-Entry Transfer Facility does not constitute delivery to
the Depository. Stockholders who deliver Shares by book-entry transfer are
referred to herein as "Book-Entry Stockholders" and other stockholders are
referred to herein as "Certificate Stockholders."
Stockholders whose certificates evidencing Shares ("Share Certificates") are
not immediately available or who cannot deliver their Share Certificates and
all other documents required hereby to the Depositary or complete the
procedures for book-entry transfer prior to the Expiration Date (as defined in
Section 1 of the Offer to Purchase) must tender their Shares according to the
guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase.
See Instruction 2.
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY AT ONE OF THE BOOK-ENTRY
TRANSFER FACILITIES, AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A
BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution: _____________________________________________
Check Box of Applicable Book-Entry Transfer Facility
(check one) [_] DTC [_] PDTC
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s): ___________________________________________
Window Ticket No. (if any): ________________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Institution which Guaranteed Delivery: _____________________________
If Delivered by Book-Entry Transfer, Check Box of Applicable Book-Entry
Transfer Facility:
[_] DTC
[_] PDTC
Account Number (if delivered by Book-Entry Transfer): ______________________
Transaction Code Number: ___________________________________________________
[_]CHECK HERE IF YOU CANNOT LOCATE YOUR CERTIFICATE(S) AND REQUIRE ASSISTANCE
IN REPLACING THEM. UPON RECEIPT OF NOTIFICATION BY THIS LETTER OF
TRANSMITTAL, THE COMPANY'S STOCK TRANSFER AGENT WILL CONTACT YOU DIRECTLY
WITH REPLACEMENT INSTRUCTIONS.
BOXES ABOVE FOR USE BY ELIGIBLE INSTITUTIONS ONLY
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to Rose Acquisition Corp., a Delaware
corporation (the "Offeror") and a direct and indirect wholly owned subsidiary
of The Sage Group plc, a company incorporated under the laws of England
("Parent"), the above-described shares of Common Stock, no par value (the
"Shares"), pursuant to the Offeror's offer to purchase all outstanding Shares
at a price of $22.00 per Share, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase dated February 2,
1998 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and
in this Letter of Transmittal (which, together with the Offer to Purchase and
any amendments or supplements hereto or thereto, constitute the "Offer"). The
undersigned understands that the Offeror reserves the right to transfer or
assign, in whole or in part from time to time, to any affiliate of Parent the
right to purchase Shares tendered pursuant to the Offer.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), effective upon acceptance for payment of and payment for the
Shares tendered herewith, the undersigned hereby sells, assigns and transfers
to, or upon the order of the Offeror, all right, title and interest in and to
all the Shares that are being tendered hereby (and any and all other Shares or
other securities issued or issuable in respect thereof (collectively,
"Distributions")) and irrevocably constitutes and appoints the Depositary the
true and lawful agent and attorney-in-fact of the undersigned with respect to
such Shares and all Distributions, with full power of substitution (such power
of attorney being deemed to be an irrevocable power coupled with an interest),
to (a) deliver certificates for such Shares and all Distributions, or transfer
ownership of such Shares and all Distributions on the account books maintained
by a Book-Entry Transfer Facility, together, in any such case, with all
accompanying evidences of transfer and authenticity, to or upon the order of
the Offeror, upon receipt by the Depositary, as the undersigned's agent, of
the purchase price (adjusted, if appropriate, as provided in the Offer to
Purchase), (b) present such Shares and all Distributions for cancellation and
transfer on the Company's books and (c) receive all benefits and otherwise
exercise all rights of beneficial ownership of such Shares and all
Distributions, all in accordance with the terms of the Offer.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the tendered Shares
and all Distributions and that, when the same are accepted for payment by the
Offeror, the Offeror will acquire good, marketable and unencumbered title
thereto, free and clear of all liens, restrictions, claims, charges and
encumbrances, and the same will not be subject to any adverse claims. The
undersigned will, upon request, execute any signature guarantees or additional
documents deemed by the Depositary or the Offeror to be necessary or desirable
to complete the sale, assignment and transfer of the tendered Shares and all
Distributions. In addition, the undersigned shall promptly remit and transfer
to the Depositary for the account of the Offeror any such Distributions issued
to the undersigned, in respect of the tendered Shares, accompanied by
documentation of transfer, and pending such remittance or appropriate
assurance thereof, the Offeror shall be entitled to all rights and privileges
as owner of any such Distributions and, subject to the terms of the Merger
Agreement, may withhold the entire purchase price or deduct from the purchase
price the amount or value thereof, as determined by the Offeror, in its sole
discretion.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned hereby irrevocably appoints Michael Jackson or Paul Walker
and each of them, and any other designees of the Offeror, the attorneys and
proxies of the undersigned, each with full power of substitution, to vote at
any annual, special or adjourned meeting of the Company's stockholders or
otherwise act (including pursuant to written consent) in such manner as each
such attorney and proxy or his or her substitute shall in his or her sole
discretion deem proper, to execute any written consent concerning any matter
as each such attorney and proxy or his or her substitute shall in his or her
sole discretion deem proper with respect to, and to otherwise act with respect
to, all the Shares tendered hereby which have been accepted for payment by the
Offeror prior to the time any such vote or action is taken (and any and all
Distributions issued or issuable in respect thereof) and with respect to which
the undersigned is entitled to vote. This appointment is effective when, and
only to the extent that, the Offeror accepts for payment such Shares as
provided in the Offer to Purchase.
<PAGE>
This power of attorney and proxy is coupled with an interest in the tendered
Shares, is irrevocable and is granted in consideration of the acceptance for
payment of such Shares in accordance with the terms of the Offer. Such
acceptance for payment shall revoke all prior powers of attorney and proxies
given by the undersigned at any time with respect to such Shares and no
subsequent powers of attorney or proxies may be given by the undersigned (and,
if given, will not be deemed effective). The Offeror reserves the right to
require that, in order for Shares to be deemed validly tendered, immediately
upon the Offeror's acceptance for payment of such Shares, the Offeror must be
able to exercise full voting and other rights with respect to such Shares,
including voting at any stockholders meeting then scheduled.
The undersigned understands that the valid tender of Shares pursuant to any
one of the procedures described in Section 3 of the Offer to Purchase to
Offeror and in the instructions hereto will constitute a binding agreement
between the undersigned and the Offeror upon the terms and subject to the
conditions of the Offer. The undersigned recognizes that under certain
circumstances set forth in the Offer to Purchase, the Offeror may not be
required to accept for payment any of the tendered Shares. The Offeror's
acceptance for payment of Shares pursuant to the Offer will constitute a
binding agreement between the undersigned and the Offeror upon the terms and
subject to the conditions of the Offer.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price of any Shares purchased, and/or
return any certificates for Shares not tendered or accepted for payment, in
the name(s) of the registered holder(s) appearing under "Description of Shares
Tendered." Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the purchase price of any Shares
purchased, and/or any certificates for Shares not tendered or accepted for
payment (and accompanying documents, as appropriate) to the address(es) of the
registered holder(s) appearing under "Description of Shares Tendered." In the
event that both the Special Delivery Instructions and the Special Payment
Instructions are completed, please issue the check for the purchase price of
any Shares purchased, and/or return any certificates for Shares not tendered
or accepted for payment in the name(s) of, and mail said check and/or any
certificates to, the person or persons so indicated. In the case of a book-
entry delivery of Shares, please credit the account maintained at a Book-Entry
Transfer Facility indicated above with any Shares not accepted for payment.
The undersigned recognizes that the Offeror has no obligation pursuant to the
Special Payment Instructions to transfer any Shares from the name of the
registered holder(s) thereof if the Offeror does not accept for payment any of
the Shares so tendered.
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check To be completed ONLY if the check
for the purchase price of Shares or for the purchase of Shares
Share Certificates evidencing purchased or Share Certificates
Shares not tendered or not evidencing Shares not tendered or
purchased are to be issued in the not purchased are to be mailed to
name of someone other than the someone other than the undersigned,
undersigned. or to the undersigned at an address
other than that shown under
"Description of Shares Tendered."
Issue check and/or certificate(s)
to:
Mail check and/or certificate(s) to:
Name:
-------------------------------
(PLEASE PRINT) Name:
--------------------------------
Address: (PLEASE PRINT)
----------------------------
Address:
------------------------------------ -----------------------------
(INCLUDE ZIP CODE)
------------------------------------
(INCLUDE ZIP CODE)
------------------------------------
Taxpayer Identification or Social
Security Number ------------------------------------
(See Substitute Form W-9 on reverse
side)
<PAGE>
IMPORTANT
STOCKHOLDER(S): SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
----------------------------------------
----------------------------------------
SIGNATURE(S) OF HOLDER(S)
Dated: ________________________________________________________________ , 199
(Must be signed by registered holder(s) exactly as name(s) appear(s) on Share
Certificates or on a security position listing or by a person(s) authorized
to become registered holder(s) by certificates and documents transmitted
herewith. If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, please provide the following
information. See Instruction 5.)
Name(s):
----------------------------------------------------------------------
------------------------------------------------------------------------------
PLEASE PRINT
Capacity:
---------------------------------------------------------------------
PLEASE PROVIDE FULL TITLE
Address:
----------------------------------------------------------------------
INCLUDE ZIP CODE
Telephone No.:
----------------------------------------------------------------
INCLUDE AREA CODE
Taxpayer Identification or
Social Security Number:
-------------------------------------------------------
SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 5)
SPACE BELOW IS FOR USE BY FINANCIAL INSTITUTIONS ONLY. FINANCIAL
INSTITUTIONS: PLACE MEDALLION GUARANTEE IN SPACE PROVIDED BELOW.
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a financial
institution (including most commercial banks, savings and loan associations
and brokerage houses) that is a participant in the Security Transfer Agent's
Medallion Program, the New York Stock Exchange Medallion Signature Guarantee
Program or the Stock Exchange Medallion Program (each an "Eligible
Institution," and collectively, "Eligible Institutions"). No signature
guarantee is required on this Letter of Transmittal (i) if this Letter of
Transmittal is signed by the registered holder(s) (which term, for purposes of
this document, shall include any participant in a Book-Entry Transfer Facility
whose name appears on a security position listing as the owner of Shares) of
Shares tendered herewith, unless such holder(s) has completed either the box
entitled "Special Delivery Instructions" or the box entitled "Special Payment
Instructions" in this Letter of Transmittal or (ii) if such Shares are
tendered for the account of an Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed by stockholders
either if Share Certificates are to be forwarded herewith or if a tender of
Shares is to be made pursuant to the procedures for delivery by book-entry
transfer set forth in Section 3 of the Offer to Purchase. For Shares to be
validly tendered pursuant to the Offer, either (i) a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), together with any
required signature guarantees, or in the case of a book-entry transfer, an
Agent's Message (as defined in the Offer to Purchase), and any other required
documents, must be received by the Depositary at one of the Depositary's
addresses set forth herein prior to the Expiration Date (as defined in the
Offer to Purchase) and either certificates for tendered Shares must be
received by the Depositary at one of such addresses or such Shares must be
delivered pursuant to the procedures for book-entry transfer (and a Book Entry
Confirmation received by the Depositary), in each case, prior to the
Expiration Date, or (ii) the tendering stockholder must comply with the
guaranteed delivery procedure set forth below.
Stockholders whose Share Certificates are not immediately available or who
cannot complete the procedures for book-entry transfer on a timely basis or
time will not permit all required documents to reach the Depositary prior to
the Expiration Date, may tender their Shares pursuant to the guaranteed
delivery procedure set forth in Section 3 of the Offer to Purchase. Pursuant
to such procedures, (i) such tender must be made by or through an Eligible
Institution, (ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Offeror (or facsimile
thereof), must be received by the Depositary prior to the Expiration Date and
(iii) the certificates for (or a Book-Entry Confirmation with respect to) such
Shares, together with this properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message, and any other
required documents are received by the Depositary within three trading days
after the date of execution of such Notice of Guaranteed Delivery, all as
provided in Section 3 of the Offer to Purchase. A "trading day" is any day on
which the National Association of Securities Dealers Automated Quotation
System, Inc. is open for business. The Notice of Guaranteed Delivery may be
delivered by hand to the Depositary or transmitted by telegram, facsimile
transmission or mail to the Depositary and must include a guarantee by an
Eligible Institution in the form set forth in such Notice of Guaranteed
Delivery.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THIS LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY TRANSFER
FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARE
CERTIFICATES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY
CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution
of this Letter of Transmittal (or facsimile thereof), waive any right to
receive any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein under "Description of
Shares Tendered" is inadequate, the Share Certificate numbers and/or the
number of Shares evidenced by such Share Certificates and the number of Shares
tendered should be listed on a separate schedule attached hereto.
6
<PAGE>
4. PARTIAL TENDERS. If fewer than all the Shares evidenced by any Share
Certificate delivered to the Depositary herewith are to be tendered, fill in
the number of Shares which are to be tendered in the box entitled "Number of
Shares Tendered." In such case, new Share Certificate(s) for the remainder of
the Shares that were evidenced by the Share Certificate(s) delivered to the
Depositary herewith will be sent to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the box entitled "Special Delivery
Instructions" on the reverse hereof, as soon as practicable after the
expiration or termination of the Offer. All Shares represented by Share
Certificates delivered to the Depositary will be deemed to have been tendered
unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written
on the face of the Share Certificate(s) evidencing such shares without any
change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
several certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal as there are different registrations of
such Shares.
If this Letter of Transmittal or any certificates or stock powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and proper evidence satisfactory
to the Offeror of their authority so to act must be submitted.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and tendered hereby, no endorsements of Share Certificates or
separate stock powers are required unless payment or Share Certificates
evidencing Shares not tendered or not accepted for payment are to be issued in
the name of a person other than the registered holder(s), in which case the
Share Certificate(s) evidencing the Shares tendered hereby must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) or such Share Certificate(s).
Signatures on such Share Certificate(s) or stock powers must be guaranteed by
an Eligible Institution. See Instruction 1.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the shares tendered hereby, the certificates
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case, signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificates. Signatures on such
Share Certificate(s) or stock powers must be guaranteed by an Eligible
Institution. See Instruction 1.
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, the
Offeror will pay, or cause to be paid, any stock transfer taxes with respect
to the transfer and sale of Shares to it or its assignee pursuant to the
Offer. If, however, payment of the purchase price of any Shares is to be made
to, or if Share Certificates evidencing Shares not tendered or accepted for
payment are to be issued in the name of, a person other than the registered
holder(s), or if tendered Shares Certificates are registered in the name of a
person other than the person(s) signing this Letter of Transmittal, the amount
of any stock transfer taxes (whether imposed on the registered holder(s) or
such person or otherwise payable on the account of the transfer to such other
person will be deducted from the purchase price of such Shares purchased,
unless evidence satisfactory to the Offeror of the payment of such taxes, or
exemption therefrom, is submitted. Except as provided in this Instruction 6,
it will not be necessary for transfer tax stamps to be affixed to the Share
Certificates evidencing the Shares tendered hereby.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in
the name of and/or Shares Certificates not accepted for payment are to be
returned to a person other than the signer of this Letter of Transmittal or if
a check is to be sent and/or such Share Certificates are to be returned to a
person other than the signer of this Letter of Transmittal or to an address
other than that shown in the box entitled "Description of Shares Tendered" on
the reverse hereof, the appropriate boxes on the reverse side of this Letter
of Transmittal should be completed. Any stockholder tendering Shares by book-
entry transfer will have any Shares not accepted for payment returned by
crediting the account maintained by such stockholder at a Book-Entry Transfer
Facility from which such transfer was made.
7
<PAGE>
8. WAIVER OF CONDITIONS. Except as otherwise provided in the Offer to
Purchase, the Offeror reserves the absolute right, in its sole discretion, to
waive any of the conditions of the Offer or any defect or irregularity in the
tender of any Shares of any particular stockholder, whether or not similar
defects or irregularities are waived in the case of other stockholders.
9. SUBSTITUTE FORM W-9. The tendering stockholder (or other payee) is
required, unless an exemption applies, to provide the Depositary with a
correct Taxpayer Identification Number ("TIN"), generally the stockholder's
social security or federal employer identification number, and with certain
other information, on Substitute Form W-9, which is provided under "Important
Tax Information" below, and to certify under penalties of perjury, that such
number is correct and that the stockholder (or other payee) is not subject to
backup withholding. If a tendering stockholder is subject to backup
withholding, he or she must cross out item (2) of the Certification Box on
Substitute Form W-9 before signing such Form. Failure to furnish the correct
TIN on the Substitute Form W-9 may subject the tendering stockholder (or other
payee) to a $50 penalty imposed by the Internal Revenue Service and payments
of cash to the tendering stockholder (or other payee) pursuant to the Offer
may be subject to backup withholding of 31%. If the tendering stockholder has
not been issued a TIN and has applied for a number or intends to apply for a
number in the near future, he or she should write "Applied For" in the space
provided for the TIN in Part I, sign and date the Substitute Form W-9 and sign
and date the Certificate of Awaiting Taxpayer Identification Number. If
"Applied For" is written in Part I and the Depositary is not provided with a
TIN by the time of payment, the Depositary will withhold 31% of all such
payments for surrendered Shares thereafter until a TIN is provided to the
Depositary.
10. LOST OR DESTROYED CERTIFICATES. If any Share Certificate(s) has (have)
been lost or destroyed, the stockholder should check the appropriate box on
the reverse side of the Letter of Transmittal. The Company's stock transfer
agent will then instruct such stockholder as to the procedure to be followed
in order to replace the Share Certificate(s). The stockholder will have to
post a surety bond of approximately 2% of the current market value of the
stock. This Letter of Transmittal and related documents cannot be processed
until procedures for replacing lost or destroyed Share Certificates have been
followed.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance or additional copies of the Offer to Purchase, the Letter of
Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
directed to the Information Agent at the locations and telephone numbers set
forth below.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY THEREOF),
TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES, OR IN THE CASE OF A BOOK-
ENTRY TRANSFER, AN AGENT'S MESSAGE, AND SHARE CERTIFICATES, OR A BOOK-ENTRY
CONFIRMATION, FOR SHARES AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY
THE DEPOSITARY, OR THE NOTICE OF GUARANTEED DELIVERY (OR A FACSIMILE COPY
THEREOF) MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE EXPIRATION
DATE.
IMPORTANT TAX INFORMATION
Under federal income tax law, a stockholder surrendering Shares must, unless
an exemption applies, provide the Depositary (as payor) with his correct TIN
on Substitute Form W-9 included in this Letter of Transmittal. If the
stockholder is an individual, his TIN is such stockholder's social security
number. If the correct TIN is not provided, the stockholder may be subject to
a $50 penalty imposed by the Internal Revenue Service and payments of cash to
the tendering stockholder (or other payee) pursuant to the Offer may be
subject to backup withholding of 31% of all payments of the purchase price.
Certain stockholders (including, among others, all corporations and certain
foreign individuals and entities) are not subject to backup withholding. In
order for an exempt foreign stockholder to avoid backup withholding, such
person should complete, sign and submit a Form W-8, Certificate of Foreign
Status, signed under penalties of perjury, attesting to his exempt status. A
Form W-8 can be obtained from the Depositary. Exempt stockholders, other than
foreign stockholders, should furnish their TIN, write "Exempt" on the face of
the Substitute Form W-9 and sign, date and return the Substitute Form W-9 to
the Depositary. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional instructions.
8
<PAGE>
If backup withholding applies, the Depositary is required to withhold 31% of
any payment made to payee. Backup withholding is not an additional tax.
Rather, the federal income tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If backup
withholding results in an overpayment of taxes, a refund may be obtained from
the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of his correct TIN (or the TIN of any other
payee) by completing the Substitute Form W-9 included in this Letter of
Transmittal certifying (1) that the TIN provided on the Substitute Form W-9 is
correct (or that such stockholder is awaiting a TIN), and that (2) the
stockholder is not subject to backup withholding because (i) the stockholder
has not been notified by the Internal Revenue Service that the stockholder is
subject to backup withholding as a result of a failure to report all interest
and dividends or (ii) the Internal Revenue Service has notified the
stockholder that the stockholder is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the TIN, generally the
social security number or employer identification number, of the record holder
of the Shares tendered hereby. If the Shares are in more than one name or are
not in the name of the actual owner, consult the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional guidance on which number to report. If the tendering stockholder
has not been issued a TIN and has applied for a number or intends to apply for
a number in the near future, he or she should write "Applied For" in the space
provided for the TIN in Part I, sign and date the Substitute Form W-9 and sign
and date the Certificate of Awaiting Taxpayer Identification Number, which
appears in a separate box below the Substitute Form W-9. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN by the time of
payment, the Depositary will withhold 31% of all payments of the purchase
price until a TIN is provided to the Depositary.
9
<PAGE>
PAYOR'S NAME: CHASEMELLON SHAREHOLDER SERVICES, AS DEPOSITARY
- -------------------------------------------------------------------------------
PART I--Taxpayer
SUBSTITUTE Identification Number--For ------------------------
all accounts, enter your Social Security Number
TIN in the box at right.
FORM W-9 (For most individuals, this OR _____________________
DEPARTMENT OF THE is your social security Employer Identification
TREASURY number. If you do not have Number
INTERNAL REVENUE a TIN, see Obtaining a
SERVICE Number in the enclosed (If awaiting TIN write
Guidelines.) Certify by "Applied For")
signing and dating below.
Note: If the account is in
more than one name, see the
chart in the enclosed
Guidelines to determine
which number to give the
payer.
PAYER'S REQUEST FOR ---------------------------------------------------------
TAXPAYER PART II--For Payees Exempt from backup Withholding,
IDENTIFICATION NUMBER see the enclosed Guidelines and complete as instructed
(TIN) therein.
-------------------------------------------------------------------------------
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because (a) I am exempt
from backup withholding, (b) I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to backup withholding as a
result of failure to report all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are not longer subject to
backup withholding, do not cross out item (2). (Also see instructions in the
enclosed Guidelines.)
- -------------------------------------------------------------------------------
SIGNATURE _____________________________________________ DATE ___________, 199__
- -------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY
IMPOSED BY THE INTERNAL REVENUE SERVICE AND IN BACKUP WITHHOLDING OF 31%
OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
WROTE "APPLIED FOR" IN PART I OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I CERTIFY UNDER THE PENALTIES OF PERJURY THAT A TAXPAYER IDENTIFICATION
NUMBER HAS NOT BEEN ISSUED TO ME, AND EITHER (A) I HAVE MAILED OR DELIVERED AN
APPLICATION TO RECEIVE A TAXPAYER IDENTIFICATION NUMBER TO THE APPROPRIATE
INTERNAL REVENUE SERVICE CENTER OR SOCIAL SECURITY ADMINISTRATION OFFICE, OR
(B) I INTEND TO MAIL OR DELIVER AN APPLICATION IN THE NEAR FUTURE. I
UNDERSTAND THAT IF I DO NOT PROVIDE A TAXPAYER IDENTIFICATION NUMBER BY THE
TIME OF PAYMENT, 31% OF ALL REPORTABLE PAYMENTS MADE TO ME THEREAFTER WILL BE
WITHHELD UNTIL I PROVIDE A NUMBER.
__________________________________ DATE ____________________________________
10
<PAGE>
Questions and requests for assistance or additional copies of the Offer to
Purchase, Letter of Transmittal and other tender offer materials may be
directed to the Dealer Manager and the Information Agent at the locations and
telephone numbers set forth below:
The Information Agent for the Offer is:
[LOGO OF MACKENZIE PARTNERS, INC. APPEARS HERE]
156 Fifth Avenue
New York, New York 10010
Banks and Brokers Call Collect (212) 929-5500
All others Call Toll-Free: (800) 322-2885
The Dealer Manager for the Offer is:
BT ALEX. BROWN INCORPORATED
101 California Street, 48th Floor
San Francisco, California 94111
(415) 544-2800 (Call Collect)
or
Call Toll-Free (800) 334-2640
<PAGE>
Exhibit (A)(3)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
STATE OF THE ART, INC.
AT
$22.00 NET PER SHARE
BY
ROSE ACQUISITION CORP.
A DIRECT AND INDIRECT
WHOLLY OWNED SUBSIDIARY OF
THE SAGE GROUP PLC
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, MARCH 2, 1998 (THE "INITIAL EXPIRATION DATE"), UNLESS THE
OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
February 2, 1998
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Rose Acquisition Corp., a Delaware corporation
(the "Offeror") and a direct and indirect wholly owned subsidiary of The Sage
Group plc, a company organized under the laws of England ("Parent"), to act as
Dealer Manager in connection with the Offeror's offer to purchase all
outstanding shares (the "Shares") of common stock, no par value (the "Common
Stock") of State Of The Art, Inc., a California corporation (the "Company"),
at a price of $22.00 per Share, net to the seller in cash, without interest,
upon the terms and subject to the conditions set forth in the Offeror's Offer
to Purchase, dated February 2, 1998 (the "Offer to Purchase"), and the related
Letter of Transmittal (which, as amended or supplemented from time to time,
together constitute the "Offer") enclosed herewith. The Offer is being made in
connection with the Agreement and Plan of Merger, dated as of January 27,
1998, by and among Parent, the Offeror and the Company. Please furnish copies
of the enclosed materials to those of your clients for whose accounts you hold
Shares registered in your name or in the name of your nominee.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee we are enclosing
copies of the following documents:
1. Offer to Purchase;
2. Letter of Transmittal to tender Shares for your use and for the
information of your clients;
3. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares are not immediately available or time will not
permit all required documents to reach the Depositary by the Expiration
Date (as defined in the Offer to Purchase) or if the procedure for book-
entry transfer cannot be completed on a timely basis.
4. A letter to stockholders of the Company from David W. Hanna, President
and Chief Executive Officer of the Company, together with a
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission by the Company;
5. A letter which may be sent to your clients for whose accounts you hold
Shares registered in your name or in the name of your nominee, with space
provided for obtaining such clients' instructions with regard to the Offer;
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and
7. Return envelope addressed to ChaseMellon Shareholder Services, L.L.C.
(the "Depositary").
<PAGE>
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, MARCH 2, 1998, UNLESS THE OFFER IS EXTENDED.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
the certificates evidencing such Shares or timely confirmation of a book-entry
transfer of such Shares into the Depositary's account at one of the Book-Entry
Transfer Facilities (as defined in the Offer to Purchase), (ii) a Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or an Agent's Message (as defined in the
Offer to Purchase) in connection with a book-entry delivery, and (iii) and any
other documents required by the Letter of Transmittal.
If holders of Shares wish to tender Shares, but cannot deliver such holders'
certificates or other required documents, or cannot comply with the procedure
for book-entry transfer, prior to the expiration of the Offer, a tender may be
effected by following the guaranteed delivery procedure described in Section 3
of the Offer to Purchase.
Neither the Offeror or the Parent will pay any fees or commissions to any
broker, dealer or other person (other than BT Alex. Brown Incorporated (the
"Dealer Manager") and MacKenzie Partners, Inc. (the "Information Agent") for
soliciting tenders of Shares pursuant to the Offer. However, upon request, the
Offeror will reimburse you for customary mailing and handling expenses
incurred by you in forwarding any of the enclosed materials to your clients.
The Offeror will pay or cause to be paid any stock transfer taxes payable with
respect to the transfer of Shares to it, except as otherwise provided in the
Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
the Information Agent or to the Dealer Manager, at the respective addresses
and telephone numbers set forth on the back cover page of the Offer to
Purchase.
Additional copies of the enclosed material may be obtained from the
Information Agent at the address and telephone number set forth on the back
cover page of the Offer to Purchase.
Very truly yours,
BT ALEX. BROWN INCORPORATED
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL AUTHORIZE YOU OR
ANY OTHER PERSON TO ACT ON BEHALF OF OR AS THE AGENT OF THE PARENT, THE
PURCHASER, THE COMPANY, THE DEALER MANAGER, THE INFORMATION AGENT OR THE
DEPOSITARY, OR OF ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER
PERSON TO USE ANY DOCUMENT OR TO MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM
IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE
STATEMENTS CONTAINED THEREIN.
<PAGE>
Exhibit (A)(4)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
STATE OF THE ART, INC.
AT
$22.00 NET PER SHARE
BY
ROSE ACQUISITION CORP.
A DIRECT AND INDIRECT
WHOLLY OWNED SUBSIDIARY OF
THE SAGE GROUP PLC
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, MARCH 2, 1998 (THE "INITIAL EXPIRATION DATE"), UNLESS THE OFFER
IS EXTENDED.
- --------------------------------------------------------------------------------
February 2, 1998
To Our Clients:
Enclosed for your consideration are an Offer to Purchase, dated February 2,
1998 (the "Offer to Purchase"), and a related Letter of Transmittal (which, as
amended or supplemented from time to time, together constitute the "Offer")
relating to the offer by Rose Acquisition Corp., a Delaware corporation (the
"Offeror") and a wholly owned subsidiary of The Sage Group plc, a company
organized under the laws of England ("Parent"), to purchase all outstanding
shares (the "Shares") of common stock, no par value (the "Common Stock"), of
State Of The Art, Inc., a California corporation (the "Company"), at a price
of $22.00 per Share, net to the seller in cash, without interest, upon the
terms and subject to the conditions set forth in the Offer. The Offer is being
made in connection with the Agreement and Plan of Merger, dated as of January
27, 1998, by and among Parent, the Offeror and the Company (the "Merger
Agreement"). Also enclosed is the Letter to Stockholders of the Company from
David W. Hanna, President and Chief Executive Officer of the Company, together
with a Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission by the Company.
WE ARE (OR OUR NOMINEE IS) THE HOLDER OF RECORD OF SHARES HELD BY US FOR
YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF
RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS
FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER
SHARES HELD BY US FOR YOUR ACCOUNT.
<PAGE>
Accordingly, we request instructions as to whether you wish to have us
tender on your behalf any or all of the Shares held by us (or our nominee) for
your account, upon the terms and subject to the condition set forth in the
Offer.
Your attention is invited to the following:
1. The tender price is $22.00 per Common Stock, net to the seller in
cash, without interest.
2. The Offer is being made for all outstanding Shares although under
certain circumstances described in the Offer to Purchase, the Offer may be
amended such that the Offer will be for 49.9999% of the outstanding Shares.
3. The Board of Directors of the Company has unanimously determined that
each of the Merger Agreement, the Offer and the Merger is fair to and in
the best interests of the shareholders of the Company and recommends that
the shareholders of the Company accept the Offer and tender their Shares to
the Purchaser pursuant to the Offer.
4. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Monday, March 2, 1998, unless the Offer is extended.
5. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in the Letter of Transmittal,
stock transfer taxes with respect to the purchase of Shares by the Offeror
pursuant to the Offer. However, U.S. federal income tax backup withholding
at a rate of 31% may be required, unless an exemption is provided or unless
the required taxpayer identification information is provided. See
Instruction 9 of the Letter of Transmittal.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing, detaching and returning to us the instruction
form contained in this letter. An envelope in which to return your
instructions to us is enclosed. If you authorize the tender of your Shares,
all such Shares will be tendered unless otherwise specified in your
instructions. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO
PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE
OFFER.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and any supplements or amendments thereto, and is being made to
all holders of Shares. The Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Shares in any jurisdiction in which
the making of the Offer or the acceptance thereof would not be in compliance
with the laws of such jurisdiction. In any jurisdiction where the securities,
blue sky or other laws require the Offer to be made by a licensed broker or
dealer, the Offer shall be deemed to be made on behalf of the Offeror by BT
Alex. Brown Incorporated or one or more registered brokers or dealers licensed
under the laws of such jurisdiction.
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
STATE OF THE ART, INC.
BY
ROSE ACQUISITION CORP.
A DIRECT AND INDIRECT
WHOLLY OWNED SUBSIDIARY OF
THE SAGE GROUP PLC
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase, dated February 2, 1998, and the related Letter of Transmittal
(which, as amended or supplemented from time to time, together constitute the
"Offer") in connection with the offer by Rose Acquisition Corp., a Delaware
corporation and a direct and indirect wholly owned subsidiary of The Sage
Group plc, a company organized under the laws of England, to purchase all
outstanding shares (the "Shares") of common stock, no par value (the "Common
Stock"), of the Company.
<PAGE>
This will instruct you to tender the number of Shares indicated below (or,
if no number is indicated below, all Shares) that are held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer.
Dated: , 1998 SIGN HERE
---------------------------------------
---------------------------------------
Signature(s) of Holder(s)
Name(s) of Holder(s)
- -----------------------------------
Number of Shares to be Tendered: ---------------------------------------
________ shares of Common Stock* ---------------------------------------
- ----------------------------------- Please Type or Print
---------------------------------------
Address
---------------------------------------
Zip Code
---------------------------------------
Area Code and Telephone Number
---------------------------------------
Taxpayer Identification or Social
Security Number
- --------
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
<PAGE>
Exhibit (A)(5)
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are
in any doubt as to the action to be taken, you should seek your own financial
advice immediately from your own appropriately authorized independent
financial advisor.
If you have sold or transferred all of your registered holdings of Common
Stock of State Of The Art, Inc., please forward this document and all
accompanying documents to the stockbroker, bank or other agent through whom
the sale or transfer was effected, for submission to the purchaser or
transferee.
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
STATE OF THE ART, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED FEBRUARY 2, 1998
TO
ROSE ACQUISITION CORP.
A DIRECT AND INDIRECT
WHOLLY OWNED SUBSIDIARY OF
THE SAGE GROUP PLC
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially in the form hereof,
must be used to accept the Offer (as defined below) if certificates evidencing
shares (the "Shares") of common stock, no par value (the "Common Stock") of
State Of The Art, Inc., a California corporation (the "Company"), are not
immediately available or time will not permit all required documents to reach
ChaseMellon Shareholder Services, L.L.C., as Depositary (the "Depositary"),
prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase
(as defined below)) or the procedure for delivery by book-entry transfer
cannot be completed on a timely basis. This Notice of Guaranteed Delivery may
be delivered by hand or transmitted by telegram, facsimile transmission or
mail to the Depositary. See Section 3 of the Offer to Purchase.
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
<S> <C> <C>
By Mail: By Hand: By Overnight Delivery:
ChaseMellon Shareholder ChaseMellon Shareholder ChaseMellon Shareholder
Services, L.L.C. Post Services, L.L.C. 120 Services, L.L.C.
Office Box 3301 South Broadway, 13th Floor New 85 Challenger Road - Mail Drop - Reorg.
Hackensack, NJ 07606 York, NY 10271 Ridgefield Park, NJ 07660
Attn: Reorganization Attn: Reorganization Attn: Reorganization Department
Department Department
By Facsimile Transmission: Confirm Receipt of Facsimile
(For Eligible Institutions Only) by Telephone:
(201) 329-8936 (201) 296-4860
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, AND TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
Shares may not be tendered pursuant to the Guaranteed Delivery Procedures.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Rose Acquisition Corp., a Delaware
corporation and a direct and indirect wholly owned subsidiary of The Sage
Group plc, a company organized under the laws of England, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated February
2, 1998 (the "Offer to Purchase"), and the related Letter of Transmittal
(which, as amended or supplemented from time to time, together constitute the
"Offer"), receipt of each of which is hereby acknowledged, the number of
Shares specified below pursuant to the guaranteed delivery procedure described
in Section 3 of the Offer to Purchase.
PLEASE CHECK RELEVANT BOX BELOW
Series and Certificate Nos. of Shares (if available):
- --------------------------------------------------------------------------------
Common Stock, par value $.01 Name(s) of Record Holder(s)
_____________________________________
Certificate Nos._____________________
Number of Shares Tendered________ [_] _____________________________________
PLEASE TYPE OR PRINT
_____________________________________
Address(es):_________________________
_____________________________________
ZIP CODE
Area Code and Tel. No.: _____________
Signature(s): _______________________
Dated: ______________________________
- --------------------------------------------------------------------------------
Check one box if Shares
will be delivered by
book-entry transfer:
[_] The Depositary Trust Company
[_] Philadelphia Depositary Trust Company
Account No.: __________________________
<PAGE>
GUARANTEE
(NOT TO BE USED FOR THE SIGNATURE GUARANTEE)
The undersigned, an Eligible Institution (as defined in the Offer to
Purchase), hereby guarantees delivery to the Depositary, at one of its
addresses set forth above, certificates ("Share Certificates") evidencing the
Shares tendered hereby, in proper form for transfer, or confirmation of book-
entry transfer of such Shares into the Depositary's account at The Depositary
Trust Company or the Philadelphia Depositary Trust Company, in each case with
delivery of a Letter of Transmittal (or facsimile thereof) properly completed
and duly executed, or an Agent's Message (as defined in the Offer to Purchase)
in the case of a book-entry delivery, and any other required documents, all
within three days on which the National Association of Securities Dealers
Automated Quotation System, Inc. is open for business after the date hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
Share Certificates to the Depositary within the time period shown here herein.
Failure to do so could result in a financial loss to such Eligible
Institution.
_____________________________________ _____________________________________
NAME OF FIRM AUTHORIZED SIGNATURE
_____________________________________ TITLE: ______________________________
ADDRESS
_____________________________________ NAME: _______________________________
ZIP CODE PLEASE TYPE OR PRINT
_____________________________________ DATED: , 199
AREA CODE AND TELEPHONE NO.
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE
CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
Exhibit (A)(6)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens,
e.g., 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen, e.g., 00-0000000. The table below will help determine the
number to give the payer.
<TABLE>
<CAPTION>
- ----------------------------------------------- -----------------------------------------------
GIVE THE GIVE THE EMPLOYER
SOCIAL SECURITY IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF-- FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ----------------------------------------------- -----------------------------------------------
<S> <C> <C> <C>
1. An individual's account The individual 8. Sole proprietorship The owner(4)
account
2. Two or more individuals The actual owner
(joint account) of the account 9. A valid trust, estate, The legal entity
or, if combined or pension trust (do not furnish
funds, the first the identifying
individual on number of the
the account(1) personal
representative
3. Husband wife (joint The actual owner or trustee
account) of the account unless the legal
or, if joint entity itself is
funds, either not designated
person(1) in the account
title)(5)
4. Custodian account of a The minor(2)
minor (Uniform Gift to 10. Corporate account The corporation
Minors Act)
11. Religious, charitable, The organization
5. Adult and minor (joint The adult or, if or educational
account) the minor is the organization account
only
contributor, the 12. Partnership account The partnership
minor(1) held in the name of the
business
6. Account in the name of The ward, minor,
guardian or committee or incompetent 13. Association, club, or The organization
for a designated ward, person(3) other tax-exempt
minor, or incompetent organization
person
14. A broker or registered The broker or
7. a. A revocable savings The grantor- nominee nominee
trust account (in trustee(1)
which grantor is also 15. Account with the The public
trustee) Department of entity
b. Any "trust" account The actual Agriculture in the name
that is not a legal owner(1) of a public entity
or valid trust under (such as a State or
State law local government,
school district, or
prison) that receives
agricultural program
payments
-----------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner. If the owner does not have an employer
identification number, furnish the owner's social security number.
(5) List first and circle the name of the legal trust, estate or pension
trust.
NOTE: IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME, THE NUMBER WILL
BE CONSIDERED TO BE THAT OF THE FIRST NAME LISTED.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you do not know your
number, obtain form SS-5, Application for a Social Security Number Card (for
resident individuals), Form SS-4, Application for Employer Identification
Number (for businesses and all other entities), for Form W-7 for International
Taxpayer Identification Number (for alien individuals required to file U.S.
tax returns), at an office of the Social Security Administration or the
Internal Revenue Service.
To complete Substitute Form W-9, if you do not have a taxpayer identification
number, write "Applied For" in the space for the taxpayer identification
number in Part I, sign and date the Form, and give it to the requester.
Generally, you will then have 60 days to obtain a taxpayer identification
number and furnish it to the requester. If the requester does not receive your
taxpayer identification number within 60 days, backup withholding, if
applicable, will begin and will continue until you furnish your taxpayer
identification number to the requester.
PAYEES EXEMPT FROM BACKUP WITHHOLDING PENALTIES
Payees specifically exempted from backup withholding on ALL payments include
the following:*
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodial account under section 403(b)(7).
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any political subdivision or instrumentality thereof.
. A foreign government or a political subdivision, agency or instrumentality
thereof.
. An international organization or any agency or instrumentality thereof.
. A registered dealer in securities or commodities registered in the United
States or a possession of the United States.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times during the tax year under the Investment
Company Act of 1940.
. A foreign central bank of issue.
- --------
* Unless otherwise noted herein, all references below to section numbers or
to regulations are references to the Internal Revenue Code and the
regulation promulgated thereunder.
EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE A SUBSTITUTE FORM W-9 TO AVOID
POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM,
SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER.
Certain payments other than interest, dividends and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICES. Section 6109 requires most recipients of dividends,
interest or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes and to help verify the accuracy of your tax return.
Payers must be given the numbers whether or not recipients are required to
file tax returns. Payers must generally withhold 31% of taxable interest,
dividends, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. NOTE: You may
be subject to backup withholding if (i) this interest is $600 or more,
(ii) the interest is paid in the course of the payer's trade or business
and (iii) you have not provided your correct taxpayer identification
number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE STATEMENTS WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--If you falsify
certifications or affirmations, you are subject to criminal penalties
including fines and/or imprisonment.
(4) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends or
patronage dividends in gross income and such failure is due to negligence, a
penalty of 20% is imposed on any portion of any underpayment attributable to
the failure.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
2
<PAGE>
Exhibit (a)(7)
27th January 1998
The Sage Group plc
Recommended tender offer for State of the Art, Inc. ("SOTA")
. Recommended tender offer to acquire SOTA, listed on NASDAQ, for
approximately $263 million ((Pounds)159 million)
. The tender offer is $22.00 in cash per share, a 33 per cent. premium to the
current price
. The tender offer will be financed partly by a vendor placing of 7,826,694
new shares representing 7.2 per cent. of the current issued share capital
of Sage to raise at least (Pounds)70 million, with the balance being
financed by bank debt. SOTA had net cash holdings at 31st December 1997
of $45.0 million ((Pounds)27.2 million)
. SOTA is a leading player in the US market for PC accounting software
. SOTA distributes its products through an established value added reseller
network, a channel strategy which is very similar to that employed by Sage
in Europe
. The acquisition of SOTA will provide Sage with a strong platform from which
to grow its US business
Commenting on today's announcement, the Chairman, Michael Jackson, said
"The acquisition of SOTA represents an exciting opportunity for the
Sage Group. SOTA has excellent products, a powerful value added
reseller network and a substantial customer base. Sage's expertise in
brand management, product marketing and channel management together
with SOTA's leading position in the US PC accounting software market
provides us with a strong platform from which to grow our US business
substantially."
Press enquiries:
- ---------------
Sage 0171-831-3113 today
Paul Walker, Chief Executive 0191-255-3000 thereafter
Aidan Hughes, Finance Director
<PAGE>
Schroders 0171-658-6000
Mark Warham
William Barter
Financial Dynamics 0171-831-3113
Steve Jacobs
Giles Sanderson
Schroders, which is regulated by the Securities and Futures Authority Limited,
is acting for Sage in relation to the acquisition of SOTA and the vendor placing
and for no one else and will not be responsible to any other person for
providing the protections afforded to its customers or for advising any other
person in relation to the acquisition of SOTA and the vendor placing.
2
<PAGE>
Introduction
Sage is today announcing a recommended offer to be made by its US subsidiary
(Rose Acquisition Corp.) for the entire issued, fully diluted share capital of
SOTA for a consideration of $263 million ((Pounds)159 million) payable on
completion.
Sage is partly financing the acquisition through a vendor placing of Sage shares
to raise not less than (Pounds)70 million (net of commissions) by the issue of
7,826,694 new ordinary shares (representing 7.2 per cent. of the current issued
share capital of Sage) at not less than 900p per share. The placing has been
fully underwritten by Schroders. The balance of the consideration of (Pounds)89
million will be financed through a five year term facility.
The offer of $22.00 per share represents a premium of 33 per cent. over the
middle market quotation of $16.50, the closing price of a SOTA share yesterday.
Background to the acquisition of SOTA
The principal activity of the Sage Group is the development, distribution and
support of branded PC accounting software and related products for small to
medium sized enterprises ('SMEs').
Since flotation in December 1989, the Group has grown both organically and by
acquisition. In the last five years, the Sage Group has increased turnover and
earnings per share at an average annual compound rate of 41 per cent. to
(Pounds)152 million and 31 per cent. to 23.4p respectively.
The Group's expansion into overseas markets has been effected over the past five
years through a series of strategic accusations. This growth strategy reflects
the Board's belief that acquiring a leading brand in an overseas market with an
established distribution network, a substantial customer base, and in
particular, a product range that has been specifically developed to comply with
that market's legislative, fiscal and accounting conventions, is more effective
than developing a product in one market and attempting to sell that product
cross-border into other markets.
Sage's acquisition strategy over the past five years has resulted in the Group
acquiring interests in significant businesses in France and Germany as well as
additional acquisitions in the UK and the USA. These businesses have benefited
from Sage's skills in brand management, product marketing and channel management
as well as from its expertise in installed base marketing (the marketing of
products and services to existing customers to generate increasing streams of
recurring revenues). The successful integration of these businesses into the
Group has contributed significantly to the Group's performance over this period
and to Sage's position as one of the leading European players in PC accounting
software products and services.
The Sage brand, the Group's substantial reseller network and its strong customer
base provide a powerful platform from which it can continue to grow organically
in Europe. The Group's strategy is
3
<PAGE>
also to develop further into international growth markets; the offer announced
today to acquire SOTA represents a major step in this expansion programme.
Reasons for the acquisition
The Board believes that the acquisition of SOTA will provide the Group with a
significant strategic presence in the important US PC accounting software
market. SOTA has excellent products, a strong value added reseller network and
a substantial customer base. the Board further believes that SOTA's existing
experienced management team will benefit from Sage's expertise in brand
management, product marketing, channel management and installed base marketing
to achieve enhanced returns. The acquisition of SOTA will provide Sage with a
platform from which to grow its business in the US.
The Board believes that the acquisition of SOTA will enhance Sage's earnings per
share in the year to September 1999, the first full year of ownership.
Information on SOTA
SOTA, a NASDAQ listed company, has its headquarters in Irvine, California. Its
principal activity is the development, distribution and support of PC accounting
software for the US market. SOTA has an extensive network of value added
resellers throughout the US through which it distributes its products and
services to the SME marketplace.
SOTA has three main product lines positioned to provide solutions to SMEs:
. BusinessWorks is an entry-level accounting software product for the smaller
business customer. There were some 22,000 users of this product in the US
market of which approximately 17 per cent. have software support contracts
with SOTA. Distribution is through a large network of 3,000 authorized
value added resellers, the significant majority of which are accountancy
practices.
. MAS 90 is an accounting software product for small to medium sized business
customers. It is available in DOS, Windows and also, more recently, in an
NT/Client Server version. There are around 65,000 users in the market of
which approximately 20 per cent. have software support contracts. MAS 90 is
distributed by some 6000 authorized value added resellers and accountancy
firms.
. Acuity Financials is a new client server product designed to address the
needs of the larger business. Distribution is currently through 130 Acuity
solution providers; 140 units have been shipped to date.
4
<PAGE>
Management
SOTA's management team is led by David Hanna who has considerable experience of
the US accounting software industry. Over the past four years, David Hanna has
built up a professional management team at SOTA which has put in place a much
improved product range, a well-organized proactive sales force, enhanced channel
communications and strong financial controls. This management team will remain
in place post acquisition to effect Sage's strategic plans for the future
development of SOTA's US business.
Financial performance of SOTA
Set out below is a summary of key financial information for SOTA as reported
under US GAAP. This information includes SOTA's annual results for 1997 which
were formally announced in the USA today.
5
<PAGE>
<TABLE>
<CAPTION>
Year ended 31 December 1995 1996 1997 1997/(1)/
$m $m $m (Pounds)m
<S> <C> <C> <C> <C>
Turnover 46.1 52.0 64.0 39.1
Operating profit 7.4 2.9 7.8 4.8
Profit before tax 8.6 4.3 9.7 5.9
Profit after tax 5.7 2.9 6.5 4.0
Net cash inflow from
operating activities 5.6 5.8 12.8 7.8
Net assets 42.3 47.0 54.0 33.0
Net cash balances 33.8 37.1 45.0 27.5
</TABLE>
(1) Basis of exchange rate: (Pounds)1 = $1.6368, being the prevailing exchange
rate at 31st December 1997.
6
<PAGE>
Financial Record
In 1995 the company was largely dependent on revenues from its range of DOS
products. During 1995, the development of Windows versions of the MAS 90 and
BusinessWorks product ranges was commenced.
In 1996, R&D investment was increased substantially to ensure the timely launch
of the MAS 90 for Windows range of products and to accelerate development of the
Acuity client server product range. Launch of the MAS 90 for Windows range
during 1996 resulted in significant marketing costs. In addition, the
increasing number of customers on support contract led to an increase in
customer support costs. Overall, improvements in revenue, largely due to the
launch of MAS 90 for Windows and an increase in installed base revenues were
offset by a substantial increase in operating expenses which led to a decline in
profit before taxation.
In 1997, revenues increased by 23 per cent. largely due to growth in MAS 90 for
Windows sales as well as increasing support revenues. However, continued
investment in R&D to ensure the satisfactory development of the MAS 90 and
Acuity product ranges again had an impact on operating expenses. A
significant investment was also made in sales and marketing with the launch of
the MAS 90 Client Server product range and the Acuity product range. Profit
before taxation increased significantly over the prior year.
Over the three year period, the mix of revenues has changed substantially. In
1995, SOTA was largely dependent on its DOS product range with a small revenue
stream being derived from the sale of business forms. By 1997, the mix
reflected the introduction of new Windows and Client Server products. In 1997,
Windows products represented 48 per cent. of the total revenues, with the new
Acuity range accounting for a further 14 per cent. Installed base revenues
resulted in a further 20 per cent. and DOS revenues declined to only 18 per
cent. of the total.
Current Trading and Prospects
The outlook for 1998 is positive. With the MAS 90 product range now complete,
the financial modules of the Acuity product range now launched and well accepted
by the market and further modules in the Acuity range planned for launch later
in 1998, further growth in primary software sales is expected.
Sage's skills in installed base marketing should provide an opportunity to
increase installed base revenues. At present only some 20 per cent. of MAS 90
customers and some 17 per cent. of BusinessWorks customers have support
contracts with SOTA and there is a clear opportunity to increase these levels.
Upgrade campaigns to encourage customers to continue to move from DOS to Windows
and from less powerful products like BusinessWorks up to the more powerful MAS
90 range represent further opportunities to stimulate installed base sales. The
Board of Sage believes that this revenue growth can be achieved whilst keeping
operating expenses firmly under control.
7
<PAGE>
Principal Terms of the Acquisition
The acquisition will be effected in a two stage process. A US subsidiary of
Sage (Rose Acquisition Corp.) will make a tender offer to SOTA shareholders by
means of a document containing an offer to purchase (the US equivalent of an
offer document) which is expected to be filed with the SEC and mailed to SOTA
shareholders on 2nd February, 1998. It is expected that the offer will
initially be open until immediately after midnight New York time on Monday, 2nd
March.
The conditions to the tender offer will include an acceptance condition
(described in further detail below) and various other conditions, including the
expiry of applicable waiting periods under the US Hart-Scott-Rodino Act and the
admission to listing of the Sage shares which are to be issued in connection
with the acquisition becoming effective.
The above arrangements are reflected in a merger agreement between Sage, Rose
Acquisition Corp. and SOTA, which also provides that, following the purchase of
SOTA shares under the tender offer, a merger between Rose Acquisition Corp. and
SOTA will be effected, under California law, with SOTA being the surviving
entity, pursuant to which SOTA will become a wholly-owned subsidiary of Sage.
If tenders in respect of more than 90 per cent. of the SOTA shares are received,
the merger will occur shortly after the closing of the tender offer. If less
than 90 per cent. (but more than 50 per cent.) tenders are achieved, Rose
Acquisition Corp. will accept tenders in respect of 49.999 per cent. of the SOTA
shares, following which, to effect the merger under California law, it will be
necessary to obtain more than 50 per cent. shareholder approval at a special
meeting of SOTA shareholders at which Rose Acquisition Corp. would be entitled
to vote its shares. In this circumstance, it is expected that the merger would
become effective approximately three months after the tender offer closes with
the result that SOTA would then become a wholly-owned subsidiary of Sage.
There merger agreement may be terminated in certain circumstances, including if
the conditions have not been met or if a higher offer is made for the SOTA
shares. A break up fee may be payable in the event of termination, either by
Rose Acquisition Corp. or by SOTA, depending on the circumstances of the
termination, of an amount equal to $8 million (plus out of pocket expenses up to
a maximum of $1.25 million).
8
<PAGE>
APPENDIX
Financial Information on SOTA
<TABLE>
<CAPTION>
Profit and loss account
Year to 31 December
-----------------------
1995 1996 1997 1997
$'000s $'000s $'000s (Pounds)'000s
------ ------ ------ -------------
<S> <C> <C> <C> <C>
Turnover 46,118 52,046 63,956 39,074
Cost of Sales (10,268) (10,377) (12,637) (7,721)
-------- -------- -------- -------
Gross profit 35,850 41,669 51,319 31,353
Operating expenses (28,488) (38,752) (43,503) (26.578)
-------- -------- -------- -------
Operating profit 7,362 2,917 7,816 4,775
Net interest income 1,234 1,381 1,844 1,127
-------- -------- -------- -------
Profit before tax 8,596 4,298 9,660 5,902
Tax (2,933) (1,406) (3,117) (1,904)
-------- -------- -------- -------
Profit after tax 5,663 2,892 6,543 3,998
======== ======== ======== ======
EPS $0.51 $0.25 $0.56 34.21p
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Cash flow
As at 31 December
---------------------
1995 1996 1997 1997
$'000s $'000s $'000s (Pounds)'000s
<S> <C> <C> <C> <C>
Fixed Assets:
Tangible 4,357 5,334 5,106 3,120
Intangible 2,226 1,630 3,421 2,090
Current assets:
Stock 1,086 1,494 777 475
Debtors 6,180 6,780 13,071 7,986
Cash and cash equivalents 33,783 37,093 45,049 27,523
------- ------- ------- -------
41,049 45,367 58,897 35,984
Creditors: Falling due
within 1 year (5,180) (4,029) (6,887) (4,208)
------- ------- ------- -------
Net Current Assets 35,869 41,338 52,010 31,776
Total Assets less Current
Liabilities 42,452 48,302 60,737 37,107
Creditors: Falling due
within 1 year Deferred (202) (244) (217) (133)
Maintenance Income - (1,046) (6,568) (4,013)
------- ------- ------- -------
Shareholder Funds 42,250 47,012 53,952 32,961
======= ======= ======= =======
</TABLE>
10
<PAGE>
Balance Sheet
<TABLE>
<CAPTION>
Year to 31 December
-----------------------
1995 1996 1997 1997
$'000s $'000s $'000s (Pounds)'000s
<S> <C> <C> <C> <C>
Net Cash inflow from
operating activities
(after tax) 5,556 5,811 12,782 7,809
Investing activities:
Purchase of fixed assets (3,160) (3,827) (2,337) (1,428)
Purchase of subsidiary - - (2,618) (1,599)
undertakings ------ ------ ------ ------
Net cash inflow/(outflow)
from investing activities (3,160) (3,827) (4,955) (3,027)
Financing:
Shares issues 1,475 1,326 1,893 1,157
Shares repurchased - - (1,764) (1,078)
------ ------ ------ ------
Net cash outflow from
financing 1,475 1,326 (129) (79)
------ ------ ------ ------
Increase in cash and cash
equivalents 3,871 3,310 7,956 4,860
Opening cash and cash
equivalents 29,912 33,783 37,093 22,663
Closing cash and cash
equivalents 33,783 37,093 45,049 27,523
======= ======= ======= ======
</TABLE>
Note: Values shown have been translated from US dollars to Sterling (for
illustrative purposes only) using the 31 December 1997 exchange rate of
(Pounds) 1:$1.6368
11
<PAGE>
Exhibit (a)(8)
NEWS RELEASE
STATE OF THE ART
----------------
Accounting Software
Company Contact:
---------------
James R. Eckstaedt
Chief Financial Officer
714/753-1222 x3805
FOR IMMEDIATE RELEASE
- ---------------------
The Sage Group plc to Acquire State Of The Art, Inc.
IRVINE, Calif., - January 26, 1998 - State Of The Art, Inc.
(NASDAQ:SOTA), a leading mid-range accounting software provider, and The Sage
Group plc (Reuters: SGE.L), of Newcastle upon Tyne, England, the world's leading
supplier of personal computer accounting software to small- and medium-sized
businesses, jointly today announced that they have signed a definitive merger
agreement, pursuant to which Sage will acquire all of the outstanding stock of
State Of The Art at $22.00 per share, or approximately $263 million. To
implement the agreement Sage will commence a cash tender offer within five
business days. The completion of the offer is subject to a number of customary
conditions.
The offer of $22.00 per share represents a premium of 33% over State
Of The Art's closing price on January 26, 1998. Under the terms of the
agreement,
<PAGE>
NEWS RELEASE STATE OF THE ART, INC.
Page 2 The Sage Group plc to Acquire State Of The Art, Inc.
State Of The Art will become a wholly owned subsidiary of The Sage Group.
With this acquisition, Sage gains market leadership of the U.S. mid-
range accounting software market, complementing similar market positions in the
United Kingdom, France and Germany. This combination is another important step
in Sage's strategy to build a global franchise in the accounting software
market.
"This acquisition brings important benefits to our customers, channel
partners and our employees," said David Hanna, president and chief executive
officer of State Of The Art. "For our 90,000 U.S. customers, this combination
offers exciting opportunities for new products, higher levels of service and
support, and a broader product functionality. For channel partners, there are
additional opportunities for growth and profits. For our employees, this is the
next step in strengthening our market leadership position on a global basis. In
addition, our shareholders obtain an attractive cash buyout."
"The acquisition of State Of The Art provides The Sage Group with a
much enhanced strategic presence in the U.S. State Of The Art has an excellent
product range, a strong value added reseller network, and a substantial customer
base," said Paul Walker, chief executive of Sage. "In the United States, our
combined product lines have virtually no overlap. We see opportunities to
increase sales by marketing products and services to our
<PAGE>
NEWS RELEASE STATE OF THE ART, INC.
Page 3 The Sage Group plc to Acquire State Of The Art, Inc.
expanded customer base. State Of The Art is a profitable, well-run company whose
experienced management team will greatly contribute to the success of our Sage
U.S. operation."
When the acquisition is complete, State Of The Art will join the group
of U.S. software companies owned by Sage called Sage U.S. Group; its other
members include DacEasy, Inc., Timeslips, Inc., and Telemagic Inc. The State Of
The Art management team, led by David W. Hanna, will remain in place after the
transaction closes.
Consummation of the merger is conditioned on, among other things, the
tender of at least 90% of the outstanding shares of State Of The Art, on a fully
diluted basis, in the tender offer.
About State Of The Art
- ----------------------
State Of The Art is a leader in providing accounting software for
small- to medium-sized businesses. The company develops and markets Acuity
Financials(TM) accounting software, a client-server solution optimized for
Microsoft(R) Windows NT(R)/SQL Server(TM) platforms; MAS 90(R) accounting
software, which offers a broad range of applications for virtually any type of
business; and Business Works(R) accounting software for small and growing
businesses. State Of The Art reported revenues for its fiscal year ending
December 31, 1997, of $64.0 million, an increase of 23% over 1996 revenues.
<PAGE>
NEWS RELEASE STATE OF THE ART, INC.
Page 4 The Sage Group plc to Acquire State Of The Art, Inc.
About The Sage Group
- --------------------
Sage is the world's leading supplier of mainstream PC accounting
software. Sage's product offerings encompass accounting, payroll, time and
billing, and contact management software, for the entire spectrum of users: from
small entrepreneurial business, to large multinational corporations. Sage's
revenues for its fiscal year ending September 30, 1997 were (Pounds)152.1
million ($250 million).
###
State Of The Art Acuity Financials, MAS 90, and Business Works are trademarks
and registered trademarks of State Of The Art, Inc. Microsoft, Windows NT and
MICROSOFT SQL Server are either trademarks or registered trademarks of Microsoft
Corporation in the U.S. and/or other countries. All other trademarks and
registered trademarks are the property of their respective owners.
UBS Securities acted as a financial advisor to State Of The Art, Inc.
<PAGE>
EXHIBIT (a)(9)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares (as defined below). The Offer (as defined below) is made solely
by the Offer to Purchase, dated February 2, 1998 (the "Offer to Purchase"), and
the related Letter of Transmittal and is being made to all holders of Shares.
The Offer is not being made to (nor will tenders be accepted from or on behalf
of) holders of Shares in any jurisdiction in which the making of the Offer or
the acceptance thereof would not be in compliance with the laws of such
jurisdiction or any administrative or judicial action pursuant thereto. In any
jurisdictions where securities, blue sky or other laws require the Offer to be
made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of the Purchaser (as defined below) by BT Alex. Brown Incorporated (the
"Dealer Manager") or one or more registered brokers or dealers licensed under
the laws of such jurisdiction.
Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock of State Of The Art, Inc. at $22.00 Net
Per Share by Rose Acquisition Corp. a direct and indirect wholly owned
subsidiary of The Sage Group plc Rose Acquisition Corp., a Delaware corporation
(the "Purchaser") and a direct and indirect wholly owned subsidiary of The Sage
Group plc, a company organized under the laws of England ("Sage Group"), is
offering to purchase all of the issued and outstanding shares (the "Shares") of
common stock, no par value (the "Common Stock"), of State Of The Art, Inc., a
California corporation (the "Company"), for $22.00 per Share or any higher price
paid in the Offer, net to the seller in cash (the "Offer Price"), upon the terms
and subject to the conditions set forth in the Offer to Purchase and in the
related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer"). Tendering
shareholders will not be obligated to pay brokerage fees or commissions or,
except as set forth in Instruction 6 of the Letter of Transmittal, transfer
taxes on the purchase of Shares pursuant to the Offer. The Purchaser is offering
to acquire all Shares as a first step in acquiring the entire equity interest in
the Company. Following consummation of the Offer, the Purchaser intends to
effect the merger described below.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, MARCH 2, 1998 (THE "INITIAL EXPIRATION DATE"), UNLESS THE OFFER
IS EXTENDED.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
January 27, 1998 (the "Merger Agreement"), by and among Sage Group, the
Purchaser and the Company pursuant to which, as soon as practicable after the
completion of the Offer and satisfaction or waiver, if permissible, of all
conditions to the Merger (as defined below), the Purchaser will be merged with
and into the Company and the separate corporate existence of the Purchaser will
thereupon cease. The merger, as effected pursuant to the immediately preceding
sentence, is referred to herein as the "Merger," and the Company as the
surviving corporation of the Merger is sometimes herein referred to as the
"Surviving Corporation." At the effective time of the Merger (the "Effective
Time"), each share of Common Stock then outstanding (other than Shares held by
Sage Group or the Purchaser and Shares held by shareholders of the Company who
perfect their dissenters' rights under California law) will be canceled and
retired and converted into the right to receive the Offer Price, in cash payable
to the holder thereof without interest.
The Board of Directors of the Company has unanimously determined that each of
the Merger Agreement,
<PAGE>
the Offer, the Merger, and the Option Agreement (as defined below) is fair to
and in the best interests of the shareholders of the Company and recommends that
the shareholders of the Company accept the Offer and tender their Shares to the
Purchaser pursuant to the Offer.
The Offer is conditioned upon, among other things, there being validly tendered
and not withdrawn prior to the expiration of the Offer, that number of shares of
Common Stock which, when added to the Shares then owned by the Purchaser,
represents at least 90% of the shares outstanding on a fully diluted basis
(without giving pro forma effect to the potential issuance of any Shares
issuable under the Option Agreement described below) on the date of purchase
(the "Minimum Condition"). The Purchaser will not be required to accept for
payment or pay for any tendered Shares until the expiration of all applicable
waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended. The Offer is also subject to other terms and conditions described in
Section 14 of the Offer to Purchase. As used herein "fully diluted basis" takes
into account the conversion or exercise of all outstanding options and other
rights and securities exercisable or convertible into shares of Common Stock.
In the event that the Minimum Condition is not satisfied on the Initial
Expiration Date pursuant to the Offer, the Purchaser is required to extend the
Offer and may waive, and in certain circumstances thereafter is required to
waive, the Minimum Condition and amend the Offer to reduce the number of Shares
subject to the Offer to such number of Shares that when added to the Shares then
owned by the Purchaser will equal 49.9999% of the Shares then outstanding (the
"Revised Minimum Number") and, if a greater number of Shares is tendered into
the Offer and not withdrawn, purchase, on a pro rata basis, the Revised Minimum
Number of Shares (it being understood that the Purchaser may, but shall not in
any event be required to accept for payment, or pay for, any Shares if less than
the Revised Minimum Number of Shares is tendered pursuant to the Offer and not
withdrawn at the applicable expiration date of the Offer). Concurrently with the
execution and delivery of the Merger Agreement, the Purchaser, Sage Group and
the Company entered into a Stock Option Agreement, dated January 27, 1998 (the
"Option Agreement"), pursuant to which, upon the terms set forth therein, the
Company granted to the Purchaser an irrevocable option (the "Stock Option") to
purchase up to the number of Shares (the "Option Shares") that, when added to
the number of shares owned by the Purchaser and its affiliates immediately
following consummation of the Offer, would constitute 90% of the Shares then
outstanding on a fully diluted basis (assuming the issuance of the Option
Shares) at a purchase price per Option Share equal to the Offer Price, subject
to the terms and conditions set forth in the Option Agreement, including,
without limitation, that the number of Shares to be issued under the Stock
Option shall not exceed the number of authorized Shares available for issuance.
As a condition and inducement to Sage Group's and the Purchaser's entering into
the Merger Agreement and incurring the liabilities therein, certain shareholders
of the Company (the "Shareholders"), who have voting power and dispositive power
with respect to an aggregate of 1,290,868 Shares, concurrently with the
execution and delivery of the Merger Agreement entered into a Shareholder
Agreement, dated January 27, 1998 (the "Shareholder Agreement"), with Sage
Group and the Purchaser. Pursuant to the Shareholder Agreement, the
Shareholders have agreed, among other things, to tender the Shares held by
them in the Offer, and to grant Sage Group a proxy with respect to the voting
of such Shares in favor of the Merger (which proxy will terminate in the event
that the Purchaser waives the Minimum Condition and accepts for payment the
Revised Minimum Number of Shares).
For the purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered to the Purchaser and
not withdrawn as of and when the Purchaser gives oral or written notice to
ChaseMellon Shareholder Services, L.L.C. (the "Depositary") of the Purchaser's
acceptance for payment of such Shares. Upon the terms and subject to the
conditions of the Offer, payment for Shares accepted for payment pursuant to the
Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering shareholders for the purpos-
<PAGE>
es of receiving payment from the Purchaser and transmitting payment to tendering
shareholders. In all cases, payment for Shares accepted for payment pursuant to
the Offer will be made only after timely receipt by the Depositary of (i)
certificates for such Shares (or a timely Book-Entry Confirmation (as defined in
the Offer to Purchase) with respect thereto), (ii) a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message (as defined in the Offer to Purchase) and (iii) any other documents
required by the Letter of Transmittal. The per share consideration paid to any
holder of a Share pursuant to the Offer will be the highest per share
consideration paid to any other holder of Shares pursuant to the Offer. Under no
circumstances will interest be paid on the purchase price to be paid by the
Purchaser for the tendered Shares, regardless of any extension of the Offer or
any delay in making such payment. Except as otherwise provided in the Offer to
Purchase, tenders of Shares are irrevocable. Shares tendered pursuant to the
Offer may be withdrawn pursuant to the procedures set forth below at any time
prior to the Expiration Date (as defined in the Offer to Purchase) and, unless
theretofore accepted for payment and paid for by the Purchaser pursuant to the
Offer, may also be withdrawn at any time after April 2, 1998, as described in
Section 4 of the Offer to Purchase.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of the Offer to Purchase and
must specify the name of the person having tendered the Shares to be withdrawn,
the number of Shares to be withdrawn and the name of the registered holder of
the Shares to be withdrawn, if different from the name of the person who
tendered the Shares. If certificates for Shares have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Depositary and, unless such Shares have been tendered by an Eligible
Institution (as defined in Section 3 of the Offer to Purchase), the signatures
on the notice of withdrawal must be guaranteed by an Eligible Institution. If
Shares have been delivered pursuant to the procedures for book-entry transfer as
set forth in Section 3 of the Offer to Purchase, any notice of withdrawal must
also specify the name and number of the account at the appropriate Book-Entry
Transfer Facility (as defined in the Offer to Purchase) to be credited with the
withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's
procedures. Withdrawals of tenders of Shares may not be rescinded, and any
Shares properly withdrawn will thereafter be deemed not validly tendered for
purposes of the Offer. However, withdrawn Shares may be tendered again by
following one of the procedures described in Section 3 of the Offer to Purchase
any time prior to the Expiration Date.
The term "Expiration Date" shall mean 12:00 midnight, New York City time, on
Monday, March 2, 1998, unless and until the Purchaser, in accordance with the
terms of the Offer, shall have extended the period of time during which the
Offer is open, in which event the term "Expiration Date" shall mean the latest
time and date at which the Offer, as so extended by the Purchaser, shall expire.
All questions as to the form and validity (including time of receipt) of notices
of withdrawal will be determined by the Purchaser, in its sole discretion, which
determination will be final and binding. None of the Purchaser, Sage Group, the
Depositary, MacKenzie Partners, Inc. (the "Information Agent"), the Dealer
Manager or any other person will be under any duty to give notification of any
defects or irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification.
Subject to the terms of the Merger Agreement, the Purchaser expressly reserves
the right, in its sole discretion, at any time or from time to time, to extend
the period of time during which the Offer is open and thereby delay acceptance
for payment of, and the payment for, any Shares, by giving oral or written
notice of such extension to the Depositary and by making a public announcement
of such extension by no later than 9:00 a.m. New York City time on the next
business day after the previously scheduled expiration date. During any such
extension, all Shares previously tendered and not withdrawn will remain subject
to the Offer, subject to the right of a tendering shareholder to withdraw such
shareholder's Shares.
The information required to be disclosed by paragraph (e)(1)(vii) of Rule 14d-6
under the Securities
<PAGE>
Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is
incorporated herein by reference.
The Company has provided the Purchaser with the Company's shareholder lists and
security position listings for the purpose of disseminating the Offer to holders
of Shares. The Offer to Purchase, the related Letter of Transmittal and other
relevant documents will be mailed by the Purchaser to record holders of Shares,
and will be furnished by the Purchaser to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose nominees,
appear on the shareholder lists, or, if applicable, who are listed as
participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of Shares.
The Offer to Purchase and the Letter of Transmittal contain important
information and should be read in their entirety before any decision is made
with respect to the Offer.
Questions and requests for assistance or additional copies of the Offer to
Purchase, Letter of Transmittal and other tender offer documents may be directed
to the Information Agent or the Dealer Manager, at the respective addresses and
telephone numbers set forth below, and copies will be furnished at the
Purchaser's expense. The Purchaser will not pay any fees or commissions to any
broker or dealer or other person (other than the Information Agent, Depositary
and Dealer Manager) for soliciting tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
Call Toll-Free (800) 322-2885
The Dealer Manager for the Offer is:
BT Alex.BrownIncorporated
101 California Street, 48th Floor
San Francisco, California 94111
(415) 544-2800 (Call Collect)
or
Call Toll-Free (800) 334-2640
February 2, 1998
<PAGE>
EXHIBIT (a)(10)
January 26, 1998
Board of Directors
State of The Art, Inc.
56 Technology Drive
Irvine, CA 92618
Members of the Board of Directors:
You have requested our opinion as to the fairness, from a financial point
of view, to the shareholders of State of The Art, Inc., a California corporation
(the "Company"), of the consideration to be received by such holders pursuant to
the terms of that certain Agreement and Plan of Merger, to be dated January 27,
1998 (the "Merger Agreement"), by and among The Sage Group plc, a company
organized under the laws of England ("Parent"), Rose Acquisition Corp., a
Delaware corporation and a direct and indirect wholly owned subsidiary of Parent
("Purchaser"), and the Company. The Merger Agreement provides, among other
things, for a tender offer (the "Offer") by Purchaser to acquire all of the
issued and outstanding shares of common stock, no par value, of the Company (the
"Company Common Stock") pursuant to which Purchaser will pay to the holders of
such shares of Company Common Stock $22.00 per share in cash for each share of
Company Common Stock accepted, and following completion of the Offer, Purchaser
will be merged with and into the Company and each outstanding share of Company
Common Stock (other than shares of Company Common Stock already owned by Parent
or Purchaser) will be converted into the right to receive $22.00 in cash
(together with the Offer, the "Transaction"). The terms and conditions of the
Transaction are more fully set forth in the Merger Agreement.
UBS Securities LLC ("UBS"), 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, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. In the ordinary course of our
business, we and our affiliates actively trade the securities of the Company and
Parent for our own account and for the accounts of our customers and,
accordingly, may at any time hold a long or short position in such securities.
We are acting as exclusive financial advisor to the Company in connection with
the Transaction and will receive a fee from the Company for our services
pursuant to the terms of our engagement letter with the Company, dated as of
January 12, 1998 (the "Engagement Letter").
In connection with our opinion, we have reviewed and considered such
financial and other matters as we have deemed relevant, including, among other
things: (i) a substantially final draft of the Merger Agreement; (ii) certain
publicly available information for the Company, including the annual report of
the Company filed on Form 10-K for the year ended December 31, 1996, and the
quarterly report of the Company filed on Form 10-Q for the quarter ended
September 30, 1997; (iii) certain internal financial analyses, financial
forecasts, reports and other information concerning the Company prepared by the
management of the Company; (iv) discussions we have had with certain members of
the management of the Company concerning the historical and current business
<PAGE>
State of The Art, Inc.
January 26, 1998
Page 2
operations, financial condition and prospects of the Company and such other
matters we deemed relevant; (v) the reported price and trading history of the
shares of the Company Common Stock as compared to the reported price and trading
histories of certain publicly traded companies we deemed relevant; (vi) the
financial condition of the Company as compared to the financial condition of
certain other companies we deemed relevant; (vii) certain financial terms of the
Transaction as compared to the financial terms of selected other business
combinations we deemed relevant; and (viii) such other information, financial
studies, analyses and investigations and such other factors that we deemed
relevant for the purposes of this opinion.
In conducting our review and arriving at our opinion, we have, with your
consent, assumed and relied, without independent investigation, upon the
accuracy and completeness of all financial and other information provided to us
by the Company or publicly available, and we have not undertaken any
responsibility for the accuracy, completeness or reasonableness of, or
independently to verify, such information. We have, with your consent, assumed
that the financial forecasts which we examined were reasonably prepared by the
management of the Company on bases reflecting the best currently available
estimates and good faith judgments of such management as to the competitive,
operating and regulatory environments and the related financial performance of
the Company for the relevant periods. We have not made or obtained any
independent evaluations, valuations or appraisals of the assets or liabilities
of the Company, nor have we been furnished with such materials. Our services to
the Company in connection with the Transaction have been comprised solely of
financial advisory services, as described in the Engagement Letter. Our opinion
is necessarily based upon economic and market conditions and other circumstances
as they exist and can be evaluated by us on the date hereof. Additionally, we
have not been authorized or requested to, and did not, solicit alternative
offers for the Company or its assets, nor have we investigated any other
alternative transactions that may be available to the Company.
It is understood that this letter is intended for the benefit and use of
the Board of Directors of the Company in its consideration of the Transaction
and may not be used for any other purpose or reproduced, disseminated, quoted or
referred to at any time, in any manner or for any purpose without our prior
written consent; provided, however, that this letter may be disclosed if
required by law and may be included in its entirety and referred to in any
filing with the Securities and Exchange Commission of the
Solicitation/Recommendation Statement of the Company relating to the
Transaction. Our opinion does not address the underlying decision by the Company
to engage in the Transaction and does not constitute a recommendation to any
shareholder of the Company as to whether such stockholder should tender his or
her shares of the Company Common Stock in the Offer or how such shareholder
should vote with respect to the merger or to take any other action in connection
with the Transaction or otherwise.
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, it is our opinion that, as of the date hereof,
the consideration to be received by the holders of shares of the Company Common
Stock (other than Parent, Purchaser and any affiliates thereof) in the
Transaction is fair, from a financial point of view, to such holders.
Very truly yours,
UBS SECURITIES LLC
<PAGE>
EXHIBIT (a)(11)
AUDITORS' REPORTS
AUDITORS' REPORT TO THE MEMBERS OF THE SAGE GROUP PLC
We have audited the financial statements on pages 28 to 46 which have been
prepared under the historical cost convention and the accounting policies set
out on pages 33 to 34.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As described on page 24 the Company's directors are responsible for the
preparation of the financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those statements and to report our
opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements.
It also includes an assessment of the significant estimates and judgements made
by the directors in the preparation of the financial statements, and of whether
the accounting policies are appropriate to the company's circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material mis-statement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
In our opinion the financial statements give a true and fair view of the
state of affairs of the Company and of the Group as at 30 September 1997 and of
the profit and cash flows of the Group for the year then ended and have been
properly prepared in accordance with the Companies Act 1985.
[LOGO OF PRICE WATERHOUSE] .
Chartered Accountants and Registered Auditors
Newcastle upon Tyne
22 December 1997
F-1
<PAGE>
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
REPORT BY THE AUDITORS TO THE DIRECTORS OF THE SAGE GROUP PLC ON CORPORATE
GOVERNANCE MATTERS
In addition to our audit of the financial statements we have reviewed your
statements on pages 22 and 23 concerning the Group's compliance with the
paragraphs of the Code of Best Practice specified for our review by the London
Stock Exchange and the adoption of the going concern basis in preparing the
financial statements. The objective of our review is to draw attention to non-
compliance with Listing Rules 12.43(j) and 12.43(v) if not otherwise disclosed.
BASIS OF OPINION
We carried out our review in accordance with guidance issued by the Auditing
Practices Board. That guidance does not require us to perform the additional
work necessary to, and we do not, express any opinion on the effectiveness of
either the Group's system of internal financial control or corporate governance
procedures nor on the ability of the Group to continue in operational
existence.
OPINION
In our opinion, your statements on internal financial controls and on going
concern on page 23 have provided the disclosures required by the Listing Rules
referred to above and are consistent with the information which came to our
attention as a result of our audit work on the financial statements.
In our opinion, based on enquiry of certain directors and officers of the
Company and examination of relevant documents, your statements on pages 22 and
23 appropriately reflect the Group's compliance with the other aspects of the
Code specified for our review by Listing Rule 12.43(j).
[LOGO OF PRICE WATERHOUSE] .
Chartered Accountants
Newcastle upon Tyne
22 December 1997
F-2
<PAGE>
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 SEPTEMBER 1997
<TABLE>
<CAPTION>
EXISTING 1997 1996
OPERATIONS ACQUISITION TOTAL TOTAL
NOTE (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
---- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Turnover................ 2 134,671 17,418 152,089 136,236
Cost of sales........... (21,273) (759) (22,032) (21,121)
------- ------- ------- -------
Gross profit............ 113,398 16,659 130,057 115,115
Selling and administra-
tive expenses.......... (75,099) (14,878) (89,977) (83,021)
------- ------- ------- -------
Operating profit ....... 2, 3 38,299 1,781 40,080 32,094
Interest receivable..... 529 291
Interest payable........ 4 (2,974) (2,332)
------- -------
Profit on ordinary ac-
tivities before taxa-
tion................... 37,635 30,053
Taxation on profit on
ordinary activities.... 6 (12,420) (10,218)
------- -------
Profit on ordinary ac-
tivities after taxa-
tion................... 25,215 19,835
Equity minority inter-
ests................... -- (7)
Profit for the financial
year attributable to
shareholders........... 25,215 19,828
Equity dividends........ 7 (3,137) (2,837)
------- -------
Amount transferred to
reserves .............. 16 22,078 16,991
------- -------
Earnings per share
(pence)................ 23 23.43p 18.50p
------- -------
Net dividend per share
(pence)................ 7 2.90p 2.64p
------- -------
</TABLE>
All operations in the year and in the comparative year were continuing. There
is no material difference between profits and losses as reported above and
historical cost profits and losses in either the current or comparative year.
F-3
<PAGE>
CONSOLIDATED BALANCE SHEET
AS AT 30 SEPTEMBER 1997
<TABLE>
<CAPTION>
1997 1996
NOTE (Pounds)'000 (Pounds)'000
---- ------------ ------------
<S> <C> <C> <C>
Fixed assets:
Tangible assets................................ 8 25,188 24,838
-------- --------
Current assets:
Stocks......................................... 10 3,299 3,350
Debtors........................................ 11 28,915 19,453
Cash at bank and in hand....................... 7,372 5,249
-------- --------
39,586 28,052
Creditors: amounts falling due within one year.. 12 (49,758) (41,393)
-------- --------
Net current liabilities......................... (10,172) (13,341)
-------- --------
Total assets less current liabilities......... 15,016 11,497
Creditors: amounts falling due after more than
one year....................................... 13 (40,974) (18,495)
Deferred maintenance income..................... (20,283) (16,112)
-------- --------
(46,241) (23,110)
-------- --------
Capital and reserves:
Called up equity share capital................. 15 1,081 1,073
Share premium.................................. 15 9,512 9,076
Profit and loss account........................ 16 77,260 52,229
-------- --------
87,853 62,378
Goodwill reserve................................ 17 (134,094) (85,592)
-------- --------
Equity shareholders' funds...................... (46,241) (23,214)
Minority equity interests....................... -- 104
-------- --------
(46,241) (23,110)
======== ========
</TABLE>
F-4
<PAGE>
COMPANY BALANCE SHEET
AS AT 30 SEPTEMBER 1997
<TABLE>
<CAPTION>
1997 1996
NOTE (Pounds)000 (Pounds)000
---- ----------- -----------
<S> <C> <C> <C>
Fixed assets
Investments..................................... 9 62,062 21,196
--- ------- ------
Current assets
Stocks.......................................... 10 694 300
Debtors......................................... 11 35,810 33,032
Cash at bank and in hand........................ 2,384 1,169
--- ------- ------
38,888 34,501
Creditors: amounts falling due within one year.... 12 (12,028) (9,767)
--- ------- ------
Net current assets................................ 26,860 24,734
--- ------- ------
Total assets less current liabilities............. 88,922 45,930
Creditors: amounts falling due after more than 1
year............................................. 13 (29,500) --
--- ------- ------
59,422 45,930
--- ------- ------
Capital and reserves
Called up equity share capital.................. 15 1,081 1,073
Share premium................................... 15 9,512 9,076
Profit and loss account......................... 16 48,829 35,781
--- ------- ------
Equity shareholders' funds........................ 59,422 45,930
--- ------- ------
</TABLE>
The financial statements on pages 28 to 46 were approved by the Board of
Directors on 22 December 1997 and are signed on their behalf by:
P.A. Walker
Director
A. J. Hughes
Director
F-5
<PAGE>
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 1997
<TABLE>
<CAPTION>
1997 1996
NOTE (Pounds)'000 (Pounds)'000
---- ------------ ------------
<S> <C> <C> <C>
Net cash inflow from operating activities..... 24(a) 40,400 37,024
Returns on investments and servicing of
finance
Interest received........................... 529 291
Interest paid............................... (2,403) (1,557)
Interest element of finance lease rental
payments................................... (545) (877)
--- ------- -------
Net cash outflow from returns on investments
and servicing of finance..................... (2,419) (2,143)
Taxation
Corporation tax (including ACT) paid........ (9,981) (8,542)
Capital Expenditure
Purchase of tangible fixed assets........... (4,733) (8,953)
Sale of tangible fixed assets............... 873 326
--- ------- -------
Net cash outflow from capital expenditure..... (3,860) (8,627)
Acquisitions
Purchase of subsidiary undertakings:
Net cash consideration - current year....... 18(c) (42,648) (16,979)
Net cash consideration - prior year......... (3,993) (3,406)
--- ------- -------
Net cash outflow from acquisitions.......... (46,641) (20,385)
Equity dividends paid....................... (2,943) (2,657)
--- ------- -------
Net cash outflow before financing........... (25,444) (5,330)
Financing
Shares issued............................... 24(c) 444 319
Movement in loan funding.................... 24(c) 26,697 4,420
Finance lease funding net of capital
payments................................... 24(c) (124) (235)
--- ------- -------
Net cash inflow from financing.............. 27,017 4,504
--- ------- -------
Increase/(Decrease) in cash in the year..... 24(b) 1,573 (826)
--- ------- -------
</TABLE>
F-6
<PAGE>
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 30 SEPTEMBER 1997
<TABLE>
<CAPTION>
1997 1996
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Profit for the financial year attributable to
shareholders......................................... 25,215 19,828
Translation of foreign currency net investments and
related borrowings................................... 2,953 949
------ ------
Total recognised gains and losses relating to the
year............................................... 28,168 20,777
====== ======
</TABLE>
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE YEAR ENDED 30 SEPTEMBER 1997
<TABLE>
<CAPTION>
1997 1996
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Profit for the financial year attributable to
shareholders........................................ 25,215 19,828
Dividends............................................ (3,137) (2,837)
------- -------
Amount transferred to reserves....................... 22,078 16,991
Translation of foreign currency net investments and
related borrowings.................................. 2,953 949
Movement in goodwill reserve in year................. (48,502) (25,821)
Shares issued for options............................ 444 319
------- -------
Movement for the year................................ (23,027) (7,562)
Opening shareholders' funds.......................... (23,214) (15,652)
------- -------
Closing shareholders' funds.......................... (46,241) (23,214)
======= =======
</TABLE>
F-7
<PAGE>
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 SEPTEMBER 1997
1. ACCOUNTING POLICIES
(a) Basis of accounting
The financial statements are prepared under the historical cost convention
and in accordance with applicable accounting standards in the United Kingdom.
(b) Basis of consolidation
The financial statements of the Group comprise the financial statements of
the Company and its subsidiaries prepared to 30 September 1997. The results of
subsidiary undertakings acquired during the year are included from the
effective date of acquisition.
(c) Goodwill
Goodwill, being the excess of the cost of shares in subsidiary undertakings
over the fair value of assets acquired, is written off directly to a goodwill
reserve in the year it is incurred.
(d) Turnover
Turnover represents invoiced sales to third parties after deducting credit
notes, allowances, trading discounts and value added tax and is adjusted to
include maintenance income on a straight line basis over the life of each
maintenance agreement.
(e) Tangible fixed assets
Tangible fixed assets are stated at cost less accumulated depreciation.
Depreciation on tangible fixed assets is provided for as follows:
Freehold land and buildings - 0%
Long leasehold land and buildings - over period of lease
Plant and equipment - 33.3% per annum on reducing balance
Fixtures and fittings - 15% per annum on reducing balance
Motor vehicles - 25% per annum on reducing balance
No depreciation is charged on the Group's freehold buildings because it is
the Group's practice to maintain these assets in a continual state of sound
repair and the directors consider that the economic life of these properties
and their residual values are such that depreciation is not significant.
(f) Development costs and other intangible assets
All costs associated with the development of software are written off as
incurred.
(g) Stocks
Stocks are stated at the lower of cost and net realisable value.
(h) Leasing
Where plant and equipment is acquired by finance leasing arrangements which
give rights approximating to ownership the amount representing the purchase
price of such assets is included in tangible fixed assets and the related
obligations are included in creditors.
F-8
<PAGE>
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS--(CONTINUED)
1. ACCOUNTING POLICIES--CONTINUED
All other leases are classified as operating leases and the annual rentals
are charged to the profit and loss account as they fall due.
(i) Foreign currency translation
Foreign currency assets and liabilities are translated into sterling at rates
of exchange ruling at the year end. Trading results are translated at the
average rate prevailing during the year. Differences arising on the re-
translation of the net investments and the results for the year are taken
directly to reserves together with differences on foreign currency borrowings
to the extent that they are used to finance or provide a hedge against Group
equity investments in foreign enterprises. All other exchange differences are
dealt with in the profit and loss account.
(j) Deferred taxation
Provision is made for deferred taxation to the extent that there is a
reasonable probability that a liability will arise in the foreseeable future.
(k) Pension scheme
The Group operates defined contribution pension schemes for certain of its
employees. The costs are charged to the profit and loss account as they fall
due.
2. SEGMENT INFORMATION
The directors consider there to be only one class of business and therefore
only geographical segment information is given below.
(a) The geographical analysis of turnover by destination is as follows:
<TABLE>
<CAPTION>
1997 1996
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
United Kingdom........................................ 62,162 53,714
Mainland Europe....................................... 68,553 59,644
United States of America.............................. 18,255 19,779
Rest of World......................................... 3,119 3,099
------- -------
152,089 136,236
======= =======
</TABLE>
(b) The geographical analysis of turnover, operating profit and net
liabilities by origin is as follows:
<TABLE>
<CAPTION>
1997 1996
OPERATING NET OPERATING NET
TURNOVER PROFIT LIABILITIES TURNOVER PROFIT LIABILITIES
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
United Kingdom.......... 62,982 24,464 (36,281) 54,231 20,153 (12,399)
Mainland Europe......... 70,077 11,763 (8,978) 61,343 8,292 (9,040)
United States of
America................ 19,030 3,853 (982) 20,662 3,649 (1,671)
------- ------ ------- ------- ------ -------
152,089 40,080 (46,241) 136,236 32,094 (23,110)
======= ====== ======= ======= ====== =======
</TABLE>
In 1997 Mainland Europe includes the results of the KHK acquisition which
contributed (Pounds)17,418,000 to turnover and (Pounds)1,781,000 to operating
profit and had net liabilities at 30 September 1997 of (Pounds)2,483,000.
F-9
<PAGE>
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS--(CONTINUED)
3. OPERATING PROFIT
Operating profit is stated after charging:
<TABLE>
<CAPTION>
1997 1996
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Staff costs (including directors' emoluments):
- Wages and salaries................................ 40,715 34,158
- Social security costs............................. 9,857 9,536
- Other pension costs............................... 639 560
Research and development (including staff costs)...... 14,193 10,597
Depreciation of tangible fixed assets - owned......... 3,119 2,662
Depreciation of tangible fixed assets - leased........ 38 228
Loss on sale of tangible fixed assets................. 99 46
Operating lease rentals:
- Hire of plant and machinery 1,453 697
- Other............................................. 2,136 1,583
Auditors' remuneration................................ 181 159
Exceptional costs (see below)......................... - 1,157
====== ======
</TABLE>
Auditors' remuneration shown above includes (Pounds)13,000 (1996:
(Pounds)12,000) in respect of the Company. Non-audit services supplied by the
Company's auditors amounted to (Pounds)46,000 (1996: (Pounds)17,000).
Exceptional costs in 1996 comprised (Pounds)713,000 incurred in restructuring
Sybel and (Pounds)444,000 of costs incurred in successfully defending an
important legal case in the UK.
4. INTEREST PAYABLE
<TABLE>
<CAPTION>
1997 1996
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Interest payable on bank borrowings................... 2,429 1,455
Finance charges on finance leases..................... 545 877
----- -----
2,974 2,332
===== =====
</TABLE>
5. EMPLOYEES AND DIRECTORS
(a) Employees
The average number of persons employed by the Group during the year was:
<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
United Kingdom and Europe........................................... 1,493 1,415
United States of America............................................ 275 300
----- -----
1,768 1,715
===== =====
</TABLE>
F-10
<PAGE>
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS--(CONTINUED)
5. EMPLOYEES AND DIRECTORS--CONTINUED
(b) Directors
The directors and their interests and those of their families in the ordinary
share capital of the Company at the dates given below were as follows:
<TABLE>
<CAPTION>
AT 30 SEPTEMBER AT 30 SEPTEMBER
SHARES 1997 1996
- ------ --------------- ---------------
<S> <C> <C>
A D Goldman (Resigned 30 September 1997)........ 8,603,225 8,822,325
L C N Bury...................................... 50,000 --
C J Constable................................... 2,000 2,000
K C Howe........................................ 250,000 150,000
A J Hughes...................................... -- --
M E W Jackson................................... 53,925 53,925
T P Maxfield.................................... 2,540,700 2,990,700
P L Stobart..................................... -- --
P A Walker...................................... 900,465 900,465
A W G Wylie..................................... 12,442,140 12,542,140
---------- ----------
24,842,455 25,461,555
========== ==========
</TABLE>
The above interests in the ordinary share capital of the Company are
beneficial other than Mr A D Goldman's holding which includes 3,494,075 shares
(1996: 3,594,075) held by him as trustee in a non-beneficial capacity and Mr A
W G Wylie's holding which includes 4,000,000 (1996:nil) held by him as trustee
in a non-beneficial capacity.
There have been no changes in the directors' interests in the share capital
of the Company between 30 September 1997 and 10 December 1997.
Three executive directors exercised share options during the year as set out
in the table below:
<TABLE>
<CAPTION>
EXERCISE AT 30 SEPTEMBER EXERCISED IN AT 30 SEPTEMBER
OPTIONS PRICE 1996 THE YEAR 1997
- ------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C>
K C Howe.................. 62.0p 250,000 (250,000) --
A J Hughes................ 99.6p 250,000 (100,000) 150,000
T P Maxfield.............. 6.6p 11,060 -- 11,060
P L Stobart............... 432.0p 115,741 -- 115,741
P A Walker................ 6.6p 428,315 (130,000) 298,315
*....................... 99.6p 250,000 -- 250,000
*....................... 339.0p 156,000 -- 156,000
------ --------- -------- -------
1,461,116 (480,000) 981,116
====== ========= ======== =======
</TABLE>
Notes:
(1) All share options exercised above were exercised on 28 May 1997 when the
prevailing market price was (Pounds)6.50.
(2) Total gains on the exercise of share options were (Pounds)2,856,820 (1996:
nil).
(3) Including gains on share options, the total emoluments of the highest paid
director were (Pounds)1,662,000 (1996: (Pounds)297,000).
Exercise dates for these options are disclosed in note 15 as is relevant market
price information.
F-11
<PAGE>
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS--(CONTINUED)
5. EMPLOYEES AND DIRECTORS--CONTINUED
Directors' emoluments for the year ended 30 September 1997 were as follows:
<TABLE>
<CAPTION>
BENEFITS PENSION
SALARY BONUS IN KIND/3/ CONTRIBUTIONS/1/ TOTAL 1997 TOTAL 1996
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------ ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
A D Goldman/4/ (Resigned
30 September 1997)..... 160 64 16 32 272 297
L C N Bury.............. 19 -- -- -- 19 11
C J Constable........... 19 -- -- -- 19 11
K C Howe................ 177 -- 8 7 192 195
A J Hughes.............. 93 33 13 16 155 130
M E W Jackson/2/........ 72 -- 1 -- 73 65
T P Maxfield/4/......... 100 35 11 17 163 158
P L Stobart (Appointed 1
January 1997).......... 97 50 10 17 174 --
P A Walker.............. 185 74 13 32 304 245
A W G Wylie............. 115 50 15 18 198 178
B R Fisher (Resigned 31
December 1995)......... -- -- -- -- -- 3
----- --- --- --- ----- -----
1,037 306 87 139 1,569 1,293
===== === === === ===== =====
</TABLE>
- --------
Notes:
(1) Retirement benefits were accruing to 7 directors (1996: 6). All pension
contributions accrued under money purchase schemes.
(2) This amount includes payments of (Pounds)28,750 (1996: (Pounds)24,996) for
corporate advisory services.
(3) Benefits in kind include the provision of a company car, fuel, telephone
and medical insurance.
(4) In addition to the above, (Pounds)62,000 (1996: (Pounds)nil) was payable to
A D Goldman and (Pounds)20,000 (1996: nil) was payable to T P Maxfield upon
their retirement being non-cash benefits representing motor vehicles.
6. TAXATION
<TABLE>
<CAPTION>
1997 1996
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
UK Corporation tax.................................... 8,281 6,785
Overseas Corporation tax.............................. 4,139 3,612
Deferred tax.......................................... -- (179)
------ ------
12,420 10,218
====== ======
</TABLE>
7. DIVIDENDS
<TABLE>
<CAPTION>
1997 1996
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Interim paid 0.97p per share (1996: 0.88p)............ 1,052 948
Final proposed 1.93p per share (1996: 1.76p).......... 2,085 1,889
----- -----
Total 2.90p (1996: 2.64p)............................. 3,137 2,837
===== =====
</TABLE>
F-12
<PAGE>
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS--(CONTINUED)
8. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
LONG
FREEHOLD LEASEHOLD
LAND AND LAND AND PLANT AND FIXTURES MOTOR
BUILDINGS BUILDINGS EQUIPMENT AND FITTINGS VEHICLES TOTAL
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Cost
At 1 October 1996...... 17,304 217 10,003 5,623 1,951 35,098
Additions.............. 64 -- 3,131 795 743 4,733
Disposals.............. -- (5) (3,057) (532) (647) (4,241)
Business acquired...... -- -- 4,206 260 53 4,519
Exchange rate
movements............. (687) -- (877) (577) (79) (2,220)
------ --- ------ ----- ----- ------
At 30 September 1997... 16,681 212 13,406 5,569 2,021 37,889
====== === ====== ===== ===== ======
Depreciation
At 1 October 1996...... -- 92 6,715 2,643 810 10,260
Charge for the year.... -- 5 1,744 1,026 382 3,157
Disposals.............. -- (5) (2,727) (164) (373) (3,269)
Business acquired...... -- -- 3,305 111 21 3,437
Exchange rate
movements............. -- -- (546) (290) (48) (884)
------ --- ------ ----- ----- ------
At 30 September 1997.... -- 92 8,491 3,326 792 12,701
====== === ====== ===== ===== ======
Net book amount
At 30 September 1997... 16,681 120 4,915 2,243 1,229 25,188
------ --- ------ ----- ----- ------
At 30 September 1996... 17,304 125 3,288 2,980 1,141 24,838
====== === ====== ===== ===== ======
</TABLE>
Included above are fixed assets purchased under finance leases at a cost of
(Pounds)5,250,000 (1996: (Pounds)6,469,000). The accumulated depreciation on
these assets at 30 September 1997 amounted to (Pounds)1,231,000 (1996:
(Pounds)1,296,000).
9. INVESTMENTS
<TABLE>
<CAPTION>
COMPANY
1997
(Pounds)'000
------------
<S> <C>
Cost
At 1 October 1996................................................. 21,492
Additions......................................................... 40,866
------
At 30 September 1997.............................................. 62,358
======
Provision for diminution in value
At 1 October 1996 and at 30 September 1997........................ (296)
======
Net book amount
At 30 September 1997.............................................. 62,062
------
At 30 September 1996 21,196
======
</TABLE>
F-13
<PAGE>
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS--(CONTINUED)
9. INVESTMENTS--CONTINUED
Principal subsidiary undertakings at 30 September 1997, all of which are
wholly owned and are included in the Group accounts, were as follows:
<TABLE>
<CAPTION>
COUNTRY OF
INCORPORATION
COMPANY NATURE OF BUSINESS AND OPERATION
------- ------------------ -------------
<C> <S> <C>
Sagesoft Limited Software Development and Publication England
Yorkshire Business Forms Limited Distribution of Computer Forms England
Multisoft Financial Systems Limited Software Development and Publication England
DacEasy Inc* Software Development and Publication USA
Telemagic Inc* Software Development and Publication USA
Timeslips Inc* Software Development and Publication USA
Prosoft Corp. (trading as Carpe Diem)* Software Development and Publication USA
Ciel SA* Software Development and Publication France
Sage France* Software Development and Publication France
KHK Software AG* Software Development and Publication Germany
</TABLE>
- --------
* Shares held by subsidiary undertaking
All investments are in ordinary share capital.
10. STOCKS
<TABLE>
<CAPTION>
1997 GROUP 1996 1997 COMPANY 1996
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Materials................... 886 950 88 120
Finished goods.............. 2,413 2,400 606 180
----- ----- --- ---
3,299 3,350 694 300
===== ===== === ===
</TABLE>
11. DEBTORS
<TABLE>
<CAPTION>
1997 GROUP 1996 1997 COMPANY 1996
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Trade debtors.............. 19,642 15,986 7,468 4,423
Amounts owed by Group
undertakings.............. -- -- 27,491 27,916
Debts factored with
recourse (note 12)........ 5,580 -- -- --
Other debtors.............. 1,549 1,559 32 23
Prepayments................ 1,623 1,436 298 198
Taxation recoverable....... 521 472 521 472
------ ------ ------ ------
28,915 19,453 35,810 33,032
====== ====== ====== ======
</TABLE>
Taxation recoverable represents advance corporation tax which is recoverable
more than one year after the balance sheet date.
F-14
<PAGE>
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS--(CONTINUED)
12. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
GROUP COMPANY
1997 1996 1997 1996
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Current portion of bank
loans and bank
overdraft.............. 5,110 3,158 4,500 --
Current portion of
finance lease
obligations............ 422 730 -- --
Trade creditors......... 9,374 8,555 1,345 1,469
Provision for debts
factored with recourse
(note 11).............. 5,580 -- -- --
Amounts owed to Group
undertakings........... -- -- 204 591
Corporation tax......... 11,041 8,574 29 --
Other taxes and social
security costs......... 7,285 7,889 1,525 1,048
Accruals................ 6,789 4,915 1,819 1,819
Deferred consideration
on acquisitions........ -- 3,241 -- 2,149
Advance corporation
tax.................... 521 472 521 472
Proposed dividend....... 2,085 1,889 2,085 1,889
Other creditors......... 1,551 1,970 -- 330
------ ------ ------ -----
49,758 41,393 12,028 9,767
====== ====== ====== =====
</TABLE>
Included in current portion of bank loans and bank overdraft is
(Pounds)4,500,000 (1996: (Pounds)3,098,000) of unsecured loans which are
repayable by instalments in less than five years and (Pounds)550,000 of bank
overdraft.
13. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
GROUP COMPANY
1997 1996 1997 1996
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Finance lease
obligations:
1-2 years............. 181 141 -- --
2-5 years............. 790 1,334 -- --
5 years and over...... 5,112 6,066 -- --
Bank loans:
1-2 years............. 8,748 3,158 8,400 --
2-5 years............. 25,558 7,151 21,100 --
5 years and over...... 585 645 -- --
------ ------ ------ ---
40,974 18,495 29,500 --
====== ====== ====== ===
</TABLE>
Included in Group bank loans above and in note 12 is (Pounds)38,278,000
(1996: (Pounds)10,069,000) of unsecured loans repayable by instalments in less
than five years which were taken out in connection with the Sybel and KHK
acquisitions. Loans repayable in excess of five years are secured on a Group
freehold property and accrue interest at a rate of 1.75% over the UK base rate
and are repayable at (Pounds)60,000 per annum.
F-15
<PAGE>
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS--(CONTINUED)
14. PROVISIONS FOR LIABILITIES AND CHARGES
The provision for deferred taxation at 30 September 1997 was (Pounds) nil
(1996: (Pounds) nil).
<TABLE>
<CAPTION>
GROUP COMPANY
1997 1996 1997 1996
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Full potential deferred tax
(asset)/liability:
Tax deferred by accelerated
capital allowances........ 714 126 -- --
Short term timing
differences............... (9,814) (2,788) -- 1
------ ------ --- ---
(9,100) (2,662) -- 1
====== ====== === ===
</TABLE>
Deferred tax has been calculated at 31% (1996: 33%) in respect of UK
companies and at the respective prevailing rates for the overseas subsidiaries.
No deferred tax has been provided in respect of the remittance of earnings
retained overseas, as there is no intention in the foreseeable future to remit
these earnings to the UK.
15. CALLED UP EQUITY SHARE CAPITAL AND SHARE PREMIUM ACCOUNT
(a) Ordinary share capital
<TABLE>
<S> <C> <C>
1997 1996
(Pounds)'000 (Pounds)'000
------------ ------------
Allotted and fully paid 108,072,478 Ordinary shares
of 1p each (1996: 107,326,095)...................... 1,081 1,073
============ ============
</TABLE>
The authorised share capital of the Company at 30 September 1997 and 30
September 1996 was (Pounds)1,438,500 comprising 143,850,000 ordinary shares of
1p each.
During the year, 745,950 1p ordinary shares were issued in respect of options
exercised under executive share option schemes which were exercised at prices
of 6.6p, 37.8p, 62.0p, 98.0p and 99.6p. Proceeds received in respect of these
shares were (Pounds)442,502. The following share options were outstanding at 30
September 1997:
<TABLE>
<CAPTION>
DATE OPTION GRANTED OPTION PRICE PER SHARE DATE EXERCISABLE NUMBER OF SHARES
- ------------------- ----------------------- ---------------------------------- ----------------
<S> <C> <C> <C>
16 March 1989 6.6p 6 December 1989--16 March 1999 309,375
11 January 1991 37.8p 11 January 1994--11 January 2001 103,160
20 December 1991 62.0p 20 December 1994--20 December 2001 130,000
5 January 1993 98.0p 5 January 1996--5 January 2003 75,000
16 December 1993 99.6p 16 December 1996--16 December 2003 400,000
15 January 1996 339.0p 15 January 1999--15 January 2006 156,000
3 May 1996 432.0p 3 May 1999--3 May 2006 160,741
10 February 1997 539.0p 10 February 2000--10 February 2007 15,000
19 May 1997 652.0p 19 May 2000--19 May 2007 150,000
In addition options as follows were granted on 20 September 1996 under the
terms of The Sage Group plc 1996 Savings Related Share Option Scheme approved by
members on 7 February 1996:
20 September 1996 346.0p 20 September 1999--19 March 2000 56,023
20 September 1996 346.0p 20 September 2001--19 March 2002 119,747
20 September 1996 346.0p 20 September 2003--19 March 2004 32,680
</TABLE>
Under the above scheme, 433 1p ordinary shares were issued during the year
for proceeds of (Pounds)1,498.
F-16
<PAGE>
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS--(CONTINUED)
15. CALLED UP EQUITY SHARE CAPITAL AND SHARE PREMIUM ACCOUNT--CONTINUED
The market price of the shares of the Company at 30 September 1997 was 696p
and the highest and lowest prices during the year were 720p and 458p
respectively.
(B) SHARE PREMIUM
<TABLE>
<CAPTION>
GROUP AND
COMPANY
(Pounds)'000
------------
<S> <C>
At 1 October 1996.................................................. 9,076
Shares issued for options exercised................................ 436
-----
At 30 September 1997............................................... 9,512
=====
</TABLE>
16. PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
GROUP COMPANY
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
At 1 October 1996..................................... 52,229 35,781
Retained profit for the year.......................... 22,078 13,048
Foreign currency translation differences.............. 2,953 --
------ ------
At 30 September 1997.................................. 77,260 48,829
====== ======
</TABLE>
Currency translation adjustments in the Group profit and loss account include
gains of (Pounds)1,172,000 (1996:(Pounds)545,000) relating to foreign currency
borrowings used to finance overseas investments.
17. GOODWILL RESERVE
<TABLE>
<CAPTION>
GROUP
(Pounds)'000
------------
<S> <C>
At 1 October 1996.................................................. 85,592
Goodwill arising in the year....................................... 48,502
-------
At 30 September 1997............................................... 134,094
=======
</TABLE>
Goodwill arising in the year comprises (Pounds)45.0m in respect of the
acquisition of KHK (see note 18(a)), (Pounds)2.5m in respect of the acquisition
of Prosoft Corp. (trading as Carpe Diem), (see note 18(b)), (Pounds)0.8m in
respect of the acquisition of minority interests in Ciel SA and (Pounds)0.2m
principally in respect of the final determination of fair values on the
acquisition of Sybel.
The cumulative amount of goodwill written off to reserves, before utilisation
of section 131(2) of the Companies Act 1985, amounts to (Pounds)137,871,000 at
30 September 1997 (1996: (Pounds)89,369,000).
F-17
<PAGE>
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS--(CONTINUED)
18. ACQUISITIONS
(a) KHK
On 27 February 1997 the Group completed the acquisition of KHK Software AG
for a net cash consideration of (Pounds)40.7m (inclusive of (Pounds)0.6m
costs). Total goodwill arising on the acquisition is (Pounds)45.0m. The fair
value of net assets acquired are based on provisional assessments pending final
determination of certain assets and liabilities.
The assets and liabilities of KHK at fair value were:
<TABLE>
<CAPTION>
FAIR VALUE ADJUSTMENTS
----------------------------------------------------
ALIGNMENT
OF ACCOUNTING FAIR VALUE
BOOK VALUE POLICIES(/1/) OTHER(/2/) TO GROUP
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Fixed assets.............. 1,585 (503) -- 1,082
Stocks.................... 568 -- (42) 526
Debtors................... 11,125 6,033 (5,859) 11,299
Cash at bank.............. 573 -- -- 573
Creditors falling due
within one year.......... (4,558) (6,033) (931) (11,522)
Provision for
reorganisation(3)........ (1,246) -- -- (1,246)
Deferred income........... (4,964) -- -- (4,964)
------ ------ ------ -------
3,083 (503) (6,832) (4,252)
Goodwill arising (note
17)...................... 45,011
------ ------ ------ -------
Cash consideration
including costs (note
18(c))................... (40,759)
====== ====== ====== =======
</TABLE>
Notes:
(1) Alignment of accounting policies relates to the elimination of intangible
fixed assets and the grossing up of debtors and borrowings to reflect trade
sales under a debt financing facility with full recourse.
(2) Other adjustments include a reappraisal of the provision for bad and
doubtful debts and an assessment of product warranty and recall costs.
(3) Relates to the reorganisation of an Austrian subsidiary which was a
commitment of management prior to acquisition.
Prior to acquisition the last full set of financial statements of KHK were
prepared to 31 December 1996 and showed a profit after taxation and minority
interests of DM 5.3m.
The pre-acquisition results for KHK for the period from 1 January 1997 to 26
February 1997 prepared under KHK's accounting policies and principles prior to
acquisition were as follows:
<TABLE>
<CAPTION>
DM'000
------
<S> <C>
Turnover................................................................ 11,291
------
Operating Loss before exceptional items................................. (313)
Exceptional Items--provision for reorganisation......................... (3,414)
------
Operating Loss after exceptional items.................................. (3,727)
Net Interest receivable................................................. 212
------
Loss before taxation.................................................... (3,515)
Taxation and minority interests......................................... (40)
------
Loss after taxation..................................................... (3,555)
======
</TABLE>
F-18
<PAGE>
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS--(CONTINUED)
18. ACQUISITIONS--CONTINUED
Other than the loss for the period there were no other gains or losses.
(b) Other
Other acquisitions comprise the purchase of Prosoft Corp. (trading as Carpe
Diem) for (Pounds)2.2m. The book value of assets acquired was (Pounds)0.2m.
Fair value adjustments relating to the deferral of maintenance revenues in
accordance with Group accounting policies and to adjustments to working capital
amounted to (Pounds)(0.5)m resulting in goodwill of (Pounds)2.5m. A maximum of
$2.8m further consideration is potentially payable for this acquisition
dependent upon achievement of revenue thresholds however none of this
additional consideration has been provided as it is considered unlikely that
further contractual payments will be made.
(c) Analysis of net outflow of cash in respect of acquisitions
Cash consideration:
<TABLE>
<CAPTION>
(Pounds)'000
------------
<S> <C>
KHK (note 18(a))................................................... 40,759
Prosoft Corp. (note 18(b))......................................... 2,180
Net cash acquired.................................................. (291)
------
42,648
======
</TABLE>
19. PARENT COMPANY PROFIT AND LOSS ACCOUNT
As permitted by Section 230(1) of the Companies Act 1985, The Sage Group plc
has not presented its own profit and loss account. The amount of profit for the
financial year before dividends dealt with in the accounts of the parent
company is (Pounds)16,185,000 (1996: (Pounds)12,926,000). There is no material
difference between the profits and losses as reported above and historical cost
profits and losses.
20. OPERATING LEASE COMMITMENTS
The Group's annual commitment under non-cancellable operating leases
comprises:
<TABLE>
<CAPTION>
1997 1996
PLANT AND LAND AND PLANT AND LAND AND
EQUIPMENT BUILDINGS EQUIPMENT BUILDINGS
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Expiring within 1 year..... 1,159 291 122 496
Expiring between 1 and 2
years..................... 600 716 108 421
Expiring between 2 and 5
years..................... 1,123 3,433 325 90
Expiring after more than 5
years..................... -- -- -- 439
----- ----- --- -----
2,882 4,440 555 1,446
===== ===== === =====
</TABLE>
The Company has no operating lease commitments (1996: nil).
F-19
<PAGE>
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS--(CONTINUED)
21. CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
The Group has no contracted capital commitments at 30 September 1997 (1996:
(Pounds)0.2m). The Group has no contingent liabilities at 30 September 1997
(1996: (Pounds)nil) with the exception of deferred consideration in respect of
the acquisition of Prosoft Corp.
22. PENSION COMMITMENTS
The Group operates one principal Group personal pension plan which is managed
by Norwich Union Life Assurance Society and covers the majority of its UK full
time employees. The Group also operates a fully insured executive pension plan
managed by the Scottish Equitable Life Assurance Society for its Executive
Directors. Both are defined contribution pension schemes.
23. EARNINGS PER SHARE
Earnings per share are calculated based on a weighted average number of 1p
shares in issue during the year of 107,641,176 (1996: 107,149,618).
24. CONSOLIDATED CASH FLOW STATEMENT
(A) RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
1997 1996
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Operating profit (1996--after exceptional costs of
(Pounds)1,157,000).................................. 40,080 32,094
Depreciation charges................................. 3,157 2,890
Loss on sale of tangible fixed assets................ 99 46
Exchange differences................................. (1,356) 26
Decrease/(Increase) in stocks........................ 578 (321)
Decrease/(Increase) in debtors....................... 2,298 (455)
(Decrease)/Increase in creditors..................... (4,650) 768
Increase in provision for deferred maintenance....... 194 1,976
------ ------
Net cash inflow from operating activities........... 40,400 37,024
====== ======
</TABLE>
Exceptional costs in 1996 include an amount of (Pounds)335,000 which had not
been paid at 30 September 1996.
F-20
<PAGE>
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS--(CONTINUED)
24. CONSOLIDATED CASH FLOW STATEMENT--CONTINUED
(B) ANALYSIS OF CHANGES IN NET CASH
<TABLE>
<CAPTION>
(Pounds)'000
------------
<S> <C>
At 1 October 1996.................................................. 5,249
Net cash movement.................................................. 1,573
-----
At 30 September 1997.............................................. 6,822
</TABLE>
KHK's overdraft balance was (Pounds)282,000 on acquisition and
(Pounds)550,000 at the year end, the movement resulting principally from
operating cash flows.
(C) ANALYSIS OF CHANGES IN FINANCING DURING THE YEAR
<TABLE>
<CAPTION>
SHARE CAPITAL OBLIGATIONS UNDER
(INCLUDING PREMIUM) LOANS FINANCE LEASES
(Pounds)'000 (Pounds)'000 (Pounds)'000
------------------- ------------ -----------------
<S> <C> <C> <C>
At 1 October 1996........... 10,149 14,112 8,271
Acquisitions................ -- 399 --
Exchange differences........ -- (1,757) (1,642)
Net cash flow from
financing.................. 444 26,697 (124)
------ ------ ------
At 30 September 1997....... 10,593 39,451 6,505
====== ====== ======
</TABLE>
(D) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT (INCLUSIVE OF
FINANCE LEASES)
<TABLE>
<CAPTION>
(Pounds)'000
------------
<S> <C>
Increase in cash in the year....................................... 1,573
Cash inflow from increase in debt.................................. (26,573)
-------
Change in net debt resulting from cash flows....................... (25,000)
Loan acquired with subsidiary...................................... (399)
Exchange difference................................................ 3,399
-------
Movement in net debt in the year................................... (22,000)
Net debt at 1 October 1996......................................... (17,134)
-------
Net debt at 30 September 1997..................................... (39,134)
=======
</TABLE>
(E) ANALYSIS OF CHANGE OF NET DEBT (INCLUSIVE OF FINANCE LEASES)
<TABLE>
<CAPTION>
AT 1 AT 30
OCTOBER EXCHANGE SEPTEMBER
1997 CASH FLOW MOVEMENT 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net cash at bank and in
hand...................... 5,249 1,573 -- 6,822
Debt due within one year... (3,888) (1,655) 561 (4,982)
Debt due after one year.... (18,495) (25,317) 2,838 (40,974)
------- ------- ----- -------
Total.................... (17,134) (25,399) 3,399 (39,134)
======= ======= ===== =======
</TABLE>
25. RELATED PARTY TRANSACTIONS
In addition to fees in connection with services as a director as disclosed in
note 5, the Company rents premises from Elderstreet Investments Limited, a
company in which Mr M E W Jackson has an interest. The rental paid during the
year was (Pounds)15,000 and (Pounds) nil was due to Elderstreet Investments
Limited at 30 September 1997.
During the year the Group purchased for (Pounds)0.9m the 5% minority interest
held in Ciel SA of which (Pounds)0.5m was paid to Mr P Y Morlet who was, at the
time, Managing Director of the Group's French subsidiaries.
F-21
<PAGE>
THE SAGE GROUP PLC ANNUAL REPORT & ACCOUNTS 1997
NOTES TO THE ACCOUNTS--(CONTINUED)
26. POST BALANCE SHEET EVENT
On 18 December 1997, the Company's print management business, Dataform
(comprising Yorkshire Business Forms Limited and Venture Business Forms) was
sold to its management team for a gross consideration of (Pounds)7.2m inclusive
of a pre-disposal dividend of (Pounds)1.1m giving a net consideration of
(Pounds)6.1m. Dataform's operating profit for the year ended 30 September 1997
was (Pounds)0.9m.
F-22
<PAGE>
EXHIBIT (b)(1)
CONFORMED COPY
--------------
DATED 27th January 1998
____________________________________________
THE SAGE GROUP PLC
ROSE ACQUISITION CORP.
- and -
THE BANKS AND FINANCIAL INSTITUTIONS
named in Schedule 1
- and -
LLOYDS BANK PLC
CAPITAL MARKETS
as Arranger
- and -
LLOYDS BANK PLC
CAPITAL MARKETS
as Agent
_____________________________________________
FACILITIES AGREEMENT
in relation to a $218,000,000 multi-currency
Term Loan Facility
and a
$15,000,000 multi-currency Revolving Credit Facility
_____________________________________________
Cameron McKenna
Mitre House
160 Aldersgate Street
London EC1A 4DD
T +44(0)171 367 3000
F +44(0)171 367 2000
(Ref: FMO/0X2244.08689)
<PAGE>
CONTENTS
--------
<TABLE>
<CAPTION>
CLAUSE DESCRIPTION PAGE NO
- ------ ----------- -------
<S> <C> <C>
1. Definitions and interpretation
------------------------------
1.1 Definitions 1
1.2 Interpretation 18
2. The Facilities
--------------
2.1 Amount and Purpose 19
2.2 Utilisation Procedures - Drawdown of the Advances 20
2.3 Utilisation Procedures - Tranches under the Term Loan Facility 22
2.4 Interest 24
2.5 Variation of Margin 27
2.6 Repayment and Prepayment 28
2.7 Currency Option 30
2.8 Default Interest 31
2.9 Payments 32
2.10 Reduction, Cancellation and Termination 33
2.11 Obligations and Rights of the Banks, 34
Arranger and Agent
3. Conditions precedent
--------------------
3.1 Conditions precedent to the Facilities 34
3.2 Conditions precedent to the making of
an Advance or Tranche 34
3.3 Rollover 35
3.4 Certain Funds Period 35
4. Taxes
-----
4.1 Grossing up 36
4.2 Bank's obligation to lodge relevant 36
declarations etc
4.3 Qualifying Bank 36
4.4 US Taxes 37
5. Tax receipts
------------
5.1 Notification 38
5.2 Delivery of tax receipts 38
5.3 Benefit of tax credits etc 38
6. Increased costs
---------------
6.1 Reimbursement for increased costs 39
6.2 Exceptions 40
6.3 Notification 40
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
7. Illegality and Market Disruption
--------------------------------
7.1 Illegality 41
7.2 Market Disruption 41
8. Mitigation of additional costs
------------------------------
8.1 Banks' obligation to mitigate 43
9. Representations and warranties
------------------------------
9.1 Representations and warranties 44
9.2 Target and Subsidiaries 48
9.3 Repetition 48
10. Financial covenants and undertakings
------------------------------------
10.1 Financial covenants 49
10.2 Undertakings 51
10.3 Target and subsidiaries 55
11. Events of Default
-----------------
11.1 Events of Default 55
11.2 Target and Subsidiaries 60
11.3 Delay 60
11.4 Interest 60
12. Costs, Expenses and Indemnities
-------------------------------
12.1 Costs and expenses 60
12.2 Indemnity by the Parent 61
12.3 Indemnity by Banks 62
13. Fees
----
13.1 Agency fee 62
13.2 Underwriting Fee 62
13.3 Syndication Fee 62
13.4 Commitment fee 62
14. Notices
-------
14.1 Service 63
14.2 Deemed delivery 63
15. Miscellaneous
-------------
15.1 Waiver 64
15.2 Governing law 64
15.3 Jurisdiction and Submission 64
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
15.4 Accounts 65
15.5 Schedules 65
15.6 Illegality 65
15.7 Currency 65
15.8 Provision of payments 66
15.9 Turnover taxes 67
15.10 Set-off 67
15.11 Excess payments 67
15.12 Redistribution of payments 68
15.13 Amendments 68
16. Assignment and Transfer and Facility Offices
--------------------------------------------
16.1 Successors, assigns and transferees 69
16.2 Restriction on assignment and transfer 69
by Borrowers
16.3 Assignment or transfer by a Bank 69
16.4 Transfer 70
16.5 Additional cost to the Borrowers 70
16.6 Facility Office 70
16.7 Confidential information 71
16.8 Fee 71
17. The Agent, the Arranger and the Reference Banks
-----------------------------------------------
17.1 Appointment of Agent 71
17.2 Waiver etc 71
17.3 No fiduciary relationship 72
17.4 Agent not required to take certain action 73
17.5 Exclusion of liability 73
17.6 No reliance 73
17.7 Extent of Agent's and Arranger's responsibility 73
17.8 No liability to account 74
17.9 Indemnity 74
17.10 Retirement of Agent 74
17.11 Reference Banks 75
17.12 Agent's costs 75
17.13 Agency and syndication division 76
17.14 No requirement to disclose 76
17.15 Agent and Arranger not deemed to have actual 76
knowledge or notice of certain matters
17.16 Meetings of Banks 76
17.17 Conflict of interest 77
18. Hedging 77
-------
19. Releases 78
--------
20. Counterparts 78
------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Schedules
- ---------
<S> <C>
1 The Banks and their Commitments 79
2 Associated Costs Rate 80
3 Transfer Certificate 82
4 Utilisation Requests 86
5 Conditions Precedent 91
6 Material Subsidiaries 98
7 Permitted Encumbrances 99
Execution pages 100
---------------
</TABLE>
<PAGE>
THIS FACILITIES AGREEMENT is made the_______of________1998
BETWEEN:
(1) THE SAGE GROUP PLC incorporated in England (Registration No 2231246) and
having its registered office at Sage House, Benton Park Road, Newcastle
upon Tyne NE7 7LZ (THE "PARENT");
(2) ROSE ACQUISITION CORP., a company incorporated in the State of Delaware,
United States of America (the "PURCHASER");
(3) THE BANKS AND FINANCIAL INSTITUTIONS whose names and present Facility
Offices are set forth in Schedule 1;
(4) LLOYDS BANK PLC CAPITAL MARKETS, whose address for this purpose is St
George's House, 6/8 Eastcheap, London EC3M 1LL in its capacity as arranger
(the "ARRANGER"); and
(5) LLOYDS BANK PLC CAPITAL MARKETS, whose address for this purpose is St
George's House, 6/8 Eastcheap, London EC3M 1LL in its capacity as agent
of and trustee for the Banks.
NOW IT IS HEREBY AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 Definitions
In this agreement and the schedules, except where the context otherwise
requires, each of the expressions set out in the left hand column shall
bear the meaning shown opposite it in the right hand column:
"ACCEPTABLE FORM" means in relation to any document a form which is agreed
between the Parent and the Agent or, in default of agreement, in a form
which is acceptable to the Agent and which shall have been designated as
such by the Agent
"ACCOUNTING REFERENCE DATE" has the meaning given to it in Part VII of the
Companies Act 1985 (as amended by the Companies Act 1989)
"ACQUISITION" means the acquisition by way of purchase and merger of the
Target by the Purchaser according to the terms of the Offer to Purchase,
the Option Agreement, the Shareholders' Agreements and the Merger
Agreement
"ACQUISITION DOCUMENTS" means the Offer to Purchase, the Merger Agreement,
the Option Agreement, the Shareholders' Agreements and the Schedule 14D-1
<PAGE>
"ADVANCE" means an advance (as from time to time reduced by repayment)
made or to be made by the Banks hereunder
"AGENT" means Lloyds Bank Plc acting in its capacity as agent and trustee
of the Banks and such expression shall include any successor to that
office appointed pursuant to clause 17
"AGENT'S FEES LETTER" means the letter of even date herewith addressed by
the Agent to the Parent
"ANNOUNCEMENT" means the announcement issued by the Purchaser of the
Tender Offer to acquire not less than 49.9% of the entire issued share
capital of Target
"ASSOCIATED COSTS RATE" means, in relation to any Advance or Tranche or
unpaid sum denominated in Sterling, the cost to any Bank of complying with
the requirements of the Bank of England or other regulatory authority
affecting mandatory liquid assets, special deposits or other requirements
of any regulatory authority of whatever nature in accordance with the
additional cost provisions as set out in Schedule 2
"AVAILABLE COMMITMENT" means, in relation to a Bank and a proposed Advance
or Tranche under this agreement and for the purposes of clause 13.4 of
this agreement, its Commitment less its Outstandings
"AVAILABILITY PERIOD" means:
(a) in respect of Advances under the Term Loan Facility, the period
beginning on the date of this agreement and ending on 31st July 1998
(b) in respect of Advances under the Revolving Advances Facility, the
period beginning on the date of this agreement and ending on the
Termination Date
"AVAILABLE REVOLVING FACILITY AMOUNT" means, in relation to any proposed
Utilisation under the Revolving Advances Facility, the aggregate of the
Revolving Commitments of all the Banks at the time of such Utilisation,
adjusted (as indicated below) so as to take into account:
(a) the aggregate of the Revolving Outstandings at the time of such
Utilisation (an adjustment downwards);
(b) (to the extent not already taken into account) any reduction in the
Revolving Commitment of a Bank which will occur prior to the
commencement of, or during, the Term relating to the proposed
Utilisation in question consequent upon a cancellation or reduction
of the whole or any part of the Revolving Commitment of such Bank,
pursuant to the terms hereof (an adjustment downwards);
(c) the aggregate of the Original Dollar Amounts of any Advances which
the Banks are then obliged to make under the Revolving Advances
2
<PAGE>
Facility on, before or after the proposed Utilisation Date by virtue
of a Utilisation Request having been made (an adjustment downwards);
and
(d) the aggregate of the Original Dollar Amounts of any Advances which
have been made under the Revolving Advances Facility by the Banks
and which are due to be repaid on or before the proposed Utilisation
Date (an adjustment upwards)
"AVAILABLE TERM LOAN FACILITY AMOUNT" means, in relation to any proposed
Utilisation under the Term Loan Facility, the aggregate of the Term Loan
Commitments of all the Banks at the time of such Utilisation, adjusted (as
indicated below) so as to take into account:
(a) the aggregate of the amounts of the Term Loan Outstandings under the
Term Loan Facility at the date of or before the time of the proposed
Utilisation and whether or not still outstanding (an adjustment
downwards);
(b) (to the extent not already taken into account) any reduction in the
Term Loan Commitment of a Bank which will occur prior to or during
the term of such proposed Utilisation consequent upon a cancellation
or reduction of the whole or any part of the Term Loan Commitment of
such Bank, pursuant to the terms hereof (an adjustment downwards);
and
(c) the aggregate of the Original Dollar Amounts of any Advances (or
Tranches comprised therein) under the Term Loan Facility which the
Banks are then obliged to make on, before or after the date of the
proposed Utilisation by virtue of a Utilisation Request having been
made (an adjustment downwards).
"BANKS" means at the date hereof, the Bank whose name is set out in
Schedule 1, and thereafter such Bank to the extent that it remains with a
Commitment hereunder and those banks and financial institutions which,
from time to time, acquire a Commitment by virtue of the provisions of
this agreement and remain with such a Commitment, and the successors in
title and permitted assigns thereof
"BASE ACCOUNTS" means the unaudited consolidated profit and loss account
and balance sheet of the Group for the Financial Year ended 30th September
1997
"BASE ACCOUNTS DATE" means 30th September 1997
"BORROWERS" means the Parent and the Purchaser; and "BORROWER" means
either of them as the context may require
"BORROWINGS" means any Indebtedness incurred in respect of:
(a) money borrowed or raised of any kind (whether or not for a cash
consideration) and premiums (if any) and accrued interest in respect
thereof;
3
<PAGE>
(b) the principal, premiums (if any) and accrued interest in respect of
any debenture, bond, note, commercial paper, loan stock or similar
debt instrument;
(c) any share capital or other amounts payable thereon, to the extent
that such share capital or amounts are redeemable or payable prior
to the Final Repayment Date pursuant to the terms of issue thereof
or the terms of any other obligation of the issuer or another person
to purchase the same or make payment thereon;
(d) any acceptance credits, documentary credits, note or bond
facilities;
(e) rental or hire payments due under hire-purchase agreements or
finance leases (whether in respect of land, machinery, equipment or
otherwise) entered into as a method of financing the acquisition of
the asset leased or hired;
(f) the deferred purchase price of assets or services where such
payments are deferred for a period of more than 90 days (if the
creditor is a person resident in the United Kingdom) or 120 days (if
the creditor is a person resident somewhere other than the United
Kingdom);
(g) any receivables sold or discounted (otherwise than on a non-recourse
basis) to the extent of any recourse to the vendor;
(h) any other transaction having the commercial effect of borrowing; and
(i) guarantees, indemnities or other suretyship obligations in respect
of any of the foregoing.
For the purposes of this definition, no item shall be counted more than
once. Where it is necessary to calculate Borrowings in Sterling then any
of the foregoing which is denominated in or calculated by reference to a
currency other than Sterling shall be converted into Sterling at such rate
as the Agent shall determine to be the spot rate at which the Agent is
able, at or about 11.00 am on the day in question, to purchase Sterling
with that amount of the currency concerned in the London foreign exchange
market
"BUSINESS DAY" means:
(a) a day (not being a Saturday or Sunday) on which banks and foreign
exchange markets are open for business (including dealing in US
Dollars) in London; and
(b) (in respect of a day on which a payment or other transaction in US
Dollars or an Optional Currency is required under this agreement in
a place other than London) a day (not being a Saturday or Sunday) on
which banks and foreign exchange markets are also open for business
in the place of the principal domestic market of the currency
concerned or
4
<PAGE>
where there is more than one such place of principal domestic
market, the place designated by the Agent for such purpose
"CAPITAL EXPENDITURE" means expenditure which should be treated as capital
expenditure in accordance with generally accepted accounting principles,
standards and practices in the United Kingdom from time to time
"CASH EQUIVALENT INVESTMENTS" means:
(a) debt securities denominated in Deutschemarks, French Francs,
Sterling or US Dollars (or a currency readily convertible into the
aforegoing) issued by the Government of a country which is a member
of the Organisation for Economic Co-operation and Development where
there is outstanding sovereign debt issued by that country which is
rated at least BBB+ by Standard & Poor's Corporation ("S&P's") or
Baal by Moody's Investor Services Inc. ("Moody's"), where such debt
securities have not more than 3 months to final maturity and are not
by their terms convertible into any other form of security
(b) debt securities denominated in Deutschemarks, French Francs,
Sterling or US Dollars (or a currency readily convertible into the
aforegoing) which have not more than 3 months to final maturity, are
not convertible into any other form of security, are rated P1 by
Moody's or A-1 by S&P's and are not issued or guaranteed by any
member of the Group
"CERTIFICATE OF COMPLIANCE" has the meaning given to it by clause
10.1(c)(vii)
"CERTIFIED COPY" means any copy certified as true, complete and up to date
by the company secretary or a director of the Parent
"CLOSE OF SYNDICATION" means the date upon which the Agent (acting
reasonably) determines that the primary syndication of the Facilities has
closed
"COMMITMENT" in relation to a Bank, means (save as otherwise provided
herein) the aggregate amount in US Dollars of its Revolving Commitment and
Term Loan Commitment set opposite its name in the First Schedule or (as
the case may be) the amounts in US Dollars of Revolving Commitment and
Term Loan Commitment specified as the portion thereof transferred pursuant
to the terms hereof to such Bank in the Transfer Certificate pursuant to
which such Bank became a party hereto, in each case to the extent not
cancelled or reduced pursuant to the provisions hereof
"COMMITMENT FEE" means the fee payable to the Agent pursuant to clause
13.4
"CONSOLIDATED EBITDA " means in respect of any period Consolidated Profit
before Interest and Tax for that period but after adding back an amount
equal to any depreciation or amortisation in respect of the Group charged
during such period
5
<PAGE>
"CONSOLIDATED FINANCE COSTS" means, in relation to any relevant period,
the aggregate of:
(a) Consolidated Net Interest Payable;
(b) any repayments of principal required to be made during and in
respect of such period in respect of any Borrowings (including
repayments of principal required to be made pursuant to the terms of
this agreement which for the avoidance of doubt shall include any
repayments which would have been required to have been made but for
any prepayment made during such period)
"CONSOLIDATED NET INTEREST PAYABLE" the aggregate of all amounts of
interest and recurrent financial expenses or charges of the Parent and its
Subsidiaries (including, without limitation, commitment commission)
payable to persons who are not the Parent or such a Subsidiary (calculated
on a consolidated basis but after deducting any interest receivable from
persons who are not the Parent or such a Subsidiary) attributable to the
period in question, and shall include any discount, fees and any element
attributable to interest comprised in payments to lessors under finance
leases or to owners under hire-purchase agreements, and also to include
(without limitation and for the avoidance of doubt) any amounts of such
interest and expenses which may not have accrued payable in any such
period and which are payable in a later period but are attributable to
that period. In calculating Consolidated Net Interest Payable for any
period, due account shall be taken of (and a consequential adjustment,
whether positive or negative shall be made to reflect) the net benefit or
loss (as the case may be) to the Parent and its Subsidiaries for or in
respect of any payments accruing to or from them in such period pursuant
to any interest rate swaps, hedging or analogous contracts for the
mitigation of interest rate fluctuations or movements which they have
entered into with third parties (which for these purposes may include one
or more of the Banks) in respect of Indebtedness
"CONSOLIDATED PROFIT BEFORE INTEREST AND TAX" means the consolidated net
profit of the Parent and its Subsidiaries attributable to the period in
question (before taxation, minority interests, exceptional items, profits
or losses on the sale or termination of operations, costs of a fundamental
reorganisation or restructuring, results of discontinued operations,
interest payable and any element attributed to interest comprised in
payments to lessors under finance leases or to owners under hire-purchase
agreements and other matters to be taken into account in calculating
Consolidated Net Interest Payable)
"CONSOLIDATED PROFIT BEFORE TAX" means the consolidated net profit of the
Parent and its Subsidiaries attributable to the period in question before
taxation
"CONSOLIDATED TOTAL BORROWINGS" means at any time, a sum in Sterling equal
to the aggregate (calculated on a consolidated basis) of the amount of
Borrowings of the Parent and its Subsidiaries after deducting Cash
Equivalent Investments and the aggregate amounts of cash in hand and cash
at bank which can at that time immediately and readily be withdrawn by the
Parent or any such Subsidiary and remitted to the United Kingdom
6
<PAGE>
"CONSOLIDATED TURNOVER" means the consolidated turnover of the Parent and
its Subsidiaries attributable to the period in question
"CONVERSION DATE" means in relation to any Tranche or Advance under the
Term Loan Facility denominated in an Optional Currency:
(a) if the relevant Tranche or Advance has at all times been outstanding
in that Optional Currency and has not been repaid and re-advanced
pursuant to clause 2.7(c), the date of drawing of the same; or
(b) if the relevant Tranche or Advance has been repaid and re-advanced
pursuant to clause 2.7, the date on which such Tranche or Advance
was last repaid and re-advanced;
"DEUTSCHEMARKS" means the lawful currency of Germany
"DOCUMENTS" has the meaning given to it by clause 12.1
"DOLLAR EQUIVALENT" means, in relation to any amount of Optional Currency
on any relevant date, the amount of US Dollars determined by the Agent as
being required to purchase that amount of Optional Currency at its spot
rate for the purchase of that Optional Currency with US Dollars at or
about 11.00am on the third Business Day immediately preceding that date
"DRAWDOWN UTILISATION" means a utilisation of one of the Facilities by the
drawing down of an Advance and where relevant, the division at such time
of that Advance in Tranches
"DRAWDOWN UTILISATION REQUEST" means a request by one of the Borrowers for
a Drawdown Utilisation
"EFFECTIVE DATE" has the meaning given to it by clause 3.1
"ENCUMBRANCE" means, without limitation, any mortgage, debenture, standard
security, charge (whether fixed or floating), pledge, hypothecation or
lien (other than a lien arising by operation of law), assignment,
agreement or other arrangement which is for the purpose of and has the
same commercial effect as the granting of security, or other security
interest of any kind
"ENVIRONMENTAL LAWS" means all laws (statutory common law or otherwise)
from time to time regulating the carrying on of any process or activity on
premises and any emissions from and all waste produced by such process or
activity with any chemicals or substances relating to the same whether
relating to health and safety, the workplace, the environment or the
provision of energy from time to time in force
"ENVIRONMENTAL LICENCE" means any permit, licence, authorisation, consent
or other approval required by or given pursuant to any Environmental Laws
7
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974 (as
amended from time to time) and the rules and regulations promulgated
thereunder from time to time in effect
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the
Target under section 414 of the Internal Revenue Code of 1986 (as amended
from time to time)
"EQUIVALENT AMOUNT" means, in relation to any amount of US Dollars on any
relevant date, the amount of Optional Currency determined by the Agent as
being capable of being purchased with that amount of US Dollars at its
spot rate for the purchase of that Optional Currency with US Dollars at
our about 11.00am on the third Business Day immediately preceding that
date
"EVENT OF DEFAULT" means any one of the events or circumstances listed in
clause 11.1
"FACILITIES" means the Revolving Advances Facility and the Term Loan
Facility; and "FACILITY" means the relevant one of them (as the context
may require)
"FACILITY OFFICE" means in relation to a Bank, the office specified in
Schedule 1 (or, in the case of a Transferee, the office specified in the
relevant Transfer Certificate) or such other office as it may from time to
time notify in writing to the Parent and the Agent for the purposes of
this agreement in accordance with clause 16.6
"FINAL REPAYMENT DATE" means the date being five years from the date
hereof
"FINANCIAL YEAR" means any period of 12 months ending on or about 30th
September in any year
"FINANCE DOCUMENTS" means this agreement, the Security Documents and any
agreement supplemental, ancillary or collateral thereto, in each case as
the same may from time to time be amended, varied, modified or
supplemented
"FIRST QUARTERLY PERIOD" means the period of three calendar months ending
on 31st December in each Financial Year
"FRENCH FRANCS" means the lawful currency at any relevant time of The
Republic of France
"GROUP" means the Parent and all its Subsidiaries from time to time
(including, without limitation, the Guarantors) and "member of the Group"
or "Group Company" means any and each of them
"GUARANTEE" means the guarantee in Acceptable Form of even date herewith
of the obligations of the Borrowers given by the Guarantors to the Agent
and the Banks and includes, for the avoidance of doubt, any deeds of
admission executed pursuant thereto
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"GUARANTORS" means the Parent and the Material Subsidiaries from time to
time parties to the Guarantee and "Guarantor" means any one of them and
includes any company which becomes a Guarantor pursuant to clause 10.2(d)
"HEDGING AGREEMENTS" means any interest rate or currency agreement or
other hedging transaction (including, without limitation, a "swap",
"collar", "cap", or "floor") entered into from time to time between the
Parent and Lloyds Bank Plc
"INDEBTEDNESS" means any obligation for the payment or repayment of money,
whether as principal or surety and whether present or future, actual or
contingent
"INFORMATION MEMORANDUM" means the document concerning the Parent which,
at the Parent's request and on its behalf, was or is to be prepared in
relation to the Facilities and distributed by the Arranger to selected
banks
"INTEREST PAYMENT DATE" means, in relation to an Advance or Tranches under
the Term Loan Facility, the last day of any Interest Period applicable
thereto (and, if applicable, each day falling on the expiry of each
period of six months during such an Interest Period)
"INTEREST PERIOD" means, in relation to the Term Loan Facility, a period
for the calculation of interest on an Advance under the Term Loan Facility
or (where an Advance is sub-divided into Tranches) on such a Tranche, to
be ascertained in accordance with clause 2.4 and in relation to any
overdue amount, each period determined in accordance with clause 2.8
"LATEST ACCOUNTS" means the audited financial statements of the Parent and
its Subsidiaries (including the notes thereto) most recently submitted to
the Agent pursuant to this agreement or, prior to the submission of any
such accounts, the Base Accounts
"LIBOR" means in relation to any Advance or Tranche or unpaid sum the rate
per annum determined by the Agent to be equal to the arithmetic mean
(rounded upwards, if not already such a multiple, to the nearest whole
multiple of one-sixteenth of one per cent) of the rates (as notified to
the Agent) at which each of the Reference Banks was offering to prime
banks in the London Interbank Market deposits in the currency in which
such Advance or Tranche or unpaid sum is to be denominated and for the
specified period at or about 11.00 am on the Quotation Date for such
period and, for the purposes of this definition, "specified period" means
the Interest Period of the relevant Advance or Tranche (in the case of the
Term Loan Facility) or the relevant Term (in the case of the Revolving
Advances Facility) or, as the case may be, the period in respect of which
LIBOR falls to be determined in relation to such unpaid sum
"MAJORITY BANKS" means a Bank or Banks whose Outstandings amount in
aggregate to at least sixty-six and two thirds per cent (66 2\3 %)
of the total Outstandings of all the Banks or, if there are no
Outstandings, a Bank or group of Banks whose Commitments amount (or, if
each Bank's Commitment has been reduced to zero, immediately before such
reduction to zero amounted) in aggregate to at least sixty-six and two
thirds per cent (66 2/3 %) of the total Commitments of all the
Banks; and for this purpany Advance or Tranche that
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is outstanding otherwise than in US Dollars shall be deemed to be
outstanding in US Dollars in its Original Dollar Amount
"MARGIN" means, subject to the terms of clause 2.5 (Variation of Margin)
0.85% per annum
"MARGIN RATIO" has the meaning given to it in clause 2.5
"MARGIN REGULATIONS" means Regulations G, T, U and X of the Board of
Governors of the United States Federal Reserve System, as in effect from
time to time and any successor regulations
"MARGIN STOCK" shall have the meaning provided in Regulation U of the
Board of Governors of the United States Federal Reserve System
"MATERIAL ADVERSE EFFECT" means any effect which would be reasonably
likely to:
(a) be materially adverse to the ability of either Borrower or the other
Obligors (taken as a whole) to perform their respective obligations
under any of the Finance Documents to which they are a party; or
(b) (for the purposes only of clause 9.1(e)(ii) and clause 9.1(l)) be
materially adverse to the business, assets or financial condition of
either Borrower or of the Group taken as a whole
"MATERIAL SUBSIDIARY" means the companies whose names, registered numbers
and registered offices are set out in Schedule 6 hereto, any Subsidiary
which becomes a Guarantor pursuant to clause 10.2(d) and any Subsidiary
save for Multisoft Financial Systems Limited of which (itself or together
with its own Subsidiaries) by reference to the accounts most recently
delivered pursuant to clause 10.1(c) accounts for at least five per cent
of turnover, gross assets or Consolidated Profit before Interest and Tax
of the Group for the period or as at the last day of the period in respect
of which such accounts have been prepared
"MERGER" means the merger of the Purchaser with and into the Target
"MERGER AGREEMENT" means the agreement and plan of merger by and among the
Purchaser, the Parent and Target to be dated as of 27th January 1998
"MERGER AGREEMENT CLOSING DATE" means the earlier of (i) the date on which
the Merger is consummated or (ii) 31st July 1998
"NON-OBLIGOR" means a member of the Group which is not an Obligor
"OBLIGORS" means the Borrowers and the Guarantors and "OBLIGOR" means any
one of them
"OFFER TO PURCHASE" means the document(s) to be despatched to the
shareholders of the Target in respect of the Tender Offer
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"OPTION AGREEMENT" has the meaning given to it in the Merger Agreement
"OPTIONAL CURRENCY" means Deutschemarks, French Francs, Sterling or any
other immediately available freely transferable and convertible currency
which is available to the Banks in sufficient amounts to fund the relevant
Advance or Tranche
"ORIGINAL DOLLAR AMOUNT" means:
(a) in relation to an Advance or Tranche denominated in US Dollars, the
actual principal amount of such Advance or Tranche; and
(b) in relation to an Advance or Tranche denominated in an Optional
Currency, the Dollar Equivalent of the principal amount of such
Advance as of the Conversion Date (in the case of any Tranche or any
Advance which is or is to be outstanding under the Term Loan
Facility) or the date on which the same was drawn or made originally
or is to be drawn or made originally (including prior to any
previous conversions) in any other case
"OUTSTANDINGS" means, in relation to a Bank at any time, the aggregate of
the Original Dollar Amount of its share of all outstanding Advances (and
Tranches comprised therein)
"PERMITTED ENCUMBRANCE" means:
(i) any lien arising automatically and solely by operation of law in the
ordinary course of business
(ii) any Encumbrance arising in the ordinary course of day to day trading
by way of retention of title to goods in favour of the supplier of
goods where such goods are supplied in such ordinary course subject
to the retention of title
(iii) any right of any bank or financial institution of set-off or
combination of accounts arising in favour of such bank or financial
institution by operation of law or pursuant to any of its written
standard terms of business as a result of day to day operation of
banking arrangements or as a result of any back to back deposit or
currency hedging operations carried out in the ordinary course of
business
(iv) any Encumbrance set out in Schedule 7 or expressly disclosed in
writing to the Agent prior to the date hereof and further provided
that the principal amount of any actual or contingent Indebtedness
from time to time secured by such Encumbrance shall not be increased
at any time thereafter
(v) any Encumbrance created with the prior written consent of the Agent
(acting on the instructions of the Majority Banks);
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(vi) any Encumbrance over goods or documents evidencing title to goods
arising in the ordinary course of a documentary credit transaction
carried out in the ordinary course of business;
(vii) any Encumbrance on assets acquired after the date of this Agreement,
or on assets of a body corporate which becomes a Subsidiary by
acquisition after the date of this agreement, provided that:
(a) any such Encumbrance is in existence prior to such acquisition
and is not created in contemplation of such acquisition; and
(b) the amount secured by such Encumbrance does not exceed, at any
time, the maximum amount secured or agreed to be secured by it
(in accordance with the original terms on which such
Encumbrance was created and further provided that the principal
amount of any actual or contingent indebtedness from time to
time secured by such Encumbrance shall not be increased at any
time thereafter) as at the date of acquisition; and
(c) such Encumbrance is discharged within a period of 6 months
after the acquisition or (only in the case of an acquisition of
a body corporate) where the terms of such Encumbrance do not
permit repayment of the amount secured by such Encumbrance
within such period, on the earliest date or dates permitted by
the terms of such Encumbrance for such repayment; and
(d) no guarantee is given by the Parent or any other member of the
Group in respect of such Encumbrance or the amount secured by
it;
(viii) encumbrances covering assets the subject of equipment and finance
leases, hire purchase or conditional sale or similar arrangements
entered into by a Group Company, provided that:
(a) such Encumbrances in existence prior to the date of this
agreement shall be included within the definition of "PERMITTED
ENCUMBRANCE" only to the extent that the Agent has prior to the
date of this agreement confirmed to the Parent that it has
received adequate written details as to the general nature and
extent of the same (such confirmation not to be unreasonably
withheld or delayed); or
(b) the amount secured by any such Encumbrances created after the
date of this agreement covering assets other than computers or
office telecommunications equipment required for the business
of the Group does not at any time exceed (Pounds)2,500,000;
(ix) any Encumbrance arising in respect of any escrow arrangements
relating to the payment of deferred consideration (not exceeding
(Pounds)1,000,000 or its equivalent) on a disposal or acquisition by
a Group Company; and
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(x) any other Encumbrance created in respect of Borrowings in an
aggregate principal amount not exceeding (Pounds)1,000,000 or its
equivalent
"PLAN" means an "Employee Benefit Plan" (as defined in section 3(2) of
ERISA) that is or, within the preceding 5 years has been established or
maintained, or to which contributions are or, within the preceding 5
years, have been made or required to be made, by the Target or any ERISA
Affiliate or with respect to which the Target or any ERISA Affiliate may
have any liability
"POTENTIAL EVENT OF DEFAULT" means any event or circumstance which with
the giving of notice, lapse of time, determination of materiality or
fulfilment of other conditions (or a combination of them) (in each case as
is specified in clause 11.1) would give rise to an occurrence of an Event
of Default
"QUALIFYING BANK":
(a) means a Bank which is a bank as defined for the purpose of Section
349 of the Taxes Act and which is within the charge to United
Kingdom corporation tax as respects interest payable to such Bank
under this agreement at the time when such interest is paid
(b) means a Bank which is resident in a country with which the United
Kingdom has a double taxation treaty pursuant to which a resident of
such country is exempt from liability to United Kingdom tax on
interest payable to it derived from a source within the United
Kingdom, which has the benefit of such exemption for itself in
relation to the Facilities, which takes interest payable under this
agreement into account for the purposes of taxation in that country
(notwithstanding the location of its Facility Office if in a
different country) and which does not carry on business in the
United Kingdom through a permanent establishment with which the
Indebtedness under this agreement in respect of which the interest
is paid is effectively connected
"QUARTERLY PERIOD" means the period of three calendar months following the
end of each of the Parent's financial years and every subsequent period of
three calendar months following the end of the preceding three calendar
month period
"QUOTATION DATE" means, in relation to any period for which an interest
rate is to be determined hereunder, the day on which quotations would
ordinarily be given by prime banks in the London Interbank Market for
deposits in the currency in relation to which such rate is to be
determined for delivery on the first day of that period Provided that, if,
for any such period, quotations would ordinarily be given on more than one
date, the Quotation Date for that period shall be the last of those dates
"REFERENCE BANKS" means the principal London office of Lloyds Bank Plc and
such other bank or banks as may for the time being be appointed with the
prior written consent of the Parent by the Agent (acting on the
instructions of the Majority Banks) to act as "Reference Banks" for the
purposes of this agreement
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"RELEVANT GROUP MEMBERS" means the Obligors and the Purchaser and
"RELEVANT GROUP MEMBER" means any of them
"RELEVANT INSTRUCTING GROUP" shall have the meaning ascribed to it in
clause 17.16(d)
"REPEATED REPRESENTATIONS" means all of those representations set out in
clause 9.1 (except for those set out in clause 9.1(e)(ii), clause
9.1(k)(i) and (ii) and clause 9.1(l))
"REPAYMENT DATE" means:
(a) in relation to an Advance under the Term Loan Facility, a date on
which one of the 10 semi-annual instalments are to be paid in
accordance with the terms of clause 2.6(b); or
(b) in relation to an Advance under the Revolving Advances Facility, the
last day of the Term of such Advance
"REQUESTED AMOUNT" means, in relation to a Utilisation Request, the
aggregate of the amounts of the Original Dollar Amount of the Advances or
Tranches (as the case may be) therein requested
"REVOLVING ADVANCES FACILITY" means the multi-currency advances facility
granted by the Banks hereunder under clause 2.1(a)(ii)
"REVOLVING COMMITMENT" means, with respect to a Bank, (and subject to this
agreement) the amount thereof set opposite its name in Schedule 1 under
the heading "Revolving Commitment" or (as the case may be) specified as
the portion thereof transferred in the Transfer Certificate pursuant to
which such Bank became a party hereto, in each case to the extent not
cancelled or reduced pursuant to the provisions hereof
"REVOLVING OUTSTANDINGS" means, at any time, the aggregate of the
Outstandings attributable to the Revolving Advances Facility;
"ROUND AMOUNT" means:
(a) in the context of the Term Loan Facility:
(i) in relation to a Utilisation in US Dollars, a minimum amount
of $10,000,000 and, if more, being also an integral multiple
of $1,000,000; and
(ii) in relation to a Utilisation in an Optional Currency, a
minimum amount of the equivalent in such Optional Currency of
$10,000,000 and, if more being also an integral multiple of
the equivalent in such Optional Currency of $1,000,000; and
(b) in the context of the Revolving Advances Facility:
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(i) in relation to a Utilisation in US Dollars, a minimum amount of
$2,000,000 and, if more, being also an integral multiple of
$1,000,000; and
(ii) in relation to a Utilisation in an Optional Currency, a minimum
amount of the equivalent in such Optional Currency of
$2,000,000 and, if more being also an integral multiple of the
equivalent in such Optional Currency of $1,000,000;
Provided always that the Agent shall have the discretion exercisable for
any relevant purpose required by this agreement to round up or down
amounts denominated in any relevant currency to the nearest sub-unit or
unit or cent (as the case may be)
"SCHEDULE 14D-1" means the Schedule 14D-1 Tender Offer Statement to be
filed by the Purchaser with the United States Securities and Exchange
Commission in connection with the Tender Offer
"SECURITY DOCUMENT" means the Guarantee and any guarantee entered into
pursuant to clause 10.2(d) and any other guarantee or security document
from time to time and for the time being entered into or created by any
Group Company in favour of the Agent as trustee for or agent of the Banks
in relation to the obligations of the Borrowers hereunder
"SHAREHOLDERS' AGREEMENTS" has the meaning given to it in the Merger
Agreement
"STERLING" and the sign "(Pounds)" means the lawful currency at any
relevant time of the United Kingdom
"SUBSIDIARIES" means:
(a) (except for the purpose of clause 10.2(d)) the companies which are
for the time being or from time to time subsidiary undertakings of
the Parent; and
(b) for the purposes of clause 10.2(d), any companies which are for the
time being or from time to time subsidiaries as defined in section
736 of the Companies Act 1985
and "SUBSIDIARY" means any one of such Subsidiaries
"SYNDICATION CONFIRMATION LETTER" means the letter of even date herewith
addressed by the Agent to the Parent
"TARGET" means State of the Art, Inc.
"TAXES" means all present and future income and other taxes levies imposts
deductions charges fees compulsory loans or withholdings of whatsoever
nature
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together with interest thereon and penalties in respect thereof if any and
"Taxation" and "Tax" shall be construed accordingly
"TAXES ACT" means the Income and Corporation Taxes Act 1988
"TENDER OFFER" means the offer for Target made, or to be made, by the
Purchaser (or on its behalf) or as such offer made from time to time be
amended, revised or renewed pursuant to the Merger Agreement and the Offer
to Purchase
"TENDER OFFER CLOSING DATE" means the date on which the Purchaser notifies
the transmittal agent specified in the Offer to Purchase that the Tender
Offer has closed
"TERM" means:
(a) in relation to an Advance under the Revolving Advances Facility, the
period for which such Advance is to be borrowed, as specified in the
Utilisation Request relating thereto; and
(b) in relation to an Advance under the Term Loan Facility, the period
commencing on the relevant Utilisation Date and ending on the Final
Repayment Date
"TERM LOAN COMMITMENT" means, with respect to a Bank (and subject to this
agreement) the amount thereof set opposite its name in Schedule 1 under
the heading "Term Loan Commitment" or (as the case may be) specified as
the portion thereof transferred in the Transfer Certificate pursuant to
which such Bank became a party hereto, in each case to the extent not
cancelled or reduced pursuant to the provisions hereof
"TERM LOAN FACILITY" means the multi-currency term loan facility granted
by the Banks hereunder under clause 2.1(a)(i)
"TERM LOAN OUTSTANDINGS" means, at any time, the aggregate of the
Outstandings attributable to the Term Loan Facility
"TERMINATION DATE" means the earlier of
(a) the Final Repayment Date;
(b) the date on which the Commitments are reduced to zero pursuant to
this agreement; and
(c) the date on which demand shall be made pursuant to and in accordance
with the terms of clause 11.1
"THIRD QUARTERLY PERIOD" means the period of three calendar months ending
on 30th June in each Financial Year
"TOTAL COMMITMENTS" means, in relation to the Banks, the aggregate for the
time being of their respective Commitments (being, for the avoidance of
doubt,
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the aggregate of their respective Revolving Commitments and their
Term Loan Commitments)
"TOTAL REVOLVING COMMITMENTS" means, in relation to the Banks, the
aggregate for the time being of their respective Revolving Commitments
"TOTAL TERM LOAN COMMITMENTS" means, in relation to the Banks, the
aggregate for the time being of their respective Term Loan Commitments
"TRANCHE" means each part or parts of an Advance into which the same is
divided in accordance with clause 2.2 or 2.3 and any amount into which the
same may be subdivided, consolidated or converted in accordance with
clause 2.3 and the principal amount of each of them for the time being
outstanding
"TRANCHE UTILISATION" means the division, sub-division, consolidation or
conversion of an Advance or Tranche pursuant to clause 2.3
"TRANCHE UTILISATION REQUEST" means a request by one of the Borrowers for
a Tranche Utilisation
"TRANSACTION DOCUMENTS" means this agreement, the Offer to Purchase, the
Guarantee, the Merger Agreement, the Option Agreement, the Shareholders'
Agreements and any agreement supplemental, ancillary or collateral
thereto, in each case as the same may from time to time be amended,
varied, modified or supplemented
"TRANSFER CERTIFICATE" means an instrument entered into pursuant to clause
16.4, in the form or substantially in the form set out in schedule 3,
whereby:
(a) a Bank transfers, or seeks to procure the transfer of, inter alia,
all or part of such Bank's rights and benefits and obligations
hereunder; and
(b) a Transferee undertakes to perform the obligations it will assume as
a result of delivery of such instrument
"TRANSFER DATE" in relation to any Transfer Certificate means the date for
the making of the transfer as specified in such Transfer Certificate
"TRANSFEREE" means a Qualifying Bank to which a Bank is entitled to
transfer and assign and transfers or seeks to assign or transfer all or
part of such Bank's rights and/or obligations hereunder
"TRANSFEROR" means a Bank which assigns or transfers or seeks to assign or
transfer all or part of its rights and/or obligations hereunder
"UTILISATION" means a Drawdown Utilisation or a Tranche Utilisation
"UTILISATION DATE" means the date on which the relevant Utilisation is to
be made
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"UTILISATION REQUEST" means a request for a Utilisation by means of a
Drawdown Utilisation Request or ( as the case may be) a Tranche
Utilisation Request
"US DOLLARS" and the sign "$" means the lawful currency of the United
States of America
"VAT" means value added tax or any similar tax substituted therefor
"VENDOR PLACING AGREEMENT" means the agreement between the Parent and J
Henry Schroder & Co Limited (2) in connection with the Acquisition.
1.2 INTERPRETATION
In this agreement and in the schedules (unless the context otherwise
requires):
(a) references to persons include firms, corporations, societies and/or
associations (whether incorporated or not) states and administrative
and governmental entities, whether or not any of the foregoing is a
separate legal entity;
(b) references to the masculine gender include the feminine and neuter
genders and vice versa and references to the singular number include
the plural and vice versa;
(c) references to this agreement include its schedules and references to
schedules, clauses, sub-clauses, paragraphs and sub-paragraphs are
to the schedules to and the clauses, sub-clauses, paragraphs and
sub-paragraphs of this agreement;
(d) the index to and the headings of the clauses are inserted for ease
of reference only and shall be ignored in construing this agreement;
(e) the expressions "subsidiary", "subsidiary undertaking" and "holding
company" shall bear the meanings respectively ascribed to those
terms in Sections 258 and 736 Companies Act, 1985 (as amended by the
Companies Act 1989);
(f) references to any statute, law, decree or regulation herein shall be
deemed to be references to such statute, law, decree or regulation
as re-enacted, amended or extended from time to time;
(g) references herein to any document (including this agreement) shall
be deemed to include references to such document as varied
supplemented or replaced from time to time;
(h) references to time are to London time;
(i) the "equivalent" (save as otherwise referred to herein) on any given
date in one currency (the "first currency") of an amount denominated
in another currency (the "second currency") is a reference to the
amount of
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the first currency which could be purchased with the amount of the
second currency at the spot rate of exchange quoted by the Agent at
or about 11.00 am on such date for the purchase of the first
currency with the second currency.
2. THE FACILITIES
2.1 AMOUNT AND PURPOSE
(a) Subject to the terms and conditions of this Agreement, the Banks
have agreed to make available:
(i) to the Borrowers a multi-currency term loan facility of
up to $218,000,000; and
(ii) to the Parent a revolving multi-currency facility in an
aggregate amount at any one time of up to $15,000,000 by
way of short term advances
denominated in US Dollars and Optional Currencies.
(b) The Term Loan Facility shall be used by the Borrowers solely for the
following purposes:
(i) as to $49,000,000 thereof by the Purchaser to fund part
of the consideration payable by it under the Offer to
Purchase, the Option Agreement, the Shareholders'
Agreements and the Merger Agreement in respect of the
acquisition of Target;
(ii) by the Parent:
(A) to on-lend or invest to or in the Purchaser
to fund the consideration payable by the
Purchaser under the Offer to Purchase, the
Option Agreement, the Shareholders'
Agreements and the Merger Agreement in
respect of the acquisition of Target and
costs and expenses in connection with the
Acquisition;
(B) to repay in full all indebtedness of the
Parent under the facilities agreement dated
25th February 1997 and made between the
Parent (1) Lloyds Bank Plc and Banque
Nationale de Paris (2) Lloyds Bank Plc (as
Arranger) (3) and Lloyds Bank Plc (as Agent)
(4).
(c) The Revolving Advances Facility shall be used by the Parent for
general working capital purposes and, to any extent necessary, for
the funding of the Acquisition.
(d) No part of the Facilities may be used for any purpose which would
cause the execution of any of the Transaction Documents by any Group
Company or the performance by any Group Company of its obligations
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thereunder to constitute, or would otherwise result in the provision
of, unlawful financial assistance for the purposes of Part V,
Chapter VI of the Companies Act 1985 (or its equivalent in any other
relevant jurisdiction) or any other applicable legislation or for
any other unlawful purpose. Without prejudice to the obligations of
the Borrowers under this clause, none of the Agent, the Arranger or
any of the Banks shall be obliged to concern themselves with the
application of amounts drawn by the Borrowers hereunder.
(e) The obligations of each Borrower hereunder are several.
2.2 UTILISATION PROCEDURES - DRAWDOWN OF THE ADVANCES
(a) Subject to the provisions of this agreement, a Borrower may request
a Drawdown Utilisation by delivering a Drawdown Utilisation Request
to the Agent, not later than 10.30 am one Business Day before the
proposed Utilisation Date (in the case of a Drawdown Utilisation in
Sterling) and 10.30 am three Business Days before the proposed
Drawdown Utilisation (in the case of a Drawdown Utilisation in US
Dollars or an Optional Currency other than Sterling). The Drawdown
Utilisation Request shall be in the form set out in Part I of
Schedule 4 (in the case of the Term Loan Facility) and in the form
set out in Part II of Schedule 4 (in the case of the Revolving
Advances Facility).
(b) Unless otherwise agreed with the Agent, only one Drawdown
Utilisation Request under each of the Facilities may be made on any
one day and subject to clause 2.7 (Currency Option) no more than two
Drawdown Utilisations may be made under the Term Loan Facility
during the term of this agreement. However, each Advance under the
Term Loan Facility may comprise more than one and up to three
Tranches.
(c) Each Drawdown Utilisation Request made pursuant to clause 2.2(a)
shall be irrevocable and binding upon the relevant Borrower and
shall specify (inter alia):
(i) that the Drawdown Utilisation Request is for an Advance
or Advances under the Term Loan Facility or the
Revolving Advances Facility (as the case may be) and in
the case of a Drawdown Utilisation Request relating to
an Advance under the Term Loan Facility specifies (if
relevant) the number of Tranches into which such Advance
is to be split;
(ii) the proposed Utilisation Date, which shall be a Business
Day during the relevant Availability Period;
(iii) the Requested Amount of the proposed Drawdown
Utilisation (which must be a Round Amount not exceeding
the Available Term Loan Facility Amount or the Available
Revolving Facility Amount (as the case may be));
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(iv) the currency of each Advance or (where relevant) each
Tranche comprised in an Advance requested under the
proposed Drawdown Utilisation (being either US Dollars
or an Optional Currency);
(v) (in the case of a Drawdown Utilisation under the Term
Loan Facility) the first Interest Period that is to
apply with respect to each Advance (or Tranche comprised
therein) under such Drawdown Utilisation, to be selected
in accordance with clause 2.4;
(vi) (in the case of a Drawdown Utilisation under the
Revolving Advances Facility) the Term of the proposed
Drawdown Utilisation, being a period of one, two, three
or six months (or such other period as may exceptionally
be agreed by all of the Banks), which will begin on the
proposed Utilisation Date and end on a Business Day
which is or precedes the Final Repayment Date; and
(vii) an account of the relevant Borrower to which the
proceeds of the proposed Drawdown Utilisation are to be
paid.
(d) Whenever the Banks are required to participate in a Drawdown
Utilisation under this clause 2.2, the aggregate amount of the
Advances or Tranches to be made under such Drawdown Utilisation
shall be allocated to and apportioned amongst the Banks by the Agent
rateably according to their respective Term Loan Commitments or
Revolving Commitments (as the case may be).
(e) The Agent shall, promptly after receipt by it of a Drawdown
Utilisation Request, notify each Bank of the details of such
Drawdown Utilisation Request and of the amount of that Bank's share
of the Advances or Tranches to be made to the relevant Borrower.
(f) If a Bank's Commitment is reduced, in accordance with the terms of
this agreement, after the Agent has received a Drawdown Utilisation
Request or made an allocation hereunder, then such part of the
proposed Drawdown Utilisation as is attributable to that Bank and
exceeds its Available Commitment (as so reduced) in respect of the
relevant Facility shall not be made and the amount of such Drawdown
Utilisation shall be reduced accordingly. Notwithstanding any other
provision of this agreement, no Bank shall be required to
participate in any Advance or Tranche which exceeds that Bank's
Available Commitment in respect of the relevant Facility.
(g) If any Advance or Tranche comprised in an Advance to be made by a
Bank pursuant to clause 2.2 or 2.3 is to be denominated in an
Optional Currency, each Bank shall determine whether or not in its
opinion:
(i) it is or will be impossible for it to obtain at 11.00 am
on the Quotation Date for such proposed Advance or
Tranche
21
<PAGE>
deposits of the Optional Currency in amounts comparable
with the amount of such proposed Advance or Tranche for
a period corresponding to the Interest Period of an
Advance or Tranche (under the Term Loan Facility) or the
Term of an Advance (under the Revolving Advances
Facility); or
(ii) any law binding on it, or any request or requirement of
any applicable central bank or other governmental agency
or regulatory authority compliance with which is
customary, would be contravened if it were to
participate in such Advance or Tranche in the Optional
Currency.
(h) If any Bank determines that it is or will be impossible for it to
obtain deposits as provided for by clause 2.2(g)(i) or that any law
or request or requirement compliance with which is customary would
be contravened as provided for by clause 2.2(g)(ii), such Bank shall
give notice of such determination to the Agent prior to 5.00pm on
the Business Day immediately preceding the proposed Quotation Date
for such Advance or Tranche. Forthwith upon receipt of such notice,
the Agent shall notify the relevant Borrower which may either cancel
the Drawdown Utilisation or (as the case may be) Tranche Utilisation
in so far as it affects the Bank in question, or request that the
participation in the Advance or Tranche to be made by such Bank be
made by such Bank in US Dollars or, where US Dollars is the affected
currency, in Sterling, in either case prior to 9.00 am on the second
Business Day before the proposed Utilisation Date and the Agent
shall promptly notify the Bank in question accordingly.
(i) If a Borrower requests that participation in an Advance or Tranche
be made by a Bank in US Dollars or Sterling pursuant to clause
2.2(h) then, subject to the terms of clause 2, the Advance or
Tranche to be made by such Bank shall be made in US Dollars or (as
the case may be) in Sterling in an amount equal to the Original
Dollar Amount thereof.
(j) If any Advance or Tranche to be made by a Bank pursuant to clause
2.2 is to be denominated in an Optional Currency, then, subject to
the terms of clause 2, the Advance or Tranche to be made by such
Bank shall be made in such Optional Currency in the amount requested
or such lesser amount as is required to ensure that the Original
Dollar Amount of that Advance and all other Outstandings under the
relevant Facility does not exceed the aggregate Commitments under
that Facility.
(k) If it has not already been cancelled or otherwise reduced to zero
prior to such time, the Commitment of each Bank shall be reduced to
zero at close of business in London on the Termination Date.
2.3 UTILISATION PROCEDURES - TRANCHES UNDER TERM LOAN FACILITY (OTHER THAN ON
FIRST DRAWDOWN OF ADVANCES UNDER SUCH FACILITY)
(a) Subject to the provisions of this agreement, a Borrower may request
a Tranche Utilisation by delivering a Tranche Utilisation Request to
the
22
<PAGE>
Agent not later than 10.30am one Business Day before the proposed
Utilisation Date (in the case of a Tranche Utilisation in Sterling)
and 10.30am three Business Days before the proposed Utilisation Date
(in the case of a Tranche Utilisation in US Dollars or an Optional
Currency other than Sterling). The Tranche Utilisation Request shall
be in the form set out in Part III of Schedule 4.
(b) A Tranche Utilisation may comprise one or more of the following:
(i) the sub-division of an Advance or existing Tranche into two or
more Tranches;
(ii) the consolidation into one Tranche or Advance of two or more
existing Tranches and/or Advances ;
(iii) the conversion of an existing Tranche or Advance , if
denominated in US Dollars, into an Optional Currency or if
denominated in an Optional Currency into another Optional
Currency or US Dollars,
Provided that:
(A) at no time shall there be more than 6 Tranches outstanding;
(B) unless otherwise agreed by the Majority Banks, the amount of
each Tranche shall at all times be in a minimum amount of
$5,000,000, or if more, an integral multiple of $1,000,000 or,
if denominated in an Optional Currency, such other comparable
and convenient amounts as may be agreed by the Agent from time
to time;
(C) Tranches in the same currency and with Interest Periods of the
same duration and commencing on the same date shall be
consolidated automatically into one Tranche;
(D) in the case of a conversion in accordance with paragraph (iii)
above, it is carried out subject to and in accordance with
clause 2.7;
(E) (subject to clause 2.7(d)), at no time shall the aggregate of
Tranches outstanding in respect of any Advance exceed the
Original Dollar Amount of that Advance (or the Tranches
comprised therein);
(F) no Tranche made available to one Borrower shall be
consolidated with a Tranche made available to the other
Borrower.
(e) Whenever the Banks are required to participate in a Tranche
Utilisation, the amount of each Tranche to be advanced shall be
allocated to and
23
<PAGE>
apportioned amongst the Banks by the Agent rateably according to
their respective Term Loan Commitments.
(f) The Agent shall, promptly after receipt by it of a Tranche
Utilisation Request, notify each Bank of the details of such Tranche
Utilisation Request and of the amount of that Bank's share of the
Tranches to be made to the relevant Borrower.
(g) If a Bank's Commitment is reduced, in accordance with the terms of
this agreement, after the Agent has received a Tranche Utilisation
Request or made an allocation hereunder, then such part of the
proposed Tranche Utilisation as is attributable to that Bank and
exceeds its Available Commitment (as so reduced) in respect of the
Term Loan Facility shall not be made and the amount of such Tranche
Utilisation shall be reduced accordingly. Notwithstanding any other
provision of this agreement, no Bank shall be required to
participate in any Tranche Utilisation which exceeds that Bank's
Available Commitment in respect of the Term Loan Facility or which,
when added to the Original Dollar Amounts of all other Tranches
outstanding in respect of the relevant Advance exceeds or would
exceed the Original Dollar Amount of such Advance.
2.4 INTEREST
(a) The following provisions of this clause 2.4(a) shall apply with
respect to interest on an Advance made under the Revolving Advances
Facility, that is to say:
(i) on the Repayment Date (and, if applicable, on the expiry of
each period of 6 months during the Term of such Advance)
relating to such Advance, the Borrower shall pay to the Agent
accrued interest on that Advance, for the account of the Banks
which made such Advance. Each Term shall, up to and including
the earlier of (1) the date falling ninety days after the
Merger Agreement Closing Date; and (2) the Close of
Syndication have a duration of one month. Thereafter, each
Term shall have such a duration as the relevant Borrower may
request pursuant to this agreement provided that the first
such successive Term may be of such a duration as is necessary
to ensure that it terminates on 30th September 1998;
(ii) the rate of interest applicable to such Advance for the Term
thereof shall be the rate per annum determined by the Agent to
be the sum of:
(A) LIBOR for such Advance;
(B) the Margin; and
(C) the Associated Costs Rate applicable thereto (in the
case of an Advance in Sterling).
24
<PAGE>
(iii) if any Term would otherwise end on a day which is not a
Business Day, that Term shall be extended to the next
succeeding Business Day, unless the result of such extension
would be to carry such Term over to another calendar month in
which event such Term shall end on the last preceding Business
Day;
(iv) any Term which commences on the last day of a calendar month
and any Term which commences on a day for which there is no
numerically corresponding day in the calendar month during
which such Term is to end shall end on the last Business Day
of the calendar month during which such Term is due to end;
(v) any Term which would otherwise end during the month of or at
any time after the Final Repayment Date shall end on the Final
Repayment Date.
(b) The following provisions of this clause 2.4(b) shall apply with
respect to interest on an Advance or a Tranche made under the Term
Loan Facility, that is to say:
(i) the first such Interest Period shall commence on the
Utilisation Date of the relevant Advance or Tranche and such
Interest Period and each successive Interest Period (which
shall commence immediately upon the end of the preceding
Interest Period) in relation to such Advance or Tranche shall,
up to and including the earlier of (1) the date falling 90
days after the Merger Agreement Closing Date and (2) the Close
of Syndication have a duration of one month. Thereafter, each
successive Interest Period shall have such a duration as the
relevant Borrower may request pursuant to the terms of clause
2.4(b)(ii) below, provided that the first such successive
Interest Period may be of such a duration as is necessary to
ensure that it terminates on 30th September 1998;
(ii) the relevant Borrower may by notice received by the Agent not
later than 10.30 am one Business Day (in the case of an
Advance or a Tranche in Sterling) or three Business Days (in
the case of an Advance or a Tranche in US Dollars or an
Optional Currency other than Sterling) before the first day of
an Interest Period specify (subject to clause 2.4(b)(i) above)
whether that Interest Period shall have a duration of one,
two, three or six months (or such other period as may
exceptionally be agreed to by all of the Banks);
(iii) Interest Periods shall be of the duration specified by the
relevant Borrower pursuant to (ii) above, but so that:
25
<PAGE>
(A) (in the case of an Advance which has been sub-divided
into Tranches) Tranches are designated and Interest
Periods are selected such that, on each Repayment Date
in respect of the Term Loan Facility, there mature
Tranches the principal amount of which, in the view of
the Agent, will be at least equal to the principal
amount to be repaid on such Repayment Date or the
equivalent in any Optional Currency (where relevant);
(B) no Interest Period for an Advance or a Tranche shall
overrun the Final Repayment Date;
(C) if the relevant Borrower otherwise fails to specify the
duration of an Interest Period in accordance with the
foregoing provisions, that Interest Period shall have a
duration of three months or other period complying with
the foregoing;
(D) if any Interest Period would otherwise end on a day
which is not a Business Day, that Interest Period shall
be extended to the next succeeding Business Day, unless
the result of such extension would be to carry such
Interest Period over to another calendar month in which
event such Interest Period shall end on the last
preceding Business Day; and
(E) any Interest Period which commences on the last day of a
calendar month and any Interest Period which commences
on a day for which there is no numerically corresponding
day in the calendar month during which such Interest
Period is to end shall end on the last Business Day of
the calendar month during which such Interest Period is
due to end;
(iv) on the last day of each Interest Period relating to an Advance
or Tranche (and, if applicable, on the expiry of each period
of 6 months during such an Interest Period), the relevant
Borrower shall pay to the Agent the accrued interest on that
Advance or Tranche, for the account of the Banks which made
such Advance or Tranche;
(v) the rate of interest applicable to such an Advance or Tranche
for an Interest Period shall be the rate per annum determined
by the Agent to be the sum of:
(A) LIBOR on the Quotation Date for the relevant Advance or
Tranche;
(B) the Margin; and
26
<PAGE>
(C) (in the case of an Advance or Tranche denominated in
Sterling) the Associated Costs Rate applicable thereto.
(c) If on the Utilisation Date of any proposed Advance or Tranche to a
Borrower under the Term Loan Facility there is an existing Advance
or Tranche outstanding under that Facility from the same Borrower,
the relevant Borrower shall be entitled to elect, by serving notice
on the Agent not later than 10.30am one Business Day before the
proposed Utilisation Date (in the case of a Utilisation in Sterling)
and 10.30am three Business Days before the proposed Utilisation Date
(in the case of Utilisation in an US Dollars or an Optional Currency
other than Sterling) that the first Interest Period relating to the
proposed Advance or Tranche shall terminate on the same day as the
Interest Period relating to the outstanding Advance or Tranche and
that on the last day of those Interests Periods the Advances or
Tranches to which they relate shall be consolidated (and thereafter
be treated in all respects) as a single Advance or Tranche (as the
case may be).
(d) The Agent shall promptly notify the Borrowers and the Banks of each
rate of interest determined by it under this clause 2.4.
(e) All interest and other payments under this agreement which are to be
calculated by reference to a rate per annum shall accrue from day to
day and be calculated on the basis of the actual days elapsed and
(in the case of amounts denominated in Sterling) a 365 day year or
(in the case of amounts denominated in US Dollars or an Optional
Currency other than Sterling) a 360 or 365 day year, as is customary
in the London Interbank Market..
(f) Each determination of a rate of interest or of other amounts
hereunder by the Agent shall, in the absence of manifest error, be
conclusive and binding upon the parties to this agreement.
2.5 VARIATION OF MARGIN
For the purposes of this agreement, Margin means the rate per annum
determined by the Agent pursuant to this Clause 2.5. The Agent shall
determine the Margin promptly following receipt of the quarterly
management accounts of the Group (as referred to in clause 10.1(c)(iv)),
together with the Certificate of Compliance (as referred to in clause
10.1(c)(vii))which the Parent is obliged to deliver to the Agent pursuant
to clause 10.1(c). Based upon the aforegoing, the Margin shall be
determined by reference to the following ratios (the "MARGIN RATIO"):
<TABLE>
<CAPTION>
MARGIN RATIO MARGIN
------------ ------
<S> <C>
The ratio of Consolidated Total Borrowings
to Consolidated EBITDA is greater
than 3:1 0.85%
The ratio of Consolidated Total Borrowings
to Consolidated EBITDA is equal to or
</TABLE>
27
<PAGE>
<TABLE>
<S> <C>
less than 3:1 0.75%
The ratio of Consolidated Total Borrowings
to Consolidated EBITDA is equal to or
less than 2:1 0.65%
</TABLE>
Provided that:
(i) the first determination of the Margin by the Agent shall only be
made following the expiry of six calendar months after the earlier
of (i) the date falling 90 days after the Merger Agreement Closing
Date and (ii) the Close of Syndication (the "INITIAL MARGIN
PERIOD");
(ii) until the first determination of the Margin by the Agent, the
Margin shall be 0.85%;
(iii) for the three calendar months following the expiry of the Initial
Margin Period, the Margin shall not reduce below 0.75%;
(iv) the Margin Ratio will be calculated by reference to the twelve
month period ending on the last day of each Quarterly Period or (as
the case may be) financial year of the Parent;
(v) any determination by the Agent of a reduction or increase in the
Margin shall take effect as from 5 Business Days after receipt by
the Agent of the Certificate of Compliance for the Quarterly Period
in which compliance or non-compliance (as the case may be) with the
Margin Ratio occurs;
(vi) there shall be no decrease in the Margin if an Event of Default has
occurred which is continuing and the Margin shall revert to 0.85%
until such time as such Event of Default is no longer continuing
whereupon the Margin shall be determined as set out above.
2.6 REPAYMENT AND PREPAYMENT
(a) Subject to this agreement, the Parent shall repay in full each
Advance under the Revolving Advances Facility on its Repayment Date
in accordance with the terms of this agreement.
(b) Subject to this agreement and to each Borrower only being
responsible for the repayment of the Advances drawn down by that
Borrower, the Borrowers shall repay the Term Loan Outstandings on
the following dates and in the following amounts (or their
equivalent in an Optional Currency where the Term Loan Outstandings
to be repaid are denominated in an Optional Currency):
28
<PAGE>
<TABLE>
<CAPTION>
Date Instalments
---- -----------
$
<S> <C>
6 months after the date of this agreement 21,800,000
12 months after the date of this agreement 21,800,000
18 months after the date of this agreement 21,800,000
24 months after the date of this agreement 21,800,000
30 months after the date of this agreement 21,800,000
36 months after the date of this agreement 21,800,000
42 months after the date of this agreement 21,800,000
48 months after the date of this agreement 21,800,000
54 months after the date of this agreement 21,800,000
60 months after the date of this agreement 21,800,000
</TABLE>
(c) If the aggregate of the monies advanced under the two Advances
permitted to be drawn under the Term Loan Facility amount to less
than 18,000,000 the repayment instalments specified in clause 2.6(b)
above shall be reduced rateably and pro rata.
(d) Any prepayment of the Term Loan Outstandings shall reduce each
outstanding repayment instalment under clause 2.6(b) on a pro rata
basis between the outstanding repayment instalments, provided that
the first $49,000,000 (or the equivalent thereof in any relevant
Optional Currency, where relevant) of any prepayments shall reduce
each outstanding repayment instalment in chronological order.
(e) By giving not less than 5 Business Days' prior written notice to the
Agent, the Borrowers may prepay the whole or any part of an Advance
or Tranche under the Term Loan Facility (but, if part, then in a
minimum amount of $1,000,000 or, if more, in integral multiples of
$500,000 or the approximate equivalent thereof (as determined by the
Agent) in the relevant Optional Currency (should the relevant
Advance or Tranche be denominated in an Optional Currency) on the
last day of any Interest Period for that Advance or Tranche without
penalty or premium or on any other date subject to the Parent
indemnifying the Agent and each Bank pursuant to clause 12.2 of this
agreement in respect of any loss, cost or expense sustained or
incurred as a consequence thereof. Any amount so prepaid may not
subsequently be redrawn. Upon such prepayment, (i) the amount which
the relevant Borrower may draw under the Term Loan Facility shall be
reduced permanently by a corresponding amount, (ii) the Total Term
Loan Commitments shall be reduced permanently by a corresponding
amount and (iii) the Term Loan Commitment of each of the Banks
therein will be correspondingly reduced pro rata in proportion to
their respective Term Loan Commitments. Each notice of prepayment
given pursuant to this clause shall be irrevocable and shall specify
the date upon which such prepayment is to take effect (which must be
a Business Day).
(f) By giving not less than 5 Business Days' prior written notice to the
Agent, the Borrower may prepay the whole or any part of an Advance
under the Revolving Advances Facility (but, if part, then in a
minimum
29
<PAGE>
amount of $1,000,000 or, if more, integral multiples of $500,000 or
the approximate equivalent thereof (as determined by the Agent) in
the relevant Optional Currency (should the relevant Advance be
denominated in an Optional Currency) on any day during its Term
without penalty or premium subject to the Parent indemnifying the
Agent and each Bank pursuant to clause 12.2 of this agreement in
respect of any loss, cost or expense including, without limitation,
breakage costs or liability sustained or incurred as a consequence
thereof. Any amounts so prepaid may subsequently be redrawn up to
the amount of the Available Revolving Facility Amount. Each notice
of prepayment given pursuant to this clause shall be irrevocable and
shall specify the date upon which such prepayment is to take effect
(which must be a Business Day).
(g) The Borrowers may not repay or prepay all or any part of any Advance
or Tranche except at the times and in the manner provided for in
this agreement.
(h) The Borrowers shall not be entitled to reborrow, in whole or in
part, any amount repaid or prepaid under the Term Loan Facility
other than pursuant to the terms of clause 2.7 (Currency Option).
2.7 CURRENCY OPTION
(a) A Borrower may elect to take, convert in accordance with clause
2.7(c) or maintain any Advance or Tranche in or into an Optional
Currency and to convert the same back into US Dollars and, unless
the Agent has determined that the circumstances referred to in
clause 2.2(g) and in clause 7.2 are applicable, that Borrower shall,
subject to the provisions of this agreement, be so entitled.
(b) If the Agent makes a determination under clauses 2.2(g) or 7.2 in
relation to the unavailability of an Optional Currency, then the
relevant Advance or Tranche shall be drawn in, maintained in or, as
appropriate, converted into US Dollars on the first day of the
relevant Interest Period.
(c) If pursuant to this agreement any Advance or Tranche under the Term
Loan Facility is to be:
(i) converted from US Dollars into an Optional Currency;
(ii) converted from an Optional Currency into US Dollars; or
(iii) converted from one Optional Currency into another Optional
Currency,
then, the relevant Borrower shall on the last day of the relevant
Interest Period and subject to clause 2.7(d) repay the relevant
Advance or Tranche in the currency in which it is then denominated
and the Bank's obligations shall (after making any repayments or
prepayments due on that date and subject as provided in this
agreement) be as follows:
30
<PAGE>
(A) if the Advance or Tranche was, immediately prior to such
repayment, denominated in US Dollars and is to be converted
into an Optional Currency, the Banks will advance on such date
the Equivalent Amount in the relevant Optional Currency of the
relevant Advance or Tranche;
(B) if the Advance or Tranche was immediately prior to such
repayment denominated in an Optional Currency and is to be
converted into US Dollars, the Banks will advance on such date
the Original Dollar Amount of the relevant Advance or Tranche;
and
(C) if the Advance or Tranche was immediately prior to such
repayment denominated in one Optional Currency and is to be
maintained in the same Optional Currency or converted from one
Optional Currency into another Optional Currency, the Banks
will advance on such date the Equivalent Amount in the
relevant Optional Currency of the Original Dollar Amount of
the relevant Advance or Tranche.
(d) The obligation of a Borrower in sub-paragraph (c) above to repay an
Advance or Tranche in an Optional Currency (and for the Banks to re-
advance any such Advance or Tranche) shall not apply where:
(i) pursuant to the provisions of sub-paragraph (c), the Advance
or Tranche would have fallen to be repaid and re-advanced in
the same Optional Currency; and
(ii) the Dollar Equivalent of the Advance or Tranche on the last
day of the current Interest Period does not differ from the
Original Dollar Amount of the Advance or Tranche by more than
5%.
2.8 DEFAULT INTEREST
If any sum (whether of principal, interest or otherwise) is not paid in
full when due, the relevant Borrower shall pay interest on the unpaid sum
from the due date until the date of actual payment both before and after
judgment at a rate being the aggregate of:
(a) 1% per annum;
(b) the Margin;
(c) LIBOR; and
(d) (if the currency in which such unpaid sum is denominated is
Sterling) the Associated Costs Rate attributable to the unpaid sum.
For this purpose:
31
<PAGE>
(i) LIBOR shall be determined by the Agent by reference to such
consecutive periods (including overnight deposits) as the Agent may
in its absolute discretion from time to time select;
(ii) the Associated Costs Rate shall be computed on the day on which such
unpaid amount was due and such other days as the Bank referred to in
the definition of "Associated Costs Rate" may select in accordance
with the provisions of Schedule 2 (as the same may be amended from
time to time as provided for in such definition) (a certificate of
the relevant Bank in each case as to the amount of such cost being
conclusive in the absence of manifest error); and
(iii) interest under this clause 2.8 shall be calculated on a day to day
basis and (in the case of amounts denominated in Sterling) a year of
365 days or (in the case of amounts denominated in US Dollars or an
Optional Currency other than Sterling) a year of 360 or 365 day
year, as is customary in the London Interbank Market and compounded
on the last day of each such consecutive period referred to in
paragraph (i) above but shall nevertheless be payable on demand.
2.9 PAYMENTS
All payments to be made by a Borrower under or in respect of the
Facilities shall be made on the due date:
(i) where such amount is denominated in Sterling, by payment in Sterling
in immediately available cleared funds to the Agent's Account No
0002727 with Lloyds Bank Plc, Treasury Division, Faryner's House, PO
Box 545, 25 Monument Street, London EC3R 3BP (Chaps Sort Code 30-15-
57), Quoting Ref: Loans Admin re Sage or such other account as the
Agent may from time to time direct;
(ii) where such amount is denominated in US Dollars, by payment in US
Dollars in immediately available cleared funds to the Agent's
Account with The Bank of New York, NY Swift Code IRVT US 3N XXX
Account Lloyds Bank Plc Loans Administration Bristol No:
8900047003 Reference: Sage or such other account as the Agent may
from time to time direct;
(iii) where such amount is denominated in an Optional Currency (other than
Sterling), by payment in the relevant Optional Currency in
immediately available funds to such account, office or bank as the
Agent may from time to time designate.
All such payments shall be made in full without any set-off or
counterclaim whatsoever and, subject to clause 4.1, free and clear of any
deductions or withholdings.
32
<PAGE>
2.10 REDUCTION, CANCELLATION AND TERMINATION
(a) The Term Loan Commitment shall be automatically reduced and
cancelled by an amount equal to any part of the Term Loan Facility
which remains undrawn at the close of business on the last day of
the Availability Period, which amount shall be applied against the
Term Loan Commitment of each Bank pro rata.
(b) The Revolving Commitment shall be automatically reduced and
cancelled by an amount equal to any part of the Revolving Advances
Facility which remains undrawn at the close of business on the last
day of the Availability Period, which amount shall be applied
against the Revolving Commitment of each Bank pro rata.
(c) Each Borrower (in the case of the Total Term Loan Commitments) or,
as the case may be, the Parent (in the case of the Total Revolving
Commitments) may at any time, and from time to time, cancel the
whole or any part of the Total Term Loan Commitments or, as the case
may be, the Total Revolving Commitments relevant to its portion of
the Facilities by giving to the Agent not less than 5 Business Days
prior written notice to that effect, specifying the date on which
such cancellation is to take effect and the amount or amounts of the
proposed cancellation or cancellations thereof Provided that:
(i) any partial cancellation shall be in a minimum aggregate
amount of $1,000,000 and (if more) integral multiples of
$500,000; and
(ii) no such cancellation shall be effective if, as a result
thereof, the Total Term Loan Commitments or the Total
Revolving Commitments (as the case may be) would be reduced
to an amount which would be less than, respectively, the Term
Loan Outstandings or the Revolving Outstandings at the time
the cancellation is to come into effect.
Any such cancellation shall be taken to reduce the relevant
Revolving Commitments or (as the case may be) Term Loan Commitments
of each of the Banks rateably by reference to the Total Revolving
Commitments or (as the case may be) Total Term Loan Commitments.
(d) Each notice of cancellation given pursuant to this clause 2.10 shall
be irrevocable and shall specify the date upon which such
cancellation is to take effect.
(e) If at any time:
(i) the Commitment of any Bank is cancelled or reduced in
aggregate to zero; and
(ii) all obligations (actual or contingent) and all Indebtedness
due or owing to such Bank by the Borrowers hereunder has been
satisfied in full, then such Bank (other than for the
purposes of
33
<PAGE>
clause 15.11 and 15.12) shall cease to be a Bank hereunder
and shall cease to be a party to this agreement.
2.11 OBLIGATIONS AND RIGHTS OF THE BANKS, ARRANGER AND AGENT
(a) If the Agent notifies a Bank that it is to make an Advance or
Tranche in accordance with clause 2.2 then, on the relevant
Utilisation Date but subject to this agreement, such Bank shall make
available its participation in such Advance (or Tranche) through
its Facility Office in accordance with this agreement.
(b) The obligations and rights of the Banks, the Arranger and the Agent
hereunder are several. The failure by a Bank (not acting in its
capacity of Agent) to perform its obligations hereunder shall not
affect the obligations of any other Bank, the Arranger, the Agent,
the Parent or the Purchaser to perform any of their respective
obligations under this agreement towards any other party hereto, nor
shall the Arranger, the Agent or any Bank be responsible for the
obligations of any other of them under this agreement.
(c) Notwithstanding any other provision of this agreement, the interests
of the Banks, the Arranger and the Agent are several and the amounts
from time to time due to the Agent or the Arranger (for its own
account) and to each Bank shall be separate and independent debts.
The Agent, the Arranger and each Bank shall have the right to
protect and enforce their rights arising under this agreement
separately and it shall not be necessary for the Agent, the Arranger
or any Bank (as the case may be) to be joined as an additional party
in any proceedings to that end.
3. CONDITIONS PRECEDENT
3.1 CONDITIONS PRECEDENT TO THE FACILITIES
It is a condition precedent to the obligations of the Banks to make the
Facilities available that the Agent shall first have received the various
documents and evidence referred to in Part I of Schedule 5 in form and
substance satisfactory to it (acting reasonably) prior to the termination
of the Availability Period. Once all such conditions precedent have been
satisfied or fulfilled or waived by the Majority Banks, the Agent shall on
that day give notice in writing to the Parent and the Banks (other than
itself) to that effect, which day shall be the "EFFECTIVE DATE".
3.2 CONDITIONS PRECEDENT TO THE MAKING OF AN ADVANCE OR TRANCHE
Notwithstanding any other provision of this agreement, none of the Banks
shall be obliged to make its participation in an Advance or Tranche or any
part of either thereof and no Utilisation Request may be made by a
Borrower unless the following further conditions are satisfied at the same
time as the giving of a Utilisation Request hereunder:
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(a) no Event of Default has occurred and is continuing or will result
from the proposed Utilisation; and
(b) no Potential Event of Default has occurred and is continuing or will
result from the proposed Utilisation; and
(c) the Repeated Representations are true and will be true on and as of
the relevant Utilisation Date with reference to the facts and
circumstances then subsisting; and
(d) in the case of a Utilisation Request made immediately prior to the
Tender Offer Closing Date, receipt by the Agent of the various
documents and evidence referred to in Part II of Schedule 5 in form
and substance satisfactory to it (acting reasonably); and
(e) in the case of a Utilisation Request made immediately prior to the
Merger Agreement Closing Date, receipt by the Agent of the various
documents and evidence referred to in Part III of Schedule 5 in form
and substance satisfactory to it (acting reasonably).
3.3 ROLLOVER
(a) Without prejudice to clause 11.1, the provisions of clause 3.2(b)
shall not apply to:
(i) any Advance under the Revolving Advances Facility (the "NEW
ADVANCE") which is to be made on the Repayment Date of
another Advance under the Revolving Advances Facility the
amount of which is equal to or greater than the New Advance;
and
(ii) any Tranche under the Term Loan Facility (the "NEW TRANCHE")
which is to be made on the repayment of another Tranche or
Tranches (in respect of the same Advance) the amount or (as
the case may be) the aggregate amount of which is equal to
the New Tranche.
3.4 CERTAIN FUNDS PERIOD
To assist the Group to have sufficient funds available to fulfil its
obligations in connection with the Acquisition, the Banks shall not on or
prior to the Merger Completion Date decline to permit any Facility to be
utilised hereunder as a consequence of:
(a) the occurrence of any Potential Event of Default or Event of Default
under Clause 11.1(b), (e)(ii), (m), (p), (r) or (to the extent
referable to a representation and warranty suspended by this Clause
3.4) (d);
(b) the occurrence of any Potential Event of Default under Clause
11.1(g) or (to the extent referable to Clause 10.2(h)) (c);
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(c) any misrepresentation under Clause 9.1(h), (i), (j), (k)(i) or (l),
provided that this clause 3.4 shall not prevent the Agent or any of the
Banks exercising any of their respective rights and remedies under this
Agreement (including, without limitation, under clause 11.1) after the
earlier of (i) 1st August 1998 and (ii) the Merger Completion Date and
notwithstanding any such utilisation.
4. TAXES
4.1 GROSSING UP
All payments to be made by a Borrower to any person hereunder shall be
made free and clear of and without deduction for or on account of Tax
unless such Borrower is required to make such a payment subject to the
deduction or withholding of Tax, in which case the sum payable by such
Borrower in respect of which such deduction or withholding is required to
be made shall be increased to the extent necessary to ensure that, after
the making of such deduction or withholding, such person receives and
retains (free from any liability in respect of any such deduction or
withholding) a net sum equal to the sum which it would have received and
so retained had no such deduction or withholding been made or required to
be made.
4.2 BANK'S OBLIGATION TO LODGE RELEVANT DECLARATION
Neither Borrower is obliged to pay any additional amount pursuant to
clause 4.1 in respect of any deduction which would not have been required
if the relevant Bank had completed and properly lodged, as soon as
practically possible after becoming a Bank hereunder a declaration, claim,
exemption or other form which it is required to complete.
4.3 QUALIFYING BANK
If:
(a) at the date of this agreement any Bank is not a Qualifying Bank; or
(b) a Bank ceases to be a Qualifying Bank other than as a result of the
introduction of, suspension, withdrawal or cancellation of, or
change in, or change in the general understanding, interpretation,
administration or application of, any law or regulation or tax
treaty compliance with which is customary or any practice or
concession of the United Kingdom Inland Revenue or any other
relevant taxing or fiscal authority in any jurisdiction with which
the relevant Bank has a connection, occurring after the date of this
agreement; or
(c) on the date of any assignment, transfer or novation under clause 16
the Transferee is not a Qualifying Bank,
then no Borrower shall be liable to pay to that Bank under clause 4.1 any
amount in respect of taxes levied or imposed by the United Kingdom or any
taxing
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authority of or in the United Kingdom in excess of the amount it would
have been obliged to pay if that Bank had been or remained a Qualifying
Bank.
4.4 U.S. TAXES
(a) The Purchaser shall not be required to pay any additional amount
pursuant to Clause 4.1 (Gross-up) in respect of United States
federal income taxes with respect to a sum payable by it pursuant to
this agreement to a Bank if such Bank:
(i) on the date it becomes a Party to this agreement either:
(1) is not a "United States Person" (as such term is defined
in Section 7701(a)(30) of the Internal Revenue Code of
1986, as amended (the "Code")) and is not entitled to
submit either (x) an Internal Revenue Service Form 1001
(or such successor Form as shall be adopted from time to
time by the United States taxation authorities) relating
to such Bank and claiming complete exemption from
withholding on all amounts (to which such withholding
would otherwise apply) to be received by such Bank,
including fees, pursuant to this agreement in connection
with any borrowing by the Purchaser as a result of a tax
treaty concluded with the United States or (y) an
Internal Revenue Service Form 4224 (or such successor
Form as shall be adopted from time to time by the United
States taxation authorities) relating to all amounts (to
which such withholding would otherwise apply) to be
received by such Bank, including fees, pursuant to this
agreement in connection with any borrowing by the
Purchaser; or
(2) is a United States Person; or
(ii) has (unless the Purchaser failed to give the notification
referred to in paragraph (c) below) failed to submit any
form, certificate or other information with respect to such
sum payable that it was required to file pursuant to
paragraph (b) below and is entitled to file under applicable
law.
(b) If a Bank is not a United States Person it shall (if and to the
extent that it is entitled to do so under applicable law) submit as
soon as reasonably practicable after the date such Bank becomes a
party to this agreement in duplicate to the Purchaser duly completed
and signed copies of either Form 1001 of the United States Internal
Revenue Service (or such successor Form as shall be adopted from
time to time by the United States taxation authorities) (relating to
such Bank and claiming complete exemption from withholding on all
amounts (to which such withholding would otherwise apply) to be
received by such Bank, including fees, pursuant to this agreement in
connection with any borrowing by the
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Purchaser as a result of a tax treaty concluded with the United
States) or Form 4224 of the United States Internal Revenue Service
(or such successor Form as shall be adopted from time to time by the
United States taxation authorities) (relating to all amounts (to
which such withholding would otherwise apply) to be received by such
Bank, including fees, pursuant to this agreement in connection with
any borrowing by the Purchaser). Thereafter and from time to time,
such Bank shall (if and to the extent that it is entitled to do so
under applicable law) submit to the Purchaser such additional duly
completed and signed copies of one or the other such Forms (or such
successor Forms as shall be adopted from time to time by the
relevant United States taxation authorities) or any additional
information as may be required under then current United States law
or regulations to claim the inapplicability of or exemption from
United States withholding taxes on payments in respect of all
amounts (to which such withholding would otherwise apply) to be
received by such Bank, including fees, pursuant to this agreement in
connection with any borrowing by the Purchaser.
(c) To the extent that the Purchaser becomes aware of the need for any
Form or information referred to in the second sentence of paragraph
(b) above, it will notify the relevant Banks as soon as reasonably
practicable thereafter.
5. TAX RECEIPTS
5.1 NOTIFICATION
If, at any time, a Borrower is required by law to make any deduction or
withholding from any sum payable by it hereunder (or if thereafter there
is any change in the rates at which or the manner in which such deductions
or withholdings are calculated), that Borrower shall promptly notify the
Agent of the same.
5.2 DELIVERY OF TAX RECEIPTS
If a Borrower makes any payment hereunder in respect of which it is
required to make any deduction or withholding, it shall pay the full
amount required to be deducted or withheld to the relevant taxation or
other authority within the time allowed for such payment under applicable
law and shall deliver to the Agent for each Bank affected, within 30 days
after it has made such payment to the applicable authority, an original
receipt issued by such authority evidencing the payment to such authority
of all amounts so required to be deducted or withheld in respect of that
Bank's share of such payment.
5.3 BENEFIT OF TAX CREDITS ETC
In the event that an additional payment is made by a Borrower to or for
the benefit of any Bank under clause 4 and, such Bank in its sole opinion,
determines that it has received or been granted a credit against or relief
or remission for, or repayment of tax paid or payable by it in respect of
or calculated with reference to the deduction or withholding giving rise
to such additional payment or, in the case
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of an additional payment under clause 4 with reference to the liability,
expense or loss to which the payment giving rise to the additional payment
relates, such Bank shall, to the extent that it can do so without
prejudice to the retention of the amount of such credit, relief, remission
or repayment, pay to that Borrower such amount as it shall in its sole
opinion have concluded to be attributable to such deduction or withholding
or, as the case may be, such liability, expense or loss. Any such payment
shall be conclusive evidence (save in the case of manifest error) of the
amount due to such Borrower hereunder and shall be accepted by such
Borrower in full and final settlement of its rights of reimbursement
hereunder in respect of such deduction or withholding. Nothing herein
contained shall interfere with the right of any person to arrange its tax
affairs in whatever manner it thinks fit and, in particular, no person
shall be under any obligation to claim credit, relief, remission or
repayment from or against its corporate profits or similar tax liability
in respect of the amount of such deduction or withholding in priority to
any other claims, reliefs, credits or deductions available to it, nor
oblige any person to disclose any information relating to its tax affairs
or any calculations in respect thereof.
6. INCREASED COSTS
6.1 REIMBURSEMENT FOR INCREASED COSTS
If, by reason of (a) any change in law or in its interpretation or
administration and/or (b) compliance with any request from or requirement
of any central bank or other fiscal, monetary or other authority
(including, without limitation, a request or requirement which affects the
manner in which a Bank or any holding company of such Bank allocates
capital resources to its obligations hereunder) whether or not having the
force of law but which is commonly complied with by banks in the relevant
jurisdiction:
(i) a Bank or any holding company of such Bank incurs an additional
cost as a result of its having entered into and/or performing its
obligations under this agreement and/or assuming or maintaining a
Commitment under this agreement and/or participating in an Advance
or Tranche hereunder;
(ii) a Bank or any holding company of such Bank is unable to obtain the
rate of return on its overall capital which it would have been able
to obtain but for its having entered into and/or performing its
obligations and/or assuming or maintaining a Commitment under this
agreement and/or participating in an Advance or Tranche;
(iii) there is any increase in the cost to a Bank or any holding company
of such Bank of funding or maintaining all or any of the Advances
or Tranches;
(iv) a Bank or a holding company of such Bank becomes liable to make any
payment on account of tax or otherwise (not being a tax imposed on
the overall net income of the Bank or the net income of its
Facility Office by the jurisdiction in which it is incorporated or
in which its Facility Office is located) on or calculated by
reference to the amount of the Advances
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or Tranches made or to be made by it hereunder and/or by reference
to any sum received or receivable by it hereunder,
then the Parent shall (unless the same is dealt with by any other
provision of this agreement), from time to time on demand of the Agent,
promptly pay to the Agent for the account of that Bank amounts sufficient
to indemnify that Bank or any such holding company of such Bank against,
as the case may be, (i) such additional cost, (ii) such reduction in such
rate of return (or such proportion of such reduction as is, in the opinion
of that Bank, attributable to its obligations hereunder), (iii) such
increased cost (or such proportion of such increased cost as is, in the
opinion of that Bank, attributable to its (or any holding company of such
Bank) funding or maintaining any Advances or Tranches hereunder) or (iv)
such liability.
6.2 EXCEPTIONS
Clause 6.1 does not apply to any amount:
(a) compensated for by the payment of the Associated Costs Rate or the
operation of clause 4.1;
(b) which is, or is attributable to, any tax on the overall net income,
profits or gains of a Bank or any of its holding companies (or the
overall net income, profits or gains of a division or branch of the
Bank or any of its holding companies);
(c) arising directly out of the implementation by the applicable
authorities having jurisdiction over such Bank and/or its Facility
Office of the matters set out in the statement of the Basle
Committee on Banking Regulations and Supervisory Practices dated
July 1988 and entitled "International Convergence of Capital
Measurement and Capital Standards" (the "Guidance") except where a
higher level of capital adequacy is imposed than that stipulated in
the Guidance at the date of this agreement;
(d) which arises directly out of a change to an applicable law or
regulation affecting a Bank which has come into effect at the time
that Bank becomes a party to this agreement or takes a transfer
under clause 16 of which that Bank is aware and compliance with
which is in accordance with the normal practice of banks and
financial institutions to which such law or regulation applies.
6.3 NOTIFICATION
A Bank intending to make a claim pursuant to clause 6.1 shall notify the
Agent of the event by reason of which it is entitled to do so as soon as
reasonably practicable after becoming aware thereof, giving reasons for
such claim, whereupon the Agent shall notify the Parent thereof.
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7. ILLEGALITY AND MARKET DISRUPTION
7.1 ILLEGALITY
If, at any time, it is unlawful, or contrary to any official directive or
request (being a directive or request with which the relevant Bank is
accustomed to comply) of any central bank or other fiscal, monetary or
other authority, or impossible for a Bank to make, fund or allow to remain
outstanding its participation in an Advance or Tranche made or to be made
by it hereunder, then that Bank shall promptly after becoming aware of the
same, deliver to the Parent through the Agent a certificate to that effect
and:
(i) such Bank shall not thereafter be obliged to make available its
participation in any Advance or Tranche hereunder and the amount of
its Commitment shall be immediately reduced to zero; and
(ii) if the Agent on behalf of such Bank so requires, the relevant
Borrower shall on such date as the Agent shall have specified
(being a date which is not before, the earlier to occur of (a) 30
days after the date of the Agent's notice and (b) the latest date
permitted by the relevant law, official directive or request)
prepay such Bank's participation in the relevant Advance(s) or
Tranche(s) together with accrued interest thereon and all other
amounts owing to such Bank hereunder.
7.2 MARKET DISRUPTION
(a) If in relation to any Advance or Tranche and any proposed Interest
Period or Term relating thereto:
(i) the Agent determines that, at or about 11.00 a.m. on the
Quotation Date, it is not possible to determine LIBOR for the
currency in which such Advance or Tranche is denominated and
none or one only of the Reference Banks is supplying a
quotation for the purposes of determining LIBOR for the
currency in which such Advance or Tranche is denominated; or
(ii) the Agent is notified by the Banks to whom in aggregate fifty
per cent. (50%) or more of the Outstandings are (or, if that
Advance or Tranche were then made, would be) owed that (i)
they are unable to obtain matching deposits in the London
Interbank Market at or about 11.00 a.m. on the Quotation Date
in sufficient amounts to fund their respective shares of such
Advance or Tranche during that Interest Period or Term or
(ii) the cost to those Banks of obtaining such deposits is in
excess of the quotations used for determining LIBOR for the
currency in which such Advance or Tranche is denominated in
accordance with the definition of LIBOR,
then the Agent shall promptly give notice thereof to the relevant
Borrower and the Banks and, notwithstanding the provisions of clause
2, the Interest Period or Term relating to that Advance or Tranche
and the
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amount of interest payable in respect of such Advance or Tranche
during that Interest Period or Term shall be determined in
accordance with the following provisions of this clause 7.2.
(b) If clause 7.2(a) applies in relation to an Advance or Tranche then,
subject to clause 2.4, the duration of the Interest Period or Term
relating to that Advance or Tranche shall be one month or, if less,
such that it shall end on the Final Repayment Date and the rate of
interest applicable to that Advance or Tranche during the Interest
Period or Term relating to it shall, subject to the provisions of
clause 7.2(c), be the rate per annum which is the sum of (i) the
Margin, (ii) (in the case of an Advance or Tranche denominated in
Sterling) the Associated Costs Rate applicable thereto and (iii) the
rate per annum determined by the Agent (and notified to the relevant
Borrower) to be the weighted average of the rates of each Bank (as
notified to the Agent and advised by the Agent to the relevant
Borrower(s) before the last day of such Interest Period) each of
which expresses as a percentage rate per annum the cost to each Bank
of funding from whatever sources and in whatever manner it may
reasonably select its portion of such Advance or Tranche during such
Interest Period or Term.
(c) The Agent shall, as soon as is reasonably practicable after it has
given the notice referred to in clause 7.2(a), enter into
negotiations with the relevant Borrower with a view to agreeing a
substitute basis (i) for determining the rates of interest from time
to time applicable to the Advances and/or (ii) upon which the
Advances or Tranches may be maintained thereafter and any such
substitute basis that is agreed within 20 days of the giving of such
notice (but in any event by no later than the date falling five
Business Days prior to the last day of the Interest Period referred
to in clause 7.2(b)) shall take effect in accordance with its terms
and be binding on each party hereto Provided that the Agent may not
agree any such substitute basis without the prior consent of each
Bank.
(d) If a substitute basis in respect of the Advances or Tranches is not
agreed pursuant to clause 7.2(c), the relevant Borrower shall be
entitled, by giving to any Bank not less than ten Business Days'
notice:
(i) to cancel all (but not part only) of the Bank's Commitment,
in respect of such Advances or Tranches, whereupon that
Bank's Commitment shall be reduced to zero; and
(ii) to prepay all (but not part only) of that Bank's Outstandings
in respect of such Advances or Tranches,
in each such case without premium or penalty (save as provided in
clause 12.2) together with accrued interest thereon and all other
amounts owing to such Bank under this agreement Provided that the
relevant Borrower may not elect to cancel the Commitment and/or
prepay the Outstandings of a Bank whose rate of interest as advised
to such Borrower by the Agent under clause 7.2(b) is equal to or
lower than the
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rate as so advised to it by the Agent in relation to another Bank
unless that other Bank's Commitment in respect of such Advances or
Tranches, is also cancelled and/or, as the case may be, its
Outstandings in respect of such Advances or Tranches, are also
prepaid at the same time.
(e) Interest on an Advance or Tranche during an Interest Period relating
to it calculated at the rates specified in clauses 7.2(b) shall be
distributed by the Agent to the Banks in proportion to the amounts
which represent the cost to each Bank of funding its share of such
Advance or Tranche during such Interest Period Provided that any
such interest which is attributable to the Margin shall be
distributed by the Agent to the Banks in proportion to their
respective shares in such Advance or Tranche.
(f) So long as any alternative basis for the calculation of interest as
provided in clauses 7.2(b) or 7.2(c) is in force the Agent, in
consultation with the relevant Borrower and the Banks, shall from
time to time, but not less often than fortnightly, review whether or
not the circumstances referred to in clause 7.2(a) still prevail
with a view to returning to the normal provisions of this agreement
relating to the determination of the rates of interest applicable to
any Advance or Tranche.
8. MITIGATION OF ADDITIONAL COSTS
8.1 BANKS' OBLIGATION TO MITIGATE
(a) If, in respect of any Bank, circumstances arise which would or would
upon the giving of notice result in:
(i) the reduction of its Commitment to zero pursuant to clause
7.1(i);
(ii) a payment being made pursuant to clause 7.1(ii);
(iii) an increase in the amount of any payment to be made to it or
for its account pursuant to clause 4.1;
(iv) a claim for indemnification pursuant to clause 6.1;
then, without in any way limiting, reducing or otherwise qualifying
either Borrower's obligations under any of the clauses referred to
in sub-clauses (i) to (iv), such Bank shall promptly after its
Facility Office becomes aware of the same notify the Agent thereof
and, in consultation with the Agent and the Parent, for a period not
exceeding 30 days, take such reasonable steps as it considers may be
reasonably open to it to mitigate the effects of such circumstances
including, if it considers appropriate, the transfer of its Facility
Office for the Facilities to another jurisdiction acceptable to the
Parent and in which it has an office carrying on a similar business
or the transfer of its rights and obligations in accordance with,
and subject to the provisions of, clause 16 to another financial
institution willing to participate in the Facilities provided that
(a) such Bank shall be under no obligation to make any such transfer
if, in the
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bona fide opinion of such Bank, such transfer would or might have an
adverse effect upon its business, operations or financial condition
or cause it to incur significant costs and (b) such Bank shall,
notwithstanding the foregoing, be under no obligation to achieve any
particular result and shall incur no liability to either Borrower by
virtue of any such steps resulting in less than complete mitigation.
(b) Nothing in clauses 5, 6, 7 and 8.1 shall oblige any Bank to disclose
to the Parent or any other person any information concerning its
financial affairs or to arrange its tax affairs in any particular
manner or at any particular time or to claim relief from tax in
respect of any particular payment in priority to any other claims,
reliefs, credits or deductions available to it.
9. REPRESENTATIONS AND WARRANTIES
9.1 REPRESENTATIONS AND WARRANTIES
To induce each of the Banks, the Arranger and the Agent to enter into this
agreement and to make available its participation in the Facilities, the
Parent represents and warrants to and for the benefit of each of the
Banks, the Agent and the Arranger that:
(a) INCORPORATION AND EXISTENCE: each Relevant Group Member is a
limited company, duly incorporated and validly existing under the
laws of the country or state of its incorporation and has the power
and the full authority and right to own its properties, assets and
revenues and to carry on its business as it is now being conducted;
(b) POWER AND AUTHORITY: each Relevant Group Member has the power to
enter into, execute, deliver and perform the Transaction Documents
to which it is a party and the transactions contemplated thereby and
all necessary corporate, shareholder or other action has been taken
to authorise the entry into, execution, delivery and performance of
each Transaction Document to which the Relevant Group Member is a
party and the other transactions contemplated thereby (and all such
authorisations are in full force and effect);
(c) OBLIGATION AND ENFORCEABILITY: this agreement constitutes and each
of the other Transaction Documents to which any Relevant Group
Member is a party (when executed) will constitute its legal, valid
and binding obligations, and, subject to laws relating to
bankruptcy, insolvency and liquidation and the existence of
equitable remedies, are enforceable against such Relevant Group
Member in accordance with their respective terms;
(d) NO CONFLICT: the entry into by each Relevant Group Member of each
Transaction Document to which such Relevant Group Member is a party
and the performance of their respective obligations thereunder, the
drawing and/or conversion of any Advance or Tranche and the use of
the proceeds thereof and the transactions contemplated by the
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Transaction Documents to which such Relevant Group Member is a party
do not conflict with or exceed (i) any applicable law or regulation
or instrument or any official or judicial order, (ii) the Memorandum
and Articles of Association (or equivalent constitutive documents)
of such Relevant Group Member, (iii) any limits on the borrowing or
other powers of any Relevant Group Member or the exercise of such
powers by the directors or other officers of any Relevant Group
Member, (iv) any material charge, contract, instrument, undertaking
or restriction to which any Relevant Group Member is a party, or (v)
any material agreement or document to which any Relevant Group
Member is a party or which is binding upon it or any of the
undertaking, property, assets or revenues of it, nor will any such
matter result in the creation or imposition of any Encumbrance on
any of the property, assets or revenues of any Relevant Group
Member.
(e) NO DEFAULT:
(i) no event has occurred and is subsisting which constitutes an
Event of Default; and
(ii) save as and only to the extent expressly disclosed in writing
by the Parent to the Agent prior to the date hereof, no event
has occurred and is subsisting which constitutes a material
default under or in respect of any other material agreement
or document to which it or any other Group Company is a party
or by which it or any of the Group Companies is bound which
would be reasonably likely to have a Material Adverse Effect;
(f) AUTHORISATIONS AND CONSENTS: all authorisations, approvals,
consents, licences, exemptions, filings, registrations,
notarisations and other matters, official or otherwise, required in
connection with each Relevant Group Member's entry into and
performance of, and the validity and enforceability against them of
the Transaction Documents to which the relevant one of them is a
party and the transactions contemplated thereby have been obtained
or effected and are in full force and effect;
(g) ACCOUNTS: the Base Accounts and the consolidated and unconsolidated
audited and unaudited accounts of the Group for each subsequent
financial period delivered by the Parent to the Agent have been
prepared in accordance with accounting principles and practices
generally accepted in the United Kingdom consistently applied and
(when taken with the notes thereto) present a true and fair view of
(in the case of the audited accounts) or fairly present (in the case
of the unaudited accounts) the financial condition of the Group as
at the date to which they have been prepared;
(h) NO LITIGATION: no litigation, arbitration or administrative
proceedings are current or pending or, to the knowledge of its
officers, threatened against any Group Company or any part of the
undertaking assets or revenues of any Group Company which has a
reasonable likelihood of
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success and which when resolved is likely to have a Material Adverse
Effect;
(i) TAXATION: the Parent and each other Group Company has complied in
all material respects with all Taxation laws in all jurisdictions in
which it is subject to Taxation; no material claims (which are not
being contested in good faith) are being asserted against either
Borrower or any of the Guarantors with respect to Taxes;
(j) ENVIRONMENTAL LAW: no Group Company has breached any Environmental
Law and the Group Companies are in possession of all Environmental
Licences required for the conduct of their respective businesses and
none of them has breached in any material respect any of the terms
or conditions of any such Environmental Licence which in any such
case would have a Material Adverse Effect;
(k) INFORMATION:
(i) General Information provided prior to the date of this
------------------------------------------------------
agreement:
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all written information provided to the Agent and/or any of
the Banks by the Parent or any other Group Company in
connection with any of the Transaction Documents prior to the
date of this agreement (and identified by the Agent and
notified in writing to the Parent prior to the date of this
agreement as being information upon which it has placed
reliance) is true and correct in all material respects and
the Parent is not aware of any material facts or
circumstances that have not been disclosed to the Agent
and/or any of the Banks prior to the date of this agreement
and which might, if disclosed, adversely affect the decision
of a person considering whether or not to provide finance to
either Borrower or to provide such finance against the
security of a guarantee issued by the Guarantors;
(ii) Information Memorandum:
----------------------
(A) the factual information in the Information Memorandum
supplied by the Group will be true and accurate in all
material respects as at the date to which it speaks;
(B) the opinions, projections and forecasts in the
Information Memorandum and the assumptions upon which
they are to be based will be arrived at after due and
careful consideration and enquiry and will generally
reflect the Parent's views as at the date of the
Information Memorandum, all assumptions made will be
reasonably made and all statements of opinion will be
genuinely and honestly held;
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(C) to the best of the knowledge and belief of the Parent
having made all reasonable and proper enquiries, as of
the date of the Information Memorandum, there will be
no material facts or circumstances which had not been
disclosed to the Arranger or Agent, which would have
made any such information, opinions, projections,
forecasts or assumptions untrue, inaccurate or
misleading in any material respect or which, if
disclosed, might have reasonably been expected
adversely to affect the decision of a person
considering whether to provide finance to either
Borrower on the terms contained herein;
(iii) Continuing Information after the date of this agreement:
-------------------------------------------------------
(A) all financial information provided to the Agent under
clause 10.1(c)(ix) will, to the best of the Parent's
knowledge, information and belief (after due enquiry
has been made), be true and correct in all material
respects;
(B) any certificates delivered by the Parent or any other
Group Company to the Agent or any of the Banks pursuant
to the terms of this agreement will be true and correct
in all material respects;
(C) all information delivered by the Parent or any other
Group Company to the Agent or any of the Banks for the
purpose of obtaining any consents, releases or waivers
from or by the Banks or the Agent under or pursuant to
this agreement will be true and correct in all material
respects;
(D) any information supplied by any Group Company to the
Agent or any Bank pursuant to clause 10.2(k) will, to
the best of that Group Company's knowledge, information
and belief (after due enquiry has been made), be true
and correct in all material respects;
(E) any financial projections provided to the Agent have
been be prepared with due care and skill and based upon
assumptions believed by the management of the Parent to
be reasonable;
(l) NO MATERIAL ADVERSE CHANGE: there has been no material adverse
change in the Parent's financial condition since the date to which
the Base Accounts were made up, nor in the consolidated financial
condition of the Group since that date, in each case which has had
or is likely to have a Material Adverse Effect;
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(m) NO ENCUMBRANCES: no Encumbrances (other than Permitted Encumbrances)
exist over all or any of the present or future undertaking, revenues
or assets of any Obligor or any of its Subsidiaries;
(n) MARGIN STOCK: The execution and delivery by the Purchaser of this
agreement, and the performance of its obligations hereunder and any
on-lending of the proceeds of any Advance by the Parent to the
Purchaser, do not and will not result in a breach or violation of
Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System;
(o) INVESTMENT COMPANY ACT: Neither the Purchaser nor any of its
subsidiaries is an "investment company" or a "company controlled by
an investment company" within the meaning of the United States
Investment Company Act of 1940, as amended;
(p) PUBLIC UTILITY HOLDING COMPANY ACT: Neither the Purchaser nor any
of its subsidiaries is a "holding company" or an "affiliate" of a
"holding company" within the meaning of the United States Public
Utility Holding Company Act of 1935, as amended;
(q) TENDER OFFER AND MERGER DOCUMENTS: Neither the Offer to Purchase,
the Schedule 14D-1 nor any document delivered to shareholders of the
Target in connection with the Tender Offer or the Merger will
contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not
misleading in the light of the circumstances under which they were
made;
(r) CERTIFICATE OF INCORPORATION: The certificate of incorporation of
the Target permits the Merger to occur with the consent of the
holders of a majority of the outstanding shares of common stock of
the Target.
9.2 TARGET AND SUBSIDIARIES
Until the expiry of a period of six months after completion of the
Acquisition, the representations and warranties contained in paragraphs
(h) (No litigation), (i) (Taxation), (j) (Environmental Law) and (m) (No
Encumbrances) above shall, to the extent only that they apply to any or
all of Target and its subsidiaries, be qualified by reference to the
actual knowledge, information and belief of the Parent at the time such
representation or warranty falls to be made hereunder.
9.3 REPETITION
The representations and warranties set out in clause 9.1 shall survive the
execution of this agreement and each of the Repeated Representations shall
be repeated on the last day of each Interest Period and upon the date of
delivery of each Utilisation Request hereunder by reference to the then
existing facts and circumstances. In the case of the representation and
warranty contained in paragraph 9.1(g), such repetition shall be deemed to
be made by reference to the accounts of the Group most recently delivered
hereunder as at the relevant time.
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10. FINANCIAL COVENANTS AND UNDERTAKINGS
10.1 FINANCIAL COVENANTS
The Parent undertakes to each of the Banks and the Agent that, so long as
any amount remains unpaid in respect of principal, interest or otherwise
hereunder or any Bank is under any obligation to make or maintain its
participation in the Facilities or any part thereof (unless the Agent
acting on the instructions of the Majority Banks otherwise agrees):
(a) CONSOLIDATED TOTAL BORROWINGS: CONSOLIDATED EBITDA it will procure
that the ratio of Consolidated Total Borrowings to Consolidated
EBITDA shall not, as at the last day of each of the periods referred
to in clause 10.1(e), exceed the ratio 4:1, in the first 12 months
commencing from the date hereof. For the remainder of the term of
this agreement the ratio shall not, as at the last day of each of
the periods referred to in clause 10.1(e), exceed the ratio 3:1.
(b) CONSOLIDATED PROFIT BEFORE INTEREST AND TAX: CONSOLIDATED NET
INTEREST PAYABLE: it will procure that the ratio of Consolidated
Profit before Interest and Tax to Consolidated Net Interest Payable,
as at the last day of each of the periods referred to in clause
10.1(e), shall not be less than the ratio 4.1;
(c) INFORMATION: the Parent will provide to the Agent (with sufficient
copies for each of the Banks) the following:
(i) as soon as is practicable and in any event within 270 days
after the end of its Financial Years, the audited accounts of
the Parent and its Material Subsidiaries for that year;
(ii) as soon as is practicable and in any event within 150 days
after the end of each of its Financial Years, the
consolidated audited accounts of the Group for that year;
(iii) no later than 60 days after the end of each half year
commencing with the half year ending on 31st March 1998, the
unaudited interim accounts of the Parent and the unaudited
consolidated results of the Group, in each case in Acceptable
Form for the immediately preceding six month period
including, without limitation, a balance sheet, profit and
loss account and cashflow statement of the Group;
(iv) no later than 45 days after the end of each Quarterly Period
commencing with the Quarterly Period ending on 31st March
1998, the quarterly management accounts of the Group, in an
Acceptable Form for the immediately preceding Quarterly
Period, including a balance sheet and a profit and loss
account as at the last day of each quarter (including details
of all off balance sheet financing arrangements entered into
during such period) together with a profit and loss forecast
for the Group
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(on a consolidated basis) for the remainder of the then
current Financial Year;
(v) by no later than 6 weeks before the end of each of its
Financial Years, the budgeted cash flow forecast for the
Group (on a consolidated basis) in an Acceptable Form;
(vi) by no later than the end of each of its Financial Years, the
budgeted cash flow forecast for the Group (on a consolidated
basis) in an Acceptable Form as ratified by the board of
directors of the Parent;
(vii) by no later than 45 days after the end of each quarter
commencing with the quarter ending on 31st March 1998 a
certificate signed by two directors of the Parent or by one
director of the Parent and by the Secretary of the Parent
advising:
(aa) that the undertakings set out in clauses 10.1(a) and
(b) have been complied with as at the end of that
quarter; and
(bb) which of the ratios (if any) set out in clause 2.5 have
been achieved;
and containing computations in form and substance reasonably
satisfactory to the Majority Banks necessary to demonstrate
such compliance or non-compliance if such is the case (the
"CERTIFICATE OF COMPLIANCE");
(viii) copies of all notices and other documents sent by any Group
Company to its shareholders (or any class thereof) and/or its
creditors generally (or any class thereof) on the date that
such documents are dispatched;
(ix) as soon as practicable, such other information as the Agent
may reasonably require in respect of the business and
financial condition of the Parent or any other Group Company;
(d) PREPARATION OF ACCOUNTS: it will procure that all accounts required
under paragraph (c) above will be prepared in accordance with
generally accepted accounting principles and practices in the United
Kingdom and consistently applied, will comply with all applicable
laws and (when taken with the notes thereto) will give a true and
fair view of (in the case of the audited accounts) and fairly
present (in the case of the unaudited accounts), as the case may be,
the financial condition of the Parent and each of its Subsidiaries
and the consolidated financial condition of the Parent and its
Subsidiaries as at the date thereof.
(e) TESTING OF COVENANTS: the covenants contained in clause 10.1(a) and
clause 10.1(b) shall be tested quarterly, first by reference to the
unaudited
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consolidated accounts of the Group produced pursuant to
clause 10.1(c)(iii) (in respect of the 12 month period ending
on the last day of the first half-year period in each
Financial Year), by reference to the relevant consolidated
audited accounts of the Group produced pursuant to clause
10.1(c)(ii) (in respect of the relevant Financial Year) and
by reference to the relevant quarterly management accounts of
the Group produced pursuant to clause 10.1(c)(iv) (in respect
of the 12 month period ending on the last day of the First
Quarterly Period and the Third Quarterly Period in each
Financial Year).
10.2 UNDERTAKINGS
So long as any amount remains unpaid in respect of principal, interest or
otherwise hereunder or any Bank is under any obligation to make or
maintain its participation in the Facilities or any part thereof (unless
the Agent acting on the instructions of the Majority Banks otherwise
agrees), each Borrower undertakes in relation to itself and the Parent
undertakes in relation to (as relevant) each Group Company, Guarantor, and
Material Subsidiary (as referred to in sub-clauses (a) to (o) (inclusive)
below that:
(a) NEGATIVE PLEDGE: save for Permitted Encumbrances, no Group Company
will grant or permit to subsist any Encumbrance over all or any of
its property, undertaking, assets, or revenues (whether present or
future);
(b) DISPOSALS: it will not, and will procure that no Group Company
will, sell, transfer, lend, dispose of or otherwise cease to
exercise direct control over (such transactions being hereunder
referred to as "disposals") its present or future undertaking,
assets or revenues, whether by one or a series of transactions
related or not, except for:
(i) disposals of assets in the ordinary course of the relevant
company's trading on an arm's length basis;
(ii) the payment of cash in the ordinary course of the relevant
company's business on an arm's length basis;
(iii) payments made by it under this agreement or under any other
Borrowings permitted under this agreement;
(iv) disposals with the prior written consent of the Majority
Banks;
(v) disposals of assets whether by one or a series of
transactions related or not the book value or consideration
payable (whichever is the greater) in respect of which does
not exceed (Pounds)10,000,000 (or its equivalent in other
currencies) in respect of any one disposal or which when
aggregated with all other such disposals in any one calendar
year does not exceed (Pounds)20,000,000 (or its equivalent in
other currencies);
(vi) payments made by it in respect of the Acquisition;
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(vii) disposals from any Group Company to any Obligor;
(viii) disposals from any non-Obligor to any non-Obligor;
(ix) disposals of surplus assets at market value and on an arm's
length basis;
(x) disposals of assets in exchange for other assets of a
comparable value;
(c) OWNERSHIP OF GUARANTORS: the Guarantors will at all times be and
remain Subsidiaries of the Parent and all of the issued share
capital of each of the Guarantors will at all time be and remain
beneficially owned (directly or indirectly) by the Parent;
(d) NEW SUBSIDIARIES: it will notify the Agent forthwith in writing if
any company incorporated in the United Kingdom after the date hereof
becomes a Material Subsidiary (whether or not such company was
previously a Subsidiary of the Parent or any Guarantor) and will, if
so required by the Agent, acting upon the instructions of the
Majority Banks (but subject to any applicable law), within thirty
days of being required to do so, in each case upon such terms as the
Agent may reasonably specify, procure that such company will, by
entering into a deed of admission in the form or substantially in
the form set out in the Guarantee, guarantee the obligations of the
Borrowers to the Agent and each of the Banks under this agreement
and the other Finance Documents;
(e) EVENT OF DEFAULT/POTENTIAL EVENT OF DEFAULT: it will promptly
notify the Agent in writing of any Event of Default or any event or
circumstances which with the giving of notice, lapse of time or
fulfilment of other conditions (or a combination of any of them) (in
each case as specified in clause 11.1) would constitute an Event of
Default;
(f) CERTIFICATE OF NO EVENT OF DEFAULT: it will upon request of the
Agent from time to time (but subject to no more than one such
request being made in any six month period), promptly supply the
Agent with a certificate signed by two directors certifying, as far
as it is aware due enquiry having been made, that no Event of
Default has occurred and is subsisting;
(g) BUSINESS: it will procure that no material change is made to the
general nature of the business of the Group taken as a whole;
(h) INSURANCE: it will, and will procure that all other Group Companies
will maintain insurances on or in relation to their respective
businesses and assets with underwriters and insurance companies of
repute against such risks of the kinds customarily insured against
by, and in amounts reasonably and commercially prudent for,
companies carrying on similar businesses and will comply and will
procure that all such other Group
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Companies will comply with all requirements of the policies of such
insurance in respect of the maintenance and repair of any assets so
insured to the extent that compliance with the same are required in
order to keep such policies on foot;
(i) AUTHORISATIONS, LICENCES, ETC: it will, and will procure that all
other Group Companies will obtain and promptly renew from time to
time, and will promptly (when requested) furnish, certified copies
to the Agent of all such authorisations, approvals, consents,
licences and exemptions as may be required under any applicable law
or regulation to enable such companies to perform their respective
obligations under the Transaction Documents to which any of them is
a party or which may be required for the validity or enforceability
thereof or which any Group Company may require for carrying on its
business and it shall procure that the relevant Group Company shall
in each case comply in all material respects with the terms of the
same;
(j) RANKING: it will ensure that its obligations under this agreement
and its and each Guarantor's obligations under the Finance Documents
to which it or (as the case may be) any such Guarantor is a party do
and will rank at least pari passu with all their respective other
present and future unsecured and unsubordinated indebtedness, other
than that indebtedness mandatorily preferred by law;
(k) ACQUISITION DOCUMENTS:
(i) it will perform and will procure that the Purchaser performs
its material obligations in accordance with the Acquisition
Documents;
(ii) it will and will procure that the Purchaser will take all
reasonable steps to protect, maintain and enforce its
material rights under the Acquisition Documents and not do or
omit to do anything which might prejudice such rights;
(iii) it will notify the Agent and on request supply reasonable
information to the Agent regarding:
(1) any material breach of any representation, warranty or
other obligation under the Acquisition Documents;
(2) any other material claims arising thereunder by reason
of breach of representation, warranty or other
obligation thereunder; and
(3) any legal proceedings by or against it or any of its
Subsidiaries in connection with any claim under the
Acquisition Documents;
(iv) it will not, and it will procure that none of the other Group
Companies which is a party thereto will, without the consent
of
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the Majority Banks (not to be unreasonably withheld) agree to
any material amendment to or variation of the Acquisition
Documents or waive any material right thereunder;
(l) ACCOUNTING REFERENCE PERIOD: it will ensure that no Group Company
alters its Accounting Reference Period except so as to be the same
as that of the Parent without the prior approval of the Agent
(acting in accordance with the instructions of the Majority Banks);
(m) ACQUISITIONS: it will not, and will procure that no Group Company
will, in any one Financial Year, purchase or otherwise acquire
whether by one or a series of transactions related or not, any
interest whatsoever in the share capital (or equivalent) or the
business or undertaking (including, but not limited to, any
franchise rights) or assets constituting a separate business, line
of business or undertaking of any company or other person for a
consideration in cash or otherwise in an amount exceeding 15% of:
(i) Consolidated Profit Before Tax; or
(ii) Consolidated Turnover,
(in each case as shown by the most recently delivered audited
accounts of the Group) during the term of this agreement (excluding
the acquisition of Target);
(n) LOANS AND CREDIT: save in the ordinary course of business it will
not and will procure that no other Group Company will make any
loans, grant any credit or give any guarantee or indemnity (except
as required hereby or in respect of the Hedging Agreements) to or
for the benefit of any person (other than another Group Company) or
otherwise voluntarily assume any liability, whether actual or
contingent, in respect of any obligation of any other person being
in an amount exceeding (Pounds)2,500,000 (or its equivalent in other
currencies) in aggregate at any one time;
(o) INTELLECTUAL PROPERTY: it will ensure that each member of the Group
has and maintains all patents, patent licences, patent rights,
service marks and licences, trademarks, trademark rights and
licences, trade names, trade name rights, copyrights and licences
under copyright and know-how rights and licences and all
applications for any of the above which are in its opinion desirable
to the running of the business of the Group.
(p) BORROWING: it will not and it will procure that for so long as
Multisoft Financial Systems Limited is a Subsidiary, it will not
incur, directly or indirectly, any Indebtedness in respect of
Borrowings or enter into any other arrangements whereby it is
entitled to incur Indebtedness in respect of Borrowings, other than:
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(i) Indebtedness owed by Multisoft Financial Systems Limited to
Barclays Bank PLC in a principal amount not exceeding
(Pounds)925,000; and
(ii) other Indebtedness of Multisoft Financial Systems Limited
which in aggregate does not exceed an amount of
(Pounds)250,000.
10.3 TARGET AND SUBSIDIARIES
(a) To the extent that any of Target or its subsidiaries shall (prior to
31st July 1998) be contractually bound to do or cause to be done any
act by any of them which on or after 31st July 1998 would cause a
breach of the terms of clause 10.2(a) (Negative Pledge) or clause
10.2(n) (Loans and Credit) and having used all reasonable endeavours
to procure a release from such contractual obligations, such act
shall not constitute a breach of the terms of this agreement.
(b) Until the expiry of a period of six months after 31st July 1998, the
failure by Target or any of its subsidiaries to comply with the
requirements of clause 10.2(o) (Intellectual Property) (having used
reasonable endeavours so to do) shall not constitute a breach of the
terms of this agreement.
11. EVENTS OF DEFAULT
11.1 EVENTS OF DEFAULT
In the event that any of the following events shall occur (each of which
shall be an Event of Default):
(a) FAILURE TO PAY: either Borrower or any Guarantor fails to pay any
amount (whether of principal, interest or otherwise) payable under
the terms of this agreement or the Guarantee (provided that no such
failure or non-payment shall be an Event of Default if it occurs
only by reason of: (i) technical difficulties beyond the reasonable
control of the relevant Borrower affecting the transfer of funds
due from the relevant Borrower to the Agent and the Agent receives
payment within three Business Days of the due date hereunder, or
(ii) administrative error and the Agent receives payment within one
Business Day of the due date hereunder);
(b) FAILURE TO COMPLY WITH FINANCIAL COVENANTS: the Parent fails to
comply with the covenants specified in clause 10.1(a) or (b) of this
agreement;
(c) FAILURE TO COMPLY WITH OTHER COVENANTS: either Borrower or any
Guarantor fails to comply with any other provision of this agreement
or any other Finance Document and either such breach is, in the
reasonable opinion of the Agent, not capable of remedy or such
breach is, in the reasonable opinion of the Agent, capable of remedy
and is not remedied within 14 days;
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(d) BREACH OF REPRESENTATION OR WARRANTY: any representation, warranty
or statement which is made by either Borrower or any Guarantor in
any of the Finance Documents or which is contained in any
certificate, statement or notice provided under or pursuant to any
of the Finance Documents proves to have been incorrect or misleading
in any material respect when made (or deemed repeated);
(e) CROSS-DEFAULT:
(i) any Borrowings in an amount exceeding (Pounds)500,000 or its
equivalent of a Group Company are not paid when due (or
within any originally applicable grace period); or
(ii) an event of default howsoever described relating to a Group
Company occurs (taking into account any originally applicable
grace period) under any document relating to Borrowings in an
amount exceeding (Pounds)500,000 or its equivalent of such
Group Company which renders those Borrowings capable of being
declared prematurely due and payable (save in the case of
events of default under documents evidencing the principal
debt related to Borrowings under paragraph (i) of the
definition of that term where the relevant Group Company
satisfies its obligations under the relevant guarantee,
indemnity or other suretyship obligation); or
(iii) any Borrowings of any Group Company becomes prematurely due
and payable or is placed on demand (other than where
originally on demand) as a result of an event of default
(however described) under the document relating to those
Borrowings; or
(iv) any floating charge securing Borrowings over the assets of
the Borrower or any Material Subsidiary crystallises.
(f) INABILITY TO PAY DEBTS:
(i) either Borrower or any Material Subsidiary becomes insolvent
or unable to pay its debts as they fall due or admits its
inability to pay its debts as they fall due;
(ii) any order is made or resolution passed or other action taken
for the suspension of payments, protection from creditors or
bankruptcy of either Borrower or any Material Subsidiary or
either Borrower or any Material Subsidiary announces an
intention to suspend making payments to all or any class of
its creditors;
(iii) either Borrower or any Material Subsidiary, due to reasons
which in the opinion of the Majority Banks acting reasonably
relate to financial difficulty, convenes a meeting of all or
any class of its creditors for the purpose of proposing or
proposes
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or makes any arrangement or composition with, or any
assignment for the benefit of, all or any class of its
creditors;
(iv) either Borrower or any Material Subsidiary, due to reasons
which in the opinion of the Majority Banks acting reasonably
relate to financial difficulty, proposes or enters into any
negotiations for or in connection with, the re-scheduling,
restructuring or re-adjustment of any indebtedness or a
moratorium is declared in respect of any of its indebtedness;
(g) DISTRESS OR ATTACHMENT: any distress, execution, attachment,
sequestration or other legal process affects the whole or any part
of the assets of either Borrower or any Material Subsidiary in
respect of assets of a value exceeding (Pounds)50,000 or its
equivalent in aggregate and is not discharged within 14 days;
(h) INSOLVENCY:
(i) an administrative or other receiver or manager or similar
officer is appointed of either Borrower or any Material
Subsidiary over the whole or any part of the assets of either
Borrower or any Material Subsidiary or either Borrower or any
Material Subsidiary requests any person to appoint such a
receiver or similar officer or any other procedural steps are
taken to enforce any Encumbrance over any property of either
Borrower or a Material Subsidiary or any encumbrancer takes
possession of all or any part of the assets of either
Borrower or a Material Subsidiary;
(ii) any order is made or any resolution is passed or any petition
is presented (other than a petition for a winding up which is
not advertised or notified to any other creditor and is
disputed by the relevant Borrower or the relevant Material
Subsidiary in good faith and which is dismissed or withdrawn
within a period of 14 days) or other procedural steps
(including the convening of any shareholders' meeting but
excluding steps taken by a creditor with a view to issuing or
presenting a petition to wind up) are taken for:
(1) the receivership, winding up, dissolution or
liquidation of either Borrower or a Material Subsidiary
other than (a) for the purpose of a reconstruction or
amalgamation the terms of which have previously been
approved by the Agent in writing on the instructions of
the Majority Banks; or (b) the solvent winding-up or
dissolution of either Borrower or any Material
Subsidiary the assets of which have been previously
transferred to either Borrower or another Material
Subsidiary;
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(2) the making of an administration order against either
Borrower or any Material Subsidiary;
(iii) any order is made or resolution passed or other action taken
for the suspension of payments, protection from creditors or
bankruptcy of either Borrower or any Material Subsidiary;
(i) SECURITY DOCUMENTS: The Guarantee or any other Security Document
for the time being or any part thereof or this agreement shall in
any respect no longer be in full force and effect or cease to be
continuing or be or purport to be determined or be or become invalid
or unenforceable or if the validity, enforceability or applicability
thereof to any obligation purported to be guaranteed or payable
shall be disputed by a member of the Group;
(j) OTHER JURISDICTIONS: there is any occurrence or situation arising
outside the jurisdiction of the High Court of Justice of England and
Wales which shall have a substantially similar effect to clauses
11.1 (e), (f) (g) or (h);
(k) UNLAWFULNESS: At any time it is or becomes unlawful for either
Borrower or any Guarantor to perform any of their respective
obligations under any of the Transaction Documents;
(l) CESSATION OF BUSINESS: any Obligor ceases, or announces an
intention to cease to carry on all or a substantial part of its
business other than by way of disposal permitted under clause
10.2(b);
(m) CHANGE OF CONTROL: at any time any person or group of connected
persons, which does not at the date hereof have (or would not be
held under section 416 Taxes Act to have at the date hereof) control
of the Parent, acquires such control (for the purposes of this
paragraph, "connected person" shall be construed in accordance with
section 839 of the Taxes Act);
(n) TERMINATION OF MERGER AGREEMENT: the Parent or the Target terminate
or purport to terminate the Merger Agreement;
(o) OWNERSHIP OF TARGET:
(i) before completion of the Merger, the Purchaser does not hold,
directly or indirectly, at least 49.9% of the issued shares
of common stock of Target following any purchase of shares in
the Target by the Purchaser after the Tender Offer Closing
Date; or
(ii) after completion of the Merger, the Purchaser ceases to be a
Subsidiary of the Parent;
(p) QUALIFICATION OF ACCOUNTS: any audited accounts or financial
statement required to be supplied to the Agent and/or the Banks
pursuant to the
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provisions of clause 10.1(c) shall be the subject of any
qualification by the auditors of the Group or any relevant Group
Company to the effect that an Obligor is unable to continue trading
as a going concern;
(q) ERISA:
(i) Any Plan which is covered by Title IV of ERISA but which is
not a multiemployer plan (as that term is defined in section
4001(a)(3) of ERISA) shall terminate under s.4001(c) or
s.4002 of ERISA;
(ii) any Obligor or any entity whether or not incorporated, which
is under common control with any other Obligor (within the
meaning of section 4001(a)(14) of ERISA) shall, or is, in the
reasonable opinion of the Majority Banks, likely to, incur
any liability in connection with a withdrawal from, or the
insolvency or reorganisation (as those terms are defined in
section 4245 and section 4241 respectively or ERISA) of, a
multiemployer plan; or
(iii) any other event or condition shall occur or exist with
respect to a Plan,
and in each case in clauses (i), (ii) and (iii) above, such event or
condition, together with all other such events or conditions, if
any, would have a Material Adverse Effect;
(r) MATERIAL ADVERSE CHANGE: any other event or series of events and
whether related or not (including, without limitation, any material
adverse change in the business, assets or financial position of the
Group after the Base Accounts Date) occurs as a result of which
either of the Parent or (for so long as it is indebted to the Banks)
the Purchaser or the other Obligors (taken as a whole) could
reasonably be expected to be unable to meet their respective
obligations under this agreement to the Agent or any Bank,
the Agent, on behalf of the Banks, may by notice to the Borrowers given
where the Event of Default is continuing:
(i) cancel and terminate its obligations and the obligations of the
Banks in respect of the Facilities and this agreement (including
their respective Commitments); and/or
(ii) declare all or any of the Advances, Tranches and any other sums
(whether of principal, interest or otherwise and whether of a
certain or contingent nature) in respect of the Facilities then
remaining outstanding and not yet due to be immediately due and
payable; and/or
(iii) declare all or any of the Advances, Tranches and any other sums
(whether of principal, interest or otherwise and whether of a
certain or contingent nature) in respect of the Facilities then
remaining outstanding
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and not yet due to be due and payable upon demand being made by the
Agent at any time thereafter, whereupon:
(A) (if (i) applies) such obligations shall be cancelled and
terminated;
(B) (if (ii) applies) such Advances, Tranches and other sums
shall become immediately due and payable; and
(C) (if (iii) applies) the Agent may by written notice declare
such Advances, Tranches and other sums to be due and payable
on demand being made by the Agent so that, at any time
thereafter, the Agent may (if so instructed by the Majority
Banks) by written notice to the Borrowers call for repayment
of all or any of such Advances, Tranches and other sums on
such date in such notice (whereupon the same shall become due
and payable on such date) or withdraw its declaration with
effect from such date as it may specify in such notice.
11.2 TARGET AND SUBSIDIARIES
Until the expiry of a period of three months following the Purchaser
acquiring ownership of more than 50% of the issued share capital of the
Target the Event of Default contained in paragraph 11.1(e)(ii) (cross-
default) above shall not apply to any or all of Target and its
Subsidiaries where the relevant agreements were entered into before the
completion of the Merger
11.3 DELAY
Without limiting the generality of clause 15.1, no delay of whatever
length by the Agent or any Bank in giving written notice or in exercising
its rights under clause 11.1 shall operate as a waiver.
11.4 INTEREST
Interest shall be charged on all sums due under the Facilities at the
relevant rate provided for under this agreement until such sums have been
paid in full.
12. COSTS, EXPENSES AND INDEMNITIES
12.1 COSTS AND EXPENSES
The Parent will from time to time on demand of the Agent (whether or not
it utilises the Facility available under this agreement) reimburse the
Agent and the Arranger for:
(a) all reasonable costs and expenses (including legal fees and printing
costs and other out-of-pocket expenses) together with VAT thereon
properly incurred by the Agent and the Arranger in connection with
the preparation, negotiation and documentation of this agreement,
and any other Transaction Document and any documents executed
pursuant
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hereto or in connection herewith (all of which are together the
"DOCUMENTS") and/or any amendment, variation or novation of,
supplement to, or waiver in respect of, this agreement; and
(b) all costs and expenses (including legal fees) together with VAT
thereon incurred by the Agent, the Arranger or any Bank in
maintaining, preserving, protecting, enforcing or attempting to
enforce any rights under the Documents; and
(c) any stamp, documentary, registration or similar tax payable in
connection with the entry into, registration, performance,
enforcement or admissibility in evidence of any of the Documents,
and shall indemnify the Banks, the Arranger and the Agent against
any liability with respect to or resulting from any failure to pay
or any delay in paying any such tax except to the extent that the
failure or delay is the result of the negligence or wilful default
of the Bank, Arranger or Agent (as the case may be).
12.2 INDEMNITY BY THE PARENT
(a) The Parent shall indemnify the Agent, the Arranger and each Bank on
a full and unqualified indemnity basis, without prejudice to any of
their other rights hereunder, against any loss (excluding loss of
margin but without prejudice to the Bank's right to recover margin
against the relevant Borrower under clause 2.8) cost or expense
(including legal expenses on a full indemnity basis and loss of
profit) or liability which the Agent, the Arranger or any Bank shall
certify as sustained or incurred by it as a consequence of:
(i) the occurrence of any Event of Default;
(ii) any default in payment by a Borrower of any sum hereunder
when due;
(iii) any repayment or prepayment of any Advance, Tranche or unpaid
sum hereunder otherwise than on the Interest Payment Date
applicable thereto;
(iv) any cancellation of any part of any Facility (other than any
loss of profit sustained by the Agent, the Arranger or any
Bank as a consequence of any cancellation permitted in
accordance with the terms and conditions of this agreement);
(v) an Advance or Tranche not being made available to a Borrower
for any reason unless caused by the failure of the Agent or a
Bank to perform its obligations under this agreement after a
Utilisation Request has been given,
including in any such case but not limited to any loss or expense
sustained or incurred in making available, maintaining or funding
any amount utilised under either Facility or part thereof or in
liquidating or
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re-employing during the relevant Interest Period deposits acquired
to make available, maintain or fund the relevant Facility or part
thereof.
(b) Each of the indemnities in clause 12.2 (and that in clause 15.7(b))
constitutes a separate and independent obligation from the other
obligations in this agreement, shall give rise to a separate and
independent cause of action, shall apply irrespective of any time or
indulgence granted by any of the Agent, the Arranger or the Banks
and shall continue in full force and effect notwithstanding any
order, judgment, claim or proof for a liquidated amount in respect
of any sum due under this agreement or any other judgment or order.
12.3 INDEMNITY BY BANKS
If the Parent fails to perform any of its obligations under clause 12.1,
each Bank shall, (i) in the proportion borne by its Outstandings to the
aggregate of the Outstandings of all the Banks; or (ii) if there are no
Outstandings at the time as may be specified by the Agent in the
proportion borne by its Commitment to the Total Commitments of all Banks;
or (iii) if there are no Outstandings and the Total Commitments have been
cancelled at such time, in the proportion borne by its Commitment to the
Total Commitments of all Banks immediately before they were cancelled,
indemnify the Agent and the Arrangers against any loss incurred by any of
them as a result of such failure and the Parent shall promptly reimburse
each Bank for any payment made by it pursuant to this clause 12.3.
13. FEES
13.1 AGENCY FEES
The Parent shall pay to the Agent, for the Agent's own account, the agency
fees specified in the Agent's Fees Letter at the times and in the amounts
specified in such letter.
13.2 UNDERWRITING FEE
The Parent shall pay to the Arranger, for the Arranger's own account, the
underwriting fee specified in the Arranger's Fees Letter.
13.3 SYNDICATION FEE
The Parent shall pay to the Arranger, for the Arranger's own account, the
syndication fee specified in the Arranger's Fees Letter.
13.4 COMMITMENT FEE
The Parent shall from the Effective Date until the Termination Date pay to
the Agent for the account of the Banks in proportion to the unutilised
Commitments a commitment fee of 50% (fifty per cent) of the Margin at the
relevant time calculated on a daily basis on the aggregate of the undrawn
amounts of the Revolving Advances Facility and the Term Loan Facility
Amount. The commitment fee shall be calculated and payable quarterly in
arrears and on the Termination Date. The first such payment date shall be
the date falling 3 months
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after the date of this agreement. For the purposes of this clause, the
Dollar Equivalent of an Optional Currency shall be used in calculating the
undrawn amounts of the relevant Facilities on the relevant date.
14. NOTICES
14.1 SERVICE
Unless otherwise specified in the agreement, any notice to be served in
connection with this agreement shall be in writing and shall be delivered:
(a) In the case of the Agent and/or the Arranger to: Lloyds Bank Plc,
Bank House, Wine Street, Bristol BS1 2AN Attn: Loans Administration
Department.
(b) In the case of the Parent to: The Sage Group PLC, Sage House, Benton
Park Road, Newcastle upon Tyne NE7 7LZ Attn: Company Secretary.
(c) In the case of the Purchaser to:
C/o The Sage Group PLC
Sage House
Benton Park Road
Newcastle upon Tyne
NE7 7LZ
Attn: Company Secretary
(d) In the case of the Banks to their respective Facility Offices marked
for the attention of the bank official nominated in schedule 1 or in
the Transfer Certificate,
or to such other address, telex and/or fax number or marked for such other
attention as it may have by at least seven days' prior notice notified the
other parties hereto.
14.2 DEEMED DELIVERY
Notices under this agreement may be delivered by hand or by post or sent
by telex or facsimile transmission and if by post shall be deemed to be
delivered to the relevant party at 10.00 am London time two Business Days
next following the date of posting and if by telex or facsimile
transmission shall be deemed to be delivered on conclusion of the relevant
transmission provided (in the case of telex) the correct answerback is
received and (in the case of fax) that the transaction is effected on a
Business Day between the hours of 9.00am and 5.00pm and a copy shall be
delivered by hand or by post within 48 hours of the transmission of the
fax. In proving such service by post, it shall be sufficient to show that
the letter containing the notice was properly addressed and posted (with
postage prepaid).
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15. MISCELLANEOUS
15.1 WAIVER
No failure or delay on the part of the Agent, the Arranger or any Bank to
exercise its rights, powers or remedies provided by law or under this
agreement, shall operate as a waiver thereof nor shall any single exercise
or any partial exercise or waiver of any such right, power or remedy
exclude any other or further exercise thereof or the exercise of any other
right, power or remedy. The rights, powers and remedies provided herein
are cumulative and not exclusive of any rights, powers and remedies
provided by law.
15.2 GOVERNING LAW
This agreement shall be governed by, and shall be construed and
interpreted in accordance with and be deemed a contract under the laws of
England and Wales.
15.3 JURISDICTION AND SUBMISSION
(a) Each Borrower hereto irrevocably agrees for the benefit of the
Agent, the Arranger and each of the Banks that the courts of England
shall have jurisdiction to hear and determine any suit, action or
proceeding, and to settle any disputes, which may arise out of or in
connection with this Agreement and, for such purposes, irrevocably
submits to the jurisdiction of such courts.
(b) Each Borrower irrevocably waives any objection which it might now or
hereafter have to the courts referred to in Clause 15.3(a) being
nominated as the forum to hear and determine any suit, action or
proceeding, and to settle any disputes, which may arise out of or in
connection with this Agreement and agrees not to claim that any such
court is not a convenient or appropriate forum.
(c) The Purchaser agrees that the process by which any suit, action or
proceeding is begun in relation to this Agreement may be served on
it by being delivered to the Parent at the address of the Parent
specified from time to time for the purposes of Clause 14.1. If the
appointment of the person mentioned in this Clause 15.3(c) ceases to
be effective, the Purchaser shall immediately appoint a further
person in England to accept service of process on its behalf in
England and, failing such appointment within 15 days, the Agent
shall be entitled to appoint such a person by notice to the
Purchaser. Nothing contained herein shall affect the right to serve
process in any other manner permitted by law.
(d) The submission to the jurisdiction of the courts referred to in
Clause 15.3(a) shall not (and shall not be construed so as to) limit
the right of the Agent, the Arranger and the Banks or any of them to
take proceedings against any Borrower in any other court of
competent jurisdiction nor shall the taking of proceedings in any
one or more jurisdictions preclude the taking of proceedings in any
other jurisdiction
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(whether concurrently or not) if and to the extent permitted by
applicable law.
(e) Each Borrower hereby consents generally in respect of any legal
action or proceeding arising out of or in connection with this
Agreement to the giving of any relief or the issue of any process in
connection with such action or proceeding including, without
limitation, the making, enforcement or execution against any
property whatsoever (irrespective of its use or intended use) of any
order or judgment which may be made or given in such action or
proceeding.
(f) To the extent that any Borrower may in any jurisdiction claim for
itself or its assets immunity from suit, execution, attachment
(whether in aid of execution, before judgment or otherwise) or other
legal process and to the extent that in any such jurisdiction there
may be attributed to itself or its assets such immunity (whether or
not claimed), such Borrower hereby irrevocably agrees not to claim
and hereby irrevocably waives such immunity to the full extent
permitted by the laws of such jurisdiction.
15.4 ACCOUNTS
Accounts maintained by the Agent or any Bank in connection with this
agreement shall (in the absence of manifest error) be conclusive evidence
of the matters to which they relate. All certificates or determinations
given or made by the Agent or any Bank hereunder or in connection herewith
shall be conclusive and binding upon the Borrowers (in the absence of
manifest error).
15.5 SCHEDULES
The schedules to this agreement shall be construed as forming an integral
part of this agreement and (unless otherwise stated) words and expressions
defined herein shall bear the same respective meanings in the schedules.
15.6 ILLEGALITY
If at any time any provision hereof is or becomes illegal, invalid or
unenforceable in any respect under the laws of any jurisdiction neither
the legality, validity or enforceability of the remaining provisions
hereof nor the legality, validity or enforceability of such provision
under the laws of any other jurisdictions shall in any way be affected or
impaired thereby.
15.7 CURRENCY
(a) US Dollars is the currency of account and payment for all sums at
any time due from the Borrowers under or in connection with this
Agreement (including damages) Provided that: (i) each payment in
respect of costs and expenses shall be made in the currency in which
the same were incurred; (ii) each payment in respect of fees payable
under or pursuant to clause 13 shall be made in the currency in
which the same are expressed to be payable thereunder; (iii) each
repayment of an Advance or Tranche or a part thereof shall be made
in the currency in
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which such Advance or Tranche is denominated at the time of that
repayment; and (iv) each payment of interest shall be made in the
currency in which the sum in respect of which such interest is
payable is denominated.
(b) Any amount received or recovered by any Bank or by the Agent or the
Arranger in respect of any sum expressed to be due to it from a
Borrower under this agreement in a currency other than the currency
(the "contractual currency") in which such sum is so expressed to be
due (whether as a result of, or as a result of the enforcement of,
any judgment or order of a court or tribunal of any jurisdiction,
the winding-up of the relevant Borrower or otherwise) shall only
constitute a discharge to that Borrower to the extent of the amount
of the contractual currency that the recipient is able, in
accordance with its usual practice, to purchase with the amount of
the currency so received or recovered on the date of receipt or
recovery (or, if later, the first date on which such purchase is
practicable). If the amount of the contractual currency so
purchased is less than the amount of the contractual currency so
expressed to be due the relevant Borrower shall indemnify the
recipient against any loss sustained by it as a result, including
the cost of making any such purchase.
15.8 PROVISION OF PAYMENTS
(a) Where a sum is to be paid hereunder to the Agent for the account of
another person, the Agent shall not be obliged (but shall be
entitled) to make the same available to that other person until it
has been able to establish to its satisfaction that it has actually
received such sum, but if it does so, or gives an undertaking to do
so, and it proves to be the case that it had not actually received
the sum it paid out, then the person to whom such sum was so made
available shall on request refund the same to the Agent together
with an amount sufficient to reimburse the Agent for any amount it
may have been required to pay out by way of interest on moneys
borrowed to fund the sum in question during the period beginning on
the due date for payment thereof and ending on the date on which it
receives the same.
(b) The Agent may assume that each Bank on the due date thereof has made
available each amount to be paid by such Bank to the Agent for the
account of or by the direction of the relevant Borrower and may (but
shall not be obliged to) pay, or give an undertaking to pay, to the
relevant Borrower or other person to whose account the payment is to
be made a corresponding amount. To the extent that such Bank does
not so make payment of the relevant amount, the Agent shall be
entitled to recover the relevant amount from such Bank or, failing
such Bank from the relevant Borrower, together with interest thereon
sufficient to compensate the Agent for the cost of funding such
amount for the period up to the date of such recovery.
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15.9 TURNOVER TAXES
The amounts (including, for the avoidance of doubt, interest) stated in
this agreement to be payable by the Borrowers are exclusive of all
turnover taxes (wherever imposed and including with respect to the UK,
without limitation, VAT). Any payment by a Borrower will be made together
with a sum in respect of VAT if such is payable.
15.10 SET-OFF
15.10 Whilst an Event of Default is subsisting, each Borrower authorises each
Bank without prior notice to such Borrower to apply any credit balance
(whether or not then due) to which such Borrower is at any time
beneficially entitled on any account of such Borrower with that Bank in or
towards satisfaction of any sum due and payable from such Borrower to such
Bank hereunder but unpaid; for this purpose, each Bank is authorised to
purchase with the moneys standing to the credit of any such account such
other currencies as may be necessary to effect such application. In
effecting such currency transaction, the applicable rate of exchange shall
be that Bank's spot rate of exchange at 11.00 a.m. on the day such
transaction was effected. No Bank shall be obliged to exercise any right
given to it by this clause 15.10 which shall be without prejudice to and
in addition to any right of set-off, combination of accounts, lien or
other right to which it is at any time otherwise entitled (whether by
operation of law, contract or otherwise).
15.11 EXCESS PAYMENTS
If, at any time, the proportion which any Bank (a "Recovering Bank") has
received or recovered (whether by payment, the exercise of a right of set-
off or combination of accounts or otherwise) in respect of its portion of
any payment (a "relevant payment") to be made under this agreement for
account of such Recovering Bank and one or more other Banks is greater
(the portion of such receipt or recovery giving rise to such excess
proportion being herein called an "excess amount") than the proportion
thereof so received or recovered by the Bank or Banks so receiving or
recovering the smallest proportion thereof, then:
(a) such Recovering Bank shall promptly pay to the Agent an amount equal
to such excess amount;
(b) there shall thereupon fall due from the relevant Borrower to the
Recovering Bank an amount equal to the amount paid out by such
Recovering Bank pursuant to paragraph (a), the amount so due being,
for the purposes hereof, treated as if it were an unpaid part of
such Recovering Bank's portion of such relevant payment; and
(c) the Agent shall treat the amount received by it from such Recovering
Bank pursuant to paragraph (a) as if such amount had been received
by it from the relevant Borrower in respect of such relevant payment
and shall pay the same to the persons entitled thereto (including
such Recovering Bank) pro rata to their respective entitlements
thereto
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Provided that, notwithstanding anything contained herein, a Recovering
Bank which shall have commenced an action or proceeding in any court to
recover sums owing to it pursuant to this Agreement and as a result
thereof, or in connection therewith, shall have received an excess amount
shall not be required to pay any proportion of such excess amount to the
Agent for the account of any Bank which has been notified in advance of
such action or proceeding and has had an opportunity to, but does not,
join in such action or proceeding or commence and diligently prosecute a
separate action or proceeding to enforce its rights in the same or another
court.
15.12 REDISTRIBUTION OF PAYMENTS
If all or a part of a sum received or recovered by a Recovering Bank
becomes repayable and is repaid by such Recovering Bank to the Borrower,
then:
(i) each Bank which has received a share of such sum by reason of the
implementation of clause 15.11 shall, if so requested by the Agent,
promptly pay to the Agent for account of such Recovering Bank an
amount equal to its share of such sum;
(ii) as between the relevant Borrower and such Bank the amount so paid
shall be treated as if it had not been received or recovered by
such Bank; and
(iii) the Agent shall determine whether, as a result of the
implementation of the foregoing provisions of this clause 15.12,
circumstances exist which necessitate the implementation of the
provisions contained in clause 15.11.
15.13 AMENDMENTS
(a) In the event that:
(i) there is introduced into the country of origin of any
currency another currency (the "new currency") on the basis
that the new currency may be used for the payment of debts in
such country in parallel with such currency, each Borrower
shall have the option, by prior written notice to the Agent,
to elect that; or
(ii) any currency ceases to be the lawful currency for the time
being of its country of origin,
any amount in respect of principal, interest or any other sum
payable pursuant to this agreement denominated in such currency
shall be converted to the new currency at the prescribed conversion
rate then prevailing and all payments in respect thereof shall
thereafter be made in such new currency.
(b) Without prejudice to clause 15.13(a), the Borrowers, the Agent, the
Arrangers and the Banks will negotiate in good faith in order to
agree any amendments to this agreement or any other document entered
into
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pursuant to this agreement in order to ensure: (a) that the terms of
this agreement or any other such document reflect market practice at
such time with regard to the introduction of monetary union within
the European Communities; and (b) in so far as it is reasonably
possible and without prejudice to market practice at such time, that
the parties to this agreement shall be left in no worse position
than they might otherwise have been had either of the events
described in clause 15.13(a) not occurred.
(c) The parties hereto agree that the occurrence of economic and
monetary union within the European Union or part(s) of it and/or any
event associated with it and/or the introduction of the new currency
into the United Kingdom will not of itself result in the discharge,
cancellation, rescission or termination in whole or in part of this
agreement, nor will it of itself give any party to this agreement
the right to discharge, cancel, rescind, terminate or vary any
Finance Document (save as provided in this clause 15.13) or give
rise to an Event of Default.
16. ASSIGNMENT AND TRANSFER AND FACILITY OFFICES
16.1 SUCCESSORS, ASSIGNS AND TRANSFEREES
This agreement shall be binding upon and enure to the benefit of each of
the parties to it, any Transferee which becomes a party to it pursuant to
a Transfer Certificate and each of their respective successors and
permitted assigns.
16.2 RESTRICTION ON ASSIGNMENT AND TRANSFER BY BORROWER
The Borrowers shall not be entitled to assign or transfer all or any of
their respective rights, benefits and obligations under this agreement.
16.3 ASSIGNMENT OR TRANSFER BY A BANK
(a) Any Bank may at any time with the prior written consent of the
Parent (such consent not to be unreasonably withheld or delayed)
assign all or any of its rights and benefits hereunder and under the
other Finance Documents, or transfer in accordance with clause 16.4
all or any of its rights, benefits and obligations hereunder, to a
Qualifying Bank. All assignments and transfers hereunder shall be
(i) in integral multiples of $2,500,000 or (ii) of the whole of the
assignor or transferor Bank's Commitment. For the purposes of this
clause 16.3, the Parent shall be deemed to have given its consent to
any such assignment or transfer if the Parent shall not have
responded in writing within 10 Business Days of receipt by it of a
request for any such consent.
(b) If any Bank assigns all or any of its rights and benefits under this
agreement in accordance with this clause 16.3 then, unless and until
the assignee has agreed with the other parties to this agreement
that it shall be under the same obligations towards each of them as
it would have been under if it had been an original party to this
agreement, the other parties shall not be obliged to recognise such
assignee as having the
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rights against each of them which it would have had if it had been
such a party to this agreement.
(c) If any Bank wishes to assign or transfer all or any part of its
Commitment in one Facility then such Bank shall, at the same time,
assign or transfer all or part of the other Facility.
16.4 TRANSFER
If any Bank wishes to transfer all or any of its rights, benefits and
obligations hereunder as contemplated by clause 16.3 then such transfer as
shall be permitted by such clause may be effected by the delivery to the
Agent of a duly completed and duly executed Transfer Certificate in which
event, on the later of the Transfer Date specified in such Transfer
Certificate and the fifth Business Day following the date of delivery
thereof to the Agent:
(i) to the extent that in such Transfer Certificate the Transferor seeks
to transfer all or part of its rights, benefits and obligations
hereunder and under the Finance Documents, the Borrowers and the
Guarantors, the Arranger, the other Banks and the Transferor shall
each be released from further obligations to the other hereunder
(including the appropriate reduction in the Commitment of the
Transferor) and under the Finance Documents to that extent and their
respective rights against each other shall be cancelled (such
rights, benefits and obligations being referred to as "discharged
rights and obligations");
(ii) each of the Borrowers and the Guarantors and the Transferee party
thereto shall each assume obligations towards each other and acquire
rights against each other which (except as to the identity of the
parties thereto) are identical to the discharged rights and
obligations;
(iii) the Agent, the Arranger, such Transferee and the other Banks shall
acquire the same rights and assume the same obligations between
themselves as they would have acquired and assumed had such
Transferee been an original party hereto and an original beneficiary
of the Security Documents as a Bank with the rights and benefits and
obligations acquired and/or assumed by it as a result of such
transfer.
16.5 ADDITIONAL COST TO THE BORROWERS
No Borrower shall, following an assignment or transfer as provided for in
clause 16.3 or 16.4 or a change by a Bank of its Facility Office as
provided for in clause 16.6, be obliged to pay any additional amount
hereunder over what it would otherwise have been obliged to pay hereunder
had such assignment, transfer or change not occurred.
16.6 FACILITY OFFICE
Each Bank shall lend initially through the office of such Bank at the
address specified in Schedule 1 or, as the case may be, in its Transfer
Certificate, and subsequently through any other office of such Bank
selected from time to time by
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such Bank through which such Bank wishes to make available its Commitment
for the purposes of this agreement. If the office through which a Bank is
making available its Commitment is changed pursuant to this clause 16.6,
such Bank shall notify the Borrowers and the Agent promptly of such
change.
16.7 CONFIDENTIAL INFORMATION
Any confidential information relating to the Group Companies or any of
them which is given to the Arranger and/or a Bank pursuant to this
agreement shall only be used by the Arranger and/or such Bank for the
purposes of this agreement or obtaining advice on its rights hereunder and
shall not be disclosed to any third party without the prior written
consent of the relevant Borrower (such consent not to be unreasonably
withheld), except for disclosure to any actual or prospective Transferee,
to the Bank's or the Arranger's auditors or other advisers or to the
extent required by law or by any court, governmental, administrative or
regulatory authority or organisation having jurisdiction, control or
authority over the Arranger or such Bank or to the extent that the
information is a matter of public knowledge.
16.8 FEE
Any Bank which assigns or transfers all or any part of its rights,
benefits or obligations under this agreement in accordance with this
clause 16 shall pay to the Agent for the account of the Agent alone a fee
of (Pounds)950.
17. THE AGENT, THE ARRANGER AND THE REFERENCE BANKS
17.1 APPOINTMENT OF AGENT
The Arranger and each Bank hereby irrevocably appoints the Agent to act as
its agent for the purposes of this agreement and the other Finance
Documents and authorises the Agent (whether or not by or through employees
or agents) to hold the Finance Documents and to take such action on their
behalf and to exercise such rights, remedies, powers and discretions as
are specifically delegated to the Agent or contemplated by this agreement
and the Finance Documents, together with such powers and discretions as
are reasonably incidental thereto. Subject to clauses 15.8 and 15.11, any
amounts received by the Agent on behalf of the Banks hereunder or under
the Guarantee shall promptly following receipt of the same be distributed
to each of the Banks pro rata in the proportion which each such Bank's
Commitment bears to the aggregate amount of the Commitments of all of the
Banks.
17.2 WAIVER ETC
(a) The Agent may, if previously so authorised in writing by the
Majority Banks (or as expressly authorised by the other provisions
of this agreement) and subject to clause 17.2(b), waive, modify,
vary or otherwise amend or excuse performance of any provision of
the Finance Documents with the written agreement of the Borrowers,
in the case of a modification, variation or amendment. Any such
action so authorised and effected by the Agent shall be promptly
notified to the Banks by the
71
<PAGE>
Agent and shall be binding on all the Banks, and the Agent shall be
under no liability whatsoever in respect of such action.
(b) Except with the prior written consent of all the Banks and the
Borrowers or as otherwise contemplated in this agreement or as a
consequence thereof, the Agent shall not be entitled to:
(i) increase or reduce any Bank's Commitment;
(ii) reduce the amount of any payment of principal interest or
other amount payable under this agreement;
(iii) change the currency in which any amount is payable under this
agreement;
(iv) extend the dates for expiry of the Facilities;
(v) release any guarantees or security constituted by the
Security Documents;
(vi) amend the definition of "Majority Banks" in clause 1.1;
(vii) amend this clause 17.
17.3 NO FIDUCIARY RELATIONSHIP
(a) Apart from holding the benefit of guarantees or security constituted
by the Security Documents for the Banks, the Agent shall not by
reason of this agreement, the other Finance Documents or the
transactions referred to thereby, have a fiduciary relationship
with, or be or be deemed to be a trustee of or for, the Arranger,
any Bank or a Group Company. With respect to its own Commitment and
participation in each Advance or Tranche, the Agent shall have the
same rights and powers under this agreement and the Finance
Documents as any other Bank and may exercise the same as though it
were not performing the duties and functions delegated to it under
this agreement and the Finance Documents and the term "Banks" shall,
unless the context otherwise requires, include the Agent in its
individual capacity as a Bank.
(b) It is acknowledged by each of the other parties to this agreement
that the role of the Arranger has been confined solely to arranging
the Facilities in principle and that the Arranger does not and has
not acted as the agent of such parties. The Arranger shall not by
reason of this agreement, the other Finance Documents or the
transactions referred to thereby have a fiduciary relationship with,
or be deemed to be a trustee of or for, any Bank or a Group Company.
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<PAGE>
17.4 AGENT NOT REQUIRED TO TAKE CERTAIN ACTION
The Agent shall not be required to request any certificate or opinion
hereunder or to make any enquiry as to the use of the proceeds or
application of any Advance or Tranche unless so required in writing by any
Bank or to make any enquiry as to any default by any Group Company in the
performance or observance of any of the provisions of the Finance
Documents or as to the existence of an Event of Default or any event or
circumstance which with the giving of notice, lapse of time or other
condition would constitute an Event of Default unless the Agent has actual
knowledge thereof or has been notified in writing thereof by a Bank.
17.5 EXCLUSION OF LIABILITY
Neither the Agent nor the Arranger nor any of their respective directors,
officers, employees or agents shall be liable to any Bank for any action
taken or omitted under or in connection with the Finance Documents unless
caused by its or their negligence or wilful misconduct.
17.6 NO RELIANCE
Each Bank acknowledges that it has not relied on any representation
whether written or oral, express or implied made by the Agent or the
Arranger to induce it to enter into this agreement and that it has made
and will continue to make, without reliance on the Agent or the Arranger
and based on such documents and investigations as it considers
appropriate, its own independent appraisal of the financial condition and
affairs of the Group Companies, the Finance Documents and the matters
provided for thereby and has made its own appraisal of the
creditworthiness of the Group Companies. Neither the Agent nor the
Arranger shall have any duty or responsibility, either initially or on a
continuing basis, to provide any Bank with any credit or other information
with respect of the Group Companies whether coming into its possession
before the making of any Advance or Tranche or at any time or times
thereafter, other than such information as is provided to the Agent
hereunder.
17.7 EXTENT OF AGENT'S AND ARRANGER'S RESPONSIBILITY
Neither the Agent nor the Arranger shall have any responsibility to any
Bank on account of the failure of any Group Company to perform its
obligations under the Finance Documents or for the financial condition of
the Group Companies or for the completeness or accuracy of any statements,
representations or warranties (whether oral or in writing) in or by
reference to this agreement or any document delivered under this agreement
or for the execution, effectiveness, genuineness, validity,
enforceability, admissibility in evidence or sufficiency of the Finance
Documents or of any certificate, report or other document executed or
delivered thereunder or otherwise in connection therewith or its
negotiation, or for the collectability of any amounts under the Finance
Documents or (in the case of the Agent) for acting (or, as the case may
be, refraining from acting) in accordance with the instructions of the
Majority Banks. The Agent and the Arranger shall be entitled to rely on
any communication, instrument or document reasonably believed by it to be
genuine and correct and to have been signed or sent by the proper person
or persons and shall be entitled to rely as to legal or other
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<PAGE>
professional matters on opinions and statements of any legal or
professional advisers selected or approved by it.
17.8 NO LIABILITY TO ACCOUNT
The Agent and the Arranger may, without any liability to account to the
Banks, accept deposits from, lend money to, and generally engage in any
kind of banking or trust business with, any Group Company or any of the
Banks as if it was not the Agent or the Arranger (as the case may be).
17.9 INDEMNITY
(a) Each Bank shall reimburse the Agent (rateably in accordance with its
Commitment), to the extent the Agent is not reimbursed by the
Borrowers upon demand, for all charges and expenses incurred by the
Agent and/or in contemplation of the enforcement of, or the
preservation of any rights under, or in carrying out its duties
under the Finance Documents including (in each case) the fees and
expenses of legal or other professional advisers. Each Bank shall
indemnify the Agent (rateably in accordance with its Commitment)
against all liabilities, damages, costs and claims whatsoever
incurred by the Agent in connection with the Finance Documents or
the exercise of its rights in the performance of its duties
thereunder or any action taken or omitted by the Agent under the
Finance Documents, unless such liabilities, damages, costs or claims
arise from the Agent's own negligence or wilful misconduct.
(b) A Bank's proportion of liability set out in clause 17.9(a) above
will be the proportion which the Bank's Commitment bears to the
Total Commitments at the date of demand or, if the Total Commitments
have been cancelled, bore to the Total Commitments immediately
before being cancelled.
17.10 RETIREMENT OF AGENT
(a) The Agent may retire from its appointment as Agent having given to
the Borrowers and each of the Banks not less than 30 days' notice of
its intention to do so provided that no such retirement shall take
effect unless there has been appointed as a successor agent with the
prior written consent of the Borrowers (which shall not be
unreasonably withheld) either:
(i) a Bank nominated by the Majority Banks or, failing such a
nomination,
(ii) any reputable and experienced bank or financial institution
nominated by the Agent.
(b) If no appointment of a successor agent has been made during the
period of notice given by the Agent under clause 17.10(a) or if
either Borrower withholds consent to a successor, whether nominated
by the Majority
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<PAGE>
Banks or by the Agent, the Agent after consultation with the Banks
will appoint as successor a Qualifying Bank.
(c) Upon any such successor as aforesaid being appointed, the retiring
Agent shall be discharged from any further obligation under this
agreement and its successor and each of the other parties to this
agreement shall have the same rights and obligations among
themselves as they would have had if such successor had been a party
to this agreement.
(d) Upon its retirement becoming effective, this clause 17 (including,
without limitation, the indemnity contained in clause 17.9) shall
continue to benefit the retiring Agent in respect of any action
taken or not taken by it under or in connection with the Finance
Documents while it was the Agent.
17.11 REFERENCE BANKS
In the event that the Commitment of any Reference Bank hereunder ceases in
accordance with this agreement and such Reference Bank no longer
participates in any Advance or Tranche or a Reference Bank assigns or
transfers the whole of its rights and obligations under this agreement, it
shall cease to be a Reference Bank and the Agent shall, if so instructed
by the Majority Banks, appoint another Bank to replace such Bank as a
Reference Bank after consulting with the Parent.
17.12 AGENT'S COSTS
The Parent shall, from time to time on demand of the Agent, reimburse the
Agent for its own account at such daily and/or hourly rates as the Agent
shall from time to time determine, acting reasonably, for the cost of
utilising its management time and/or other resources in connection with
taking all such steps or other action which the Agent may deem
appropriate, which the Majority Banks require or which either Borrower
requests in connection with:
(a) the granting or proposed granting of any waiver or consent requested
by a Borrower hereunder or under any Transaction Document;
(b) any amendment or proposed amendment hereto or to any Transaction
Document;
(c) any breach by a Borrower of its obligations hereunder or under any
Transaction Document or any investigation as to whether any such
breach may have occurred consequent upon notice given by the
relevant Borrower to the Agent where it could be reasonably
concluded from the relevant notice that the relevant Borrower may
have breached its obligations hereunder or under any Transaction
Document; and
(d) the occurrence of any event which is or may become an Event of
Default, any event or circumstance notified pursuant to clause
10.2(e) or consequent upon any event or circumstance otherwise
notified by the relevant Borrower to the Agent where it could be
reasonably concluded
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<PAGE>
from the relevant notice that the Borrower may have breached its
obligations hereunder or under any Transaction Document; and
(e) the release of any Guarantor from the Guarantee.
17.13 AGENCY AND SYNDICATION DIVISION
In acting as Agent and Arranger for the Banks, that division of the Agent
or the Arranger (as the case may be) which has responsibility for agency,
arranging and syndication of this agreement shall be treated as a separate
entity from any other of the divisions of the Agent or the Arranger (as
the case may be) or its subsidiaries and, without detracting from the
generality of the foregoing, in the event that any of the Agent's or the
Arranger's divisions (including the divisions which have responsibility
for agency, arranging and syndication of this agreement) or similar units
or subsidiaries should act for either Borrower in any capacity whether as
bankers or otherwise in relation to any other matter, any information
given by either Borrower to such divisions, similar units or subsidiaries
shall be treated as confidential and the Agent or (as the case may be) the
Arranger shall as between itself and the Banks not be obliged to disclose
the same to any Bank or any other person.
17.14 NO REQUIREMENT TO DISCLOSE
Notwithstanding anything to the contrary expressed or implied herein and
without prejudice to the generality of clause 17.13, the Agent shall as
between itself and the Banks not be obliged to disclose to any Bank or
other person any information supplied by a Borrower to it in its capacity
as agent for the Banks which is identified by the relevant Borrower at the
time of supply as being confidential and supplied solely for the purpose
of evaluating in consultation with the Agent whether any waiver or
amendment might be required to any of the provisions contained herein or
in the Finance Documents Provided that nothing in this clause 17.14 shall
apply to any information supplied by the Parent pursuant to clause 10.1.
17.15 AGENT AND ARRANGER NOT DEEMED TO HAVE ACTUAL KNOWLEDGE OR NOTICE OF
CERTAIN MATTERS
For the purposes of this agreement and the Security Documents, neither the
Agent nor the Arranger shall be deemed to have any actual knowledge or
actual notice of the contents of any information obtained by it or
supplied to it by or on behalf of a Borrower other than (in the case of
the Agent) the contents of information obtained by or supplied to it as
agent for the Banks under this agreement and the Security Documents and
which information the Agent is not obliged to keep confidential pursuant
to clause 17.14.
17.16 MEETINGS OF BANKS
(a) The Agent may at any time in its own discretion convene a meeting of
the Banks.
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<PAGE>
(b) If authorised by a Relevant Instructing Group, the Agent shall at
any time convene a meeting of the Banks.
(c) Whenever the Agent is to convene any such meeting it shall forthwith
give notice in writing to the Banks of the day, time and place
thereof and the nature of the business to be transacted thereat.
(d) For the purpose of this clause 17.16 A "RELEVANT INSTRUCTING GROUP"
means:
(i) before an Advance has been made, a Bank or group of Banks
whose Commitments amount in aggregate to more than 50 per
cent. of all the Commitments;
(ii) after an Advance has been made, a Bank or group of Banks
which are participating to the extent of more than 50 per
cent of the Outstandings.
17.17 CONFLICT OF INTEREST
(a) The Agent may (without limitation to any other provision of this
clause 17) act as agent or trustee or in a fiduciary or other
capacity on behalf of any other group of banks or financial
institutions providing facilities to Group Companies or any
associated company or any such member without regard to the effect
of exercising or omitting to exercise its rights, discretions,
powers and duties in such capacity on the interests of the Banks and
to act or omit to act in such capacity as freely in all respects as
if the Agent had not been appointed to act as agent for the Banks;
(b) The Arranger may (without limitation to any other provision of this
clause 17) act as arranger or in a fiduciary or other capacity on
behalf of any other group of banks or financial institutions
providing facilities to Group Companies or any associated company or
any such member without regard to the effect of exercising or
omitting to exercise its rights, discretions, powers and duties in
such capacity on the interests of the Banks and to act or omit to
act in such capacity as freely in all respects as if the Arranger
were not acting as arranger under this agreement;
(c) Both the Agent and the Arranger may subscribe for, hold or be or
become beneficially entitled to, or dispose of, shares or
securities, or options or other rights to and interests in shares or
securities in any member or members of the Group or any associated
company of any such member (and, in each case, may do so without
liability to account).
18. HEDGING
The Banks acknowledge that the Parent may enter into Hedging Agreements
with Lloyds Bank Plc if, after discussion with Lloyds Bank Plc, the Parent
is of the view that such Hedging Agreements are necessary to reduce to a
level of risk
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acceptable to the Parent the relevant Borrower's risk of exposure to
increases and fluctuations in the rates of interest and/or currency
payable by the relevant Borrower under this agreement. Further the Banks
acknowledge that as a condition of entering into any such Hedging
Agreements with the Parent Lloyds Bank Plc may take a guarantee from the
Guarantors in respect of all present and future sums, liabilities or
obligations which may from time to time be due, owing or incurred
(actually or contingently) by the Parent to Lloyds Bank Plc under or in
connection with any such Hedging Agreements.
19. RELEASES
If a Guarantor elects to dispense with the laying of accounts and reports
before the company in general meeting in accordance with the provisions of
section 252 of the Companies Act 1985 and the gross assets of any such
Guarantor are at the relevant time less than (Pounds)1,000, the Agent
shall upon receipt of a written request by the Borrowers (and is hereby
authorised by the Banks and the Hedging Bank to) execute a deed of release
in the form or substantially in the form set out in the Guarantee provided
always that all continuing Guarantors consent to such release and confirm
that their respective liabilities as Guarantors shall not be discharged or
otherwise affected as a consequence of such release.
20. COUNTERPARTS
This agreement may be executed in any number of counterparts, all of which
taken together and when delivered to the Agent shall constitute one and
the same instrument. Any party may enter into this agreement by executing
any such counterpart.
AS WITNESS the hands of the duly authorised representatives of the parties
hereto the day and year first before written.
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<PAGE>
SCHEDULE 1
The Banks and their Commitments
-------------------------------
<TABLE>
<CAPTION>
NAME FACILITY OFFICE REVOLVING LOAN TERM LOAN TOTAL
- ---- --------------- -------------- --------- -----
COMMITMENT COMMITMENT COMMITMENTS
---------- ---------- -----------
$ $ $
<S> <C> <C> <C> <C>
Lloyds PO Box 96 $15,000,000 $218,000,000 $233,000,000
Bank 6/7 Park Row
Plc Leeds LS1 1NX
Tel: 0113 237 2262
Fax: 0113 237 2176
Telex:
Attn: C. Taylor Esq
</TABLE>
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SCHEDULE 2
Associated Costs Rate
---------------------
For the purposes of this agreement, the cost of compliance with existing
requirements of the Bank of England in respect of Advances, Tranches or unpaid
sums will be calculated by the Agent in relation to each Advance or Tranche on
the basis of rates to be supplied by each of the Reference Banks by reference to
the circumstances existing on the first day of each Interest Period or (in the
case of the Revolving Advances Facility) Term in respect of such Advance,
Tranche or unpaid sum and, if any such Interest Period or Term exceeds three
months, at three calendar monthly intervals from the first day of such Interest
Period or Term during its duration in accordance with the following formula:
A B + C (B - E) + D (B - F) per cent. per annum
---------------------------
100 - (A+D)
Where:
A is the percentage of eligible liabilities which such Bank is from
time to time required to maintain as an interest free cash deposit
with the Bank of England to comply with cash ratio requirements.
B is the percentage rate per annum at which Sterling deposits are
offered by such Reference Bank, in accordance with its normal
practice, for the relevant Interest Period or Term (or remainder
thereof) or three months, whichever is the shorter, to a leading
bank in the London Interbank Market at or about 11.00 am in a sum
approximately equal to the amount of the relevant Advance, Tranche
or unpaid sum.
C is the percentage of eligible liabilities which such Bank is from
time to time required by the Bank of England to maintain as secured
money with members of the London Discount Market Association
("LDMA") and/or as secured call money with money brokers and gilt
edged market makers.
D is the percentage of eligble liabilities which such Reference Bank
is required from time to time to maintain as interest bearing
special deposits with the Bank of England.
E is the percentage rate per annum at which members of the LDMA are
offered Sterling deposits in a sum approximately equal to the amount
of the relevant Advance, Tranche or unpaid sum as a callable fixture
from such Reference Bank as determined in accordance with B above at
or about 11.00 am.
F is the percentage rate per annum payable by the Bank of England to
such Reference Bank on interest bearing special deposits.
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For the purposes of this Schedule "eligible liabilities" and "special deposits"
shall bear the meanings ascribed to them from time to time by the Bank of
England.
1. The percentages used in A, C and D above shall be those required to be
maintained on the first day of each Interest Period or Term and, in the
case of an Interest Period or Term longer than three months, on the first
day of each three calendar monthly intervals from the date of the Advance
or Tranche.
2. In application of the above formula, A, B, C, D, E and F will be included
in the formula as figures and not as percentages, eg if A is 0.5 per cent.
and B is 12 per cent., AB will be calculated as 0.5 X 12 and not as 0.5
per cent. X 12 per cent.
3. Calculations will be made on the basis of a 365 day year.
4. A negative result obtained by subtracting E from B or F from B shall be
taken as zero.
5. The resulting figure shall be rounded, if necessary, to the nearest whole
multiple of 0.005 per cent. per annum and, if less than 0.005 per cent.
shall be disregarded.
6. Additional amounts calculated in accordance with this Schedule are payable
on the last day of each Interest Period or Term and, additionally, in the
case of a Interest Period or Term in excess of three months, at three
monthly intervals from the date of the Advance or Tranche.
7. The determination of the Associated Costs Rate in relation to any period
shall, in the absence of manifest error, be conclusive and binding on all
of the parties hereto.
8. The Agent may from time to time, after consultation with the Borrowers and
the Banks, determine and notify to all the parties hereto any amendments
or variations which are required to be made to the formula set out above
in order to comply with the existing or future requirements from time to
time imposed by the Bank of England in relation to Advances or Tranches
denominated in Sterling (including, without limitation, any requirements
relating to Sterling primary liquidity) and, any such determination shall,
in the absence of manifest error, be conclusive and binding on all the
parties hereto.
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SCHEDULE 3
Transfer Certificate
--------------------
To: Lloyds Bank Plc
St George's House
6/8 Eastcheap
London EC3M 1LL
Attention: Capital Markets Group
TRANSFER CERTIFICATE
--------------------
relating to the agreement (as the same may have been amended or novated from
time to time the "Facilities Agreement") dated [ ] 1998 whereby a
term loan facility and a revolving advances facility were made available to The
Sage Group PLC and Rose Acquisition Corp. Terms defined in the Facilities
Agreement shall have the same meaning herein.
1. [Transferor] (the "Transferor") confirms the accuracy of the summary of
its Commitment and its participation in the Advances (and Tranches
comprised therein) set out in the Schedule below and requests [Transferee]
(the "Transferee") to accept and procure the transfer to the Transferee of
[the whole/per cent] of such Commitment and its participation in the
Advances (and Tranches comprised therein) by counter-signing and
delivering this Transfer Certificate to the Agent at its address for the
service of notices specified in the Facilities Agreement.
2. The Transferee hereby requests the Agent to accept this Transfer
Certificate as being delivered to the Agent pursuant to and for the
purposes of clause 16.4 of the Facilities Agreement so as to take effect
in accordance with the terms thereof on [date of transfer] or on such
later date as may be determined in accordance with the terms of such
clause 16.4.
3. The Transferee warrants to the Transferor, the Agent, the Arranger and the
Banks that it has received a copy of the Facilities Agreement and the
other Finance Documents, together with such other information and
documents as it has required in connection with this transaction and that
it has not relied and will not hereafter rely on the Transferor, the
Agent, the Arranger or the Banks to check or enquire on its behalf into
the legality, validity, effectiveness, adequacy, accuracy or completeness
of any such information and further agrees that it has not relied and will
not rely on the Transferor, the Agent, the Arranger or the Banks to assess
or keep under review on its behalf the financial condition,
creditworthiness, condition, affairs, status or nature of any of the
Borrowers, the Guarantors, the other Group Companies or any other person.
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4. The Transferee hereby undertakes with the Transferor and each of the other
parties to the Facilities Agreement that it will perform in accordance
with their terms all those obligations which by the terms of the
Facilities Agreement will be assumed by it after delivery of this Transfer
Certificate to the Agent and satisfaction of the conditions (if any)
subject to which this Transfer Certificate is expressed to take effect.
5. Neither the Transferor, the Agent, the Arranger nor any of the Banks has
made or makes any representation or warranty whether written or oral,
express or implied or assumes any responsibility with respect to the
legality, validity, effectiveness, adequacy or enforceability of the
Facilities Agreement or the other Finance Documents and assumes no
responsibility for the financial condition of the Borrowers, the
Guarantors, the other Group Companies or any other person or for the
performance and observance by the Borrowers, the Guarantors, the other
Group Companies or any other person of any of their obligations under the
Facilities Agreement or the Finance Documents or any document relating
thereto and any and all such conditions and warranties, whether express or
implied by law or otherwise, are hereby excluded.
6. The Transferor hereby gives notice to the Transferee that the Transferor
is under no obligation to repurchase all or any part of the rights and
obligations hereby transferred at any time nor to support any losses
directly or indirectly incurred or suffered by the Transferee for any
reason whatsoever. The Transferee hereby acknowledges the absence of any
such obligation.
7. The Transferee represents and warrants that it is a Qualifying Bank.
8. This Transfer Certificate shall be governed by and construed in accordance
with English law and the provisions of clause 15 of the Facilities
Agreement shall (as they affect or either Borrower or any Guarantor) apply
with respect to any agreement arising in consequence of this Transfer
Certificate.
Note:
- ----
1. No transfer of part of a Bank's Commitment shall be effective unless the
amount of the Commitment expressed to be transferred is the whole thereof
or otherwise an amount of not less than $[ ] or, if more, an
integral multiple of $[ ].
2. Banks and future Transferees are advised not to employ Transfer
Certificates or otherwise to assign or transfer interests in the
Facilities Agreement without first ensuring that the transaction complies
with all applicable laws and regulations, including the Financial Services
Act, 1986 and regulations made thereunder.
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THE SCHEDULE
------------
(the Transferor's original commitment and participation)
--------------------------------------------------------
Term Loan Term Loan: Participation in Term Loan
- --------- ---------- ---------------------------
Commitment: Total Advances/ Advances/Tranches Outstanding
- ----------- --------------- -----------------------------
Undrawn Portion Tranches Outstanding
- --------------- --------------------
[ ] [ ] [ ]
(the Transferee's participation)
------------------------------
Percentage of Commitment transferred: [ ]%.
Transfer Date
-------------
[ ] 19
Revolving Advances Revolving Advances: Participation in
- ------------------ ------------------- ----------------
Commitment: Total Advances Revolving Advances
- ----------- -------------- ------------------
Undrawn Portion Outstanding Outstanding
- --------------- ----------- -----------
[ ] [ ] [ ]
(the Transferee's participation)
--------------------------------
Percentage of Commitment transfer: [ ]%
Transfer Date
-------------
[ ] 19
In witness whereof this Transfer Certificate has been executed on behalf of the
Transferor and the Transferee.
By ............ By ................
For: [Transferor] For: [Transferee]
Date: Date:
Address:
Fax:
Telephone:
Attention:
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Agent
- -----
Agreed for and on behalf of itself as Agent and the other parties to the
Facilities Agreement.
By ......................
Date:
Arranger
- --------
By ......................
Date:
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<PAGE>
SCHEDULE 4
PART I
------
Form of Drawdown Utilisation Request - Term Loan Facility
---------------------------------------------------------
To: Lloyds Bank Plc (as Agent)
From: [The Sage Group PLC [Rose Acquisition Corp.]
Dated:
Dear Sirs,
Facilities Agreement dated [ ] 1998
- -------------------------------------------------
1. We refer to the facilities agreement dated [ ] 1998 and made
between The Sage Group PLC and [Rose Acquisition Corp.] as Borrowers (each
a "Borrower"), the banks and financial institutions parties thereto from
time to time (the "Banks"), Lloyds Bank Plc as arranger (the "Arranger")
and Lloyds Bank Plc as agent (the "Agent"), as the same has been amended
and novated from time to time (the "Facilities Agreement"). Terms defined
in the Facilities Agreement shall bear the same meaning herein.
2. We hereby give you irrevocable notice that we, as a Borrower, wish the
Banks to make an Advance pursuant to the Term Loan Facility under the
Facilities Agreement, as follows:
(i) Utilisation Date:
(ii) Requested Amount in Sterling:
(iii) Requested Amount in Optional Currency:
(iv) First Interest Period (subject to clause 2.4):
3. We request that the Advance be divided into the following Tranches each
having the Interest Period and being denominated in currencies set out
below:
<TABLE>
<CAPTION>
Tranche Tranche Tranche
------- ------- -------
No 1 No 2 No 3
---- ---- -------
<S> <C> <C>
</TABLE>
(i) Amount:
(ii) Interest Period:
(iii) Currency
4. (A) Maximum amount to be drawndown on the Tender Offer Closing Date
shall be calculated as follows:
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(a) An amount, in sterling, being the amount outstanding under the
Facility Agreement between the Parent and, among others,
Lloyds Bank Plc dated 25th February 1997.
(b) An amount, in US dollars, being the difference between the
total consideration payable by the Purchaser under the Tender
Offer and the net proceeds received by the Parent under the
Vendor Placing Agreement converted into US dollars.
(B) The amount to be received by the Company under the Vendor Placing
must not be less than (Pounds)70,000,000.
5. The account to which the proceeds of the Utilisation are to be sent, is:
6. We confirm that, at the date hereof, the Repeated Representations are true
and correct and will remain so at the proposed Utilisation Date, that no
Event of Default has occurred and is continuing or would occur as a result
of the proposed Utilisation nor will an Event of Default occur as a result
of the proposed Utilisation.
Yours faithfully,
___________________
For and on behalf of
[name of relevant Borrower]
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SCHEDULE 4
PART II
-------
Form of Drawdown Utilisation Request - Revolving Advances Facility
------------------------------------------------------------------
To: Lloyds Bank Plc (as Agent)
From: The Sage Group PLC
Dated:
Dear Sirs,
Facilities Agreement dated [ ] 1998
- --------------------------------------------------
1. We refer to the facilities agreement dated [ ] 1998 and made
between ourselves and Rose Acquisition Corp. as Borrowers, the banks and
financial institutions parties thereto from time to time (the "Banks"),
Lloyds Bank Plc as arranger (the "Arranger") and Lloyds Bank Plc as agent
(the "Agent"), as the same has been amended and novated from time to time
(the "Facilities Agreement"). Terms defined in the Facilities Agreement
shall bear the same meaning herein.
2. We hereby give you irrevocable notice that we wish to utilise the
Revolving Advances Facility as follows:
(i) Utilisation Date:
(ii) Requested Amounts in Sterling:
(iii) Requested Amounts in Optional Currency:
(iv) Term (subject to clause 2.4):
3. The account to which the proceeds of the Utilisation are to be sent, is:
4. We confirm that, at the date hereof, the Repeated Representations are true
and correct and will remain so at the proposed Utilisation Date, that no
Event of Default has occurred and is continuing or would occur as a result
of the proposed Utilisation nor will an Event of Default occur as a result
of the proposed Utilisation.
Yours faithfully,
__________________
For and on behalf of
The Sage Group PLC
88
<PAGE>
SCHEDULE 4
PART III
--------
Form of Tranche Utilisation Request - Term Loan Facility
To: Lloyds Bank Plc (as Agent)
From: [name of relevant Borrower]
Dated: ........January 1998
Dear Sirs
FACILITIES AGREEMENT DATED [ ] 1998
- ---------------------------------------------------
1. We refer to the facilities agreement dated [ ] 1997 and made
between The Sage Group PLC and Rose Acquisition Corp. as borrowers, Lloyds
Bank Capital Markets as agent (the "AGENT") and the banks and financial
institutions parties thereto from time to time (the "BANKS"), as the same
has been amended and novated from time to time (the "FACILITIES
AGREEMENT"). Terms defined in the Facilities Agreement shall bear the
same meaning herein.
2. [We advise that the following relevant Tranche(s) mature(s) on the
Utilisation Date referred to in paragraph 3 below and that we wish to
subdivide or consolidate or convert the relevant Tranche(s) in accordance
with clause 2.3 of the Facilities Agreement by making a Tranche
Utilisation as described in paragraph 3 below.
Details of Relevant Tranche(s):
-------------------------------
Relevant Relevant Relevant
Tranche No 1 Tranche No 2 Tranche No 3
(i) Amount:
(ii) Currency:]
[We advise that we wish that the Advance of [amount] made on [ ]
/Tranche(s) No(s) [ ] be divided into the Tranche(s) set out in
paragraph 3 below.]
3. We hereby give you notice that we wish to make a Tranche Utilisation as
follows:
Details of Relevant Tranche(s):
-------------------------------
(i) Utilisation Date:
Relevant Relevant Relevant
Tranche No 1 Tranche No 2 Tranche No 3
(ii) Amount:
89
<PAGE>
(iii) Interest Period:
(iv) Currency:
4. We confirm that, at the date hereof, the Repeated Representations are true
and correct and will remain so at the proposed Utilisation Date, that no
Event of Default has occurred and is continuing or would occur as a result
of the proposed Utilisation nor will an Event of Default occur as a result
of the proposed Utilisation.
Yours faithfully
_______________________
For and on behalf of
[relevant Borrower]
90
<PAGE>
SCHEDULE 5
Conditions Precedent
--------------------
PART I
------
1. The Facilities Agreement
------------------------
This agreement duly executed by each of the parties hereto.
2. Constitutional Documents of the Parent
--------------------------------------
Certified Copies of:
(a) the Certificate of Incorporation of the Parent and each Certificate
of Incorporation on Change of Name (if any); and
(b) the Memorandum and Articles of Association of the Parent.
3. Constitutional Documents of Guarantors
--------------------------------------
Certified Copies of:
(a) the Certificate of Incorporation of each Guarantor and each
Certificate of Incorporation on Change of Name; and
(b) the Memorandum and Articles of Association of each Guarantor.
4. Constitutional Documents of Purchaser
-------------------------------------
(a) Certified Copy of Charter and By-Laws;
(b) evidence in form satisfactory to the Agent that the Purchaser is a
wholly owned Subsidiary of the Parent.
5. Board Resolutions of Parent and the Purchaser
----------------------------------------------
Certified Copies of extracts from resolutions of the board of directors of
the Parent and the Purchaser approving the acceptance of this agreement
and the utilisation of the Facilities, the execution and delivery by the
Parent and the Purchaser of the Transaction Documents to which either of
them is to be a party (as the case may be), and the performance of the
transactions contemplated thereby, and authorising a person or persons
(specified by name or office) to execute, on behalf of the Parent and the
Purchaser (as the case may be), the Transaction Documents to which either
of them is a party and any other notices or documents to be given or
delivered by it thereunder or in connection with them.
91
<PAGE>
6. Secretarial Certificates of Parent and the Purchaser
-----------------------------------------------------
A certificate of the secretary of the Parent and the Purchaser, setting
out the names, offices and signatures of the persons referred to in 5 and
6 above.
7. Board Resolutions of Guarantors
-------------------------------
Certified Copies of extracts from resolutions of each Guarantor's board of
directors and from resolutions of its shareholders, approving the
execution and delivery by such Guarantor of the Transaction Documents to
which it is to be a party and the performance of its obligations
thereunder and authorising a person or persons (specified by name or
office) to execute the same on behalf of such Guarantor and any other
notices or documents to be given or delivered by it thereunder.
8. Secretarial Certificates of Guarantors
--------------------------------------
A certificate of the secretary of each Guarantor, setting out the names,
offices and signatures of the persons referred to in 7 above.
9. No breach of powers
-------------------
A certificate addressed to the Agent signed by each of the secretaries of
the Parent, each Guarantor and the Purchaser, certifying (without personal
liability save where the certificate is given fraudulently or with intent
to mislead or deceive) that the entry into and performance by it of those
Transaction Documents to which it is to be party and (in the case of the
Parent and the Purchaser) the utilisation of the Facilities is within its
corporate powers and have been duly approved by all necessary corporate
action and will not infringe any limitation or restriction upon its powers
or authorities or of its respective directors or other officers under its
Memorandum and Articles of Association (or Charter and By-Laws as the case
may be).
10. Guarantee
---------
The Guarantee duly executed by each Guarantor.
11. Acquisition
-----------
(a) the Merger Agreement;
(b) a copy of the Announcement;
(c) a certificate from a duly authorised director of the Parent
certifying that the Merger Agreement and the Announcement sets out
all material terms of the Tender Offer;
(d) a certified copy of the Vendor Placing Agreement executed by both
parties.
92
<PAGE>
12. Fees
----
Payment of the fees and expenses referred to in clause 13 of this
agreement expressed to be payable prior to or upon signing of this
agreement.
13. Encumbrances
------------
Evidence that any Encumbrances (other than Permitted Encumbrances)
affecting the property, undertaking, and assets of Group Companies have
been released.
14. Syndication Confirmation Letter
-------------------------------
The Syndication Confirmation Letter.
15. Legal Opinions
--------------
(a) A legal opinion from the solicitors to the Agent relating to the
legality, validity and enforceability of this Agreement.
(b) A legal opinion from Skadden Arps, Slate, Meagher & Flom relating to
the Facility Agreement.
93
<PAGE>
SCHEDULE 5
PART II (Tender Offer Closing Date)
-----------------------------------
(Section A)
1. Acquisition documents
---------------------
(a) a copy of the Offer to Purchase and all related documents delivered
to shareholders of the Target in connection with the Tender Offer.
(b) a certificate from a duly authorised director of the Borrower
containing the matters set out in Section B below.
(c) the Option Agreement duly executed by the parties.
(d) certificates from the depositary and a duly authorised director of
the Borrower confirming that valid tenders had been received and
not, where permitted, withdrawn in respect of not less than 50% of
the Target's shares (or such lesser amount as the Bank may have
previously agreed in writing); and
(e) (i) a certificate from the depositary, in form satisfactory to the
Bank, confirming that it has received and has under its sole
control (other than funds to be made available under this
Agreement) an amount in US dollars (being not less than
(Pounds)70,000,000 and that the Tender Offer has become
unconditional in accordance with its terms); and/or
(ii) an escrow letter in form satisfactory to the Agent.
2. Opinion
-------
An opinion from Skadden Arps Slate, Meagher & Flom as to certain US
securities law and regulatory matters relating to the Tender Offer.
94
<PAGE>
SCHEDULE 5
PART II
-------
(Section B)
(Contents of Certificate)
(a) The Tender Offer has expired and there has been validly tendered to the
Purchaser and not withdrawn and the Purchaser shall have accepted for
payment and shall purchase concurrently with the Advance hereunder, that
number of shares of common stock of the Target which when added to any
shares then owned by the Purchaser, represents not less than 49.99% of the
issued common stock of the Target. Every condition to the Tender Offer set
forth in the Offer to Purchase has been satisfied or the Agent has
consented in writing to the waiver thereof.
(b) There does not (to the best of my knowledge and belief) exist (i) any
judgment, order, injunction or other restraining order, or (ii) any
pending or threatened litigation, proceeding or investigation which, if
adversely determined, could prohibit, prevent, make unlawful or impose any
material adverse condition upon, either (A) this Agreement, the Option
Agreement, the Tender Offer, the Merger Agreement, or any transaction
contemplated hereunder or thereunder, or (B) the ability of the Parent,
the Purchaser, the Agent or any affiliate of any of the foregoing to
perform its respective obligations in connection with the Tender Offer or
the Merger or pursuant to any of the documents referred to in clause (A)
above.
95
<PAGE>
SCHEDULE 5
PART III (Merger Agreement Closing Date)
----------------------------------------
(Section A)
1. Certificate
-----------
A certificate from a duly authorised officer of the Parent confirming the
matters in Section B below.
2. Opinion
-------
An opinion from Skadden Arps, Slate, Meagher & Flom that the Merger
Agreement has been duly consummated in accordance with California law.
96
<PAGE>
SCHEDULE 5
PART III
--------
(Section B)
Every condition precedent to the respective obligations of each of the parties
to the Merger Agreement, including without limitation, approval by the requisite
number of votes of the shareholders of the Purchaser and the Target, has been
satisfied; there exists no impediment or unsatisfied condition precedent to the
consummation of the merger in the manner contemplated by the Merger Agreement;
and the holders of 5% (or less) of the outstanding shares of common stock of the
Target have not asserted appraisal rights in connection with the merger; and no
provision of the General Corporation Law of the State of California prevents the
consummation of the merger as contemplated in the Merger Agreement.
97
<PAGE>
SCHEDULE 6
Material Subsidiaries
---------------------
Name Registered Registered
- ---- ---------- ----------
Number Office
------ ------
Sagesoft Limited 1045967 Sage House
Benton Park Road
Newcastle upon Tyne
NE7 7LZ
Sage Overseas Limited 2514472 Sage House
Benton Park Road
Newcastle upon Tyne
NE7 7LZ
98
<PAGE>
SCHEDULE 7
Permitted Encumbrances
----------------------
1. Legal Charge dated 19th October 1990, granted by Multisoft Financial
Systems Limited in favour of Barclays Bank Plc over Cross and Pillory
House, Cross and Pillory Lane, Alton, Hampshire GU34 1HL securing a
principal amount of (pounds)925,000.
2. Debenture dated 19th October 1990, granted by Multisoft Financial Systems
Limited to Barclays Bank Plc over all its present and future assets
securing a principal amount of (pounds)925,000.
3. Legal Charge dated 19th October 1990, granted by Multisoft Financial
Systems Limited over Unit 13, The Waters Edge Business Park, Salford
Quays, Salford, Greater Manchester, security a principal amount of
(pounds)925,000.
4. Pledge over 82,896 share of the company Sybel Informatique S.A. granted by
Sage Overseas Limited in favour of Banque Nationale de Paris securing a
facility in a principal amount of 125,000,000 French Francs.
5. Charge dated 20th August 1991, granted by Multisoft Financial Systems
Limited in favour of Close Brothers Limited over certain insurance
policies and their proceeds.
6. Charge dated 11th February 1994, granted by Multisoft Financial Systems
Limited in favour of Centre-File Ltd over certain bank accounts with
Barclays Bank Plc.
99
<PAGE>
The Parent
- ----------
SIGNED for and on behalf of
THE SAGE GROUP PLC
by: Paul Walker Aidan Hughes
The Purchaser
- -------------
SIGNED for and on behalf of
ROSE ACQUISITION CORP.
by: Paul Walker Aidan Hughes
The Banks
- ---------
SIGNED for and on behalf of
LLOYDS BANK PLC
by: C Taylor
The Arranger
- ------------
SIGNED for and on behalf of
LLOYDS BANK PLC
by: T P Burgess
The Agent
- ---------
SIGNED for and on behalf of
LLOYDS BANK PLC
by: L Tinsley
100
<PAGE>
EXHIBIT (b)(2)
27TH JANUARY 1998
THE SAGE GROUP PLC
J. HENRY SCHRODER & CO. LIMITED
=======================================
VENDOR PLACING AGREEMENT
=======================================
FRESHFIELDS
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
CLAUSE PAGE
<S> <C>
1. Definitions................................................... 1
2. Conditions.................................................... 3
3. Placing....................................................... 4
4. Delivery of documents......................................... 5
5. Allotment, Payment and registration........................... 6
6. Fees, Commissions and Expenses................................ 7
7. Further assurances of the Company............................. 8
8. Warranties and undertakings of the Company.................... 10
9. Indemnity..................................................... 14
10. Undertakings and Acknowledgement............................... 15
11. Termination and continuing provisions......................... 16
12. Notices....................................................... 16
13. Miscellaneous................................................. 17
</TABLE>
<PAGE>
AN AGREEMENT made on 27 JANUARY 1998
BETWEEN
THE SAGE GROUP PLC whose registered office is at Sage House, Benton Park Road,
Newcastle-upon-Tyne, NE7 7LZ (the COMPANY); and
J. HENRY SCHRODER & CO. LIMITED whose registered office is at 120 Cheapside,
London EC2V 6DS (SCHRODERS)
WHEREAS
(A) By an agreement dated the same date as this Agreement (the MERGER
AGREEMENT), made between State of the Art Inc (SOTA), Sage Acquisition Corp.
(BIDCO) and the Company, Bidco has agreed to offer, by means of the Tender Offer
Documentation, to acquire from the Vendors all shares of the issued and
outstanding common stock, no par value, of SOTA (the STOCK) and proposes to
satisfy part of the consideration for such acquisition by the allotment and
issue to the persons nominated by Schroders or to Schroders (as the case may be)
of 7,826,694 new ordinary shares in the capital of the Company (the PLACING
SHARES), credited as fully paid (such shares to rank, upon issue, in all
respects pari passu with the existing issued ordinary shares of the Company,
save that they will not rank for any final dividend in respect of the year ended
30 September 1997 declared in respect of such ordinary shares).
(B) Schroders is willing to procure investors (other than the Vendors) to
accept the allotment of or, to the extent that it does not do so, itself as
principal to accept the allotment of the Placing Shares in accordance with the
provisions of this Agreement (the PLACING) on terms that the aggregate value of
the Placing Shares will be used to enable Bidco to fulfil its obligations under
the Merger Agreement and the Tender Offer Documentation.
IT IS AGREED as follows:
DEFINITIONS
1.1 In this Agreement (including the Recitals and the Schedule) the following
expressions shall, except where the context requires otherwise, have the
following meanings:
ACQUISITION means the proposed acquisition by Bidco of the Stock pursuant to the
Tender Offer Documentation;
ACT means the Companies Act 1985;
ADMISSION means the admission of the Placing Shares to the Official List of the
London Stock Exchange;
ADMISSION CONDITION means the condition set out in clause 2.1(d);
<PAGE>
BIDCO has the meaning set out in Recital (A);
CONDITIONS has the meaning set out in clause 2.1;
DEALING DAY means any day on which the London Stock Exchange is open for
business in London;
DIRECTORS means the directors for the time being of the Company;
EXISTING SHARES means the ordinary shares of 1 pence each in the capital of the
Company in issue at the date of this Agreement;
FSA means the Financial Services Act 1986;
GROUP has the meaning given in clause 8.1(d) and, for the avoidance of doubt,
will not be taken to include any entities acquired pursuant to the Acquisition;
LISTING RULES means the listing rules made by the London Stock Exchange pursuant
to Part IV of the FSA (as amended from time to time);
LONDON STOCK EXCHANGE means the London Stock Exchange Limited;
MERGER AGREEMENT means the agreement referred to in Recital (A);
ORDINARY SHARES means ordinary shares of 1 pence each in the capital of the
Company;
PLACING has the meaning set out in Recital (B);
PLACEES has the meaning set out in clause 3.1;
PLACING LETTER means the agreed form of letter to be despatched by Schroders (or
their agent) to the Placees inviting them to agree to acquire the Placing
Shares;
PLACING LIST has the meaning set out in clause 3.3;
PLACING PRICE means the price per Placing Share (which shall be not less than
900 p per share) at which those Placing Shares for which Schroders shall have
procured investors pursuant to clause 3.1(a) are to be issued as determined by
Schroders following the tender process and to be set out in the Placing Letters;
PLACING SHARES has the meaning set out in Recital (A);
PRESS ANNOUNCEMENTS means the press announcements to be issued in the United
Kingdom (the UK PRESS ANNOUNCEMENT) and the United States respectively, in the
form of the agreed drafts;
STOCK has the meaning set out in Recital (A);
TENDER OFFER means the US tender offer by Bidco to acquire the Stock;
Page 2
<PAGE>
TENDER OFFER DOCUMENTATION means the Schedule 14-D-1 document and the associated
letter of transmittal to be issued by Bidco in connection with the Acquisition;
VENDORS means the holders of the Stock; and
WARRANTIES means the representations, warranties and undertakings set out in
clause 8.
1.2 References to the Recitals, clauses and the Schedule are to the Recitals
to, clauses of and Schedule to, this Agreement (except where the context
otherwise requires).
1.3 The expressions HOLDING COMPANY, SUBSIDIARY and SUBSIDIARY UNDERTAKING
shall have the meanings given to those terms by the Act.
1.4 Any reference to an "agreed draft" or "agreed form" is to the form of the
relevant document agreed by or on behalf of the Company and, for the purposes of
its commitments hereunder, by or on behalf of Schroders and initialled by them
or on their behalf (in each case with such amendments as may be agreed by or on
behalf of the Company and Schroders).
1.5 Any reference to an enactment is a reference to it as from time to time
amended, consolidated or re-enacted (with or without modification) and includes
all instruments or orders made thereunder.
1.6 Words denoting the singular include the plural and vice versa. Words
importing gender shall include all genders and words denoting persons shall
include corporations, unincorporated associations and partnerships.
1.7 References in this Agreement to the word MATERIAL shall mean material in
the context of the Placing or the underwriting of the Placing.
CONDITIONS
2.1 Schroders' obligations under clause 3.1 are conditional upon each of the
following conditions (the CONDITIONS) having been satisfied:
(a) the Tender Offer having closed in accordance with its terms (including in
circumstances where Bidco accepts for purchase 49.9999% of the Stock);
(b) the release of the UK Press Announcement in accordance with clause 7.1;
(c) the Company having allotted the Placing Shares in accordance with clause 5
(conditional only upon satisfaction of the Admission Condition); and
Page 3
<PAGE>
(d) the Admission of the Placing Shares becoming effective in accordance with
paragraph 7.1 of the Listing Rules by not later than 9.00 a.m. on any day
until and including 27 March 1998.
Schroders may, in its absolute discretion, agree to extend the time for
satisfaction of any of the Conditions to not later than 9.00 am on 27 March 1998
(in which case, references to such Condition in this Agreement shall be to such
Condition as so varied) or to waive the satisfaction of any of the Conditions
(except for the Admission Condition).
Schroders agrees that it shall waive the Condition in clause 2.1(a) (which
waiver shall be subject to the Admission Condition being satisfied) if all the
other Conditions have been satisfied on or by the required times or dates
therefor, provided that the Company and/or Bidco (as appropriate) shall have
undertaken in writing to Schroders to give an irrevocable and unconditional
instruction (in the agreed form) immediately following Admission that the Stock
be accepted for purchase.
2.2 The Company will use all reasonable endeavours to procure the satisfaction
of the Conditions by the specified times and dates.
2.3 If any of the Conditions is not satisfied or (except for the Admission
Condition) waived by Schroders in its absolute discretion on or by the required
times or dates therefor (including any extension pursuant to clause 2.1), the
obligations of Schroders under this Agreement shall cease and determine.
PLACING
3.1 Schroders hereby undertakes, subject to the Conditions and in reliance upon
the representations, undertakings, covenants and warranties of the Company set
out in this Agreement (including the Warranties):
(a) as agent for the Company to procure investors (to such extent as Schroders
shall in its absolute discretion determine) to acquire the Placing Shares
(PLACEES) in accordance with a tender process discussed with the Company,
and on the terms and conditions set out in the Placing Letter; and
(b) to the extent it does not procure such investors who have agreed to acquire
the Placing Shares at not less than 900p per share, itself to acquire as
principal such Placing Shares at 900p per Placing Share,
in all cases free of all stamp duty, stamp duty reserve tax and other expenses.
3.2 The Company authorises Schroders, as its agent, to issue or cause to be
issued copies of the UK Press Announcement together with Placing Letters to such
persons as Schroders shall in its absolute discretion determine for the purpose
of arranging the Placing on the terms and conditions set out in the Placing
Letter.
Page 4
<PAGE>
3.3 Schroders shall give the Company written notice, by 10.00 a.m. on 2 March
1998, listing the name and registration details of each Placee and the number of
Placing Shares to be allotted to each Placee (the PLACING LIST). For the
avoidance of doubt, Schroders may (at its absolute discretion) nominate itself
in the Placing List to be a Placee at the Placing Price in respect of some or
all of the Placing Shares.
3.4 The Company hereby irrevocably and unconditionally appoints Schroders as
its agent for the purpose of effecting the Placing under clause 3.1(a) on the
terms and subject to the conditions set out in this Agreement and the Placing
Letter and solely on the basis of the information contained in the UK Press
Announcement and other information published by the Company. Schroders hereby
accepts such appointment. The Company hereby confirms that this appointment
confers on Schroders all powers, authorities and discretions on behalf of the
Company which are reasonably necessary for, or reasonably incidental to, the
Placing and the Company hereby agrees to ratify and confirm everything which
Schroders may lawfully do in the exercise of that appointment and those powers,
authorities and discretions.
DELIVERY OF DOCUMENTS
4.1 The Company shall deliver to Schroders forthwith upon its execution of this
Agreement:
(a) a certified copy of the minutes of a meeting of the Directors (or a duly
authorised committee thereof) in the agreed form approving and authorising,
inter alia, the execution by the Company of this Agreement and the Merger
Agreement, the signing of a London Stock Exchange form of application for
listing in respect of the Placing Shares on behalf of the Company and the
issue of the Press Announcements;
(b) a certified copy of the minutes of the meeting of the Directors at which
any committee referred to in clause 4.1(a) was appointed;
(c) a certified copy of the resolution of the members of the Company
authorising the Directors to allot, inter alia, the Placing Shares; and
(d) copies of the Press Announcements and the Merger Agreement in the agreed
forms, signed for the purpose of identification by a Director or other
person duly authorised to do so as stated in the minutes.
4.2 The Company shall, from time to time, procure to be communicated or
delivered to Schroders all such information and documents (signed by the
appropriate person where so required) as Schroders may reasonably require to
enable it to discharge its obligations hereunder or pursuant to the Placing or
as may be required to comply with the requirements of the London Stock Exchange.
Page 5
<PAGE>
ALLOTMENT, PAYMENT AND REGISTRATION
5.1 The Company shall deliver to Schroders before 8.00 a.m. on the day of
Admission (or such later time and/or date as the Company and Schroders may agree
in writing) a certified copy of the minutes of a meeting of the Directors (or of
the duly authorised committee referred to at clause 4.1(a)) in the agreed form
allotting the Placing Shares to the Placees and at the price(s) stated, and in
the proportions specified, in the Placing List, subject only to the satisfaction
of the Admission Condition.
5.2 The Placing Shares shall be allotted and issued fully paid up and free from
all claims, charges, liens, equities, encumbrances and other third party rights
of any nature whatsoever and shall rank pari passu in all respects with the
Existing Shares including the right to receive dividends and other distributions
hereafter declared, paid or made in respect of such shares save that they shall
not rank for the proposed final dividend of 1.93p (net) per share in respect of
the year ended 30 September 1997.
5.3 Following allotment by the Company of the Placing Shares in accordance with
clause 5, Schroders shall on behalf of the Company inform the London Stock
Exchange that the Placing Shares have been allotted subject only to the
satisfaction of the Admission Condition and request the London Stock Exchange to
undertake all such steps as are necessary for Admission to occur as soon as
practicable thereafter and in any event by 8.30 a.m. on the day of allotment of
the Placing Shares (or such later time and/or the date as the Company and
Schroders may agree in writing).
5.4 On the day of Admission (or such later date as may be agreed between
Schroders and the Company), subject to the Admission Condition having been
satisfied, Schroders shall make or procure payment to the account of the Company
(acting as trustee for the benefit of Sage (South Gosforth) Limited and at such
bank account as the Company shall notify to Schroders) of (less any deductions
permitted to be made under clause 6.2):
(a) an amount equal to the Placing Price multiplied by the number of Placing
Shares for which Schroders procures investors pursuant to clause 3.1(a);
and
(b) an amount equal to 900p multiplied by the number of Placing Shares which
Schroders itself is obliged to acquire pursuant to clause 3.1(b).
The receipt of such amounts in such account shall be an absolute discharge of
Schroders' obligations hereunder, and the obligations of the Placees, in respect
of all amounts payable (whether to the Vendors or otherwise) in respect of the
allotment and issue of the Placing Shares and the Company acknowledges that it
Page 6
<PAGE>
shall have no right or interest whatsoever in any amounts received subsequently
by Schroders from the Placees. Schroders acknowledges that it shall have no
recourse against the Company if it fails to receive the relevant amounts from
the Placees.
5.5 The Company shall procure that its registrars shall as soon as reasonably
practicable following Admission (without a registration fee being payable by
Schroders and/or the Placees) register Schroders and/or those Placees procured
by it as holders of the Placing Shares with effect from Admission and shall as
soon as reasonably practicable following Admission, and in any event by not
later than the second dealing day following Admission deliver to Schroders or as
it shall direct fully paid share certificates in respect of the Placing Shares
and shall, pending such delivery, certify all transfers of the Placing Shares
against the Company's register of members.
FEES, COMMISSIONS AND EXPENSES
6.1 The Company shall pay to Schroders for its services hereunder:
(a) whether or not Schroders' obligations under clause 3.1 become unconditional
or this Agreement is terminated by Schroders in accordance with its terms,
a commitment commission of one half of one per cent. of a sum equal to the
Placing Price multiplied by the number of Placing Shares in respect of the
first thirty days of Schroders' commitment hereunder (such period
commencing on the date of this Agreement) or if less the period commencing
on the date of this Agreement up to and including the date on which
Schroders' obligations hereunder shall cease and determine;
(b) whether or not Schroders' obligations under clause 3.1 become unconditional
or this Agreement is terminated by Schroders in accordance with its terms,
an additional commitment commission of 1/8th of one per cent. of a sum
equal to the Placing Price multiplied by the number of Placing Shares for
each and every period of seven days or part thereof (if any) commencing on
the day next following the expiry of the thirty day period referred to in
paragraph (a) above, up to and including the earlier of (i) the date on
which the Admission Condition is satisfied and (ii) the date on which
Schroders' obligations hereunder shall cease and determine; and
(c) an advisory and underwriting fee as provided in the engagement letter
between Schroders and the Company dated 27 January 1998,
together in each case with value added tax thereon, if any.
Any fees and commissions payable to Placees shall be paid by Schroders. For the
avoidance of doubt, the Company agrees that Schroders shall not be responsible
for the payment of any fees payable to NatWest Securities Limited by the Company
in respect of services to be provided by NatWest Securities Limited in relation
to the Placing.
Page 7
<PAGE>
6.2 In addition to the commissions referred to in Clause 6.1, the Company shall
pay all other costs and expenses (excluding fees and/or commissions payable to
Placees) of, and in connection with, the Merger Agreement, the Tender Offer
Documentation, this Agreement, the allotment and issue of the Placing Shares,
the Placing and securing Admission including (but not limited to) the London
Stock Exchange listing fees, printing and advertising costs, postage, its own
and Schroders' legal expenses, Schroders' out-of-pocket expenses, all
accountancy and other professional fees and all stamp duty and stamp duty
reserve tax and other duties and taxes in relation to the acquisition of Placing
Shares by Schroders or persons procured to acquire Placing Shares pursuant to
this Agreement. The Company shall promptly following a request by Schroders pay
or reimburse the amount of any costs and expenses incurred by Schroders which
are to be borne by the Company and which Schroders has paid on behalf of the
Company. The Company hereby authorises Schroders to deduct from any sums
payable by it to the Company the commissions, fees and expenses (and related
value added tax, if any) payable by the Company pursuant to this Clause 6.
6.3 Where, pursuant to this Agreement, a sum is reimbursed to Schroders, the
Company shall, in addition, pay to Schroders in respect of value added tax:
(a) where the payment (or any part of it) constitutes the consideration (or
part of it) for any supply of services by Schroders to the Company, such
amount as equals any value added tax payable thereon and on such
irrecoverable value added tax, if any, as is referred to in (b) below;
(b) (except where the payment falls within (c) below), such amount as equals
any value added tax charged to Schroders in respect of any cost, charge,
duty, tax or expense which gives rise to the payment and which is not
recoverable by Schroders by repayment or credit; and
(c) on any reimbursement of or other payment to Schroders in respect of or
indemnification for costs, charges, duties, taxes or expenses incurred by
Schroders as agent for the Company, such amount as equals the amount
included in the costs, charges, duties, taxes or expenses in respect of
value added tax.
6.4 The commissions and fee referred to in clause 6.1 (together with any value
added tax thereon) shall be paid (where applicable), if Admission occurs, by
deducting such amounts from the payments to be made by Schroders under clause
5.4 or, if earlier, not later than two dealing days after the date on which
Schroders' obligations under this Agreement cease and determine pursuant to
clause 2 or are terminated pursuant to clause 11.
FURTHER ASSURANCES OF THE COMPANY
7.1 The Company undertakes to Schroders at the Company's expense:
Page 8
<PAGE>
(a) to procure publication of the UK Press Announcement through the Regulatory
News Service (as defined in the Listing Rules) by 8.00 a.m. today;
(b) to deliver to the London Stock Exchange all such further documents as and
when required by the London Stock Exchange in connection with the Company's
application for the Admission of the Placing Shares in accordance with its
rules and requirements;
(c) to supply all such information, pay such fees, give such undertakings and
do or procure to be done all such acts or things as may be required by the
London Stock Exchange to procure Admission;
(d) to procure that the Tender Offer Documentation is despatched to the Vendors
on 2 February 1998; and
(e) to execute and/or provide or procure to be executed or provided all such
documents and to do or procure to be done all such other acts and things as
are necessary to cause the Placees to receive the entire right, title and
interest to and in the Placing Shares pursuant to this Agreement and the
Placing and to enable the provisions of this Agreement and the Placing to
be carried out and given full force and effect.
7.2 Schroders undertakes to give the Company all reasonable assistance (at the
expense of the Company) in connection with clause 7.1 and obtaining Admission.
7.3 The Company further undertakes that it will not, except as previously
agreed in writing by Schroders:
(a) agree to any (i) alteration, revision or amendment of any of the terms or
conditions of the Merger Agreement or the Tender Offer Documentation or
waive, vary, compromise or release any obligation or condition (except with
respect to the Minimum Condition and the Revised Minimum Number, each as
defined in the Merger Agreement) or grant any other time for performance or
completion thereof or other indulgence thereunder which, in any such case,
is material in the context of the Placing; or (ii) alteration to or
increase in the consideration payable to the Vendors under the Tender
Offer; or
(b) proceed to completion of the Merger Agreement or the Acquisition prior to
the satisfaction of all of the terms and conditions set out in the Merger
Agreement and the Tender Offer Documentation which are material in the
context of the Placing; or
(c) should it be aware prior to Admission that it is entitled to rescind or
terminate the Merger Agreement or the Acquisition, exercise its right to
proceed with completion of, or to terminate, the Merger Agreement or the
Acquisition.
Page 9
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7.4 The Company's obligations under clause 7.3 shall cease to apply in the
event of Schroders terminating its obligations under this Agreement.
WARRANTIES AND UNDERTAKINGS OF THE COMPANY
8.1 The Company represents, warrants and undertakes to Schroders that:
(a) application will be made by the Company to the London Stock Exchange in
accordance with section 143 of the Financial Services Act 1986 for
admission of the Placing Shares to the Official List of the London Stock
Exchange;
(b) the information (other than expressions of opinion, intention or
expectation) contained in each of the Press Announcements is true and
accurate in all material respects, is in accordance with the facts and is
not misleading and each expression of opinion, intention or expectation
(including any forecast or estimate of profits or dividends) contained in
each of the Press Announcements is fairly based and honestly held by each
of the Directors and has been made reasonably and on reasonable grounds
after due and careful consideration and there are no other facts known, or
which could on reasonable enquiry have been known, to the Company or to its
Directors which are not disclosed in each of the Press Announcements the
omission of which would make any such statement of fact or expression of
opinion, intention or expectation false or misleading or which would affect
the import of any information contained therein or which, in the context of
the Placing, is or would be material for disclosure to Schroders or to a
Placee;
(c) following the issue of the UK Press Announcement in accordance with clause
7.1(a), all information which it is necessary for the Company to notify to
comply with the FSA and the Listing Rules will have been notified to the
Company Announcements Office of the London Stock Exchange and all
statements of fact so notified will have been true and accurate in all
material respects at that time and not misleading at that time (whether by
omission or otherwise) and all expressions of opinion, intention or
expectation so notified will have been made on reasonable grounds and will
have been fairly based and honestly held; the Company is not aware of any
circumstances (other than in connection with the Tender Offer or the Merger
Agreement) now subsisting or proposed or likely to come about which are
likely to lead to any obligation on the Company to make any announcement
through or notification to the London Stock Exchange within a period of one
month commencing on the date of Admission;
(d) the audited consolidated balance sheet of the Company and its subsidiary
undertakings (GROUP) as at 30 September 1997, the audited consolidated
profit and loss account of the Group for the financial year ended on such
date and the statement of cash flows of the Group for such financial year
Page 10
<PAGE>
and the notes to such financial statements (together with the remainder of
the annual report and accounts of the Company for that year being referred
to herein as the ACCOUNTS) give a true and fair view of the assets,
liabilities (including contingent liabilities whether for taxation or
otherwise), reserves, profits (or losses) and state of affairs of the Group
as at such date and the financial year ended on that day and the Accounts
have been prepared in accordance with the Act and all applicable statements
of standard accounting practice and with generally accepted accounting
principles and practice consistently applied; that all statements of fact
contained in the Accounts concerning the financial or trading position or
prospects of the Group were at the date of approval of the Accounts by the
board of directors of the Company true and accurate in all material
respects and were not at the date of approval of the Accounts by the board
of directors of the Company misleading in any material respect; that all
expressions of opinion, intention or expectation on the part of the
directors of the Company contained in the Accounts concerning the financial
or trading position or prospects of the Group were at that date made on
reasonable grounds and were fairly based and honestly held and that since
such date and, save as disclosed in the Accounts or any document (PRIOR
DOCUMENT) issued or announcement (PRIOR ANNOUNCEMENT) made to the public or
the press or the London Stock Exchange by the Company since that date, the
operations of the Group have been carried on in the ordinary and usual
course and there has been no material adverse change in the financial or
trading position or prospects of the Group and no contracts or commitments
of an unusual or onerous nature (other than the Merger Agreement) have been
entered into by any member of the Group which are material in the context
of the Placing;
(e) the entry into of this Agreement and the Merger Agreement and the
publication of the Tender Offer Documentation by the Company and/or Bidco
(as the case may be) and the performance of the Company's and/or Bidco's
(as the case may be) obligations thereunder (including, without limitation,
the allotment and issue of the Placing Shares and the payment of the
commissions, fees and expenses) are within the powers of the Company and/or
Bidco and their respective directors without the need for any further
sanction or consent by members of the Company or any class of them or any
other person and will comply with all relevant requirements of the Act, the
rules and regulations of the London Stock Exchange, the FSA and all other
applicable laws, rules and regulations and with all agreements to which any
member of the Group is a party or by which it or any of them or its or any
of their property is bound and will not infringe any limits, restrictions,
obligations or commitments of any member of the Group howsoever arising and
the Placing Shares will, upon issue, be free from all claims, charges,
liens, encumbrances, equities and other third party rights of any nature
whatsoever and will on Admission rank pari passu in
Page 11
<PAGE>
all respects with the Existing Shares including the right to receive
dividends and other distributions hereafter declared, paid or made in
respect of such shares save that they shall not rank for the proposed final
dividend of 1.93p (net) per share in respect of the year ended 30 September
1997;
(f) all authorisations, approvals, consents and licences required by the
Company and/or Bidco (as the case may be) for the entry into of this
Agreement and the Merger Agreement and the publication of the Tender Offer
Documentation have been unconditionally obtained and are in full force and
effect;
(g) the Merger Agreement has not been terminated or rescinded and is valid and
binding on the parties thereto; the Company is not aware of any
circumstance which is likely to result in the Merger Agreement or the
Tender Offer being terminated or rescinded, or any of the conditions to
that Agreement or the Tender Offer ceasing to be capable of fulfilment and
the Company is not aware of any reason why:
(i) the representations and warranties on the part of SOTA
contained in the Merger Agreement are not true in accordance
with their terms (subject to disclosures made prior to the
date hereof by SOTA); or
(ii) the undertakings on the part of SOTA contained in the Merger
Agreement are not capable of being, or are likely not to be,
performed in accordance with their terms;
(h) no member of the Group has (i) been notified in writing of any claims
outstanding against it or (ii) is engaged in, or has within the previous
twelve months been engaged in any litigation or arbitration proceedings or
similar proceedings or in any government, regulatory or similar
investigation or enquiry which, in any case, individually or collectively
may have or during the twelve months preceding the date hereof has had a
significant effect on the financial or trading position or prospects of the
Group or which individually or collectively are or may be material for
disclosure in the context of the Placing and no such litigation or
arbitration or similar proceedings or any such investigation or enquiry is
threatened nor, to the best of the knowledge, information and belief of the
Directors (having made all reasonable enquiries), are there any
circumstances which may give rise to any such litigation or arbitration
proceedings or similar proceedings or any such investigation or enquiry;
(i) except as disclosed in the Accounts, any Prior Document or any Prior
Announcement, and except for options under the Company's Inland Revenue
approved share option schemes, there are no arrangements
Page 12
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which (contingently or otherwise) may give rise to an obligation on any
member of the Group to allot or issue any securities;
(j) no borrowing of any member of the Group has been declared payable before
its stated maturity which has not been satisfied in full and no
circumstances have arisen or, so far as the Company is aware, are about to
arise such that any person is entitled (or would, with the giving of notice
or lapse of time or fulfilment of any condition that is not within the
control of the Company or the making of any determination, become entitled)
to require payment before its stated maturity of, or to take any step to
enforce security over, any indebtedness in respect of borrowed moneys of
any member of the Group and the Company and its directors have complied
with all restrictions affecting their respective powers to borrow contained
in the Articles of Association of the Company or any other restriction on
such powers;
(k) no member of the Group has taken any action nor, so far as the Company is
aware, have any other steps been taken or legal proceedings started or
threatened against any of them for their winding up or dissolution, or for
any of them to enter into any arrangement or composition for the benefit of
creditors, or for the appointment of a receiver, administrator, trustee or
similar officer of any of them, or any of their respective properties,
revenues or assets in the previous 12 months; and
(l) all information supplied by the Company to Schroders in connection with
this Agreement or its advice given relating to the Acquisition is true and
accurate in all material respects and not misleading in any material
respect.
8.2 The Company shall immediately notify Schroders if it comes to the knowledge
of the Company or any of the Directors at any time prior to Admission that any
of the Warranties was untrue or inaccurate or misleading or would, if repeated
by reference to the facts and circumstances in existence at any time prior to
Admission, be untrue or inaccurate or misleading.
8.3 The Company hereby acknowledges that neither Schroders nor any subsidiary
undertaking or holding company thereof or subsidiary undertaking of any such
holding company (an AFFILIATE) has been requested by the Company to carry out
(a) any form of investigation or verification exercise relating to the accuracy
and fairness of any information contained in the Press Announcements or
otherwise published by or on behalf of the Company in connection with the
Placing or the Acquisition or (b) any evaluation of the terms of the Acquisition
or of the Company's investigations into SOTA.
Page 13
<PAGE>
INDEMNITY
9.1 No claim shall be made against Schroders or any Affiliate or any of their
respective directors, officers, employees, agents and advisers (together with
Schroders hereinafter called the INDEMNIFIED PERSONS) to recover any loss,
liability, damage, cost, charge or expense which any member of the Group or
their respective directors, officers or agents may suffer or incur by reason of
or arising out of the carrying out by Schroders (or on its behalf) of its
obligations under this Agreement or in connection with the Acquisition save to
the extent that such loss, damage, liability, cost, charge or expense arises
from the negligence or wilful default of an Indemnified Person or from any
breach by an Indemnified Person of its duties and obligations under the FSA or
under the regulatory system (as defined in the Rules of the Securities and
Futures Authority) or from a breach by an Indemnified Person of Schroders'
obligations under this Agreement.
9.2 The Company hereby agrees and undertakes with Schroders to keep each and
every Indemnified Person indemnified against all actions, claims, demands,
proceedings or judgements (collectively INDEMNIFIED CLAIMS) and all losses,
liabilities, damages, costs, charges and expenses of whatever nature (including
costs, charges and expenses incurred in investigating or defending any
indemnified claim and in complying with any request made pursuant to clause 9.3
below (collectively INDEMNIFIED LOSSES)) made against or incurred by any
Indemnified Person directly or indirectly relating to or arising from the
carrying out or performance by or on behalf of Schroders of its obligations or
services under or in connection with this Agreement or in connection with the
Acquisition or the Placing PROVIDED THAT this indemnity shall not extend to such
claims or losses to the extent that they are attributable to the negligence or
wilful default of such Indemnified Person or persons or to a breach by an
Indemnified Person of Schroders' obligations under this Agreement or under the
FSA or under the regulatory system (as defined in the Rules of the Securities
and Futures Authority).
For the avoidance of doubt, the Company hereby acknowledges that any such
negligence, wilful default or breach by an Indemnified Person in relation to one
indemnified claim or indemnified loss shall not prejudice the rights of an
Indemnified Person to recover under this indemnity in relation to any other
indemnified claim or indemnified loss.
9.3 Any Indemnified Person against whom an indemnified claim is made shall be
entitled to defend, compromise, settle or deal with such indemnified claim as
Schroders may see fit after having considered all reasonable requests which the
Company may make and Schroders will, or will procure that the Indemnified Person
will, promptly notify the Company in writing of the fact that an indemnified
claim has been made and keep the Company informed on the conduct of any defence
to such claim and in relation to any settlement or compromise of it.
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9.4 If any amount becomes payable under the indemnity in this clause 9, the
Company shall pay such additional amount (if any) as is required to ensure that
the net amount received by the relevant Indemnified Person, after all deductions
and withholdings required by law or any taxation authority to be made from such
aggregate payment and all taxation suffered in respect of its receipt, will
equal the full amount which would have been received had no such deduction or
withholding been made and had no such taxation been suffered.
9.5 The benefit of this clause 9 shall survive any termination of the
arrangements contained in this Agreement and is in addition to any rights which
any Indemnified Person may have at common law or otherwise including, but not
limited to, any right of contribution.
9.6 Schroders shall have no liability to the Company in connection with this
Agreement save as a result of its negligence, wilful default or breach of its
obligations to the Company hereunder or under the FSA or its breach of any duty
owed to the Company under the rules of the Securities and Futures Authority.
UNDERTAKINGS AND ACKNOWLEDGEMENT
10.1 The Company undertakes to Schroders that it shall not, at any time between
the date hereof and one month after the date of Admission, enter into any
agreement or arrangement or do or (so far as it lies within its powers to
prevent) permit to be done any other act or thing which, in any case, would give
rise to any obligation to make an announcement to the London Stock Exchange in
accordance with the Listing Rules save for issuing the Press Announcements and
entering into and completing the Tender Offer Documentation as contemplated by
the Merger Agreement.
10.2 Without prejudice to the obligations of the Company under clause 10.3
and/or the Listing Rules, the Company hereby undertakes to Schroders that it
will not, at any time between the date hereof and one month after the date of
Admission or the date on which Schroders' obligations hereunder cease and
determine, make any public announcement or statement regarding the Placing or
otherwise relating to the financial condition or trading or prospects of the
Group, whether in response to enquiries or otherwise, without the prior consent
of Schroders, save for issuing the Press Announcements and entering into and
completing the Tender Offer Documentation as contemplated by the Merger
Agreement.
10.3 The Company hereby undertakes to Schroders that it will not at any time for
a period of one month from the date of Admission make any announcement,
statement or communication via the London Stock Exchange, without first
consulting with Schroders as to the content, form and manner of publication of
such announcement, statement or communication.
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10.4 The Company undertakes to make all such announcements concerning the
Placing and/or the Acquisition as shall be necessary to comply with the Listing
Rules and/or section 47 of the FSA and, in particular, the Company undertakes to
announce through the Regulatory News Service (as defined in the Listing Rules)
the Placing Price forthwith after its determination by Schroders and its
notification to the Company. Schroders reserves the right to make any such
announcement if the Company fails to fulfil its obligations under this clause
10.4.
10.5 The Company undertakes to do all such acts and things as are reasonably
necessary or desirable to enable the provisions of this Agreement and the
Placing to be carried out and given full force and effect.
TERMINATION AND CONTINUING PROVISIONS
11.1 If Schroders shall become aware, at any time prior to Admission, that:
(a) the Company is in breach of any of its obligations hereunder in a manner
which Schroders acting reasonably regards as material in the context of
the Placing; or
(b) any of the Warranties given by the Company hereunder is at the date of
this Agreement untrue, inaccurate or misleading in any respect which
Schroders acting reasonably regards as material in the context of the
Placing,
Schroders shall be entitled in its absolute discretion by notice in writing to
the Company given prior to Admission forthwith to terminate its obligations
hereunder.
11.2 Termination of Schroders' obligations in accordance with this clause 11
shall be without prejudice to, or to Schroders' rights under, clauses 6, 8, 9
and this clause 11 which shall continue in full force and effect for all
purposes.
11.3 The representations, warranties, undertakings and indemnities set out in
this Agreement and the Warranties shall remain in full force and effect
notwithstanding Admission and/or fulfilment by Schroders of its obligations
hereunder and shall be in addition to and shall not be construed to limit,
affect or prejudice any other right or remedy available to the person in whose
favour such representation, warranty, undertaking, indemnity or Warranty is
made.
NOTICES
12.1 Any notice to be given under this Agreement shall be in writing for the
attention of the person stated below and served personally or sent by pre-paid
registered mail to the respective addresses shown above or by facsimile as
stated below, or as the party required to receive the same may otherwise from
time to time notify to the other:
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THE COMPANY:
Facsimile Number: 0191 255 0306
Attention: The Company Secretary
SCHRODERS:
Facsimile Number: 0171 658 6459
Attention: Mark Warham
12.2 Any such notice shall be deemed to have been served if delivered, at the
time of delivery; if sent by facsimile, at the time of effective transmission
unless the same shall be transmitted after 5.30 p.m. in which event it shall be
deemed to have been served at 10.00 a.m. on the next following business day; if
posted, at 10.00 a.m. on the second business day after it was put into the post.
MISCELLANEOUS
13. Without prejudice to Schroders' discretion under clause 2, time shall be of
the essence of this Agreement, both as regards the times, dates and any period
mentioned herein and as to any times, dates and periods which may, by agreement
in writing between the parties hereto, be substituted for them. All references
to business days shall mean days on which banks are generally open for business
in the City of London.
14. Any failure to exercise or delay in exercising a right or remedy provided
by this Agreement or by law does not constitute a waiver of the right or remedy
or a waiver of other rights or remedies. No single or partial exercise of a
right or remedy provided by this Agreement or by law prevents further exercise
of the right or remedy or the exercise of another right or remedy.
15. This Agreement shall be governed by and construed in all respects in
accordance with English law and the parties hereto irrevocably submit to the
exclusive jurisdiction of the courts of England.
AS WITNESS the hands of the duly authorised signatories of the parties the day
and year first before written
SIGNED by Paul Walker )
for and on behalf of ) Paul Walker
THE SAGE GROUP PLC )
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SIGNED by Mark Warham )
for and on behalf of ) M Warham
J. HENRY SCHRODER & CO. LIMITED )
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Exhibit (c)(1)
AGREEMENT AND PLAN OF MERGER
by and among
THE SAGE GROUP PLC
ROSE ACQUISITION CORP.
and
STATE OF THE ART, INC.
dated
January 27, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
ARTICLE I
THE OFFER AND MERGER
<S> <C> <C>
Section 1.1 The Offer...................................................... 2
Section 1.2 Company Actions................................................ 6
Section 1.3 Directors...................................................... 7
Section 1.4 The Merger..................................................... 9
Section 1.5 Effective Time................................................. 9
Section 1.6 Closing........................................................ 10
Section 1.7 Directors and Officers of the Surviving Corporation............ 10
Section 1.8 Effects of the Merger.......................................... 10
Section 1.9 Subsequent Actions............................................. 10
Section 1.10 Shareholders' Meeting.......................................... 11
Section 1.11 Merger Without Meeting of Shareholders......................... 11
Section 1.12 Earliest Consummation.......................................... 12
<CAPTION>
ARTICLE II
CONVERSION OF SECURITIES
<S> <C> <C>
Section 2.1 Conversion of Capital Stock.................................... 12
Section 2.2 Dissenting Shares.............................................. 13
Section 2.3 Surrender of Shares; Stock Transfer Books...................... 13
Section 2.4 Company Stock Plans............................................ 15
<CAPTION>
ARTICLE III
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
<S> <C> <C>
Section 3.1 Organization................................................... 19
Section 3.2 Capitalization................................................. 20
Section 3.3 Authorization; Validity of Agreement; Company Action........... 22
Section 3.4 Consents and Approvals; No Violations.......................... 22
Section 3.5 SEC Reports and Financial Statements........................... 23
Section 3.6 Absence of Certain Changes..................................... 24
Section 3.7 No Undisclosed Liabilities..................................... 24
</TABLE>
1
<PAGE>
<TABLE>
<S> <C> <C>
Section 3.8 Litigation..................................................... 25
Section 3.9 Employee Benefit Plans; ERISA.................................. 25
Section 3.10 Taxes.......................................................... 28
Section 3.11 Contracts...................................................... 29
Section 3.12 Real Property.................................................. 29
Section 3.13 Intellectual Property.......................................... 30
Section 3.14 Labor Matters.................................................. 31
Section 3.15 Compliance with Laws........................................... 32
Section 3.16 Environmental Matters.......................................... 32
Section 3.17 Product Warranties............................................. 33
Section 3.18 Information in Proxy Statement................................. 33
Section 3.19 Related Party Transactions..................................... 34
Section 3.20 Opinion of Financial Advisor................................... 34
Section 3.21 Insurance...................................................... 34
Section 3.22 State Takeover Statutes; Required Vote......................... 34
Section 3.23 Brokers........................................................ 34
Section 3.24 Full Disclosure................................................ 35
<CAPTION>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER
<S> <C> <C>
Section 4.1 Organization................................................... 35
Section 4.2 Authorization; Validity of Agreement; Necessary Action......... 35
Section 4.3 Consents and Approvals; No Violations.......................... 36
Section 4.4 Information in Proxy Statement................................. 37
Section 4.5 Interim Operations of the Purchaser............................ 37
Section 4.6 Brokers........................................................ 37
Section 4.7 Financing...................................................... 37
Section 4.8 Share Ownership................................................ 38
<CAPTION>
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
<S> <C> <C>
Section 5.1 Acquisition Proposals.......................................... 38
Section 5.2 Interim Operations of the Company.............................. 39
Section 5.3 No Solicitation................................................ 42
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
ARTICLE VI
ADDITIONAL AGREEMENTS
<S> <C> <C>
Section 6.1 Proxy Statement................................................ 44
Section 6.2 Meeting of Shareholders of the Company......................... 44
Section 6.3 Additional Agreements.......................................... 44
Section 6.4 Notification of Certain Matters................................ 44
Section 6.5 Access; Confidentiality........................................ 45
Section 6.6 Consents and Approvals......................................... 46
Section 6.7 Publicity...................................................... 46
Section 6.8 Directors' and Officers' Insurance and Indemnification......... 47
Section 6.9 Purchaser Compliance........................................... 48
Section 6.10 Commercially Reasonable Efforts................................ 48
Section 6.11 State Takeover Laws............................................ 49
Section 6.12 Financing Related Efforts...................................... 49
<CAPTION>
ARTICLE VII
CONDITIONS
<S> <C> <C>
Section 7.1 Conditions to Each Party's Obligations to Effect the Merger.... 50
<CAPTION>
ARTICLE VIII
TERMINATION
<S> <C> <C>
Section 8.1 Termination.................................................... 51
Section 8.2 Effect of Termination.......................................... 52
<CAPTION>
ARTICLE IX
MISCELLANEOUS
<S> <C> <C>
Section 9.1 Amendment and Modification..................................... 54
Section 9.2 Non-survival of Representations and Warranties................. 54
Section 9.3 Expenses....................................................... 54
Section 9.4 Notices........................................................ 54
Section 9.5 Interpretation................................................. 56
Section 9.6 Counterparts................................................... 56
Section 9.7 Entire Agreement; No Third Party Beneficiaries................. 56
Section 9.8 Severability................................................... 57
Section 9.9 Governing Law.................................................. 57
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C>
Section 9.10 Assignment.................................................... 57
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Index of Defined Terms
----------------------
Defined Term Section No.
- ------------ -----------
<S> <C>
Acquisition Proposal........................................................ 5.1
Acquisition Proposal Interest............................................... 5.1
Admission................................................................6.12(b)
Agreement...............................................................Recitals
Appointment Date.............................................................5.2
Articles of Incorporation....................................................1.4
Assumed Options.......................................................2.4(a)(ii)
Audit....................................................................3.10(b)
Average Premium...........................................................6.8(b)
Benefit Plans.............................................................3.9(a)
By-Laws......................................................................1.4
Cash-Out Options.......................................................2.4(a)(i)
Certificates..............................................................2.3(b)
Closing......................................................................1.6
Closing Date.................................................................1.6
Code......................................................................3.9(b)
Common Stock..............................................................3.2(a)
Commonly Controlled Entity................................................3.9(b)
Company.................................................................Recitals
Company Agreements...........................................................3.4
Company Board of Directors..............................................Recitals
Company Disclosure Schedule..........................................Article III
Company Material Adverse Change...........................................3.1(a)
Company Material Adverse Effect...........................................3.1(a)
Company SEC Documents........................................................3.5
Confidentiality Agreement.................................................5.3(b)
D&O Insurance.............................................................6.8(b)
December 1997 Financial Statements...........................................3.5
Dissenting Shares............................................................2.2
Effective Time...............................................................1.5
Encumbrances..............................................................3.2(b)
Environmental Claims.....................................................3.16(b)
Environmental Laws.......................................................3.16(a)
ERISA.....................................................................3.9(b)
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Exchange Act..............................................................1.1(a)
Exchange Ratio.......................................................2.4(a)(iii)
Financial Statements.........................................................3.5
Financing....................................................................4.7
Financing Documents..........................................................4.7
GAAP.........................................................................3.5
GCL.....................................................................Recitals
Governmental Entity..........................................................3.4
HSR Act......................................................................3.4
Indemnified Party.........................................................6.8(a)
Independent Directors.....................................................1.3(c)
Initial Expiration Date...................................................1.1(a)
Intellectual Property Rights................................................3.13
London Stock Exchange........................................................6.7
Materials of Environmental Concern.......................................3.16(a)
Merger.......................................................................1.4
Merger Agreement.........................................................Annex I
Merger Consideration......................................................2.1(c)
Minimum Condition........................................................Annex I
New Shares...............................................................6.12(b)
Offer...................................................................Recitals
Offer Documents...........................................................1.1(b)
Offer Price.............................................................Recitals
Offer to Purchase.........................................................1.1(a)
Option.................................................................2.4(a)(i)
Option Agreement........................................................Recitals
Parachute Gross-Up Payment................................................3.9(g)
Parent..................................................................Recitals
Parent Common Share..................................................2.4(a)(iii)
Paying Agent..............................................................2.3(a)
Pension Plans.............................................................3.9(b)
Person.......................................................................9.5
Preferred Stock...........................................................3.2(a)
Proxy Statement......................................................1.10(a)(ii)
Purchaser...............................................................Recitals
Purchaser Common Stock.......................................................2.1
Real Property............................................................3.12(a)
Revised Minimum Number....................................................1.1(d)
Schedule 14D-l............................................................1.1(b)
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Schedule 14D-9............................................................1.2(b)
SEC.......................................................................1.1(b)
Secretary of State...........................................................1.5
Securities Act...............................................................3.5
Shareholder.............................................................Recitals
Shareholder Agreement...................................................Recitals
Shares..................................................................Recitals
Special Meeting.......................................................1.10(a)(i)
Stock Plans...............................................................2.4(a)
Stock Purchase Plan.......................................................2.4(f)
Subsidiary................................................................3.1(a)
Substitute Financing......................................................1.1(a)
Superior Proposal.........................................................5.3(b)
Surviving Corporation........................................................1.4
Tax......................................................................3.10(b)
Tax Authority............................................................3.10(b)
Tax Returns..............................................................3.10(b)
Taxes....................................................................3.10(b)
Termination Fee...........................................................8.2(b)
Transactions..............................................................1.2(a)
Transmittal Documents.....................................................2.3(b)
Voting Debt...............................................................3.2(a)
</TABLE>
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter referred to as this
"Agreement"), dated January 27, 1998, by and among The Sage Group plc, a company
- ----------
organized under the laws of England ("Parent"), Rose Acquisition Corp., a
------
Delaware corporation and a direct and indirect wholly owned subsidiary of Parent
(the "Purchaser"), and State Of The Art, Inc., a California corporation (the
---------
"Company").
- --------
WHEREAS, the Board of Directors of each of Parent, the Purchaser and
the Company has approved, and deems it advisable and in the best interests of
its respective shareholders to consummate, the acquisition of the Company by
Parent upon the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance thereof, it is proposed that Purchaser make a
cash tender offer (the "Offer") to acquire all shares (the "Shares") of the
----- ------
issued and outstanding common stock, no par value, of the Company, for $22.00
per share, net to the seller in cash (such price, or any such higher price per
Share as may be paid in the Offer, being referred to herein as the "Offer
-----
Price");
- -----
WHEREAS, also in furtherance of such acquisition, the Board of
Directors of each of Parent, Purchaser and the Company have each approved the
Merger (as defined below) following the Offer in accordance with the General
Corporation Law of the State of California (the "GCL") and upon the terms and
---
subject to the conditions set forth herein, whereby each issued and outstanding
Share not owned directly or indirectly by Parent, the Purchaser or the Company
will be converted into the right to receive an amount equal to the Offer Price
in cash;
WHEREAS, the Board of Directors of the Company (the "Company Board of
----------------
Directors") has determined that the consideration to be paid for each Share in
- ---------
the Offer and the Merger is fair to the holders of such Shares and has resolved
to recommend that the holders of such Shares accept the Offer and approve this
Agreement and each of the transactions contemplated hereby upon the terms and
subject to the conditions set forth herein;
WHEREAS, as a condition and further inducement to Parent and the
Purchaser to enter into this Agreement and incurring the obligations set forth
herein, certain shareholders (each a "Shareholder") concurrently herewith is
-----------
entering into a
<PAGE>
Shareholder Agreement (the "Shareholder Agreement"), dated as of the date
---------------------
hereof, with Parent and the Purchaser, in the form attached hereto as Exhibit A,
pursuant to which each Shareholder has agreed, among other things, to tender the
Shares held by each in the Offer and to grant Parent a proxy with respect to the
voting of such Shares in favor of the Merger upon the terms and subject to the
conditions set forth therein;
WHEREAS, as a condition and further inducement to Parent and the
Purchaser to enter into this Agreement and incurring the obligations set forth
herein, concurrently with the execution and delivery of this Agreement,
Purchaser and the Company are entering into an Option Agreement in the form of
Exhibit B hereto (the "Option Agreement"), pursuant to which among other things,
----------------
the Company has granted the Purchaser an option to purchase certain newly-issued
shares of Common Stock (as hereinafter defined), subject to certain conditions;
WHEREAS, the Company, Parent and Purchaser desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and Merger and also to prescribe to certain various conditions to the
Offer and the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer.
---------
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 8.1 hereof and none of the events set forth in Annex I
shall have occurred and be existing, as promptly as practicable (but in no event
later than five business days after the public announcement of the execution of
this Agreement), Purchaser shall commence (within the meaning of Rule 14d-2
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) the
------------
Offer at the Offer Price. The obligations of the Purchaser to accept for
payment and to pay for any Shares validly tendered on or prior to the expiration
of the Offer and not
2
<PAGE>
withdrawn shall be subject only to the conditions set forth in Annex I hereto.
The Offer shall be made by means of an offer to purchase (the "Offer to
--------
Purchase") subject to the conditions set forth in Annex I hereto. Except as
- --------
provided in Section 1.1(d), Purchaser shall not, without the prior written
consent of the Company, (i) decrease the Offer Price or change the form of
consideration payable in the Offer, (ii) decrease the number of Shares sought to
be purchased in the Offer (except as otherwise set forth in Section 1.1(d)
hereof), (iii) impose conditions to the Offer in addition to those set forth in
Annex I, (iv) amend any condition of the Offer set forth in Annex I, (v) extend
the initial expiration date (the "Initial Expiration Date") of the Offer,
-----------------------
except as required by law and except that in the event that any condition to the
Offer is not satisfied or waived on the Initial Expiration Date, the Purchaser
shall, and shall continue to, extend the Offer from time to time until a date
not later than March 26, 1998 (it being understood that the Purchaser may
determine the interim expiration dates of any extension of the Offer during such
extension period), or (vi) amend any other term of the Offer in any manner
adverse to any holders of the Shares; provided, however that in the event that
-------- -------
any condition to the Offer is not satisfied on a date following the Initial
Expiration Date on which the Offer is scheduled to expire, (i) Purchaser may,
from time to time, in its sole discretion, extend the expiration date of the
Offer until a date not later than July 31, 1998 and (ii) at the written request
of the Company delivered no later than March 26, 1998, the Purchaser shall, and
shall continue to, extend the Offer from time to time for the period commencing
on the date of the notice referred to above until a date not later than July 31,
1998 (it being understood that the Purchaser may determine the interim
expiration dates of any extension of the Offer during such extension period);
provided, further, that in the event that the Purchaser extends the expiration
- -------- -------
date of the Offer in accordance with such request: (A) Annex I shall be deemed
to be amended to provide an additional condition that the Purchaser shall not be
required to accept for payment or pay for any tendered Shares unless and until
Parent and the Purchaser shall have obtained sufficient financing (the
"Substitute Financing") in replacement, if necessary, of the Financing (as
--------------------
defined below) in order to permit Parent and the Purchaser to acquire all of the
Shares in the Offer and the Merger and to pay the anticipated expenses in
connection therewith, (B) the condition set forth in paragraph (h) of Annex I
shall be amended and replaced with the condition set forth in clause (A) above,
(C) from and after such time Parent shall not be subject to Section 6.12 and (D)
Parent shall use all commercially reasonable efforts to secure the Substitute
Financing prior to July 31, 1998 and to provide funds to the Purchaser to permit
it to perform its obligations hereunder and in the Offer (provided that Parent
shall not be required to obtain Substitute Financing on economic terms
materially less favorable to it than the Financing). Purchaser shall, on the
terms and
3
<PAGE>
subject to the prior satisfaction or waiver of the conditions of the Offer,
accept for payment and pay for Shares tendered as soon as it is legally
permitted to do so under applicable law. Parent shall provide or cause to be
provided to the Purchaser on a timely basis the funds necessary to accept for
payment, and pay for, any Shares that the Purchaser becomes obligated to accept
for payment, and pay for, pursuant to the Offer.
(b) Concurrently with the commencement of the Offer, Parent and the
Purchaser shall file with the United States Securities and Exchange Commission
(the "SEC") a Tender Offer Statement on Schedule 14D-1 with respect to the Offer
---
(together with all amendments and supplements thereto and including the exhibits
thereto, the "Schedule 14D-l"). The Schedule 14D-1 will include, as exhibits,
--------------
the Offer to Purchase and a form of letter of transmittal and summary
advertisement (collectively, together with any amendments and supplements
thereto, the "Offer Documents") Parent and Purchaser agree that the Offer
---------------
Documents will comply in all material respects with the provisions of applicable
Federal securities laws and, on the date filed with the SEC and on the date
first published or sent to the Company's shareholders, shall not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading, except
that no representation is made by Parent or the Purchaser with respect to
information furnished by the Company expressly for inclusion in the Offer
Documents. The information supplied by the Company expressly for inclusion in
the Offer Documents and by Parent or the Purchaser expressly for inclusion in
the Schedule 14D-9 (as hereinafter defined) will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading. No
representation, warranty or covenant is made or shall be made herein by the
Company with respect to information contained in the Offer Documents other than
information supplied by the Company in writing expressly for inclusion in the
Offer Documents.
(c) Each of Parent and the Purchaser will take all steps necessary to
cause the Offer Documents to be filed with the SEC and to be disseminated to
holders of the Shares, in each case as and to the extent required by applicable
federal securities laws. Each of Parent and the Purchaser, on the one hand, and
the Company, on the other hand, will promptly correct any information provided
by it for use in the Schedule 14D-1 or the Offer Documents if and to the extent
that it shall have become false or misleading in any material respect, and the
Purchaser further will
4
<PAGE>
take all steps necessary to cause the Schedule 14D-1 or the Offer Documents as
so corrected to be filed with the SEC and to be disseminated to holders of the
Shares, in each case as and to the extent required by applicable federal
securities laws. The Company and its counsel shall be given the reasonable
opportunity to review the initial Schedule 14D-1 (as well as all amendments or
supplements thereto) before any such document is filed with the SEC. In
addition, Parent and the Purchaser will provide the Company and its counsel with
any comments or other communications, whether written or oral, Parent, the
Purchaser or their counsel may receive from time to time from the SEC or its
staff with respect to the Offer Documents promptly after the receipt of such
comments or other communications.
(d) Subject to the limitations set forth in Section 1.1(a), in the
event the Minimum Condition (as defined in Annex I) is not satisfied on the
Initial Expiration Date, the Purchaser may either (i) extend the Offer pursuant
to clause (v) of Section 1.1(a) for a period or periods not to exceed, in the
aggregate ten (10) business days, or (ii) amend the Offer to provide that, in
the event (x) the Minimum Condition is not satisfied at the next scheduled
expiration date of the Offer (without giving pro forma effect to the potential
issuance of any Shares issuable upon exercise of the Option Agreement) and (y)
the number of Shares tendered pursuant to the Offer and not withdrawn as of such
next scheduled expiration date is more than 50% of the then outstanding Shares,
the Purchaser shall waive the Minimum Condition and amend the Offer to reduce
the number of Shares subject to the Offer to a number of Shares that when added
to the Shares then owned by the Purchaser will equal 49.9999% of the Shares then
outstanding (the "Revised Minimum Number") and, if a greater number of Shares is
----------------------
tendered into the Offer and not withdrawn, purchase, on a pro rata basis, the
Revised Minimum Number of Shares (it being understood that the Purchaser may,
but shall not in any event be required to, accept for payment, or pay for any
Shares if less than the Revised Minimum Number of Shares are tendered pursuant
to the Offer and not withdrawn at the applicable expiration date); provided,
--------
further, that in the event the Minimum Condition is not satisfied on or before
- -------
the ten (10) business day period referred to in paragraph (d)(i) above, the
Purchaser shall waive the Minimum Condition and amend the Offer to reduce the
number of Shares subject to the Offer to the Revised Minimum Number of Shares.
Notwithstanding any other provision of this Agreement, in the event that the
Purchaser purchases a number of Shares equal to the Revised Minimum Number,
without the prior written consent of the Purchaser prior to the termination of
this Agreement, the Company shall take no action whatsoever to increase the
number of Shares owned by the Purchaser in excess of the Revised Minimum Number.
5
<PAGE>
Section 1.2 Company Actions.
---------------
(a) The Company represents that the Company Board of Directors, at a
meeting duly called and held has (i) unanimously determined that each of the
Agreement, the Offer, the Merger and the Option Agreement (as hereinafter
defined) are fair to and in the best interests of the shareholders of the
Company, (ii) duly approved this Agreement, the Option Agreement and the
transactions contemplated hereby and thereby, including the Offer and the Merger
(collectively, the "Transactions"), and duly approved the Offer and the Merger
------------
in accordance with Section 1101 of the GCL, and (iii) resolved to recommend that
the shareholders of the Company accept the Offer and tender their shares
thereunder to the Purchaser and approve and adopt this Agreement and the Merger
(provided, however, that subject to and in accordance with the provisions of
Section 5.3, such recommendation may be withdrawn, modified or amended in
connection with a Superior Proposal (as defined in Section 5.3)).
(b) As soon as practicable on or after the date the Offer is
commenced, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 (together with all amendments or supplements thereto
and including the exhibits thereto, the "Schedule 14D-9") which shall, subject
--------------
to the provisions of Section 5.3(c) contain the recommendation referred to in
clause (iii) of Section 1.2(a) hereof. The Schedule 14D-9 will comply in all
material respects with the provisions of applicable federal securities laws and,
on the date filed with the SEC and on the date first published or sent to the
Company's shareholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information furnished by
Parent or the Purchaser expressly for inclusion in the Schedule 14D-9. No
representation, warranty or covenant is made or shall be made herein by Parent
or the Purchaser with respect to information contained in the Schedule 14D-9
other than the information supplied by Parent or the Purchaser in writing
expressly for inclusion in the Schedule 14D-9. The Company further agrees to
take all steps necessary to cause the Schedule 14D-9 to be filed with the SEC
and to be disseminated to holders of the Shares, in each case, as and to the
extent required by applicable federal securities laws. The Company shall mail,
or cause to be mailed, such Schedule 14D-9 to the shareholders of the Company at
the same time the Offer Documents are first mailed to the shareholders of the
Company together with such Offer Documents. Each of the Company, on the one
hand, and Parent and the Purchaser, on the other
6
<PAGE>
hand, agrees promptly to correct any information provided by it for use in the
Schedule 14D-9 if and to the extent that it shall have become false or
misleading in any material respect and the Company further agrees to take all
steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the
SEC and to be disseminated to holders of the Shares, in each case, as and to the
extent required by applicable federal securities laws. Parent and its counsel
shall be given the opportunity to review the Schedule 14D-9 before it is filed
with the SEC. In addition, the Company agrees to provide Parent, the Purchaser
and their counsel with any comments, whether written or oral, that the Company
or its counsel may receive from time to time from the SEC or its staff with
respect to the Schedule 14D-9 promptly after the receipt of such comments or
other communications.
(c) In connection with the Offer, the Company will promptly furnish or
cause to be furnished to the Purchaser mailing labels, security position
listings and any available listing or computer file containing the names and
addresses of all record holders of Shares, each as of a recent date, and shall
promptly furnish the Purchaser with such additional information (including, but
not limited to, updated mailing labels, security position listings and available
listings or computer files containing the names and addresses of all
record holders of Shares).
Section 1.3 Directors.
---------
(a) Subject to compliance with applicable law, promptly upon the
purchase of and payment for any Shares by the Purchaser pursuant to the Offer,
and from time to time thereafter as Shares are acquired by the Purchaser, Parent
shall be entitled to designate such number of directors, rounded up to the next
whole number, on the Company Board of Directors as is equal to the product of
the total number of directors on such Board (determined after giving effect to
the directors designated by Parent pursuant to this sentence) multiplied by the
percentage that the aggregate number of Shares which Purchaser or any affiliate
of the Purchaser owns beneficially bears to the total number of Shares then
outstanding. In furtherance thereof, the Company shall, upon the request of
Parent, promptly secure the resignations of such number of its incumbent
directors as is necessary to enable Parent's designees to be elected to the
Company Board of Directors and shall take all actions available to the Company
to cause Parent's designees to be so elected. At such time, the Company shall,
if requested by Parent, also cause persons designated by Parent to constitute at
least the same percentage (rounded up to the next whole number) as is on the
Company Board of Directors of (i) each committee of the Company Board of
Directors, (ii) each board of directors (or similar body) of each Subsidiary (as
7
<PAGE>
hereinafter defined) of the Company and (iii) each committee (or similar body)
of each such board.
(b) The Company shall promptly take all actions required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-l promulgated thereunder in order
to fulfill its obligations under Section 1.3(a) hereof, and shall include in the
Schedule 14D-9 mailed to shareholders promptly after the commencement of the
Offer (or an amendment thereof or an information statement pursuant to Rule 14f-
1 if the Purchaser has not theretofore designated directors) such information
with respect to the Company and its officers and directors as is required under
Section 14(f) and Rule 14f-1 in order to fulfill its obligations under Section
1.3(a). Parent or the Purchaser shall supply the Company information with
respect to either of them and their nominees, officers, directors and affiliates
required by such Section 14(f) and Rule 14f-1. The provisions of this Section
1.3 are in addition to and shall not limit any rights which the Parent,
Purchaser or any of their affiliates may have as a holder or beneficial owner of
Shares as a matter of law with respect to the election of directors or
otherwise.
(c) In the event that Parent's designees are elected to the Company
Board of Directors, subject to the other terms of this Agreement and until the
Effective Time, the Company Board of Directors shall have at least two directors
who are directors on the date hereof and neither of whom is an officer of the
Company (other than the present Chief Executive Officer of the Company) nor a
designee, shareholder, affiliate or associate (within the meaning of the federal
securities laws) of Parent (one or more of such directors, the "Independent
-----------
Directors"), provided that, in such event, if the number of Independent
- --------- -------- ----
Directors shall be reduced below two for any reason whatsoever, any remaining
Independent Director shall be entitled to designate persons to fill such
vacancies who shall be deemed Independent Directors for purposes of this
Agreement or, if no Independent Director then remains, the other directors shall
designate one person to fill one of the vacancies who shall not be a
shareholder, affiliate or associate of Parent or the Purchaser and such person
shall be deemed to be an Independent Director for purposes of this Agreement.
Notwithstanding anything in this Agreement to the contrary, in the event that
Parent's designees are elected to the Company Board of Directors, after the
acceptance for payment of Shares pursuant to the Offer and prior to the
Effective Time (as hereinafter defined), the affirmative vote of a majority of
the Independent Directors shall be required to (a) amend or terminate this
Agreement on behalf of the Company, (b) exercise or waive any of the Company's
rights, benefits or remedies hereunder, (c) extend the time for performance of
the Purchaser's obligations
8
<PAGE>
hereunder or (d) take any other action by the Company Board of Directors under
or in connection with this Agreement; provided, however, that if there shall be
-------- -------
no such directors, such actions may be effected by unanimous vote of the entire
Company Board of Directors.
Section 1.4 The Merger. Upon the terms and subject to satisfaction
----------
or waiver of the conditions of this Agreement, and in accordance with the
applicable provisions of this Agreement and the GCL, at the Effective Time, the
Company and the Purchaser shall consummate a merger (the "Merger") pursuant to
------
which (a) the Purchaser shall be merged with and into the Company and the
separate corporate existence of the Purchaser shall thereupon cease, (b) the
Company shall be the successor or surviving corporation in the Merger (sometimes
hereinafter referred to as the "Surviving Corporation") and shall continue to be
---------------------
governed by the laws of the State of California, and (c) the separate corporate
existence of the Company with all of its rights, privileges, immunities, powers
and franchises shall continue unaffected by the Merger, except as set forth in
this Section 1.4. Pursuant to the Merger, (x) the Articles of Incorporation of
the Company (the "Articles of Incorporation"), shall be amended in its entirety
-------------------------
to read as the Articles of Incorporation of the Purchaser in effect immediately
prior to the Effective Time, except that Article I thereof shall read as
follows: "The name of the Corporation is STATE OF THE ART, INC." and , as so
amended, shall be the articles of incorporation of the Surviving Corporation
until thereafter amended as provided by law and such Articles of Incorporation
and (y) the By-Laws of the Purchaser (the "By-Laws"), as in effect immediately
-------
prior to the Effective time (as hereinafter defined), shall be the By-Laws of
the Surviving Corporation until thereafter amended as provided by law, by such
Articles of Incorporation or by such By-Laws.
Section 1.5 Effective Time. As soon as practicable after the
--------------
satisfaction or waiver of the conditions set forth in Article VII hereof,
Parent, the Purchaser and the Company shall cause to be executed and filed on
the Closing Date (as hereinafter defined) (or on such other date as Parent and
the Company may agree) with the Secretary of State of the State of California
(the "Secretary of State") in the manner required by the GCL an agreement of
------------------
merger together with an officer's certificate of the Company and the Purchaser,
and the parties shall take such other and further actions as may be required by
law to make the merger effective. The time the Merger becomes effective in
accordance with applicable law is hereinafter referred to as the "Effective
---------
Time."
- ----
9
<PAGE>
Section 1.6 Closing. The closing of the Merger (the "Closing") shall
------- -------
take place at 10:00 a.m. on a date to be specified by the parties, which shall
be no later than the second business day after satisfaction or waiver of all of
the conditions set forth in Article VII hereof (the "Closing Date"), at the
------------
offices of Skadden, Arps, Slate, Meagher & Flom LLP, Four Embarcadero Center,
Suite 3800, San Francisco, California, unless another date or place is agreed to
in writing by the parties hereto.
Section 1.7 Directors and Officers of the Surviving Corporation.
---------------------------------------------------
Subject to applicable law, the directors of the Purchaser and the officers of
the Company at the Effective Time shall, from and after the Effective Time, be
the directors and officers of the Surviving Corporation until their successors
shall have been duly elected or appointed or qualified or until their earlier
death, resignation or removal in accordance with the Articles of Incorporation
and the By-laws. If, at the Effective Time, a vacancy shall exist on the
Company Board of Directors or in any office of the Surviving Corporation, such
vacancy may thereafter be filled in the manner provided by law.
Section 1.8 Effects of the Merger. At the Effective Time, the Merger
---------------------
shall have the effects set forth in Section 1107 of the GCL. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time all
the property, rights, privileges, powers and franchises of the Company and the
Purchaser shall vest in the Surviving Corporation, and all debts, liabilities
and duties of the Company and the Purchaser shall become the debts, liabilities
and duties of the Surviving Corporation.
Section 1.9 Subsequent Actions. If at any time after the Effective
------------------
Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the Company or the Purchaser acquired
or to be acquired by the Surviving Corporation as a result of, or in connection
with the Merger or otherwise to carry out this Agreement, the officers and
directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of either the Company or the Purchaser, all
such deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf of each of such corporations or otherwise, all such other
actions and things as may be necessary or desirable to vest, perfect or confirm
any and all rights, title and interest in, to and under such rights, properties
or assets in the Surviving Corporation or otherwise to carry out this Agreement.
10
<PAGE>
Section 1.10 Shareholders' Meeting.
---------------------
(a) If required by the Articles of Incorporation and/or applicable law
in order to consummate the Merger, the Company, acting through its Board of
Directors, shall, in accordance with applicable law:
(i) duly call, give notice of, convene and hold a special
meeting of its shareholders (the "Special Meeting") as promptly as
---------------
practicable following the acceptance for payment and purchase of Shares by
the Purchaser pursuant to the Offer for the purpose of considering and
taking action upon the approval of the Merger and the adoption of this
Agreement;
(ii) prepare and file with the SEC a preliminary proxy or
information statement relating to the Merger and this Agreement and use its
commercially reasonable efforts (x) to obtain and furnish the information
required to be included by the SEC in the Proxy Statement (as hereinafter
defined) and, after consultation with Parent, to respond promptly to any
comments made by the SEC with respect to the preliminary proxy or
information statement and cause a definitive proxy or information
statement, including any amendment or supplement thereto (the "Proxy
-----
Statement") to be mailed to its shareholders, provided that no amendment or
---------
supplement to the Proxy Statement will be made by the Company without
consultation with Parent and its counsel and (y) to obtain the necessary
approvals of the Merger and this Agreement by its shareholders; and
(iii) subject to the fiduciary obligations of the Board of
Directors of the Company under applicable law, include in the Proxy
Statement the recommendation of the Board of Directors that shareholders of
the Company vote in favor of the approval of the Merger and the adoption of
this Agreement.
(b) Parent will provide the Company with the information concerning
Parent and the Purchaser required to be included in the Proxy Statement. Parent
shall vote, or cause to be voted, all of the Shares then owned by it, the
Purchaser or any of its other subsidiaries and affiliates in favor of the
approval of the Merger and the approval and adoption of this Agreement.
Section 1.11 Merger Without Meeting of Shareholders. Notwithstanding
--------------------------------------
Section 1.10 hereof, in the event that Parent, the Purchaser and any other
11
<PAGE>
Subsidiaries of Parent shall have acquired in the aggregate at least 90% of the
outstanding Shares pursuant to the Offer or otherwise (including as a result of
the exercise of the Option Agreement), the parties hereto shall take all
necessary and appropriate action to cause the Merger to become effective as soon
as practicable after the acceptance for payment of and payment for Shares by the
Purchaser pursuant to the Offer, without a meeting of shareholders of the
Company, in accordance with Section 1110 of the GCL.
Section 1.12 Earliest Consummation. Each party hereto shall use its
---------------------
commercially reasonable efforts to consummate the Merger as soon as practicable.
If the conditions set forth in Annex I hereto are satisfied, or waived, the
Purchaser shall consummate the Offer and accept for payment Shares tendered
therein and thereafter effectuate the Merger as soon as practicable after the
Purchaser accepts the Shares for payment pursuant to the Offer.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. As of the Effective Time,
---------------------------
by virtue of the Merger and without any action on the part of the holders of any
Shares or holders of any class or series of common stock, par value $.01 per
share, of the Purchaser (the "Purchaser Common Stock"):
----------------------
(a) Each issued and outstanding share of Purchaser Common Stock shall
be converted into and become one validly issued, fully paid and nonassessable
share of common stock of the Surviving Corporation.
(b) All Shares owned by Parent, the Purchaser or any other wholly
owned subsidiary of Parent shall be cancelled and retired, and shall cease to
exist other than shares in Section 2.1(d) and no consideration shall be
delivered in exchange therefor.
(c) Each issued and outstanding Share immediately before the Effective
Time (other than any Shares to be cancelled pursuant to Section 2.1(b) and any
Dissenting Shares (as hereinafter defined)) shall be cancelled and extinguished
and be converted into the right to receive the Offer Price in cash, payable to
the holder thereof, without interest (the "Merger Consideration"), upon
--------------------
surrender of the
12
<PAGE>
certificate formerly representing such Share in the manner provided in Section
2.3 hereof.
(d) Each share of Purchaser Common Stock, issued and outstanding
immediately before the Effective Time shall thereafter represent one validly
issued, fully paid and nonassessable share of common stock, par value $.01 per
share, of the Surviving Corporation.
Section 2.2 Dissenting Shares.
-----------------
Notwithstanding anything in this Agreement to the contrary, Shares
outstanding immediately prior to the Effective Time and held by a holder who has
not voted in favor of the Merger or consented thereto in writing and who has
demanded appraisal for such shares in accordance with Section 1300 of the GCL,
if such Section 1300 provides for appraisal rights for such Shares in the Merger
("Dissenting Shares"), shall not be converted into the right to receive the
-----------------
Merger Consideration as provided in Section 2.1, unless and until such holder
fails to perfect or withdraws or otherwise loses his right to appraisal and
payment under the GCL. If, after the Effective Time, any such holder fails to
perfect or withdraws or loses his right to appraisal, then such Dissenting
Shares shall thereupon be treated as if they had been converted as of the
Effective Time into the right to receive the Merger Consideration, if any, to
which such holder is entitled, without interest or dividends thereon. The
Company shall give Parent prompt notice of any demands received by the Company
for appraisal of Shares and, prior to the Effective Time, Parent shall have the
right to participate in all negotiations and proceedings with respect to such
demands. Prior to the Effective Time, the Company shall not, except with the
prior written consent of Parent, make any payments with respect to or settle or
offer to settle, any such demands.
Section 2.3 Surrender of Shares; Stock Transfer Books.
-----------------------------------------
(a) Before the Effective Time, the Purchaser shall designate a bank or
trust company reasonably acceptable to the Company to act as agent for the
holders of Shares in connection with the Merger (the "Paying Agent") to receive
------------
the funds necessary to make the payments contemplated by Section 2.1(a). At the
Effective Time, the Purchaser shall deposit, or cause to be deposited, in trust
with the Paying Agent for the benefit of holders of Shares the aggregate
consideration to which such holders shall be entitled at the Effective Time
pursuant to Section 2.1(a). Such funds shall be invested as directed by Parent
or the Surviving Corporation
13
<PAGE>
pending payment thereof by the paying agent to holders of the Shares. Earnings
from such investments shall be the sole and exclusive property of the Purchaser
and the Surviving Corporation and no part thereof shall accrue to the benefit of
the holders of the Shares. If for any reason (including losses) such funds are
inadequate to pay the amounts to which holders of Shares shall be entitled under
this Section 2.3, Parent shall in any event be liable for payment thereof. Such
funds deposited with the Paying Agent pursuant to this Section 2.3 shall not be
used for any purpose except as expressly provided in this Agreement. From time
to time at or after the Effective Time, Parent shall take all lawful action
necessary to make the appropriate cash payments, if any, to holders of
Dissenting Shares. Prior to the Effective Time, Parent shall enter into
appropriate commercial arrangements to ensure effectuation of the immediately
preceding sentence.
(b) As soon as reasonably practicable after the Effective Time, the
Paying Agent shall mail to each holder of record of a certificate or
certificates, which immediately prior to the Effective Time represented
outstanding Shares (the "Certificates"), whose Shares were converted pursuant to
------------
Section 2.1 into the right to receive the Merger Consideration (i) a letter of
transmittal (which shall specify that delivery shall be effected and that the
risk of loss of and title to the Certificates shall pass, only upon delivery of
the Certificates to the Paying Agent and shall be in such form and have such
other provisions not inconsistent with this Agreement as Parent may specify) and
(ii) instructions for use in effecting the surrender of Certificates in exchange
for payment of the Merger Consideration (together, the "Transmittal Documents").
---------------------
Upon surrender of a Certificate for cancellation to the Paying Agent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal, duly executed, the holder of such Certificate shall be entitled
to receive in exchange therefor the Merger Consideration for each Share formerly
represented by such Certificate, and the Certificate so surrendered shall
forthwith be cancelled. If payment of the Merger Consideration is to be made to
a person other than the person in whose name the surrendered Certificate is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or shall otherwise be in proper form for
transfer and that the person requesting such payment shall have paid any
transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such tax either has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.3, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration in cash as contemplated by this Section 2.3.
Upon the surrender of
14
<PAGE>
Certificates in accordance with the terms and instructions contained in the
Transmittal Documents, the Purchaser shall cause the Paying Agent to pay the
holder of such certificates in exchange therefor cash in an amount equal to the
Merger Consideration multiplied by the number of Shares represented by such
Certificate (other than Certificates representing Dissenting Shares and
Certificates representing Shares held by the Purchaser).
(c) At the Effective Time, the stock transfer books of the Company
shall be closed and there shall not be any further registration of transfers of
shares of any shares of capital stock thereafter on the records of the Company.
From and after the Effective Time, the holders of certificates evidencing
ownership of the Shares outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to such Shares, except as otherwise
provided for herein or by applicable law. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be cancelled
and exchanged for cash as provided in this Article II. No interest shall accrue
or be paid on any cash payable upon the surrender of a Certificate or
Certificates which immediately before the Effective Time represented outstanding
Shares.
(d) Promptly following the date which is one year after the Effective
Time, the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any cash (including any interest received with respect thereto),
Certificates and other documents in its possession relating to the transactions
contemplated hereby, which had been made available to the Paying Agent and which
have not been disbursed to holders of Certificates, and thereafter such holders
shall be entitled to look to the Surviving Corporation (subject to abandoned
property, escheat or similar laws) only as general creditors thereof with
respect to the Merger Consideration payable upon due surrender of their
Certificates, without any interest thereon. Notwithstanding the foregoing,
neither the Surviving Corporation nor the Paying Agent shall be liable to any
holder of a Certificate for Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(e) The Merger Consideration paid in the Merger shall be net to the
holder of Shares in cash, subject to reduction only for any applicable Federal
withholding taxes or, as set forth in Section 2.3(b), stock transfer taxes
payable by such holder.
Section 2.4 Company Stock Plans.
-------------------
15
<PAGE>
(a) For purposes of this Agreement, the following terms shall have the
meanings set forth below:
(i) "Cash-Out Options" shall mean each option outstanding at the
----------------
Effective Time to purchase Shares (an "Option") granted under (A) the Company's
------
1990 Stock Option Plan, 1994 Incentive Stock Option, Nonqualified Stock Option
and Restricted Stock Purchase Plan, or Stock Option Plan for Non-Employee
Directors, (B) the Manzanita Software Systems 1985 Stock Option Plan or (C) any
other stock-based incentive plan or arrangement of the Company excluding any
options granted under the Company's 1997 Employee Stock Purchase Plan (the
"Stock Plans") that is not an Assumed Option (as defined below).
- ------------
(ii) "Assumed Options" shall mean those Options or portions there
---------------
of as identified on Schedule 2.4(a) granted under the Company's 1990 Stock
Option Plan or 1994 Incentive Stock Option, Nonqualified Stock Option and
Restricted Stock Purchase Plan that will not have vested and become exercisable
as of the Effective Time as identified on Section 2.4(a) of the Company
Disclosure Schedule having an aggregate exercise price on the date hereof in an
amount not materially less than $5 million. To the extent any Options or
portions thereof, as identified on Schedule 2.4(a), cannot be assumed by Parent,
such Options or portions thereof shall be treated as Cash-Out Options and shall
be cancelled as of the Effective Time in consideration for a cash payment in
accordance with Section 2.4(b).
(iii) "Exchange Ratio" shall mean the quotient of (x) the Offer
--------------
Price multiplied by the average of the mid-point of the bid and ask price of the
rate of currency exchange of pounds sterling for U.S. dollars quoted in The
Financial Times for each of the business days in a consecutive twenty business
period ending two business days prior to the Effective Date and (y) the average
per Share closing price of the ordinary shares of 1 pence each in the capital of
Parent (a "Parent Common Share") as reported on the London Stock Exchange on
-------------------
each of the ten trading days immediately preceding the Effective Time.
(b) The Company shall take all actions necessary to provide that at
the Effective Time, (i) each Cash-Out Option shall be cancelled and (ii) in
consideration of such cancellation, each holder of a Cash-Out Option shall
receive in consideration thereof an amount (subject to any applicable
withholding tax) in cash equal to the product of (x) the excess, if any, of the
Offer Price over the per Share exercise price of such Cash-Out Option and (y)
the number of Shares subject to such Cash-Out Option. The Company shall use all
commercially reasonable efforts to
16
<PAGE>
effectuate the foregoing, including without limitation amending the Stock Plans
and obtaining any necessary consents from holders of Cash-Out Options.
(c) At the Effective Time, each Assumed Option shall be assumed by
Parent (and Parent shall take all action necessary under applicable law, to
cause such result or equivalent result without disadvantage to the Option
holders) and shall thereupon constitute an option to acquire that number of
Parent Common Shares equal to (i) the number of Shares subject to the Assumed
Option immediately prior to the Effective Time, multiplied by (ii) the Exchange
Ratio, rounded down to the nearest whole share, at a price per Parent Common
Share equal to (x) the exercise price of the Assumed Option immediately prior to
the Effective Time, divided by (y) the Exchange Ratio, rounded up to the nearest
whole cent. Other than as described in the immediately preceding sentence, the
Assumed Options shall be subject to the same terms and conditions as applicable
immediately prior to the Effective Time; provided, however, that the terms of
-------- -------
the Stock Plans shall be amended as necessary to comply with all applicable
securities laws and laws of the jurisdiction of the Parent (but without
disadvantage to the option holder). As soon as reasonably practicable following
the Effective Time, Parent shall deliver to each holder of an Assumed Option an
appropriate notice setting forth the terms of such assumption. With respect to
any Assumed Option that is an incentive stock option (within the meaning of
Section 422 of the Code) immediately prior to the Effective Time, such
assumption shall, to the extent reasonably practicable, conform to the
requirements of Section 424(a) of the Code. Parent shall take all action
necessary for the Parent Common Shares to rank pari passu in all respects with
all other Parent Common Shares then in issue and to be listed and issuable upon
exercise of the Assumed Options so that such Assumed Options shall be freely
tradeable on the London Stock Exchange. Notwithstanding the foregoing
provisions of this Section 2.4(c), to the extent any Option or portion thereof
is not assumed pursuant to this Section 2.4(c), such Options or portion thereof
shall be treated as a Cash-Out Option.
(d) Except as may be otherwise agreed to by Parent or the Purchaser
and the Company or as otherwise contemplated or required to effectuate this
Section 2.4, the Stock Plans shall terminate as of the Effective Time and the
provisions in any other plan, program or arrangement providing for the issuance
or grant of any other interest in respect of the capital stock of the Company or
any of its Subsidiaries shall be deleted as of the Effective Time.
(e) The Company shall take all necessary actions to provide that as of
the Effective Time no holder of Options under the Stock Plans will have any
17
<PAGE>
right to receive shares of common stock of the Surviving Corporation upon
exercise of any such Option.
(f) The Company shall take all actions necessary to provide that at or
immediately prior to the Effective Time, (i) each then outstanding option under
the Company's 1997 Employee Stock Purchase Plan (the "Stock Purchase Plan")
-------------------
shall automatically be exercised and (ii) in lieu of the issuance of
Certificates, each option holder shall receive an amount in cash (subject to any
applicable withholding tax) equal to the product of (x) the number of Shares
otherwise issuable upon such exercise and (y) the Merger Consideration. The
Company shall use all reasonable efforts to effectuate the foregoing, including
without limitation amending the Stock Purchase Plan and obtaining any necessary
consents from holders of Options. The Company (i) shall not permit the
commencement of any new offering period under the Stock Purchase Plan following
the date hereof, (ii) shall not permit any optionee to increase his or her rate
of contributions under the Stock Purchase Plan following the date hereof, (iii)
shall terminate the Stock Purchase Plan as of the Effective Time, and (iv) shall
take any other actions necessary to provide that as of the Effective Time no
holder of options under the Stock Purchase Plan will have any right to receive
shares of common stock of the Surviving Corporation upon exercise of any such
option.
(g) Notwithstanding anything in this Agreement to the contrary, a vote
of a majority of the Independent Directors shall be required to amend this
Section 2.4 in any manner adverse to the holders of Options described herein.
(h) In the event that an employee of the Company who is a holder of
Cash-Out Options is terminated by the Company without cause after the
consummation of the Offer but prior to the Effective Time, such employee shall
receive on the Effective Date with respect to all Cash-Out Options held by such
employee as of the date of such termination of employment the cash payment
determined in accordance with Section 2.4(b) that such employee would have
received had such employee been employed as of the Effective Date.
18
<PAGE>
ARTICLE III
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
Except as set forth in the schedule delivered to Parent prior to the
execution of this Agreement (the "Company Disclosure Schedule") of exceptions to
---------------------------
the Company's representations and warranties set forth herein, the Company
represents and warrants to Parent and the Purchaser as set forth below. Each
exception set forth in the Company Disclosure Schedule is identified by
reference to, or has been grouped under a heading referring to, a specific
individual section of this Agreement.
Section 3.1 Organization.
------------
(a) Each of the Company and its Subsidiaries (as defined below) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization and has all requisite
corporate power or other and authority and all necessary governmental approvals
to own, lease and operate its properties and to carry on its business as now
being conducted, except where the failure to be so organized, existing and in
good standing or to have such power, authority, and governmental approvals would
not, individually or in the aggregate, have a Company Material Adverse Effect
(as hereinafter defined). As used in this Agreement, the term "Subsidiary"
----------
shall mean, with respect to any party, any corporation or other organization,
whether incorporated or unincorporated or domestic or foreign to the United
States of which (i) such party or any other Subsidiary of such party is a
general partner (excluding such partnerships where such party or any Subsidiary
of such party do not have a majority of the voting interest in such partnership)
or (ii) at least a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the board of directors or
others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries. As used in this Agreement, "Company Material Adverse Change" or
-------------------------------
"Company Material Adverse Effect" means any change or effect that is materially
-------------------------------
adverse to (i) the business, operations, properties (including intangible
properties), financial condition, results of operations or assets of the Company
and its Subsidiaries, taken as a whole, or (ii) the ability of the Company to
consummate any of the Transactions or to perform its obligations under this
Agreement or the Option Agreement, other than changes or effects which are or
result from occurrences relating to the economy
19
<PAGE>
in general or such entity's industry in general and not specifically relating to
such entity, the delay or cancellation of orders for the Company's products
directly attributable to the announcement of this Agreement or stockholder
litigation brought or threatened against the Company or any member of its Board
of Directors in respect to this Agreement, the Offer, or the Merger, including
all costs and expenses in connection therewith and other fees and expenses
incurred by the Company in connection with the Transactions as contemplated
hereby. The Company Disclosure Schedule sets forth in Section 3.1(a) a complete
list of the Company's Subsidiaries.
(b) The Company and each of its Subsidiaries is duly qualified or
licensed to do business and in good standing in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except where the failure
to be so duly qualified or licensed and in good standing would not individually
or in the aggregate have a Company Material Adverse Effect. Except as set forth
in Section 3.1(b) of the Company Disclosure Schedule, other than its
Subsidiaries, the Company does not own any significant equity interest in any
corporation or other entity.
Section 3.2 Capitalization.
--------------
(a) The authorized capital stock of the Company consists of (i)
25,000,000 shares of common stock, no par value per share (the "Common Stock")
------------
and (ii) 1,000,000 shares of preferred stock (the "Preferred Stock"). As of
---------------
December 31, 1997, (i) 11,173,945 Shares are issued and outstanding, (ii) no
shares of Preferred Stock are issued and outstanding, (iii) pursuant to
California law no Shares are issued and held in the treasury of the Company, and
(iv) a total of 1,709,227 Shares are reserved for issuance pursuant to the Stock
Plans, of which (A) 260,550 Shares are reserved for issuance pursuant to
outstanding Options and 33,670 Shares are reserved for issuance pursuant to
future awards, in each case under the Company's 1990 Stock Option Plan, (B)
1,284,736 Shares are reserved for issuance pursuant to outstanding Options, no
Shares have been issued as shares of restricted stock that have not vested as of
the date hereof, and 408,479 Shares are reserved for issuance pursuant to future
awards, in each case under the Company's 1994 Incentive Stock Option,
Nonqualified Stock Option and Restricted Stock Purchase Plan, (C) 145,000 Shares
are reserved for issuance pursuant to outstanding Options, and 55,000 Shares are
reserved for issuance pursuant to future awards, in each case under the
Company's Stock Plan for Non-Employee Directors, and (D) 18,941 Shares are
reserved for issuance pursuant to outstanding Options, and 635 shares are
reserved for issuance pursuant to future awards, in each case under the 1985
Manzanita Stock
20
<PAGE>
Option Plan, and (v) assuming that the Effective Date were to occur on or about
March 26, 1998, approximately 6,515 Shares would be issuable upon the exercise
of options outstanding under the Company's 1997 Employee Stock Purchase Plan at
a price of $13.8125 per Share. All the outstanding shares of the Company's
capital stock are, and all Shares which may be issued pursuant to the exercise
of outstanding Options will be, when issued in accordance with the terms
thereof, duly authorized, validly issued, fully paid and non-assessable. There
are no bonds, debentures, notes or other indebtedness having general voting
rights (or convertible into securities having such rights) ("Voting Debt")
-----------
of the Company or any of its Subsidiaries issued and outstanding. Except as
disclosed in this Section 3.2 or as set forth in Section 3.2(a) of the Company
Disclosure Schedule, other than pursuant to the Option Agreement, (i) there are
no shares of capital stock of the Company authorized, issued or outstanding,
(ii) there are no existing options, warrants, calls, pre-emptive rights,
subscriptions or other rights, agreements, arrangements or commitments of any
character, relating to the issued or unissued capital stock of the Company or
any of its Subsidiaries, obligating the Company or any of its Subsidiaries to
issue, transfer or sell or cause to be issued, transferred or sold any shares of
capital stock or Voting Debt of, or other equity interest in, the Company or any
of its Subsidiaries or securities convertible into or exchangeable for such
shares or equity interests, or obligating the Company or any of its Subsidiaries
to grant, extend or enter into any such option, warrant, call, subscription or
other right, agreement, arrangement or commitment, and (iii) except as set forth
in Section 3.2(a) of the Company Disclosure Schedule, there are no outstanding
contractual obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any Shares, or the capital stock of the Company or
any Subsidiary or affiliate of the Company or to provide funds to make any
investment (in the form of a loan, capital contribution or otherwise) in any
Subsidiary or any other entity.
(b) All of the outstanding shares of capital stock of each of the
Subsidiaries are beneficially owned by the Company, directly or indirectly, and
all such shares have been validly issued and are fully paid and nonassessable
and are owned by either the Company or one of its Subsidiaries free and clear of
all liens, charges, security interests, options, claims, mortgages, pledges, or
other encumbrances and restrictions of any nature whatsoever ("Encumbrances").
------------
(c) There are no voting trusts or other agreements or understandings
to which the Company or any of its Subsidiaries is a party with respect to the
voting of the capital stock of the Company or any of the Subsidiaries.
21
<PAGE>
Section 3.3 Authorization; Validity of Agreement; Company Action.
----------------------------------------------------
(a) The Company has full corporate power and authority to execute and
deliver this Agreement, the Option Agreement and to consummate the Transactions.
The execution, delivery and performance by the Company of this Agreement and the
Option Agreement, and the consummation by it of the Transactions, have been duly
and validly authorized by its Board of Directors and, no other corporate action
on the part of the Company is necessary (other than, with respect to the Merger,
the approval and adoption of the Merger and this Agreement by holders of the
Shares to the extent required by the Company's articles of incorporation and by
applicable law) to authorize the execution and delivery by the Company of this
Agreement and the Option Agreement, and the consummation by it of the
Transactions contemplated hereby. Each of this Agreement and the Option
Agreement has been duly executed and delivered by the Company and, assuming due
and valid authorization, execution and delivery hereof by Parent and the
Purchaser, is a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms except that (i) such enforcement may be
subject to applicable bankruptcy, insolvency or other similar laws, now or
hereafter in effect, affecting creditors' rights generally, and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceedings therefor may be brought.
Section 3.4 Consents and Approvals; No Violations. Except as set
-------------------------------------
forth in Section 3.4 of the Company Disclosure Schedule, none of the execution,
delivery or performance of this Agreement by the Company, the consummation by
the Company of the Transactions or compliance by the Company with any of the
provisions hereof will (i) conflict with or result in any breach of any
provision of the Articles of Incorporation, the By-laws or similar
organizational documents of the Company or any of its Subsidiaries, state
securities laws or blue sky laws and the GCL, (ii) require any filing by the
Company with, or permit, authorization, consent or approval of, any court,
arbitral tribunal, administrative agency or commission or other governmental or
other regulatory authority or agency, foreign or domestic (a "Governmental
------------
Entity") (except for (A) compliance with any applicable requirements of the
- ------
Exchange Act, (B) the filing of an agreement of merger together with an
officer's certificate of the Company and the Purchaser pursuant to the GCL, (C)
filings, permits, authorizations, consents and approvals as may be required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), (D) the filing with the SEC and the Nasdaq Stock Market, Inc. of (1)
-------
the Schedule 14D-9, (2) a proxy statement relating to shareholder approval, if
such
22
<PAGE>
approval is required by law and (3) such reports under Section 13(a) of the
Exchange Act as may be required in connection with this Agreement and the
transactions contemplated by this Agreement or (E) such filings and approvals as
may be required by any applicable state securities, "blue sky" or takeover
laws), (iii) result in a violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which the Company or
any of its Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound (the "Company Agreements") or (iv) violate any
------------------
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company, any of its Subsidiaries or any of their properties or assets, except in
the case of clause (ii), (iii) or (iv) where failure to obtain such permits,
authorizations, consents or approvals or to make such filings, or where such
violations, breaches or defaults which would not, individually or in the
aggregate, have a Company Material Adverse Effect.
Section 3.5 SEC Reports and Financial Statements. The Company has
------------------------------------
filed with the SEC all forms, reports, schedules, statements and other documents
required to be filed by it since December 31, 1995 under the Exchange Act or the
Securities Act of 1933, as amended (the "Securities Act") (as such documents
--------------
have been amended since the time of their filing, collectively, the "Company SEC
-----------
Documents"). As of their respective dates, or if amended, as of the date of the
- ---------
last such amendment, the Company SEC Documents (a) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading and (b)
complied in all material respects with the applicable requirements of the
Exchange Act and the Securities Act, as the case may be, and the applicable
rules and regulations of the SEC thereunder. None of the Company's Subsidiaries
is required to file any forms, reports or other documents with the SEC. The
financial statements included in the Company SEC Documents and the Company's
condensed consolidated statement of income for the year ended and condensed
consolidated balance sheet at December 31, 1997 (the "December 1997 Financial
-----------------------
Statements") (other than for the absence of footnotes, in the case of the
- ----------
December 1997 Financial Statements and interim financial statements)
(collectively, the "Financial Statements") (i) have been prepared from and are
--------------------
in accordance with, the books and records of the Company and its consolidated
Subsidiaries, (ii) comply in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC
23
<PAGE>
with respect thereto, (iii) have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
----
during the periods involved (except as may be indicated in the notes thereto and
except, in the case of the unaudited interim statements, as may be permitted
under Form 10-Q of the Exchange Act) and (iv) fairly present the consolidated
financial position and the consolidated results of operations and cash flows
(subject, in the case of unaudited interim financial statements, to normal year-
end adjustments) of the Company and its consolidated Subsidiaries as of the
times and for the periods referred to therein. A true, correct and complete
(other than the absence of footnotes) copy of the December 1997 Financial
Statements has been previously provided to Parent. The audited consolidated
financial statements of the Company for the year ended December 31, 1997 will
not be inconsistent with the December 1997 Financial Statements in any material
respect which is adverse.
Section 3.6 Absence of Certain Changes. Except as contemplated by
--------------------------
this Agreement and except as set forth in Section 3.6 of the Company Disclosure
Schedule or in the Company SEC Documents filed prior to the date hereof, since
December 31, 1997, the Company and its Subsidiaries have conducted their
respective businesses only in the ordinary and usual course. From December 31,
1997 through the date of this Agreement, there has not occurred (i) any event,
change or effect (including the incurrence of any liabilities of any nature,
whether or not accrued, contingent or otherwise) having, individually or in the
aggregate, a Company Material Adverse Effect, or (ii) any declaration, setting
aside or payment of any dividend or other distribution (whether in cash, stock
or property) with respect to the equity to the equity interests of the Company
or any of its Subsidiaries in accounting principles or methods, except insofar
as may be required by a change GAAP. Since December 31, 1997 neither the
Company nor any of its Subsidiaries has taken any of the actions prohibited by
Section 5.2 hereof.
Section 3.7 No Undisclosed Liabilities. Except (a) as recognized
--------------------------
or disclosed in the Financial Statements or the Company SEC Reports and (b) for
liabilities and obligations (i) incurred in the ordinary course of business
December 31, 1997, (ii) pursuant to the terms of this Agreement or (iii) as
disclosed in Section 3.7 of the Company Disclosure Schedule, (iv) as disclosed
in Section 3.8 of the Company Disclosure Schedule, or (v) as would not have a
Company Material Adverse Effect, neither the Company nor any of its Subsidiaries
has incurred any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise required by GAAP to be recognized or disclosed
on a consolidated balance sheet of the Company and its Subsidiaries or in the
notes thereto. Section 3.7 of the
24
<PAGE>
Company Disclosure Schedule sets forth the amount of principal and unpaid
interest outstanding under each instrument evidencing any material amount of
indebtedness for borrowed money of the Company and its Subsidiaries which will
accelerate or become due or result in a right of redemption or repurchase on the
part of the holder of such indebtedness (with or without due notice or lapse of
time) as a result of this Agreement, the Merger or the other transactions
contemplated hereby or thereby.
Section 3.8 Litigation. Except as set forth in Section 3.8 of the
----------
Company Disclosure Schedule or in the Company SEC Documents, as of the date
hereof, there is no suit, claim, action, proceeding, including, without
limitation, arbitration proceeding or alternative dispute resolution proceeding,
or investigation pending or, to the knowledge of the Company, threatened against
or affecting, the Company or any of its Subsidiaries before any Governmental
Entity as to which there is a reasonable possibility of an adverse determination
and that, either individually or in the aggregate, if adversely determined,
would have a Company Material Adverse Effect.
Section 3.9 Employee Benefit Plans; ERISA.
-----------------------------
(a) Except as disclosed in the Company SEC Documents, since the
audited financial statements for the year ended December 31, 1996 until the date
hereof, there has not been any adoption or amendment (or an agreement to adopt
or amend) in any material respect by the Company or any of its subsidiaries of
any material employment or collective bargaining agreement or any bonus,
pension, profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, stock appreciation right
or other stock-based incentive, retirement, vacation, severance, change in
control or termination pay, disability, death benefit, hospitalization, medical
or other insurance or any other plan, program, agreement, arrangement or
understanding (whether or not legally binding) providing benefits to any current
or former employee, officer or director of the Company or any Subsidiary
(collectively, the "Benefit Plans"). Except as disclosed in the Company SEC
-------------
Documents or in Section 3.9(a) of the Company Disclosure Schedule, there exist,
as of the date hereof, no material employment, severance, termination or
indemnification agreements, arrangements or understandings between the Company
or any of its Subsidiaries, and any current or former employee, officer or
director of the Company.
(b) Section 3.9(b) of the Company Disclosure Schedule contains a list
and brief description of all "employee pension benefit plans" (as defined in
25
<PAGE>
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (sometimes referred to herein as "Pension Plans"), "employee welfare
----- -------------
benefit plans" (as defined in Section 3(1) of ERISA) and all other material
Benefit Plans sponsored, maintained, contributed to or required to be
contributed to, by the Company or any of its Subsidiaries or any person or
entity that, together with the Company and its Subsidiaries, is treated as a
single employer under Section 414(b), (c), (m) or (o) of the Internal Revenue
Code of 1986, as amended (the "Code") (the Company and each such other person or
----
entity, a "Commonly Controlled Entity") for the benefit of any current or former
--------------------------
employees, officers or directors of the Company or any of its Subsidiaries. The
Company has made available to Parent true, complete and correct copies of (1)
each Benefit Plan (or, in the case of any unwritten Benefit Plans, descriptions
thereof), (2) the most recent annual report on Form 5500 filed with the Internal
Revenue Service with respect to each Benefit Plan (if any such report was
required), (3) the most recent summary plan description for each Benefit Plan
for which such summary plan description is required (together with all Summaries
of Material Modification issued with respect thereto), (4) each trust agreement
and group annuity contract relating to any Benefit Plan and (5) all material
contracts and employee communications relating to each Benefit Plan. Each
Benefit Plan has been administered materially in accordance with its terms. The
Company, each of its Subsidiaries and all the Benefit Plans are all in material
compliance with applicable provisions of ERISA, the Code and other applicable
laws.
(c) All Pension Plans have been the subject of determination, opinion,
notification or advisory letters from the Internal Revenue Service to the effect
that such Pension Plans are qualified and exempt from Federal income taxes under
Sections 401(a) and 501(a), respectively, of the Code, a true, complete and
correct copy of each such determination letter has been made available to
Parent, and no such determination, opinion, notification or advisory letter has
been revoked nor has any event occurred since the date of the most recent
determination letter or application therefor for each Pension Plan that would
adversely affect its qualification or materially increase its costs.
(d) Neither the Company, nor any of its Subsidiaries, nor any Commonly
Controlled Entity has at any time maintained, contributed or been obligated to
contribute to any Benefit Plan that is subject to Title IV of ERISA, including
without limitation any "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA).
26
<PAGE>
(e) Except as set forth in Section 3.9(e) of the Company Disclosure
Schedule, no employee of the Company or any of its Subsidiaries will be entitled
to any additional compensation or benefits or any acceleration of the time of
payment or vesting or any other enhancement of any compensation or benefits
under any Benefit Plan as a result of the transactions contemplated by this
Agreement.
(f) The deduction of any amount payable pursuant to the terms of the
Benefit Plans will not be subject to disallowance under Section 162(m) of the
Code.
(g) No amount that could be received (whether in cash or property or
the vesting of property) by any employee, officer or director of the Company or
any of its Subsidiaries under any employment, severance or termination
agreement, other compensation arrangement or other Benefit Plan currently in
effect would be an "excess parachute payment" (as such term is defined in
Section 28OG(b)(1) of the Code). No such person is entitled to receive any
additional payment from the Company or any of its Subsidiaries, the Surviving
Corporation or any other person (a "Parachute Gross-Up Payment") in the event
--------------------------
that the excise tax of Section 4999(a) of the Code is imposed on such person.
The Board of Directors of the Company has not granted to any officer, director
or employee of the Company any right to receive any Parachute Gross-Up Payment.
(h) No Benefit Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect to current or
former employees of the Company, its Subsidiaries or any Commonly Controlled
Entity after retirement or other termination of service, other than (i) coverage
mandated by applicable law, (ii) death benefits or retirement benefits under any
Pension Plan, (iii) deferred compensation benefits accrued as liabilities on the
books of the Company, the Subsidiary or any Commonly Controlled Entity, (iv)
benefits, the full cost of which is borne by the current or former employee,
officer or director (or his beneficiary), except in the event that a separation
or severance plan program or arrangement provides otherwise, (v) life insurance
benefits for which the employee dies while in service with the Company, or (vi)
any employee stock options which may be exercised after termination of
employment.
(i) There are no pending or, to the Company's knowledge, threatened or
anticipated claims by or on behalf of any Benefit Plan, by any employee or
beneficiary under any Benefit Plan or otherwise involving any Benefit Plan
(other than routine claims for benefits).
27
<PAGE>
(j) Neither the Company, the Subsidiary, any Commonly Controlled
Entity, any of the Benefit Plans, any trust created thereunder nor any trustee
or administrator thereof has engaged in a transaction or has taken or failed to
take any action in connection with which any such person or entity or any party
dealing with the Benefit Plans or any such trust could be subject to either a
civil penalty assessed pursuant to section 409 or 502(i) or ERISA or a tax
imposed pursuant to section 4975, 4976, or 4980B of the Code.
Section 3.10 Taxes.
-----
(a) Except as set forth in Section 3.10 of the Company Disclosure
Schedule:
(i) the Company and its Subsidiaries (x) have duly filed (or
there have been filed on their behalf) with the appropriate Tax Authorities
(as hereinafter defined) all material Tax Returns (as hereinafter defined)
required to be filed by them, and, to the knowledge and belief of the
Company, such Tax Returns are true, correct and complete in all material
respects, and (y) duly paid in full (or there has been paid on their
behalf), or have established reserves (in accordance with GAAP) as
reflected on the Financial Statements, all material Taxes (as hereinafter
defined) that are due and payable;
(ii) there are no material liens for Taxes upon any property or
assets of the Company or any Subsidiary thereof, except for liens for Taxes
not yet due or for which adequate reserves have been established in
accordance with GAAP;
(iii) as of the date hereof, no material Federal, state, local
or foreign Audits are pending with regard to any material Taxes or material
Tax Returns of the Company or its Subsidiaries and to the best knowledge of
the Company and its Subsidiaries no such Audit is threatened;
(iv) the United States federal income Tax Returns of the Company
and its Subsidiaries have been examined by the applicable Tax Authorities
(or the applicable statutes of limitation for the assessment of Taxes for
such periods have expired) for all periods through and including December
31, 1993, and as of the date hereof no material adjustments have been
asserted as a result of such examinations which have not been (I)
28
<PAGE>
resolved and fully paid, or (II) reserved on the Financial Statements in
accordance with GAAP;
(b) "Audit" means any audit, assessment, or other examination relating
-----
to Taxes by any Tax Authority or any judicial or administrative proceedings
relating to Taxes. "Tax" or "Taxes" means all Federal, state, local, and
--- -----
foreign taxes, and other assessments of a similar nature (whether imposed
directly or through withholding), including any interest, additions to tax, or
penalties applicable thereto, imposed by any Tax Authority. "Tax Authority"
-------------
means the Internal Revenue Service and any other domestic or foreign
governmental authority responsible for the administration of any Taxes. "Tax
---
Returns" mean all Federal, state, local and foreign tax returns, declarations,
- -------
statements, reports, schedules, forms, and information returns and any
amendments thereto.
Section 3.11 Contracts. Each Company Agreement is valid, binding
---------
and enforceable and in full force and effect, except where failure to be valid,
binding and enforceable and in full force and effect would not have a Company
Material Adverse Effect, and there are no defaults thereunder, except those
defaults that would not have a Company Material Adverse Effect. Section 3.11 of
the Company Disclosure Schedule sets forth a true and complete list of (i) all
material Company Agreements (defined as any agreement required to be filed as an
Exhibit to an Annual Report on Form 10-K of the Company pursuant to Item
601(b)(10) of Regulation S-K) entered into by the Company or any of its
Subsidiaries since December 31, 1996 and all amendments to any Company
Agreements included as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 and (ii) all non-competition
agreements imposing restrictions on the ability of the Company or any of its
Subsidiaries to conduct business in any jurisdiction or territory.
Section 3.12 Real Property.
-------------
(a) Section 3.12 of the Company Disclosure Schedule sets forth a
complete list of all real property owned by the Company or its Subsidiaries (the
"Real Property"). Except as set forth in Section 3.12 of the Company Disclosure
-------------
Schedule, the Company or its Subsidiaries has good and marketable title to the
Real Property, free and clear of all Encumbrances. Copies of (i) all deeds,
title insurance policies and surveys of the Real Property and (ii) all documents
evidencing all Encumbrances upon the Real Property have been furnished to
Parent. Except as disclosed in Section 3.12 of the Company Disclosure Schedule,
the Company is not a
29
<PAGE>
party to any lease, assignment or similar arrangement under which the Company is
a lessor, assignor or otherwise makes available for use by any third party any
portion of the Real Property.
(b) The Company has not received any notice of or other writing
referring to any requirements or recommendations by any insurance company that
has issued a policy covering any part of the Real Property or by any board of
fire underwriters or other body exercising similar functions, requiring or
recommending any repairs or work to be done on any part of the Real Property.
The plumbing, electrical, heating, air conditioning, ventilating and all other
structural or material mechanical systems in the buildings upon the Real
Property are in good working order and working condition, so as to be adequate
for the operation of the business of the Company as heretofore conducted, and
the roof, basement and foundation walls of all buildings on the Real Property
are free of leaks and other material defects, except for any matter otherwise
covered by this sentence which does not have, individually or in the aggregate,
a Company Material Adverse Effect.
(c) The Company has obtained all appropriate licenses, permits,
easements and rights of way, including proofs of dedication, required to use and
operate the Real Property in the manner in which the Real Property is currently
being used and operated, except for such licenses, permits or rights of way the
failure of which to have obtained does not have, individually or in the
aggregate, a Company Material Adverse Effect.
(d) The Company has not received notification that the Company is in
violation of any applicable building, zoning, anti-pollution, health or other
law, ordinance or regulation in respect of the Real Property or structures or
their operations thereon and no such violation exists.
Section 3.13 Intellectual Property. Other than as would not have a
---------------------
Company Material Adverse Effect, the Company and its Subsidiaries own free and
clear of all liens and encumbrances, or are validly licensed or otherwise have
the right to use, all trademarks, trade secrets, trademark rights, trade names,
trade name rights, service marks, service mark rights, and copyrights, and to
the Company's knowledge, all patents and patent applications, and other
proprietary intellectual property rights which are used in the conduct of the
business of the Company and its Subsidiaries either individually or taken as a
whole (collectively, "Intellectual Property Rights"). Except as would not have
----------------------------
a Company Material Adverse Effect, to the knowledge of the Company, all patents,
copyrights, and trademarks, and all
30
<PAGE>
registrations and applications relating thereto (i) have been duly maintained
(including the proper, sufficient and timely submission of all necessary filings
and fees), (ii) have not lapsed, expired or been abandoned, and (iii) are not
the subject of any opposition, interference, cancellation or other proceeding
before any governmental registration or other authority in any jurisdiction.
Except as would not have Company Material Adverse Effect, (x) the Company will
continue to own or be licensed to the Intellectual Property Rights after
consummation of the Offer and the Merger (consistent with their ownership and
license rights prior to said consummation) and (y) the consummation of the Offer
and Merger will not result in the material breach of any license, sublicense or
other agreement relating to the Intellectual Property Rights. Except as would
not have Company Material Adverse Effect, to the knowledge of the Company, no
claim, suit, action or proceeding involving any infringement of, or conflict
with, any intellectual property rights of any third party has been made or
asserted against the Company or any of its Subsidiaries in respect of the
operation of the Company's or any Subsidiary's business, nor is there any basis
for such. Except as would not have Company Material Adverse Effect, to the
knowledge of the Company, no person is infringing, or taking any action in
conflict with, the rights of the Company or any Subsidiary with respect to any
Intellectual Property Right. Except as would not have a Company Material Adverse
Effect, to the knowledge of the Company, neither the Company nor any Subsidiary
has licensed, or otherwise granted, to any third party, any rights in or to any
material Intellectual Property Rights other than in the ordinary course of the
Company's business of licensing applications software to resellers and end-
users.
Except where such disclosure would not have a Company Material Adverse
Effect, no trade secret, know-how or other confidential information relating to
the Company or its Subsidiaries has been disclosed or authorized to be disclosed
to any third party, other than pursuant to a standard non-disclosure agreement.
Section 3.14 Labor Matters. The Company and each of its
-------------
Subsidiaries has good labor relations and there are no controversies pending, or
to the knowledge of the Company, threatened between the Company and any of its
Subsidiaries and any of their respective employees, which failure to have good
labor relations or controversies would have, individually or in the aggregate, a
Company Material Adverse Effect. There are no collective bargaining or other
labor union agreements to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is bound. Since
December 31, 1996, neither the Company nor any of its Subsidiaries has
encountered any labor union organizing
31
<PAGE>
activity, nor had any actual or threatened employee strikes, work stoppages,
slowdowns or lockouts.
Section 3.15 Compliance with Laws. The Company and its Subsidiaries
--------------------
have complied in a timely manner and in all material respects with all laws,
rules and regulations, ordinances, judgments, decrees, orders, writs and
injunctions of all United States federal, state, local, foreign governments and
agencies thereof which affect the business, properties or assets of the Company
and its Subsidiaries, except for instances of possible noncompliance that
individually or in the aggregate would not have Company material Adverse Effect,
and no notice, charge, claim, action or assertion has been received by the
Company or any of its Subsidiaries or has been filed, commenced or, to the
Company's knowledge, threatened against the Company or any of its Subsidiaries
alleging any violation of any of the foregoing, except for instances of possible
noncompliance that individually or in the aggregate would not have Company
Material Adverse Effect. All licenses, permits and approvals required under such
laws, rules and regulations are in full force and effect except where the
failure to be in full force and effect would not have a Company Material Adverse
Effect.
Section 3.16 Environmental Matters. Except as set forth in Section
---------------------
3.16 of the Company Disclosure Schedule, (a) the Company and its Subsidiaries
are in compliance in all material respects with federal, state, local and
foreign laws and regulations relating to pollution or protection or preservation
of human health or the environment, including, without limitation, laws and
regulations relating to emissions, discharges, releases or threatened releases
of toxic or hazardous substances or hazardous waste, petroleum and petroleum
products, asbestos or asbestos-containing materials, polychlorinated biphenyls,
radon, or lead or lead-based paints or materials ("Materials of Environmental
--------------------------
Concern"), or otherwise relating to the generation, storage, containment
- -------
(whether above ground or underground), disposal, transport or handling of
Materials of Environmental Concern, or the preservation of the environment or
mitigation of adverse effects thereon (collectively, "Environmental Laws"), and
------------------
including, but not limited to, compliance with any permits or other governmental
authorizations or the terms and conditions thereof, except where noncompliance
is not reasonably likely to have a Company Material Adverse Effect; (b) neither
the Company nor any of its Subsidiaries has received any communication or
notice, whether from a governmental authority or otherwise, alleging any
violation of or noncompliance with any Environmental Laws by any of the Company
or its Subsidiaries or for which the any of them is responsible, and there is no
pending or, to the Company's knowledge, no threatened claim, action,
investigation or notice by any
32
<PAGE>
person or entity alleging potential liability for investigatory, cleanup or
governmental response costs, or natural resources or property damages, or
personal injuries, attorney's fees or penalties relating to (i) the presence, or
release into the environment, of any Materials of Environmental Concern at any
location owned or operated by the Company or its Subsidiaries, now or in the
past, or (ii) any violation, or alleged violation, of any Environmental Law
(collectively, "Environmental Claims"), except where such notices,
--------------------
communications or Environmental Claims would not have a Company Material Adverse
Effect; and (c) to the Company's knowledge, there are no past or present facts
or circumstances that are reasonably likely to form the basis of any
Environmental Claim against the Company or its Subsidiaries or against any
person or entity whose liability for any Environmental Claim the Company or its
Subsidiaries have retained or assumed either contractually or by operation of
law, except where such Environmental Claim, if made, would not have a Company
Material Adverse Effect.
Section 3.17 Product Warranties. Except as described in Section
------------------
3.17 of the Company Disclosure Schedule, all products are sold or licensed by
the Company pursuant to terms that provide (i) the Company's disclaimer of all
warranties, express or implied, including those of merchantability and fitness
for a particular purpose; (ii) the Company's disclaimer of all consequential
damages arising from the use or possession of the product, regardless of whether
such liability is based in tort, contract or otherwise; and (iii) language
stating that if the foregoing disclaimers are held to be unenforceable, the
Company's maximum liability shall not exceed the amount of money(ies) paid for
such product(s), except, in each case, where the failure so to provide would not
have a Company Material Adverse Effect.
Section 3.18 Information in Proxy Statement. The Proxy Statement,
------------------------------
if any (or any amendment thereof or supplement thereto), at the date mailed to
Company shareholders and at the time of the meeting of Company shareholders to
be held in connection with the Merger, will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, except that no
representation is made by the Company with respect to statements made therein
based on information supplied in writing by Parent or the Purchaser expressly
for inclusion in the Proxy Statement. The Proxy Statement will comply in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
33
<PAGE>
Section 3.19 Related Party Transactions. Except as set forth in
--------------------------
the Company SEC Documents or on Schedule 3.19 hereto, no director, officer, or
"affiliate" (as such term is defined in Rule 12b-2 under the Exchange Act) of
the Company (i) has outstanding any indebtedness or other similar obligations to
the Company or any of its Subsidiaries, other than ordinary course of business
travel advances or (ii) other than employment related benefits agreements
contemplated by or disclosed in this Agreement, is a party to any legally
binding contract, commitment or obligation to, from or with the Company or any
Subsidiary of the Company.
Section 3.20 Opinion of Financial Advisor. The Company has
----------------------------
received the written opinion of UBS, dated the date hereof, to the effect that,
as of such date, the consideration to be received in the Offer and the Merger by
the Company's shareholders is fair to the Company's shareholders from a
financial point of view, a copy of which opinion has been delivered to Parent
and the Purchaser.
Section 3.21 Insurance. The Company and each of its Subsidiaries
---------
have policies of insurance and bonds of the type and in amounts customarily
carried by persons conducting businesses or owning assets similar to those of
the Company and its Subsidiaries. Except as disclosed in Section 3.21 of the
Company Disclosure Schedule, there is no material claim pending under any of
such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been paid and the Company and its
Subsidiaries, to the knowledge of the Company, are otherwise in compliance in
all material respects with the terms of such policies and bonds. The Company
has no knowledge of any threatened termination of, or material premium increase
with respect to, any of such policies. This Section 3.21 shall not apply to any
insurance providing for employee benefits.
Section 3.22 State Takeover Statutes; Required Vote. Except for
--------------------------------------
Section 1101 of the GCL, no California takeover statute or similar statute
applies or purports to apply to the Offer or the Merger, or to this Agreement,
the Option Agreement or the Shareholder Agreements or the transactions
contemplated hereby or thereby. Subject to Section 1101 of GCL, in the event
the Shareholders' Meeting is required to approve the Merger and the adoption of
this Agreement the approval by the holders of a majority of the outstanding
Shares is the only vote required to approve the Merger and the adoption of this
Agreement.
Section 3.23 Brokers. No brokers, investment bankers, financial
-------
advisors or other persons, the fees and expenses of which will be paid by
Company,
34
<PAGE>
are or will be entitled in the aggregate to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company other than amounts not in excess of the amount contemplated by the
engagement and related fee letter between the Company and UBS, true, correct and
complete copies of which have been delivered to Parent.
Section 3.24 Full Disclosure. To the knowledge of the Company, the
---------------
representations and warranties by the Company in this Agreement and the
documents referred to herein (including the Schedules and Exhibits hereto),
taken together with all the other information provided to the Parent or its
counsel in connection with the transactions contemplated hereby, do not contain
any untrue statements of a material fact or omit to state any material fact
necessary, in order to make the statements made herein or therein, in light of
the circumstances under which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER
Parent and the Purchaser represent and warrant to the Company as
follows:
Section 4.1 Organization. Each of Parent and the Purchaser is a
------------
corporation duly organized and validly existing under the laws of the
jurisdiction of its incorporation or organization and has all requisite
corporate power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as now being
conducted, except where the failure to be so organized and existing or to have
such power, authority, and governmental approvals would not, individually or in
the aggregate, impair in any material respect the ability of each of Parent and
the Purchaser to perform its obligations under this Agreement, as the case may
be, or prevent or materially delay the consummation of any of the Transactions.
Section 4.2 Authorization; Validity of Agreement; Necessary Action.
------------------------------------------------------
Each of Parent and the Purchaser has full corporate power and authority to
execute and deliver this Agreement and to consummate the Transactions. The
execution,
35
<PAGE>
delivery and performance by Parent and the Purchaser of this Agreement and the
consummation of the Merger and of the Transactions have been duly authorized by
the boards of directors of the Purchaser and Parent and by Parent and a wholly
owned Subsidiary of Parent as the sole shareholders of the Purchaser, and no
other corporate authority or approval on the part of Parent or the Purchaser is
necessary to authorize the execution and delivery by Parent and the Purchaser of
this Agreement and the consummation of the Transactions. This Agreement has been
duly executed and delivered by Parent and the Purchaser and, assuming due and
valid authorization, execution and delivery hereof by the Company, is a valid
and binding obligation of each of Parent and the Purchaser enforceable against
each of them in accordance with its terms, except that (i) such enforcement may
be subject to applicable bankruptcy, insolvency or other similar laws, now or
hereafter in effect, affecting creditors' rights generally, and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
Section 4.3 Consents and Approvals; No Violations. None of the
-------------------------------------
execution, delivery or performance of this Agreement by Parent or the Purchaser,
the consummation by Parent or the Purchaser of the Transactions or compliance by
Parent or the Purchaser with any of the provisions hereof will (i) conflict with
or result in any breach of any provision of the organizational documents of
Parent or the Certificate of Incorporation or By-Laws of the Purchaser, (ii)
require any filing by Parent or the Purchaser with, or permit, authorization,
consent or approval of, any Governmental Entity (except for (i) compliance with
any applicable requirements of the Exchange Act, (ii) the filing of an agreement
of merger together with an officer's certificate of the Company and the
Purchaser pursuant to the GCL, (iii) filings, permits, authorizations, consents
and approvals as may be required under, the HSR Act, (iv) the filing with the
SEC and the Nasdaq Stock Market, Inc. of (A) the Schedule 14D-1, (B) a proxy
statement relating to shareholder approval, if such approval is required by law
and (C) such reports under Section 13(a) as may be required in connection with
this Agreement and the transactions contemplated by this Agreement or (iv) such
filings and approvals as may be required by any applicable state securities,
"blue sky" or takeover laws), (iii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration) under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which
Parent, or any of its Subsidiaries or the Purchaser is a party or by which any
of them or any of their respective properties or assets may be bound, or (iv)
violate any order, writ, injunc-
36
<PAGE>
tion, decree, statute, rule or regulation applicable to Parent, any of its
Subsidiaries or any of their properties or assets, except in the case of clause
(ii), (iii) or (iv) such violations, breaches or defaults which would not,
individually or in the aggregate, impair in any material respect the ability of
each of Parent and the Purchaser to perform its obligations under this
Agreement, as the case may be, or prevent the consummation of any the
Transactions.
Section 4.4 Information in Proxy Statement. None of the information
------------------------------
supplied by Parent or the Purchaser in writing expressly for inclusion or
incorporation by reference in the Proxy Statement (or any amendment thereof or
supplement thereto) will, at the date mailed to shareholders and at the time of
the meeting of shareholders to be held in connection with the Merger, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements made
therein, in light of the circumstances under which they are made, not
misleading.
Section 4.5 Interim Operations of the Purchaser. The Purchaser was
-----------------------------------
formed solely for the purpose of engaging in the Transactions, has engaged in no
other business activities other than in connection with the Transaction as
contemplated hereby.
Section 4.6 Brokers. No broker, investment banker, financial
-------
advisor or other person, other than BT Alex.Brown and J Henry Schroder & Company
Limited, the fees and expenses of which will be paid by Parent, is entitled to
any broker's, finder's, financial advisor's or other similar fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Purchaser.
Section 4.7 Financing. Purchaser has, or will have available to it
---------
upon the consummation of the Offer, sufficient funds to consummate the
Transactions , including payment in full for all Shares validly tendered into
the Offer or outstanding at the Effective Time. Parent and the Purchaser have
received, and have furnished to the Company, true and complete copies of (i) the
Vendor Placing Agreement, dated January 27, 1998, between Parent and J. Henry
Schroder & Co. Limited and (ii) the Facilities Agreement, dated January 27,
1998, among Parent, the Purchaser, the Banks and Financial Institutions named in
Schedule 1 thereto, Lloyds Bank plc Capital Markets Group, as arranger, and
Lloyds Bank plc Capital Markets Group as agent (collectively, the "Financing
---------
Documents") with respect to the financing of the acquisition of the Shares in
- ---------
the Offer and the Merger (the "Financ-
------
37
<PAGE>
ing"). The aggregate proceeds of the Financing, together with internal corporate
- ---
funds of Parent or the Purchaser, are sufficient to acquire all of the Shares in
the Offer and the Merger and to pay anticipated expenses in connection
therewith. The Financing Documents are valid, binding and enforceable in
accordance with their terms and have not been revoked as of the date hereof.
Nothing has come to the attention of Parent or the Purchaser which would cause
either Parent or the Purchaser to believe that the proceeds of the Financing
will not be available to them by the Initial Expiration Date. Parent will not
enter into any amendments or supplements to the Financing Documents that would
materially reduce the likelihood of obtaining the Financing or any other
commitments and agreements from third parties to provide financing to Parent or
to the Purchaser without the prior written consent of the Company, which will
not be unreasonably withheld.
Section 4.8 Share Ownership. Neither Parent nor the Purchaser are
---------------
the beneficial owner of any shares of capital stock of the Company.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.1 Acquisition Proposals. The Company will notify the
---------------------
Purchaser promptly if any proposals are received by, any information is
requested from, or any negotiations or discussions are sought to be initiated or
continued with the Company or its officers, directors, employees, investment
bankers, attorneys, accountants or other agents, in each case in connection with
any Acquisition Proposal (as hereinafter defined) or the possibility or
consideration of making an Acquisition Proposal ("Acquisition Proposal
--------------------
Interest") indicating, in connection with such notice, the name of the Person
- --------
indicating such Acquisition Proposal Interest and the material terms and
conditions of any proposals or offers. The Company agrees that it will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal Interest. The Company agrees that it shall keep
Parent informed, on a current basis, of the status and terms of any Acquisition
Proposal Interest. As used in this Agreement, "Acquisition Proposal" shall
--------------------
mean any tender or exchange offer involving the Company, any proposal for a
merger, consolidation or other business combination involving the Company, any
proposal or offer to acquire in any manner a substantial equity interest in, or
a substantial portion of the business or assets of, the Company (other than
immaterial or insubstantial assets or inventory in the ordinary course of
business or assets held for sale), any proposal or
38
<PAGE>
offer with respect to any recapitalization or restructuring with respect to the
Company or any proposal or offer with respect to any other transaction similar
to any of the foregoing with respect to the Company other than pursuant to the
transactions to be effected pursuant to this Agreement.
Section 5.2 Interim Operations of the Company. The Company covenants
---------------------------------
and agrees that, except (i) as expressly contemplated by this Agreement or the
Option Agreement, (ii) as set forth in Section 5.2 of the Company Disclosure
Schedule, (iii) in the ordinary course of business consistent with past practice
or (iv) as agreed in writing by Parent, after the date hereof, and prior to the
earlier of (x) the termination of this Agreement in accordance with Article VIII
hereof and (y) the time the designees of Parent have been elected to, and shall
constitute a majority of, the Board of Directors of the Company pursuant to
Section 1.3 hereof (the "Appointment Date"):
----------------
(a) the business of the Company and its Subsidiaries shall be
conducted only in the ordinary course consistent with past practice and each of
the Company and its Subsidiaries shall use its commercially reasonable efforts
to preserve its present business organization intact and maintain its
satisfactory relations with customers, suppliers, employees, contractors,
distributors and others having business dealings with it;
(b) the Company will not, directly or indirectly, (i) except upon
exercise of the Options or other rights to purchase shares of Common Stock
pursuant to the Stock Plans outstanding on the date hereof, issue, sell,
transfer or pledge or agree to sell, transfer or pledge any capital stock of any
of its Subsidiaries beneficially owned by it, (ii) amend its Articles of
Incorporation or By-laws or similar organizational documents; or (iii) split,
combine or reclassify the outstanding Shares or any outstanding capital stock of
the Company;
(c) neither the Company nor any of its Subsidiaries shall: (i)
declare, set aside or pay any dividend or other distribution payable in cash,
stock or property with respect to its capital stock; (ii) issue, sell, pledge,
dispose of or encumber any additional shares of, or securities convertible into
or exchangeable for, or options, warrants, calls, commitments or rights of any
kind to acquire, any shares of capital stock of any class of the Company or its
Subsidiaries, other than Shares reserved for issuance on the date hereof
pursuant to the exercise of the Options outstanding on the date hereof and
except with respect to any sales in accordance with the Stock Purchase Plan;
(iii) transfer, lease, license, sell, mortgage, pledge,
39
<PAGE>
dispose of, or encumber any of its material assets, or incur or modify any
material indebtedness or other liability, other than in the ordinary and usual
course of business and consistent with past practice; or (iv) redeem, purchase
or otherwise acquire any shares of any class or series of its capital stock, or
any instrument or security which consists of or includes a right to acquire such
shares except as permitted by Section 5.2(b) and other than in connection with
the exercise of options or rights under the Stock Plans and except with respect
to any sales in accordance with the Stock Purchase Plan;
(d) neither the Company nor any of its Subsidiaries shall make any
change in the compensation payable or to become payable to any of its officers,
directors, employees, agents or consultants (other than general increases in
wages to employees who are not directors or affiliates in the ordinary course
consistent with past practice), or to persons providing management services,
enter into or amend any employment, severance, consulting, termination or other
agreement or employee benefit plan or make any loans to any of its officers,
directors, employees, affiliates, agents or consultants or make any change in
its existing borrowing or lending arrangements for or on behalf of any of such
persons pursuant to an employee benefit plan or otherwise;
(e) neither the Company nor any of its Subsidiaries shall pay or make
any accrual or arrangement for payment of any pension, retirement allowance or
other employee benefit pursuant to any existing plan, agreement or arrangement
to any officer, director, employee or affiliate or pay or agree to pay or make
any accrual or arrangement for payment to any officers, directors, employees or
affiliates of the Company of any amount relating to unused vacation days, except
payments and accruals made in the ordinary course consistent with past practice;
adopt or pay, grant, issue, accelerate or accrue salary or other payments or
benefits pursuant to any pension, profit-sharing, bonus, extra compensation,
incentive, deferred compensation, stock purchase, stock option, stock
appreciation right, group insurance, severance pay, retirement or other employee
benefit plan, agreement or arrangement, or any employment or consulting
agreement with or for the benefit of any director, officer, employee, agent or
consultant, whether past or present; or amend in any material respect any such
existing plan, agreement or arrangement in a manner inconsistent with the
foregoing;
(f) the Company shall not, in any material respect, modify, amend or
terminate any of the Company Agreements, and neither the Company nor
40
<PAGE>
any of its Subsidiaries shall waive, release or assign any material rights on
claims under any of the Company Agreements;
(g) neither the Company nor any of its Subsidiaries will (i) incur or
assume any long-term debt or any short-term indebtedness; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person; (iii) make
any loans, advances or capital contributions to, or investments in, any other
person; or (iv) enter into any material commitment or transaction (including,
but not limited to, any material borrowing, capital expenditure or purchase,
sale or lease of assets or real estate);
(h) neither the Company nor any of its Subsidiaries will (i) change
any of the accounting methods used by it materially affecting its assets,
liabilities or business, except for such changes required by GAAP or (ii) make
any material Tax election or change any material Tax election already made,
enter into any closing agreement or settle any material Tax Audit;
(i) neither the Company nor any of its Subsidiaries will pay,
discharge or satisfy any claims, liabilities or obligations (whether absolute,
accrued, contingent or otherwise), other than the payment, discharge or
satisfaction of any such claims, liabilities or obligations, in the ordinary
course of business and consistent with past practice, or of claims, liabilities
or obligations reflected or reserved against in, or contemplated by, the
consolidated financial statements (or the notes thereto) of the Company;
(j) except as otherwise permitted pursuant to Section 5.3, neither the
Company nor any of its Subsidiaries will adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring, recapitalization
or other reorganization of the Company or any of its Subsidiaries (other than
the Merger);
(k) neither the Company nor any of its Subsidiaries will take, or
agree in writing or otherwise to take, any action that would or is reasonably
likely to result in any of the conditions to the Merger set forth in Article VII
or any of the conditions to the Offer set forth in Annex I not being satisfied,
or would make many representation or warranty of the Company contained herein
inaccurate in any material respect at, or as of any time prior to, the Effective
Time, or that would materially impair the ability of the Company to consummate
the Merger in accordance with the terms hereof or materially delay such
consummation; and
41
<PAGE>
(l) subject to the exceptions and qualifications set forth above,
neither the Company nor any of its Subsidiaries will enter into any written
agreement, contract, commitment or arrangement to do any of the foregoing, or
authorize, recommend, propose, in writing or announce an intention to do any of
the foregoing.
Section 5.3 No Solicitation.
---------------
(a) Except as provided in Section 5.3(b) below, the Company, from the
date of this Agreement until the earlier of termination of this Agreement or
the Effective Time, will not nor shall it authorize or permit its officers,
directors, employees, investment bankers, attorneys, accountants and other
agents to (and, at the further request of Parent, will use reasonable efforts to
ensure that such persons do not) directly or indirectly (i) initiate, solicit or
knowingly encourage, or knowingly take any action to facilitate the making of,
any offer or proposal which constitutes or is reasonably likely to lead to any
Acquisition Proposal, (ii) enter into any agreement with respect to any
Acquisition Proposal, or (iii) in the event of an unsolicited Acquisition
Proposal for the Company engage in negotiations or discussions with, or provide
any information or data to, any Person (other than Parent, any of its affiliates
or representatives) relating to any Acquisition Proposal; provided, however,
-------- -------
that nothing contained in this Section 5.3 or any other provision hereof shall
prohibit the Company or the Company Board of Directors from (i) taking and
disclosing to the Company's shareholders its position with respect to tender or
exchange offer by a third party pursuant to Rules 14d-9 and 14e-2 promulgated
under the Exchange Act, (ii) making such disclosure to the Company's
shareholders as, in the good faith judgment of the Board of Directors, after
receipt of advice from outside legal counsel to the Company is necessary for the
Company Board of Directors to comply with its fiduciary duties to the Company's
shareholders under applicable law or (iii) otherwise complying with their
fiduciary duties to shareholders.
(b) Notwithstanding the foregoing, prior to the acceptance of Shares
pursuant to the Offer, the Company may furnish information concerning its
business, properties or assets to any Person pursuant to a confidentiality
agreement with terms no less favorable to the Company than those contained in
the Confidentiality Agreement, dated January 14, 1998 entered into between
Parent and the Company (the "Confidentiality Agreement") and may negotiate and
-------------------------
participate in discussions and negotiations with such Person concerning an
Acquisition Proposal if (x) such entity or group has on an unsolicited basis
submitted a bona fide written proposal to the Company relating to any such
transaction which the Board of Directors deter-
42
<PAGE>
mines in good faith, after receiving advice from a nationally recognized
investment banking firm, represents a superior transaction to the Offer and the
Merger which is not conditioned upon obtaining additional financing the
certainty of closing of which is less certain than the satisfaction of condition
set forth in paragraph (h) of Annex I and in Section 1.1(a) on conditions less
favorable to the Company than the Financing and (y) in the opinion of the
Company Board of Directors, only after receipt of advice from outside legal
counsel to the Company, the failure to provide such information or access or to
engage in such discussions or negotiations would cause the Board of Directors to
violate its fiduciary duties to the Company's shareholders under applicable law
(an Acquisition Proposal which satisfies clauses (x) and (y) being referred to
herein as a "Superior Proposal"). The Company shall promptly, and in any event
-----------------
within one business day following receipt of a Superior Proposal, notify Parent
of the receipt of the same and prior to providing any such party with any
material non-public information. The Company shall promptly provide to Parent
any material non-public information regarding the Company provided to any other
party which was not previously provided to Parent.
(c) Except as set forth herein, neither the Board of Directors of the
Company nor any committee thereof shall (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Parent or the Purchaser, the approval
or recommendation by such Board of Directors or any such committee of the Offer,
this Agreement or the Merger, (ii) approve or recommend or propose to approve or
recommend, any Acquisition Proposal or (iii) enter into any agreement with
respect to any Acquisition Proposal. Notwithstanding the foregoing, prior to
the time of acceptance for payment of Shares in the Offer, the Board of
Directors of the Company may (subject to the terms of this and the following
sentence) withdraw or modify its approval or recommendation of the Offer, this
Agreement or the Merger, approve or recommend a Superior Proposal, or enter into
an agreement with respect to a Superior Proposal, in each case at any time after
the fifth business day following the Company's delivery to Parent of written
notice advising Parent that the Board of Directors has received a Superior
Proposal, specifying the material terms and conditions of such Superior Proposal
and identifying the person making such Superior Proposal; provided that the
Company shall not enter into an agreement with respect to a Superior Proposal
unless the Company also shall have furnished Parent with written notice that it
intends to enter into such agreement.
43
<PAGE>
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Proxy Statement. As promptly as practicable after the
---------------
consummation of the Offer and if required by the Exchange Act, the Company shall
prepare and file with the SEC, and shall use all commercially reasonable efforts
to respond promptly to any comments made by the SEC, and promptly thereafter
shall mail to shareholders, the Proxy Statement. In such event, the Proxy
Statement shall contain the recommendation of the Board of Directors in favor of
the Merger.
Section 6.2 Meeting of Shareholders of the Company. At the Special
--------------------------------------
Meeting, if any, the Company shall use its commercially reasonable efforts to
solicit from Shareholders of the Company proxies in favor of the Merger and
shall take all other action necessary or, in the reasonable opinion of the
Purchaser, advisable to secure any vote or consent of shareholders required by
the GCL to effect the Merger. The Purchaser agrees that it shall vote, or cause
to be voted, in favor of the Merger all Shares directly or indirectly
beneficially owned by it.
Section 6.3 Additional Agreements. Subject to the terms and
---------------------
conditions as herein provided, the Company, Parent and Purchaser will each
comply in all material respects with all applicable laws and with all applicable
rules and regulations of any governmental authority to achieve the satisfaction
of the Minimum Condition and all conditions set forth in Annex I attached hereto
and Article VII hereof, and to consummate and make effective the Merger and the
other transactions contemplated hereby. Each of the parties hereto agrees to
use all commercially reasonable efforts to obtain in a timely manner all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings, and to use all reasonable efforts to take, or cause
to be taken, all other actions and to do, or cause to be done, all other things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement. In case at any
time after the Effective Time any further action is necessary or desirable to
carry out the purposes of this Agreement, the proper officers and directors of
the Company, Parent and the Purchaser shall use all reasonable efforts to take,
or cause to be taken, all such necessary actions.
Section 6.4 Notification of Certain Matters. The Company shall give
-------------------------------
prompt notice to the Purchaser and the Purchaser shall give prompt notice to the
Company, of (i) the occurrence, or non-occurrence of any event whose occurrence,
or
44
<PAGE>
non-occurrence would be likely to cause either (x) any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect at any time from the date hereof to the Effective Time or (y) any
condition set forth in Annex I to be unsatisfied in any material respect at any
time from the date hereof to the date the Purchaser purchases Shares pursuant to
the Offer (except to the extent it refers to a specific date) and (ii) any
material failure of the Company, the Purchaser or Parent, as the case may be, or
any officer, director, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
-------- -------
Section 6.4 shall not limit or otherwise affect the remedies available hereunder
to the party receiving such notice or the representations or warranties of the
parties or the conditions to the obligations of the parties hereto.
Section 6.5 Access; Confidentiality. From the date hereof to the
-----------------------
Effective Time, upon reasonable notice and subject to the terms of the
Confidentiality Agreement, the Company shall (and shall cause each of its
Subsidiaries to) afford to the officers, employees, accountants, counsel,
financing sources and other representatives of Parent, reasonable access, during
normal business hours during the period prior to the Appointment Date, to all
its properties, books, contracts, commitments and records and, during such
period, the Company shall (and shall cause each of its Subsidiaries to), subject
to any limitations imposed by law with respect to records of employees, furnish
promptly to the Parent (a) a copy of each report, schedule, registration
statement and other document filed or received by it during such period pursuant
to the requirements of federal securities laws and (b) all other information
concerning its business, properties and personnel as Parent may reasonably
request. Access shall include the right to conduct such environmental studies
and tests as Parent, in its reasonable discretion, shall deem appropriate,
subject to any limitations of, and within the rights to the Company, under the
Company's leases. Prior to conducting any such studies and test, Parent shall
submit to Company the names of the persons conducting the evaluations, the scope
of the evaluations, and other material information concerning such studies for
the Company's approval, which shall not be unreasonably withheld or delayed.
After the Appointment Date, the Company shall provide Parent and such persons as
Parent shall designate with all such information as is in Company's possession
or control and as Parent shall reasonably request, at such time as Parent shall
reasonably request. Unless otherwise required by law or regulation (including
stock exchange rules) and until the Appointment Date, Parent and Purchaser will
hold any such information which is non-public in confidence in accordance with
the terms of the Confidentiality Agreement (except as may be required by law or
by any listing agreement with or by the listing rules of the London
45
<PAGE>
Stock Exchange) and, in the event this Agreement is terminated for any reason,
Parent shall promptly return or destroy such information in accordance with
paragraph (6) of the Confidentiality Agreement. No investigation pursuant to
this Section 6.6 shall affect any representation or warranty made by the parties
hereunder.
Section 6.6 Consents and Approvals.
----------------------
(a) Each of Parent, the Purchaser and the Company will take all
reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on it with respect to this Agreement and the Transactions
(which actions shall include, without limitation, furnishing all information
required under the HSR Act and in connection with approvals of or filings with
any other Governmental Entity) and will promptly cooperate with and, subject to
such confidentiality agreements as may be reasonably necessary or requested,
furnish information to each other or their counsel in connection with any such
requirements imposed upon any of them or any of their Subsidiaries in connection
with this Agreement and the Transactions. Each of the Company, Parent and the
Purchaser will, and will cause its Subsidiaries to, take all reasonable actions
necessary to obtain (and will cooperate with each other in obtaining) any
consent, authorization, order or approval of, or any exemption by, any
Governmental Entity or other public or private third party required to be
obtained or made by Parent, the Purchaser, the Company or any of their
Subsidiaries in connection with the Transactions or the taking of any action
contemplated thereby or by this Agreement.
(b) Each of the Company, the Purchaser and Parent shall take all
reasonable actions necessary to file as soon as practicable notifications under
the HSR Act, or under comparable merger notification laws of non-U.S.
jurisdictions and to respond as promptly as practicable to any inquiries
received from the Federal Trade Commission and the Antitrust Division of the
Department of Justice or the authorities of such other jurisdiction for
additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any State Attorney
General or other Governmental Entity in connection with antitrust matters.
Section 6.7 Publicity. The initial press release with respect to
---------
the execution of this Agreement shall be a joint press release acceptable to
Parent and the Company. Thereafter, so long as this Agreement is in effect,
neither the Company, Parent nor any of their respective affiliates shall issue
or cause the publication of any press release or other announcement with respect
to the Merger, this Agreement or the other Transactions without the prior
consultation of the other party, except as such
46
<PAGE>
party believes, after receiving the advice of outside counsel, may be required
by law or by any listing agreement with or listing rules of a national
securities exchange or trading market or by the listing rules of The London
Stock Exchange (the "London Stock Exchange").
---------------------
Section 6.8 Directors' and Officers' Insurance and Indemnification.
------------------------------------------------------
(a) For six years after the Effective Time, the Surviving Corporation
(or any successor to the Surviving Corporation) shall indemnify, defend and hold
harmless the present and former officers and directors of the Company and its
Subsidiaries, and persons who become any of the foregoing prior to the Effective
Time (each an "Indemnified Party") against all losses, claims, damages,
-----------------
liabilities, costs, fees and expenses (including reasonable fees and
disbursements of counsel and judgments, fines, losses, claims, liabilities and
amounts paid in settlement (provided that any such settlement is effected with
the written consent of the Parent or the Surviving Corporation which consent
shall not unreasonably be withheld)) arising out of actions or omissions
occurring at or prior to the Effective Time to the full extent permissible under
applicable provisions of the GCL, the terms of the Company's Articles of
Incorporation or the By-laws, and under any agreements as in effect at the date
hereof (true and correct copies of which have been previously provided to
Parent); provided that, in the event any claim or claims are asserted or made
-------- ----
within such six-year period, all rights to indemnification in respect of any
such claim or claims shall continue until disposition of any and all such
claims.
(b) Parent or the Surviving Corporation shall maintain the Company's
existing officers' and directors' liability insurance ("D&O Insurance") for a
-------------
period of not less than six years after the Effective Time; provided, that the
-------- ----
Parent may substitute therefor policies of substantially equivalent coverage and
amounts containing terms no less favorable to such former directors or officers;
provided, further, if the existing D&O Insurance expires, is terminated or
- -------- -------
cancelled during such period, Parent or the Surviving Corporation will use all
reasonable efforts to obtain substantially similar D&O Insurance; provided,
--------
further, however, that in no event shall Parent be required to pay aggregate
- ------- -------
premiums for insurance under this Section 6.8(b) in excess of 150% of the
average of the aggregate premiums paid by the Company in 1996 and 1997 on an
annualized basis for such purpose, as adjusted for any increase in the Consumer
Price Index following the date of this Agreement, (the "Average Premium"), which
---------------
true and correct amounts are set forth in Section 6.8(b) of the Company
Disclosure Schedule; and provided, further, that if the Parent or the Surviving
-------- -------
Corporation is unable to obtain the amount of insurance required by this
47
<PAGE>
Section 6.8(b) for such aggregate premium, Parent or the Surviving Corporation
shall obtain as much insurance as can be obtained for an annual premium not in
excess of 150% of the Average Premium.
Section 6.9 Purchaser Compliance. Parent shall cause the Purchaser
--------------------
to comply with all of its obligations under this Agreement.
Section 6.10 Commercially Reasonable Efforts.
-------------------------------
(a) Prior to the Closing, upon the terms and subject to the conditions
of this Agreement, the Purchaser and the Company, agree to use their respective
commercially reasonable efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, all things reasonably necessary and appropriate,
under any applicable laws to consummate and make effective the transactions
contemplated by this Agreement as promptly as practicable including, but not
limited to (i) the preparation and filing of all forms, registrations and
notices required to be filed to consummate the transactions contemplated by this
Agreement and the taking of such actions as are necessary to obtain any
requisite approvals, consents, orders, exemptions or waivers by any third party
or Governmental Entity, and (ii) the satisfaction of the other parties'
conditions to Closing. In addition, no party hereto shall take any action after
the date hereof that would reasonably be expected to materially delay the
obtaining of, or result in not obtaining, any permission, approval or consent
from any Governmental Entity necessary to be obtained prior to the acceptance
for payment, and payment for, the Shares in the Offer or the Closing.
(b) Prior to the Closing, each party shall promptly consult with the
other parties hereto with respect to and subject to such confidentiality
agreements as may be reasonably necessary or requested, provide any necessary
information with respect to and provide the other (or its counsel) copies of,
all filings made by such party with any Governmental Entity or any other
information supplied by such party to a Governmental Entity in connection with
this Agreement and the transactions contemplated by this Agreement. Each party
hereto shall promptly inform the other of any communication from any
Governmental Entity regarding any of the transactions contemplated by this
Agreement unless otherwise prohibited by law. If any party hereto or affiliate
thereof receives a request for additional information or documentary material
from any such Government Entity with respect to the transactions contemplated by
this Agreement, then such party will endeavor in good faith to make, or cause to
be made, as soon as reasonably practicable and after consultation with the other
party, an appropriate response in compliance with such request. To the
48
<PAGE>
extent that transfers of permits or Environmental Permits are required as a
result of execution of this Agreement or consummation of the transactions
contemplated hereby, the Company shall use its commercially reasonable efforts
to effect such transfers.
(c) Notwithstanding the foregoing, nothing in this Agreement shall be
deemed to require the Purchaser to defend against any litigation brought by any
Governmental Entity seeking to prevent the consummation of the transactions
contemplated hereby.
Section 6.11 State Takeover Laws. The Company shall, upon the
-------------------
request of the Purchaser, take all commercially reasonable steps to assist in
any challenge by the Purchaser to the validity or applicability to the
transactions contemplated by this Agreement and the Option Agreements, including
the Offer and the Merger and the Shareholder Agreements, of any state takeover
law.
Section 6.12 Financing Related Efforts.
-------------------------
(a) Parent shall use all commercially reasonable efforts to cause the
Financing to be consummated and to provide funds to the Purchaser to permit it
to perform its obligations hereunder and in the Offer.
(b) Parent shall use all commercially reasonable efforts to obtain the
admission of the shares of Capital Stock of Parent to be issued in connection
with the Financing (the "New Shares") to the Official List of the London Stock
----------
Exchange Limited (such admission to have become effective in accordance with the
Listing Rules of the London Stock Exchange Limited) (the "Admission") by the
---------
Initial Expiration Date, and shall take all actions as may be necessary or
desirable to obtain the Admission including, but not limited to, the following:
(i) Parent shall apply, within two days after the date hereof,
for the New Shares to be admitted to the Official List of the London
Stock Exchange Limited and shall not withdraw, or permit to be
withdrawn, such application, or do, or permit to be done (or omit, or
permit to be omitted), anything which may prejudice, preclude or
adversely affect the Admission by the Initial Expiration Date;
(ii) Parent shall, and shall cause its Subsidiaries and
affiliates and its listing agent, to supply all information, give all
undertakings,
49
<PAGE>
execute all documents, pay all fees and do, or cause to be done, all
such things as may be necessary or desirable, or required by the
London Stock Exchange Limited, for the purpose of obtaining the
Admission by the Initial Expiration Date; and
(iii) Parent shall immediately inform the Company in writing of
any and all developments with respect to the Admission.
(c) Parent will provide the Company with true, correct and complete
copies of all amendments and supplements to the Financing Documents as well as
true, correct and complete copies of all other commitments and agreements with
respect to the transaction contemplated by this Agreement and any amendments or
supplements thereto from third parties to provide financing to the Parent or to
the Purchaser.
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Each Party's Obligations to Effect the
----------------------------------------------------
Merger. The respective obligations of each party to effect the Merger shall be
- ------
subject to the satisfaction on or prior to the Closing Date of each of the
following conditions, any and all of which may be waived in whole or in part by
Parent, the Purchaser and the Company, as the case may be, to the extent
permitted by applicable law:
(a) Shareholder Approval. The Merger and this Agreement shall have
--------------------
been approved and adopted by the requisite vote of the holders of the Shares, to
the extent required pursuant to the requirements of the Articles of
Incorporation and the GCL.
(b) Statutes; Court Orders. No statute, rule, regulation or order
----------------------
shall have been enacted, promulgated or issued by any United States or United
Kingdom Governmental Entity which prohibits the consummation of the Merger; and
there shall be no order or injunction of a court of competent jurisdiction in
effect preventing consummation of the Merger; and
(c) Purchase of Shares in Offer. The Purchaser shall have purchased,
---------------------------
or caused to be purchased, the Shares pursuant to the Offer; provided, that
--------
50
<PAGE>
this condition shall be deemed to have been satisfied with respect to the
obligation of Parent and the Purchaser to effect the Merger if the Purchaser
fails to accept for payment or pay for Shares pursuant to the Offer in violation
of the terms of the Offer or of this Agreement; and
(d) HSR Approval. The applicable waiting period under the HSR Act
------------
shall have expired or been terminated.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be terminated and the
-----------
transactions contemplated herein may be abandoned at any time before the
Effective Time, whether before or after shareholder approval thereof (provided,
however, that if Shares are purchased pursuant to the Offer, Parent may not in
any event terminate this Agreement):
(a) By mutual written consent of Parent and the Company; or
(b) By Parent if the Offer shall have expired without any Shares being
purchased thereunder by the Purchaser and without the Purchaser having had an
obligation under Section 1.1(a) of this Agreement to extend the Offer; provided,
however, that Parent shall not be entitled to terminate this Agreement pursuant
to this Section 8.1(b) if it or the Purchaser is in material breach of its
representations and warranties, covenants or other obligations under this
Agreement; or
(c) By either Parent or the Company (i) if a court of competent
jurisdiction or other Governmental Entity shall have issued an order, decree or
ruling or taken any other action, in each case permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement or (ii) prior to the purchase of Shares pursuant to the Offer, if
there has been a willful breach by the other party of any representation,
warranty, covenant or agreement set forth in this Agreement, which breach shall
result in any condition set forth in Annex I (other than clause (i) thereof) not
being satisfied (and such breach is not reasonably capable of being cured and
such condition satisfied within thirty (30) days after the receipt of notice
thereof); or
51
<PAGE>
(d) By the Company to allow the Company to enter into an agreement in
accordance with Section 5.3(b) with respect to a Superior Proposal which the
Board of Directors has determined is more favorable to the shareholders of the
Company than the transactions contemplated hereby; provided, however, that it
-------- -------
has complied with all provisions thereof, including the notice provision
therein, and that it makes simultaneous payment of the Termination Fee, plus any
amounts then due as a reimbursement of expenses; or
(e) By Parent, at any time prior to the purchase of the Shares
pursuant to the Offer, if (i) the Company Board of Directors shall have
withdrawn, modified, or changed its recommendation in respect of this Agreement
or the Offer in a manner adverse to the Purchaser, or (ii) the Company Board of
Directors shall have recommended any proposal other than by Parent or the
Purchaser in respect of an Acquisition Proposal, (iii) the Company shall have
exercised a right with respect to an Acquisition Proposal referenced in Section
5.3(b) and shall, directly or through its representatives, continue discussions
with any third party concerning an Acquisition Proposal for more than ten
business days after the date of receipt of such Acquisition Proposal, or (iv) an
Acquisition Proposal that is publicly disclosed shall have been commenced,
publicly proposed or communicated to the Company which contains a proposal as to
price (without regard to whether such proposal specifies a specific price or a
range of potential prices) and the Company shall not have rejected such proposal
within ten business days of its receipt or, if sooner, the date its existence
first becomes publicly disclosed; or
(f) By the Company, if the Offer shall have expired without any Shares
being purchased thereunder by the Purchaser and without the Company having the
right to extend the Offer pursuant to this Agreement (unless Parent shall have
timely extended the Offer in accordance with its rights under this Agreement);
provided, however, that the Company shall not be entitled to terminate this
Agreement pursuant to this Section 8.1(f) if it is in material breach of its
representations, warranties, covenants or other obligations under this
Agreement.
Section 8.2 Effect of Termination.
---------------------
(a) In the event of the termination of this Agreement as provided in
Section 8.1 hereof, written notice thereof shall forthwith be given to the other
party or parties specifying the provision hereof pursuant to which such
termination is made, and this Agreement shall forthwith become null and void and
there shall be no liability on the part of Parent, the Purchaser or the Company,
except (i) as set forth in
52
<PAGE>
Sections 6.5(a), 8.2 and 9.3 hereof and (ii) nothing herein shall relieve any
party from liability for any breach of this Agreement.
(b) If (i) Parent shall have terminated this Agreement pursuant to
Section 8.1(e)(i) or Section 8.1(e)(ii), (ii) (x) Parent shall have terminated
this Agreement pursuant to Section 8.1(c)(ii), Section 8.1(e)(iii) or Section
8.1(e)(iv) and (y) following the date hereof but prior to such termination there
shall have been an Acquisition Proposal Interest and (z) the Company shall have
entered into a definitive agreement with respect to an Acquisition Proposal or
consummated an Acquisition Proposal with respect to the Company within one year
after the termination by Parent pursuant to Section 8.1(c)(ii), Section
8.1(e)(iii) or Section 8.1(e)(iv) or (iii) the Company shall have terminated
this Agreement pursuant to Section 8.1(d), then the Company shall pay (A)
simultaneously with such termination if pursuant to Section 8.1(d), (B)
promptly, but in no event later than two business days after the date of such
termination if pursuant to Section 8.1(e)(i) or Section 8.1(e)(ii), or (C) upon
execution of a definitive agreement with respect to a Acquisition Proposal or
upon the consummation of an Acquisition Proposal with respect to the Company if
pursuant to Section 8.1(c)(ii), Section 8.1(e)(iii) or Section 8.1(e)(iv), to
Parent a termination fee (the "Termination Fee") of $8,000,000 plus an amount,
---------------
not in excess of $1,250,000, equal to the Purchaser's reasonable actual and
documented out-of-pocket expenses incurred by Parent and the Purchaser in
connection with the Offer, the Merger, this Agreement and the consummation of
the transactions contemplated hereby, which amount shall be payable by wire
transfer to such account as Parent may designate in writing to the Company.
(c) If this Agreement is terminated, and at any time on or prior to
March 26, 1998, all of the conditions set forth on Annex I have been fulfilled
except (i) the condition set forth in paragraph (h) of Annex I and (ii) any
other conditions that are not fulfilled as a result, directly or indirectly, of
a breach by Parent or the Purchaser or any representation, warranty, covenant or
agreement set forth in this Agreement, then promptly, but in no event later than
two business days after the date of such termination, Parent shall pay to the
Company a termination fee of $8,000,000 plus an amount, not in excess of
$1,250,000, equal to the Company's reasonable actual and documented out-of-
pocket expenses incurred by the Company in connection with the Offer, the
Merger, this Agreement and the consummation of the transactions contemplated
hereby, which amount shall be payable by wire transfer to such account as the
Company may designate in writing to Parent.
53
<PAGE>
ARTICLE IX
MISCELLANEOUS
Section 9.1 Amendment and Modification. Subject to applicable law
--------------------------
and except as otherwise provided in the Agreement, this Agreement may be
amended, modified and supplemented in any and all respects, whether before or
after any vote of the shareholders of the Company contemplated hereby, by
written agreement of the parties hereto, by action taken by their respective
Boards of Directors or equivalent governing bodies, but, after the purchase of
Shares pursuant to the Offer, no amendment shall be made which decreases the
Merger Consideration and, after the approval of this Agreement by the
shareholders, no amendment shall be made which by law requires further approval
by such shareholders without obtaining such further approval. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties hereto.
Section 9.2 Non-survival of Representations and Warranties. None of
----------------------------------------------
the representations and warranties in this Agreement or in any schedule,
instrument or other document delivered pursuant to this Agreement shall survive
the acceptance for payment, and payment for, the Shares by the Purchaser
pursuant to the Offer.
Section 9.3 Expenses. Except as expressly set forth in Section
--------
8.2(b), all fees, costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such fees, costs and expenses except any transfer, stamp or similar taxes shall
be borne by Parent.
Section 9.4 Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by a nationally recognized overnight
courier service, such as Federal Express (providing proof of delivery), to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
54
<PAGE>
(a) if to Parent or the Purchaser, to:
The Sage Group plc
Sage House
Benton Park Road
Newcastle Upon Tone , NE7 7LZ
Attention: Paul Walker
Telephone No.: (191) 255-3003
Telecopy No.: (191) 255-0306
with a copy to:
Rose Acquisition Corp.
C/O The Sage Group plc
Sage House
Benton Park Road
Newcastle Upon Tone , NE7 7LZ
Attention: Paul Walker
Telephone No.: (191) 255-3003
Telecopy No.: (191) 255-0306
and
Skadden, Arps, Slate, Meagher & Flom LLP
Four Embarcadero Center, Suite 3800
San Francisco, California 94111-4114
Attention: Kenton J. King, Esq.
Telephone No.: (415) 984-6483
Telecopy No.: (415) 984-2698
and
55
<PAGE>
(b) if to the Company, to:
State Of The Art, Inc.
56 Technology Drive
Irvine, California 92618
Attention: David W. Hanna
Telephone No.: (714) 450-3880
Telecopy No.: (714) 753-1596
with a copy to:
Wilson Sonsini Goodrich and Rosati, P.C.
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: John A. Fore, Esq.
Telephone No.: (650) 493-9300
Telecopy No.: (650) 493-6811
Section 9.5 Interpretation. When a reference is made in this
--------------
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. Whenever the words "include", "includes" or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation." As used in this Agreement, the term
"affiliates" shall have the meaning set forth in Rule 12b-2 of the Exchange Act.
As used in this Agreement, the term "Person" shall mean a natural person,
------
partnership, corporation, limited liability company, business trust, joint stock
company, trust, unincorporated association, joint venture, Governmental Entity
or other entity or organization.
Section 9.6 Counterparts. This Agreement may be executed in two or
------------
more counterparts, each of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties.
Section 9.7 Entire Agreement; No Third Party Beneficiaries. This
----------------------------------------------
Agreement and the Confidentiality Agreement:
(a) constitute the entire agreement among the parties with respect to
the subject matter hereof and thereof and supersedes all other prior agreements
and understandings, both written and oral, among the parties or any of them with
respect
56
<PAGE>
to the subject matter hereof and thereof (provided that the provisions of this
Agreement shall supersede any conflicting provisions of the Confidentiality
Agreement), and
(b) except as provided in Sections 2.4 and 6.8 is not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
Section 9.8 Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by rule of law or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
Section 9.9 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of California without giving
effect to the principles of conflicts of law thereof.
Section 9.10 Assignment. This Agreement shall not be assigned by
----------
any of the parties hereto (whether by operation of law or otherwise) without the
prior written content of the other parties, except that the Purchaser may
assign, in its sole discretion, any or all of its rights, interests and
obligations hereunder to Parent or to any direct or indirect wholly owned
Subsidiary of Parent. Subject to the preceding sentence, but without relieving
any party hereto of any obligation hereunder, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
57
<PAGE>
IN WITNESS WHEREOF, Parent, the Purchaser and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
THE SAGE GROUP PLC
By: /s/ Michael E. W. Jackson
-----------------------------
Name: Michael E. W. Jackson
Title: Chairman
ROSE ACQUISITION CORP.
By: /s/ Paul Walker
-----------------------------
Name: Paul Walker
Title: Chief Executive
STATE OF THE ART, INC.
By: /s/ David W. Hanna
-----------------------------
Name: David W. Hanna
Title: President, C.E.O. and
Chairman of the Board
<PAGE>
ANNEX I
Notwithstanding any other provisions of the Offer, the Purchaser shall
not be required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-l(c) under the Exchange Act (relating
to the Purchaser's obligation to pay for or return tendered Shares promptly
after termination or withdrawal of the Offer), pay for, and may delay the
acceptance for payment of or, subject to the restriction referred to above, the
payment for, any tendered Shares unless there are validly tendered and not
withdrawn prior to the expiration date for the Offer that number of Shares
which, when added to the Shares owned by the Purchaser, will represent at least
90% of the outstanding Shares on a fully diluted basis (without giving pro forma
effect to the potential issuance of any Shares issuable under the Option
Agreement) on the date of purchase (the "Minimum Condition"); provided, however,
----------------- -------- -------
that the Minimum Condition must be waived by the Purchaser and the Revised
Minimum Number substituted therefor as contemplated, and to the extent required,
by Section 1.1(d) of the Merger Agreement. Furthermore, notwithstanding any
other provisions of the Offer, the Purchaser shall not be required to accept for
payment or pay for any tendered Shares if, at the scheduled expiration date, (i)
any applicable waiting period under the HSR Act has not expired or terminated
prior to termination of the Offer, or (ii) any of the following events shall
have occurred and be continuing:
(a) there shall be pending any suit, action or proceeding by any
United States or United Kingdom Governmental Entity against the Purchaser,
Parent, the Company or any Subsidiary of the Company (i) seeking to prohibit or
impose any material limitations on Parent's or the Purchaser's ownership or
operation (or that of any of their respective Subsidiaries or affiliates) of all
or a material portion of the business or assets of Parent and its Subsidiaries,
taken as a whole, or all or a material portion of the business or assets of the
Company and its Subsidiaries, taken as a whole, or to compel Parent or the
Purchaser or their respective Subsidiaries and affiliates to dispose of or hold
separate any material portion of the business or assets of the Company or Parent
and their respective Subsidiaries, in each case taken as a whole, (ii)
challenging the acquisition by Parent or the Purchaser of any Shares under the
Offer or seeking to restrain or prohibit the making or consummation of the Offer
or the Merger, (iii) seeking to impose material limitations on the ability of
the Purchaser, or render the Purchaser unable, to accept for payment, pay for or
purchase some or all of the Shares pursuant to the Offer and the Merger, or (iv)
subject to the limitations under Section 1101(e) of the California General
Corporation Law,
A-1
<PAGE>
seeking to impose material limitations on the ability of Purchaser or Parent
effectively to exercise full rights of ownership of the Shares, including,
without limitation, the right to vote the Shares purchased by it on all matters
properly presented to the Company's shareholders;
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated, or deemed applicable
(pursuant to an authoritative interpretation by or on behalf of a Government
Entity, to the Offer or the Merger) or any other action shall be taken by any
Governmental Entity, other than the application to the Offer or the Merger of
applicable waiting periods under HSR Act, that is likely to result in any of the
consequences referred to in clauses (i) through (iv) of paragraph (a) above;
(c) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on the London Stock Exchange, the
New York Stock Exchange, the American Stock Exchange or the Nasdaq Stock Market
for a period in excess of 24 hours (excluding suspensions or limitations
resulting solely from physical damage or interference with such exchanges not
related to market conditions), (ii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or the United
Kingdom (whether or not mandatory), (iii) a commencement of a war, armed
hostilities or other international or United States or United Kingdom calamity
directly or indirectly involving the United States or the United Kingdom (other
than an action involving solely U.N. personnel or support of U.N. personnel),
(iv) any limitation (whether or not mandatory) by any United States or United
Kingdom Governmental Entity on the extension of credit generally by banks or
other financial institutions, or (v) a change in general financial, bank or
capital market conditions which materially and adversely affects the ability of
financial institutions in the United States to extend credit or syndicate loans,
which, in the case any of the foregoing, in the reasonable judgment of Parent,
makes it impractical to proceed with the acceptance of Shares for payment
pursuant to the Offer or the payment therefor;
(d) the representations and warranties of the Company set forth in the
Merger Agreement that are not qualified by reference to Company Material Adverse
Effect were not true and correct in any respect, or any other such
representations or warranties were not true and correct in any respect that
(when taken together with all other such representations and warranties not true
and correct) would likely have a Company Material Adverse Effect (i) in the case
of any representation or warranty which addresses matters as of a particular
date, as of such date, or (ii) in the
A-2
<PAGE>
case of all other representations and warranties, as of the date of this
Agreement and as of the scheduled expiration of the Offer.
(e) since the date of this Agreement, there shall have occurred any
change that constitutes (or that would likely constitute) a Company Material
Adverse Change;
(f) the Board of Directors of the Company or any committee thereof
shall have withdrawn or materially modified in a manner adverse to Parent or the
Purchaser or its recommendation of the Offer, the Merger or the Merger
Agreement, or approved or recommended any Acquisition Proposal;
(g) the Company shall have failed to perform or to comply in any
material respect with any agreement or covenant to be performed or complied with
by it under this Agreement;
(h) The London Stock Exchange shall have failed to admit to the
Official List of the London Stock Exchange the New Shares or such admission
shall have not become effective in accordance with paragraph 7.1 of the listing
rules of the London Stock Exchange ; provided, however, that this condition to
-------- -------
the Offer shall be deemed to have been met if, assuming the Purchaser had
accepted the Shares for payment in the Offer, such Admission would be
substantially certain to occur; and
(i) the Merger Agreement shall have been terminated in accordance with
its terms.
The foregoing conditions are for the sole benefit of Parent and the
Purchaser, may be asserted by Parent or the Purchaser regardless of the
circumstances giving rise to such condition and may be waived by Parent or the
Purchaser in whole or in part at any time and from time to time in the sole
discretion of Parent or the Purchaser, subject in each case to the terms of this
Agreement. The failure by Parent or the Purchaser at any time to exercise any
of the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed an ongoing right which may be asserted at any time
and from time to time.
The capitalized terms used in this Annex I shall have the meanings set
forth in the Agreement to which it is annexed, except that the term "Merger
------
Agreement" shall be deemed to refer to the Agreement to which this Annex I is
- ---------
appended.
A-3
<PAGE>
Exhibit (c)(2)
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT (this "Agreement"), dated January 27, 1998, by
---------
and among The Sage Group plc, a company organized under the laws of England
("Parent"), Rose Acquisition Corp., a Delaware corporation and a direct and
- --------
indirect wholly-owned subsidiary of Parent (the "Purchaser") and each of David
---------
W. Hanna, George Riviere and Jeffrey E. Gold (each in his individual capacity,
the "Shareholder", and collectively, the "Shareholders").
----------- ------------
WHEREAS, each of the Shareholders is, as of the date hereof, the
record and beneficial owner of the shares of common stock, no par value (the
"Common Stock"), of State of the Art, Inc., a California corporation (the
------------
"Company") set forth on Annex I hereto;
-------
WHEREAS, Parent, the Purchaser and the Company concurrently herewith
are entering into an Agreement and Plan of Merger, dated as of the date hereof
(the "Merger Agreement"), which provides, among other things, for the
----------------
acquisition of the Company by Parent by means of a cash tender offer (the
"Offer") for all of the outstanding shares of Common Stock and for the
-----
subsequent merger (the "Merger") of the Purchaser with and into the Company upon
------
the terms and subject to the conditions set forth in the Merger Agreement; and
WHEREAS, as a condition to the willingness of Parent and the Purchaser
to enter into the Merger Agreement, and in order to induce Parent and the
Purchaser to enter into the Merger Agreement, the Shareholders have agreed to
enter into this Agreement.
NOW, THEREFORE, in consideration of the execution and delivery by
Parent and the Purchaser of the Merger Agreement and the foregoing and the
mutual representations, warranties, covenants and agreements set forth herein
and therein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
<PAGE>
SECTION 1. Representations and Warranties of the Shareholder. Each
-------------------------------------------------
of the Shareholders hereby represents and warrants to Parent and the Purchaser,
severally and not jointly, as follows:
(a) Such Shareholder is the record and beneficial owner of the shares
of Common Stock (as may be adjusted from time to time pursuant to Section 6
hereof, the "Shares") set forth opposite his name on Annex I to this Agreement.
------
(b) Such Shareholder has the legal capacity to execute and deliver
this Agreement and to consummate the transactions contemplated hereby.
(c) This Agreement has been validly executed and delivered by such
Shareholder and constitutes the legal, valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance with its terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally, and (ii) the availability of the remedy of specific
performance or injunctive or other forms of equitable relief may be subject to
equitable defenses and would be subject to the discretion of the court before
which any proceeding therefor may be brought.
(d) Neither the execution and delivery of this Agreement nor the
consummation by such Shareholder of the transactions contemplated hereby will
violate any other agreement to which such Shareholder is a party.
(e) The Shares and the certificates representing the Shares owned by
such Shareholder are now and at all times during the term hereof will be held by
such Shareholder, or by a nominee or custodian for the benefit of such
Shareholder, free and clear of all liens, claims, security interests, proxies,
voting trusts or agreements, understandings or arrangements or any other
encumbrances whatsoever, except for any such encumbrances or proxies arising
hereunder.
2
<PAGE>
SECTION 2. Representations and Warranties of Parent and the
------------------------------------------------
Purchaser. Each of Parent and the Purchaser hereby, jointly and severally,
- ---------
represents and warrants to the Shareholder as follows:
(a) Parent is a corporation duly organized, validly existing and in
good standing under the laws of England, the Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, and each of Parent and the Purchaser has all requisite corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, and has taken all necessary corporate action
to authorize the execution, delivery and performance of this Agreement.
(b) This Agreement has been duly authorized, executed and delivered
by each of Parent and the Purchaser and constitutes the legal, valid and binding
obligation of each of Parent and the Purchaser, enforceable against each of them
in accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally and (ii) the availability
of the remedy of specific performance or injunctive or other forms of equitable
relief may be subject to equitable defenses and would be subject to the
discretion of the court before which any proceeding therefor may be brought.
(c) Neither the execution and delivery of this Agreement nor the
consummation by each of Parent and the Purchaser of the transactions
contemplated hereby will result in a violation of, or a default under, or
conflict with, any contract, trust, commitment, agreement, understanding,
arrangement or restriction of any kind to which each of Parent and the Purchaser
is a party or bound. The consummation by each of Parent and the Purchaser of
the transactions contemplated hereby will not violate, or require any consent,
approval, or notice under, any provision of any judgment, order, decree,
statute, law, rule or regulation applicable to either Parent or the Purchaser,
except for any necessary filing under the HSR Act or state takeover laws.
SECTION 3. Purchase and Sale of the Shares. Each of the Shareholders
-------------------------------
hereby agrees that it shall
3
<PAGE>
tender the Shares into the Offer promptly, and in any event no later than the
tenth business day following the commencement of the Offer pursuant to Section
1.1 of the Merger Agreement, and that such Shareholder shall not withdraw any
Shares so tendered unless the Offer is terminated or has expired. The Purchaser
hereby agrees to purchase all the Shares so tendered at a price per Share equal
to $22.00 per Share or any higher price that may be paid in the Offer; provided,
--------
however, that the Purchaser's obligation to accept for payment and pay for the
- -------
Shares in the Offer is subject to all the terms and conditions of the Offer set
forth in the Merger Agreement and Annex I thereto.
SECTION 4. Transfer of the Shares. Prior to the termination of this
----------------------
Agreement, except as otherwise provided herein, none of the Shareholders shall:
(i) transfer (which term shall include, without limitation, for the purposes of
this Agreement, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of the Shares; (ii) enter into any contract, option or
other agreement or understanding with respect to any transfer of any or all of
the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or
other authorization or consent in or with respect to the Shares; (iv) deposit
the Shares into a voting trust or enter into a voting agreement or arrangement
with respect to the Shares or (v) take any other action that would in any way
restrict, limit or interfere with the performance of such Shareholder's
obligations hereunder or the transactions contemplated hereby.
SECTION 5. Grant of Irrevocable Proxy; Appointment of Proxy.
------------------------------------------------
(a) Each of the Shareholders hereby irrevocably grants to, and
appoints, Parent and any nominee thereof, its proxy and attorney-in-fact (with
full power of substitution), for and in the name, place and stead of such
Shareholder, to vote the Shares, or grant a consent or approval in respect of
the Shares, in connection with any meeting of the Shareholders of the Company
(i) in favor of the Merger, and (ii) against any action or agreement which would
impede, interfere with or prevent the Merger, including any other extraordinary
corporate transaction, such as a merger, reorganization or liquidation involving
the Company and a third party or
4
<PAGE>
any other proposal of a third party to acquire the Company; provided, however,
-------- -------
that such irrevocable proxy shall be immediately revoked if, in accordance with
Section 1.1(d) of the Merger Agreement, the Purchaser waives the Minimum
Condition (as defined in the Merger Agreement) and accepts for payment the
Revised Minimum Number of Shares (as defined in the Merger Agreement).
(b) Such Shareholder represents that any proxies heretofore given in
respect of the Shares, if any, are not irrevocable, and that such proxies are
hereby revoked.
(c) Such Shareholder hereby affirms that the irrevocable proxy set
forth in this Section 5 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the performance of
the duties of such Shareholder under this Agreement. Such Shareholder hereby
further affirms that the irrevocable proxy is coupled with an interest and,
except as set forth in Section 8 hereof, is intended to be irrevocable in
accordance with the provisions of Section 705 of the California General
Corporation Law.
SECTION 6. Certain Events. In the event of any stock split, stock
--------------
dividend, merger, reorganization, recapitalization or other change in the
capital structure of the Company affecting the Common Stock or the acquisition
of additional shares of Common Stock or other securities or rights of the
Company by the Shareholder, the number of Shares shall be adjusted
appropriately, and this Agreement and the obligations hereunder shall attach to
any additional shares of Common Stock or other securities or rights of the
Company issued to or acquired by each of the Shareholders.
SECTION 7. Certain Other Agreements. Each of the Shareholders will
------------------------
notify the Purchaser immediately if any proposals are received by, any
information is requested from, or any negotiations or discussions are sought to
be initiated or continued with such Shareholder or its officers, directors,
employees, investment bankers, attorneys, accountants or other agents, if any,
in each case in connection with any Acquisition Proposal or Acquisition Proposal
Interest (as such terms are defined in the Merger Agreement) indicating, in
connection with
5
<PAGE>
such notice, the name of the person indicating such Acquisition Proposal
Interest and the terms and conditions of any proposals or offers. Each of the
Shareholders agrees that it will immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any Acquisition Proposal Interest. Such Shareholder
agrees that it shall keep Parent informed, on a current basis, of the status and
terms of any Acquisition Proposal Interest. Such Shareholder agrees that it will
not, directly or indirectly: (i) initiate, solicit or encourage, or take any
action to facilitate the making of, any offer or proposal which constitutes or
is reasonably likely to lead to any Acquisition Proposal, or (ii) in the event
of an unsolicited written Acquisition Proposal engage in negotiations or
discussions with, or provide any information or data to, any person (other than
Parent, any of its affiliates or representatives and except for information
which has been previously publicly disseminated by the Company) relating to any
Acquisition Proposal.
SECTION 8. Further Assurances. Each of the Shareholders shall, upon
------------------
request of Parent or the Purchaser, execute and deliver any additional documents
and take such further actions as may reasonably be deemed by Parent or the
Purchaser to be necessary or desirable to carry out the provisions hereof and to
vest the power to vote the Shares as contemplated by Section 5 hereof in Parent.
SECTION 9. Termination. Subject to Section 5(a) hereof, this
-----------
Agreement, and all rights and obligations of the parties hereunder, shall
terminate immediately upon the earlier of (a) six months following the
termination of the Merger Agreement in accordance with its terms or (b) the
Effective Time (as defined in the Merger Agreement); provided, however, that
-------- -------
Sections 8 and 10 shall survive any termination of this Agreement.
SECTION 10. Expenses. All fees and expenses incurred by any one
--------
party hereto shall be borne by the party incurring such fees and expenses.
SECTION 11. Public Announcements. Each of the Shareholders, the
--------------------
Parent and the Purchaser agrees that it will not issue any press release or
otherwise make any
6
<PAGE>
public statement with respect to this Agreement or the transactions contemplated
hereby without the prior consent of the other party, which consent shall not be
unreasonably withheld or delayed; provided, however, that such disclosure can be
-------- -------
made without obtaining such prior consent if (i) the disclosure is required by
law, and (ii) the party making such disclosure has first used its best efforts
to consult with the other party about the form and substance of such disclosure.
SECTION 12. Miscellaneous.
-------------
(a) Capitalized terms used and not otherwise defined in this
Agreement shall have the respective meanings assigned to such terms in the
Merger Agreement.
(b) All notices and other communications hereunder shall be in
writing and shall be deemed given upon (i) transmitter's confirmation of a
receipt of a facsimile transmission, (ii) confirmed delivery by a standard
overnight carrier or when delivered by hand or (iii) the expiration of five
business days after the day when mailed in the United States by certified or
registered mail, postage prepaid, addressed at the following addresses (or at
such other address for a party as shall be specified by like notice):
(A) if to the Shareholders, to:
State of the Art, Inc.
56 Technology Drive
Irvine, California 92618-2301
Telephone:(714)753-1222 x3800
Facsimile:(714)753-1596
Attention: David W. Hanna
with a copy to:
Fenwick & West
Two Palo Alto Square
Palo Alto, California 94306
Telephone: (650)494-0600
Facsimile: (650)494-1417
Attention: Scott Spector
7
<PAGE>
State of the Art, Inc.
56 Technology Drive
Irvine, California 92618-2301
Telephone: (714) 450-3857
Facsimile: (714) 753-7884
Attention: George Riviere
with a copy to:
Fenwick & West
Two Palo Alto Square
Palo Alto, California 94306
Telephone: (650)494-0600
Facsimile: (650)494-1417
Attention: Scott Spector
5085 Grosvenor Circle
Granite Bay, California 95746
Telephone: (916) 791 7738
Facsimile: (916) 791-2683
Attention: Jeffrey E. Gold
with a copy to:
Fenwick & West
Two Palo Alto Square
Palo Alto, California 94306
Telephone: (650)494-0600
Facsimile: (650)494-1417
Attention: Scott Spector
and
(B) if to Parent or the Purchaser, to:
The Sage Group plc
Sage House
Benton Park Road
Newcastle Upon Tyne
NE7 7LZ
Telephone: 191-255-3000
Facsimile: 191-255-0306
Attention: Paul A. Walker
8
<PAGE>
with a copy to:
Skadden, Arps, Slate, Meagher
& Flom LLP
Four Embarcadero Center, Suite 3800
San Francisco, California 94111-4114
Telephone: (415) 984-6400
Facsimile: (415) 984-2698
Attention: Kenton J. King, Esq.
(c) The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(d) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall be considered one
and the same agreement.
(e) This Agreement (including the Merger Agreement and any other
documents and instruments referred to herein) constitutes the entire agreement,
and supersedes all prior agreements and understandings, whether written and
oral, among the parties hereto with respect to the subject matter hereof.
(f) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of California without giving effect to the
principles of conflicts of laws thereof.
(g) Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by, the parties and their
respective successors and assigns, and the provisions of this Agreement are not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
(h) If any term, provision, covenant or restriction herein is held by
a court of competent juris-
9
<PAGE>
diction or other authority to be invalid, void or unenforceable or against its
regulatory policy, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
(i) Each of the parties hereto acknowledges and agrees that in the
event of any breach of this Agreement, each non-breaching party would be
irreparably and immediately harmed and could not be made whole by monetary
damages. It is accordingly agreed that the parties hereto (i) will waive, in
any action for specific performance, the defense of adequacy of a remedy at law
and (ii) shall be entitled, in addition to any other remedy to which they may be
entitled at law or in equity, to compel specific performance of this Agreement
in any action instituted in any state or federal court sitting in San Francisco,
California. The parties hereto consent to personal jurisdiction in any such
action brought in any state or federal court sitting in San Francisco,
California and to service of process upon it in the manner set forth in Section
12(b) hereof.
(j) No amendment, modification or waiver in respect of this Agreement
shall be effective against any party unless it shall be in writing and signed by
such party.
10
<PAGE>
IN WITNESS WHEREOF, Parent, the Purchaser and the Shareholders have
caused this Agreement to be duly executed and delivered as of the date first
written above.
THE SAGE GROUP PLC
By: /s/ Paul Walker
----------------------------------
Name: Paul Walker
Title: Chief Executive
ROSE ACQUISITION CORP.
By: /s/ Paul Walker
----------------------------------
Name: Paul Walker
Title: Vice President and Secretary
DAVID W. HANNA
/s/ David W. Hanna
-------------------------------------
GEORGE RIVIERE
/s/ George Riviere
-------------------------------------
JEFFREY L. GOLD
/s/ Jeffrey L. Gold
-------------------------------------
11
<PAGE>
ANNEX I
Ownership of Company Common Stock
<TABLE>
<CAPTION>
<S> <C> <C>
1. David W. Hanna 110,811 Shares
2. George Riviere 700,221 Shares
3. Jeffrey E. Gold 479,836 Shares
</TABLE>
12
<PAGE>
Exhibit (c)(3)
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated January 26, 1998 (this "Agreement"), by
and among The Sage Group plc, a company organized under the laws of England
("Parent"), Rose Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Parent (the "Purchaser"), and State of the Art, Inc., a California
corporation (the "Company").
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, the Purchaser and the Company are entering into an Agreement
and Plan of Merger (as such agreement may hereafter be amended from time to
time, the "Merger Agreement"; capitalized terms used but not defined in this
Agreement shall have the meanings ascribed to them in the Merger Agreement),
which provides, upon the terms and subject to the conditions thereof, for (i)
the commencement by the Purchaser of a tender offer (the "Offer") to purchase
all of the issued and outstanding shares of the common stock, no par value, of
the Company ("Common Stock") at the applicable Offer Price and (ii) the
subsequent merger of the Purchaser with and into the Company (the "Merger"),
whereby each share of Common Stock, other than shares owned directly or
indirectly by Parent, the Purchaser or the Company and other than dissenting
shares, will be converted into the right to receive in cash the Offer Price
applicable thereto; and
WHEREAS, as a condition to the willingness of Parent and the Purchaser
to enter into the Merger Agreement, Parent and the Purchaser have required that
the Company agree, and in order to induce Parent and the Purchaser to enter into
the Merger Agreement, the Company has agreed, to grant the Purchaser an option
to purchase shares of Common Stock, upon the terms and subject to the conditions
of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement and in the Merger Agreement, the parties hereto agree as follows:
ARTICLE I
THE TOP-UP STOCK OPTION
SECTION 1.1. Grant of Top-Up Stock Option. Subject to the terms and
----------------------------
conditions set forth herein, the Company hereby grants to the Purchaser an
irrevocable option (the "Top-Up Stock Option") to purchase that number of shares
of Common Stock (the "Top-Up Option Shares") equal to the number of shares of
Common Stock that, when added to the number of shares of Common Stock owned by
the Purchaser and its affiliates immediately following consummation of
<PAGE>
the Offer, shall constitute 90% of the shares of Common Stock then outstanding
on a fully diluted basis (assuming the issuance of the Top-Up Option Shares) at
a purchase price per Top-Up Option Share equal to the Offer Price; provided,
--------
however, that the Top-Up Stock Option shall not be exercisable if the number
- -------
of shares of Common Stock subject thereto exceeds the number of authorized
shares of Common Stock available for issuance. The Company agrees to provide
Parent and the Purchaser with information regarding the number of shares of
Common Stock available for issuance on an ongoing basis.
SECTION 1.2. Exercise of Top-Up Stock Option. (a) Subject to the
-------------------------------
conditions set forth in Section 2.1 and any additional requirements of law, the
Top-Up Stock Option may be exercised by the Purchaser, in whole but not in part,
at any one time after the occurrence of a Top-Up Exercise Event (as defined
below) and prior to the Top-Up Termination Date (as defined below).
(b) A "Top-Up Exercise Event" shall occur for purposes of this
Agreement upon the Purchaser's acceptance for payment pursuant to the Offer of
shares of Common Stock constituting more than 50% but less than 90% of the
shares of Common Stock then outstanding on a fully diluted basis.
(c) Except as provided in the last sentence of this Section 1.2.(c),
the "Top-Up Termination Date" shall occur for purposes of this Agreement upon
the earliest to occur of:
(i) the Effective Time;
(ii) the date which is ten (10) business days after the
occurrence of a Top-Up Exercise Event;
(iii) the termination of the Merger Agreement; and
(iv) the date on which the Purchaser waives the Minimum Condition
and accepts for payment the Revised Minimum Number of
Shares.
Notwithstanding the occurrence of the Top-Up Termination Date, the Purchaser
shall be entitled to purchase the Top-Up Option Shares if it has exercised the
Top-Up Stock Option in accordance with the terms hereof prior to such
occurrence, and the occurrence of the Top-Up Termination Date shall not affect
any rights hereunder which by their terms do not terminate or expire prior to or
as of such date.
(d) In the event the Purchaser wishes to exercise the Top-Up Stock
Option, the Purchaser shall send to the Company a written notice (a "Top-Up
Exercise Notice", the date of which notice is referred to herein as the "Top-Up
Notice Date") specifying the denominations of the certificate or certificates
evidencing the Top-Up Option Shares which the Purchaser wishes to receive, the
place for the closing of the purchase and sale pursuant to the Top-Up Stock
Option (the "Top-Up Closing") and a date not earlier than three (3) business
days nor later than ten (10) business
-2-
<PAGE>
days from the Top-Up Notice Date for the Top-Up Closing (the "Top-Up Closing
Date"); provided, however, that (i) if the Top-Up Closing cannot be consummated
-------- -------
by reason of any applicable laws or orders, the period of time that otherwise
would run pursuant to this sentence shall run instead from the date on which
such restriction on consummation has expired or been terminated and (ii) without
limiting the foregoing, if prior notification to or approval of any Governmental
Entity is required in connection with such purchase, the Purchaser and the
Company shall promptly file the required notice or application for approval and
shall cooperate in the expeditious filing of such notice or application, and the
period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which, as the case may be, (A) any required
notification period has expired or been terminated or (B) any required approval
has been obtained, and in either event, any requisite waiting period has expired
or been terminated. The Company shall, within two (2) business days after
receipt of the Top-Up Exercise Notice, deliver written notice to the Purchaser
specifying the number of Top-Up Option Shares and the aggregate purchase price
therefor.
ARTICLE II
CLOSING
SECTION 2.1. Conditions to Closing. The obligation of the Company
---------------------
to deliver Top-Up Option Shares upon the exercise of the Top-Up Stock Option is
subject to the following conditions:
(a) All waiting periods, if any, under the HSR Act applicable to the
issuance of the Top-Up Option Shares hereunder shall have expired or have
been terminated; and
(b) There shall be no preliminary or permanent injunction or other
final, non-appealable judgment by a court of competent jurisdiction
preventing or prohibiting the exercise of the Top-Up Stock Option or the
delivery of the Top-Up Option Shares in respect of such exercise.
SECTION 2.2. Closing. (a) At the Top-Up Closing, (i) the Company
-------
shall deliver to the Purchaser a certificate or certificates evidencing the
applicable number of Top-Up Option Shares (in the denominations specified in the
Top-Up Exercise Notice), and (ii) the Purchaser shall purchase each Top-Up
Option Share from the Company at the Offer Price. Payment by the Purchaser of
the Offer Price for the Top-Up Option Shares shall be made by delivery of a
promissory note, (adequately secured by collateral other than the Shares
acquired), in form and substance reasonably satisfactory to the Company and in a
principal face amount equal to the aggregate amount of the purchase price, as
determined in accordance with Section 1.1., which promissory note shall bear
interest at a rate equal to 6% per annum (or such level of interest rate that is
adequate to prevent imputed income under applicable regulations) and shall be
payable in full with accrued interest upon the earlier to occur of (i) five (5)
business days after the Closing hereunder, and (ii) two (2) business
-3-
<PAGE>
days following written demand given by the Company to the Purchaser at any time
following the Effective Time.
(b) The Company shall pay all expenses, and any and all Federal, state
and local taxes and other charges, that may be payable in connection with the
preparation, issuance and delivery of stock certificates under this Section 2.2.
(c) Certificates evidencing Top-Up Option Shares delivered hereunder
may include legends legally required including the legend in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
It is understood and agreed that the foregoing legend shall be removed by
delivery of substitute certificate(s) without such legend upon the sale of the
Top-Up Option Shares pursuant to a registered public offering or Rule 144 under
the Securities Act of 1933, as amended (the "Securities Act"), or any other sale
as a result of which such legend is no longer required.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and the Purchaser
(except as otherwise may be prohibited, restricted or limited by law or any rule
or regulation of a regulatory entity) as follows:
SECTION 3.1. Organization; Authority Relative to this Agreement.
--------------------------------------------------
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of California. The Company has all
requisite corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
on the part of the Company. This Agreement has been duly and validly executed
and delivered by the Company and, assuming the due and valid authorization,
execution and delivery by Parent and the Purchaser, constitutes a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally, and by general equitable principles.
-4-
<PAGE>
SECTION 3.2. Authority to Issue Shares. The Company has taken all
-------------------------
necessary corporate action to authorize and reserve and permit it to issue, and
at all times from the date hereof through the Top-Up Termination Date shall have
reserved, all the Top-Up Option Shares issuable pursuant to this Agreement. All
of the shares of Common Stock issuable under the Top-Up Stock Option, upon their
issuance and delivery in accordance with the terms of this Agreement, will be
duly authorized, validly issued, fully paid and nonassessable, will be delivered
free and clear of all security interests, liens, claims, pledges, options,
rights of first refusal, agreements, limitations on the Purchaser's voting
rights, charges, adverse rights and other encumbrances of any nature whatsoever
(other than this Agreement) and will not be subject to any preemptive rights.
SECTION 3.3. No Conflict; Required Filings and Consents. (a) The
------------------------------------------
execution and delivery of this Agreement by the Company does not, and the
performance by the Company of its obligations hereunder and the consummation of
the transactions contemplated hereby will not, (i) conflict with or violate the
articles of incorporation or bylaws of the Company, (ii) assuming that all
consents and filings described in Section 3.3(b) have been obtained or made,
conflict with or violate any law applicable to the Company or by which any
property or asset of the Company is bound or affected or (iii) result in any
violation pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Company is a party or by which the Company or any of its properties may be bound
or affected.
(b) No consent of, or filing with, any Governmental Entity is required
by the Company in connection with the execution and delivery of this Agreement,
the performance by the Company of its obligations hereunder or the consummation
by the Company of the transactions contemplated hereby, except for (i)
compliance with the HSR Act and (ii) consents or filings the failure of which to
be obtained or made would not, individually or in the aggregate, prevent or
materially delay the consummation of the transactions contemplated hereby or the
performance by the Company of any of its obligations hereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
Parent and the Purchaser hereby represent and warrant to the Company
as follows:
SECTION 4.1. Organization; Authority Relative to this Agreement.
--------------------------------------------------
Each of Parent and the Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. Each of Parent and the Purchaser has all requisite corporate
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Parent and the Purchaser and the
consummation by Parent and the Purchaser of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action on the
part of Parent and the Purchaser. This Agreement has been duly and validly
-5-
<PAGE>
executed and delivered by Parent and the Purchaser and, assuming the due and
valid authorization, execution and delivery by the Company, constitutes a valid
and binding obligation of Parent and the Purchaser, enforceable against each of
Parent and the Purchaser in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally, and by general equitable principles.
SECTION 4.2. No Conflict; Required Filings and Consents. (a) The
------------------------------------------
execution and delivery of this Agreement by Parent and the Purchaser do not, and
the performance by Parent and the Purchaser of their obligations hereunder and
the consummation of the transactions contemplated hereby will not, (i) conflict
with or violate the articles of incorporation or bylaws or equivalent
organizational documents of Parent or the Purchaser, (ii) assuming that all
consents and filings described in Section 4.2(b) have been obtained or made,
conflict with or violate any law applicable to Parent or the Purchaser or by
which any property or asset of Parent or the Purchaser is bound or affected or
(iii) result in any violation pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Parent or the Purchaser is a party or by which Parent or the
Purchaser or any of their respective properties may be bound or affected.
(b) No consent of, or filing with, any Governmental Entity is required
by Parent or the Purchaser in connection with the execution and delivery of this
Agreement, the performance by Parent or the Purchaser of any of its obligations
hereunder or the consummation by Parent or the Purchaser of the transactions
contemplated hereby, except for (i) compliance with the HSR Act and (ii)
consents or filings the failure of which to be obtained or made would not,
individually or in the aggregate, prevent or materially delay the consummation
of the transactions contemplated hereby or the performance by Parent or the
Purchaser of any of their respective obligations hereunder.
ARTICLE V
COVENANTS OF THE PURCHASER
SECTION 5.1. Distribution. The Purchaser shall acquire the Top-Up
------------
Option Shares for investment purposes only (and, only for the purpose of
effecting a short-form merger with the Company) and not with a view to any
distribution thereof in violation of the Securities Act.
-6-
<PAGE>
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Amendment. This Agreement may not be amended except by
---------
an instrument in writing signed by the parties hereto.
SECTION 6.2. Waiver. Any party hereto may (a) extend the time for
------
or waive compliance with the performance of any obligation or other act of any
other party hereto or (b) waive any inaccuracy in the representations and
warranties contained herein or in any document delivered pursuant hereto. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
SECTION 6.3. Fees and Expenses. All costs, fees and expenses
-----------------
incurred in connection with this Agreement shall be paid by the party incurring
such expenses.
SECTION 6.4. Notices. All notices, requests, claims, demands and
-------
other communications hereunder shall be in writing and shall be deemed given if
delivered personally or sent by telecopy or by overnight courier (providing
proof of delivery) to the respective parties at their addresses as specified in
Section 9.4 of the Merger Agreement.
SECTION 6.5. Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner to the fullest extent permitted by applicable law in order that the
transactions contemplated hereby may be consummated as originally contemplated
to the fullest extent possible.
SECTION 6.6. Assignment; Binding Effect; Benefit. Neither this
-----------------------------------
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned, in whole or in part, by operation of law or otherwise, by any of the
parties hereto without the prior written consent of the other parties, except
that the Purchaser may assign, in its discretion, any or all of its rights,
interests and obligations hereunder to Parent or any direct or indirect
subsidiary of Parent, but no such assignment shall relieve the Purchaser of any
of its obligations hereunder. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of, and be enforceable by, the
parties hereto and their respective successors and permitted assigns.
Notwithstanding anything contained in this Agreement to the contrary, nothing in
this Agreement, express or implied, is intended to confer on any person other
than the parties hereto or their respective successors and
-7-
<PAGE>
permitted assigns any rights, remedies, obligations or liabilities under or by
reason of this Agreement.
SECTION 6.7. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of California, without giving
effect to the principles of conflicts of laws thereof.
SECTION 6.8. Headings. The descriptive headings contained in this
--------
Agreement are included for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
SECTION 6.9. Counterparts. This Agreement may be executed and
------------
delivered (including by facsimile transmission) in one or more counterparts, all
of which shall be considered one and the same agreement and shall become
effective when one or more 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.
SECTION 6.10. Entire Agreement. This Agreement constitutes the
----------------
entire agreement, and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter of this
Agreement.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, all as of
the date first written above.
THE SAGE GROUP PLC
By: /s/ Paul Walker
--------------------------------
Name: Paul Walker
Title: Chief Executive Officer
ROSE ACQUISITION CORP.
By: /s/ Paul Walker
--------------------------------
Name: Paul Walker
Title: Vice-President and Secretary
--------------------------------
STATE OF THE ART, INC.
By: /s/ David W. Hanna
--------------------------------
Name: David W. Hanna
Title: President and Chief Executive Officer
-9-
<PAGE>
Exhibit (c)(4)
State of the Art, Inc.
56 Technology Drive
Irvine, CA 92618
U.S.A.
January 7, 1998
The Sage Group plc
Sage House
Benton Park Road
Newcastle upon Tyne
NE7 7LZ
United Kingdom
Attention: P. A. Walker, Chief Executive
CONFIDENTIALITY AGREEMENT
-------------------------
Gentlemen:
In connection with your consideration of a possible business
transaction (a "Transaction") with State Of The Art, Inc. (the "Company"), the
Company and you expect to make available to one another certain nonpublic
information concerning their respective business, financial condition,
operations, assets and liabilities. As a condition to such information being
furnished to each party and its directors, officers, employees, agents or
advisors, including, without limitation, attorneys, accountants, consultants,
bankers and financial advisors) (collectively, "Representatives"), each party
agrees to treat any nonpublic information concerning the other party (whether
prepared by the disclosing party, its advisors or otherwise and irrespective of
the form of communication) which is furnished hereunder to a party or to its
Representatives now or in the future by or on behalf of the disclosing party
(herein collectively referred to as the "Evaluation Material") in accordance
with the provisions of this Agreement, and to take or abstain from taking
certain other actions hereinafter set forth.
<PAGE>
1. Evaluation Material. The term "Evaluation Material" also shall be
-------------------
deemed to include all notes, analyses, compilations, studies, interpretations or
other documents prepared by each party or its Representatives which contain,
reflect or are based upon, in whole or in part, the information furnished to
such party or its Representatives pursuant hereto which is not available to the
general public. The term "Evaluation Material" does not include information on
which (i) is or becomes generally available to the public other than as a result
of a breach of this Agreement by the receiving party or its Representatives (ii)
was within the receiving party's possession prior to its being furnished to the
receiving party by or on behalf of the disclosing party, provided that the
source of such information was not know by the receiving party to be bound by a
confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the disclosing party, (iii) is or becomes
available to the receiving party on a non-confidential basis from a source other
than the disclosing party or any of its Representatives, provided that such
source was not known by the receiving party to be bound by a confidentiality
agreement with or other contractual, legal or fiduciary obligation of
confidentiality to the disclosing party or any other party with respect to such
information, (iv) is disclosed by the disclosing party to a third party without
a duty of confidentiality, (v) is independently developed by the recipient
without use of Evaluation Material, (vi) is disclosed under operation of law, or
(vii) is disclosed by the recipient or its Representatives with the discloser's
prior written approval.
2. Purpose of Disclosure of Evaluation Material. It is understood
--------------------------------------------
and agreed to by each party that any exchange of information under this
Agreement shall be solely for the purpose of evaluating a Transaction between
the parties and not to affect, in any way, each party's relative competitive
position to each party or to other entities. It is further agreed, that the
information to be disclosed to each other shall only be that information which
is reasonably necessary to a Transaction and that information which is not
reasonably necessary for such purposes shall not be disclosed or exchanged. For
purposes of determining when information is reasonably necessary for such
purpose. legal counsel to each party shall agree, in advance, to review
information requests so as to comply with such standard. In addition, review of
competitively sensitive information such as information concerning product
development or marketing plans, product prices or pricing plans, cost data,
customer or similar information which has been determined to be reasonably
necessary to a Transaction, shall be limited only to those senior executives and
Representatives who are involved in evaluating or negotiating a Transaction or
approving the value of a Transaction.
2
<PAGE>
3. Use of Evaluation Material. Each party hereby agrees that it and
--------------------------
its Representatives shall use the other's Evaluation Material solely for the
purpose of evaluating a possible Transaction between the parties, and that the
disclosing party's Evaluation Material will be kept confidential and each party
and its Representatives will not disclose or use for purposes other than the
evaluation of a Transaction any of the other's Evaluation Material in any manner
whatsoever; provided, however, that (i) the receiving party may make any
disclosure of such information to which the disclosing party gives its prior
written consent and (ii) any of such information may be disclosed to the
receiving party's Representatives who need to know such information for the sole
purpose of evaluating a possible Transaction between the parties, who are
provided with a copy of this Agreement and who are directed by the receiving
party to treat such information confidentially. Each party is aware, and will
advise its Representatives who are informed of the matters that are the subject
of this Agreement, of the restrictions imposed by the United States securities
laws on the purchase or sale of securities by any person who has received
material, nonpublic information from the issuer of such securities and on the
communication of such information to any other person when it is reasonably
foreseeable that such other person is likely to purchase or sell such securities
in reliance upon such information.
4. Non-Disclosure. In addition, each party agrees that, without the
--------------
prior written consent of the other party, its Representatives will not disclose
to any other person the fact that any Evaluation Material has been made
available hereunder, that discussions or negotiations are taking place
concerning a Transaction involving the parties or any of the terms, conditions
or other facts with respect thereto (including the status thereof), provided
that you may make such disclosure to the London Stock Exchange on a confidential
basis in order to seek a waiver of shareholder approval of the Transaction and
provided further that a party may make such disclosure if in the written opinion
of a party's outside counsel, such disclosure is necessary to avoid committing a
violation of law. In such event, the disclosing party shall use its best
efforts to give advance notice to the other party.
5. Required Disclosure. In the event that a party or its
-------------------
Representatives are requested or required (by oral questions, interrogatories,
requests for information or documents in legal proceedings, subpoena, civil
investigative demand or other similar process) to disclose any of the other
party's Evaluation Material, the party requested or required to make the
disclosure shall provide the other party with prompt notice of any such request
or requirement so that the other party may seek a protective order or other
appropriate remedy and/or waive compliance with the
3
<PAGE>
provisions of this Agreement. If, in the absence of a protective order or other
remedy or the receipt of a wavier by such other party, the party requested or
required to make the disclosure or any of its Representatives are nonetheless,
in the opinion of counsel, legally compelled to disclose the other party's
Evaluation Material to any tribunal, the party requested or required to make the
disclosure or its Representative may, without liability hereunder, disclose to
such tribunal only that portion of the other party's Evaluation Material which
such counsel advises is legally required to be disclosed, provided that the
party requested or required to make the disclosure exercises its reasonable
efforts to preserve the confidentiality of the other party's Evaluation
Material, including, without limitation, by cooperating with the other party to
obtain an appropriate protective order or other reliable assurance that
confidential treatment will be accorded the other party's Evaluation Material by
such tribunal.
6. Termination of Discussion. If either party decides that it does
-------------------------
not wish to proceed with a transaction with the other party, the party so
deciding will promptly inform the other party of that decision by giving a
written notice of termination. In that case, or at any time upon the request of
either disclosing party for any reason, each receiving party will promptly
deliver to the disclosing party or destroy all written Evaluation Material (and
all copies thereof and extracts therefrom) furnished to the receiving party or
its Representatives by or on behalf of the disclosing party pursuant hereto. In
the event of such a decision or request, all other Evaluation Material prepared
by the requesting party shall be destroyed and no copy thereof shall be
retained, and in no event shall either party be obligated to disclose or provide
the Evaluation Material prepared by it or its Representatives to the other
party. Notwithstanding the return or destruction of the Evaluation Material,
each party and its Representatives will continue to be bound by its obligations
of confidentiality and other obligations hereunder.
7. No Representation of Accuracy. Each party understands and
-----------------------------
acknowledges that neither party nor any of its Representatives makes any
representation or warranty, expressed or implied, as to the accuracy or
completeness of the Evaluation Material made available by it or to it. Each
party agrees that neither party nor any of its Representatives shall have any
liability to the other party or to any of its Representatives relating to or
resulting from the use of or reliance upon such other party's Evaluation
Material or any errors therein or omissions therefrom. Only those
representations or warranties which are made in a final definitive agreement
regarding the Transaction, when, as and if executed, and subject to such
limitations and restrictions, as may be specified therein, will have any legal
effect.
4
<PAGE>
8. Definitive Agreements. Each party understands and agrees that no
---------------------
contract or agreement providing for any Transaction involving the parties shall
be deemed to exist between the parties unless and until a final definitive
agreement has been executed and delivered. Each party also agrees that unless
and until a final definitive agreement regarding a Transaction between the
parties has been executed and delivered, neither party will be under any legal
obligation of any kind whatsoever with respect to such a Transaction by virtue
of this Agreement, except for the matters specifically agreed to herein. Both
parties further acknowledge and agree that each party reserves the right, in its
sole discretion, to provide or not provide Evaluation Material to the receiving
party under this Agreement, to reject any and all proposals made by the other
party or any of its Representatives with regard to a Transaction between the
parties, and to terminate discussions and negotiations at any time.
9. Waiver. It is understood and agreed that no failure or delay by
------
either party in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise thereof preclude
any other or future exercise thereof or the exercise of any other right, power
or privilege hereunder.
10. Miscellaneous. Each party agrees to be reasonable for any breach
-------------
of this Agreement by any of its Representatives. No failure or delay by either
party or any of their respective Representatives in exercising any right, power
or privileges under this Agreement shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise of
any right, power or privilege hereunder. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
11. Injunctive Relief. It is further understood and agreed that
-----------------
money damages would not be a sufficient remedy for any breach of this Agreement
by either party or any of its Representatives and that the non-breaching party
shall be entitled to equitable relief, including injunction and specific
performance, as a remedy for any such breach. Such remedies shall not be deemed
to be the exclusive remedies for a breach of this Agreement but shall be in
addition to all other remedies available at law or equity. In the event of
litigation relating to this Agreement, if a court of competent jurisdiction
determines that either party or any of its Representatives have breached this
Agreement, then the breaching party shall be liable and pay
5
<PAGE>
to the non-breaching party the reasonable legal fees incurred in connection with
such litigation, including an appeal therefrom.
12. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, THE UNITED STATES OF
AMERICA, APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED WITHIN SUCH STATE.
13. Term. This Agreement shall terminate three years from the date
----
first set forth above.
14. Standstill. For a period of one year from the date of this
----------
Agreement, each party and its Affiliates (as defined under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), will not (and each party
and its Affiliates will not assist or encourage others to, directly or
indirectly, unless specifically requested to do so in writing in advance by the
other party's Board of Directors:
a. acquire or agree, offer, seek or propose to acquire, or cause to
be acquired ownership (including, but not limited to, beneficial
ownership as defined in Rule 13d-3 under the Exchange Act) of any
of the other party's or its subsidiaries' assets (other than in
the ordinary course of business) or business or any voting
securities issued by the other party which are, or may be,
entitled to vote in the election of the other party's directors
("Voting Securities"), or any rights or options to acquire such
ownership, including from a third party; or
b. make, or in any way participate in, any solicitation of proxies
or consents with respect to any Voting Securities of the other
party, become a participant in any proxy context with respect to
the other party; or seek to advise, encourage or influence any
person or entity with respect to the voting of any Voting
Securities, or demand a copy of the other party's stock ledger,
list of its stockholders or other books and records, or call or
attempt to call any meeting of the stockholders of the other
party, or
6
<PAGE>
c. enter into any discussions, negotiations, arrangements or
understandings with any third party with respect to any of the
matters described in (a) or (b) above.
15. Non-Solicitation. The Company and you agree that, for a period
----------------
of one year from the date of the Agreement, the Company and you will not,
directly or indirectly, solicit for employment any employee of you (or any
subsidiary of you) or the Company (or any subsidiary of the Company),
respectively, or with whom the Company or you, respectively, have had contact or
who became known to the Company or you, respectively, in connection with the
Company's or your, respectively, consideration of the Transaction except for a
general solicitation not aimed at such employees.
16. Counterparts. This Agreement may be executed in two
------------
counterparts, which together shall be considered one and the same agreement and
shall become effective when such counterparts have been signed by each party and
delivered to the other party, it being understood that all parties need not sign
the same counterpart.
7
<PAGE>
Please confirm your agreement with the foregoing by signing and
returning one copy of this Agreement to the undersigned, whereupon this
Agreement shall become a binding agreement between you and the Company.
Very truly yours,
State of the Art, Inc.
By: /s/ David W. Hanna
----------------------------------
David W. Hanna, Chairman, President
Chief Executive Officer
Accepted and Agreed as of
the date first written above
The Sage Group plc
By: /s/ Paul Walker
------------------------------
Name: Paul Walker
Title: Chief Executive Officer
8
<PAGE>
Exhibit (c)(5)
STATE OF THE ART, INC.
56 Technology Drive
Irvine, California 92618
February 23, 1998
The Sage Group plc
Rose Acquisition Corp.
Sage House
Benton Park Road
Newcastle Upon Tyne, NE7 7LZ
England
Ladies and Gentlemen:
Reference is hereby made to the Agreement and Plan of Merger, dated
January 27, 1998 (the "Merger Agreement"), by and among The Sage Group plc, a
corporation organized under the laws of England ("Parent"), Rose Acquisition
Corp., a Delaware corporation (the "Purchaser"), and State Of The Art, Inc., a
California corporation (the "Company"). Capitalized terms used herein and not
otherwise defined shall have the meanings assigned to such terms in the Merger
Agreement.
In order to permit the Purchaser to consummate the Offer in accor
dance with the terms set forth in the Merger Agreement in the event that greater
than ninety percent (90%) of the issued and outstanding Shares of the Company
are tendered and not withdrawn as of any scheduled expiration date of the Offer,
but less than ninety percent (90%) of the issued and outstanding Shares on a
fully diluted basis are tendered and not withdrawn as of such expiration date,
in the event that at least 10,279,000 of the issued and outstanding Shares
of the Company are tendered and not withdrawn as of such expiration date, Parent
and the Purchaser agree to waive, and the Company hereby consents to the waiver
by the Purchaser of, the Minimum Condition described in Annex I to the Merger
Agreement to such extent. The Company hereby represents and warrants that, (i)
as of February 19, 1998,
<PAGE>
there are 11,178,085 Shares of the Company issued and outstanding, and (ii)
options to purchase no more than 898,233 Shares pursuant to Stock Plans of the
Company are or will be exercisable at any time between the date hereof through
April 1, 1998 (including pursuant to any accelerated vesting provisions upon a
change of control of the Company).
Each of Parent, Purchaser and the Company hereby agrees that the terms of
this letter shall remain effective from the date hereof until the earlier of (i)
March 12, 1998, and (ii) the date upon which the Purchaser accepts for payment
the Shares of the Company pursuant to the terms of the Offer.
2
<PAGE>
Very truly yours,
STATE OF THE ART, INC.
By: /s/ DAVID W. HANNA
--------------------------------
Name: David W. Hanna
Title: President, Chief Executive
Officer and Chairman of the
Board
ACKNOWLEDGED AND AGREED:
THE SAGE GROUP PLC
By: /s/ PAUL WALKER
---------------------------------
Name: Paul Walker
Title: Chief Executive Officer
ROSE ACQUISITION CORP.
By: /s/ PAUL WALKER
-------------------
Name: Paul Walker
Title: Vice President and Secretary
3
<PAGE>
Exhibit (c)(6)
DAVID W. HANNA
c/o State Of The Art, Inc.
56 Technology Drive
Irvine, California 92618
February 23, 1998
The Sage Group plc
Rose Acquisition Corp.
Sage House
Benton Park Road
Newcastle Upon Tyne, NE7 7LZ
England
Ladies and Gentlemen:
Reference is hereby made to the Agreement and Plan of Merger, dated
January 27, 1998 (the "Merger Agreement"), by and among The Sage Group plc, a
corporation organized under the laws of England, Rose Acquisition Corp., a Dela
ware corporation (the "Purchaser"), and State Of The Art, Inc., a California
corpora tion (the "Company"). Capitalized terms used herein and not otherwise
defined shall have the meanings assigned to such terms in the Merger Agreement.
The undersigned represents and warrants that the undersigned is the
holder of options (the "Options") to purchase 513,541 Shares of the Company,
which Options are currently exercisable or will be exercisable by April 1,
1998.
As an inducement for you to waive the Minimum Condition described in
Annex I to the Merger Agreement and consummate the Offer in accordance with the
terms set forth in the Merger Agreement, the undersigned hereby agrees not to
exercise any of the Options from the date hereof through the Effective Time.
The undersigned does not, and nothing in this letter shall be construed to,
waive any
<PAGE>
benefits intended to be conferred on the undersigned pursuant to Section 2.4 of
the Merger Agreement.
The agreement set forth herein shall terminate upon the earlier of the
Effective time and the termination of the Merger Agreement in accordance with
its terms.
2
<PAGE>
Very truly yours,
/s/ DAVID W. HANNA
-----------------------------------
David W. Hanna
ACKNOWLEDGED AND AGREED:
THE SAGE GROUP PLC
By: /s/ PAUL WALKER
----------------------------------
Name: Paul Walker
Title: Chief Executive Officer
ROSE ACQUISITION CORP.
By: /s/ PAUL WALKER
-------------------------------
Name: Paul Walker
Title: Vice President and Secretary
3
<PAGE>
Exhibit (c)(7)
JEFFREY E. GOLD
c/o State Of The Art, Inc.
56 Technology Drive
Irvine, California 92618
February 23, 1998
The Sage Group plc
Rose Acquisition Corp.
Sage House
Benton Park Road
Newcastle Upon Tyne, NE7 7LZ
England
Ladies and Gentlemen:
Reference is hereby made to the Agreement and Plan of Merger, dated
January 27, 1998 (the "Merger Agreement"), by and among The Sage Group plc, a
corporation organized under the laws of England, Rose Acquisition Corp., a Dela
ware corporation (the "Purchaser"), and State Of The Art, Inc., a California
corpora tion (the "Company"). Capitalized terms used herein and not otherwise
defined shall have the meanings assigned to such terms in the Merger Agreement.
The undersigned represents and warrants that the undersigned is the
holder of options (the "Options") to purchase 52,672 Shares of the Company,
which Options are currently exercisable or will be exercisable by April 1,
1998.
As an inducement for you to waive the Minimum Condition described in
Annex I to the Merger Agreement and consummate the Offer in accordance with the
terms set forth in the Merger Agreement, the undersigned hereby agrees not to
exercise any of the Options from the date hereof through the Effective Time.
The undersigned does not, and nothing in this letter shall be construed to,
waive any
<PAGE>
benefits intended to be conferred on the undersigned pursuant to Section 2.4 of
the Merger Agreement.
The agreement set forth herein shall terminate upon the earlier of the
Effective time and the termination of the Merger Agreement in accordance with
its terms.
2
<PAGE>
Very truly yours,
/s/ JEFFREY E. GOLD
----------------------------------------------
Jeffrey E. Gold
ACKNOWLEDGED AND AGREED:
THE SAGE GROUP PLC
By: /s/ PAUL WALKER
----------------------------------
Name: Paul Walker
Title: Chief Executive Officer
ROSE ACQUISITION CORP.
By: /s/ PAUL WALKER
------------------------------
Name: Paul Walker
Title: Vice President and Secretary
3
<PAGE>
Exhibit (c)(8)
GEORGE RIVIERE
c/o State Of The Art, Inc.
56 Technology Drive
Irvine, California 92618
February 23, 1998
The Sage Group plc
Rose Acquisition Corp.
Sage House
Benton Park Road
Newcastle Upon Tyne, NE7 7LZ
England
Ladies and Gentlemen:
Reference is hereby made to the Agreement and Plan of Merger, dated
January 27, 1998 (the "Merger Agreement"), by and among The Sage Group plc, a
corporation organized under the laws of England, Rose Acquisition Corp., a Dela
ware corporation (the "Purchaser"), and State Of The Art, Inc., a California
corpora tion (the "Company"). Capitalized terms used herein and not otherwise
defined shall have the meanings assigned to such terms in the Merger Agreement.
The undersigned represents and warrants that the undersigned is the
holder of options (the "Options") to purchase 23,958 Shares of the Company,
which Options are currently exercisable or will be exercisable by April 1,
1998.
As an inducement for you to waive the Minimum Condition described in
Annex I to the Merger Agreement and consummate the Offer in accordance with the
terms set forth in the Merger Agreement, the undersigned hereby agrees not to
exercise any of the Options from the date hereof through the Effective Time.
The undersigned does not, and nothing in this letter shall be construed to,
waive any
<PAGE>
benefits intended to be conferred on the undersigned pursuant to Section 2.4 of
the Merger Agreement.
The agreement set forth herein shall terminate upon the earlier of the
Effective time and the termination of the Merger Agreement in accordance with
its terms.
2
<PAGE>
Very truly yours,
/s/ GEORGE RIVIERE
-------------------------------------
George Riviere
ACKNOWLEDGED AND AGREED:
THE SAGE GROUP PLC
By: /s/ PAUL WALKER
---------------------------------
Name: Paul Walker
Title: Chief Executive Officer
ROSE ACQUISITION CORP.
By: /s/ PAUL WALKER
------------------------------
Name: Paul Walker
Title: Vice President and Secretary
3
<PAGE>
Exhibit (c)(9)
DAVID R. BUTLER
c/o State Of The Art, Inc.
56 Technology Drive
Irvine, California 92618
February 23, 1998
The Sage Group plc
Rose Acquisition Corp.
Sage House
Benton Park Road
Newcastle Upon Tyne, NE7 7LZ
England
Ladies and Gentlemen:
Reference is hereby made to the Agreement and Plan of Merger, dated
January 27, 1998 (the "Merger Agreement"), by and among The Sage Group plc, a
corporation organized under the laws of England, Rose Acquisition Corp., a
Delaware corporation (the "Purchaser"), and State Of The Art, Inc., a California
corporation (the "Company"). Capitalized terms used herein and not otherwise
defined shall have the meanings assigned to such terms in the Merger Agreement.
The undersigned represents and warrants that the undersigned is the
holder of options (the "Options") to purchase 30,208 of the Company,
which Options are currently exercisable or will be exercisable by April 1,
1998.
As an inducement for you to waive the Minimum Condition described in
Annex I to the Merger Agreement and consummate the Offer in accordance with the
terms set forth in the Merger Agreement, the undersigned hereby agrees not to
exercise any of the Options from the date hereof through the Effective Time. The
undersigned does not, and nothing in this letter shall be construed to, waive
any
<PAGE>
benefits intended to be conferred on the undersigned pursuant to Section 2.4 of
the Merger Agreement.
The agreement set forth herein shall terminate upon the earlier of the
Effective time and the termination of the Merger Agreement in accordance with
its terms.
2
<PAGE>
Very truly yours,
/s/ DAVID R. BUTLER
----------------------------------
David R. Butler
ACKNOWLEDGED AND AGREED:
THE SAGE GROUP PLC
By: /s/ PAUL WALKER
-------------------------------
Name: Paul Walker
Titled: Chief Executive Officer
ROSE ACQUISITION CORP.
By: /s/ PAUL WALKER
-------------------------------
Name: Paul Walker
Title: Vice President and Secretary
3
<PAGE>
Exhibit (c)(10)
W. FRANK KING
c/o State Of The Art, Inc.
56 Technology Drive
Irvine, California 92618
February 23, 1998
The Sage Group plc
Rose Acquisition Corp.
Sage House
Benton Park Road
Newcastle Upon Tyne, NE7 7LZ
England
Ladies and Gentlemen:
Reference is hereby made to the Agreement and Plan of Merger, dated
January 27, 1998 (the "Merger Agreement"), by and among The Sage Group plc, a
corporation organized under the laws of England, Rose Acquisition Corp., a
Delaware corporation (the "Purchaser"), and State Of The Art, Inc., a California
corporation (the "Company"). Capitalized terms used herein and not otherwise
defined shall have the meanings assigned to such terms in the Merger Agreement.
The undersigned represents and warrants that the undersigned is the
holder of options (the "Options") to purchase 35,000 Shares of the Company,
which Options are currently exercisable or will be exercisable by April 1,
1998.
As an inducement for you to waive the Minimum Condition described in
Annex I to the Merger Agreement and consummate the Offer in accordance with the
terms set forth in the Merger Agreement, the undersigned hereby agrees not to
exercise any of the Options from the date hereof through the Effective Time. The
undersigned does not, and nothing in this letter shall be construed to, waive
any
<PAGE>
benefits intended to be conferred on the undersigned pursuant to Section 2.4 of
the Merger Agreement.
The agreement set forth herein shall terminate upon the earlier of the
Effective time and the termination of the Merger Agreement in accordance with
its terms.
2
<PAGE>
Very truly yours,
/s/ FRANK KING
--------------------------
W. Frank King
ACKNOWLEDGED AND AGREED;
THE SAGE GROUP PLC
By: /s/ PAUL WALKER
--------------------------------
Name: Paul Walker
Title: Chief Executive Officer
ROSE ACQUISITION CORP.
By: /s/ PAUL WALKER
--------------------------------
Name: Paul Walker
Title: Vice President and Secretary
3
<PAGE>
EXHIBIT (C)(11)
JOINT FILING AGREEMENT
This will confirm the agreement by and between the undersigned that the
Statement on Schedule 13D (the "Statement") filed on or about this date with
respect to the beneficial ownership by the undersigned of shares of common
stock, no par value, of State Of The Art, Inc., a California corporation, is
being filed on behalf of the undersigned.
Each of the undersigned hereby acknowledges that pursuant to Rule 13d-1(f)
promulgated under the Securities Exchange Act of 1934, as amended, that each
person on whose behalf the Statement is filed is responsible for the timely
filing of such statement and any amendments thereto, and for the completeness
and accuracy of the information concerning such person contained therein; and
that such person is not responsible for the completeness or accuracy of the
information concerning the other persons making the filing, unless such person
knows or has reason to believe that such information is inaccurate.
This Agreement may be executed in one or more counterparts by each of the
undersigned, and each of which, taken together, shall constitute one and the
same instrument.
Date: February 27, 1998
THE SAGE GROUP PLC
By: /s/ PAUL WALKER
---------------
Name: Paul Walker
Title: Chief Executive Officer
ROSE ACQUISITION CORP.
By: /s/ PAUL WALKER
---------------
Name: Paul Walker
Title: Vice President and Secretary
