<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
June 9, 1998
NETWORKS ASSOCIATES, INC.
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware
----------------------------------------------
(State or other jurisdiction of incorporation)
0-20558 77-0316593
--------------------- ------------------------------------
(Commission File No.) (IRS Employer Identification Number)
3965 Freedom Circle
Santa Clara, California 95054
----------------------------------------
(Address of Principal Executive Offices)
(408) 988-3832
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
<PAGE> 2
Item 5. Other Events
On June 9, 1998, Networks Associates, Inc., a Delaware corporation
("Network Associates"), and Dr Solomon's Group plc, a corporation duly organized
and existing under the laws of England and Wales ("Dr. Solomon"), agreed to the
terms of the proposed acquisition of all the issued share capital of Dr. Solomon
by Network Associates (the "Acquisition") by means of a Scheme of Arrangement in
accordance with Section 425 of the Companies Act (as amended) of England and
Wales. Pursuant to the terms of the Transaction Agreement, dated June 9, 1998,
by and between Dr. Solomon and Network Associates (the "Transaction Agreement"),
holders of Dr. Solomon Ordinary Shares will receive 0.27625 shares of Network
Associates Common Stock for each Dr. Solomon Ordinary Share. As one Dr. Solomon
American Depository Share ("ADS") represents three Dr. Solomon Ordinary Shares,
this is equivalent to 0.82875 shares of Network Associates Common Stock for each
Dr. Solomon ADS.
The Acquisition is expected to close within 90 days contingent upon
the fulfilment of certain conditions as outlined in the Transaction Agreement
including, but not limited to, expiration or early termination of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and approval of the Acquisition by both the shareholders of Dr. Solomon
and the High Court of Justice in England and Wales. The Acquisition will be
accounted for as a pooling of interests.
-2-
<PAGE> 3
Item 7. Financial Statements and Exhibits
(a) Exhibits
2.1 Press Release, dated June 9, 1998.
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NETWORKS ASSOCIATES, INC.
Dated: June 9, 1998 By: /s/ PRABHAT K. GOYAL
-----------------------
Prabhat K. Goyal
Chief Financial Officer
-4-
<PAGE> 5
NETWORKS ASSOCIATES, INC.
CURRENT REPORT ON FORM 8-K
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
2.1 Press Release, dated June 9, 1998.
</TABLE>
<PAGE> 1
Exhibit 2.1
Network Associates, Inc. and Dr Solomon's Group PLC
Goldman Sachs International
622617
For immediate release.
Not for release, publication or distribution in Australia or Japan.
June 9, 1998
NETWORK ASSOCIATES TO ACQUIRE DR SOLOMON'S
European Anti-Virus Software Vendor to Join Preeminent Network Security
and Management Company
Network Associates (NASDAQ: NETA), formed late last year by the merger of McAfee
Associates and Network General, and Dr Solomon's Group PLC (NASDAQ: SOLLY),
today announced that they have signed a definitive agreement whereby Network
Associates proposes to acquire Dr Solomon's, a leading European-based provider
of anti-virus software products. The Acquisition, valued at over $640 million,
will be a taxable transaction to US holders of Dr Solomon's Ordinary Shares and
ADSs and is expected to be accounted for as a pooling of interests for US
accounting purposes.
Today's announcement builds on the foundation of Network Associates' core
strengths and extends its popular anti-virus technology, which evolved from its
flagship product, McAfee VirusScan. Shortly after the Acquisition, Dr Solomon's
Anti-Virus Toolkit will be available as part of Network Associates' enterprise
security suites, the Total Virus Defense (TVD) suite, and Net Tools Secure, the
only integrated software bundle on the market to incorporate anti-virus,
encryption, authentication, firewall, intrusion detection and scanning
technology.
"With today's news, Network Associates further demonstrates its vision and
commitment to deliver world-class enterprise security products to the global
market," said Bill Larson, CEO, chairman and president of Network Associates.
"Network Associates is primed to deploy integrated enterprise security systems
to Europe's largest companies."
"I believe that Dr Solomon's and Network Associates represent an excellent fit
in terms of products, markets and infrastructure," said Geoff Leary, chief
executive of Dr Solomon's. "The combination should enable one of the most
comprehensive ranges of security products to be made available to Dr Solomon's
customers around the world."
Network Associates has distributed more than 50 million units of its security
and anti-virus software, and its customer base includes a significant number of
Fortune 500 companies. Its PGP encryption and authentication technology is
considered a worldwide standard for Internet email and file encryption. Network
Associates' market presence will be enhanced through access to Dr Solomon's
customers.
Network Associates was one of the first anti-virus providers on the market to
attack virus infection through a multi-tiered approach with the TVD suite. In
1998 Network Associates evolved and expanded that strategy with the delivery of
its Net Tools Secure suite, which addresses network security through an
integrated, multi-tiered security architecture.
Network Associates expects that it will incur a one time charge in the third
quarter of 1998 resulting from expenses and other charges associated with the
Acquisition. Excluding this one time charge, the Board of Network Associates
expects the Acquisition to be modestly dilutive to earnings per share in the
third quarter of its financial year ending December 31, 1998, but is expected to
be non-dilutive in the fourth quarter, and to be modestly accretive for the
financial year ending December 31, 1999. This statement should not be
interpreted to mean that the future earnings per share of Network Associates
Common Stock will necessarily be greater than the earnings per share of Network
Associates for its financial year ending December 31, 1997.
The proposed Acquisition is to take place by means of a scheme of arrangement
under section 425 of the UK Companies Act of 1985. Under the terms of the
Acquisition, holders of Dr Solomon's Ordinary Shares will receive 0.27625 shares
of Network Associates' Common Stock for each Dr Solomon's Ordinary
<PAGE> 2
Share. As one Dr Solomon's ADS represents three Dr Solomon's Ordinary Shares,
this is equivalent to 0.82875 shares of Network Associates Common Stock for each
Dr Solomon's ADS. The Boards of Dr Solomon's and Network Associates expect the
Acquisition to be completed within approximately 90 days, subject to the
approval of Dr Solomon's shareholders and the High Court in London, regulatory
reviews and the satisfaction or waiver of other conditions.
With headquarters in Aylesbury, UK, Dr Solomon's Group PLC, a leading supplier
of anti-virus software, develops, markets and supports anti-virus software
programs for PCs and PC networks. Dr Solomon's products provide effective and
easy-to-use software solutions to the risks posed by the proliferation of new
and increasingly sophisticated types of computer viruses. The most recent
version of the Dr Solomon's Anti-Virus Toolkit can detect and identify more than
19,000 known computer viruses.
With headquarters in Santa Clara, California, Network Associates, Inc., formed
by the merger of McAfee Associates and Network General, is a leading supplier of
enterprise network security and management solutions. Network Associates' Net
Tools Secure and Net Tools Manager offer suite-based network security and
management solutions. Net Tools Secure and Net Tools Manager suites combine to
create Net Tools which centralizes these solutions within an easy-to-use,
integrated systems management environment. For more information, Network
Associates can be reached at (408) 988-3832 or on the Internet at http://www.
nai.com.
<TABLE>
Enquiries:
<S> <C>
Dr Solomon's
David Stephens, Finance Director +44 1296 318 700
Goldman Sachs International
Fergal O'Driscoll +44 171 774 1000
Greg Lemkau +1 415 393 7500
Shandwick Consultants
Rollo Head +44 171 329 0096
Network Associates
Prabhat Goyal, Chief Financial Officer +1 408 346 3110
Morgan Stanley
Andrew Bell +44 171 425 5555
Nicholas Osborne +1 650 234 5500
Copithorne & Bellows
Alissa Bushnell +1 415 975 2224
</TABLE>
This summary should be read in conjunction with the full text of the
announcement.
This announcement contains forward-looking statements including with respect to
the consummation of the Acquisition and the integration of products, and
opportunities and synergies related to the Acquisition. Because such statements
apply to future events, they are subject to risks and uncertainties that could
cause the actual results to differ materially, including without limitation,
integration risks related to the Acquisition and the risk that the Acquisition
will not be consummated, and the risks that the anticipated benefits of the
Acquisition will not be realised.
This announcement is published on behalf of Network Associates and Dr Solomon's
and has been approved by Morgan Stanley & Co. Limited and Goldman Sachs
International, each of which are regulated by The Securities and Futures
Authority Limited, for the purposes of section 57 of the Financial Services Act
1986.
<PAGE> 3
Goldman Sachs International, which is regulated by The Securities and Futures
Authority Limited, is acting for Dr Solomon's in connection with the Acquisition
and no-one else and will not be responsible to anyone other than Dr Solomon's
for providing the protections afforded to customers of Goldman Sachs
International, nor for providing advice in relation to the Acquisition.
Morgan Stanley and Co. Limited, which is regulated by The Securities and Futures
Authority Limited, is acting for Network Associates in connection with the
Acquisition and no-one else and will not be responsible to anyone other than
Network Associates for providing the protections afforded to customers of Morgan
Stanley and Co. Limited, nor for providing advice in relation to the
Acquisition.
This announcement does not constitute an offer or an invitation to purchase any
securities.
<PAGE> 4
Network Associates, Inc. and Dr Solomon's Group PLC
Goldman Sachs International
622617
For immediate release.
Not for release, publication or distribution in Australia or Japan.
June 9, 1998
ACQUISITION OF DR SOLOMON'S GROUP PLC BY NETWORK ASSOCIATES INC
Introduction
The Boards of Dr Solomon's and Network Associates announce that they have agreed
the terms for the proposed Acquisition of the entire issued share capital of Dr
Solomon's by Network Associates by means of a scheme of arrangement under
section 425 of the Companies Act.
Both Boards expect the Acquisition to be completed within approximately 90 days,
subject to Dr Solomon's shareholder and Court approval, regulatory reviews and
the satisfaction or waiver of other conditions set out in Appendix I to this
announcement.
Terms of the Acquisition
Under the terms of the Acquisition, holders of Dr Solomon's Ordinary Shares will
receive 0.27625 shares of Network Associates' Common Stock for each Dr Solomon's
Ordinary Share. As one Dr Solomon's ADS represents three Dr Solomon's Ordinary
Shares, this is equivalent to 0.82875 shares of Network Associates' Common Stock
for each Dr Solomon's ADS.
The Acquisition values the entire current issued share capital of Dr Solomon's
at approximately $642 million (pound sterling 393 million) and each Dr Solomon's
ADS at $34.81, based on the last sale price of $42.00 per share of Network
Associates' Common Stock on NASDAQ on June 8, 1998 (the latest dealing day prior
to the announcement of the Acquisition). This represents a premium of 15.5 per
cent over the average last sale price of $30.15 of a Dr Solomon's ADS on NASDAQ
for the 30 days prior to the date of this announcement and a premium of 8.4 per
cent over the last sale price of $32.125 of a Dr Solomon's ADS on NASDAQ on June
8, 1998. The Acquisition will be a taxable transaction to US holders of Dr
Solomon's Ordinary Shares and Dr Solomon's ADSs. The Acquisition is expected to
be accounted for as a pooling of interests for US accounting purposes.
Following the completion of the Acquisition, it is expected that former holders
of Dr Solomon's Ordinary Shares and Dr Solomon's ADSs will hold approximately
11.7% of the enlarged Common Stock of Network Associates (excluding the effect
of the exercise of any options).
Network Associates currently holds 100 Dr Solomon's ADSs and intends to make
further purchases (subject to applicable securities laws) of a small number of
Dr Solomon's Ordinary Shares and/or Dr Solomon's ADSs (representing no more than
600 underlying shares) prior to the Effective Date. Network Associates intends
that immediately following the Effective Date, Network Associates will transfer
all or a portion of the Dr Solomon's Ordinary Shares owned by it to a direct or
indirect subsidiary.
Fractions of new Network Associates' Common Stock will not be issued. In lieu
thereof, holders of Dr Solomon's Ordinary Shares and/or Dr Solomon's ADSs will
receive cash (without interest) in an amount equal to the product of such
fractional part of Network Associates Common Stock multiplied by the closing
market price of Network Associates Common Stock on NASDAQ on the day following
the Effective Date. (Amounts of less than pound sterling 3.00 (or the US dollar
equivalent) will be retained for the benefit of Network Associates). The
Acquisition is subject to a number of terms and conditions which, together with
the obligations of Network Associates and Dr Solomon's to implement the Scheme,
are governed by the Transaction Agreement dated June 9, 1998. The conditions are
set out in Appendix I to this announcement.
Recommendation
The directors of Dr Solomon's, who have been so advised by Goldman Sachs
<PAGE> 5
International, financial adviser to Dr Solomon's, consider the terms of the
Acquisition to be fair and reasonable. In providing advice to the directors of
Dr Solomon's, Goldman Sachs International has taken into account the directors'
commercial assessments.
The directors of Dr Solomon's are unanimously recommending holders of Dr
Solomon's Ordinary Shares and Dr Solomon's ADSs to approve the Scheme and
Acquisition, as they intend to do in respect of their own beneficial holdings
totalling 10,125,000 Dr Solomon's Ordinary Shares, representing 18.3% of Dr
Solomon's issued share capital.
Information on Dr Solomon's
Dr Solomon's, a leading supplier of anti-virus software in the UK and elsewhere
in Europe, develops, markets and supports anti-virus software programs for PCs
and PC networks. Dr Solomon's products provide effective and easy-to-use
software solutions to the risks posed by the proliferation of new and
increasingly sophisticated types of computer viruses. Dr Solomon's principal
product line is the "Dr Solomon's Anti-Virus Toolkit" family of anti-virus
software programs. Since its introduction in 1989, the Toolkit has become one of
the leading global anti-virus software programs. The most recent version of the
Toolkit can detect and identify more than 19,000 known computer viruses.
Dr Solomon's targets its sales and marketing efforts primarily at medium and
large corporate customers with networks of PCs. A substantial percentage of Dr
Solomon's sales are in the form of recurring revenues from corporate licenses.
Dr Solomon's has over 150 people working in sales and approximately 60 third
party international partners. Dr Solomon's products include award winning virus
detection engine technology and feature-rich anti-virus management technology.
For the nine months ended February 28, 1998, on an unaudited basis, Dr Solomon's
recorded operating profit of pound sterling 9.6 million (1997: pound sterling
6.1 million) and net income of pound sterling 6.9 million (1997: pound sterling
2.4 million), based on revenues of pound sterling 41.5 million (1997: pound
sterling 25.4 million). For the last four reported quarters, ended February 28,
1998, on an unaudited basis, Dr Solomon's had total bookings of pound sterling
63.1 million, representing a 58% increase over the prior four quarters.
Dr Solomon's ADSs are quoted on NASDAQ and on EASDAQ. Dr Solomon's had a market
capitalisation of $592 million as of June 8, 1998, based on a last sale price of
$32.125 of Dr Solomon's ADSs on NASDAQ on that date. This represents a 89%
increase on the IPO price of $17 per Dr Solomon's ADS. The IPO was completed in
December 1996.
Information on Network Associates
With headquarters in Santa Clara, California, Network Associates, formed late
last year by the merger of McAfee Associates and Network General, is a leading
supplier of enterprise network security and management solutions. Network
Associates focuses on providing broad and integrated network security and
management software products for enterprise customers, targeting in particular
the Windows NT/Intel platform. Network Associates customer base includes a
significant number of Fortune 500 companies. Its PGP encryption and
authentification technology is considered a worldwide standard for internet
email and file encryption. Network Associates offers a comprehensive suite of
network security products under the Net Tools Secure product suite including the
Total Virus Defense suite of anti-virus products, featuring a multi-tiered
approach to virus detection and eradication, and the Total Network Security
suite of products including encryption, intrusion detection, authentication, and
firewall products. Network Associates was one of the first anti-virus providers
on the market to attack virus infection through a multi-tiered approach with the
Total Virus Defense (TVD) suite. Network Associates Net Tools Manager product
suite includes the Total Network Visibility suite of network fault and
performance solutions and the Total Service Desk suite of integrated service
desk solutions.
Network Associates' four product suites are sold under a product umbrella called
Net Tools. Net Tools is being designed as a fully integrated product offering
intended to reduce the total cost of managing an enterprise network.
Many of Network Associates' network security and management products are
<PAGE> 6
available on a stand-alone basis. Network Associates is also a leader in
electronic software distribution, which is the principal means by which it
markets and distributes its software products to its customers.
For the year ended December 31, 1997, Network Associates recorded operating
profit of $194.0 million (1996: $136.5 million) (pre-acquisition and related
costs) and net income of $147.5 million (1996: $94.8 million) (pre-acquisition
and related costs), based on revenues of $612.2 million (1996: $407.6 million).
For the year ended December 31, 1997, revenue growth for 1997 was 50%. As of
March 31, 1998, Network Associates had $627 million in cash and $77 million in
deferred revenue.
On May 29, 1998, Network Associates effected a 3-for-2 stock split by means of a
stock dividend paid to stockholders of record on May 12, 1998.
Network Associates' Common Stock is quoted on NASDAQ. Network Associates had a
market capitalisation of approximately $4.9 billion as of June 8, 1998, based on
a last sale price of $42.00 per share of Network Associates' Common Stock on
that date.
In April 1998 Network Associates acquired Magic Solutions International, Inc, a
privately held provider of internal help desk and asset management solutions,
and Trusted Information Systems, Inc, a publicly held provider of comprehensive
security systems for computer networks for approximately $110 million and $300
million, respectively.
Background to and reasons for the Acquisition
The Boards of Dr Solomon's and Network Associates believe that Dr Solomon's and
Network Associates represent an excellent fit in terms of technology, products,
markets and infrastructure. The combined group will be one of the world's
largest companies catering primarily to the network security and management
markets, and offering a broad suite of products to protect, manage and monitor
corporate networks for enterprise customers seeking the benefits of a secure,
reliable computing network.
Today's announcement builds on the foundation of Network Associates' core
strengths and extends its popular anti-virus technology, which evolved from its
flagship product, McAfee VirusScan, an industry leader. Network Associates' core
strengths include its broad product line, its position in the rapidly growing
security market, its scale, its high quality services organisation with more
than 85 seasoned security consultants, its installed base with over 50 million
units distributed and its award-winning global virus research team with
laboratories on 5 continents. Shortly after the Acquisition, Dr Solomon's
Anti-Virus Toolkit will be available as part of Network Associates' enterprise
security suites, the Total Virus Defense (TVD) suite, and Net Tools Secure, the
only integrated software bundle on the market to incorporate anti-virus,
encryption, authentication, firewall, intrusion detection and scanning
technology.
Dr Solomon's strategy for the past two years has been based on three principal
themes: the maintenance of its leadership in anti-virus technology; the defense
and enhancement of its market leadership in the UK and Northern Europe; and
achieving sustainable and profitable market shares.
The combination will provide Network Associates with the potential to access Dr
Solomon's strong European distribution channels, benefit from Dr Solomon's
strategic product technologies, strengthen Network Associates' suite of
integrated security products, and achieve significant distribution channel and
services synergies.
Dr Solomon's should benefit from being part of a larger group with a broader
product range and greater overall market strength. Combining Network Associates'
successful marketing, sales, distribution and customer service expertise with Dr
Solomon's infrastructure, leading anti-virus technology, strong European
distribution channels and loyal customer base, should provide for greater
success for the combined Network Associates group than is likely to be achieved
separately by either Dr Solomon's or Network Associates. Given the expected
synergies and increased market opportunities created by the Acquisition, the
Boards of Network Associates and Dr Solomon's believe the Acquisition will be
beneficial to their respective shareholders and customers.
<PAGE> 7
The Board of Network Associates expects that it will incur a one time charge in
the third quarter of 1998, resulting from expenses and other charges associated
with the Acquisition. Excluding this one time charge, the Board of Network
Associates expects the Acquisition to be modestly dilutive to earnings per share
in the third quarter of its financial year ending December 31, 1998, but is
expected to be non-dilutive to earnings per share in the fourth quarter of its
financial year ending December 31, 1998, and to be modestly accretive for the
financial year ending December 31, 1999. This statement should not be
interpreted to mean that the future earnings per share of Network Associates
Common Stock will necessarily be greater than the earnings per share of Network
Associates for its financial year ended December 31, 1997.
Bill Larson, CEO, Chairman and President of Network Associates, said:
"With today's news, Network Associates further demonstrates its vision and
commitment to deliver world-class enterprise security products to the global
market.
Network Associates is primed to deploy integrated enterprise security systems to
Europe's largest companies."
Geoff Leary, Chief Executive of Dr Solomon's, said:
"I believe that Dr Solomon's and Network Associates represent an excellent fit
in terms of products, markets and infrastructure. The combination should enable
one of the most comprehensive ranges of security products to be made available
to Dr Solomon's customers around the world."
Integration and growth opportunities
Network Associates intends managing the integration of Dr Solomon's as rapidly
and as efficiently as possible. Dr Solomon's Anti-Virus Toolkit 8 is expected to
be shipped on schedule in Fall 1998 and both complete product lines will be
included in Network Associates suites shortly after the transaction closes. In
early 1999, Network Associates expects to begin shipping an upgrade
incorporating the best of Network Associates and Dr Solomon's technology. This
will be a free upgrade to subscribers of either existing product.
Through the Acquisition, Network Associates is expected to benefit from enhanced
growth opportunities including acceleration of growth in the international
security software market, acceleration of the enterprise transition in Europe,
and incorporation of the best elements from both product lines. Further, Network
Associates intends expanding penetration into large European accounts through
the breadth of its product line and the strength of its services and consulting
organisation. Also, Network Associates intends upgrading Dr Solomon's customers
to comprehensive Network Security suites.
Management and employees
Since the two companies compete in many of the same markets with similar product
lines, it is expected that in order to achieve synergistic benefits from the
Acquisition, there will be some rationalisation within the combined workforce.
Transition planning for the merging of the worldwide combined workforce will
begin immediately. Our staff are a major asset of the business and ensuring
their effective and productive deployment will be a key success factor for the
enlarged organisation. Network Associates confirms that existing employment
rights, including pension rights, of the management and all employees of Dr
Solomon's Group will be fully safeguarded.
Dr Solomon's Share Option Schemes
The terms of the Scheme, if approved by Dr Solomon's Shareholders and the Court,
will bind the holders of all Dr Solomon's Ordinary Shares (and the holders of Dr
Solomon's ADSs via the Depositary), including those issued upon exercise of
options, in issue on the day prior to the Effective Date.
Options granted under the Dr Solomon's Company Share Option Scheme 1996 and the
Dr Solomon's Executive Share Option Scheme 1996 (the "1996 Schemes")
<PAGE> 8
become exercisable during a six month period commencing on the date option
holders are formally notified about the Scheme. Such exercise will be
conditional on the Scheme becoming effective. Options granted under the Dr
Solomon's Group Share Option Scheme will be exercisable for one month following
the date the Scheme becomes effective. As an alternative to exercise, option
holders will be permitted to release their options over Dr Solomon's Ordinary
Shares in consideration for the grant of options of an equivalent value over
shares of Common Stock in Network Associates. As a further alternative, holders
of options granted under the 1996 Schemes will be permitted to cancel their
options and receive Network Associates Common Stock with a value equal to the
latent profit in their options.
Expected Timetable (Subject to change)
Posting of Scheme Circular - June 26, 1998
Latest date for Dr Solomon's ADS holders to instruct the Depositary how to vote
- - July 16,1998
Latest date for proxies from Dr Solomon's Ordinary Shareholders to be received -
July 19, 1998
Dr Solomon's Shareholders' Meetings - July 21, 1998
Final Court hearing to sanction the Scheme - August 12, 1998
Effective date of the Scheme, de-listing and completion of Acquisition -
August 13, 1998
General
The Acquisition will be subject to the conditions and certain further terms
which are set out in Appendix I to this announcement and to such other terms
which will be set out in the Scheme Circular as may be required to comply with
the Companies Act and the provisions of the City Code. Persons not resident in
the United Kingdom may be affected by the laws of the relevant jurisdictions.
Persons who are not resident in the United Kingdom should inform themselves
about and observe any applicable requirements.
<TABLE>
Enquiries:
<S> <C>
Dr Solomon's
Geoff Leary, Chief Executive +44 1296 318 700
David Stephens, Finance Director +44 1296 318 700
Goldman Sachs International
Fergal O'Driscoll +44 171 774 1000
Greg Lemkau +1 415 393 7500
Shandwick Consultants
Rollo Head +44 171 329 0096
Network Associates
Prabhat Goyal, Chief Financial Officer +1 408 346 3110
Morgan Stanley
Andrew Bell +44 171 425 5555
Nicholas Osborne +1 650 234 5500
</TABLE>
This announcement contains forward-looking statements including with respect to
the consummation of the Acquisition and the integration of products, and
opportunities and synergies related to the Acquisition. Because such statements
apply to future events, they are subject to risks and uncertainties that could
cause the actual results to differ materially, including without limitation,
integration risks related to the Acquisition and the risk that the Acquisition
will not be consummated, and the risks that the anticipated benefits of the
Acquisition will not be realised.
<PAGE> 9
This announcement is published on behalf of Network Associates and Dr Solomon's
and has been approved by Morgan Stanley & Co. Limited and Goldman Sachs
International, each of which are regulated by The Securities and Futures
Authority Limited, for the purposes of section 57 of the Financial Services Act
1986.
Goldman Sachs International, which is regulated by The Securities and Futures
Authority Limited, is acting for Dr Solomon's in connection with the Acquisition
and no-one else and will not be responsible to anyone other than Dr Solomon's
for providing the protections afforded to customers of Goldman Sachs
International, nor for providing advice in relation to the Acquisition.
Morgan Stanley and Co. Limited, which is regulated by The Securities and Futures
Authority Limited, is acting for Network Associates in connection with the
Acquisition and no-one else and will not be responsible to anyone other than
Network Associates for providing the protections afforded to customers of Morgan
Stanley and Co. Limited, nor for providing advice in relation to the
Acquisition.
This announcement does not constitute an offer or an invitation to purchase any
securities.
Appendix I contains the conditions of the Scheme and certain other terms of the
Acquisition.
Appendix II contains the definitions of terms used in this announcement.
APPENDIX I
<PAGE> 10
The conditions of the Scheme and certain other terms of the Acquisition
Under the terms of the Transaction Agreement, the obligations of Network
Associates and Dr Solomon's to effect the Scheme are subject to the satisfaction
or waiver on or prior to the Effective Date in the case of the condition set out
in paragraph 2 below, and immediately prior to commencement of the hearing at
which the Court grants the Final Court Order (the hearing at which such order is
granted being the Final Hearing) in the case of each of the other conditions set
forth below, of the following conditions:
1. approval of the Scheme by a majority in number, representing at least 75%
in value, of the holders of the Dr Solomon's Ordinary Shares present and
voting in person or by proxy at the Court Meeting and the special
resolution to be proposed at the Extraordinary General Meeting being duly
passed (the Required Shareholders Vote);
2. the Scheme being sanctioned, and the reduction of capital involved therein
being confirmed, by the Court, with or without modification; and an office
copy of such order shall have been duly delivered to the Registrar of
Companies for registration and the Registrar shall have issued its
certificate of such registration;
3. the waiting period (and any extension thereof) applicable to the
Acquisition under the US Hart-Scott Rodino Antitrust Improvements Act of
1976 shall have been terminated or shall have expired; the U.K. Office of
Fair Trading shall have indicated prior to the commencement of the Final
Hearing, in terms satisfactory to Network Associates, that it is not the
intention of the Secretary of State for Trade and Industry to refer the
proposed acquisition by Network Associates of Dr Solomon's, or any matters
arising therefrom, to the Monopolies and Mergers Commission; and the
receipt of such other consents, authorisations, filings, approvals and
registrations as are necessary;
4. no temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Scheme shall
be in effect; provided, however, that each of the parties shall have used
all reasonable best efforts to prevent the entry of any such injunction or
other order and to appeal as promptly as possible to any such injunction
or other order that may be entered;
5. there not being any pending or threatened any suit, action, investigation
or proceeding by any court, administrative agency or commission or other
governmental or regulatory body or authority or instrumentality (each
being a Governmental Entity), (i) seeking to restrain or prohibit the
consummation of the Scheme or any of the other transactions contemplated
by the Transaction Agreement or seeking to obtain from Network Associates
or Dr Solomon's or any of their respective subsidiaries any damages that
are material in relation to Network Associates and its subsidiaries taken
as a whole or Dr Solomon's and its subsidiaries, taken as a whole, as
applicable, (ii) seeking to prohibit or limit the ownership or operation
by Network Associates or Dr Solomon's or any of their respective
subsidiaries of any material portion of the business or assets of Network
Associates and its subsidiaries taken as a whole or Dr Solomon's and its
subsidiaries taken as a whole, or seeking to require Network Associates or
Dr Solomon's or any of their respective subsidiaries to dispose of or hold
separate any material portion of the business or assets of Network
Associates and its subsidiaries, taken as a whole, or Dr Solomon's and its
subsidiaries, taken as a whole, as a result of the Scheme or any of the
other transactions contemplated by the Transaction Agreement, or (iii)
which otherwise is reasonably likely to have a material adverse effect on
either Network Associates or Dr Solomon's.
6. Network Associates having received letters from each of Coopers & Lybrand
L.L.P. and Deloitte & Touche, respectively, dated within two (2) business
days prior to the date of the Final Hearing, regarding that firm's
concurrence with Network Associates' management's and Dr Solomon's
management's conclusions as to the appropriateness of pooling of interest
accounting for the Scheme under U.S. Accounting Principles Board Opinion
No. 16, if the Scheme is consummated in
<PAGE> 11
accordance with the Transaction Agreement.
The obligations of Dr Solomon's to effect the Scheme are further subject to
satisfaction (or waiver by Dr Solomon's) immediately prior to commencement of
the Final Hearing of the following conditions:
1. The representations and warranties of Network Associates set forth in the
Transaction Agreement that are qualified as to materiality being true and
correct, and the representations and warranties of Network Associates set
forth in the Transaction Agreement that are not so qualified being true
and correct in all material respects, in each case as of the date of the
Transaction Agreement and, except to the extent such representations and
warranties speak as of an earlier date or as could not reasonably be
expected to have a material adverse effect on Network Associates, as of
the date of the Final Hearing as though made on and as of commencement of
the Final Hearing, except as otherwise contemplated by the Transaction
Agreement and Dr Solomon's having received a certificate signed on behalf
of Network Associates by the chief executive officer and the chief
financial officer of Network Associates to that effect.
2. Network Associates having performed in all material respects all
obligations required to be performed by it under the Transaction Agreement
prior to the date of the Final Hearing, and Dr Solomon's having received a
certificate signed on behalf of Network Associates by the chief executive
officer and the chief financial officer of Network Associates to such
effect.
3. Dr Solomon's having received, in a form reasonably acceptable to the
directors of Dr Solomon's, clearance from the Inland Revenue under Section
138 of the Taxation of Chargeable Gains Act 1992 for transactions involved
in the Scheme.
4. The shares of Network Associates Common Stock to be issued to effect the
Acquisition being approved for listing on NASDAQ.
5. No material adverse effect with respect to Network Associates having
occurred since the date of the Transaction Agreement and continuing.
6. Dr Solomon's having received a legal opinion in the agreed form, dated as
of the date of the Final Hearing, from Wilson Sonsini Goodrich & Rosati.
The obligations of Network Associates to effect the Acquisition are further
subject to the satisfaction (or waiver by Network Associates) immediately prior
to the commencement of the Final Hearing of the following conditions:
1. The representations and warranties of Dr Solomon's set forth in the
Transaction Agreement that are qualified as to materiality being true
and correct, and the representations and warranties of Dr Solomon's set
forth in the Transaction Agreement that are not so qualified being true
and correct in all material respects, in each case as of the date of
the Transaction Agreement and, except to the extent such
representations and warranties speak as of an earlier date or as could
not reasonably be expected to have a material adverse effect on Dr
Solomon's, as of the date of the Final Hearing as though made on and as
of commencement of the Final Hearing, except as otherwise contemplated
by the Transaction Agreement and Network Associates having received a
certificate signed on behalf of Dr Solomon's by the chief executive
officer and the chief financial officer of Dr Solomon's to that effect.
2. Dr Solomon's having performed in all material respects all obligations
required to be performed by it under the Transaction Agreement prior to
the date of the Final Hearing, and Network Associates having received a
certificate signed on behalf of Dr Solomon's by the chief executive
officer and the chief financial officer of Dr Solomon's to that effect.
3. No material adverse effect with respect to Dr Solomon's having occurred
since the date of the Transaction Agreement and continuing.
4. Each of the directors of Dr Solomon's at the request of Network Associates
having submitted their resignation as directors to take
<PAGE> 12
effect as of the Effective Date, but without prejudice to their respective
rights as employees and Dr Solomon's and Network Associates acknowledge
that such resignations shall not constitute resignations by any director
as an employee or breach by the directors of their terms of employment, or
entitle Dr Solomon's to terminate the employment of any of the directors.
5. Network Associates having received a legal opinion in the agreed form,
dated the date of the Final Hearing, from Macfarlanes.
Termination of the Transaction Agreement
The Transaction Agreement may be terminated at any time prior to the
commencement of the Final Hearing, whether before or after approval of matters
presented in connection with the Scheme by the shareholders of Dr Solomon's:
1. by mutual written consent of Dr Solomon's and Network Associates;
2. by either Dr Solomon's or Network Associates,
(i) if the Required Shareholders Vote shall not have been obtained at the duly
held Dr Solomon's shareholder meetings or an adjournment thereof;
(ii) if any Governmental Entity shall have issued an order, decree or ruling or
taken any other action permanently enjoining, restraining or otherwise
prohibiting the Acquisition and such order, decree, ruling or other action
shall have become final and nonappealable;
(iii) in the event of a breach by the other party of any representation,
warranty, covenant or other agreement contained in the Transaction
Agreement which would result in the failure of a condition to the
obligations of such party under the Transaction Agreement and cannot
reasonably be or has not been cured within 20 days after the giving of
written notice to the breaching party of such breach but in any event
prior to the commencement of the Final Hearing (a Material Breach)
(provided that the terminating party is not then in Material Breach of any
representation, warranty, covenant or other agreement contained in the
Transaction Agreement);or
(iv) if the Effective Date shall not have occurred by October 31, 1998, for any
reason provided, however, that the right to terminate the Transaction
Agreement shall not be available to any party whose action or failure to
act has been a principal cause of or resulted in the failure of the
Effective Date to occur on or before such date and such action or failure
to act constitutes a breach of the Transaction Agreement.
3. by Dr Solomon's: if the Board of Directors of Dr Solomon's approves or
recommends a bona fide Dr Solomon's Acquisition Proposal (see below) to
acquire, directly or indirectly, for consideration consisting of cash
and/or securities, more than 50% of the Dr Solomon's Ordinary Shares then
outstanding or all or substantially all the assets of Dr Solomon's, and
otherwise on terms which the Board of Directors of Dr Solomon's determines
in its good faith reasonable judgement to be more favourable to Dr
Solomon's stockholders than the Acquisition (after having received the
advice of Dr Solomon's independent financial adviser as to the value of
the consideration provided for in such proposal) and for which financing,
to the extent required, is then committed or which, in the good faith
reasonable judgement of the Dr Solomon's Board of Directors, is reasonably
capable of being financed by such third party (a Dr Solomon's Superior
Proposal) and Dr Solomon's shall have paid to Network Associates the break
up fee;
4. by Network Associates:
(i) if, prior to the Dr Solomon's shareholders meetings, any proposal for
a merger or other business combination, any scheme of arrangement,
exchange offer, liquidation, or takeover offer (within the meaning of
Section 428 of the Companies Act) involving Dr Solomon's or any of its
subsidiaries or any proposal or offer to acquire in any manner,
directly or indirectly, an equity interest of 15% or more in any voting
<PAGE> 13
securities of or a substantial portion of the assets of Dr Solomon's or
any of its subsidiaries, or any other similar transactions the
consummation of which could reasonably be expected to prevent or
materially impede, interfere with, or delay the Acquisition (a Dr
Solomon's Acquisition Proposal) is commenced, publicly proposed,
publicly disclosed or communicated to Dr Solomon's (or the willingness
of any person to make a Dr Solomon's Acquisition Proposal is publicly
disclosed or communicated to Dr Solomon's) and the Board of Directors
of Dr Solomon's or any committee thereof shall have withdrawn or
modified in a manner adverse to Network Associates its approval or
recommendation for the Required Shareholders Vote, and approved or
recommended the Dr Solomon's Acquisition Proposal, or resolved to do
the foregoing actions;
(ii) if Dr Solomon's shall have entered into any agreement with respect to any
Dr Solomon's Superior Proposal; or
(iii) if the Effective Date shall not have occurred on or prior to August 31,
1998, other than as a result of a material breach of the Transaction
Agreement by Network Associates or as a result of the failure to satisfy
the U.S. anti-trust condition in paragraph 3 above (set out in the
conditions to be satisfied or waived prior to the Final Hearing) prior to
such date (when such failure shall be the result of a material breach by
Dr Solomon's of its objections contained in the
Transaction Agreement).
Payment on Termination
1. Dr Solomon's shall promptly pay, or cause to be paid, to Network
Associates:
(i) U.S. $3,500,000, if the Transaction Agreement is terminated by Dr
Solomon's in the circumstances set out in 3 above;
(ii) U.S. $3,500,000, if the Transaction Agreement is terminated by Network
Associates in the circumstances set out in (4)(i) or (ii) above;
(iii) U.S. $500,000, if the Transaction Agreement is terminated by either Dr
Solomon's or Network Associates in the circumstances set out in (2)(i)
above (provided that Network Associates is not in material breach of the
Transaction Agreement and at the time of the Extraordinary General
Meeting there shall have been no material adverse effect on Network
Associates) or U.S.$3,500,000, (less any earlier payment) if the
Transaction Agreement is so terminated and within the nine month period
following any such transaction Dr Solomon's shall consummate a Dr
Solomon's Acquisition Proposal or enter into any agreement, understanding
or commitment with respect to a Dr Solomon's Acquisition Proposal and such
transaction is consummated.
(iv) U.S. $3,500,000, if the Transaction Agreement is terminated by Network
Associates in the circumstances set out in (4)(iii) above (provided
that Network Associates is not in material breach of the Transaction
Agreement and at the time of such termination there shall have been no
material adverse effect on Network Associates) and within the nine
month period following any such termination Dr Solomon's shall
consummate a Dr Solomon's Acquisition Proposal or enter into any
agreement, understanding or commitment with respect to a Dr Solomon's
Acquisition Proposal and such transaction is consummated.
In no event shall more than $3,500,000 be payable to Network Associates
under the foregoing provisions.
APPENDIX II
<PAGE> 14
Definitions
In this announcement, the following definitions apply unless the context
requires otherwise:
"Acquisition" the proposed acquisition of the entire issued share
capital of Dr Solomon's to be effected by means of
the Scheme;
"Business Day" a day (other than a Saturday or Sunday) on which
banks are generally open in London for normal
business;
"City Code" the City Code on Takeovers and Mergers;
"Companies Act" the Companies Act of 1985 (as amended) of England
and Wales;
"Court" the High Court of Justice in England and Wales;
"Court Meeting" the meeting of the holders of Dr Solomon's Shares
to be convened pursuant to an Order of the Court
for the purposes of approving the Scheme;
"Depositary" The Bank of New York;
"Dr Solomon's" Dr Solomon's Group PLC;
"Dr Solomon's ADS(s)" American Depositary Share(s) of Dr Solomon's, each
representing three ordinary shares of 1p each in
the share capital of Dr Solomon's which are traded
on NASDAQ and EASDAQ;
"Dr Solomon's Group" Dr Solomon's and its subsidiary and associated
undertakings;
"Dr Solomon's ordinary shares of 1p each in the share capital of
Ordinary Shares" Dr Solomon's;
"Dr Solomon's holders of Dr Solomon's Ordinary Shares and Dr
Shareholders" Solomon's ADSs;
"Dr Solomon's Share the Dr Solomon's Company Scheme 1996, the Dr
Option Schemes" Solomon's Group Share Option Scheme, the
Dr Solomon's Executive Share Option Scheme 1996,
and the Dr Solomon's Savings Related Option Scheme;
"Dr Solomon's Trust" the Dr Solomon's Employee Benefit Trust constituted
by a trust deed between Dr Solomon's and Bank of
Scotland (International) Limited dated August
15,1996;
"EASDAQ" European Association of Securities Dealers
Automated Quotation;
"Effective Date" the date on which the Scheme becomes effective,
which is expected to be August 13, 1998,
"Extraordinary the extraordinary general meeting of Dr Solomon's
General Meeting" to be convened inter alia for the purposes of
approving the Acquisition;
"Final Court Order" the order of the Court sanctioning the Scheme under
Section 425 of the Companies Act and confirming the
cancellation of the share capital in connection
therewith under Section 137 of the Companies Act;
"Goldman Sachs" Goldman Sachs International;
"Meetings" the Court Meeting and the Extraordinary General
Meeting;
<PAGE> 15
<TABLE>
<S> <C>
"Morgan Stanley" Morgan Stanley & Co. Limited;
"NASDAQ" The NASDAQ National Market;
"Network Associates" Networks Associates, Inc.;
"Network Associates' common stock of Network Associates, par value
Common Stock" $0.01;
"Offer period" the period commencing on June 9, 1998 (being the
date of this announcement) until close of business
in the UK on the date of the Meetings;
"Panel" the Panel on Takeovers and Mergers;
"Record Date" the business day immediately preceding the Effective Date;
"Record Time" 10.00 p.m. (London time) on the Record Date;
"Registrar" The Registrar of Companies in England and Wales
"1996 Schemes" Dr Solomon's Company Share Option Scheme 1996 and
the Dr Solomon's Executive Share Option Scheme
1996;
"Scheme" the proposed scheme of arrangement under section
425 of the Companies Act between Dr Solomon's and
Dr Solomon's Ordinary Shareholders to be set out in
the Scheme Circular
"Scheme Circular" the circular proposed to be despatched to holders
of Dr Solomon's Ordinary Shares and Dr Solomon's
ADSs setting out details of the Acquisition and the
Scheme, information about Dr Solomon's and Network
Associates and containing the notices of the
Meetings;
"Scheme Shares" the Dr Solomon's Ordinary Shares in the capital of
Dr Solomon's in issue at the date of the Scheme
Circular, together with all (if any) additional Dr
Solomon's Ordinary Shares which (i) may be issued
prior to the Court Meeting and (ii) may be issued
on or after the date of the Court Meeting and up
until the Record Time;
"Transaction the agreement dated June 9, 1998, between Network
Agreement" Associates and Dr Solomon's, containing the terms
and conditions of the Acquisition;
"United Kingdom" or "UK" the United Kingdom of Great Britain and Northern
Ireland;
"United States" or "US" the United States of America, its territories and
possessions, any state of the United States of
America, the District of Columbia, and all other
areas subject to its jurisdiction;
</TABLE>
In this document, where the sterling equivalent is given for a US dollar sum, or
vice versa, the exchange rate used (save where otherwise stated) is US
$1.6340/pound sterling1.
References to June 8, 1998 are to the latest practicable date prior to the
making of this announcement.
