<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
C-ATS SOFTWARE INC.
(NAME OF SUBJECT COMPANY)
C-ATS SOFTWARE INC.
(NAME OF PERSON FILING STATEMENT)
COMMON STOCK, PAR VALUE $0.001 PER SHARE
(TITLE OF CLASS OF SECURITIES)
124778-10-1
(CUSIP NUMBER OF CLASS OF SECURITIES)
DAVID GILBERT
PRESIDENT
1870 EMBARCADERO ROAD
PALO ALTO, CALIFORNIA 94303
(650) 321-3000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS
ON BEHALF OF THE PERSON FILING STATEMENT)
------------------------
COPIES TO:
MARIO M. ROSATI, ESQ.
MICHAEL J. DANAHER, ESQ.
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CA 94304-1050
(650) 493-9300
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
INTRODUCTION
This Solicitation/Recommendation Statement on Schedule 14D-9 (this
"Schedule 14D-9") relates to an offer by Moxie Acquisition Corp., a Delaware
corporation ("Purchaser") and a wholly-owned subsidiary of Kirsty, Inc., a
Delaware corporation (the "USA Sub") and an indirect wholly-owned subsidiary of
Misys plc, a company organized under the laws of England ("Parent" or "Misys"),
to purchase all of the Shares (as defined below) of C-ATS Software Inc., a
Delaware corporation. Capitalized terms used herein and not otherwise defined
herein shall have the meaning assigned to them in the Offer to Purchase dated
December 18, 1998, a copy of which is filed as Exhibit 1 hereto (the "Offer to
Purchase").
The information contained under the captions "Purpose of the Offer; the
Merger Agreement; Other Agreements; Plans for the Company," "Dividends and
Distributions" and "Certain Conditions of the Offer" of the Offer to Purchase
incorporated herein by reference.
ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is C-ATS Software Inc., a Delaware
corporation (the "Company" or "C-ATS Software Inc."). The address of the
principal executive office of the Company is 1870 Embarcadero Road, Palo Alto,
California 94303. The title of the class of equity securities of the Company to
which this Schedule 14D-9 relates is the common stock of the Company, par value
$0.001 per share (the "Shares"), of the Company.
ITEM 2. TENDER OFFER OF THE BIDDER
This Schedule 14D-9 relates to the tender offer (the "Offer") disclosed in
the Schedule 14D-1 dated December 18, 1998 (as amended or supplemented, the
"Schedule 14D-1") filed with the Securities and Exchange Commission (the
"Commission") by Purchaser and Parent relating to an offer by Purchaser to
purchase all outstanding Shares at $7.50 per share, net to the seller in cash,
without interest (the "Offer Price"), upon the terms and subject to the
conditions set forth in the Offer to Purchase and the related letter of
transmittal ("Letter of Transmittal"). The Schedule 14D-1 states that the
principal executive offices of Parent are located at Burleigh House, Salford
Priors, Worcestershire WR11 5SH, England and that the principal executive
offices of Purchaser and USA Sub are located at 45 Broadway, New York, New York
10006.
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of December 14, 1998 (the "Merger Agreement") among the Company, Parent, USA
Sub and Purchaser. A copy of the Merger Agreement is filed as Exhibit 7 to this
Schedule 14D-9 and is hereby incorporated by reference. The Merger Agreement
provides that, among other things, as soon as practicable following the
consummation of the Offer and the satisfaction of certain other conditions set
forth in the Merger Agreement and in accordance with the relevant provisions of
the General Corporation Law of the State of Delaware ("Delaware Law"), Purchaser
will be merged with and into the Company (the "Merger"). Following consummation
of the Merger, the Company will continue as the surviving corporation (the
"Surviving Corporation") and will become an indirect wholly-owned subsidiary of
Parent. At the effective time of the Merger (the "Effective Time"), each
outstanding Share (other than Shares held by stockholders who perfect their
appraisal rights under Delaware law, Shares owned by the Company as treasury
stock and Shares owned by the Parent or any direct or indirect wholly-owned
subsidiary of Parent or of the Company) will be converted into the right to
receive $7.50 in cash (the "Merger Consideration") without interest. The terms
of the Merger Agreement are summarized under the captions "Purpose of the Offer;
The Merger Agreement; Other Agreements; Plans for the Company," "Dividends and
Distributions" and "Certain Conditions of the Offer" of the Offer to Purchase.
All information contained in this Schedule 14D-9 or incorporated herein by
reference concerning the Parent, USA Sub or Purchaser or their affiliates, or
actions that with respect to any of them, was provided by Parent, USA Sub or
Purchaser or their affiliates, and the Company takes no responsibility for the
accuracy or completeness of such information or for any failure by such entities
to disclose events or circumstances that have occurred and may affect the
significance, completeness or accuracy of such information.
2
<PAGE> 3
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the person
filing this Schedule 14D-9, are set forth in Item 1 above. Unless the context
otherwise requires, references to the Company in this Schedule 14D-9 are to the
Company and its subsidiaries, viewed as a single entity.
(b)(1) Arrangements with the Company, its Executive Officers, Directors or
Affiliates
(i) Certain contracts, agreements, arrangements or understandings
between the Company or its affiliates and certain of the Company's
directors, executive officers, and affiliates are described in the
Information Statement of the Company attached to this Schedule 14D-9 as
Annex A ("Information Statement"). The Information Statement is being
furnished to the Company's stockholders pursuant to Section 14(f) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule
14f-1 promulgated under the Exchange Act in connection with Purchaser's
right (after consummation of the Offer) to designate persons to the Board
of Directors of the Company other than at a meeting of the stockholders of
the Company. The Information Statement is incorporated herein by reference.
(2) Arrangements with Parent, its Executive Officers, Directors or
Affiliates
The information contained under the captions "Purpose of the Offer; the
Merger Agreement; Other Agreements; Plans for the Company," "Dividends and
Distributions" and "Certain Conditions to the Offer" of the Offer to Purchase,
is incorporated herein by reference. Certain contracts, agreements, arrangements
or understandings between the Company or its affiliates and the Purchaser, its
executive officers and affiliates are described in the Offer to Purchase,
including the following:
(i) The Merger Agreement.
(ii) The Stockholders Agreements. On December 14, 1998 the Parent, USA
Sub and Purchaser entered into Stockholders Agreements (the "Stockholders
Agreements") with each of the Rod A. Beckstrom Trust, David and Diedra
Gilbert, Robert Geske, Jerry Bock and Rod A. and Patrice V. Beckstrom
Charitable Remainder Trust (the "Certain Stockholders") which provide that,
among other things, the Certain Stockholders agree to tender in the Offer
and not to withdraw therefrom, the 1,587,783 Shares owned by them, as well
as any other Shares acquired prior to the expiration of the Offer,
including Shares acquired pursuant to stock options, warrants or any
similar instruments.
(iii) The Employment Agreements. In connection with the Offer and the
Merger, the Company has entered into employment agreements (the "Employment
Agreements"), each dated December 14, 1998, with Messrs. Gilbert and
Beckstrom to secure their continued employment following the Merger.
(iv) The Long Term Incentive Plan. Subsequent to the Merger, the
Surviving Corporation plans to implement a Long Term Incentive Plan (the
"LTIP") for Messrs. Gilbert and Beckstrom and such other executives as may
be selected by the Board of Directors of the Surviving Corporation, with
Parent's consent.
Except as set forth above or incorporated herein by reference, there are no
contracts, agreements, arrangements or understandings or any actual or potential
conflicts of interest between the Company or its affiliates and (i) the Company,
its executive officers, directors or affiliates or (ii) the Parent, its
executive officers, directors or affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) Recommendation of the Board of Directors
The Board of Directors of the Company has unanimously approved the Offer
and the Merger and determined that the terms of the Offer and the Merger are
fair to, and in the best interests of, the stockholders of the Company and
unanimously recommends that stockholders of the Company accept the Offer and
tender their Shares to Purchaser.
3
<PAGE> 4
As set forth in the Offer, the Merger Agreement and the Letter of
Transmittal (the "Offer Documents"), Purchaser will purchase shares tendered
prior to the close of the Offer (and not validly withdrawn) if the Conditions to
the Offer have been satisfied (or waived). Stockholders considering not
tendering their shares in order to wait for the Merger should note that if the
Minimum Condition is not satisfied or any of the other conditions to the Offer
are not satisfied, Purchaser is not obligated to purchase any Shares, and can
terminate the Offer and the Merger Agreement and not proceed with the Merger.
Under the DGCL, the approval of the Board and the affirmative vote of the
holders of a majority of the outstanding shares are required to approve the
Merger. Accordingly, if the Conditions to the Offer are satisfied, Purchaser
will have sufficient voting power to cause the approval of the Merger without
the affirmative vote of any other stockholder. Under the DGCL, if Purchaser
acquires, pursuant to the Offer or otherwise, at least 90% of the then
outstanding Shares, Parent will be able to approve and adopt the Merger
Agreement and the Merger, without a vote of the Company's stockholders. Parent,
USA Sub, Purchaser and the Company have agreed to use their best efforts to
take, or cause to be taken, actions necessary, proper or advisable to consummate
and make effective in the most expeditious manner possible the Merger and the
transactions contemplated by the Merger Agreement. If Purchaser does not acquire
at least 90% of the then outstanding Shares pursuant to the Offer or otherwise
and a vote of the Company's stockholders is required under the DGCL, a
significantly longer period of time will be required to effect the Merger.
The Offer will expire upon the Expiration Date. The term "Expiration Date"
means 12:00 midnight, New York City time, on Tuesday, January 19, 1999, unless
the Purchaser 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 Purchaser, shall expire. Copies of
the press releases issued by the Company and Parent on December 14, 1998
announcing the Merger and the Offer are filed as Exhibits 3 and 4 to this
Schedule 14D-9 and are incorporated herein by reference in their entirety.
(b) Background of the Offer; Reasons for the Recommendation.
Background of the Offer
The Company engages in certain lines of business that are complementary to
those of Midas-Kapiti International, Ltd. ("MKI"), an indirect wholly-owned
subsidiary of Parent. In March, 1998, Mr. Rod Beckstrom, President of the
Company, met with Mr. John Graham, Director of Business Development of Parent,
and Mr. Rupert Soames, Chief Executive Officer of MKI to discuss possibilities
for joint marketing efforts. Representatives of the Company and MKI met from
time to time since April, 1998, in connection with the preparation of proposals
to customers that combine the products and services offered by MKI and the
Company. The Company and MKI subsequently jointly marketed their products to
several prospective customers.
From July 22 through July 24, 1998, Mr. Soames and Mr. Stephen Gowers,
Product Development Director of MKI, met in Palo Alto, California with Mr. Rod
A. Beckstrom, Chief Executive Officer of the Company and Mr. David Gilbert,
President of the Company, to discuss the possibility of combining the Company's
risk operations with MKI's Global Manager/Risk Vision business. Messrs. Soames
and Gowers indicated they would discuss the matter further with representatives
of Parent.
On August 11, 1998 and again on September 11, 1998, Mr. Soames met with
Messrs. Beckstrom and Gilbert to consider how the combined businesses might be
organized and operated. On September 2, 1998, Mr. Soames forwarded a letter to
Mr. Beckstrom outlining the terms of confidentiality that would pertain to
future discussions regarding a "potential business partnership."
On August 19, 1998 the Company's Board of Directors was briefed on the
status of discussions with Parent and other prospective partners. At the
meeting, Broadview International LLC ("Broadview") discussed its plans for
investigating and pursuing strategic options.
On October 12, 1998, Mr. Strone Macpherson, Deputy Chairman of Parent, met
in Palo Alto, California with Messrs. Beckstrom and Gilbert to discuss potential
non-price transaction terms. Representatives of the two companies held a number
of telephone conversations during the following weeks. On October 15 and 16,
4
<PAGE> 5
1998, Mr. Soames reviewed with Messrs. Gilbert and Beckstrom, by telephone, the
outcome of the meetings held with Mr. Macpherson, and discussed ways to progress
towards a potential transaction.
On October 16, 1998, Mr. Soames and Mr. Ross Graham, Corporate Development
Director and Secretary of Parent, held discussions in London with Mr. Gilbert
during which Messrs. Soames, Graham and Gilbert discussed the basic framework of
a potential transaction and Parent's representatives provided Mr. Gilbert with
an outline of non-price transaction terms.
On October 19, 1998, representatives of Parent indicated preliminarily to
the Company's representatives that it would be willing to pay a price in the
range of $6.50-$7.50 per Share, subject to the satisfactory completion of due
diligence and definitive documentation. On October 19, 1998, Parent's
representatives confirmed the price to be $7.00 per Share. On October 29, 1998,
Mr. Gilbert informed Mr. Macpherson that the $7.00 per Share offer was too low
and that a third party had orally indicated its interest in potentially
acquiring the Company in a stock-for-stock transaction. Messrs. Macpherson,
Graham and Gilbert had additional discussions by telephone on October 30, 1998
to further explore the Company's position.
On November 11, 1998, further to a telephone conversation held on November
10, 1998 between Messrs. Macpherson and Gilbert, Mr. Macpherson sent a letter to
Mr. Gilbert expressing Parent's formal interest in acquiring the Company and
attached a term sheet indicating a price range of $7.50-$8.00 per Share, but
stating that based on the data it had at the time, $7.50 was the appropriate
price.
On November 11, 1998, the Company's Board of Directors was briefed on the
status of negotiations with Parent and other prospective parties. The Board
authorized management to pursue negotiations with Parent.
Between November 16, 1998 and December 7, 1998, the Parent, MKI and its
legal and financial advisors conducted their due diligence review of the
Company.
On November 18, 1998, Messrs. Beckstrom and Gilbert met in New York with
Mr. Soames and Mr. John Sussens, Managing Director of Parent, to discuss how the
risk businesses of the Company and MKI could be jointly developed.
On November 23, 1998, Mr. Gilbert and counsel to the Company met in New
York with Mr. Graham, Ms. Tazim Essani, Vice President, Corporate Development,
of Parent, and Parent's legal and financial advisors to negotiate the terms of
the agreements. Negotiations of the Merger Agreement, the Stockholders
Agreements and related documents continued by telephone during the subsequent
weeks.
On December 9, 1998, the Company's Board of Directors met again to consider
the proposed Merger. Mr. Gilbert briefed the Board on the results of the
negotiations. Legal counsel briefed the Board on legal issues and the
specifications of the draft agreements. Representatives of Broadview presented
their opinion that the transaction was fair to the Company's shareholders from a
financial point of view. The Board agreed unanimously to approve the Offer and
the Merger.
On December 10, 1998, Mr. Gilbert and Mr. Graham met in New York to resolve
outstanding issues. On December 10 and 11, 1998, the parties and their
respective legal counsel made final changes to the Merger Agreement and the
various related agreements and ancillary documents.
On December 14, 1998, the parties executed the agreements and the
transaction was publicly announced.
5
<PAGE> 6
Reasons for the Recommendation.
At a meeting on December 9, 1998, the Board of Directors of the Company
unanimously approved the Offer and the Merger and determined that the terms of
the Offer and the Merger are fair to, and in the best interests of, the
stockholders of the Company, and unanimously resolved to recommend that
stockholders accept the Offer and tender their Shares.
In arriving at its decision to approve the Merger Agreement and the
transactions contemplated thereby and to recommend acceptance of the Offer, the
Board of Directors considered, among other things, the following factors:
(1) The $7.50 per Share price represented a premium of approximately
76% over the closing sale price of $4.25 per Share as reported on the
Nasdaq National Market on December 8, 1998, the last trading day prior to
the date the Board authorized and approved the Merger Agreement, and that
payment in cash would provide the Company's stockholders with immediate
liquidity. By comparison, the Company believes that the near-term prospects
of attaining similar market values as an independent company would be
subject to substantial risks and uncertainties.
(2) Given the experience, reputation and financial condition of
Parent, the Conditions to the Offer and the low risk of regulatory
objections, there would be a high likelihood that the Merger would be
completed.
(3) The Company's future growth as an independent company would
largely be dependent on the success of a single product line, CARMA.
Although the Company believes CARMA is "best of breed" and has been well
received, it is still early in the product life cycle and broad market
acceptance is subject to various risks. In particular, the vendor market is
consolidating, leading to increasingly larger competitors with greater
financial resources and global reach. The Company's ability to compete
effectively would require significant investment to expand worldwide
distribution and services. In addition, some potential customers have
sought to reduce the number of vendors they deal with and have exhibited a
willingness to sacrifice product quality and features in order to acquire
broader, integrated solutions. Since the Company has a narrow product line,
such a trend increases the obstacles to broad market acceptance of the
Company's products. All of these factors also increase the difficulty of
forecasting revenues. In addition to CARMA, the Company also markets a
trading system. However, the increased competition and commoditization of
the market for trading systems has affected the Company's revenues and
margins in this market, and this trend is expected to continue.
(4) The recent financial performance of the Company has not been as
strong as expected. Due to longer than expected sales cycles in the market
for financial risk management, the Company's revenues for the quarter ended
September 30, 1998, were approximately $893,000 lower than the previous
quarter and lower than analyst expectations, and the Company experienced a
net loss of approximately $1,063,000 for that quarter. In addition, in
recent years "small cap" stocks such as the Company's have not performed
well relative to the overall public markets. This is particularly the case
for companies such as the Company whose revenues are uneven or irregular
because they depend on large sales to individual customers.
(5) The degree of uncertainty regarding the potential for third-party
proposals, either from parties that had discussions with the Company or
from other parties, and regarding the timing, regulatory issues, terms and
conditions and potential economic value of any third-party proposals.
(6) The terms of the Merger Agreement permit the Company to respond to
certain unsolicited third party offers to acquire the Company.
(7) The Merger was supported by senior members of the Company's
management team and by the other parties to the Stockholders Agreements.
(8) The presentation and opinion of Broadview dated December 9, 1998
to the effect that, as of such date and subject to the limitations and
assumptions set forth therein, the cash consideration to be
6
<PAGE> 7
received by the holders of Shares in the Offer and the Merger is fair from
a financial point of view to such stockholders.
THE FULL TEXT OF BROADVIEW'S FAIRNESS OPINION IS FILED AS EXHIBIT 6 TO THIS
SCHEDULE 14D-9 AND IS ALSO ATTACHED HERETO AS ANNEX B. STOCKHOLDERS ARE URGED TO
READ SUCH OPINION IN ITS ENTIRETY.
In light of all factors, including those set forth above, the Board of
Directors unanimously approved the Offer and the Merger. In view of the variety
of factors considered in connection with its evaluation of the Offer and the
Merger, the Board of Directors did not assign relative weights to the specific
factors considered in reaching its decision.
It is expected that if Shares are not accepted for payment by the Purchaser
in the Offer and if the Merger is not consummated, the Company's current
management, under the general direction of the Board of Directors, will continue
to manage the Company as an on-going business. However, the Company would, under
these circumstances, continue to explore other possible methods of maximizing
stockholder value.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Company retained Broadview to provide financial advisory services in
connection with a possible business transaction for the Company. Pursuant to a
letter agreement dated June 22, 1998 between the Company and Broadview, the
Company, as compensation for such services, has agreed to pay Broadview a
transaction fee equal to (i) $500,000 plus 1.0% of the total consideration (the
"Consideration") in excess of $20 million paid directly or indirectly to or by
the Company to its stockholders in connection with the Offer and the Merger in
the event the Consideration is less than $60 million and (ii) $500,000 plus 1.5%
of the Consideration in excess of $20 million in the event the Consideration is
equal to or greater than $60 million. Additionally, the Company has agreed to
pay to Broadview a fee in the amount of $250,000 upon the delivery to the
Company of the opinion of Broadview attached to this Schedule 14D-9 as Annex B.
Such $250,000 fee shall be credited against the transaction fee described above.
The Company has also agreed to reimburse Broadview for all of its reasonable out
of pocket expenses incurred in connection with rendering financial advisory
services, including fees and disbursements of its legal counsel. In addition,
the Company has agreed to indemnify and hold harmless Broadview and its
affiliates for certain claims, damages and liabilities related to or arising in
any manner out of any transaction, proposal or any other matter contemplated by
its engagement as financial advisor.
Except as set forth above, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any person to
make solicitations or recommendations to the stockholders of the Company on its
behalf with respect to the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) During the past 60 days, except for the Stockholders Agreements, no
transactions in Shares have been effected by the Company or, to the Company's
knowledge, by any of its executive officers, directors, affiliates or
subsidiaries.
(b) To the Company's knowledge, all of the Company's executive officers,
directors, affiliates and subsidiaries who own Shares currently intend to tender
all of their Shares (other than Shares, if any, held by such person that if
tendered, could cause such person to incur liability under the provisions of
Section 16(b) of the Exchange Act of 1934, as amended) pursuant to the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as set forth herein, no negotiation is being undertaken or is
underway by the Company in response to the Offer that relates to or would result
in (i) an extraordinary transaction, such as a merger or reorganization
involving the Company or any subsidiary thereof; (ii) a purchase, sale or
transfer of a material amount of assets by the Company or any subsidiary
thereof; (iii) a tender offer for or other acquisition of
7
<PAGE> 8
securities by or of the Company; or (iv) any material change in the present
capitalization or dividend policy of the Company.
(b) Except as set forth herein, there is no transaction, board resolution,
agreement in principle or signed contract in response to the Offer that relates
to or would result in one or more of the events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
The Information Statement attached as Annex A hereto and incorporated
herein by reference is being furnished in connection with the possible
designation by the Purchaser, pursuant to the Merger Agreement, of certain
persons to be appointed to the Board other than at a meeting of the Company's
stockholders as described in Item 3.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
*1 Offer to Purchase dated December 18, 1998 (incorporated by
reference to Exhibit (a)(1) to Purchaser's Tender Offer
Statement on December 18, 1998, as amended (the "14D-1").
*2 Letter of Transmittal (incorporated by reference to Exhibit
(a)(2) to the 14D-1).
3 Text of Press Release issued by Parent and the Company on
December 14, 1998 (incorporated by reference to Exhibit
(a)(8) to the 14D-1)
4 Text of Press Release issued by Parent on December 14, 1998
(incorporated by reference to Exhibit (a)(9) to the 14D-1).
*5 Letter to Stockholders dated December 18, 1998 from Rod A.
Beckstrom, Chief Executive Officer of the Company.
*6(1) Opinion of Broadview International LLC, dated December 9,
1998.
7 Agreement and Plan of Merger dated as of December 14, 1998,
among the Company, Parent, USA Sub and Purchaser
(incorporated by reference to Exhibit (c)(1) to the 14D-1).
8 Stockholders Agreement dated as of December 14, 1998 between
Parent, USA Sub and Purchaser and the Rod A. Beckstrom
Trust, David and Diedra Gilbert, Robert Geske and Jerry Bock
(incorporated by reference to Exhibit (c)(2) to the 14D-1).
9 Stockholders Agreement dated as of December 14, 1998 between
Parent, USA Sub and Purchaser and the Rod A. and Patrice V.
Beckstrom Charitable Remainder Trust (incorporated by
reference to Exhibit (c)(3) to the 14D-1).
10 Employment Agreement, dated December 14, 1998, between the
Company and David Gilbert (incorporated by reference to
Exhibit (c)(5) to the 14D-1).
11 Employment Agreement, dated December 14, 1998, between the
Company and Rod A. Beckstrom (incorporated by reference to
Exhibit (c)(4) of 14D-1).
12 Long Term Incentive Plan Term Sheet (incorporated by
reference to Exhibit (c)(6) of the 14D-1).
13 Form of Change of Control Agreement.
14(2) 1988 Incentive Stock Plan and related agreements.
15(3) 1995 Stock Plan and related agreements.
16(4) Director Option Plan and related agreements
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
*17(5) The Company's Information Statement pursuant to Section
14(f) of the Exchange Act and Rule 14f-1 thereunder.
</TABLE>
- ---------------
* Included in materials mailed to stockholders.
(1) Attached hereto as Annex B.
(2) Incorporated by reference to Exhibit 10.1 of the Company's Registration
Statement on Form S-11 (Registration No. 33-89242), as amended.
(3) Incorporated by reference to Exhibit 10.4 of the Company's Registration
Statement on Form S-1 (Registration No. 33-89242), as amended.
(4) Incorporated by reference to Exhibit 10.2 of the Company's Registration
Statement on Form S-1 (Registration No. 33-89242), as amended.
(5) Attached hereto as Annex A.
9
<PAGE> 10
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
accurate.
C-ATS SOFTWARE INC.
By: /s/ ROD A. BECKSTROM
------------------------------------
Rod A. Beckstrom
Chief Executive Officer
Dated: December 18, 1998
10
<PAGE> 11
ANNEX A
C-ATS SOFTWARE INC.
1870 EMBARCADERO ROAD
PALO ALTO, CALIFORNIA 94303
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about December 18, 1998,
as a part of the C-ATS Software Inc. ("Company") Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") to the holders of record of
shares of Common Stock, par value $0.001 per share, of the Company (the
"Shares") at the close of business on or about December 16, 1998. You are
receiving this Information Statement in connection with the possible election of
persons designated by Purchaser (as defined below) to a majority of the seats on
the Board of Directors of the Company.
On December 14, 1998, the Company, Misys plc, a public limited company
organized under the laws of England ("Misys" or "Parent"), Kirsty, Inc., a
Delaware corporation and wholly-owned subsidiary of Misys ("USA Sub"), and Moxie
Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of USA Sub
("Purchaser"), entered into an Agreement and Plan of Merger (the "Merger
Agreement") in accordance with the terms and subject to the conditions of which
(i) Parent will cause the Purchaser to commence a tender offer (the "Offer") for
all outstanding Shares at a price of $7.50 per Share to the stockholders of the
Company in cash and without interest thereon, and (ii) Purchaser will be merged
with and into the Company (the "Merger"). As a result of the Offer and the
Merger, the Company will become an indirect, wholly-owned subsidiary of Parent.
The Merger Agreement requires the Company to use all reasonable efforts to
cause the directors designated by Parent to be elected to the Board of Directors
under the circumstances described therein. See "Board of Directors and Executive
Officers."
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
thereunder. Capitalized terms used herein and not otherwise defined herein shall
have the meaning set forth in the Schedule 14D-9. YOU ARE URGED TO READ THIS
INFORMATION STATEMENT CAREFULLY. YOU ARE NOT, HOWEVER, REQUIRED TO TAKE ANY
ACTION IN CONNECTION WITH THIS INFORMATION STATEMENT.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
December 18, 1998. The Offer is scheduled to expire at 12:00 midnight, New York
City time, on Tuesday, January 19, 1999, unless the Offer is extended.
The information contained in this Information Statement concerning Parent,
USA Sub and Purchaser has been furnished to the Company by Parent, USA Sub and
Purchaser, and the Company assumes no responsibility for the accuracy or
completeness of such information.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of December 11, 1998, there were
7,123,577 Shares outstanding and 1,792,550 Shares authorized for issuance
pursuant to the exercise of outstanding options to purchase Shares. The Board of
Directors currently consists of one class with six (6) members. At each annual
meeting of stockholders, all six (6) directors are elected for one-year terms.
The officers of the Company serve at the discretion of the Board.
The Merger Agreement provides that, promptly upon the purchase by the
Purchaser of Shares pursuant to the Offer, the Purchaser shall be entitled,
subject to compliance with Section 14(f) of the Exchange Act, to
A-1
<PAGE> 12
designate up to such number of directors, rounded to the next whole number, on
the Board as shall give the Purchaser representation on the Board equal to the
product of the total number of directors on the Board (giving effect to the
directors elected pursuant to this sentence) multiplied by the percentage that
the aggregate number of Shares beneficially owned by Parent, the Purchaser or
any of their affiliates at such time bears to the total number of Shares
outstanding (provided that, if Parent, the Purchaser and their affiliates
beneficially own in the aggregate at least a majority of the Shares, the
Purchaser shall in any event be entitled to designate at least a majority of the
directors on the Board), and the Company shall, at such time, promptly take all
actions necessary to cause the Purchaser's designees to be elected as directors
of the Company, including increasing the size of the Board or securing the
resignations of incumbent directors or both; provided, however, that in the
event that the Purchaser's designees are elected to the Board, until the
effective time of the Merger (the "Effective Time"), the Board shall have at
least one director who was a director of the Company on the date of the Merger
Agreement and who was not an officers of the Company or any of its subsidiaries
(each, an "Independent Director") and, provided, further, that, if no
Independent Directors then remain, the other directors of the Company on the
date of the Merger Agreement shall designate one person to fill such vacancy who
shall not be an officer or affiliate of the Company or any of its subsidiaries,
or officer or affiliate of Parent or any of its subsidiaries, and any such
person is deemed to be an Independent Director for purposes of the Merger
Agreement. At such times, the Company has agreed to use reasonable best efforts
to cause persons designated by the Purchaser to constitute the same percentage
as persons designated by the Purchaser shall constitute of the Board with
respect to (a) each committee of the Board, (b) each board of directors of each
subsidiary of the Company, and (c) each committee of each such board, to the
extent permitted by applicable law. The Merger Agreement provides that,
following the election or appointment of designees of the Purchaser pursuant to
the terms of the Merger Agreement and prior to the Effective Time, any amendment
of the Merger Agreement or the constituent documents of the Company, any
termination of the Merger Agreement by the Company, any extension by the Company
of the time for the performance of any of the obligations or other acts of the
Purchaser or waiver of any of the Company's rights under the Merger Agreement
shall require the concurrence of a majority of the Independent Directors.
It is expected that the Parent Designees may assume office at any time
following the purchase by Purchaser and Parent of a majority of the outstanding
Shares pursuant to the Offer, which purchase cannot be earlier that January 20,
1999, and that, upon assuming office, the Parent Designees (as defined below)
will thereafter constitute the majority of the Board of Directors of the
Company.
A-2
<PAGE> 13
PARENT DESIGNEES
Pursuant to the Merger Agreement, Parent has the right to designate a
majority of the directors of the Company following the consummation of the
Offer. It is currently anticipated that Parent will designate such directors
from the individuals listed in the following table (collectively the "Parent
Designees"). The following table sets forth the name, age, present principal
occupations or employment and five-year employment history for each of the
Parent Designees. Unless otherwise indicated, each individual is a citizen of
the United Kingdom and the business address is Burleigh House, Salford Priors,
Worcestershire WR11 5SH, England.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT WITH
NAME AGE MISYS PLC; MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- --------------------------------------- --- -------------------------------------------------------------
<S> <C> <C>
Kevin Lomax............................ 51 Executive Chairman, Misys plc (1985 to present).
Strone Macpherson...................... 51 Deputy Chairman, Misys plc (1989 to present).
Howard Evans........................... 49 Finance Director, Misys plc (January, 1998 to present);
Finance Director, Courtaulds plc (1994-1997); Partner, Price
Waterhouse, Accountants (1984-1994).
Ross K. Graham......................... 52 Corporate Development Director and Company Secretary, Misys
plc (January, 1998 to present); Finance Director, Misys plc
(1987 to January, 1998).
Michael K. O'Leary..................... 47 Chief Executive Officer, Medic Computer Systems Inc.
Medic Computer Systems Inc. (February, 1998 to present); Chief Executive Officer,
8601 Six Forks Road Insurance Division, Misys plc (1992-1998).
Suite 300
Raleigh, North Carolina
27615 United States
John G. Sussens........................ 54 Managing Director, Misys plc (1989 to present); Chief
Executive, Banking Division, Misys plc (1985-1998); Chief
Executive Officer, Insurance and Information Systems
Divisions (1989-1995).
Anthony G. L. Alexander................ 61 Chairman, Marley plc (1997 to present); Vice Chairman,
Crafnant Imperial Tobacco Group plc (August, 1996 to present); Chief
Gregories Farm Lane Operating Officer, UK, Hanson plc (1986-1996).
Beaconsfield
Bucks
HP9 1HJ England
Dr. George Gray........................ 61 Chairman, Serco Group plc (1982 to present).
19 Lakeside Grange
Weybridge
Surrey
KT13 9ZE England
George ("Chuck") Farr.................. 58 Retired (1998 to present); Vice Chairman of American Express
69 Vineyard Lane (1995-1998); Director, McKinsey & Company (1968-1995).
Greenwich, CT 06831
Charles John Colwell................... 33 President, Secretary and Treasurer, Kirsty, Inc.; Chief
Summit Systems Inc. Financial Officer, Summit Systems, Inc. (1998 to present);
22 Cortlandt Street Regional Financial Controller, Midas-Kapiti International
New York, NY 10007 Ltd. (1995-1998); Internal Auditor, Misys plc (1993-1995).
Rupert C. Soames....................... 39 Vice President and Treasurer, Moxie Acquisition Corp.; Chief
Midas-Kapiti International Ltd Executive Officer, Midas-Kapiti International Limited (1997
1 St. George's Road to present); Managing Director, Avery Berkel UK (1995-1997);
Wimbledon Assistant Commercial Director, GEC Group (1991-1995).
London
SW 19 4DR England
</TABLE>
To the Company's knowledge, none of the Parent Designees (i) is currently a
director of, or holds any position with, the Company, (ii) has a familial
relationship with any of the directors or executive officers of the Company or
(iii) beneficially owns any securities (or rights to acquire any securities) of
the Company.
A-3
<PAGE> 14
The Company has been advised by Parent that, to the best of Parent's knowledge,
none of the Parent Designees has been involved in any transaction with the
Company or any of its directors, executive officers or affiliates which are
required to be disclosed pursuant to the rules and regulations of the Securities
and Exchange Commission (the "Commission" or "SEC"), except as may be disclosed
herein or in the Schedule 14D-9.
Parent has advised the Company that each of the persons listed in the table
above has consented to act as a director, and that none of such persons has
during the last five years been convicted in a criminal proceeding (excluding
traffic violations and similar misdemeanors) or was a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding 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 or is
involved in any other legal proceeding which is required to be disclosed under
Item 401(f) of Regulation S-K promulgated by the SEC.
THE CURRENT MEMBERS OF THE BOARD AND EXECUTIVE OFFICERS OF THE COMPANY
Biographical information concerning each of the Company's current directors
and executive officers as of December 31, 1997 is as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ------------------------- --- -------------------------------------------------------------
<S> <C> <C>
Rod A. Beckstrom......... 37 Chief Executive Officer and Chairman of the Board
David Gilbert............ 52 President, Chief Operating Officer and Director
Manuel Correia(2)........ 63 Director
Mark P. Kalkus(1)........ 35 Director
Dale Prouty(2)........... 45 Director
Mario M. Rosati(1)....... 51 Director and Secretary
James E. Graber.......... 53 Vice President of Finance and Chief Financial Officer
Robert L. Geske.......... 52 Vice President of Research and Development and Director
Finn Christensen......... 33 Vice President of Marketing
Amos Barzilay............ 43 Vice President of Capital Markets/Treasury
Jill Kulick.............. 50 Vice President of Human Resources
</TABLE>
- ---------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Rod A. Beckstrom was a founder of the Company and has been Chief Executive
Officer and Chairman since 1988. Before founding the Company, Mr. Beckstrom
worked at Morgan Stanley International in London as a swaps trader. Mr.
Beckstrom received a B.A. in Economics and an M.B.A. from Stanford University.
David Gilbert became a Director of the Company in November 1997. Dr.
Gilbert has served as President and Chief Operating Officer of the Company since
September 1996. In 1979, he founded Banking Decision Systems, Inc., which was
acquired in 1988 by Logica, Inc. ("Logica"). At Logica he served as Senior Vice
President and International Director of Logica's global risk management
business. Until its recent acquisition by First Nationwide Holdings, Inc., Dr.
Gilbert was also Chairman of the Board of Directors at California Federal before
its merger with First Nationwide Holdings, Inc. Dr. Gilbert received a Ph.D. in
Economics from Harvard University.
Dale Prouty became a Director of the Company in August 1997. From May 1991
until his retirement in April 1997, he served as Executive Vice President of
Investment Technology Group, Inc. ("ITG"). Dr. Prouty now serves as executive
consultant for ITG. Prior to this, Dr. Prouty founded and served as chief
executive officer of Integrated Analytics Corporation ("IAC"), a provider of
real-time intelligent systems for the securities industry, which was ultimately
acquired by ITG. Prior to this, Dr. Prouty developed analytic software systems
for Inference Corporation and NASA Project Galileo. Dr. Prouty is also a
director of Investment Technology Group, Inc. and Sqribe Technology. He received
a Ph.D. in Applied Physics from California Institute of Technology.
A-4
<PAGE> 15
Mark P. Kalkus became a Director of the Company in 1990. Mr. Kalkus has
been President and Chief Operating Officer of Lamar Companies, a real estate
investment concern, since 1992. From 1988 to 1992, Mr. Kalkus was Vice President
of Lamar Companies. Mr. Kalkus received a B.A. degree from Stanford University
and a J.D. from Stanford Law School.
Mario M. Rosati has been a Director of the Company since 1989 and Secretary
since 1988. Mr. Rosati is a member of the law firm of Wilson Sonsini Goodrich &
Rosati. Mr. Rosati received a B.A. degree from the University of California at
Los Angeles and a J.D. from the Boalt Hall School of Law at the University of
California at Berkeley. Mr. Rosati is also a director of Aehr Test Systems,
Inc., Genus, Inc., LECG, Inc., Meridian Data, Inc., Ross Systems, Inc., Sanmina
Corporation and several privately held companies.
Manuel Correia became a Director of the Company in January 1995. Since May
of 1997, he has been the Executive Vice President and Chief Operating Officer of
CoWare, Inc. CoWare, Inc. is a start-up company in the EDA business. From
November 1988 to May 1997, Mr. Correia was Vice President of Technical Services
for Cadence Design Systems, Inc., one of the world's largest CAD firms. Prior to
this, Mr. Correia was Vice President of Marketing and Customer Service for
Gateway Design Automation. Mr. Correia received a B.S. degree in Electrical
Engineering from Northeastern University and an M.S. degree in Management
Sciences from State University of New York. Mr. Correia is also a director of
Infinium Software, Inc.
James E. Graber has served as Vice President of Finance and Chief Financial
Officer of the Company since November 1997. From June 1991 to November 1997, he
served as the principal financial consultant at Graber Associates, a financial
consulting company.
Robert L. Geske has served as Vice President of Research and Development
and director of the Company since February 1996. From 1986 to its acquisition by
the Company in February 1996, Mr. Geske served as Chairman of the Board and
Chief Executive Officer of LOR/Geske Bock Associates, Inc. Mr. Geske has also
served as Professor of Finance at the University of California at Los Angeles
since July 1977.
Finn Christensen has served as Vice President of Marketing since February
1996. From March 1992 to January 1996, he served as Principal of Risk Management
and Derivatives Trading Systems at Fusion Systems Group, Inc., a financial
services company.
Amos Barzilay has served as Vice President of Capital Markets/Treasury
since March 1996. From January 1994 to February 1996, he served as Director of
Industry Marketing at Informix Corporation, a database software company. From
April 1991 to December 1993, Mr. Barzilay served as Vice President of
Application at Syntelligence Systems, Inc., a financial services company.
Jill Kulick has served as Vice President of Human Resources since July
1997. From 1994 to June 1997, she served as Vice President, Human Resources
Officer at Bank of America, N.A.
There are no family relationships between any of the foregoing officers and
directors.
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended December 31, 1997 (the "Last Fiscal Year"),
the Board of Directors held a total of four (4) meetings. Each of the incumbent
directors attended at least 75% of all meetings of the Board of Directors and of
the committees, if any, upon which such director served.
The Audit Committee, which currently consists of directors Manuel Correia
and Dale Prouty, was established to review, in consultation with the independent
accountants, the Company's financial statements, accounting and other policies,
accounting systems and system of internal controls. The Audit Committee also
recommends the engagement of the Company's independent accountants and reviews
other matters relating to the relationships of the Company with its accountants.
The Audit Committee met three (3) times during the Last Fiscal Year.
The Compensation Committee, which currently consists of directors Mark P.
Kalkus and Mario M. Rosati, was established to review and act on matters
relating to compensation levels and benefit plans for key executives of the
Company, among other things. The Compensation Committee met four (4) times
during the
A-5
<PAGE> 16
Last Fiscal Year. The Board of Directors currently has no nominating committee
or a committee performing a similar function.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors for the Last Fiscal
Year consisted of directors Mark P. Kalkus, Andrew S. Rachleff and Mario M.
Rosati. No interlocking relationship exists between the Company's Board of
Directors or Compensation Committee and the Board of Directors or compensation
committee of any other company.
COMPENSATION OF DIRECTORS
In the Last Fiscal Year, non-employee Directors were compensated $2,500 per
quarter for their services. Directors are also reimbursed for their expenses
incurred in attending Board meetings. Non-employee directors participate in the
1995 Director Option Plan (the "Director Plan"). Under the Director Plan, each
current non-employee director has been granted, on the later of January 6, 1995
or the date on which such individual first became a director, a non-statutory
option to purchase 15,000 shares of Common Stock which has a term of ten years
and which vests or will vest and become exercisable as to one-twelfth ( 1/12) of
the shares at the end of each three month period from its date of grant, such
that each option shall be fully exercisable three years following its date of
grant, based on continued service as a director. Beginning in 1998, for each
subsequent year after three years of continued service as a Director, each
non-employee director shall be permitted to choose from either of two
compensation plans. Under the terms of the first plan, a non-employee Director
will receive $2,500 per quarter and a non-statutory option to purchase 7,500
shares of Common Stock which will vest as to 25% of the shares at the end of
each three-month period. Under the terms of the second plan, a non-employee
Director will receive no cash compensation and a non-statutory option to
purchase 10,000 shares of Common Stock which will vest as to 25% of the shares
at the end of each three-month period. Such options shall have a term of ten
years and shall have an exercise price of 100% of the fair market value of the
Common Stock on the date of the grant. During the fiscal year ended December 31,
1997, options to purchase an aggregate of 100,000 shares of the Company's Common
Stock were granted to Rod A. Beckstrom pursuant to the company's 1995 plan. Of
such grant, options to purchase 50,000 shares have an exercise price of $6.50
per share and options to purchase 50,000 shares have an exercise price of $8.00
per share. These options are exercisable over four years with 25% of the shares
subject to the option vesting 12 months after the vesting commencement date, and
one forty-eighth ( 1/48) of the shares subject to the option vesting each month
thereafter.
A-6
<PAGE> 17
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the Company's four other executive officers
(collectively, the "Named Executive Officers") for services rendered in all
capacities to the Company during the years ended December 31, 1995, 1996 and
1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES ALL OTHER
------------------------ UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) OPTIONS(#) ($)(2)
--------------------------- ---- ------------ -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Rod A. Beckstrom.................. 1997 192,725 28,875 100,000 1,200
Chief Executive Officer 1996 191,540 28,875 50,000 --
1995 160,209 -- -- --
David Gilbert(4).................. 1997 192,637 28,875 -- 1,200
President and Chief 1996 179,823 28,875 200,000 30,000(3)
Operating Officer 1995 -- -- -- --
Finn Christensen(5)............... 1997 151,750 20,250 -- --
Vice President of Marketing 1996 132,250 20,250 90,000 --
1995 -- -- -- --
Robert L. Geske(6)................ 1997 144,000 21,600 -- 1,200
Vice President of 1996 132,000 21,600 -- --
Research and Development 1995 -- -- -- --
Amos Barzilay(7).................. 1997 152,682 21,750 -- 1,200
Vice President Capital 1996 115,202 21,750 90,000 --
Markets and Treasury 1995 -- -- -- --
</TABLE>
- ---------------
(1) Amounts shown are before salary reductions resulting from contributions to
the Company's 401(k) Profit Sharing Plan (the "401(k) Plan").
(2) Includes matching contributions of $1,200 each paid by the Company under the
401(k) Plan.
(3) Amount shown is a relocation expense reimbursement.
(4) Dr. Gilbert joined the Company in January 1996.
(5) Mr. Christensen joined the Company in February 1996.
(6) Mr. Geske joined the Company in January 1996.
(7) Mr. Barzilay joined the Company in March 1996.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
In connection with the February 13, 1996 acquisition of LOR/Geske Bock
Associates, Inc., by C-ATS Sub, Inc., a wholly-owned subsidiary of the Company,
Robert Geske entered into an employment agreement, dated January 30, 1996,
wherein Mr. Geske agreed to serve as a Vice President of the Company. In
consideration for his services, Mr. Geske receives an annual base salary of
$144,000 and is eligible to participate in any of the Company's executive bonus
plans. The term of Mr. Geske's agreement is four years, and after the four year
period. Further, under the agreement, Mr. Geske is to receive certain severance
benefits should his employment with the Company terminate for any reason other
than for cause.
In connection with the Offer and the Merger, the Company has entered into
employment agreements (the "Employment Agreements"), each dated the date of the
Merger Agreement, with Messrs. Gilbert and Beckstrom to secure their continued
employment following the Merger. The following is a summary of the material
provisions of the Employment Agreements. The summary is qualified in its
entirety by reference to
A-7
<PAGE> 18
the Employment Agreements which are incorporated by reference and copies of
which have been filed with the Commission as exhibits to the Schedule 14D-1.
Under the Employment Agreements, Messrs. Gilbert and Beckstrom will be
employed for a term commencing on the Effective Time of the Merger and ending on
the third anniversary thereof (the "Initial Term"). Following the Initial Term,
the Employment Agreements will be renewable for successive six month terms.
During the term of the Employment Agreements, each of Messrs. Gilbert and
Beckstrom will be paid a base salary of $250,000, subject to annual review on
each May 31. In the event of the termination of Messrs. Gilbert's or Beckstrom's
employment, during the Initial Term, without cause by the Surviving Corporation
or by either of them for good reason (in each case, as defined in the Employment
Agreements), such terminated executive will receive six months' continuation of
base salary payments and medical benefits. The Employment Agreements also
contain restrictions on competition and solicitation of employees and clients
and other customer provisions.
The Company plans to enter into similar employment agreements with certain
other executive employees (each, an "Executive Employee" and collectively, the
"Executive Employees") in order to secure their continued employment following
the Merger as well.
CHANGE IN CONTROL ARRANGEMENTS
On November 11, 1998, the Board of Directors approved change of control
agreements (the "Change of Control Agreements") with J. Graber, J. Kulick, A.
Barzilay and F. Christensen. The Change of Control Agreements provide that
during the twelve months following a change in control of the Company, the
Company will not terminate employment without cause, without advance notice
equal to the lesser of (i) six months or (ii) twelve months minus the time
elapsed since the change in control.
STOCK OPTION GRANTS AND EXERCISES
The following table sets forth the number and terms of options granted to
the Named Officers during the last fiscal year ended December 31, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
---------------------------- AT ASSUMED ANNUAL RATES
NUMBER OF % OF OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------------
NAME GRANTED FISCAL YEAR(1) ($/SHARE) DATE 5% 10%
---- ---------- -------------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Rod A. Beckstrom....... 50,000 7.7% $6.50 8/13/07 $204,391 $517,966
50,000 7.7% $8.00 8/13/07 $129,391 $442,966
David Gilbert.......... -- -- -- -- -- --
Finn Christensen....... -- -- -- -- -- --
Robert L. Geske........ -- -- -- -- -- --
Amos Barzilay.......... -- -- -- -- -- --
</TABLE>
- ---------------
(1) Based on 650,000 total options granted to employees during the Last Fiscal
Year.
(2) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission. There can
be no assurance that the actual stock price appreciation over the option
term will be at the assumed 5% and 10% levels or any other defined level.
Actual gains, if any, on stock option exercises are dependent on the future
performance of the Common Stock, overall market conditions and the option
holders' continued employment through the vesting period. The amounts
reflected in the table may not be achieved and do not reflect the Company's
estimate of future stock price growth. Unless the market price of the Common
Stock appreciates over the option term, no value will be realized from the
option grants made to the Named Officers.
A-8
<PAGE> 19
The following table provides information with respect to option exercises
by the Named Officers during the fiscal year ended December 31, 1997 and the
value of their unexercised options at December 31, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR 1997 AND
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ON VALUE OPTIONS AT FISCAL YEAR END(#) FISCAL YEAR END ($)(2)
EXERCISE REALIZED ------------------------------ ----------------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Rod A. Beckstrom..... -- -- 81,876 128,124 $248,010 $13,523
David Gilbert........ -- -- 69,793 130,207 $ 25,823 $48,177
Finn Christensen..... -- -- 35,625 54,375 $ 13,181 $20,119
Robert L. Geske...... -- -- -- -- -- --
Amos Barzilay........ -- -- 34,375 55,625 $ 12,719 $20,581
</TABLE>
- ---------------
(1) Calculated as the fair market value of the shares on the date of exercise
less the exercise price of the options.
(2) Calculated as the fair market value of the securities underlying the options
at the fiscal year end ($5.063 per share on December 31, 1997) less the
exercise price of the options.
STOCK PLANS
The Company's 1988 Incentive Stock Plan (the "1988 Plan") and 1995 Stock
Plan (the "1995 Plan") provide for the grants to employees of the Company of
incentive stock options, and for the grant of nonstatutory stock options or
stock purchase rights to employees and consultants of the Company.
The 1998 Plan provides that, in the event of a merger of the Company, the
outstanding options will be assumed by the successor or equivalent options
substituted by the successor. The 1995 Plan provides that, in the event of the
merger of the Company, the outstanding options may be assumed and become
exercisable for the consideration issued in the merger or equivalent options
substituted by the successor and that, if outstanding options are neither
assumed nor substituted, they will become immediately fully vested and
exercisable.
On November 7, 1996, the Compensation Committee approved a form of Stock
Option Agreement for certain executive officers which provide for the immediate
acceleration of all unvested options in the event of a change of control of the
Company. Upon the consummation of the Merger, such change of control provisions
will accelerate and fully vest all unvested options of J. Graber, J. Kulick, A.
Barzilay, F. Christensen, D. Samuels, D. Gilbert and R. Beckstrom.
In connection with the Merger, the Board of Directors approved the
acceleration of all unvested options of Messrs. Gilbert and Beckstrom upon the
request of the Parent.
LIMITATIONS ON LIABILITIES AND INDEMNIFICATION MATTERS
The Company's Certificate of Incorporation limits the liability of its
directors to the fullest extent permitted by the General Corporation Law of the
State of Delaware.
The Company's Bylaws provide that the Company shall indemnify its directors
and officers, and that the Company has the power to indemnify its employees and
other agents, to the maximum extent and in the manner permitted by the General
Corporation Law of the State of Delaware as the same now exists or may hereafter
be amended. In addition, the Company's stockholders have approved, and the
Company intends as soon as is practicable to enter into, agreements to indemnify
its directors and officers. Such agreements may require the Company, among other
things, to indemnify such officers and directors against certain liabilities
that may arise by reason of their status or service as directors or officers
(other than liabilities arising from willful misconduct of a culpable nature),
to advance their expenses incurred as a result of any proceeding
A-9
<PAGE> 20
against them as to which they could be indemnified, and to obtain directors' and
officers' insurance if available on reasonable terms.
The Company's By-laws, provide that the Company shall indemnify its
directors and officers to the fullest extent permitted by Delaware law,
including in circumstances in which indemnification is otherwise discretionary
under Delaware law. The Company has also entered into indemnification agreements
with its officers and directors containing provisions which may require the
Company, among other things, to indemnify such officers and directors against
certain liabilities that may anise by reason of their status or service as
directors or officers (other than liabilities arising from willful misconduct of
a culpable nature), to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified, and to obtain
directors' and officers' insurance if available on reasonable terms.
CERTAIN TRANSACTIONS
GENERAL
In its ordinary course of business, the Company enters into transactions
with certain of its directors and officers. The Company believes that each such
transaction has been on terms no less favorable for the Company than could have
been obtained in a transaction with an independent third party.
CHANGE OF CONTROL AGREEMENTS
On November 11, 1998, the Board of Directors approved change of control
agreements (the "Change of Control Agreements") with J. Graber, J. Kulick, A.
Barzilay, F. Christensen and D. Samuels. The Change of Control Agreements
provide that during the twelve months following a change in control of the
Company, the Company will not terminate employment without cause, without
advance notice equal to the lesser of (i) six months or (ii) twelve months minus
the time elapsed since the change in control.
STOCK OPTIONS
During the Last Fiscal Year, options to purchase an aggregate of 100,000
shares of the Company's Common Stock were granted to Rod A. Beckstrom pursuant
to the company's 1995 Stock Plan. Of such grant, options to purchase 50,000
shares have an exercise price of $6.50 per share and options to purchase 50,000
shares have an exercise price of $8.00 per share. These options are exercisable
over four years with 25% of the shares subject to the option vesting 12 months
after the vesting commencement date, and 1/48 of the shares subject to the
option vesting each month thereafter.
On December 9, 1998, the Board of Directors authorized Messrs. Gilbert and
Beckstrom, if requested by Parent, to exercise all unvested options held by them
for the purpose tendering into the Offer the shares received on exercise of the
options.
LEGAL COUNSEL
During the last fiscal year, Mario M. Rosati, a member of the Board of
Directors of the Company, was also a member of the law firm of Wilson Sonsini
Goodrich & Rosati, a professional corporation. The Company has continued to
retain Wilson Sonsini Goodrich & Rosati, a professional corporation as its legal
counsel during the current fiscal year.
A-10
<PAGE> 21
SECURITY OWNERSHIP OF DIRECTORS, OFFICERS AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 31, 1998 (the "Record
Date"), except as otherwise noted, by (i) each stockholder known to the Company
to be a beneficial owner of more than 5% of the Company's Common Stock; (ii)
each director and nominee for director; (iii) each of the Company's executive
officers named in the Summary Compensation Table appearing herein (the "Named
Officers"); and (iv) all current executive officers and directors of the Company
as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
-----------------------
BENEFICIAL OWNER NUMBER PERCENT(2)
---------------- --------- ----------
<S> <C> <C>
Misys plc(3)................................................ 3,465,375 39.7%
Burleigh House
Chapel Oak, Salford Priors
Worcestershire WR 3SH England
Rod A. Beckstrom(4)......................................... 1,231,323 17.4%
David L. Babson and Company Incorporated(5)................. 732,800 10.7%
One Memorial Drive
Cambridge, MA 02142
Merrill, Pickard, Anderson & Eyre V, L.P.(6)(7)............. 679,015 9.9%
(Andrew Rachleff)
2480 Sand Hill Road, Suite 200
Menlo Park, CA 94205
State of Wisconsin Investment Board(8)...................... 463,700 6.8%
P.O. Box 7842
Madison, WI 53707
Robert Geske................................................ 289,325 4.2%
Jerome Bock................................................. 289,325 4.2%
Manuel Correia(9)........................................... 15,000 *
Mark P. Kalkus(10).......................................... 53,100 *
Amos Barzilay(11)........................................... 48,376 *
Mario M. Rosati(12)......................................... 17,997 *
Andrew Rachleff(6)(7)....................................... 679,015 9.9%
Finn Christensen(13)........................................ 47,626 *
David Gilbert(14)........................................... 252,000 3.5%
James Graber................................................ -- *
Jill Kulick................................................. -- *
All Directors and Executive Officers as a group (12
persons)(15).............................................. 2,921,087 39.2%
</TABLE>
- ---------------
* Represents less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Unless otherwise indicated in the
footnotes to this table, the persons and entities named in the table have
represented to the Company that they have sole voting and sole investment
power with respect to all shares beneficially owned, subject to community
property laws where applicable. Unless otherwise indicated, the address of
each of the beneficial owners listed in the table is c/o C-ATS Software
Inc., 1870 Embarcadero Road, Palo Alto, CA 94303.
(2) Percent ownership is based on 6,855,874 shares of Common Stock outstanding.
Shares of Common Stock subject to options that are currently exercisable or
exercisable within 60 days of the Record Date are deemed to be outstanding
and to be beneficially owned by the person holding such options or warrants
for the purpose of computing the percentage ownership of such person but
are not treated as outstanding for the purpose of computing the percentage
ownership of any other person.
A-11
<PAGE> 22
(3) Beneficial ownership of the Company's Common Stock as of December 14, 1998.
Shares of Common Stock subject to options that are currently exercisable or
exercisable within 60 days of December 14, 1998 are deemed to be
outstanding and to be beneficially owned by the person holding such options
for the purpose of computing the percentage ownership of such person.
Includes (i) 1,587,783 shares held by certain stockholders and subject to
unconditional tender obligations by such certain stockholders pursuant to
the Offer; (ii) 460,000 shares issuable upon exercise of options held by
Messrs. Gilbert and Beckstrom which, if exercised, are subject to
unconditional tender obligations pursuant to the Offer; and (iii) 1,417,592
shares subject to an irrevocable option (the "Top-Up Option") to purchase
such shares from the Company provided certain conditions are satisfied. The
number of shares subject to the Top-Up Option will increase if the number
of shares outstanding increases. Misys disclaims beneficial ownership of
the shares subject to the Top-Up Option.
(4) Includes (i) 210,000 shares issuable upon exercise of options held by Mr.
Beckstrom exercisable within 60 days of December 14, 1998 and (ii) 14,200
shares held by family members and trusts for the benefit of family members
to which Mr. Beckstrom disclaims beneficial ownership.
(5) Based on Amendment Number 1 to Schedule 13G filed in January 1998 by David
L. Babson and Company Incorporated which has sole voting power over 732,800
shares.
(6) Based on Amendment Number 1 to Schedule 13G filed in January 1998 by
Merrill, Pickard, Anderson & Eyre V, L.P. on behalf of itself, Andrew
Rachleff, Bruce Dunlevie, James Anderson and Steven Merrill.
(7) Includes 10,000 shares owned by Mr. Rachleff and 669,015 shares owned
beneficially by Merrill, Pickard, Anderson & Eyre V, L.P., of which
Merrill, Pickard, Anderson & Eyre V Management Co., L.P. is a general
partner. Mr. Rachleff is a general partner of Merrill, Pickard, Anderson &
Eyre V Management Co., L.P. and in such capacity, Mr. Rachleff may be
deemed to share voting and investment power with respect to such shares,
although he disclaims beneficial ownership of such shares except to the
extent of his pecuniary interest therein. In addition to Mr. Rachleff,
there are three other general partners of Merrill, Pickard, Anderson & Eyre
V Management Co., L.P., James C. Anderson, Bruce W. Dunlevie and Steven L.
Merrill, each of whom may be deemed to share voting and investment power
with respect to such shares. Each disclaims beneficial ownership of such
shares except to the extent of his pecuniary interest therein.
(8) Based on Amendment Number 2 to Schedule 13G filed in January 1998 by State
of Wisconsin Investment Board which has sole voting power over 463,700
shares.
(9) Includes 15,000 shares issuable upon exercise of options held by Mr.
Correia exercisable within 60 days of the Record Date.
(10) Includes (i) 15,000 shares issuable upon exercise of options held by Mr.
Kalkus exercisable within 60 days of the Record Date and (ii) 16,000 shares
held by family members and trusts for the benefit of family members to
which Mr. Kalkus disclaims beneficial ownership.
(11) Includes 44,376 shares issuable upon exercise of options held by Mr.
Barzilay exercisable within 60 days of the Record Date.
(12) Includes 15,000 shares issuable upon exercise of options held by Mr. Rosati
exercisable within 60 days of the Record Date.
(13) Includes 45,626 shares issuable upon exercise of options held by Mr.
Christensen exercisable within 60 days of the Record Date.
(14) Includes 250,000 shares issuable upon exercise of options held by Dr.
Gilbert exercisable within 60 days of December 14, 1998.
(15) Includes 595,002 shares issuable upon exercise of options held by Directors
and Executive Officers as a group exercisable within 60 days of either the
Record Date or December 14, 1998, as indicated in footnotes (3) through
(14).
A-12
<PAGE> 23
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
Decisions on compensation of the Company's executive officers are made by
the Compensation Committee of the Board of Directors. The members of the
Compensation Committee for the Last Fiscal Year, Messrs. Kalkus, Rachleff and
Rosati are non-employee directors. Decisions by the Compensation Committee
relating to the compensation of the Company's executive officers are reviewed by
the full Board (which did not modify or reject any Compensation Committee
decisions during 1997), except for decisions about awards under the Company's
Stock Plan, which decisions must be made solely by the committee in order for
the grants under such Stock Plan to satisfy Rule 16b-3.
Compensation Philosophy and Relationship of Performance. This report
reflects the Compensation Committee's executive officer compensation philosophy
for the year ended December 31, 1997 as endorsed by the Board of Directors. The
resulting actions taken by the Company are shown in the compensation tables
supporting this report. The Compensation Committee either approves or recommends
to the Board of Directors compensation levels and compensation components for
the executive officers. With regard to compensation actions affecting the Chief
Executive Officer, all of the non-employee members of the Board of Directors
acted as the approving body.
The Compensation Committee's executive compensation policies are designed
to enhance the financial performance of the Company, and thus stockholder value,
by aligning the financial interests of the key executives with those of
stockholders.
The executive compensation program (the "Program") is viewed in total
considering all of the component parts: base salary, annual performance bonus,
benefits and long-term incentive opportunity in the form of stock options and
stock ownership. The annual compensation components consist generally of equal
or lower base salaries than those of companies within the industry combined with
incentive plans based on the Company's financial performance that can result in
total compensation generally in line with those at comparable companies.
Long-term incentives are tied to stock performance through the use of stock
options. The Compensation Committee's position is that stock ownership by
management is beneficial in aligning management's and stockholders' interests in
the enhancement of stockholder value. Overall, the intent is to have more
significant emphasis on variable compensation components and less on fixed cost
components. The Committee believes this philosophy and structure are in the best
interests of the stockholders.
Executive compensation for fiscal 1997 primarily consisted of base salary
and performance incentives awarded in the form of stock options for such period.
Annual Incentive Arrangements. The Company has adopted a Program which
provides annual incentive compensation in the form of cash bonuses to key
employees, including the Named Officers, who by the nature of their positions
are deemed sufficiently accountable to impact directly the financial results of
the Company. The Program is approved by the Compensation Committee, whose
members are not eligible to participate in the Program.
The Committee believes that key executives should have a significant
proportion of total cash compensation subject to specific strategic and
financial measurements. At the beginning of each fiscal year, or upon an
individual being appointed an executive officer, the Committee sets a target
bonus range (0 - 60%) in 1998 for each executive officer expressed as a
percentage of the executive's base salary. Performance goals for purposes of
determining annual incentive compensation are established, which include sales,
profitability and other strategic and financial measurements. Senior management,
including the Named Officers, have the potential to earn significantly higher
levels of incentive compensation if the Company exceeds its targets. The target
incentive compensation levels established by the Compensation Committee for 1997
expressed as a percentage of base salary were approximately 30%.
The performance goals established at the beginning of 1997 were based on
several strategic and financial measurements including a target level of
profitability and sales and attainment of certain other objectives. Based on
evaluation of the above criteria, the Compensation Committee chose to award
incentive payments for 1997 averaging approximately 15%.
A-13
<PAGE> 24
Stock Options. The Compensation Committee of the Board of Directors
generally determines stock option grants to eligible employees including the
Named Officers. The Committee believes that options granted to management
reinforce the Compensation Committee's philosophy that management compensation
should be closely linked with stockholder value. Stock options have been granted
to all of the Company's management and key employees.
Other Compensation Plans. The Company has adopted certain broad-based
employee benefit plans in which all employees, including the Named Officers, are
permitted to participate on the same terms and conditions relating to
eligibility and generally subject to the same limitations on the amounts that
may be contributed or the benefits payable under those plans. Under the
Company's 401(k) Plan, which is a defined contribution plan qualified under
Sections 401(a) and 401(k) of the Code, participants, including the Named
Officers, can contribute a percentage of their annual compensation. The 401(k)
Plan allows for the Company to make matching contributions. In 1997, the Company
made a matching contribution for participants of $1,200 or 25% of the
individual's contribution, whichever was less.
Mr. Beckstrom's 1997 Compensation. Compensation for the Chief Executive
Officer aligns with the philosophies and practices discussed above for executive
officers in general. All compensation determinations and stock option grants to
the Chief Executive Officer are reviewed by the Compensation Committee with the
Board of Directors. Mr. Beckstrom is not eligible to participate in the Employee
Stock Purchase Plan.
At the beginning of each fiscal year, the Compensation Committee sets a
target bonus amount for the Chief Executive Officer. The target incentive
compensation level established for Mr. Beckstrom for 1997, expressed as a
percentage of his base salary, was 30%.
For 1997, the Chief Executive Officer's performance goals were established
based on strategic and financial measurements, including a target level of sales
and profitability. In evaluating, Mr. Beckstrom's performance for the purpose of
determining his incentive compensation for such period, the Compensation
Committee considered the Company's performance against its financial and
strategic objectives. Based on the evaluation, the Compensation Committee
decided that Mr. Beckstrom's performance qualified him to receive a 15% bonus
award. For specific data regarding Mr. Beckstrom's 1997 compensation, see
"Executive Compensation -- Summary Compensation Table."
Compensation Committee
Mario Rosati
Mark Kalkus
Andrew S. Rachleff
A-14
<PAGE> 25
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16A of the Exchange Act requires that directors, certain officers
of the Company and ten percent stockholders file reports of ownership and
changes in ownership with the Securities and Exchange Commission (the "SEC") as
to the Company's securities beneficially owned by them. Such persons are also
required by SEC rules to furnish the Company with copies of all Section 16(a)
forms they file.
Based solely on its review of copies of Forms 3 and 4 and amendments
thereto furnished to the Company pursuant to Rule 16a-3(e) and Forms 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year, and any written representations referred to in Item 405(b)(2)(i) of
Regulation S-K stating that no Forms 5 were required, the Company believes that,
during the Last Fiscal Year, all Section 16(a) filing requirements applicable to
the Company's officers, directors and ten percent stockholders were complied
with.
A-15
<PAGE> 26
ANNEX B
[BROADVIEW LETTERHEAD]
December 9, 1998
Confidential
Board of Directors
C-ATS Software Inc.
1870 Embarcadero Road
Palo Alto, CA 94303
Dear Members of the Board:
We understand that C-ATS Software Inc. ("C-ATS" or the "Company"), Misys
plc ("Misys" or the "Parent"), Misys USA Sub, a wholly owned subsidiary of Misys
(the "US Parent"), and C-ATS Software Acquisition Corp., a wholly owned
subsidiary of the US Parent (the "Purchaser"), propose to enter into an
Agreement and Plan of Merger (the "Agreement") pursuant to which Parent will
cause the Purchaser to offer to purchase all of the outstanding shares of C-ATS
common stock, par value $.001 per share ("C-ATS Common Stock"), for $7.50 cash
per share (the "Consideration"), upon the terms and subject to the conditions
described in the Agreement (the "Offer"), and subsequently merge with and into
C-ATS (the "Merger"). Pursuant to the Merger, each issued and outstanding share
of C-ATS not acquired in the Offer will be converted into the right to receive
an amount of cash equal to the Consideration. The terms and conditions of the
above described Offer and Merger (together the "Transaction") are more fully
detailed in the Agreement.
You have requested our opinion as to whether the Consideration to be
received by C-ATS shareholders in the Transaction is fair, from a financial
point of view, to C-ATS shareholders.
Broadview International LLC focuses on providing merger and acquisition
advisory services to information technology ("IT") companies. In this capacity,
we are continually engaged in valuing such businesses, and we maintain an
extensive database of IT mergers and acquisitions for comparative purposes. We
are currently acting as financial advisor to C-ATS Board of Directors and will
receive a fee from C-ATS upon the successful conclusion of the Transaction.
B-1
<PAGE> 27
[BROADVIEW LETTERHEAD]
In rendering our opinion, we have, among other things:
1.) reviewed the terms of the Agreement dated December 2, 1998 furnished to us
by C-ATS management on December 3, 1998 (which, for the purposes of this
opinion, we have assumed, with your permission, to be identical in all
material respects to the agreement to be executed);
2.) reviewed C-ATS Form 10-K for the fiscal years ended December 31, 1997,
including the audited financial statements included therein, and C-ATS Form
10-Q for its quarterly period ended September 30, 1998, including the
unaudited financial statements included therein;
3.) reviewed certain internal financial and operating information, including
quarterly projections through December 31, 1999, relating to C-ATS prepared
by C-ATS management and furnished to us by C-ATS management;
4.) participated in discussions with C-ATS management concerning the
operations, business strategy, current financial performance and prospects
for C-ATS;
5.) discussed with C-ATS management its view of the strategic rationale for the
Merger;
6.) reviewed the recent reported closing prices and trading activity for C-ATS
Common Stock;
7.) compared certain aspects of the financial performance of C-ATS with public
companies we deemed comparable;
8.) analyzed available information, both public and private, concerning other
mergers and acquisitions we believe to be comparable in whole or in part to
the Transaction;
9.) reviewed recent equity research analyst reports covering C-ATS;
10.) assisted in negotiations and discussions related to the Transaction among
C-ATS and Misys; and
11.) conducted other financial studies, analyses and investigations as we deemed
appropriate for purposes of this opinion.
B-2
<PAGE> 28
[BROADVIEW LETTERHEAD]
In rendering our opinion, we have relied, without independent verification,
on the accuracy and completeness of all the financial and other information
(including without limitation the representations and warranties contained in
the Agreement) that was publicly available or furnished to us by C-ATS. With
respect to the financial projections examined by us, we have assumed that they
were reasonably prepared and reflected the best available estimates and good
faith judgments of the management of C-ATS as to the future performance of
C-ATS. We have neither made nor obtained an independent appraisal or valuation
of any of C-ATS assets.
Based upon and subject to the foregoing, we are of the opinion that the
Consideration to be received by C-ATS shareholders in the Transaction is fair,
from a financial point of view, to C-ATS shareholders.
For purposes of this opinion, we have assumed that C-ATS is not currently
involved in any material transactions other than the Transaction and those
activities undertaken in the ordinary course of conducting its business. Our
opinion is necessarily based upon market, economic, financial and other
conditions as they exist and can be evaluated as of the date of this opinion,
and any change in such conditions may impact this opinion.
This opinion speaks only as of the date hereof. It is understood that this
opinion is for the information of the Board of Directors of C-ATS in connection
with its consideration of the Transaction and does not constitute a
recommendation to any C-ATS shareholder as to whether such shareholder should
tender its shares in the Offer or as to how such shareholder should vote on the
Merger. This opinion may not be published or referred to, in whole or part,
without our prior written permission, which shall not be unreasonably withheld.
Broadview International LLC hereby consents to references to and the inclusion
of this opinion in its entirety in the Schedule 14D-9 to be distributed to C-ATS
shareholders in connection with the Transaction.
Sincerely,
/s/Broadview International LLC
Broadview International LLC
B-3
<PAGE> 29
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
*1 Offer to Purchase dated December 18, 1998 (incorporated by
reference to Exhibit (a)(1) to Purchaser's Tender Offer
Statement on December 18, 1998, as amended (the "14D-1").
*2 Letter of Transmittal (incorporated by reference to Exhibit
(a)(2) to the 14D-1).
3 Text of Press Release issued by Parent and the Company on
December 14, 1998 (incorporated by reference to Exhibit
(a)(8) to the 14D-1)
4 Text of Press Release issued by Parent on December 14, 1998
(incorporated by reference to Exhibit (a)(9) to the 14D-1).
*5 Letter to Stockholders dated December 18, 1998 from Rod A.
Beckstrom, Chief Executive Officer of the Company.
*6(1) Opinion of Broadview International LLC, dated December 9,
1998.
7 Agreement and Plan of Merger dated as of December 14, 1998,
among the Company, Parent, USA Sub and Purchaser
(incorporated by reference to Exhibit (c)(1) to the 14D-1).
8 Stockholders Agreement dated as of December 14, 1998 between
Parent, USA Sub and Purchaser and the Rod A. Beckstrom
Trust, David and Diedra Gilbert, Robert Geske and Jerry Bock
(incorporated by reference to Exhibit (c)(2) to the 14D-1).
9 Stockholders Agreement dated as of December 14, 1998 between
Parent, USA Sub and Purchaser and the Rod A. and Patrice V.
Beckstrom Charitable Remainder Trust (incorporated by
reference to Exhibit (c)(3) to the 14D-1).
10 Employment Agreement, dated December 14, 1998, between the
Company and David Gilbert (incorporated by reference to
Exhibit (c)(5) to the 14D-1).
11 Employment Agreement, dated December 14, 1998, between the
Company and Rod A. Beckstrom (incorporated by reference to
Exhibit (c)(4) of 14D-1).
12 Long Term Incentive Plan Term Sheet (incorporated by
reference to Exhibit (c)(6) of the 14D-1).
13 Form of Change of Control Agreement.
14(2) 1988 Incentive Stock Plan and related agreements.
15(3) 1995 Stock Plan and related agreements.
16(4) Director Option Plan and related agreements
*17(5) The Company's Information Statement pursuant to Section
14(f) of the Exchange Act and Rule 14f-1 thereunder.
</TABLE>
- ---------------
* Included in materials mailed to stockholders.
(1) Attached hereto as Annex B.
(2) Incorporated by reference to Exhibit 10.1 of the Company's Registration
Statement on Form S-11 (Registration No. 33-89242), as amended.
(3) Incorporated by reference to Exhibit 10.4 of the Company's Registration
Statement on Form S-1 (Registration No. 33-89242), as amended.
(4) Incorporated by reference to Exhibit 10.2 of the Company's Registration
Statement on Form S-1 (Registration No. 33-89242), as amended.
(5) Attached hereto as Annex A.
<PAGE> 1
C-ATS
December 18, 1998
To Our Stockholders:
I am pleased to inform you that C-ATS Software Inc. (the "Company"), Misys
plc, a public limited company organized under the laws of England ("Misys"), and
its indirect wholly-owned subsidiaries Kirsty, Inc., a Delaware corporation, and
Moxie Acquisition Corp., a Delaware corporation ("Purchaser"), have entered into
an Agreement and Plan of Merger dated December 14, 1998 (the "Merger Agreement")
pursuant to which Purchaser has commenced a cash tender offer (the "Offer") to
purchase all of the outstanding shares of the Company's common stock (the
"Shares") for $7.50 per share. Under the Merger Agreement, the Offer, if
consummated, will be followed by a merger of Purchaser into the Company (the
"Merger") in which any remaining Shares (other than Shares as to which appraisal
rights have been properly exercised and perfected, Shares held in treasury by
the Company or Shares owned by Purchaser or its affiliates) will be converted
into the right to receive $7.50 per Share in cash, without interest.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE OFFER AND THE
MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY STOCKHOLDERS AND
RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT
TO THE OFFER. YOU ARE ENCOURAGED TO CONSULT WITH YOUR FINANCIAL OR TAX ADVISOR
REGARDING THE IMPACT THEREOF ON YOU PRIOR TO TENDERING YOUR SHARES IN THE OFFER
OR VOTING TO APPROVE THE MERGER.
In arriving at its recommendations, the Board of Directors gave careful
consideration to a number of factors described in the attached Schedule 14D-9
that has been filed with the Securities and Exchange Commission, including,
among other things, the opinion of Broadview International LLC, the financial
advisor retained by the Board of Directors, to the effect that the $7.50 in cash
to be received by the holders of Shares in the Offer and Merger is fair to such
holders from a financial point of view.
In addition to the attached Schedule 14D-9 relating to the Offer, also
enclosed is the Offer to Purchase, dated December 18, 1998, of Purchaser,
together with related materials, including a Letter of Transmittal to be used
for tendering your Shares. These documents set forth the terms and conditions of
the Offer and the Merger and provide instructions as to how to tender your
Shares. We urge you to read the enclosed material carefully.
On behalf of the Board of Directors,
/s/ Rod A. Beckstrom
Rod A. Beckstrom
Chairman of the Board
And Chief Executive Officer
C-ATS Software Inc.
1870 Embarcadero Road
Palo Alto, CA 94303 USA
Tel: 650.321.3000
Fax: 650.321.3050
www.cats.com
<PAGE> 1
C-ATS SOFTWARE INC.
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (the "Agreement") is made and entered
into by and between __________ (the "Employee") and C-ATS Software Inc., a
Delaware corporation (the "Company"), effective as of the latest date set forth
by the signatures of the parties hereto below (the "Effective Date").
R E C I T A L S
A. It is expected that the Company from time to time will consider the
possibility of an acquisition by another company or other change of control. The
Board of Directors of the Company (the "Board") recognizes that such
consideration can be a distraction to the Employee and can cause the Employee to
consider alternative employment opportunities. The Board has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication and objectivity of the Employee,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company.
B. The Board believes that it is in the best interests of the Company
and its shareholders to provide the Employee with an incentive to continue his
employment and to motivate the Employee to maximize the value of the Company
upon a Change of Control for the benefit of its shareholders.
C. The Board believes that it is imperative to provide the Employee with
assurance of adequate notice prior to a termination of employment following a
Change of Control in order to provide the Employee with enhanced financial
security and provide incentive and encouragement to the Employee to remain with
the Company notwithstanding the possibility of a Change of Control.
D. Certain capitalized terms used in the Agreement are defined in
Section 6 below.
The parties hereto agree as follows:
1. Term of Agreement. This Agreement shall terminate upon the date that
all obligations of the parties hereto with respect to this Agreement have been
satisfied.
2. At-Will Employment. The Company and the Employee acknowledge that the
Employee's employment is and shall continue to be at-will, as defined under
applicable law. If the Employee's employment terminates for any reason,
including (without limitation) any termination prior to a Change of Control, the
Employee shall not be entitled to any payments, benefits, damages,
<PAGE> 2
awards or compensation other than as provided by this Agreement, or as may
otherwise be available in accordance with the Company's established employee
plans and practices or pursuant to other agreements with the Company.
3. Benefits.
(a) Involuntary Termination Following A Change of Control. During
the twelve months following a Change of Control, the Company will not terminate
Employee's employment without Cause without giving advance notice equal to the
lesser of (i) six months or (ii) twelve months minus the time elapsed since the
Change of Control occurred (the "Notice Period"). At the Company's option, the
Company may terminate Employee's employment prior to the end of the Notice
Period provided that the Company make continuing severance benefit payments, at
Employee's Annual Compensation rate on quarterly intervals, and continue all
health insurance benefits for the balance of the Notice Period.
(b) Voluntary Resignation; Termination For Cause. If the
Employee's employment terminates by reason of the Employee's voluntary
resignation (and is not an Involuntary Termination), or if the Employee is
terminated for Cause, then the Employee shall not be entitled to receive
extended notice of termination or other benefits except for those (if any) as
may then be established under the Company's then existing severance and benefits
plans and practices or pursuant to other agreements with the Company.
(c) Disability; Death. If the Company terminates the Employee's
employment as a result of the Employee's Disability, or such Employee's
employment is terminated due to the death of the Employee, then the Employee
shall not be entitled to receive extended notice of termination or other
benefits except for those (if any) as may then be established under the
Company's then existing severance and benefits plans and practices or pursuant
to other agreements with the Company.
(d) Termination Apart from Change of Control. In the event the
Employee's employment is terminated for any reason, either prior to the
occurrence of a Change of Control or after the twelve (12)-month period
following a Change of Control, then the Employee shall be entitled to receive
severance and any other benefits only as may then be established under the
Company's existing severance and benefits plans and practices or pursuant to
other agreements with the Company.
4. Definition of Terms. The following terms referred to in this
Agreement shall have the following meanings:
(a) Annual Compensation. "Annual Compensation" means an amount
equal to the sum of Employee's (i) annual Company salary at the highest rate in
effect in the twelve months immediately preceding the Change of Control, and
(ii) 100% of the Employee's annual target bonus as in effect immediately prior
to the Change of Control.
-2-
<PAGE> 3
(b) Cause. "Cause" shall mean either (i) any act of personal
dishonesty taken by the Employee in connection with his responsibilities as an
employee and intended to result in substantial personal enrichment of the
Employee, (ii) the conviction of a felony, (iii) a willful act by the Employee
which constitutes gross misconduct and which is injurious to the Company, or
(iv) following delivery to the Employee of a written demand for performance from
the Company which describes the basis for the Company's belief that the Employee
has not substantially performed his duties, continued violations by the Employee
of the Employee's obligations to the Company which are demonstrably willful and
deliberate on the Employee's part.
(c) Change of Control. "Change of Control" means the occurrence
of any of the following events:
(i) Any "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the total voting power represented by the Company's then outstanding
voting securities;
(ii) A change in the composition of the Board occurring
within a one-year period, as a result of which fewer than a majority of the
directors are Incumbent Directors. "Incumbent Directors" shall mean directors
who either (A) are directors of the Company as of the date hereof, or (B) are
elected, or nominated for election, to the Board with the affirmative votes
(either by a specific vote or by approval of the proxy statement of the Company
in which such person is named as a nominee for election as a director without
objection to such nomination) of at least a majority of the Incumbent Directors
at the time of such election or nomination;
(iii) The consummation of a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or the entity
that controls the Company or controls such surviving entity) at least fifty
percent (50%) of the total voting power represented by the voting securities of
the Company or such surviving entity or the entity that controls the Company or
controls such surviving entity outstanding immediately after such merger or
consolidation; or
(iv) The consummation of the sale or disposition by the
Company of all or substantially all the Company's assets.
(d) Disability. "Disability" shall mean that the Employee has
been unable to perform his Company duties as the result of his incapacity due to
physical or mental illness, and such inability, at least 26 weeks after its
commencement, is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Employee or the Employee's
legal representative (such Agreement as to acceptability not to be unreasonably
withheld).
-3-
<PAGE> 4
Termination resulting from Disability may only be effected after at least 30
days' written notice by the Company of its intention to terminate the Employee's
employment. In the event that the Employee resumes the performance of
substantially all of his duties hereunder before the termination of his
employment becomes effective, the notice of intent to terminate shall
automatically be deemed to have been revoked.
(e) Involuntary Termination. "Involuntary Termination" shall mean
(i) without the Employee's express written consent, a material reduction of the
Employee's duties, title, authority or responsibilities, relative to the
Employee's duties, title, authority or responsibilities as in effect immediately
prior to such reduction, or the assignment to Employee of such reduced duties,
title, authority or responsibilities; (ii) without the Employee's express
written consent, a material reduction, without good business reasons, of the
facilities and perquisites (including office space and location) available to
the Employee immediately prior to such reduction; (iii) a reduction by the
Company in the base salary of the Employee as in effect immediately prior to
such reduction; (iv) a material reduction by the Company in the kind or level of
employee benefits, including bonuses, to which the Employee was entitled
immediately prior to such reduction with the result that the Employee's overall
benefits package is materially reduced; (v) the relocation of the Employee to a
facility or a location more than twenty-five (25) miles from the Employee's then
present location, without the Employee's express written consent; (vi) any
purported termination of the Employee by the Company which is not effected for
Disability or for Cause, or any purported termination for which the grounds
relied upon are not valid; (vii) the failure of the Company to obtain the
assumption of this agreement by any successors contemplated in Section 7(a)
below; or (viii) any act or set of facts or circumstances which would, under
California case law or statute constitute a constructive termination of the
Employee.
(f) Termination Date. "Termination Date" shall mean (i) if this
Agreement is terminated by the Company for Disability, thirty (30) days after
notice of termination is given to the Employee (provided that the Employee shall
not have returned to the performance of the Employee's duties on a full-time
basis during such thirty (30)-day period), (ii) if the Employee's employment is
terminated by the Company for any other reason, the date on which a notice of
termination is given, provided that if within thirty (30) days after the Company
gives the Employee notice of termination, the Employee notifies the Company that
a dispute exists concerning the termination or the benefits due pursuant to this
Agreement, then the Termination Date shall be the date on which such dispute is
finally determined, either by mutual written agreement of the parties, or a by
final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected), or
(iii) if the Agreement is terminated by the Employee, the date on which the
Employee delivers the notice of termination to the Company.
(g) Effective Date. "Effective Date" shall be December 1, 1998.
-4-
<PAGE> 5
5. Successors.
(a) Company's Successors. Any successor to the Company (whether
direct or indirect and whether by purchase, merger, consolidation, liquidation
or otherwise) to all or substantially all of the Company's business and/or
assets shall assume the obligations under this Agreement and agree expressly to
perform the obligations under this Agreement in the same manner and to the same
extent as the Company would be required to perform such obligations in the
absence of a succession. For all purposes under this Agreement, the term
"Company" shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement described in this Section
7(a) or which becomes bound by the terms of this Agreement by operation of law.
(b) Employee's Successors. The terms of this Agreement and all
rights of the Employee hereunder shall inure to the benefit of, and be
enforceable by, the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
6. Notice.
(a) General. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. In the case of the Employee,
mailed notices shall be addressed to him at the home address which he most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, and all notices
shall be directed to the attention of its Secretary.
(b) Notice of Termination. Any termination by the Company for
Cause or by the Employee as a result of a voluntary resignation or an
Involuntary Termination shall be communicated by a notice of termination to the
other party hereto given in accordance with Section 8(a) of this Agreement. Such
notice shall indicate the specific termination provision in this Agreement
relied upon, shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination under the provision so indicated, and
shall specify the termination date (which shall be not more than 30 days after
the giving of such notice). The failure by the Employee to include in the notice
any fact or circumstance which contributes to a showing of Involuntary
Termination shall not waive any right of the Employee hereunder or preclude the
Employee from asserting such fact or circumstance in enforcing his rights
hereunder.
7. Miscellaneous Provisions.
(a) No Duty to Mitigate. The Employee shall not be required to
mitigate the amount of any payment contemplated by this Agreement, nor shall any
such payment be reduced by any earnings that the Employee may receive from any
other source.
-5-
<PAGE> 6
(b) Waiver. No provision of this Agreement shall be modified,
waived or discharged unless the modification, waiver or discharge is agreed to
in writing and signed by the Employee and by an authorized officer of the
Company (other than the Employee). No waiver by either party of any breach of,
or of compliance with, any condition or provision of this Agreement by the other
party shall be considered a waiver of any other condition or provision or of the
same condition or provision at another time.
(c) Whole Agreement. No agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof. This Agreement
represents the entire understanding of the parties hereto with respect to the
subject matter hereof and supersedes all prior arrangements and understandings
regarding same.
(d) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California.
(e) Severability. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(f) Withholding. All payments made pursuant to this Agreement
will be subject to withholding of applicable income and employment taxes.
(g) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
-6-
<PAGE> 7
IN WITNESS WHEREOF, each of the parties has executed this
Agreement, in the case of the Company by its duly authorized officer, as of the
day and year set forth below.
COMPANY C-ATS SOFTWARE INC.
By:
----------------------------------
Title:
-------------------------------
Date:
------------
EMPLOYEE
------------------------------------
[SIGNATURE PAGE TO CHANGE OF CONTROL AGREEMENT]
-7-
